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 AUGUST 31, 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)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 98-0178784
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
#3-1482 Springfield Road , Kelowna, British Columbia, Canada V1Y 5V3
(Address of principal executive offices) (Zip Code)
(250) 762-7552
(Issuer's Telephone Number, including Area Code)
Thomas E. Stepp, Jr.
Stepp & Beauchamp LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
Telephone: 949.660.9700
Facsimile: 949.660.9010
(Name, Address and Telephone Number of Agent for Service)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
[ ] Yes [ ]No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of August 31, 2000, there were
5,965,699 shares of the issuer's $.001 par value common stock issued and
outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Balance Sheet
$ United States
August 31, 2000 and May 31, 2000
(Unaudited - Prepared by Management)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
August 31, May 31,
2000 2000
-------------------------------------------------------------------------------------
Assets
<S> <C> <C>
Current assets
Cash $ 1,089,907 $ 959,318
Accounts receivable 7,373 21,070
Prepaid expenses 3,425 6,820
-------------------------------------------------------------------------------------
1,100,705 987,208
Advances and deposits 75,395 42,000
Patent costs 11,462 12,504
Capital assets (note 2) 48,655 47,124
-------------------------------------------------------------------------------------
$ 1,236,217 $ 1,088,836
=====================================================================================
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 17,241 $ 27,791
Redeemable preferred shares (note 3) 301,727 301,727
Share subscriptions (note 4(b)) 134,290 185,513
Stockholders' equity
Capital stock (note 4) 5,965 5,846
Additional paid in capital 2,589,966 2,201,056
Deficit accumulated during the development stage (1,846,276) (1,666,401)
Accumulated other comprehensive income 33,304 33,304
-------------------------------------------------------------------------------------
782,959 573,805
-------------------------------------------------------------------------------------
$ 1,236,217 $ 1,088,836
=====================================================================================
</TABLE>
See accompanying notes to financial statements
On behalf of the Board:
_____________________ Director
_____________________ Director
2
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Statement of Loss
$ United States
For the three months ended August 31, 2000 and 1999
(Unaudited - Prepared by Management)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
From Inception
(March 17, 1997) 2000 1999
to August 31, 2000
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expenses
Advertising $ 14,135 $ -- $ --
Amortization 51,315 4,755 4,042
Automotive 49,139 4,632 2,786
Consulting fees 151,549 27,322 8,078
Conventions and seminars 2,300 2,300 --
Design plans 10,911 -- --
Director's fees 21,528 -- --
Foreign exchange loss (gain) 15,251 (25) 829
Freight 1,082 1,082
Insurance 18,112 5,557 --
Interest and bank charges 10,724 1,833 795
Legal and accounting 199,947 25,864 16,739
Licences, fees and dues 4,341 -- --
Management fees 426,698 60,434 34,404
Office and administration 205,763 30,020 15,446
Product development 29,119 2,535 --
Promotion and entertainment 16,332 527 453
Prospectus and share issuance 3,350 3,350 --
Rent 133,218 18,176 10,265
Repairs and maintenance 2,381 65 --
Storage 467 467 --
Telephone and utilities 42,396 2,409 2,633
Travel 54,424 1,720 647
Video production 26,783 511 --
Write down of inventory 55,734 -- --
Write down of product rights and
patent costs 374,128 -- --
--------------------------------------------------------------------------------------------------
1,921,127 193,534 97,117
--------------------------------------------------------------------------------------------------
Loss from operations (1,921,127) (193,534) (97,117)
Other income
Interest income 74,851 13,659 2,884
--------------------------------------------------------------------------------------------------
(1,846,276) (179,875) (94,233)
--------------------------------------------------------------------------------------------------
Net loss $(1,846,276) $ (179,875) $ (94,233)
--------------------------------------------------------------------------------------------------
Loss per share $ (0.03) $ (0.02)
Weighted average shares used 5,909,401 5,529,198
==================================================================================================
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Statement of Cash Flows
$ United States
For the three months ended August 31, 2000 and 1999
(Unaudited - Prepared by Management)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
From inception
