U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER:
L.O.M. MEDICAL INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE
(State or other 98-0178784
jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or Industrial Classification Identification No.)
organization) Code Number)
#3 - 1482 Springfield Road, Kelowna British Columbia, Canada VIY 5V3
(Address of principal executive offices) (Zip Code)
(250) 762-7552
(Issuer's Telephone Number, including Area Code)
Thomas E. Stepp, Jr.
Stepp & Beauchamp LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
Telephone: 949.660.9700
Facsimile: 949.660.9010
(Name, Address and Telephone Number of Agent for Service)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. [X] Yes [ ]
No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of August 31, 1999, there were
5,538,849 shares of the issuer's $.001 par value common stock issued and
outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Balance Sheet
$ United States
August 31, 1999 and May 31, 1999
(Unaudited - Prepared by Management)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
August 31, May 31,
1999 1999
- -----------------------------------------------------------------------------------------------
Assets
Current assets
<S> <C> <C>
Cash $ 343,546 $ 346,646
Accounts receivable 32,765 26,442
Prepaid expenses 3,452 3,453
- -----------------------------------------------------------------------------------------------
379,763 376,541
Product rights and patent costs (note 3) 15,630 16,740
Capital assets (note 4) 46,799 49,869
- -----------------------------------------------------------------------------------------------
$ 442,192 $ 443,150
===============================================================================================
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 38,723 $ 36,404
Redeemable preferred shares (note 5) 301,727 301,727
Share subscriptions (note 6(b)) 90,956 62,731
Stockholders' equity
Capital stock (note 6) 5,538 5,519
Additional paid in capital 1,233,721 1,171,009
Deficit accumulated during the development stage (1,251,799) (1,157,566)
Accumulated other comprehensive income 23,326 23,326
- -----------------------------------------------------------------------------------------------
10,786 42,288
- -----------------------------------------------------------------------------------------------
$ 442,192 $ 443,150
===============================================================================================
</TABLE>
See accompanying notes to financial statements
On behalf of the Board:
_____________________ Director
_____________________ Director
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Statement of Loss
$ United States
For the three months ended August 31, 1999 and 1998
(Unaudited - Prepared by Management)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
From Inception
(March 17, 1997) 1999 1998
to August 31, 1999
- ------------------------------------------------------------------------------------------------------
Expenses
<S> <C> <C> <C>
Advertising $ 12,118 $ - $ 874
Amortization 32,611 4,042 968
Automotive 29,713 2,786 2,662
Consulting fees 75,864 8,078 -
Design plans 10,911 - 2,728
Director's fees 15,424 - 2,130
Foreign exchange loss (gain) 3,459 829 (2,162)
Insurance 3,424 - 401
Interest and bank charges 4,082 795 234
Legal and accounting 106,248 16,739 9,851
Licences, fees and dues 865 - 73
Management fees 248,917 34,404 35,965
Office and administration 123,146 15,446 6,867
Product development 8,799 - 396
Promotion and entertainment 13,281 453 1,472
Rent 89,957 10,265 7,635
Repairs and maintenance 2,316 - 493
Telephone and utilities 29,833 2,633 2,376
Travel 33,991 647 2,540
Video production 20,040 - 1,893
Write down of inventory 55,734 - -
Write down of product rights and
patent costs 374,128 - -
- ------------------------------------------------------------------------------------------------------
1,294,861 97,117 77,396
- ------------------------------------------------------------------------------------------------------
Loss from operations (1,294,861) (97,117) (77,396)
Other income
Interest income 43,062 2,884 4,086
- ------------------------------------------------------------------------------------------------------
(1,251,799) (94,233) (73,310)
- ------------------------------------------------------------------------------------------------------
Net loss $ (1,251,799) $ (94,233) $ (73,310)
======================================================================================================
Loss per share $ (0.02) $ (0.01)
Weighted average shares used 5,529,198 5,483,247
======================================================================================================
</TABLE>
See accompanying notes to financial statements
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Statement of Cash Flows
$ United States
For the three months ended August 31, 1999 and 1998
(Unaudited - Prepared by Management)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
From inception
