U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED FEBRUARY 29, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________ TO _____________
COMMISSION FILE NUMBER:
L.O.M. MEDICAL INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 98-0178784
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
580-885 Dunsmuir Street, Vancouver, British Columbia, Canada V6C 1N8
(Address of principal executive offices) (Zip Code)
(604) 602-9400
(Issuer's Telephone Number, including Area Code)
Thomas E. Stepp, Jr.
Stepp & Beauchamp LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
Telephone: 949.660.9700
Facsimile: 949.660.9010
(Name, Address and Telephone Number of Agent for Service)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. [X] Yes [ ]
No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of February 29, 2000, there were
5,610,099 shares of the issuer's $.001 par value common stock issued and
outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Balance Sheet
$ United States
February 29, 2000 and May 31, 1999
<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
Minority interest (5,536) (5,536)
Stockholders' equity
Capital stock (note 6) 5,687 5,538
Additional paid in capital 1,640,321 1,233,721
Deficit accumulated during the development stage (1,481,648) (1,152,030)
Accumulated other comprehensive income 23,396 23,326
- ----------------------------------------------------------------------------------
187,756 110,555
- ----------------------------------------------------------------------------------
$ 503,310 $ 443,150
- ----------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
On behalf of the Board:
/s/ John Klippenstein
- --------------------- Director
/s/ Pat [ILLEGIBLE] Director
- ---------------------
2
<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
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
From Inception
(March 17, 1997) 2000 1999
to February 29, 2000
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expenses
Advertising $ 9,663 $ 1,438 $ 3,547
Amortization 34,051 12,520 13,246
Automotive 40,260 13,749 11,899
Consulting fees 60,859 39,970 15,667
Design plans 10,911 -- --
Director's fees 19,394 3,970 5,178
Foreign exchange (gain) loss (6,199) (3,737) 4,640
Insurance 3,620 1,639 282
Interest and bank charges 5,772 3,801 776
Legal and accounting 139,680 57,701 31,931
Licenses, fees and dues 4,341 3,476 431
Management fees 260,242 45,729 52,991
Office and administration 117,884 26,668 47,813
Product development 1,582 -- --
Promotion and entertainment 12,161 2,009 3,199
Rent 91,302 27,013 25,313
Repairs and maintenance 2,150 -- 133
Salaries 78,624 78,624 --
Telephone and utilities 31,820 8,609 10,280
Travel 30,062 15,109 3,594
Video production 21,343 3,855 7,436
Write down of inventory 55,734 -- --
Write down of product rights and
patent costs 374,128 -- --
- -------------------------------------------------------------------------------------------------------------------
1,399,384 342,143 238,356
- -------------------------------------------------------------------------------------------------------------------
Loss from operations (1,399,384) (342,143) (238,356)
Other income
Interest income 50,472 12,525 16,211
- -------------------------------------------------------------------------------------------------------------------
Net loss $(1,348,912) $ (329,618) $ (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
3
<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
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
2000 1999
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
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 29,370 10,643
Licenses, 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 -- 44
Salaries 47,034 --
Telephone and utilities 2,297 3,427
Travel 4,859 1,198
Video production 926 2,478
- --------------------------------------------------------------------------------------------------
137,826 79,448
- --------------------------------------------------------------------------------------------------
Loss from operations (137,826) (79,448)
Other income
Interest income 6,037 5,405
- --------------------------------------------------------------------------------------------------
Net loss $ (131,789) $ (74,043)
- --------------------------------------------------------------------------------------------------
Loss per share $ (0.02) $ (0.01)
Weighted average shares used 5,610,099 5,519,547
- --------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
4
<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
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
From inception
(March 17, 1997) 2000 1999
to February 29, 2000
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net loss $(1,348,912) $ (329,618) $ (222,145)
Items not involving cash
Amortization 34,051 12,520 13,246
Write down of inventory 55,734 -- --
Write down of product rights 374,128 -- --
Changes in non-cash working capital
Accounts receivable 52,663 (2,895) (9,269)
Prepaid expenses (1,467) 1,886 (543)
Accounts payable and accrued liabilities (6,791) (16,971) (16,847)
Inventory purchases (55,734) 100 --
- ----------------------------------------------------------------------------------------------------------------
(896,328) (334,978) (235,558)
Financing
Issuance of capital stock 1,041,008 406,749 80,377
Issuance of redeemable preferred shares
of subsidiary 309,677 -- --
- ----------------------------------------------------------------------------------------------------------------
1,350,685 406,749 80,377
Investing
Acquisition of capital assets (54,183) (396) (41,629)
Acquisition of product rights and patents (381,336) -- 3,887
Acquisition of shares 374,952 --
