U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of
The Securities Exchange Act of 1934
L.O.M. MEDICAL INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 98-0178784
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
#3 - 1482 Springfield Road, Kelowna, B. C. Canada V1Y 5V3
(Address of registrant's principal executive offices) (Zip Code)
250.762.7552
(Registrant's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on which
to be so Registered: Each Class is to be Registered:
-------------------- -------------------------------
None None
Securities to be registered under Section 12(g) of the Act:
Common Stock, Par Value $.001
- -----------------------------
(Title of Class)
Preferred Stock, Par Value $.001
Copies to:
Thomas E. Stepp, Jr.
Stepp & Beauchamp, LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
949.660.9700
Facsimile: 949.660.9010
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L.O.M. MEDICAL INTERNATIONAL, INC.,
a Delaware corporation
Index to Amendment No. 3 to Registration Statement on Form 10-SB
Item Number and Caption Page
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1. Description of Business 3
2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8
3. Description of Property 12
4. Security Ownership of Certain Beneficial Owners and Management 12
5. Directors, Executive Officers, Promoters and Control Persons 13
6. Executive Compensation - Remuneration of Directors and Officers 15
7. Certain Relationships and Related Transactions 15
8. Description of Securities 16
PART II
1. Market Price of and Dividends on the Registrant's Common Equity and Related 17
Stockholder Matters
2. Legal Proceedings 17
3. Changes in and Disagreements with Accountants 17
4. Recent Sales of Unregistered Securities 17
5. Indemnification of Directors and Officers 18
PART F/S
Financial Statements F-1 through F-21
Signatures 20
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Item 1. Description of Business.
Development of the Company. L.O.M. Medical International Inc., a Delaware
corporation ("Company"), was incorporated in the State of Delaware on March 17,
1997. The executive offices of the Company are located at #3 - 1482 Springfield
Road, Kelowna, B. C., Canada V1Y 5V3. The Company's telephone number is
250.762.7552.
As a point of clarification, as used in this Registration Statement, the word
"Dollars" and the symbol "$" 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.
The Company was originally incorporated for the purpose of researching and
developing health care products. The goal of the Company is to become an
innovator and provider of a retractable syringe ("Syringe") and related products
and technologies to the health care market. The Company also hopes to
successfully market and distribute its line of eye care products. The Company
has successfully patented and licensed products in seventy countries including
the United States and Canada. The Company 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. The Company anticipates that the Syringe will change standard
disposal methods for used syringes. The Company has developed a product designed
to function as a standard hypodermic syringe that is safer to the caregiver or
health care worker. The Company 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. The Company intends to promote the Syringe as a safer and less
risk-oriented instrument for hospital staff and health care workers. The Company
is optimistic that doctors, nurses, and health care workers alike will recognize
and appreciate the safety features of the Syringe because of its ease of
"use-and-disposal" and its unique "contaminate-prevention" characteristics.
The Company anticipates that the products and technologies developed by the
Company will be offered to distributors on a worldwide basis, with an initial
emphasis in Canada and the United States. The Company hopes that product and
technology ideas will be generated through active dialogues among the Company,
its customers, and its network of scientific advisors, participation in national
and international conferences, and reviews of selected scientific literature.
The Company interacts with a network of scientific advisors within the industry,
including members of academic institutions, as well as potential customers. The
Company anticipates that these interactions should enable the Company to
identify the specialized needs of those potential customers and to provide
innovative and commercially acceptable products and technologies. At this time,
the Company's relationship with scientific advisors and academic institutions is
limited to an advisory relationship. The Company currently performs all of its
own research and development. The Company does not currently use the services of
third parties to conduct any of its research and development.
The Company anticipates that it will be testing the Syringe in conjunction with
teaching universities in Canada, Britain, and other constituents of the United
Kingdom. The Company 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. The Company 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. The Company 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.
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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. The
Company believes that the design of the Lens-O-Matic will reduce the risk of
contamination and infection to the patient. The Company has developed a liquid
cleaner for the Lens-O-Matic that quickly cleans contact lenses. The Company has
obtained Food and Drug Administration Approval ("FDA") for the Lens-O-Matic
product. The Company 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. The Company has also completed the formulation of its contact lens
solutions and copyrights covering these products have been registered. The
Company has also completed the design and labeling of the Lens-O-Matic package.
The Company believes that its eye-care products are ready for marketing and
distribution.
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.
Business of the Company's Subsidiary. On or about June 1, 1997, the Company
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.
The Company 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 the Company purchased those rights for
US$380,885. The primary business purpose of the subsidiary is to develop and
market new products through the Company.
At the time the Company purchased the shares of L.O.M. Laboratories, John
Klippenstein was serving as the President, Chief Executive Officer and a
director of the Company as well as serving as the President and a director of
L.O.M. Laboratories. Moreover, at the time of the transaction, Mr.
Klippenstein's wife, Maria Klippenstein was both the Secretary and the Treasurer
of L.O.M. Laboratories and the Secretary and the Treasurer of the Company. Mr.
and Mrs. Klippenstein were also the only shareholders of L.O.M. Laboratories
prior to the issuance of the shares to the Company. At the time of the issuance
of the shares to the Company, there was no independent third party valuation to
verify the value of those assets. The Company's auditors have treated this
transaction as a business combination as described in Note 2 to the attached
audited financial statements for the year ended May 31, 1999. Mr. and Mrs.
Klippenstein retained the remaining 4% of L.O.M. Laboratory. The transaction was
structured as such because Mr. Klippenstein could not transfer the Lens-O-Matic
rights to the Company without suffering severe and adverse tax consequences.
However, based on tax advice, Mr. and Mrs. Klippenstein could transfer the
shares they own in L.O.M. Laboratory and use Canadian tax rules to delay any
potential tax liability that may have occurred at the time of the transaction.
Mr. Klippenstein had a verifiable tax base of approximately CDN$100,000 and the
Company's Board of Directors believed that the investment in L.O.M. Laboratory
would be worth approximately CDN$500,000. On or about January 1, 1998, the
Company purchased the rights to the Lens-O-Matic for CDN$100,000 and CDN$400,000
worth of preferred shares. Mr. Klippenstein and the Company'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 Company began earning a
profit from sales of the Lens-O-Matic. Moreover, Mr. Klippenstein and the
Company's Board of Directors agreed the such conversions could only take place
upon approval by the Company's Board of Directors.
Employees. The Company currently has two employees and several consultants on
staff. Management of the Company uses consultants for business, accounting,
engineering, and legal services as-required. Management of the Company has
experience and background in manufacturing medical products and obtaining
patents internationally, as well as obtaining medical approvals worldwide.
The 2 employees are Maria Klippenstein and John Klippenstein. Mrs. Klippenstein
is the Secretary and Treasurer of L.O.M. Laboratory as well as the Secretary and
Treasurer of the Company. Her day-to-day duties include monitoring accounts
payable and receivable, reporting to the Company's stock transfer agent,
shareholder relations and reporting to the Company's corporate securities
attorney. Mr. Klippenstein is the Company's President and Chief Executive
Officer. He performs all the duties of that office.
The Company has also hired Peter McFadden, Certified Accountant, and James
O'Brien as consultants. Peter McFadden is also the Chief Financial Officer of
L.O.M. Laboratory. Mr. McFadden's day-to-day duties include corporate finances,
accounting and communications with the Company's auditors, corporate reporting
and annual tax filings, financial
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reporting to the Company's Board of Directors, corporate financial advising,
organization and reporting on annual shareholder meetings, and corporate tax
planning. Mr. O'Brien is in charge of general corporate research, including, but
not limited to, product research, contract negotiations, distribution
agreements, product promotions and public relations. L.O.M. Laboratories has
also entered into a subcontractor's agreement with Pam Klippenstein. Ms.
Klippenstein's duties include managing the Vancouver office, general office
duties, drafting and review of the Company's newsletters, general
correspondence, directors' meetings including minutes and reports, and mailroom
and website updates. L.O.M. Laboratories has also entered into a contract with
Dr. Jeffrey Berg, Sr. Dr. Berg's duties include product analysis and strategic
alliances with medical publications, product evaluation and reports, negotiating
strategic alliances and brokerage liaisons.
Competition. Competition in the medical products industry is intense and the
Company expects the competition to increase. The Company will compete directly
with other companies and businesses that have developed and are in the process
of developing technologies and products which will be competitive with the
products developed and offered by the Company. There can be no assurance that
other technologies or products which are functionally equivalent or similar to
the technologies and products of the Company have not been developed or are not
in development. The Company expects that there are companies or businesses which
may have developed or are developing such technologies and products as well as
other companies and businesses which have the expertise which would encourage
them to develop and market products directly competitive with those developed
and marketed by the Company. Many of these competitors have greater financial
and other resources, and more experience in research and development than the
Company. To the extent that customers exhibit loyalty to the supplier that first
supplies them with a particular product or technology, the competitors of the
Company may have an advantage over the Company with respect to products and
technologies first developed by such competitors. As a result of their size and
breadth of their product offerings, certain of these competitors have been and
will be able to establish managed accounts by which, through a combination of
direct computer links and volume discounts, they seek to gain a disproportionate
share of orders for health care products and technologies from prospective
customers. Such managed accounts present significant competitive barriers to the
Company. It is anticipated that the Company will benefit from its participation
in niche research markets which, as they expand, may attract the attention of
the competitors of the Company.
There can be no assurance that competitors have not or will not succeed in
developing technologies and products that are more effective than any which have
been or are being developed by the Company or which would render the products of
the Company obsolete and noncompetitive. Many of the competitors of the Company
have substantially greater experience, financial and technical resources and
production, marketing and development capabilities than the Company. If the
Company commences commercial sales of its products, it will also be competing
with respect to manufacturing efficiency and sales and marketing capabilities.
The strategy of the Company for growth is substantially dependent upon its
ability to market and distribute products successfully. Other companies,
including those with substantially greater financial, marketing and sales
resources, compete with the Company, and have the advantage of marketing
existing products with existing production and distribution facilities. There
can be no assurance that the Company will be able to market and distribute
products on acceptable terms, or at all. Failure of the Company to market its
products successfully could have a material adverse effect on the Company's
business, financial condition or results of operations.
Specifically, when the Company applied for its United States patents in 1997, a
United States Patent search revealed 7 separate patents which related to
different safety syringes. The Company also caused the preparation of a market
report issued by Frost & Sullivan entitled "U.S. Disposable Needle, Syringe, and
Related Products, Markets" Publication No. 5341-54. The market report described
the market, pricing and the specific competition. The Company believes that
there is virtually no competition other than one syringe which is called
"Vanishing Point" presently manufactured in Texas. The company which
manufacturers this syringe is called Retractable Technologies Inc. ("RTI"). The
syringe manufactured by RTI works on a pre-tension stainless spring which
releases once the medicine chamber is emptied. The plunger will trigger the
retraction by applying additional pressure. The price of this syringe is US$0.52
per 3CC syringe, whereas standard 3CC syringes sell at US$0.26. The syringe
manufactured by RTI is currently marketed only in California because the Company
is not able to produce enough product to satisfy the demand because the RTI
design is labor intensive and does not allow on-line high speed production. The
Company believes that the Syringe has the distinct advantage that its design was
engineered for high speed production and its cost and is much more cost
effective and not as labor intensive as the syringe produced by Retractable
Technologies Inc.
