SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
L.O.M. MEDICAL INTERNATIONAL, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
[_] Fee paid previously with preliminary materials:
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[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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L.O.M. Medical International, INC.
#3-1482 Springfield Road
Kelowna, British Columbia, Canada V1Y 5V3
June 20th, 2000
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
L.O.M. Medical International, Inc., a Delaware corporation ("Company"), which
will be held at 6:30 p.m., Pacific Standard Time, on July 21, 2000, at the Coast
Capri Hotel located at 1171 Harvey Avenue, in Kelowna, British Columbia Canada
VIY 5V3 ("Annual Meeting"). All holders of the Company's outstanding common
stock as of May 15, 2000, are entitled to vote at the Annual Meeting.
Enclosed is a copy of the Notice of Annual Meeting of Stockholders, Proxy
Statement, and Proxy Card. A current report regarding the business operations of
the Company will be presented at the Annual Meeting and stockholders will have
an opportunity to ask questions.
We hope you will be able to attend the Annual Meeting. Whether or not you
expect to attend, it is important you complete, sign, date, and return the proxy
card in the enclosed envelope in order to make certain that your shares will be
represented at the Annual Meeting.
Sincerely,
/s/ John Klippenstein
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John Klippenstein
President
<PAGE>
L.O.M. Medical International, INC.
#3-1482 Springfield Road
Kelowna, British Columbia, Canada V1Y 5V3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on July 21, 2000
NOTICE IS HEREBY given that the Annual Meeting of Stockholders of L.O.M.
Medical International, Inc., a Delaware corporation ("Company"), will be held at
6:30 p.m., Pacific Standard Time, on July 21, 2000, at The Coast Capri Hotel
located at 1171 Harvey Avenue, in Kelowna, British Columbia, Canada V1Y 5V3
("Annual Meeting") for the following purposes:
1. To elect six (6) members to the Board of Directors of the Company;
2. To approve and adopt the Companys Stock Option Plan;
3. To approve, adopt and ratify the actions taken by the Companys officers and
directors during the last fiscal year;
4. To approve the Company entering into Indemnification Agreements with its
executive officers and directors;
5. To approve the selection of KPMG LLP to audit the financial statements of
the Company for the fiscal year ended May 31, 2001; and
6. To transact such other business as may properly come before the Annual
Meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on May 15, 2000, as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting and all adjourned meetings thereof.
<PAGE>
By Order of the Board of Directors
/s/ John Klippenstein
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John Klippenstein,
President
Dated: June 20th, 2000
PLEASE FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE RETURN ENVELOPE
FURNISHED FOR THAT PURPOSE AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO
ATTEND THE ANNUAL MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY
REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT.
<PAGE>
L.O.M. Medical International, INC.
#3-1482 Springfield Road
Kelowna, British Columbia, Canada V1Y 5V3
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held July 21, 2000
VOTING AND PROXY
This Proxy Statement is being furnished in connection with the solicitation of
proxies by the Board of Directors of L.O.M. Medical International, Inc., a
Delaware corporation ("Company"), for use at the annual meeting of stockholders
of the Company to be held at 6:30 p.m., Pacific Standard Time, on July 21, 2000,
at The Coast Capri Hotel located at 1171 Harvey Avenue, in Kelowna, British
Columbia, Canada V1Y 5V3 ("Annual Meeting"), and at any adjournments thereof.
When a Proxy is properly executed and returned, the shares of the Company's
$.001 par value common stock that such Proxy represents will be voted in
accordance with any directions specified therein. If no specification is
indicated, those shares will be voted "FOR" (i) the election as directors of the
Company of the six (6) nominees named herein; (ii) approval and adoption of the
Company's Stock Option Plan (attached hereto as "Exhibit One"); (iii) the
approval, adoption and ratification of the actions taken by the Company's
officers and directors during the most recent fiscal year; (iv) the approval of
the Company entering into Indemnification Agreements with its executive officers
and directors; (v) the approval and ratification of the selection and
appointment of KPMG LLP as independent certified public accountants of the
Company to audit the financial statements of the Company for the fiscal year
ended May 31, 2001.
Any stockholder giving a Proxy has the power to revoke that Proxy at any time
before that Proxy is voted by (i) giving to the Secretary of the Company written
notice of such revocation, (ii) issuance of a subsequent Proxy, or (iii) voting
in person at the Annual Meeting. The affirmative vote of the holders of not less
than two-thirds (2/3) of the issued and outstanding shares of the Company's
$.001 par value common stock will be required for the approval of such proposal.