(March 17, 1997) 1999 1998
to August 31, 1999
- ---------------------------------------------------------------------------------------------------------------
Operating activities
<S> <C> <C> <C>
Net loss $ (1,251,799) $ (94,233) $ (73,310)
Items not involving cash
Amortization 32,611 4,042 968
Gain on sale of capital asset (2,659) --
Write down of inventory 55,734 -- --
Write down of product rights 374,128 -- --
Changes in non-cash working capital
Accounts receivable (32,765) (6,323) --
Prepaid expenses (3,352) 1 --
Accounts payable and accrued liabilities 38,723 2,319 (3,740)
Inventory purchases (55,834) -- --
- ---------------------------------------------------------------------------------------------------------------
(845,213) (94,194) (76,082)
Financing
Issuance of capital stock 571,528 -- 10,888
Advances to shareholder (90,577) -- --
Proceeds from subscriptions for shares 758,687 90,956 --
- ---------------------------------------------------------------------------------------------------------------
1,239,638 90,956 10,888
Investing
Acquisition of capital assets (80,532) -- (35,940)
Proceeds on disposition of capital asset 6,327 138 --
- ---------------------------------------------------------------------------------------------------------------
(74,205) 138 (35,940)
Other comprehensive income 23,326 -- --
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash 343,546 (3,100) (101,134)
Cash, beginning of period -- 346,646 548,197
- ---------------------------------------------------------------------------------------------------------------
Cash, end of period $ 343,546 $ 343,546 $ 447,063
- ---------------------------------------------------------------------------------------------------------------
Supplementary information:
Interest paid $ -- $ -- $ --
Income taxes paid -- -- --
Non-cash financing and investing activities:
Issuance of redeemable preferred shares
for product rights 309,677 -- --
- ---------------------------------------------------------------------------------------------------------------
Common shares issued for conversion of
share subscriptions $ 62,731 $ 62,731 $ --
===============================================================================================================
</TABLE>
See accompanying notes to financial statements
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Statement of Stockholders' Equity and Comprehensive Income
$ United States
For the three months ended August 31, 1999 and 1998
(Unaudited - Prepared by Management)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Deficit
Capital Stock Accumulated Accumulated
---------------------- Additional During the Other Total
Number Paid in Development Comprehensive Stockholders'
of Shares Amount Capital Stage Income Equity
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, May 31, 1999 5,519,547 $ 5,519 $ 1,171,009 $(1,157,566) $ 23,326 $ 42,288
Common shares issued
for conversion of share
subscriptions 19,302 19 62,712 -- -- 62,731
Comprehensive income:
Loss -- -- -- (94,233) -- (94,233)
Foreign currency translation -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------
-- -- -- (94,233) -- (94,233)
- ---------------------------------------------------------------------------------------------------------------
Balance, August 31, 1999 5,538,849 $ 5,538 $ 1,233,721 $(1,251,799) $ 23,326 $ 10,786
===============================================================================================================
</TABLE>
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
$ United States
(Unaudited - Prepared by Management)
- --------------------------------------------------------------------------------
L.O.M. Medical International Inc. was incorporated on March 17, 1997 under the
General Corporation Laws of Delaware. It conducts research and development on
new products in the medical field and has filed a patent application on a
retractable syringe. Operations effectively commenced on June 1, 1997.
1. Significant accounting policies:
a) Going concern
These financial statements have been prepared on the going concern
basis, which assumes the realization of assets and liquidation of
liabilities in the normal course of business. As shown in the
consolidated financial statements, to date, the Company has
accumulated a deficit since inception of $1,251,799. This factor,
among others raises substantial doubt about the Company's ability to
continue as a going concern. The Company's ability to continue as a
going concern is dependent on its ability to generate future
profitable operations and receive continued financial support from its
stockholders and other investors.
Management's plans with respect to generating future profitable
operations include future sales of the retractable syringe as well as
additional funding from stockholders in the form of additional share
subscriptions.
b) Translation of financial statements
The Company's subsidiary, L.O.M. Laboratories Inc. operates in Canada
and its operations are conducted in Canadian currency.