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Compliance with Environmental Laws. Because of the nature of the operations of
the Company and possible use of hazardous substances in its ongoing research and
development and manufacturing activities, the Company may be subject to
stringent laws, rules, regulations and policies governing the use, generation,
manufacturing, storage, air emission, effluent discharge, handling and disposal
of certain materials and waste. The risk of accidental contamination or injury
from hazardous materials cannot be completely eliminated. In the event of such
an accident, the Company could be held liable for any damages that result and
any such liability could exceed the financial resources of the Company.
Regulation by governmental authorities in the United States and other countries
will be a significant factor in the production and marketing of any products
which may be developed by the Company. The nature and extent to which such
regulation may apply to the Company will vary depending on the nature of the
specific product. Although it is believed that the Company is currently in
compliance with all applicable governmental and environmental laws, rules,
regulations and policies, there can be no assurance that the business, financial
condition, and results of operations of the Company will not be materially
adversely affected by current or future environmental laws, rules, regulations
and policies, or by liability occurring because of any past or future releases
or discharges of materials that could be hazardous.
Compliance with Governmental Regulations.
United States Governmental Regulation. Virtually all of the Company's products
will require regulatory approval by governmental agencies prior to
commercialization. The Company expects to research and develop products and
technologies requiring rigorous pre-clinical and clinical testing and other
approval procedures by the FDA and similar health authorities in foreign
countries. Various federal statutes and regulations also govern or influence the
manufacturing, safety, labeling, storage, record keeping and marketing of such
products. The process of obtaining these approvals and the subsequent compliance
with appropriate federal and foreign statutes and regulations requires the
expenditure of substantial resources. The effect of government regulations may
be to delay for a considerable period of time or even prevent the marketing of
any product that the Company may develop and/or to impose costly procedures on
the Company's activities. Non-compliance with applicable requirements can result
in, among other things, fines, injunctions, seizures of products, total or
partial suspension of product marketing, failure of government to grant
pre-market approval, withdrawal of marketing approvals, product recall and
criminal prosecution.
On November 28, 1990, the Safe Medical Devices Act ("SMDA") became law. The SMDA
amended the Food, Drug and Cosmetic Act and has several provisions that affect
the medical device industry. Several provisions of the SMDA are self-enacting.
Both distributors and importers of medical devices are affected by the SMDA.
Beginning on November 28, 1990, medical facilities are now required to report
patient deaths attributed to devices to the manufacturers and the Food and Drug
Administration ("FDA"). Medical facilities are also now required to report
serious injuries and serious illnesses contributed or caused by medical devices
to the manufacturers. Because the SMDA user facility reporting requirement is
self-implementing and contains limited procedures for reporting, the FDA issued
interim guidance for user facilities in order to comply with the SMDA. The
guidance includes a test reporting form that the facilities may use to report
incidences to manufacturers. SMDA Section 519(d) or 21 U.S.C. 360(i)(d),
requires that manufacturers, importers and distributors annually certify to the
FDA the number of MDR reports they have submitted in a year or that no such
reports were submitted. Moreover, distributors will be required to report
incidents to manufacturers and to the FDA under Section 519(a)(6) or 21 U.S.C.
360(i)(a)(6). They will also be required to register with the FDA.
There are also two provisions in the SMDA that affect product removal and
correction. The first section is Section 519(f) or 21 U.S.C. 360(i)(f). In this
section, a firm is required to report to the FDA when it removes or corrects a
distributed product when those actions are intended to reduce risk to public
health posed by a device or to remedy a violation of the SMDA that may present a
risk to public health. If a product removal or correction is reported under the
MDR with an incident report, it does not have to be reported a second time to
the FDA. The second provision is Section 303(j) or 21 U.S.C. 333(j). This
provision became effective November 28, 1990. The agency now has the authority
under certain conditions to order manufacturers, importers, distributors or
retailers of devices to immediately cease distribution of a violative product.
It can also order notification to health care professionals and user facilities
to cease use of a product when there is a reasonable probability that it would
cause serious adverse health consequences or death. The person subject to the
order has the opportunity for an informal hearing within 10 days after the date
of the issuance on the actions required by the order and whether the device
should be recalled.
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Manufacturers of devices that are reasonably likely to have adverse health
consequences and are permanent implants or life sustaining or life supporting
and are used outside of a device user facility are required to develop device
tracking system. This language appears in Section 519(e) or 21 U.S.C. 360(i)(e).
Canadian Governmental Regulation. In Canada, all products that require approval
for marketing and sales must be submitted to the Health Production Branch
Tunney's Pasture Ottawa ("Branch Tunney's"). Testing by Branch Tunney's includes
the testing of (i) a product's design function; (ii) a product's materials;
(iii) method of product sterilization; (iv) sample of the product's packaging;
(v) a product's labeling; (vi) indications of lot numbers; (vii) size; (viii)
manufacturers names and/or place of production; and (ix) projected run date.
Trial runs of the Syringe will be carried out through hospitals, where product
performance will be evaluated. For the market and distribution of the Syringe,
the Company is in the process of obtaining Health Canada and Food and Drug
Administration Approval Numbers. The Company will also need to acquire DIN
numbers and UPC codes. Finally, the Company will have to obtain national drug
codes.
The Company is also subject to the provisions of the Canadian Food and Drug Act
("CFDA"). Chapter F-27 of the CFDA regulates the advertisement and sale of food,
drugs, cosmetics and medical device products. Specifically, this section of the
CFDA restricts the labeling, packaging, and treatment process and sale or
advertisement of any medical device in a manner that is false, misleading or
deceptive or is likely to create an erroneous impression regarding its design,
construction, performance, intended use, quantity, character, value,
composition, merit or safety. Moreover, the regulation provides that where a
standard has been prescribed for a device, no person shall label, package, sell
or advertise any article in any manner that is likely to be mistaken for such a
device unless the article complies with the prescribed standard. Part II of the
Chapter F-27 of the CFDA also explains the administration and enforcement powers
of inspectors working under the CFDA. Specifically, the CFDA gives inspectors
the right to, at any reasonable time, enter any place where on reasonable
grounds the inspector believes any article is manufactured, prepared, packaged,
preserved or stored, and examine any such article and make or take samples
thereof and anything the inspector reasonably believes is used or capable of
being used for such manufacture, preparation, preservation, packaging or
storing. The inspector will also have the power and authority to open and
examine any receptacle or package that on reasonable grounds he believes any
article to which the CFDA or the regulations apply. Finally, the inspector shall
have the power to seize and obtain for such time reasonably necessary any
article by means of or in relation to which he reasonably believes any provision
of the CFDA or regulations have been violated.
The Company is also subject to the provisions of Chapter 871 of the CFDA
specifically relating to the medical device regulations. Specifically, Chapter
871 of the CFDA addresses the labeling of medical devices.
Part I of Chapter 871 provides that labeling on medical devices must contain (i)
the name of the device; (ii) name and address of the manufacturer, distributor
or importer of the device; (iii) a lot number or serial number of the device;
(iv) the model designation of the device; (v) the precise nature of the benefits
claimed to be obtainable through the use of the device; (vi) directions for use
of the device; (vii) information as to whether a device is sterile; (viii) the
expiration date of the device if applicable; and (ix) a list of the contents of
the package and the number of complete units contained therein. Part I of
Chapter 871 of the CFDA also contains extensive and involved regulations
concerning the specific nature and quality of any labeling on medical devices,
including but not limited to, warnings, language, position of label and any
required symbols. This same section also addresses product testing before sale.
Specifically, the CFDA provides that no manufactures of a device or person who
has imported into Canada a device for sale shall sell the device unless tests
have been conducted with respect thereof and the tests indicate that the nature
of the benefits claimed to be obtainable through the use of the device and the
performance characteristics claimed by the device are justified as shown by the
evidence available in Canada to the manufacturer or the person importing the
device.
Reports to Security Holders. The Company is now considered a reporting company
according to the Securities and Exchange Commission ("SEC"). As a reporting
company, the Company is obligated to provide and annual report to its security
holders, which includes financial statements. The public may read and copy any
materials filed with the SEC at the SEC's Public Reference Room at 450 Fifth
Street N.W., Washington, D.C. 20549. The public may also obtain information on
the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC. The address of that site is http://www.sec.gov.The Company
currently maintains its own Internet address at www.lomm.com.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion includes a number of forward-looking statements which
indicate the Company's current expectations with respect to future events and
financial performance. Forward-looking statements can be identified by the use
of forward-looking terminology such as "believes", "anticipates", "estimates",
"projects", "expects", "may", "will", or "should" or the negative thereof or
other variations thereon or comparable terminology. Such statements are subject
to certain risks, uncertainties and assumptions. No assurances can be given that
the future results anticipated by those forward-looking statements will be
achieved. The following matters constitute cautionary statements identifying
important factors with respect to such forward-looking statements, including
certain risks and uncertainties, that could cause actual results to vary
materially from the future results covered in such forward-looking statements.
Other factors could also cause actual results to vary materially from the future
results anticipated in such forward-looking statements. Undue reliance should
not be placed on those forward-looking statements, are based on facts existing
as of the date of this Registration Statement.
The Company 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 the Company, 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. The
Company has produced testing quantities amounting to 33,000 units of its eye
care products. The Company'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. The Company believes
that this can be increased to 150,000 units by running additional shifts. The
Company 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. The Company does anticipate that it will be able to
manufacture its products for initial commercialization.
The Company anticipates that it will contract out the first two years of
production of the Syringe. At the end of the second year of production, the
Company anticipates it will engage in significant discussions regarding the
potential for the construction of its own production facility. The Company
recognizes that the construction of its own production facility will be
contingent upon its having reached its sales and profit projections. The Company
anticipates that it will present this issue for vote by its Board of Directors
and shareholders. In this regard, the Company 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, the Company's eye care products are currently produced
in Canada. The Company owns all of the necessary injection molds. The Company
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 the Company's own work force. All other products of the Company, 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.
The Company is currently negotiating with the Irish Development Board in Ireland
("Development Board"). Representatives from the Development Board have met with
the Company's Board of Directors on 3 different occasions and have offered to
assist the Company in establishing a production facility in Ireland. The Company
has already sent representatives to Ireland to discuss the production of the
Syringe as well as strategic alliances for market distribution of all the
Company's products. The Company's plans to construct a production facility are
merely preliminary. As such, the Company has not reached an estimation of the
capital resources necessary to fund such a project nor has the Company
determined how long such a project would take to complete. The Company
anticipates that at the end of the projected two-year period, the Company 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 the Company will have the necessary funds at the end of the
two-year period to construct its proposed production facilities. Should the
Company not have the necessary funds, the Company anticipates it will continue
to cause its products to be produced on a contract basis.
The manufacture of the products of the Company involves a number of steps and
requires compliance with stringent quality control specifications imposed by the
Company and various regulators. The Company may not be able to quickly replace
its manufacturing capacity if it were unable to use its manufacturing facilities
as a result of a fire, natural disaster (including earthquake), equipment
failure or other difficulty, or if such facilities are deemed not in compliance
with the various regulators' requirements and the non-compliance could not be
rapidly rectified. The inability or reduced capacity
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of the Company to manufacture or have manufactured any of its products would
have a material adverse effect on the Company's business and results of
operations.