At the close of business on May 15, 2000, the record date for determining
stockholders entitled to notice of and to vote at the Annual Meeting, the
Company had issued and outstanding 5,846,459 shares of its $.001 par value
common stock ("Common Stock"). Each
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share of Common Stock entitles the holder of record thereof to one vote on any
matter coming before the Annual Meeting. Only stockholders of record at the
close of business on May 15, 2000, are entitled to notice of and to vote at the
Annual Meeting or at any adjournments thereof.
The Company will pay the expenses of soliciting proxies for the Annual Meeting,
including the cost of preparing, assembling and mailing the proxy solicitation
materials. Proxies may be solicited personally, or by mail or by telephone, by
directors, officers and regular employees of the Company who will not be
additionally compensated therefor. It is anticipated that this Proxy Statement
and accompanying Proxy will be mailed to all stockholders entitled to vote at
the Annual Meeting on or about July 3, 2000.
The matters to be considered and acted upon at the Annual Meeting are referred
to in the preceding notice and are specified more completely below.
ELECTION OF DIRECTORS
(Proposal 1)
Directors of the Company are elected annually and hold office until the next
annual meeting of stockholders of the Company or until their respective
successors are elected and qualified. It is intended that the Proxies solicited
by the Board of Directors of the Company will be voted for election of the six
(6) nominees specified below, unless a contrary instruction is made on the
Proxy. If, for any reason, one or more of these nominees should be unavailable
as a candidate for director of the Company, an event which is not anticipated,
the persons specified in the accompanying Proxy will vote for another candidate
or candidates nominated by the Board of Directors. To be elected to the Board of
Directors of the Company, a nominee must receive the affirmative vote of the
holders of a majority of the total issued and outstanding Common Stock.
Cumulative voting for nominees is not permitted.
All six (6) of the nominees for directors are at present, directors of the
Company.
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The following table sets forth certain information with respect to (i) each
nominee for director of the Company, and (ii) all director nominees and
executive officers of the Company as a group at May 1, 2000, including the
number of shares of Common Stock beneficially owned by each of them. Percentages
are based on the number of shares of the Company's outstanding Common Stock on a
fully diluted basis as of May 1, 2000.
<TABLE>
<CAPTION>
Title of Class Name of Beneficial Owner Amount Percent of Class
-------------- ------------------------ ------ ----------------
<S> <C> <C> <C>
Common Stock David A. Gramlich 40,000 0.7%
21274-87 Place
Langley, B.C. V1M 1Z8 Director
Common Stock Colin Lee 55,000 0.9%
2749 McColl Place
Victoria, B.C. V8N 5Y8 Director
Common Stock Peter McFadden 4,100 0.07%
418 Oakview Road Vice President, Chief
Kelowna, B.C. V1W 4K2 Financial Officer and a
Director
Common Stock John Klippenstein 3,629,779(1) 62.1%
494 Casa Rio Drive President, Chief
Kelowna, B.C. V1Z 3L6 Executive Officer and a
Director
Common Stock Maria Klippenstein 3,629,779(2) 62.1%
494 Casa Rio Drive Secretary and Treasurer
Kelowna, B.C. V1Z 3L6
Common Stock John Gergely 1,000 0.01%
21327-86A Cresent
Langley, B.C. V1M 2A1 Director
</TABLE>
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(1) Includes 1,814,884 shares of the Company's $.001 par value common stock
owned by Mr. Klippenstein's wife, Maria Klippenstein.
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(2) Includes 1,814,895 shares of the Company's $.001 par value common stock
owned by Mrs. Klippenstein's husband, John Klippenstein.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("Commission") and generally includes voting
or investment power with respect to securities. In accordance with Commission
rules, shares of Common Stock which may be acquired upon exercise of stock
options or warrants which are currently exercisable or which become exercisable
within 60 days of this Proxy Statement are deemed beneficially owned by the
optionees.
Nominees for Directors
John Klippenstein, age 61, 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 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, age 44, 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, age 59, 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
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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, age 59, 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., age 62, 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., age 35, 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, age 57, 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.
Board of Directors Meetings During Last Fiscal Year
From the Company's inception on March 17, 1997, to February 28, 2000, the Board
of Directors consisted of five directors, John Klippenstein, Peter McFadden,
David Gramlich,
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Dr. Colin Lee and Dr. John Gergely. On or about February 28, 2000, Dr. Jeffrey
Berg was appointed to the Company's Board of Directors. During the Company's
most recent fiscal year all corporate action was taken by written consent in
lieu of holding Board of Directors' meetings. The Company contemplates that the
directors elected at the Annual Meeting will form a Compensation Committee
consisting of two directors, at least one of whom shall be an independent
director, and shall make recommendations concerning salaries and incentive
compensation for employees (including officers and management personnel) of the
Company. The Company also contemplates the formation of an Audit Committee
consisting of two (2) directors, at least one of whom shall be an independent
director, which shall review the results and scope of the audits and other
services provided by the Company's independent auditors.