The method of translation applied is as follows:
i) Monetary assets and liabilities are translated at the rate of
exchange in effect at the balance sheet date, being US $1.00 per
Cdn $1.48
ii) Non-monetary assets and liabilities are translated at the rate in
effect at the transaction date.
iii) Revenues and expenses are translated at the exchange rate in
effect at the transaction date.
iv) The net adjustment arising from the translation is included in
accumulated other comprehensive income.
c) Basis of presentation and consolidation The consolidated financial
statements include the accounts of the Company and its 96% owned
subsidiary, L.O.M. Laboratories Inc.
d) Product rights and patent costs
Product rights and patent costs relate to amounts paid to acquire the
rights to produce and distribute products as well as the costs
associated with patent applications.
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 3
$ United States
(Unaudited - Prepared by Management)
- --------------------------------------------------------------------------------
1. Significant accounting policies (continued):
d) Product rights and patent costs (continued) These costs are being
amortized on a straight-line basis over five years. Management
periodically reviews the carrying values of the product rights and
patent costs and based upon several factors, including the current
assessment of the viability of the product, determines whether the
carrying value exceeds the net realizable value for such costs. If it
is determined that the carrying value cannot be supported, the related
costs are changed against operations in the year of determination of
the impairment in value.
e) Capital assets
Capital assets are recorded at cost. Amortization is provided using
the following methods and annual rates which are intended to amortize
the cost of the assets over their estimated useful life:
----------------------------------------------------------------------
Asset Method Rate
----------------------------------------------------------------------
Leasehold improvements Straight-line 20%
Computer software Straight-line 100%
Equipment Declining balance 30%
Furniture and fixtures Declining balance 20%
----------------------------------------------------------------------
f) Management estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
g) Financial instruments
The fair values of the Company's cash, accounts receivable and
accounts payable and accrued liabilities approximate their carrying
values due to the relatively short periods to maturity of the
instruments. It is not possible to arrive at a fair value for
redeemable preferred shares as a maturity date is not determinable.
The maximum credit risk exposure for all financial assets is the
carrying amount of those assets.
h) Loss per share
Loss per share has been calculated using the weighted average number
of common shares outstanding during the period.
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 4
$ United States
(Unaudited - Prepared by Management)
- --------------------------------------------------------------------------------
1. Significant accounting policies (continued):
i) Accounting standards change In June 1998, the Financial Accounting
Standards Board issued SFAS no. 133, "Accounting for Derivative
Instruments and Hedging Activities." Adoption of this statement is not
expected to have a significant impact on the Company's results of
operations or financial position.
j) Income taxes The Company accounts for income taxes by the asset and
liability method. Under the asset and liability method, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
2. Business combination:
Effective January 13, 1998, the Company acquired 96% of the outstanding
Class A common voting shares of L.O.M. Laboratories Inc. Prior to and
immediately after the acquisition, L.O.M. Laboratories Inc. was controlled
by a related party, the president and controlling shareholder of the
Company. Accordingly, this transaction has been measured at the carrying
amount of the assets and liabilities of L.O.M. Laboratories Inc. with the
comparative figures presented on the balance sheet and the statements of
loss and cash flows being restated to reflect the results of both companies
from inception.
3. Product rights and patent costs:
----------------------------------------------------------------------
August 31, May 31,
1999 1999
----------------------------------------------------------------------
Product rights $ 68 68
Patent costs 15,562 16,672
----------------------------------------------------------------------
$15,562 16,740
----------------------------------------------------------------------
Product rights represent certain rights to manufacture and market a contact
lens inserter and storage system ("Lens-o-matic") developed by the
president of the Company. At the time of the acquisition of the product
rights from the president of the Company, the value attributed to the
product rights, $380,885, was agreed to by the Company's Board of
Directors. During the year ended May 31, 1999, the investment was written
down to a nominal amount, due to its speculative nature.
Patent costs relate to the costs incurred for patent application for a
retractable syringe developed by the Company.