Currently, the Company does have the necessary production facilities to produce
its line of eye care products on a commercial basis. The Company has FDA
approval to market its line of eye care products in the United States. Also, as
previously discussed, the Company has the necessary Canadian approval to market
its eye-care products in Canada. The Company has commenced marketing the
Lens-O-Matic in Canada as well as the United States. Shippert Medical will be
marketing the Company's eye care products in the United States as well as in
Canada. The Company 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.
The products of the Company will be subject to numerous foreign government
standards and regulations that are continually being amended. Although the
Company will endeavor to satisfy foreign technical and regulatory standards,
there can be no assurance that the products of the Company will comply with
foreign government standards and regulations, or changes thereto, or that it
will be cost effective for the Company to redesign its products to comply with
such standards or regulations. The inability of the Company to design or
redesign products to comply with foreign standards could have a material adverse
effect on the Company's business, financial condition and results of operations.
The business of the Company and its subsidiaries will expose it to potential
product liability risks that are inherent in the testing, manufacturing and
marketing of medical products. The Company does not currently have product
liability insurance, and there can be no assurance that the Company will be able
to obtain or maintain such insurance on acceptable terms or, if obtained, that
such insurance will provide adequate coverage against potential liabilities. The
Company faces an inherent business risk of exposure to product liability and
other claims in the event that the development or use of its technology or
products is alleged to have resulted in adverse effects. Such risk exists even
with respect to those products that are manufactured in licensed and regulated
facilities or that otherwise possess regulatory approval for commercial sale.
There can be no assurance that the Company will avoid significant product
liability exposure. There can be no assurance that insurance coverage will be
available in the future on commercially reasonable terms, or at all, that such
insurance will be adequate to cover potential product liability claims or that a
loss of insurance coverage or the assertion of a product liability claim or
claims would not materially adversely affect the Company's business, financial
condition and results of operations. While the Company has taken, and will
continue to take, what it believes are appropriate precautions, there can be no
assurance that it will avoid significant liability exposure. An inability to
obtain product liability insurance at acceptable cost or to otherwise protect
against potential product liability claims could prevent or inhibit the
commercialization of products developed by the Company. A product liability
claim could have a material adverse effect on the Company's business, financial
condition and results of operations.
The health care industry is subject to changing political, economic and
regulatory influences that will affect the procurement practices and operation
of health care organizations. Changes in current health care financing and
reimbursements systems could result in the need for unplanned product
enhancements, in delays or cancellations of product orders or shipments, or in
the revocation of endorsement of the products of the Company. Any of such
occurrences could have a material adverse effect on the Company's business,
financial condition and results of operations. During the past several years,
various health care industries have been subject to an increase in governmental
regulation of, among other things, reimbursement rates. Certain proposals to
reform the health care systems are periodically under consideration by the
appropriate regulators. These programs may contain proposals to increase
government involvement in health care and otherwise change the operating
environment for the customers of the Company. Health care organizations have
responded to these proposals and the uncertainty surrounding these proposals by
curtailing or deferring investments in cost containment tools and related
technology, such as the products of the Company. The Company cannot predict what
impact, if any, such factors might have on its business, financial condition and
results of operations. In addition, many health care providers are consolidating
to create integrated health care delivery systems with greater regional market
power. As a result, these emerging systems could have greater bargaining power,
which may lead to price erosion of the products of the Company. The failure of
the Company to maintain adequate price levels would have a material adverse
effect on the Company's business, financial condition and results of operations.
Other legislative or market-driven reforms could have unpredictable effects on
the Company's business, financial condition and results of operations.
The Company, is a development stage enterprise and is currently putting
technology in place which will, if successful, mitigate the net losses
experienced by the Company. The Company is reviewing its options and evaluating
its potential to
9
<PAGE>
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 Company has also conducted extensive negotiations with various
medical companies in an attempt to establish beneficial strategic alliances. The
Company hopes that these negotiations will result in significant earnings for
the Company. To achieve and maintain the competitiveness of its products and to
conduct costly and time-consuming research and development, the Company may be
required to raise substantial funds in addition to the funds already raised
through the issuance of the Company's shares. The Company'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 Company 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, the Company may
be required to curtail operations significantly or to obtain funds through
entering into arrangements with collaborative partners or others that may
require the Company to relinquish rights to certain products that the Company
would not otherwise relinquish. The Company believes that it is poised to
maintain its long-term liquidity. This is based upon cash flow projections
prepared by the Company. A copy of the cash flow projections have been appended
to this report for your information. Management of the Company has raised enough
capital and will be able it to meet its financial obligations for a period of at
least twelve (12) months from March 1, 2000. The Company 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 the Company, the Company believes it can significantly improve its
long-term liquidity. An anticipated cash flow analysis for the 12-month period
beginning March 1, 2000, and ending February 29, 2001, is attached as Exhibit 1
to this Amendment No. 3 to the Company's Registration Statement on Form 10-SB.
Impact of the Year 2000. The Company anticipates that the Year 2000 ("Y2K")
could impact the business of the Company. Many business software applications
use only the last two digits to indicate the applicable year. Unless these
programs are modified, computers running time-sensitive software may be unable
to distinguish between 1900 and 2000, resulting in system failures or
miscalculations and disruptions of operations, including, among other things, a
temporary inability to process transactions or engage in other normal business
activities. Many Y2K problems might not be readily apparent when they first
occur, but instead could imperceptibly degrade technology systems and corrupt
information stored in computerized databases, in some cases before January 1,
2000.
In order to improve operating performance and meet Y2K compliance, the Company
anticipates it will undertake a number of significant systems initiatives. The
Company has determined that the incremental cost of ensuring that its computer
systems are Y2K compliant is not expected to have a material adverse impact on
the Company. The Company has completed a preliminary assessment of each of its
operations and their Y2K readiness and feels that the appropriate actions are
being taken, and expects to complete its overall Y2K readiness program prior to
any anticipated impact on its operations. The Company has determined that, with
modifications to existing software and conversions to new systems, the Y2K issue
will not pose significant operational problems for its computer systems. The
Company recognizes, however, that if such modifications are not completed, the
Y2K issue could have a material impact on the operations of the Company. The
Company has initiated formal communications with a number of its significant
suppliers to determine the extent to which the Company's interface systems are
vulnerable to those third parties' failure to remedy their own Y2K issues, and
anticipates it will initiate similar communications with major customers as well
as the balance of its major suppliers in 1999. There is no guarantee that the
systems of other companies on which the Company's systems rely will be timely
converted and will not have an adverse effect on the Company's systems.
Liquidity and Capital Resources. Cash and equivalents constitute the Company's
current internal sources of liquidity. Because the Company is not generating any
revenues from the sale or licensing of its products, the Company's only external
source of liquidity is the sale of its capital stock.
The Company's unaudited balance sheet as a May 31, 1998, showed current assets
of US$571,528.00, made up primarily of cash of US$548,197.00 and accounts
receivable of US$11,446.00. For that same period, current liabilities were
US$21,304.00. Therefore, on May 31, 1998, current assets exceeded current
liabilities by US$550,224.00. The net loss at May 31, 1998, was US$293,239.00.
Loss from operations at May 31, 1998, was US$309,574.00.
10
<PAGE>
The Company's audited balance sheet as at May 31, 1999, showed current assets of
US$376,541.00, made up primarily of cash of US$346,646.00 and accounts
receivable of US$26,442.00. The current liabilities at that date were
US$36,404.00. Therefore, on that date current assets exceeded current
liabilities by US$340,137.00. The net loss for the year ended May 31, 1999, was
US$726,055.00. Loss from operations at May 31, 1999, was US$747,667.00.
The Company's unaudited balance sheet as at February 29, 2000, showed current
assets of US$448,755.00, made up primarily of US$417,951.00 in cash and
US$29,337.00 in accounts receivable. Current liabilities were US$19,363.00.
Therefore, on February 29, 2000, current assets exceeded current liabilities by
US$429,392.00. The net loss for the nine months ended February 29, 2000, was
US$318,184.00, compared to a net loss of US$222,145.00 for the corresponding
9-month period in 1999. Loss from operations for the 9-month period ending
February 29, 2000, amounted to US$126,392.00 compared to US$79,453.00 for the
corresponding 9-month period in 1999.
The business strategy of the Company may enable the Company to realize revenue
to support, in part, its operations and, therefore, may reduce offerings of the
Company's common stock needed to raise capital.
Results of Operations. The Company has not yet realized any revenue from
operations.
Manufacturing and Marketing the Company's Products.
The Syringe. The Company 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. The Company also contemplates that it will
be able to readily obtain the necessary packaging for the Syringe. The Company
does not believe that its sales will be affected by seasonal factors. The
Company believes that prototypes of the Syringe will be ready for testing in
March, 2000. The Company believes that it will complete testing in Canada and
gain the necessary regulatory approvals in or around June, 2000. The Company
believes it will complete the necessary United States testing as well as secure
the required United States regulatory approval in or around September, 2000.
The Company 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. The Company 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,
the Company 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. The Company 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. The Company will
then utilize professionals such as doctors and related health care professionals
who approve, recommend and endorse the Company's products, including the
Syringe. Thereafter, the Company anticipates that the Syringe will be supplied
to large national distributors within specific regions all over the world. The
Company anticipates that the distributors will thereafter market the Syringe to
pharmacy and medical supply companies. The Company's overall operating plan is
to act as a manufacturer, selling directly and only to distributors and retail
chains. The Company hopes that the product will gain acceptance in the medical
community and that the Company's skill in positioning and merchandising the
products and technology of the Company will enable it to acquire a commercially
reasonable portion of the market.
Lens-O-Matic. The Company anticipates that its eye care products will be sold
both by retail stores and as a kit distributed by the medical profession. The
Company 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 the Company's sales
representatives. The Company has recently secured FDA approval for the
manufacturing and distribution of a first product run of its eye-care products.
The Company has developed our own dyes and injection molds for our Lens-O-Matic
and related products. The Company has 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. The Company
manufactures the necessary components for the Lens-O-Matic and related products
in Saskatchewan, Canada. The Company is currently negotiating with Shippert
Medical Technologies of Englewood, Colorado ("Shippert") pursuant to which the
Company anticipates that Shippert will distribute the Company's product line in
the United States. The Company anticipates that its
11
<PAGE>
agreement with Shippert will be finalized within the second fiscal quarter of
2000. The Company has begun marketing its eye-care products. The Company has
received requests for the Lens-O-Matic from the United States, Europe and Asia.
The Company plans to focus its initial marketing efforts in Canada and the
United States. The Company hopes to eventually expand its product marketing and
sales into Europe, South America, Central America, Mexico and Asia. The Company
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 the
Company's primary marketing method. It is expected that the Company'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 the Company 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 the Company's sales may be made through
independent distributors over which the Company has no control and who also will
represent products of other companies. The Company 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.
Item 3. Description of Property.