All directors of the Company hold office until the next annual meeting of
stockholders of the Company and the election and qualification of their
successors. Officers of the Company are appointed annually by, and serve at the
discretion of, the Board of Directors.
Principal Stockholders. Other than officers and directors, no persons are
beneficial owners of more than 5% of the Company's Common Stock.
Executive Compensation. Any compensation received by officers and management
personnel of the Company will be determined from time to time by the Board of
Directors of the Company (specifically the Compensation Committee). Officers,
directors and management personnel of the Company will be reimbursed for any
out-of-pocket expenses incurred on behalf of the Company.
Currency Notations. As a point of clarification, as used in this Proxy
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.
Summary Compensation Table. The table set forth below summarizes the annual and
long-term compensation for services in all capacities to the Company payable to
the Chief Executive Officer of the Company and the other executive officers of
the Company whose total annual salary and bonus is anticipated to exceed $50,000
during the calendar year ended December 31, 2000.
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Name of Individual Capacities in Which Aggregate Remuneration
Remuneration was
Earned
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John Klippenstein
President and Chief
Executive Officer US $140,000
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As of May 31, 2000, Mr. Klippenstein had been paid US$138,634.82 in
remuneration. The Company's auditors also recorded US$13,575.64 in vehicle
benefit to Mr. Klippenstein and US$19,131.50 in rental lease payments.
Compensation of Directors. There was no compensation to directors in their
capacities as such.
To be elected to the Board of Directors of the Company, a nominee must receive
the affirmative vote of the holders of a majority of the total issued and
outstanding Common Stock. Cumulative voting for nominees is not permitted.
APPROVAL OF STOCK OPTION PLAN
(Proposal 2)
Management of the Company believes that it is in the best interests of the
Company to reserve certain authorized shares of Common Stock pursuant to the
terms and subject to the conditions specified in the Company's Stock Option
Plan, which was approved and adopted by the Company's Board of Directors on
February 28, 2000, and which is attached hereto as Exhibit A. The stock options
so specified are intended to serve as an incentive to, and to encourage stock
ownership by, certain directors, officers, employees and certain persons
rendering service to the Company so that they may acquire or increase their
proprietary interest in the success of the Company, and to encourage them to
remain in the Company's service.
Approval of the proposal to approve and adopt the Company's Stock Option Plan
requires the affirmative vote of the holders of a majority of the total issued
and outstanding Common Stock.
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RATIFICATION OF ACTIONS BY OFFICERS AND DIRECTORS
DURING THE COMPANY'S LAST FISCAL YEAR
(Proposal 3)
Management of the Company will report to the Company's shareholders regarding
the actions taken by the Company's officers and directors during the last fiscal
year, including, but not limited to, material contracts entered into by the
Company. Management of the Company believes that these actions taken by the
Company's officers and directors and the material contracts entered into by the
Company have been in the best interests of the Company and its shareholders,
and, therefore, will request that holders of the issued and outstanding Common
Stock vote to approve, consent to, adopt and ratify each of those actions and
material contracts.
Approval of the proposal to approve, adopt and ratify the actions taken by the
Company's officers and sole director during the Company's most recent fiscal
year requires the affirmative vote of the holders of a majority of the issued
and outstanding Common Stock.
APPROVAL OF THE INDEMNIFICATION AGREEMENTS
TO BE ENTERED INTO BETWEEN THE COMPANY
AND ITS OFFICERS AND DIRECTORS
(Proposal 4)
The Company anticipates that within the next 6 months, it will enter into
Indemnification Agreements with each of its executive officers and directors
pursuant to which the Company shall indemnify each such director and officer for
all expenses and liabilities, including criminal monetary judgments, penalties
and fines, incurred by each such director and officer in connection with any
criminal or civil action brought or threatened against such director and officer
because of such director and officer being or having been an executive officer
or director of the Company. To be entitled to indemnification by the Company,
such person must have acted in good faith and in a manner such person believed
to be in the best interests of the Company and, with respect to criminal
actions, such director and officer must have had no reasonable cause to believe
his or her conduct was unlawful.
Approval of the proposal to enter into Indemnification Agreements with the
Company's executive officers and directors requires the affirmative vote of the
holders of a majority of the total issued and outstanding Common Stock.