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 5
$ United States
(Unaudited - Prepared by Management)
- --------------------------------------------------------------------------------
4. Capital assets:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
August 31, May 31,
1999 1999
----------------------------------------------------------------------------------------------------------------
Accumulated Net book Net book
Cost amortization value value
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Leasehold improvements $27,919 $ 6,980 $20,939 $22,335
Computer software 520 424 96 130
Equipment 20,948 10,934 10,014 10,826
Furniture and fixtures 20,746 4,996 15,750 16,578
----------------------------------------------------------------------------------------------------------------
$70,133 $23,334 $46,799 $49,869
----------------------------------------------------------------------------------------------------------------
</TABLE>
5. Redeemable preferred shares:
The Company's subsidiary has redeemable preferred shares outstanding as
follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
August 31, May 31,
1999 1999
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Issued:
4,000 Class C preferred shares with a par value of $100 Cdn redeemable
at $110.16 Cdn per share at the option of the holder. Each share is
entitled to a fixed non-cumulative dividend at the rate of 9% per
annum
payable at such times as determined by the Directors. 301,727 301,727
---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 6
$ United States
(Unaudited - Prepared by Management)
- --------------------------------------------------------------------------------
6. Capital stock:
a) Authorized:
50,000,000 Common shares with a par value of $.001 each 5,000,000
Preferred shares with a par value of $.001 each
b) Share subscriptions:
Subsequent to August 31, 1999, the Company issued 27,986 common shares
at $3.25 per share for net proceeds of $90,956 which were received
prior to August 31, 1999.
c) Stock option plan:
1,000,000 common shares of the Company are reserved for issuance upon
exercise of stock options. As at August 31, 1999, no stock options
have been granted.
7. Related party transactions:
During the period the Company entered into the following transactions
with related parties:
---------------------------------------------------------------------------
1999 1998
---------------------------------------------------------------------------
Legal and accounting fees paid to a director $ 464 $ 1,827
Management fees paid to president 34,404 35,965
Office and administration fees paid to president's spouse 9,000 9,081
Office and administration fees paid to an individual
related to the president 4,389 4,389
Rent paid to a company controlled by the president 4,605 4,605
Inventory purchased from president -- 55,834
Leasehold improvements on premises controlled by
the president -- 27,919
---------------------------------------------------------------------------
These transactions are in the normal course of operations and are measured
at the exchange amount of consideration established and agreed to by the
related parties.
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 7
$ United States
(Unaudited - Prepared by Management)
- --------------------------------------------------------------------------------
8. Commitments:
The Company is obligated to make future lease payments for it's offices as
follows:
2000 $ 27,685
2001 $ 19,453
2002 $ 19,453
2003 $ 19,453
2004 $ 19,453
9. Income taxes:
At August 31, 1999, the Company had a net operating loss carryforward for
United States income tax purposes of approximately $1,000,000. The net
operating loss expires in increments beginning in 2008. No amount has been
reflected on the balance sheet for future income taxes as any future income
tax asset has been fully offset by a valuation allowance.
10. Uncertainty due to the Year 2000 Issue:
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using Year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Development of the Registrant. L.O.M. Medical International Inc., a Delaware
corporation ("Registrant"), was incorporated in the State of Delaware on March
17, 1997. The executive offices of Registrant are located at #3 - 1482
Springfield Road, Kelowna British Columbia, Canada V6C 1N8. Registrant's
telephone number is (250) 762-7552.
As a point of clarification, as used in this Form 10-QSB, the word "Dollars" and
the symbol "$" means and refers to the currency of the United States of America,
unless otherwise stated. As used in this Registration Statement, the term "CDN$"
means and refers to the currency of Canada, in Canadian dollars.
Registrant was originally incorporated for the purpose of researching and
developing health care products. The goal of Registrant is to become an
innovator and provider of a retractable syringe ("Syringe") and related products
and technologies to the health care market. Registrant also hopes to
successfully market and distribute its line of eye care products. Registrant has
successfully patented and licensed products in seventy other countries including
the United States and Canada. Registrant envisions that it will be able to
develop new and improved products and provide the health care industry with
better, safer products throughout the world.