- ----------------------------------------------------------------------------------------------------------------
(60,567) (396) (37,742)
Foreign currency translation adjustment 24,161 (70) --
- ----------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash 417,951 71,305 (192,923)
Cash, beginning of period -- 346,646 548,197
- ----------------------------------------------------------------------------------------------------------------
Cash, end of year $ 417,951 $ 417,951 $ 355,274
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
5
<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
<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 2,410,947 $ 2,411 $ 472,355 $ -- $ -- $ 474,766
Common shares issued
to subscribers for shares
of subsidiary Company
(note 2) 3,072,300 3,072 601,928 -- -- 605,000
Excess of consideration
given over carrying amount
of net assets of subsidiary
acquired (note 2) -- -- -- (132,736) -- (132,736)
Comprehensive income:
Loss -- -- -- (293,239) -- (293,239)
Foreign currency translation -- -- -- -- 6,288 6,288
- --------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) -- -- -- (293,239) 6,288 (286,951)
- --------------------------------------------------------------------------------------------------------------------
Balance, May 31, 1998
(Unaudited) 5,483,247 5,483 1,074,283 (425,975) 6,288 660,079
Common shares issued
net of share issue costs 36,300 36 96,726 -- -- 96,762
Share subscriptions received
for 19,302 shares at $3.25
per share -- 19 62,712 -- -- 62,731
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 5,538 1,233,721 (1,152,030) 23,326 110,555
Common shares issued
net of share issue costs 71,250 96 233,734 -- -- 233,830
Common shares issued for
conversion of share
subscriptions 19,302 -- -- -- -- --
Share subscriptions received
for 53,206 shares at $3.25
per share -- 53 172,866 -- -- 172,919
Comprehensive income:
Loss -- -- -- (329,618) -- (329,618)
Foreign currency translation -- -- -- -- 70 70
- --------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) -- -- -- (329,618) 70 (329,548)
- --------------------------------------------------------------------------------------------------------------------
Balance, February 29, 2000 5,610,099 $ 5,687 $ 1,640,321 $(1,481,648) $ 23,396 $ 187,756
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
$ United States
- --------------------------------------------------------------------------------
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
$1,481,648. 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) 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) Revenues and expenses are translated at the exchange rate in
effect at the transaction date.
iii) 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.
7
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 3
$ United States
- --------------------------------------------------------------------------------
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) 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.
g) 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.
8
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 4
$ United States
- --------------------------------------------------------------------------------
1. Significant accounting policies (continued):
h) 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.
i) Loss per share
Loss per share has been calculated using the weighted average number
of common shares outstanding during the period.
j) 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.
2. Business combination:
Effective June 1, 1997, 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 difference
between the carrying amount and the exchange amount reflected as a charge
to equity. Details of the acquisition are as follows:
- --------------------------------------------------------------------------------
Net assets (liabilities) acquired at carrying amounts
Cash $ 375,000
Non-cash current assets 82,000
Product rights and patent costs 22,000
Capital assets 14,000
Current liabilities (26,224)
Share subscriptions (605,000)
Minority interest 5,536
- --------------------------------------------------------------------------------
(132,688)
Excess of consideration given over carrying amount
of net assets acquired 132,736
- --------------------------------------------------------------------------------
Consideration given:
Cash $ 48
- --------------------------------------------------------------------------------
9
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 5
$ United States
- --------------------------------------------------------------------------------
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.
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
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
5. Redeemable preferred shares:
The Company's subsidiary has redeemable preferred shares outstanding as
follows:
- --------------------------------------------------------------------------------------------
2000 1999
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Issued:
4,000 Class C preferred shares with a par value of $100
Cdn redeemable at $110.16 Cdn per share at the option
of the holder. Each share is entitled to a fixed
non-cumulative dividend at the rate of 9% per annum
payable at such times as determined by the Directors. 301,727 301,727
- --------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 6
$ United States
- --------------------------------------------------------------------------------
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 $172,866, 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 May 31, 1999, no stock options have
been granted.