Property held by the Company. As of the dates specified in the following table,
the Company held the following property:
<TABLE>
<CAPTION>
==========================================================================================================
Property May 31, 1998 May 31, 1999 February 29, 2000
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash US$548,197.00 US$346,646.00 US$417,951.00
==========================================================================================================
</TABLE>
Facilities. The Company leases office space located at 1482 Springfield Road,
Kelowna, Canada from Tech-Nacan Consultants ("Tech-Nacan"). Tech-Nacan is a
company owned by John Klippenstein, the Company's President, Chief Executive
Officer and a director, and Maria Klippenstein, Secretary and the Treasurer of
the Company. The Company also leases office space at 885 Dunsmuir Street in
Vancouver, Canada. The Company also leases space in Great Plains Industrial Park
in Saskatchewan for the assembly and storage of the Company's Lens-O-Matic
product. For the year ended May 31, 1999, the Company paid a total of
US$33,751.00 towards the rental of its offices. For the three-month period ended
August 31, 1999, the Company paid US$10,265.00 towards the rental of its
offices. The Company is obligated to make future lease payments as follows:
Year Payment
---- ---------
2000 US$36,913
2001 US$19,453
2002 US$19,453
2003 US$19,453
2004 US$19,453
Item 4. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners. Except for the directors
and principal executive officers of the Company, no other individual
beneficially owns 5% or more of the Company's issued and outstanding shares.
(b) Security Ownership of Management. The directors and principal executive
officers of the Company beneficially own, in the aggregate, 3,766,059 shares of
the Company's common stock, or approximately 68% of the Company's issued and
outstanding shares, as set forth in the following table:
12
<PAGE>
<TABLE>
<CAPTION>
Title of Class Name of Beneficial Owner Amount Percent of Class
- -------------- ------------------------ ------ ----------------
<S> <C> <C> <C>
Common Stock David E. Gramlich 69,300 1.2%
21274-87 Place
Langley, B.C. V1M 1Z8 Director
Common Stock Colin Lee 55,000 1.0%
2749 McColl Place
Victoria, B.C. V8N 5Y8 Director
Common Stock Peter McFadden 10,980 .1%
418 Oakview Road Vice President, Chief
Kelowna, B.C. V1W 4K2 Financial Officer and a
Director
Common Stock John Klippenstein 3,629,776(1) 63.4%
494 Casa Rio Drive President, Chief
Kelowna, B.C. V1Z 3L6 Executive Officer and a
Director
Common Stock Maria Klippenstein 3,629,776(2) 63.4%
494 Casa Rio Drive Secretary and Treasurer
Kelowna, B.C. V1Z 3L6
Common Stock John Gergely 1,000 .02%
21327-86A Cresent
Langley, B.C. V1M 2A1 Director
</TABLE>
(1) Includes 1,814,084 shares of the Company's $.001 par value common stock
owned by Mr. Klippenstein's wife, Maria Klippenstein.
(2) Includes 1,814,084 shares of the Company's $.001 par value common stock
owned by Mrs. Klippenstein's husband, John Klippenstein.
Changes in Control. Management of the Company is not aware of any arrangements
which may result in "changes in control" as that term is defined by the
provisions of Item 403(c) of Regulation S-B. On or about June 1, 1997, the
Company agreed to acquire a 96% interest (4800 Class A common voting shares) of
L.O.M. Laboratories Inc., a British Columbia company ("L.O.M. Labs"). However,
the acquisition was not effective until on or about January 13, 1998, when the
shareholders and directors of L.O.M. Laboratories Inc. approved the sale of the
4800 shares to the Company. L.O.M. Laboratories Inc. is now a 96%-owned
subsidiary of the Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors and principal executive officers of the Company are as specified
on the following table:
<TABLE>
<CAPTION>
=================================================================================================================================
Name Age Position Term as Director
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John Klippenstein 60 President, Chief Executive Officer and Director From inception to present
- ---------------------------------------------------------------------------------------------------------------------------------
Peter McFadden 43 Vice President, Chief Financial Officer and Director From inception to present
- ---------------------------------------------------------------------------------------------------------------------------------
Maria Klippenstein 59 Secretary and Treasurer
- ---------------------------------------------------------------------------------------------------------------------------------
David A. Gramlich 58 Director From inception to present
- ---------------------------------------------------------------------------------------------------------------------------------
Colin Lee 62 Director From inception to present
- ---------------------------------------------------------------------------------------------------------------------------------
John Gergely 35 Director From inception to present
- ---------------------------------------------------------------------------------------------------------------------------------
Dr. Jeffrey Berg 56 Director From February 28, 2000 to
present
=================================================================================================================================
</TABLE>
John Klippenstein is the President, Chief Executive Officer and a director of
the Company. received his education in Winnipeg and received a Certified
Engineering Technician degree in 1964 from Red River College in Winnipeg,
Manitoba. From 1980 to present, Mr. Klippenstein has been the President and
owner of Tech-Nacan Consultants. From
13
<PAGE>
1994 to present, Mr. Klippenstein has been the President of the Company's
subsidiary, L.O.M. Laboratories, Inc. Mr. Klippenstein is currently a director
of Highland Security Corporation and has been since 1996. Mr. Klippenstein has
also worked for several land development companies until 1969 when he started
his personal land development and construction management company, which still
has holdings in Kelowna, British Columbia. As owner of Tech-Nacan Consultants
Inc., Mr. Klippenstein has developed and built many large commercial and
industrial projects including health care facilities, clinics, schools,
institutional buildings, senior citizen housing, high rise apartment complexes,
recreational complexes, and food processing facilities in Manitoba, Saskatchewan
and Alberta.
Peter McFadden is the Chief Financial Officer and a director of the Company. Mr.
McFadden began his university education in 1979. He received his Bachelor of
Science degree at McMaster University, and a Masters Degree in Business
Administration from the University of Windsor in 1982. From 1994 to present, Mr.
McFadden has operated his own public accounting firm under the name of Peter
McFadden Inc. Chartered Accountants. Prior to establishing his own accounting
practice, Mr. McFadden spent 12 years as a Senior Manager for a national public
accounting firm. Mr. McFadden is also a lecturer at Okanagan University.
Maria Klippenstein is Secretary and Treasurer of the Company. Mrs. Klippenstein
has completed university level studies in industrial accounting including
bookkeeping, accounts receivable and accounts payable, and banking. From 1980 to
present, Mrs. Klippenstein has been the Secretary and Treasurer of Tech-Nacan
Consultants. From 1994 to present, Mrs. Klippenstein has been the Secretary and
Treasurer of L.O.M. Laboratories, Inc., the Company's subsidiary. Mrs.
Klippenstein has 20 years of experience in accounting and is proficient in
AccPac accounting software and cost accounting. Mrs. Klippenstein is also an
accomplished artist and photographer.
David A. Gramlich is a director of the Company. Mr. Gramlich began his business
career in 1968 in the field of real estate. From 1968 to 1979, he worked as a
manager of several real estate firms. From 1979 to 1998, Mr. Gramlich was a
self-employed businessman specializing in real estate and development. Mr.
Gramlich also owned Video Max, a company which owned and operated four video
stores in the City of Langley, British Columbia. Since 1998, Mr. Gramlich has
been employed by Candan R.V. Centre as a sales and lease consultant. Mr.
Gramlich has participated in industrial, commercial and institutional
transactions.
Colin Lee, M. D., is a director of the Company. Dr. Lee came to Canada in 1968
after having received his medical degree from Capetown University in South
Africa in 1966. Since his arrival in Canada, Dr. Lee has worked in the specialty
of radiology. Dr. Lee owns and operates 5 radiology clinics in Vancouver Island
and Victoria, British Columbia, in partnership with Dr. Sidney Joss. Dr. Lee not
only brings his medical knowledge to the Company, but also his investment
experience.
John Gergely, M. D., is a director of the Company. Dr. Gergely currently works
at Vancouver General Hospital, where he interns, specializing as an anesthetist.
Dr. Gergely graduated from the Royal University Hospital in Saskatoon,
Saskatchewan with a Medical Doctorate Degree. He graduated second in his class
of 60. Dr. Gergely anticipates participating in the Company's medical product
research and testing activities. Dr. Gergley has been a Medical Doctor for five
years.
Jeffrey Berg, PhD, is a director of the Company. Dr. Berg is a senior research
analyst as well as a prime consultant to medical companies located within the
United States, including, but not limited to, Johnson & Johnson and Bausch &
Lomb. Dr. Berg typically associates himself with companies offering
pharmaceutical, biotechnological and medical-device and diagnostic products. Dr.
Berg has also been published in medical publications. Dr. Berg is the owner and
President of Health Care Insights. Health Care Insights has offices in Edison,
New Jersey.
None of the officers and directors have been officers and directors of reporting
companies.
John Klippenstein and Maria Klippenstein are husband and wife. Other than the
persons listed above, there are no significant employees expected by the Company
to make a significant contribution to the business of the Company. All directors
of the Company serve until the next annual meeting of stockholders. The
Company's executive officers are appointed by the Company's Board of Directors
and serve at the discretion of the Board of Directors.
There are no orders, judgments, or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or
14
<PAGE>
in the sale of a particular security or temporarily or permanently restraining
Mr. Klippenstein, Mr. McFadden, Dr. Gergley, Mr. Gramlich, Dr. Lee, Dr. Berg or
Mrs. Klippenstein from engaging in or continuing any conduct, practice or
employment in connection with the purchase or sale of securities, or convicting
such person of any felony or misdemeanor involving a security, or any aspect of
the securities business or of theft or of any felony, nor are Mr. Klippenstein,
Mr. McFadden, Dr. Gergley, Mr. Gramlich, Dr. Lee, Dr. Berg or Mrs. Klippenstein
the officers or directors of any corporation or entity so enjoined.
Item 6. Executive Compensation - Remuneration of Directors and Officers.
Specified below, in tabular form, is the aggregate annual remuneration of the
Company's Chief Executive Officer and the four (4) most highly compensated
executive officers other than the Chief Executive Officer who were serving as
executive officers at the end of the Company's last completed fiscal year.
<TABLE>
<CAPTION>
==================================================================================================================================
Name of Individual or Identity of Group Capacities in which Remuneration was Aggregate Remuneration
received
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
John Klippenstein President and Chief Executive Officer CDN$130,000
==================================================================================================================================
</TABLE>
Specified below, in tabular form, is the aggregate annual remuneration of the
Directors of the Company who were serving as directors at the end of the
Company's last completed fiscal year.
<TABLE>
<CAPTION>
==================================================================================================================================
Name of Individual or Identity of Group Capacities in which Remuneration was Aggregate Remuneration
received
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
All Directors None None
==================================================================================================================================
</TABLE>
Each director of the Company receives reimbursement for actual and necessary
expenses incurred in attending meetings of the Board.
Item 7. Certain Relationships and Related Transactions.
Transactions with Promoters. J. Alexander & Company is the market maker for the
Company. J. Alexander & Company has not received any shares of common stock of
the Company for its market making services.
Related Party Transactions. On or about January 1, 1998, prior to becoming a
subsidiary of the Company, L.O.M. Laboratories Inc., purchased from John
Klippenstein all product rights to the Lens-O-Matic. L.O.M. Laboratories Inc.
paid a purchase price of CDN$542,000 allocated as follows: (i) L.O.M.
Laboratories Inc. forgave John Klippenstein's debt of CDN$101,329; and (ii)
L.O.M. Laboratories Inc. issued, to John Klippenstein, 4000 of the Company's
Class "C" Preferred Shares valued at CDN$440,671. At the time of the
transaction, John Klippenstein was serving as the President, Chief Executive
Officer and director of the Company as well as serving as President and a
director of L.O.M. Laboratories Inc. John Klippenstein signed the Purchase and
Sale Agreement in his individual capacity as seller and as the authorized
officer of L.O.M. Laboratories Inc. At the time of the transaction, Mr.