(March 17, 1997) 2000 1999
to August 31, 2000
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net loss $(1,846,276) (179,875) $ (94,233)
Items not involving cash
Amortization 51,315 4,755 4,042
Gain on sale of capital asset (2,659) -- --
Write down of inventory 55,734 -- --
Write down of product rights 374,128 -- --
Changes in non-cash working capital
Accounts receivable (7,373) 13,697 (6,323)
Prepaid expenses (3,425) 3,395 1
Accounts payable and accrued liabilities 17,241 (10,550) 2,319
Inventory purchases (55,734) -- --
---------------------------------------------------------------------------------------------------------
(1,417,049) (168,578) (94,194)
Financing
Issuance of capital stock 1,742,687 203,516 --
Proceeds from subscriptions for shares 987,534 134,290 90,956
---------------------------------------------------------------------------------------------------------
2,730,221 337,806 90,956
Investing
Acquisition of capital assets (96,963) (5,244) --
Acquisition of product rights (90,577) -- --
Proceeds on disposition of capital asset 6,189 -- 138
Advances and deposits (75,395) (33,395) --
---------------------------------------------------------------------------------------------------------
(256,746) (38,639) 138
Foreign currency translation adjustment 177 -- --
Other comprehensive income 33,304 -- --
---------------------------------------------------------------------------------------------------------
Increase (decrease) in cash 1,089,907 130,589 (3,100)
Cash, beginning of period -- 959,318 346,646
---------------------------------------------------------------------------------------------------------
Cash, end of period $ 1,089,907 $ 1,089,907 $ 343,546
---------------------------------------------------------------------------------------------------------
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 $ 248,244 $ 185,513 $ 62,731
---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Equity and Comprehensive Income
$ United States
For the period from inception on March 17, 1997 to August 31, 2000
<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 3 $ -- $ -- $ -- $ --
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 shares 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 income (loss) -- -- -- (293,239) (7,294) (300,533)
----------------------------------------------------------------------------------------------------------------------
Balance, May 31, 1998 5,483,247 5,483 1,074,283 (431,511) 6,288 654,543
Common shares issued
net of share 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
Common shares issued
net of share issue costs 307,610 308 967,335 -- -- 967,643
Common shares issued for
conversion of share
subscriptions 19,302 19 62,712 -- -- 62,731
Comprehensive income:
Loss -- -- -- (508,835) -- (508,835)
Foreign currency translation -- -- -- -- 9,978 9,978
----------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) -- -- -- (508,835) 9,978 (498,857)
----------------------------------------------------------------------------------------------------------------------
Balance, May 31, 2000 5,846,459 $ 5,846 $ 2,201,056 $(1,666,401) $ 33,304 $ 573,805
======================================================================================================================
</TABLE>
5
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Equity and Comprehensive Income
(continued)
$ United States
For the period from inception on March 17, 1997 to August 31, 2000
<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, 2000 5,846,459 $ 5,846 $ 2,201,056 $(1,666,401) $ 33,304 $ 573,805
Common shares issued
net of share issue costs 62,159 62 203,454 -- -- 203,516
Common shares issued for
conversion of share
subscriptions 57,081 57 185,456 -- -- 185,513
Comprehensive income:
Loss -- -- -- (179,875) -- (179,875)
Foreign currency translation -- -- -- -- -- --
----------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) -- -- -- (179,875) -- 209,154
----------------------------------------------------------------------------------------------------------------------
Balance, Aug 31, 2000 5,965,699 $ 5,965 $ 2,589,966 $(1,846,276) $ 33,304 $ 782,959
----------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<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
$1,846,276. 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) 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.
c) 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 $1.47
ii) Non-monetary assets and liabilities are translated at the rate of
exchange 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.
d) Patent costs
Patent costs relate to amounts paid to acquire the rights to produce
and distribute products as well as the costs associated with patent
applications.
7
<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) Patent costs (continued)
These costs are being amortized on a straight-line basis over five
years.