7. Related party transactions:
During the period the Company entered into the following transactions with
related parties:
<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
- ---------------------------------------------------------------------------------------------------------
</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.
11
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 7
$ United States
- --------------------------------------------------------------------------------
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.
Item 2. Management's Discussion and Analysis or Plan of Operation
Development of the Registrant. 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 Registrant are located at #580-885 Dunsmuir
Street, Vancouver, British Columbia, Canada V6C 1N8. Registrant's telephone
number is 604.602.9400.
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.
Registrant was originally incorporated for the purpose of researching and
developing health care products. The goal of Registrant is to become an
innovator and provider of a retractable syringe ("Syringe") and related products
and technologies to the health care market. Registrant also hopes to
successfully market and distribute its line of eye care products. Registrant has
successfully patented and licensed products in twenty-four other countries
including the United States and Canada. Registrant envisions that it will be
able to develop new and improved products and provide the health care industry
with better, safer products throughout the world.
The Syringe. Registrant anticipates that the Syringe will change standard
disposal methods for used syringes. In this regard, Registrant has developed a
product designed to function as a standard hypodermic syringe with one
difference: it is safer and less perilous to the caregiver or health care
worker. Registrant believes that the Syringe's unique design will allow health
care providers to avoid direct contact with used needles. The Syringe is covered
by United States Patent No. 5,868,713 dated February 9, 1999, and international
patents have been filed in 24 different countries.
Once the needle is injected, the user simply has to press the plunger top gently
with his or her thumb to automatically retract the needle into its own sealed
chamber. The needle is now hidden where it remains locked in place and cannot be
used again. The Syringe does not require a health care worker to use both hands
to retract the needle after it has been used and withdrawn from the patient. The
Syringe will be produced in standard industry sizes from 1CC to 20 CC,
inclusive. Registrant anticipates that the products and technologies developed
by Registrant will be offered to distributors on a worldwide basis, with an
initial emphasis in Canada and the United States.
12
<PAGE>
Registrant anticipates that it will be testing the Syringe in conjunction with
teaching universities in Canada, Britain, and other constituents of the United
Kingdom. Testing of the Syringe has not yet begun. We hope to begin testing
after the first prototype is completed in or around July, 2000. The Registrant
believes it has commitments from teaching hospitals that will test the Syringe
once it is available.
The Lens-O-Matic. Registrant has invented and developed an insertion and storage
device for contact lenses (the "Lens-O-Matic") which is an ideal medical method
of handling and inserting contact lenses. Registrant has developed the following
components and solutions that will be used together with the Lens-O-Matic
insertion and storage system: (1) a medical inserter that will remove contact
lenses in a medical emergency situation for use by hospital medical staff and
paramedics; (2) disposable and replacement inserter ends; (3) additional storage
cups and caps; and (4) all soaking and disinfecting solutions that are to be
used with the Lens-O-Matic inserter.
The Lens-O-Matic is designed so that the practitioner will no longer have direct
hand or finger contact with the contact lens when fitting the patient.
Registrant believes that the design of the Lens-O-Matic will reduce the risk of
contamination and infection to the patient. Registrant has developed a liquid
cleaner for the Lens-O-Matic that quickly cleans contact lenses. Registrant has
obtained Food and Drug Administration Approval ("FDA") for the Lens-O-Matic
product. Registrant has also completed market testing and believes that the
Lens-O-Matic was well received at the A.O.A. convention in Montreal, Canada,
where approximately 30,000 units were distributed to opticians, optometrists and
pharmacies. Registrant has also completed the formulation of its contact lens
solutions and copyrights covering these products have been registered.
Registrant has also completed the design and labeling of the Lens-O-Matic
package. Registrant has begun to market its eye-care products.
The target markets for the distribution for the Lens-O-Matic product include,
but are not necessarily limited to, (i) hospitals and clinics, including
Shippert Medical of Englewood, Colorado ("Shippert"), Cross Mark Sales &
Marketing of Plano, Texas; and (ii) optometrists and opticians including, Health
Care Insights of Edison, New Jersey.