Klippenstein's wife, Maria Klippenstein, was both the Secretary and the
Treasurer of L.O.M. Laboratories Inc. and the Secretary and Treasurer of the
Company. The value of the investment will ultimately be determined by the
acceptance of the product in the market place which is uncertain at this time.
On or about June 1, 1997, the Company agreed to purchase 4,800 of the 5,000
total issued and outstanding shares of L.O.M. Laboratories Inc.'s 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,
Inc., approved the sale. The Company agreed to pay US$1.00 per share. This
represents a 96% interest in the subsidiary. The other 200 issued and
outstanding common shares are owned by John and Maria Klippenstein. At the time
of the transaction, John Klippenstein was serving as the President, Chief
Executive Officer and director of the Company as well as serving as President
and a director of L.O.M. Laboratories Inc. At the time of the transaction, Mr.
Klippenstein's wife, Maria Klippenstein, was both the Secretary and the
Treasurer of L.O.M. Laboratories Inc., and the Secretary and the Treasurer of
the Company. As discussed in the accompanying financial statements, this
transaction was measured at the carrying amount of the assets of the L.O.M.
15
<PAGE>
Laboratories, Inc. with the difference between the carrying amount and the
exchange amount reflected as a charge to equity. The details of the acquisition
are described in more detail in Note 2 of the accompanying financial statements
for the year ended May 31, 1999.
The Company leases its office space from 494040 B.C. Ltd. (Tech-Nacan
Consultants). Tech-Nacan Consultants, a British Columbia corporation, is a real
estate development company owned by John Klippenstein, President, Chief
Executive Officer and a director of the Company, and Maria Klippenstein,
Secretary and Treasurer of the Company. For the year ended May 31, 1999, the
Company paid US$18,420.00 for that office space. During that same period, the
Company expended US$27,919.00 for improvements on those premises. During the
9-month period ended February 29, 2000, the Company did not expend any funds for
improvements on those premises.
On or about October 27, 1997, with the Board of Director's approval, the Company
and John Klippenstein executed a five-year employment contract. Under the
agreement, John Klippenstein is to provide management services for the Company
for which the Company agreed to pay US$120,000 for the first year with a
US$10,000 increase every year thereafter, resulting in a final fifth year salary
of US$160,000. John Klippenstein currently is the President, Chief Executive
Officer and a director of the Company. During the year ended May 31, 1999, the
Company paid US$52,991 to Mr. Klippenstein. During the 9-month period ended
February 29, 2000, the Company paid US$45,729.00 to Mr. Klippenstein.
On or about July 10, 1997, the Company's subsidiary, L.O.M. Laboratories Inc.
entered into a Loan Agreement with David A. Gramlich, a current director of the
Company. Under the terms of the Loan Agreement, L.O.M. Laboratories Inc. loaned
Mr. Gramlich CDN$17,000, interest to accrue at the Royal Bank prime rate;
principal and interest to be due upon demand.
During the year ended May 31, 1999, the Company paid to Peter McFadden, Vice
President and Chief Financial Officer and a director of the Company, US$8,500.00
in legal and accounting fees. During the 9-month period ended February 29, 2000,
the Company paid Mr. McFadden US$10,425 in legal and accounting fees.
During the year ended May 31, 1999, the Company paid to Maria Klippenstein,
Secretary and the Treasurer of the Company and wife of John Klippenstein,
President, Chief Executive Officer and a director of the Company, US$47,813.00
in office and administrative fees. During the 9-month period ended February 29,
2000, the Company paid US$26.668.00 to Mrs. Klippenstein in office and
administrative fees.
During the year ended May 31, 1999, the Company paid to Pam Klippenstein,
relative of Maria and John Klippenstein, office and administration fees in the
amount of US$13,168.00 for the office management fees for the management of the
Company's subsidiaries' office. During the 9-month period ended February 29,
2000, the Company paid Pam Klippenstein US$13,168.00 in office management fees.
During the year ended May 31, 1999, the Company purchased inventory from John
Klippenstein, President, Chief Executive Officer and a director of the Company
in the amount of US$55,834.00. During the 9-month period ended February 29,
2000, the Company did not purchase any inventory from Mr. Klippenstein.
Except as disclosed in this section entitled "Related Party Transactions", the
Company is not aware of any other related party transactions. In the future, the
Company will fully disclose as required all transactions between related
parties.
Item 8. Description of Securities.
The Company is authorized to issue 50,000,000 shares of common stock, $.001 par
value, each share of common stock having equal rights and preferences, including
voting privileges. The Company is also authorized to issue 5,000,000 shares of
preferred stock with a par value of $.001. As of November 30, 1999, 5,589,281
shares of the Company's common stock were issued and outstanding. As of November
30, 1999, none of the Company's preferred stock was issued and outstanding.
The shares of $.001 par value common stock of the Company constitute equity
interests in the Company entitling each shareholder to a pro rata share of cash
distributions made to shareholders, including dividend payments. The holders of
the Company's common stock are entitled to one vote for each share of record on
all matters to be voted on by
16
<PAGE>
shareholders. There is no cumulative voting with respect to the election of
directors of the Company or any other matter, with the result that the holders
of more than 50% of the shares voted for the election of those directors can
elect all of the directors. The holders of the Company's common stock are
entitled to receive dividends when, as and if declared by the Company's Board of
Directors from funds legally available therefor; provided, however, that cash
dividends are at the sole discretion of the Company's Board of Directors. In the
event of liquidation, dissolution or winding up of the Company, the holders of
common stock are entitled to share ratably in all assets remaining available for
distribution to them after payment of liabilities of the Company and after
provision has been made for each class of stock, if any, having preference in
relation to the Company's common stock. Holders of the shares of Company's
common stock have no conversion, preemptive or other subscription rights, and
there are no redemption provisions applicable to the Company's common stock. All
of the outstanding shares of Company's common stock are duly authorized, validly
issued, fully paid and non-assessable.
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.
The Company participates in the OTC Bulletin Board Electronic Quotation System
maintained by the National Association of Securities Dealers, Inc., under the
trading symbol "LOMM". However, because no trading has occurred in the Company's
securities, there is no information as to any either high or low bids for the
Company's stock. In the future, any low or high bid on the Company's stock would
reflect inter-dealer prices without retail mark-up, markdown or commission and
may not reflect actual transactions. As of May 31, 1998, there were no issued or
outstanding warrants to purchase the Company's common stock. Although the
Company has reserved 1,000,000 shares of its $.001 par value common stock for
issuance upon the exercise of options, as of May 31, 1999, no options had been
granted.
There are approximately 286 holders of the Company's common stock. There have
been no cash dividends declared on the Company's common stock in the last two
fiscal years. Dividends are declared at the sole discretion of the Company's
Board of Directors.
Item 2. Legal Proceedings.
There are no legal actions pending against the Company nor are any such legal
actions contemplated.
Item 3. Changes in and Disagreements with Accountants.
There have been no changes in or disagreements with the Company's accountants
since the formation of the Company required to be disclosed pursuant to Item 304
of Regulation S-B except for the following:
On or about October, 1999, the Company's auditor, Joe Maciel Inc. resigned. The
decision to change accountants was approved by the Company's Board of Directors.
The audit report prepared by Joe Maciel Inc.'s did not contain an adverse
opinion or disclaimer of opinion. There were no disagreements with the Company's
former accountant. On or about October, 1999, KPMG LLP was engaged to prepare
the Company's audited financial statements and to review the Company's
management prepared interim financial statements. The reason for the change was
that Mr. Maciel is a Canadian Chartered Accountant and his audit was prepared
under Canadian Generally Accepted Accounting Principles. Since the Company
selected KPMG to prepare the financial statements under U.S. GAAP, he
subsequently resigned as auditor.
Item 4. Recent Sales of Unregistered Securities.
There have been no sales of unregistered securities within the last three (3)
years which would be required to be disclosed pursuant to Item 701 of Regulation
S-B, except for the following:
On or about April 16, 1997, the Company commenced an offering of shares of its
$.001 par value common stock for US$1.00 per share. The shares were issued in
reliance on an exemption from the registration requirements of the Securities
Act of 1933 ("Act") specified by the provisions of Section 3(b) of the Act and
Rule 504 of Regulation D promulgated by the Securities and Exchange Commission
pursuant to Section 3(b). The Company sold a total of 917,718 shares of its
common stock pursuant to that offering. Gross proceeds from the offering were
US$917,718 in cash. The
17
<PAGE>
offering price for the Company's shares of common stock was arbitrarily
established by the Company and had no relationship to assets, book value,
revenues or other established criteria of value. The Company was able to rely on
Rule 504 of Regulation D because it satisfied all of the requirements of such
rule, including, but not necessarily limited to, limitations on amount of funds
which may be raised.
On or about September 1, 1998, the Company commenced an offering of shares of
its $.001 par value common stock for US$5.00 per share. The shares were issued
in reliance upon the exemption from the registration requirements of the Act as
set forth in Regulation S promulgated by the Securities and Exchange Commission.
Specifically, the offer was made to "non U.S. persons outside the United States
of America", as that term is defined under applicable federal and state
securities laws. There were no underwriters involved and no commissions paid.
Through May 31, 1999, the Company had sold a total of 4,601,829 shares of its
common stock pursuant to that offering. The offering price for the units was
arbitrarily established by the Company and had no relationship to assets, book
value, revenues or other established criteria of value.
Item 5. Indemnification of Directors and Officers.
Article Seventh of the Company's Articles of Incorporation provides that no
director shall be personally liable to the Corporation or its stockholders for
monetary damages for any breach of fiduciary duty by such director as a
director. Article Seventh also states that, notwithstanding the foregoing
sentence, a director shall be liable to the extent provided by applicable law,
(i) for breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (iii) pursuant to
Section 174 of the Delaware General Corporation Law or (iv) for any transaction
from which the director derived an improper personal benefit. Finally, this
Article provides that no amendment or repeal of the Article shall apply to or
have any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
The Company may enter into indemnification agreements with each of its officers
and directors pursuant to which the Company agrees to indemnify each such
officer and director for all expenses and liabilities, including criminal
monetary judgments, penalties and fines, incurred by such officer or director in
connection with any criminal or civil action brought or threatened against such
officer or director by reason of such person being or having been an officer or
director of the Company. In order to be entitled to indemnification by the
Company, such officer or director must have acted in good faith and in a manner
such officer or director believed to be in the best interests of the Company
and, with respect to criminal actions, such person must have had no reasonable
cause to believe his or her conduct was unlawful.
DISCLOSURE OF POSITION OF COMMISSION REGARDING INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES:
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF
1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING THE COMPANY
PURSUANT TO THE FOREGOING PROVISIONS, THE COMPANY HAS BEEN INFORMED THAT IN THE
OPINION OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION IS
AGAINST PUBLIC POLICY AS EXPRESSED IN THE SECURITIES ACT OF 1933 AND IS,
THEREFORE, UNENFORCEABLE.
18
<PAGE>
PART F/S
Copies of the financial statements specified in Regulation 228.310 (Item 310)
are filed with this Amendment No. 3 to Registration Statement, Form 10-SB.