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.
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.
8
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 4
$ United States
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------
1. Significant accounting policies (continued):
i) Loss per share
Loss per share has been calculated using the weighted average number
of common shares outstanding during the period.
2. Capital assets:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
August 31, May 31,
2000 2000
--------------------------------------------------------------------------------------------------------
Accumulated Net book Net book
Cost amortization value value
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Leasehold improvements $27,919 $12,563 $15,356 $16,752
Computer software 5,446 1,778 3,668 4,192
Equipment 29,844 15,311 14,533 12,588
Furniture and fixtures 23,354 8,256 15,098 13,592
--------------------------------------------------------------------------------------------------------
$86,563 $37,908 $48,655 $47,124
--------------------------------------------------------------------------------------------------------
</TABLE>
3. Redeemable preferred shares:
The Company's subsidiary has redeemable preferred shares outstanding as
follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
August 31, May 31,
2000 2000
--------------------------------------------------------------------------------------------------------
<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>
4. Capital stock:
a) Authorized:
50,000,000 Common shares with a par value of $.001 each 5,000,000
Preferred shares with a par value of $.001 each
b) Share subscriptions:
Subsequent to August 31, 2000, the Company issued 67,734 common shares
at $3.25 per share for net proceeds of $134,290 which were received
prior to August 31, 2000.
9
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 6
$ United States
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------
4. Capital stock (continued):
c) Stock option plan:
1,000,000 common shares of the Company are reserved for issuance upon
exercise of stock options. As at August 31, 2000, no stock options
have been granted.
5. 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 $ 8,403 $ 464
Management fees paid to president 30,608 34,404
Office and administration fees paid to president's spouse 9,182 9,000
Office and administration fees paid to an individual
related to the president 5,322 4,389
Management fees to a company controlled by the president 20,000 -
Rent paid to a company controlled by the president 14,140 4,605
-----------------------------------------------------------------------------------------------
</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.
6. Commitments:
The Company is obligated to make future lease payments for it's offices as
follows:
2001 $ 14,590
2002 $ 19,453
2003 $ 19,453
2004 $ 19,453
2005 $ 19,453
7. Income taxes:
At August 31, 2000, the Company had a net operating loss carryforward for
United States income tax purposes of approximately $1,800,000. 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
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
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. Our executive offices are located at #3-1482 Springfield Road, Kelowna, B.
C., Canada V1Y 5V3. The Company's telephone number is 250.762.7552.
For purposes of clarification, anytime the symbol "US" is used within this
Annual Report of Form 10-KSB, it refers to the currency of the United States.
Anytime the symbol "CDN" is used, it refers to the currency of Canada.
Business of the Company. The Company was originally incorporated for the purpose
of researching and developing health care products. Our goal is to become an
innovator and provider of a retractable syringe ("Syringe") and related products
and technologies to the health care market. We also hope to successfully market
and distribute our line of eye care products. We have successfully patented and
licensed products in seventy countries including the United States and Canada.
We envision that we will be able to develop new and improved products and
provide the health care industry with better, safer products throughout the
world.
The Syringe. We anticipate that the Syringe will change standard disposal
methods for used syringes. We have developed a product designed to function as a
standard hypodermic syringe that is safer to the caregiver or health care
worker. We believe 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. We intend to promote the Syringe as a safer and less risk-oriented
instrument for hospital staff and health care workers. We are 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.
We anticipate that the products and technologies developed by us will be offered
to distributors on a worldwide basis, with an initial emphasis in Canada and the
United States. We hope that new product and technology ideas will be generated
through active dialogues among us, our customers, and our network of scientific
advisors, as well as through active participation in national and international
conferences, and reviews of selected scientific literature.
Our management interacts with a network of scientific advisors within the
industry, including members of academic institutions, as well as potential
customers. We anticipate that these interactions will enable us to identify the
specialized needs of those potential customers and to provide innovative and
commercially acceptable products and technologies. At this time, our
relationship with scientific advisors and academic institutions is limited to an
advisory relationship. We currently perform all of our own research and
development. We do not currently use the services of third parties to conduct
any of our research and development.