The Syringe. Registrant anticipates that it will obtain the necessary plastic
for the injection molds used to manufacture the Syringe from various domestic
and international suppliers. Initially, Tessey Plastics of Elbridge, New York
will be manufacturing the Syringe on a contract basis. The engineering for the
molds and production dyes are near completion. Registrant also contemplates that
it will be able to readily obtain the necessary packaging for the Syringe.
Registrant does not believe that its sales will be affected by seasonal factors.
Registrant believes that prototypes of the Syringe will be ready for testing in
July, 2000. Registrant believes that it will complete testing in Canada and gain
the necessary regulatory approvals in or around September, 2000. Registrant
believes it will complete the necessary United States testing as well as secure
the required United States regulatory approval in or around the end of November,
2000.
As previously discussed, Registrant hopes to eventually establish a production
facility in Spokane, Washington. It is anticipated that the facility will
initially produce approximately 2,500,000 units of the Syringe per month with
the capacity to meet increased market demands. Registrant believes that it will
deliver its products to the North American markets by courier. All supply and
distribution agreements will be negotiated by Health Care Insights.
Once testing of the Syringe is completed, and assuming FDA approval is received,
Registrant hopes to manufacture, or cause to be manufactured, a specified number
of units of the Syringe, which will be provided, at no charge, to a target group
of physicians for testing. Registrant plans to provide units to various
individuals who are to form part of the testing group. These individuals will be
asked to try the Syringe and report their findings. Registrant will then utilize
professionals such as doctors and related health care professionals who approve,
recommend and endorse Registrant's products, including the Syringe. Thereafter,
Registrant anticipates that the Syringe will be supplied to large national
distributors within specific regions all over the world. Registrant anticipates
that the distributors will thereafter market the Syringe to pharmacy and medical
supply companies. Registrant's overall operating plan is to act as a
manufacturer, selling directly and only to distributors and retail chains.
Registrant hopes that the product will gain acceptance in the medical community
and that Registrant's skill in positioning and merchandising the products and
technology of Registrant will enable it to acquire a commercially reasonable
portion of the market.
Lens-O-Matic. Registrant anticipates that its eye care products will be sold
both by retail stores and as a kit distributed by the medical profession.
Registrant expects that its eye care products will be sold through pharmacies,
wholesale drug distributors and chain stores and that such products will be sold
to Optometrists and Ophthalmologists directly by Registrant's sales
representatives. Registrant has recently secured FDA approval for the
manufacturing and distribution
13
<PAGE>
of a first product run of its eye-care products. We have developed our own dyes
and injection molds for our Lens-O-Matic and related products. We have paid for
all of the dyes and molds and currently own them. The first product run of our
eye care products includes the utilization of our production dyes at full
capacity, the production of a marketable product which exceeds FDA standards for
medical devices. We manufacture the necessary components for the Lens-O-Matic
and related products in Saskatchewan, Canada. Registrant is negotiating with
Shippert Medical Technologies of Englewood, Colorado ("Shippert") pursuant to
which Registrant anticipates that Shippert will distribute Registrant's product
line in the United States. Registrant has entered into a contract with a medical
distribution company in Turkey whereby Registrant will provide a minimum of
5,000 units of the Lens-O-Matic per month. If the contract is performed to term,
Registrant believes the value to Registrant will be US$240,000.00. The first
5,000 units are now in transit.
Registrant plans to focus its initial marketing efforts in Canada and the United
States. Registrant hopes to eventually expand its product marketing and sales
into Europe, South America, Central America, Mexico and Asia. Registrant plans
to market its products by advertising in catalogs and medical journals, by
distributing brochures (both written and video), by direct mail and by posters.
Follow-up calls will be made to promising prospects. This approach will be
Registrant's primary marketing method. It is expected that Registrant's
personnel will attend various trade shows and medical conventions in order to
introduce the Syringe with the hope of gaining endorsements and approvals. There
can be no assurance that Registrant would be able to establish successfully
other methods of marketing and sales of its products should it become necessary
or desirable in the future. A significant portion of Registrant's sales may be
made through independent distributors over which Registrant has no control and
who also will represent products of other companies. Registrant recognizes that
in order to increase market awareness and the marketing potential of its
products, it must hire adequate personnel and institute effective advertising in
the most cost effective way.
Registrant is not currently producing commercial quantities of its products nor
is it currently supplying any services to any third parties. No assurance can be
given that Registrant, on a timely basis, will be able to make the transition
from manufacturing testing quantities of the Syringe to commercial production
quantities successfully or be able to arrange for contract manufacturing.