The Syringe. Registrant anticipates that the Syringe will change standard
disposal methods for used syringes. The Registrant has developed a product
designed to function as a standard hypodermic syringe that is safer to the
caregiver or health care worker. Registrant believes that the Syringe's unique
design will allow health care providers to avoid direct contact with used
needles. The Syringe is covered by United States Patent No. 5,868,713 dated
February 9, 1999, and international patents have been filed in 24 different
countries.
Once the needle is injected, the user simply has to press the plunger top gently
with his or her thumb to automatically retract the needle into its own sealed
chamber. The needle is now hidden where it remains locked in place and cannot be
used again. The Syringe does not require a health care worker to use both hands
to retract the needle after it has been used and withdrawn from the patient. The
Syringe will be produced in standard industry sizes from 1CC to 20 CC,
inclusive. Registrant anticipates that the products and technologies developed
by Registrant will be offered to distributors on a worldwide basis, with an
initial emphasis in Canada and the United States.
Registrant anticipates that it will be testing the Syringe in conjunction with
teaching universities in Canada, Britain, and other constituents of the United
Kingdom. Registrant has also developed ancillary components to be used in
medical emergency situations and which can also be used by hospital medical
staff and paramedics.
The Lens-O-Matic. Registrant has invented and developed an insertion and storage
device for contact lenses (the "Lens-O-Matic") which is an ideal medical method
of handling and inserting contact lenses. Registrant has developed the following
components and solutions that will be used together with the Lens-O-Matic
insertion and storage system: (1) a medical inserter that will remove contact
lenses in a medical emergency situation for use by hospital medical staff and
paramedics; (2) disposable and replacement inserter ends; (3) additional storage
cups and caps; and (4) all soaking and disinfecting solutions that are to be
used with the Lens-O-Matic inserter.
The Lens-O-Matic is designed so that the practitioner will no longer have direct
hand or finger contact with the contact lens when fitting the patient.
Registrant believes that the design of the Lens-O-Matic will reduce the risk of
contamination and infection to the patient. Registrant has developed a liquid
cleaner for the Lens-O-Matic that quickly cleans contact lenses. Registrant has
obtained Food and Drug Administration Approval ("FDA") for the Lens-O-Matic
product. Registrant has also completed market testing and believes that the
Lens-O-Matic was well received at the A.O.A. convention in Montreal, Canada,
where approximately 30,000 units were distributed to opticians, optometrists and
pharmacies. Registrant has also completed the formulation of its contact lens
solutions and copyrights covering these products have been registered.
Registrant has also completed the design and labeling of the Lens-O-Matic
package. Registrant believes that its eye-care products are ready for marketing
and distribution.
2
<PAGE>
The target markets for the distribution for the Lens-O-Matic product include,
but are not necessarily limited to, (i) hospitals and clinics, including
Shippert Medical of Englewood, Colorado ("Shippert"), Cross Mark Sales &
Marketing of Plano, Texas; and (ii) optometrists and opticians including, Health
Care Insights of Edison, New Jersey.
The Syringe. Registrant anticipates that it will obtain the necessary plastic
for the injection molds used to manufacture the Syringe from various domestic
and international suppliers. Initially, Tessey Plastics of Elbridge, New York
will be manufacturing the Syringe on a contract basis. The engineering for the
molds and dyes are near completion. Registrant also contemplates that it will be
able to readily obtain the necessary packaging for the Syringe. Registrant does
not believe that its sales will be affected by seasonal factors. Registrant
believes that prototypes of the Syringe will be ready for testing in March,
2000. Registrant believes that it will complete testing in Canada and gain the
necessary regulatory approvals in or around June, 2000. Registrant believes it
will complete the necessary United States testing as well as secure the required
United States regulatory approval in or around September, 2000.