We anticipate that we will be testing the Syringe in conjunction with teaching
universities in Canada, Britain, and other constituents of the United Kingdom.
The Lens-O-Matic. We have 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. We have developed the following
components and solutions that will be used together with the Lens-O-Matic
insertion and storage system:
o a medical inserter that will remove contact lenses in a medical
emergency situation for use by hospital medical staff and paramedics;
o disposable and replacement inserter ends;
o additional storage cups and caps; and
o all soaking and disinfecting solutions that are to be used with the
Lens-O-Matic inserter.
11
<PAGE>
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. We
believe that the design of the Lens-O-Matic will reduce the risk of
contamination and infection to the patient. We have developed a liquid cleaner
for the Lens-O-Matic that quickly cleans contact lenses. We have obtained Food
and Drug Administration Approval ("FDA") for the Lens-O-Matic product. We have
also completed market testing and believe 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. We have
also completed the formulation of our contact lens solutions and copyrights
covering these products have been registered. We have also completed the design
and labeling of the Lens-O-Matic package. We believe that our 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:
o hospitals and clinics, including Shippert Medical of Englewood,
Colorado ("Shippert"), Cross Mark Sales & Marketing of Plano, Texas;
and
o optometrists and opticians including, Health Care Insights of Edison,
New Jersey.
Mind Your Own Skin. We are currently in the first phase of licensing agreements
with the owners of "Mind Your Own Skin". We have invested over $100,000.00 to
date to pay for licensing agreements and patents in North America. We intend to
manufacture and distribute the product in the future.
Business of the Company's Subsidiary. There has been no activity in the
subsidiary this quarter. For the forseeable future the subsidiary will be
inactive.
Our Future Capital Requirements. We will require additional cash to implement
our business strategies, including cash for (i) payment of increased operating
expenses and (ii) further implementation of our business strategies. No
assurance can be given, however, that we will have access to the capital markets
in the future, or that financing will be available on acceptable terms to
satisfy our cash requirements to implement our business strategies. Our
inability to access the capital markets or obtain acceptable financing could
have a material adverse effect on our results of operations and financial
condition.
Our forecast of the period of time through which our financial resources will be
adequate to support our operations is a forward-looking statement that involves
risks and uncertainties, and actual results could vary as a result of a number
of factors.
We anticipate that we will need to raise additional capital over the next
several months in order to develop, promote, produce and distribute our 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 our
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, we may be required to curtail our operations
significantly or to obtain funds through entering into arrangements with
collaborative partners or others that may require us to relinquish rights to
certain of our products that we would not otherwise relinquish. However, we
believe that we are poised to maintain our long-term liquidity.
We anticipate spending funds in excess if $500,000 over the next several months
in order to produce our syringe for testing purposes. During this period there
may be significant increases to our staffing levels. A portion of these
expenditures will include funds used for further research on the Syringe.
We are not currently producing commercial quantities of our products nor are we
currently supplying any services to any third parties. No assurance can be given
that we will, on a timely basis, 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. We
have produced 33,000 units of our eye care products which will be used for
demonstrations. As such, we have not inventoried the units but have expensed
them in prior financial statements. Our current production capacity does allow
for the production of commercial quantities of our eye care products. We believe
that we can increase our output to 150,000 units. We have a second set of dyes
designed that will have a 300,000 unit capacity which would allow the production
of a total of 450,000 units of our eye care products per month.
We anticipate that we will contract out the first two years of production of the
Syringe. At the end of the second year of production, we anticipate we will
engage in significant discussions regarding the potential for the construction
of our own production facility. We recognize that the construction of our own
production facility will be contingent upon us having reached our sales and
profit projections. We anticipate that we will present this issue for vote by
our Board of Directors
12
<PAGE>
and shareholders. In this regard, we anticipate that we will locate our
production facilities in North America, specifically, the State of Washington,
due to its strategic location for penetration into the United States and
Canadian markets.