Registrant has produced testing quantities amounting to 33,000 units of its eye
care products. Registrant's current production capacity does allow for the
production of commercial quantities of its eye care products, with its present
dyes allowing for the production of 75,000 units per month. Registrant believes
that this can be increased to 150,000 units by running additional shifts.
Registrant has a second set of dyes designed that will have a 300,000 unit
capacity which would allow the production for a total of 450,000 units of its
eye care products per month. Registrant does anticipate that it will be able to
manufacture its products for initial commercialization.
Registrant anticipates that it will contract out the first two years of
production of the Syringe. At the end of the second year of production,
Registrant anticipates it will engage in significant discussions regarding the
potential for the construction of its own production facility. Registrant
recognizes that the construction of its own production facility will be
contingent upon its having reached its sales and profit projections. Registrant
anticipates that it will present this issue for vote by its Board of Directors
and shareholders. In this regard, Registrant anticipates that it will locate its
production facilities in North America, specifically, the state of Washington,
due to its strategic location for penetration into the United States and
Canadian markets.
As previously discussed, Registrant's eye care products are currently produced
in Canada. Registrant owns all of the necessary injection molds. Registrant
contracts out for the production of components needed for the assembly and
packaging of its eye care products. The actual assembly and packaging are done
by Registrant's own work force. All other products of Registrant, those either
currently in production or the subject of future production will be produced on
a contract basis through plants that are FDA approved for production of medical
products.
Registrant is currently negotiating with the Irish Development Board in Ireland
("Development Board"). Representatives from the Development Board have met with
Registrant's Board of Directors on 3 different occasions and have offered to
assist Registrant in establishing a production facility in Ireland. Registrant
has already sent representatives to Ireland to discuss the production of the
Syringe as well as strategic alliances for market distribution of all
Registrant's products. Registrant's plans to construct a production facility are
merely preliminary. As such, Registrant has not reached an estimation of the
capital resources necessary to fund such a project nor has Registrant determined
how long such a project would take to complete. Registrant anticipates that at
the end of the projected two-year period, Registrant will have a sufficient
revenue stream to finance, at least partially, the construction of the proposed
production facilities. However, there can be no assurance that Registrant will
have the necessary funds at the end of the two-year period to construct its
14
<PAGE>
proposed production facilities. Should Registrant not have the necessary funds,
Registrant anticipates it will continue to cause its products to be produced on
a contract basis.
Currently, Registrant does have the necessary production facilities to produce
its line of eye care products on a commercial basis. Registrant has FDA approval
to market its line of eye care products in the United States. Also, as
previously discussed, Registrant has the necessary Canadian approval to market
its eye-care products in Canada. Shippert Medical will be marketing Registrant's
eye care products in the United States as well as in Canada. Registrant has
entered into a marketing and distribution contract with Shippert Medical. The
contract has an initial two-year term with a two-year renewal option.
Business of Registrant's Subsidiary. On or about June 1, 1997, Registrant agreed
to purchase 4,800 of the 5,000 total issued and outstanding shares of L.O.M.
Laboratories Inc.'s ("L.O.M. Laboratories") Class "A" common shares. Registrant
agreed to pay US$1.00 per share. This represents a 96% interest in L.O.M.
Laboratories. L.O.M. Laboratories owned the rights to the Lens-O-Matic system
until January 1, 1998, when Registrant purchased those rights for US$380,885.
The primary business purpose of the subsidiary is to develop and market new
products through Registrant. L.O.M. Laboratories has developed a line of skin
care products. We hope that the line of skin care products will be produced and
marketed in or around August, 2000. Registrant has applied for patents for the
line of skin care products in both the United States and Canada.
Liquidity. The Registrant had cash resources of US$417,951 at February 29, 2000.
At February 28, 1999, the Registrant had cash resources of US$346,646.00. At
February 29, 2000, the Registrant had total current assets of US$448,755.00 and
total current liabilities of US$19,363.00. At February 29, 2000, total current
assets exceeded total current liabilities by US$429,412.00. At February 28,
1999, Registrant had total current assets of US$376,541.00 and total current
liabilities of US$36,404.00. At February 28, 1999, total current assets exceeded
total current liabilities by US$340,137.00. The cash and equivalents constitute
the Registrant's present internal sources of liquidity. Because neither the
Registrant nor its subsidiary are generating any significant revenues, the
Registrant's only external source of liquidity is the sale of its capital stock.