As previously discussed, Registrant hopes to eventually establish a production
facility in Spokane, Washington. It is anticipated that the facility will
initially produce approximately 2,500,000 units of the Syringe per month with
the capacity to meet increased market demands. Registrant believes that it will
deliver its products to the North American markets by courier. All supply and
distribution agreements will be negotiated by Health Care Insights.
Once testing of the Syringe is completed, and assuming FDA approval is received,
Registrant hopes to manufacture, or cause to be manufactured, a specified number
of units of the Syringe, which will be provided, at no charge, to a target group
of physicians for testing. Registrant plans to provide units to various
individuals who are to form part of the testing group. These individuals will be
asked to try the Syringe and report their findings. Registrant will then utilize
professionals such as doctors and related health care professionals who approve,
recommend and endorse Registrant's products, including the Syringe. Thereafter,
Registrant anticipates that the Syringe will be supplied to large national
distributors within specific regions all over the world. Registrant anticipates
that the distributors will thereafter market the Syringe to pharmacy and medical
supply companies. Registrant's overall operating plan is to act as a
manufacturer, selling directly and only to distributors and retail chains.
Registrant hopes that the product will gain acceptance in the medical community
and that Registrant's skill in positioning and merchandising the products and
technology of Registrant will enable it to acquire a commercially reasonable
portion of the market.
Lens-O-Matic. Registrant anticipates that its eye care products will be sold
both by retail stores and as a kit distributed by the medical profession.
Registrant expects that its eye care products will be sold through pharmacies,
wholesale drug distributors and chain stores and that such products will be sold
to Optometrists and Ophthalmologists directly by Registrant's sales
representatives. Registrant has recently secured FDA approval for the
manufacturing and distribution of a first product run of its eye-care products.
We have developed our own dyes and injection molds for our Lens-O-Matic and
related products. We have paid for all of the dyes and molds and currently own
them. The first product run of our eye care products includes the utilization of
our production dyes at full capacity, the production of a marketable product
which exceeds FDA standards for medical devices. We manufacture the necessary
components for the Lens-O-Matic and related products in Saskatchewan, Canada.
Registrant is currently negotiating with Shippert Medical Technologies of
Englewood, Colorado ("Shippert") pursuant to which Registrant anticipates that
Shippert will distribute Registrant's product line in the United States.
Registrant anticipates that the marketing of its eye-care products will begin in
early 2000.
Registrant plans to focus its initial marketing efforts in Canada and the United
States. Registrant hopes to eventually expand its product marketing and sales
into Europe, South America, Central America, Mexico and Asia. Registrant plans
to market its products by advertising in catalogs and medical journals, by
distributing brochures (both written and video), by direct mail and by posters.
Follow-up calls will be made to promising prospects. This approach will be
Registrant's primary marketing method. It is expected that Registrant's
personnel will attend various trade shows and medical conventions in order to
introduce the Syringe with the hope of gaining endorsements and approvals. There
can be no assurance that Registrant would be able to establish successfully
other methods of marketing and sales of its products should it become necessary
or desirable in the future. A significant portion of Registrant's sales may be
made through independent distributors over which Registrant has no control and
who also will represent products of other companies. Registrant recognizes that
in order to increase market awareness and the marketing potential of its
products, it must hire adequate personnel and institute effective advertising in
the most cost effective way.
3
<PAGE>
Registrant is not currently producing commercial quantities of its products nor
is it currently supplying any services to any third parties. No assurance can be
given that Registrant, on a timely basis, will be able to make the transition
from manufacturing testing quantities of the Syringe to commercial production
quantities successfully or be able to arrange for contract manufacturing.
Registrant has produced testing quantities amounting to 33,000 units of its eye
care products. Registrant's current production capacity does allow for the
production of commercial quantities of its eye care products, with its present
dyes allowing for the production of 75,000 units per month. Registrant believes
that this can be increased to 150,000 units by running additional shifts.
Registrant has a second set of dyes designed that will have a 300,000 unit
capacity which would allow the production for a total of 450,000 units of its
eye care products per month. Registrant does anticipate that it will be able to
manufacture its products for initial commercialization.