Our eye care products are currently produced in Canada. We own all of the
necessary injection molds. We contract out for the production of components
needed for the assembly and packaging of our eye care products. The actual
assembly and packaging will be subcontracted out at this time. All of our other
products, 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 manufacture of our products involves a number of steps and requires
compliance with stringent quality control specifications imposed by us and
various regulators. We may not be able to quickly replace our manufacturing
capacity if we were unable to use our 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.
Our inability or reduced capacity to manufacture or have manufactured any of our
products would have a material adverse effect on our business and results of
operations.
We currently have access to the necessary production facilities to produce our
line of eye care products on a commercial basis. We have FDA approval to market
our line of eye care products in the United States. Also, as previously
discussed, we have the necessary Canadian approval to market our eye-care
products in Canada. We have commenced marketing the Lens-O-Matic in Canada as
well as the United States. Shippert Medical may be one of the companies that
will be marketing our eye care products in the United States as well as in
Canada. We have entered negotiations for a marketing and distribution contract
with Shippert Medical. The proposed contract has an initial two-year term with a
two-year renewal option.
Our products will be subject to numerous foreign government standards and
regulations that are continually being amended. Although we will endeavor to
satisfy foreign technical and regulatory standards, there can be no assurance
that our products will comply with foreign government standards and regulations,
or changes thereto, or that it will be cost effective for us to redesign our
products to comply with such standards or regulations. Our inability to design
or redesign products to comply with foreign standards could have a material
adverse effect on our business, financial condition and results of operations.
The negotiations to set up a manufacturing plant in Ireland have not progressed
beyond the preliminary discussions discussed in our previous filings.
Our business and the business of our subsidiary will expose us to potential
product liability risks that are inherent in the testing, manufacturing and
marketing of medical products. We do not currently have product liability
insurance, and there can be no assurance that we 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. We face an
inherent business risk of exposure to product liability and other claims in the
event that the development or use of our 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 we 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, or 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 our business, financial condition and results of
operations. While we have taken, and will continue to take, what we believes are
appropriate precautions, there can be no assurance that we 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 our products.
A product liability claim could have a material adverse effect on our business,
financial condition and results of operations.
We believe that we are poised to maintain our long-term liquidity. This is based
upon cash flow projections prepared by us. We believe we have raised enough
capital to allow us to meet our financial obligations for a period of at least
twelve (12) months from August 31, 2000. However, our forecast for the period of
time through which our financial resources will be adequate to support our
operations is a forward-looking statement that involves risks and uncertainties,
and actual results could fail as a result of a number of factors.
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Liquidity. We had cash resources of US$1,089,907.00 at August 31, 2000. At May
31, 2000, we had cash resources of US$959,318.00. At August 31, 2000, we had
total current assets of US$1,100,705.00 and total current liabilities of
US$17,241.00. At August 31, 2000, total current assets exceeded total current
liabilities by US$1,083,464.00. At May 31, 2000, we had total current assets of
US$987,208.00 and total current liabilities of US$27,791.00. At May 31, 2000,
total current assets exceeded total current liabilities by US$959,417.00. The
cash and equivalents constitute our present internal sources of liquidity.
Because we are not generating any significant revenues, our only external source
of liquidity is the sale of our 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 August 31, 2000, was US$1,846,276.00. The net loss for the
3-month period ended August 31, 2000, was US$179,875.00. The net loss for the
12-month period ended May 31, 2000, was US$508,835.00. Such losses were
primarily the result of operational expenditures.
Item 2. Changes in Securities
We have offered to all shareholders of record, one warrant for every two shares
held by each shareholder. Each warrant entitles the holder of such warrant to
purchase one share of our common stock for $5.00 per share. Each warrant expires
by its own terms ninety (90) days after the first transaction in the Company's
shares occurs on the Over-the-Counter Bulletin Board.
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
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: September __, 2000 L.O.M. Medical International, Inc.
By: /s/ John Klippenstein
-----------------------------------
John Klippenstein
Its: President
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