Results of Operations. The Registrant has not yet realized any significant
revenue from operations. The net loss from operations from March 17, 1997
(inception) to February 29, 2000, was US$1,348,912.00. The net loss for the
9-month period ended February 29, 2000 was US$329,618.00. The net loss for the
9-month period ended February 28, 1999, was US$222,145.00. The net loss for the
3-month period ended February 29, 2000, was US$131,789.00. The net loss for the
same period in 1999 was US$74,043.00. Such losses were primarily the result of
selling, general and administrative expenses, management fees, rent and
consulting fees.
The Registrant may require additional cash to implement its business strategies,
including cash for (i) payment of increased operating expenses and (ii) further
implementation of those business strategies. No assurance can be given, however,
that the Registrant will have access to the capital markets in the future, or
that financing will be available on acceptable terms to satisfy the cash
requirements of the Registrant to implement its business strategies. The
inability of the Registrant to access the capital markets or obtain acceptable
financing could have a material adverse effect on the results of operations and
financial conditions of the Registrant.
The Registrant's forecast of the period of time through which its financial
resources will be adequate to support its operations is a forward-looking
statement that involves risks and uncertainties, and actual results could vary
as a result of a number of factors.
The Registrant anticipates that it will need to raise additional capital within
the next 12 months in order to develop, promote, produce and distribute its
proposed products. Such additional capital may be raised through additional
public or private financings, as well as borrowings and other resources. To the
extent that additional capital is raised through the sale of equity or
equity-related securities, the issuance of such securities could result in
dilution of the Registrant's stockholders. There can be no assurance that
additional funding will be available on favorable terms, if at all. If adequate
funds are not available within the next 12 months, the Registrant may be
required to curtail its operations significantly or to obtain funds through
entering into arrangements with collaborative partners or others that may
require the Registrant to relinquish rights to certain of its products that the
Registrant would not otherwise relinquish.
15
<PAGE>
Registrant, being a developmental stage enterprise, is currently putting
technology in place which will, if successful, mitigate the net loss experienced
by Registrant. Registrant is reviewing its options to raise substantial equity
capital. Management has proceeded as planned in the ongoing development of the
Syringe and the Lens-O-Matic. In order to meet its requisite budget, management
has held and continues to conduct negotiations with investors. Registrant has
also conducted extensive negotiations with various medical companies in an
attempt to establish beneficial strategic alliances. Registrant hopes that these
negotiations will result in significant investment income for Registrant. To
achieve and maintain the competitiveness of its products and to conduct costly
and time-consuming research and development, Registrant may be required to raise
substantial funds in addition to the funds already raised through the issuance
of Registrant's shares. Registrant will continue to develop its products for
commercial sale. Registrant's forecast for the period of time through which its
financial resources will be adequate to support its operations is a
forward-looking statement that involves risks and uncertainties, and actual
results could fail as a result of a number of factors. Registrant anticipates
that it will need to raise additional capital in order to develop, promote,
produce and distribute its products. Such additional capital may be raised
through additional public or private financings, as well as borrowings and other
resources.
There can be no assurance that additional funding will be available under
favorable terms, if at all. If adequate funds are not available, Registrant may
be required to curtail operations significantly or to obtain funds through
entering into arrangements with collaborative partners or others that may
require Registrant to relinquish rights to certain products that Registrant
would not otherwise relinquish. However, Registrant believes that it is poised
to maintain its long-term liquidity. Registrant believes that within a short
period of time, it can begin marketing commercial quantities of its eye care
products. Coupled with the further issuance of common stock of Registrant,
Registrant believes it can significantly improve its long-term liquidity.
The Registrant does not anticipate any material expenditures within the next 12
months. The Registrant does not anticipate any significant research and
development within the next 12 months, nor does the Registrant anticipate that
it will lease or purchase any significant equipment within the next 12 months.
The Registrant does not anticipate a significant change in the number of its
employees within the next 12 months.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: April __, 2000 L.O.M. Medical International, Inc.
By: /s/ John Klippenstein
------------------------
John Klippenstein
Its: President
17
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