(a) Index to Financial Statements. Page
Auditors' Report for the year ended May 31, 1999 F-1
(Consolidated) Audited Balance Sheet as at May 31, 1998
and as at May 31, 1999 F-2
(Consolidated) Audited Statement of Loss
for the years ended May 31, 1998 and 1999 F-3
(Consolidated) Audited Statement of Cash Flows
for the years ended May 31, 1998 and 1999 F-4
(Consolidated) Audited Statement of Stockholders' Equity and
Comprehensive Income for years ended May 31, 1998 and 1999 F-5
Notes to Audited Consolidated Financial Statements F-6 through F-10
Independent Auditors' Review Report F-11
Unaudited Consolidated Balance Sheet as at February 29, 2000 F-12
Unaudited Consolidated Statement of Loss
For Nine Months Ended February 29, 2000 F-13
Unaudited Consolidated Statement of Cash Flows
For Nine Months Ended February 29, 2000 F-14
Unaudited Consolidated Statement of Stockholders' Equity and
Comprehensive Income for Nine Months Ended February 29, 2000 F-15
Notes to Unaudited Consolidated Financial Statements F-16 through F-21
(b) Index to Exhibits.
(1) Anticipated Cash Flow for 12-Month
Period From March 1, 2000, to February 29, 2001 E-1
19
<PAGE>
AUDITORS' REPORT TO THE STOCKHOLDERS
We have audited the consolidated balance sheet of L.O.M. Medical International
Inc. and subsidiary, a development stage enterprise, as at May 31, 1999 and the
consolidated statements of loss, cash flows and stockholders' equity and
comprehensive income for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the 1999 consolidated financial statements, referred to above,
present fairly, in all material respects, the financial position of L.O.M.
Medical International Inc. and subsidiary as at May 31, 1999 and the results of
its operations and its cash flows for the year then ended in accordance with
generally accepted accounting principles in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the consolidated financial
statements, the Company has accumulated a deficit since inception of $1,157,566.
This factor, as discussed in Note 1 a) raises substantial doubt about the
Company's ability to continue as a going concern. Managements plans in regard to
these matters are also described in note 1a). The financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.
Signed "KPMG LLP"
Chartered Accountants
Kelowna, Canada
November 29, 1999
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Balance Sheet
$ United States
May 31, 1999 and 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1999 1998
(Unaudited)
- ----------------------------------------------------------------------------------
Assets
<S> <C> <C>
Current assets
Cash $ 346,646 $ 548,197
Accounts receivable 26,442 11,446
Inventory 100 --
Prepaid expenses 3,353 11,885
- ----------------------------------------------------------------------------------
376,541 571,528
Product rights and patent costs (note 3) 16,740 403,336
Capital assets (note 4) 49,869 10,660
- ----------------------------------------------------------------------------------
$ 443,150 $ 985,524
- ----------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 36,404 $ 21,304
Redeemable preferred shares (note 5) 301,727 309,677
Share subscriptions (note 6(b)) 62,731 --
Stockholders' equity
Capital stock (note 6) 5,519 5,483
Additional paid in capital 1,171,009 1,074,283
Deficit accumulated during the development stage (1,157,566) (431,511)
Accumulated other comprehensive income 23,326 6,288
- ----------------------------------------------------------------------------------
42,288 654,543
- ----------------------------------------------------------------------------------
$ 443,150 $ 985,524
- ----------------------------------------------------------------------------------
</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
Years ended May 31, 1999 and 1998
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
From Inception
(March 17, 1997) 1999 1998
to May 31, 1999 (Unaudited)
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Expenses
Advertising $ 12,118 $ 4,729 $ 3,496
Amortization 28,569 17,661 3,870
Automotive 26,927 15,865 10,646
Consulting fees 67,786 20,889 --
Design plans 10,911 -- 10,911
Director's fees 15,424 6,904 8,520
Foreign exchange loss (gain) 2,630 6,187 (8,649)
Insurance 3,424 376 1,605
Interest and bank charges 3,287 1,034 937
Legal and accounting 89,509 42,575 39,404
Licences, fees and dues 865 575 290
Management fees 214,513 70,654 143,859
Office and administration 107,700 63,750 27,466
Product development 8,799 -- 1,582
Promotion and entertainment 12,828 4,265 5,887
Rent 79,692 33,751 30,538
Repairs and maintenance 2,316 177 1,973
Telephone and utilities 27,200 13,706 9,505
Travel 33,344 4,792 10,161
Video production 20,040 9,915 7,573
Write down of inventory (note 8) 55,734 55,734 --
Write down of product rights and
patent costs (note 3) 374,128 374,128 --
- ---------------------------------------------------------------------------------
1,197,744 747,667 309,574
- ---------------------------------------------------------------------------------
Loss from operations 1,197,744 (747,667) (309,574)
Other income
Interest income 40,178 21,612 16,335
- ---------------------------------------------------------------------------------
(1,157,566) (726,055) (293,239)
- ---------------------------------------------------------------------------------
Net loss $(1,157,566) $ (726,055) $ (293,239)
- ---------------------------------------------------------------------------------
Loss per share $ (0.13) $ (0.05)
Weighted average shares used 5,503,339 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
Years ended May 31, 1999 and 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
From inception
(March 17, 1997) 1999 1998
to May 31, 1999 (Unaudited)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net loss $(1,157,566) $ (726,055) $ (293,239)
Items not involving cash
Amortization 28,569 17,661 3,870
Gain on sale of capital asset (2,659) -- (2,659)
Write down of inventory 55,734 55,734 --
Write down of product rights 374,128 374,128 --
Changes in non-cash working capital
Accounts receivable (26,442) (14,996) (7,404)
Prepaid expenses (3,353) 8,532 (10,155)
Accounts payable and accrued liabilities 36,404 15,100 6,791
Inventory purchases (55,834) (55,834) --
- ------------------------------------------------------------------------------------------
(751,019) (325,730) (302,796)
Financing
Issuance of capital stock 571,528 96,762 474,766
Advances to shareholder (90,577) -- --
Proceeds from subscriptions for shares 667,731 62,731 --
- ------------------------------------------------------------------------------------------
1,148,682 159,493 474,766
Investing
Acquisition of capital assets (80,532) (52,352) (4,718)
Proceeds on disposition of capital asset 6,189 -- 6,189
- ------------------------------------------------------------------------------------------
(74,343) (52,352) 1,471
Other comprehensive income 23,326 17,038 (7,294)
- ------------------------------------------------------------------------------------------
Increase (decrease) in cash 346,646 (201,551) 166,147
Cash, beginning of year -- 548,197 382,050
- ------------------------------------------------------------------------------------------
Cash, end of year $ 346,646 $ 346,646 $ 548,197
- ------------------------------------------------------------------------------------------
Supplementary information:
Interest paid $ -- $ -- $ --
Income taxes paid -- -- --
Non-cash financing and investing activities:
Issuance of redeemable preferred shares
for product rights $ 309,677 $ -- $ 309,677
- ------------------------------------------------------------------------------------------
</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 period from inception on March 17, 1997 to May 31, 1999
<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>
Common shares issued net
of share issue costs 3 $ 1 $ -- $ -- $ -- $ 1
Comprehensive income:
Loss -- -- -- (138,272) -- (138,272)
Foreign currency translation -- -- -- -- 13,582 13,582
- ---------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) -- -- -- (138,272) 13,582 (124,690)
- ---------------------------------------------------------------------------------------------------------------------------
Balance, May 31, 1997 3 1 -- (138,272) 13,582 (124,689)
Common shares issued
net of share issue costs 2,410,944 2,410 472,355 -- -- 474,765
Common shares issued
net of share issue costs 3,072,300 3,072 601,928 -- -- 605,000
Comprehensive income:
Loss -- -- -- (293,239) -- (293,239)
Foreign currency translation -- -- -- -- (7,294) (7,294)
- ---------------------------------------------------------------------------------------------------------------------------
Comprehensive (loss) -- -- -- (293,239) (7,294) (300,533)
- ---------------------------------------------------------------------------------------------------------------------------
Balance, May 31, 1998
(Unaudited) 5,483,247 5,483 1,074,283 (431,511) 6,288 654,543
Common shares issued
net of shares issue costs 36,300 36 96,726 -- -- 96,762
Comprehensive income:
Loss -- -- -- (726,055) -- (726,055)
Foreign currency translation -- -- -- -- 17,038 17,038
- ---------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) -- -- -- (726,055) 17,038 (709,017)
- ---------------------------------------------------------------------------------------------------------------------------
Balance, May 31, 1999 5,519,547 $ 5,519 $ 1,171,009 $(1,157,566) $ 23,326 $ 42,288
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
$ United States
Year ended May 31, 1999
- --------------------------------------------------------------------------------
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 $1,157,566. 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 $1.4605 (1998 - $1.4365).
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. These costs are being amortized
on a straight-line basis over five years.
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 3
$ United States
Year ended May 31, 1999
- --------------------------------------------------------------------------------
1. Significant accounting policies (continued):
d) Product rights and patent costs (continued):
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
Year ended May 31, 1999
- --------------------------------------------------------------------------------
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.
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 5
$ United States
Year ended May 31, 1999
- --------------------------------------------------------------------------------
3. Product rights and patent costs:
- --------------------------------------------------------------------------------
1999 1998
(Unaudited)
- --------------------------------------------------------------------------------
Product rights $ 68 $ 380,885
Patent costs 16,672 22,451
- --------------------------------------------------------------------------------
$ 16,740 $ 403,336
- --------------------------------------------------------------------------------
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.
4. Capital assets:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
1999 1998
(Unaudited)
- ------------------------------------------------------------------------------------------
Accumulated Net book Net book
Cost amortization value value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Leasehold improvements 27,919 5,584 22,335 $ --
Computer software 520 390 130 267
Equipment 20,948 10,122 10,826 10,257
Furniture and fixtures 20,746 4,168 16,578 136
- ------------------------------------------------------------------------------------------
$70,133 $20,264 $49,869 $10,660
- ------------------------------------------------------------------------------------------
</TABLE>
5. Redeemable preferred shares:
The Company's subsidiary has redeemable preferred shares outstanding as
follows:
- --------------------------------------------------------------------------------
1999 1998
(Unaudited)
- --------------------------------------------------------------------------------
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.
301,727 309,677
- --------------------------------------------------------------------------------
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 6
$ United States
Year ended May 31, 1999
- --------------------------------------------------------------------------------
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 May 31, 1999, the Company issued 19,302 common shares at
$3.25 per share for net proceeds of $62,731 which were received prior
to May 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 May 31, 1999, no stock options have
been granted.
7. Related party transactions:
During the year the Company entered into the following transactions with
related parties:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
1999 1998
-------------------------------------------------------------------------------
<S> <C> <C>
Legal and accounting fees paid to a director $ 7,307 $ 6,091
Management fees paid to president 70,654 102,140
Office and administration fees paid to president's spouse 36,325 --
Office and administration fees paid to an individual
related to the president 17,557 15,391
Rent paid to a company controlled by the president 18,420 12,496
Inventory purchased from president 55,834 --
Leasehold improvements on premises controlled by the
president 27,919 --
Purchase of product rights from president -- 380,885
-------------------------------------------------------------------------------
</TABLE>
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>
INDEPENDENT AUDITORS' REVIEW REPORT
The Board of Directors:
We have reviewed the consolidated balance sheet of L.O.M. Medical International
Inc. and subsidiary, a development stage enterprise, as of February 29, 2000 and
the related consolidated statements of loss, cash flows and stockholders' equity
and comprehensive Income for the three month and nine month periods ended
February 29, 2000 and 1999. These consolidated financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with United States generally accepted accounting principles.