Registrant anticipates that it will contract out the first two years of
production of the Syringe. At the end of the second year of production,
Registrant anticipates it will engage in significant discussions regarding the
potential for the construction of its own production facility. Registrant
recognizes that the construction of its own production facility will be
contingent upon its having reached its sales and profit projections. Registrant
anticipates that it will present this issue for vote by its Board of Directors
and shareholders. In this regard, Registrant anticipates that it will locate its
production facilities in North America, specifically, the state of Washington,
due to its strategic location for penetration into the United States and
Canadian markets.
As previously discussed, Registrant's eye care products are currently produced
in Canada. Registrant owns all of the necessary injection molds. Registrant
contracts out for the production of components needed for the assembly and
packaging of its eye care products. The actual assembly and packaging are done
by Registrant's own work force. All other products of Registrant, those either
currently in production or the subject of future production will be produced on
a contract basis through plants that are FDA approved for production of medical
products.
Registrant is currently negotiating with the Irish Development Board in Ireland
("Development Board"). Representatives from the Development Board have met with
Registrant's Board of Directors on 3 different occasions and have offered to
assist Registrant in establishing a production facility in Ireland. Registrant
has already sent representatives to Ireland to discuss the production of the
Syringe as well as strategic alliances for market distribution of all
Registrant's products. Registrant's plans to construct a production facility are
merely preliminary. As such, Registrant has not reached an estimation of the
capital resources necessary to fund such a project nor has Registrant determined
how long such a project would take to complete. Registrant anticipates that at
the end of the projected two-year period, Registrant will have a sufficient
revenue stream to finance, at least partially, the construction of the proposed
production facilities. However, there can be no assurance that Registrant will
have the necessary funds at the end of the two-year period to construct its
proposed production facilities. Should Registrant not have the necessary funds,
Registrant anticipates it will continue to cause its products to be produced on
a contract basis.
Currently, Registrant does have the necessary production facilities to produce
its line of eye care products on a commercial basis. Registrant has FDA approval
to market its line of eye care products in the United States. Also, as
previously discussed, Registrant has the necessary Canadian approval to market
its eye-care products in Canada. Shippert Medical will be marketing Registrant's
eye care products in the United States as well as in Canada. Registrant has
entered into a marketing and distribution contract with Shippert Medical. The
contract has an initial two-year term with a two-year renewal option.
Business of Registrant's Subsidiary. On or about June 1, 1997, Registrant agreed
to purchase 4,800 of the 5,000 total issued and outstanding shares of L.O.M.
Laboratories Inc.'s ("L.O.M. Laboratories") Class "A" common shares; however,
the effective date of such purchase was not until January 13, 1998, when the
shareholders and directors of L.O.M. Laboratories approved such a sale.
Registrant agreed to pay US$.001 per share. This represents a 96% interest in
L.O.M. Laboratories. L.O.M. Laboratories owned the rights to the Lens-O-Matic
system until January 1, 1998, when Registrant purchased those rights for
US$380,885. Mr. Klippenstein and the Registrant's Board of Directors also orally
agreed on certain performance conditions. Those performance conditions specify
that none of the preferred shares transferred under the agreement would be
redeemed until such time as the Registrant began earning a profit from sales of
the Lens-O-Matic. Moreover, Mr. Klippenstein and the Registrant's Board of
Directors agreed the such conversions could only take place upon approval by the
Registrant's Board of Directors. The primary business purpose of the subsidiary
is to develop and market new products through Registrant.
4
<PAGE>
Liquidity. The Registrant had cash resources of US$447,063.00 at August 31,
1998. At August 31, 1999, the Registrant had cash resources of US$343,546.00. At
August 31, 1999, the Registrant had total current assets of US$379,763.00 and
total current liabilities of US$38,723.00. At August 31, 1999, total current
assets exceeded total current liabilities by US$341,040.00. The cash and
equivalents constitute the Registrant's present internal sources of liquidity.
Because neither the Registrant nor its subsidiary are generating any significant
revenues, the Registrant's only external source of liquidity is the sale of its
capital stock.