We have previously audited, in accordance with United states generally accepted
auditing standards, the consolidated balance sheet of L.O.M. Medical
International Inc. and subsidiary, a development stage enterprise, as of May 31,
1999 and the related consolidated statements of loss, cash flows and
stockholders equity and comprehensive income for the year then ended (not
presented herein); and in our report dated November 29, 1999 we expressed an
unqualified opinion on those consolidated financial statements. In our opinion
the information set forth in the accompanying consolidated balance sheet as of
May 31, 1999 as fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
Our report dated November 29, 1999, on the consolidated financial statements of
L.O.M. Medical International Inc. and subsidiary, a development stage
enterprise, as of and for the year ended May 31, 1999 contains an explanatory
paragraph that states that the Company has an accumulated deficit that raises
substantial doubt about the entity's ability to continue as a going concern. The
consolidated balance sheet as of May 31, 1999 does not include any adjustments
that might result from the outcome of that uncertainty.
"signed KPMG LLP"
Kelowna, Canada
March 15, 2000
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 7
$ United States
Year ended May 31, 1999
- --------------------------------------------------------------------------------
8. Write down of inventory:
The Company purchased $55,834 of inventory from the president during the
year. Due to valuation uncertainties, the inventory has been written down
to a nominal amount.
9. Income taxes:
At May 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. Commitments:
The Company is obligated to make future lease payments for it's offices as
follows:
2000 $ 36,913
2001 $ 19,453
2002 $ 19,453
2003 $ 19,453
2004 $ 19,453
11. 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>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Balance Sheet
$ United States
February 29, 2000 and May 31, 1999
(Unaudited - Prepared by Management)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
2000 1999
- ---------------------------------------------------------------------------------------
Assets
<S> <C> <C>
Current assets
Cash $ 417,951 $ 346,646
Accounts receivable 29,337 26,442
Prepaid expenses 1,467 3,453
- ---------------------------------------------------------------------------------------
448,755 376,541
Product rights and patent costs (note 3) 13,546 16,740
Capital assets (note 4) 41,009 49,869
- ---------------------------------------------------------------------------------------
$ 503,310 $ 443,150
- ---------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 19,363 $ 36,404
Redeemable preferred shares (note 5) 301,727 301,727
Share subscriptions (note 6 b)) 172,919 62,731
Stockholders' equity
Capital stock (note 6) 5,634 5,519
Additional paid in capital 1,456,021 1,171,009
Deficit accumulated during the development stage (1,475,750) (1,157,566)
Accumulated other comprehensive income 23,396 23,326
- ---------------------------------------------------------------------------------------
9,301 42,288
- ---------------------------------------------------------------------------------------
$ 503,310 $ 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 nine months ended February 29, 2000 and 1999 (Unaudited - Prepared by
Management)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
From Inception
(March 17, 1997) 2000 1999
to February 29, 2000
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expenses
Advertising $ 13,556 $ 1,438 $ 3,547
Amortization 41,089 12,520 13,246
Automotive 40,676 13,749 11,899
Consulting fees 107,756 39,970 15,667
Design plans 10,911 -- --
Director's fees 19,394 3,970 5,178
Foreign exchange (gain) loss (1,107) (3,737) 4,640
Insurance 5,063 1,639 282
Interest and bank charges 7,088 3,801 776
Legal and accounting 135,776 46,267 31,931
Licences, fees and dues 4,341 3,476 431
Management fees 260,242 45,729 52,991
Office and administration 134,368 26,668 47,813
Product development 8,799 -- --
Promotion and entertainment 14,837 2,009 3,199
Rent 106,705 27,013 25,313
Repairs and maintenance 2,316 -- 133
Salaries 78,624 78,624 --
Telephone and utilities 35,809 8,609 10,280
Travel 48,453 15,109 3,594
Video production 23,895 3,855 7,436
Write down of inventory 55,734 -- --
Write down of product rights and
patent costs 374,128 -- --
- --------------------------------------------------------------------------------------
1,528,453 330,709 238,356
- --------------------------------------------------------------------------------------
Loss from operations (1,528,453) (330,709) (238,356)
Other income
Interest income 52,703 12,525 16,211
- --------------------------------------------------------------------------------------
(1,475,750) (318,184) (222,145)
- --------------------------------------------------------------------------------------
Net loss $(1,475,750) $ (318,184) $ (222,145)
- --------------------------------------------------------------------------------------
Loss per share $ (0.06) $ (0.04)
- --------------------------------------------------------------------------------------
Weighted average shares used 5,550,663 5,512,383
</TABLE>
See accompanying notes to financial statements
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Statement of Loss
$ United States
For the three months ended February 29, 2000 and 1999 (Unaudited - Prepared by
Management)
- -------------------------------------------------------------------------------
2000 1999
- -------------------------------------------------------------------------------
Expenses
Advertising $ 1,433 $ 1,182
Amortization 4,273 4,415
Automotive 5,562 3,966
Consulting fees 18,989 5,222
Director's fees 2,253 1,726
Foreign exchange (gain) loss (2,016) 1,546
Insurance 1,639 94
Interest and bank charges 1,512 259
Legal and accounting 17,936 10,643
Licences, fees and dues 3,291 143
Management fees 481 17,664
Office and administration 6,100 15,938
Promotion and entertainment 527 1,066
Rent 9,296 8,437
Repairs and maintenance -- 49
Salaries 47,034 --
Telephone and utilities 2,297 3,427
Travel 4,859 1,198
Video production 926 2,478
- -------------------------------------------------------------------------------
126,392 79,453
- -------------------------------------------------------------------------------
Loss from operations (126,392) (79,453)
Other income
Interest income 6,037 5,405
- -------------------------------------------------------------------------------
Net loss $ (120,355) $ (74,048)
- -------------------------------------------------------------------------------
Loss per share $ (0.02) $ (0.01)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Weighted average shares used 5,610,099 5,519,547
- -------------------------------------------------------------------------------
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 nine months ended February 29, 2000 and 1999 (Unaudited - Prepared by
Management)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
From inception
(March 17, 1997) 2000 1999
to February 29, 2000
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net loss $(1,475,750) $ (318,184) $ (222,145)
Items not involving cash
Amortization 41,089 12,520 13,246
Gain on sale of capital assets (2,659) -- --
Write down of inventory 55,734 -- --
Write down of product rights 377,322 3,194 --
Changes in non-cash working capital
Accounts receivable (29,337) (2,895) (9,269)
Prepaid expenses (1,467) 1,886 (543)
Accounts payable and accrued liabilities 19,363 (17,041) (16,847)
Inventory purchases (55,734) 100 --
- ----------------------------------------------------------------------------------------------------
(1,071,439) (320,420) (235,558)
Financing
Issuance of capital stock 793,924 222,396 80,377
Advances to shareholder (90,577) -- --
Proceeds on disposition of capital asset 840,650 172,919 --
- ----------------------------------------------------------------------------------------------------
1,543,997 395,315 80,377
Investing
Acquisition of capital assets (84,192) (3,660) (37,742)
Proceeds on disposition of capital asset 6,189 -- --
- ----------------------------------------------------------------------------------------------------
(78,003) (3,660) (37,742)
Foreign currency translation adjustment 23,396 70 --
- ----------------------------------------------------------------------------------------------------
Increase (decrease) in cash 417,951 71,305 (192,923)
Cash, beginning of period -- 346,646 548,197
- ----------------------------------------------------------------------------------------------------
Cash, end of period $ 417,951 $ 417,951 $ 355,274
- ----------------------------------------------------------------------------------------------------
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 nine months ended February 29, 2000 and 1999 (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
net of share issue costs 71,250 96 222,300 -- -- 222,396
Common shares issued for
conversion of share
subscriptions 19,302 19 62,712 -- -- 62,731
Comprehensive income:
Loss -- -- -- (318,184) -- (318,184)
Foreign currency translation -- -- -- -- 70 70
- ----------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) -- -- -- (318,184) 70 (318,114)
- ----------------------------------------------------------------------------------------------------------------------
Balance, February 29, 2000 5,610,099 $ 5,634 $ 1,456,021 $(1,475,750) $ 23,396 $ 9,301
- ----------------------------------------------------------------------------------------------------------------------
</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 generated
no revenues and has accumulated a deficit since inception of
$1,475,750. 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 $1.44
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.
<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
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. 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 public market for this stock does not
exist. The maximum credit risk exposure for all financial assets is
the carrying amount of those assets.
<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):
h) Loss per share
Loss per share has been calculated using the weighted average number
of common shares outstanding during the period.
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:
---------------------------------------------------------------------------
2000 1999
---------------------------------------------------------------------------
Product rights $ -- $ 68
Patent costs 13,546 16,672
---------------------------------------------------------------------------
$13,546 $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.
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 5
$ United States
(Unaudited - Prepared by Management)
- -------------------------------------------------------------------------------
3. Product rights and patent costs (continued):
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.
4. Capital assets:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
2000 1999
-------------------------------------------------------------------------------------------------------------
Accumulated Net book Net book
Cost amortization value value
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Leasehold improvements 27,919 9,772 18,147 $ 22,335
Computer software 520 488 32 130
Equipment 20,948 12,558 8,390 10,826
Furniture and fixtures 21,113 6,673 14,440 16,578
-------------------------------------------------------------------------------------------------------------
$ 70,500 $ 29,491 $ 41,009 $ 49,869
-------------------------------------------------------------------------------------------------------------
</TABLE>
5. Redeemable preferred shares:
The Company's subsidiary has redeemable preferred shares outstanding as
follows:
---------------------------------------------------------------------------
2000 1999
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
<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 February 29, 2000, the Company issued 53,206 common
shares at $3.25 per share for net proceeds of $172,919, which were
received prior to February 29, 2000.
c) Stock option plan:
1,000,000 common shares of the Company are reserved for issuance upon
exercise of stock options. As at February 29, 2000, no stock options
have been granted.
7. Related party transactions:
During the period the Company entered into the following transactions with
related parties:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
2000 1999
-----------------------------------------------------------------------------
<S> <C> <C>
Legal and accounting fees paid to a director $10,425 $ 8,500
Management fees paid to president 45,729 52,991
Office and administration fees paid to president's spouse 26,668 47,813
Rent paid to a company controlled by the president 14,779 14,779
Office and administrative fees paid to an individual related
to the president 13,168 13,168
Inventory purchased from president -- 55,834
Leasehold improvements on premises controlled by the president -- 27,919
-----------------------------------------------------------------------------
</TABLE>
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.
8. Income taxes:
At May 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 expire 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.
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 7
$ United States
(Unaudited - Prepared by Management)
- --------------------------------------------------------------------------------
9. Commitments:
The Company is obligated to make future lease payments for its offices as
follows:
2000 $ 9,900
2001 $ 19,453
2002 $ 19,453
2003 $ 19,453
2004 $ 19,453
10. Subsequent Events:
At the Feb 28, 2000 board meeting, the board of directors approved, subject
to legal review, the issuance of one warrant for every two shares held on
March 15, 2000. The entitlement for each warrant has not yet been
determined. The board also approved an option plan for the board members
which would allow board members to purchase 5,000 shares annually at a
market based price once a year.
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Balance Sheet
$ United States
February 29, 2000 and May 31, 1999
(Unaudited - Prepared by Management)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
2000 1999
- ---------------------------------------------------------------------------------------
Assets
<S> <C> <C>
Current assets
Cash $ 417,951 $ 346,646
Accounts receivable 29,337 26,442
Prepaid expenses 1,467 3,453
- ---------------------------------------------------------------------------------------
448,755 376,541
Product rights and patent costs (note 3) 13,546 16,740
Capital assets (note 4) 41,009 49,869
- ---------------------------------------------------------------------------------------
$ 503,310 $ 443,150
- ---------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 19,363 $ 36,404
Redeemable preferred shares (note 5) 301,727 301,727
Share subscriptions (note 6 b)) 172,919 62,731
Stockholders' equity
Capital stock (note 6) 5,634 5,519
Additional paid in capital 1,456,021 1,171,009
Deficit accumulated during the development stage (1,475,750) (1,157,566)
Accumulated other comprehensive income 23,396 23,326
- ---------------------------------------------------------------------------------------
9,301 42,288
- ---------------------------------------------------------------------------------------
$ 503,310 $ 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 nine months ended February 29, 2000 and 1999 (Unaudited - Prepared by
Management)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
From Inception
(March 17, 1997) 2000 1999
to February 29, 2000
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expenses
Advertising $ 13,556 $ 1,438 $ 3,547
Amortization 41,089 12,520 13,246
Automotive 40,676 13,749 11,899
Consulting fees 107,756 39,970 15,667
Design plans 10,911 -- --
Director's fees 19,394 3,970 5,178
Foreign exchange (gain) loss (1,107) (3,737) 4,640
Insurance 5,063 1,639 282
Interest and bank charges 7,088 3,801 776
Legal and accounting 135,776 46,267 31,931
Licences, fees and dues 4,341 3,476 431
Management fees 260,242 45,729 52,991
Office and administration 134,368 26,668 47,813
Product development 8,799 -- --
Promotion and entertainment 14,837 2,009 3,199
Rent 106,705 27,013 25,313
Repairs and maintenance 2,316 -- 133
Salaries 78,624 78,624 --
Telephone and utilities 35,809 8,609 10,280
Travel 48,453 15,109 3,594
Video production 23,895 3,855 7,436
Write down of inventory 55,734 -- --
Write down of product rights and
patent costs 374,128 -- --
- --------------------------------------------------------------------------------------
1,528,453 330,709 238,356
- --------------------------------------------------------------------------------------
Loss from operations (1,528,453) (330,709) (238,356)
Other income
Interest income 52,703 12,525 16,211
- --------------------------------------------------------------------------------------
(1,475,750) (318,184) (222,145)
- --------------------------------------------------------------------------------------
Net loss $(1,475,750) $ (318,184) $ (222,145)
- --------------------------------------------------------------------------------------
Loss per share $ (0.06) $ (0.04)
- --------------------------------------------------------------------------------------
Weighted average shares used 5,550,663 5,512,383
</TABLE>
See accompanying notes to financial statements
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Statement of Loss
$ United States
For the three months ended February 29, 2000 and 1999 (Unaudited - Prepared by
Management)
- -------------------------------------------------------------------------------
2000 1999
- -------------------------------------------------------------------------------
Expenses
Advertising $ 1,433 $ 1,182
Amortization 4,273 4,415
Automotive 5,562 3,966
Consulting fees 18,989 5,222
Director's fees 2,253 1,726
Foreign exchange (gain) loss (2,016) 1,546
Insurance 1,639 94
Interest and bank charges 1,512 259
Legal and accounting 17,936 10,643
Licences, fees and dues 3,291 143
Management fees 481 17,664
Office and administration 6,100 15,938
Promotion and entertainment 527 1,066
Rent 9,296 8,437
Repairs and maintenance -- 49
Salaries 47,034 --
Telephone and utilities 2,297 3,427
Travel 4,859 1,198
Video production 926 2,478
- -------------------------------------------------------------------------------
126,392 79,453
- -------------------------------------------------------------------------------
Loss from operations (126,392) (79,453)
Other income
Interest income 6,037 5,405
- -------------------------------------------------------------------------------
Net loss $ (120,355) $ (74,048)
- -------------------------------------------------------------------------------
Loss per share $ (0.02) $ (0.01)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Weighted average shares used 5,610,099 5,519,547
- -------------------------------------------------------------------------------
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 nine months ended February 29, 2000 and 1999 (Unaudited - Prepared by
Management)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
From inception
(March 17, 1997) 2000 1999
to February 29, 2000
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net loss $(1,475,750) $ (318,184) $ (222,145)
Items not involving cash
Amortization 41,089 12,520 13,246
Gain on sale of capital assets (2,659) -- --
Write down of inventory 55,734 -- --
Write down of product rights 377,322 3,194 --
Changes in non-cash working capital
Accounts receivable (29,337) (2,895) (9,269)
Prepaid expenses (1,467) 1,886 (543)
Accounts payable and accrued liabilities 19,363 (17,041) (16,847)
Inventory purchases (55,734) 100 --
- ----------------------------------------------------------------------------------------------------
(1,071,439) (320,420) (235,558)
Financing
Issuance of capital stock 793,924 222,396 80,377
Advances to shareholder (90,577) -- --
Proceeds on disposition of capital asset 840,650 172,919 --
- ----------------------------------------------------------------------------------------------------
1,543,997 395,315 80,377
Investing
Acquisition of capital assets (84,192) (3,660) (37,742)
Proceeds on disposition of capital asset 6,189 -- --
- ----------------------------------------------------------------------------------------------------
(78,003) (3,660) (37,742)
Foreign currency translation adjustment 23,396 70 --
- ----------------------------------------------------------------------------------------------------
Increase (decrease) in cash 417,951 71,305 (192,923)
Cash, beginning of period -- 346,646 548,197
- ----------------------------------------------------------------------------------------------------
Cash, end of period $ 417,951 $ 417,951 $ 355,274
- ----------------------------------------------------------------------------------------------------
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 nine months ended February 29, 2000 and 1999 (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
net of share issue costs 71,250 96 222,300 -- -- 222,396
Common shares issued for
conversion of share
subscriptions 19,302 19 62,712 -- -- 62,731
Comprehensive income:
Loss -- -- -- (318,184) -- (318,184)
Foreign currency translation -- -- -- -- 70 70
-----------
Comprehensive income (loss) -- -- -- (318,184) 70 (318,114)
-----------
Balance, February 29, 2000 5,610,099 $ 5,634 $ 1,456,021 $(1,475,750) $ 23,396 $ 9,301
-----------
</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 generated
no revenues and has accumulated a deficit since inception of
$1,475,750. 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 $1.44
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.
<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
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. 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 public market for this stock does not
exist. The maximum credit risk exposure for all financial assets is
the carrying amount of those assets.
<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):
h) Loss per share
Loss per share has been calculated using the weighted average number
of common shares outstanding during the period.
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:
---------------------------------------------------------------------------
2000 1999
---------------------------------------------------------------------------
Product rights $ -- $ 68
Patent costs 13,546 16,672
---------------------------------------------------------------------------
$13,546 $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.
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 5
$ United States
(Unaudited - Prepared by Management)
- -------------------------------------------------------------------------------
3. Product rights and patent costs (continued):
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.
4. Capital assets:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
2000 1999
-------------------------------------------------------------------------------------------------------------
Accumulated Net book Net book
Cost amortization value value
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Leasehold improvements 27,919 9,772 18,147 $ 22,335
Computer software 520 488 32 130
-------------------------------------------------------------------------------------------------------------
Equipment 20,948 12,558 8,390 10,826
-------------------------------------------------------------------------------------------------------------
Furniture and fixtures 21,113 6,673 14,440 16,578
-------------------------------------------------------------------------------------------------------------
$ 70,500 $ 29,491 $ 41,009 $ 49,869
-------------------------------------------------------------------------------------------------------------
</TABLE>
5. Redeemable preferred shares:
The Company's subsidiary has redeemable preferred shares outstanding as
follows:
---------------------------------------------------------------------------
2000 1999
---------------------------------------------------------------------------
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
---------------------------------------------------------------------------
<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 February 29, 2000, the Company issued 53,206 common
shares at $3.25 per share for net proceeds of $172,919, which were
received prior to February 29, 2000.
c) Stock option plan:
1,000,000 common shares of the Company are reserved for issuance upon
exercise of stock options. As at February 29, 2000, no stock options
have been granted.
7. Related party transactions:
During the period the Company entered into the following transactions with
related parties:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
2000 1999
-----------------------------------------------------------------------------
<S> <C> <C>
Legal and accounting fees paid to a director $10,425 $ 8,500
Management fees paid to president 45,729 52,991
Office and administration fees paid to president's spouse 26,668 47,813
Rent paid to a company controlled by the president 14,779 14,779
Office and administrative fees paid to an individual related
to the president 13,168 13,168
Inventory purchased from president -- 55,834
Leasehold improvements on premises controlled by the president -- 27,919
-----------------------------------------------------------------------------
</TABLE>
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.
8. Income taxes:
At May 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 expire 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.
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 7
$ United States
(Unaudited - Prepared by Management)
- --------------------------------------------------------------------------------
9. Commitments:
The Company is obligated to make future lease payments for its offices as
follows:
2000 $ 9,900
2001 $ 19,453
2002 $ 19,453
2003 $ 19,453
2004 $ 19,453
10. Subsequent Events:
At the Feb 28, 2000 board meeting, the board of directors approved, subject
to legal review, the issuance of one warrant for every two shares held on
March 15, 2000. The entitlement for each warrant has not yet been
determined. The board also approved an option plan for the board members
which would allow board members to purchase 5,000 shares annually at a
market based price once a year.
<PAGE>
SIGNATURES
In accordance with the provisions of Section 12 of the Securities Exchange
Act of 1934, the Company has duly caused this Amendment No. 3 to Registration
Statement on Form 10-SB to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Newport Beach, State of California on May 15,
2000.
L.O.M. MEDICAL TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ John Klippenstein
-----------------------------
John Klippenstein
Its: President
ANTICIPATED CASH FLOW
The following chart represents the Company's anticipated cash flow for the
period from March 1, 2000 to February 29, 2001. However, no assurances can be
given that the future results anticipated by the following analysis will be
achieved. The following analysis may be significantly affected by certain
factors, including certain risks and uncertainties which could cause actual
results to vary materially from the future results covered in the following
analysis. Other factors could also cause actual results to vary materially from
the future results anticipated in the following analysis. Undue reliance should
not be placed on the following analysis. Finally, the following analysis is
based on facts existing as of the date of Amendment No. 3 to the Company's
Registration Statement on Form 10-SB
OPENING CASH POSITION
Estimated sales of the Lens-O-Matic $ 417,000
Estimated proceeds from issuance of common shares $3,000,000
----------
$3,240,000
Cash Out
Advertising 5,000
Amoritization 15,000
Automotive 20,000
Consulting fees 260,000
Director's fees 30,000
Insurance 30,000
Interest and bank charges 1,000
Legal and accounting 195,000
Lensomatic product costs 40,000
Lensomatic product market launch 300,000
Licences, fees and dues 2,000
Mail and courier 15,000
Management fees 5,000
Office and administration 36,000
product analysis and market evaluation 75,000
Promotion and entertainment 6,000
Rent 45,000
Repairs and maintenance 1,000
Salaries 206,000
Shares sales costs 175,000
Syringe product development 1,200,000
Telephone and utilities 20,000
Travel 40,000
Video Production 15,000
----------
Total cash out $2,737,500
ESTIMATED CLOSING CASH $ 919,500
==========