Results of Operations. The Registrant has not yet realized any significant
revenue from operations. Loss from operations from March 17, 1997 (inception) to
August 31, 1999, was US$1,113,527.00. The net loss for the 3 month period ended
August 31, 1998 was US$73,310.00. The net loss for the 3 month period ended
August 31, 1999, was US$94,223.00. Such losses were primarily the result of
selling, general and administrative expenses, management fees, rent and
consulting fees.
The Registrant may require additional cash to implement its business strategies,
including cash for (i) payment of increased operating expenses and (ii) further
implementation of those business strategies. No assurance can be given, however,
that the Registrant will have access to the capital markets in the future, or
that financing will be available on acceptable terms to satisfy the cash
requirements of the Registrant to implement its business strategies. The
inability of the Registrant to access the capital markets or obtain acceptable
financing could have a material adverse effect on the results of operations and
financial conditions of the Registrant.
The Registrant's forecast of the period of time through which its financial
resources will be adequate to support its operations is a forward-looking
statement that involves risks and uncertainties, and actual results could vary
as a result of a number of factors.
The Registrant anticipates that it will need to raise additional capital within
the next 12 months in order to develop, promote, produce and distribute its
proposed products. Such additional capital may be raised through additional
public or private financings, as well as borrowings and other resources. To the
extent that additional capital is raised through the sale of equity or
equity-related securities, the issuance of such securities could result in
dilution of the Registrant's stockholders. There can be no assurance that
additional funding will be available on favorable terms, if at all. If adequate
funds are not available within the next 12 months, the Registrant may be
required to curtail its operations significantly or to obtain funds through
entering into arrangements with collaborative partners or others that may
require the Registrant to relinquish rights to certain of its products that the
Registrant would not otherwise relinquish.
The Registrant, is a development stage enterprise and is currently putting
technology in place which will, if successful, mitigate the net losses
experienced by the Registrant. The Registrant is reviewing its options and
evaluating its potential to raise substantial equity capital. Management has
proceeded as planned in the ongoing development of the Syringe and the
Lens-O-Matic. In order to meet its requisite budget, management has held and
continues to conduct negotiations with investors. The Registrant has also
conducted extensive negotiations with various medical companies in an attempt to
establish beneficial strategic alliances. The Registrant hopes that these
negotiations will result in significant earnings for the Registrant. To achieve
and maintain the competitiveness of its products and to conduct costly and
time-consuming research and development, the Registrant may be required to raise
substantial funds in addition to the funds already raised through the issuance
of the Registrant's shares. The Registrant's forecast for the period of time
through which its financial resources will be adequate to support its operations
is a forward-looking statement that involves risks and uncertainties, and actual
results could fail as a result of a number of factors. The Registrant
anticipates that it will need to raise additional capital in order to develop,
promote, produce and distribute its products. Such additional capital may be
raised through additional public or private financings, as well as borrowings
and other resources.
There can be no assurance that additional funding will be available under
favorable terms, if at all. If adequate funds are not available, Registrant may
be required to curtail operations significantly or to obtain funds through
entering into arrangements with collaborative partners or others that may
require Registrant to relinquish rights to certain products that Registrant
would not otherwise relinquish. The Registrant believes that it is poised to
maintain its long-term liquidity. Management of Registrant believes that its
plans described above will enable it to meet its obligations for a period of at
least twelve (12) months from June 30, 1999. Registrant believes that within a
short period of time, it can begin manufacturing and marketing commercial
quantities of its eye care products. Coupled with the further issuance of common
stock of Registrant, Registrant believes it can significantly improve its
long-term liquidity.
5
<PAGE>
The Registrant does not anticipate any material expenditures within the next 12
months. The Registrant does not anticipate any significant research and
development within the next 12 months, nor does the Registrant anticipate that
it will lease or purchase any significant equipment within the next 12 months.
The Registrant does not anticipate a significant change in the number of its
employees within the next 12 months.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
6
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 15, 2000 L.O.M. Medical International, Inc.
By: /s/ John Klippenstein
--------------------------------
John Klippenstein
Its: President