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INDEPENDENT AUDITORS - KPMG LLP
(Proposal 5)
Management of the Company has selected the certified public accounting firm of
KPMG LLP to audit and comment on the Company's financial statements for the
Company's fiscal year ended May 31, 2001, and to conduct whatever audit
functions are deemed necessary pursuant thereto. KPMG LLP is responsible for the
audit of the Company's financial statements for the fiscal year ended May 31,
2000, for inclusion in the Company's Annual Report on Form 10-KSB which will be
filed with the Commission on or before August 29, 2000.
Approval of the selection of KMPG LLP to audit the financial statements of the
Company for the fiscal year ended May 31, 2001, requires the affirmative vote of
the holders of a majority of the issued and outstanding Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On or about January 1, 1998, prior to becoming a subsidiary of the Company,
L.O.M. Laboratories Inc., purchased from John Klippenstein, President and a
Director of the Company, 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 Mr. Klippenstein's debt of CDN$101,329; and
(ii) L.O.M. Laboratories Inc. issued, to Mr. Klippenstein, 4000 of the Company's
Class "C" Preferred Shares valued at CDN$440,671. At the time of the
transaction, Mr. 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., Mr. 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
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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.
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. As of May 19, 2000, the loan was
repaid in full.
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.
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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.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters to be brought
before the Annual Meeting. If, however, other matters should come before the
Annual Meeting, it is the intention of each person specified in the Proxy to
vote such Proxy in accordance with his or her judgment on such matters.
ANNUAL REPORT ON FORM 10-KSB
Because the Company's year end is May 31st, the Company has not yet filed an
Annual Report on Form 10-KSB. However, the Company has filed the requisite
Quarterly Reports on the Form 10-QSB which are available without charge to
stockholders and may be obtained by writing to the Company at #3-1482
Springfield Road, Kelowna, British Columbia, Canada V1Y 5V3, Attention:
Information Agent. A summary of the Company's most recent Amendment to its
Registration Statement on Form 10-SB is attached to this Proxy Statement as
Appendix A.
On or about July 13, 1999, the Company became a reporting company with the
Commission. Although the Company has been removed from the Over-the-Counter
Bulletin Board maintained by the National Association of Securities Dealers,
Inc. (the "Bulletin Board"), the Company is nevertheless obligated to file
quarterly and annual reports, which include financial statements. The Company is
currently listed on the Pink Sheets but is also in the process of attempting to
clear comments with the Securities and Exchange Commission and be re-listed on
the Bulletin Board. The public may read and copy any materials filed with the
Commission, including the Registration Statement on Form 10-SB filed by the
Company on May 14, 1999; the amendment thereto filed on January 6, 2000; the
amendment thereto filed on January 20, 2000; the amendment thereto filed on May
17, 2000; and the Company's Quarterly Reports on Form 10-QSB filed on February
22, 2000 and April 14, 2000 and the amendments filed thereto on May 17, 2000, at
the Commission's Public Reference Room at
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450 Fifth Street N.W., Washington, D.C. 20549, or by accessing the Commission's
website at http://www.sec.gov. A summary of the Company's most recent Amendment
to its Registration Statement on Form 10-SB filed with the SEC on May 17, 2000,
is attached hereto as Appendix A.
STOCKHOLDER PROPOSALS
Any proposals of security holders which are intended to be presented at next
year's annual meeting must be received by the Company at its principal executive
offices on or before June 1, 2001, in order to be considered for inclusion in
the Company's Proxy materials relating to that annual meeting.
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EXHIBIT ONE
STOCK OPTION PLAN
Article
I. Purposes of the Plan
II. Amount of Stock Subject to Plan
III. Effective Date and Term of the Plan
IV. Administration
V. Eligibility
VI. Limitation on Exercise of Incentive Options
VII. Options: Price and Payment
VIII. Use of Proceeds
IX. Term of Options and Limitations on the Right of Exercise
X. Exercise of Options
XI. Nontransferability of Options and Stock Appreciation Rights
XII. Termination of Directors, Employees and Independent Contractors
XIII. Adjustment of Shares; Effect of Certain Transactions
XIV. Right to Terminate Employees and Independent Contractors
XV. Purchase for Investment
XVI. Issuance of Certificates; Legends; Payment of Expenses
XVII. Withholding Taxes
XVIII. Listing of Shares and Related Matters
XIX. Amendment of the Plan
XX. Termination or Suspension of the Plan
XXI. Governing Law
XXII. Partial Invalidity
L.O.M. MEDICAL INTERNATIONAL, INC., 2000 STOCK OPTION PLAN
I. PURPOSES OF THE PLAN
1.01 L.O.M. Medical International, Inc., a Delaware corporation
("Company"), desires to provide to certain of its directors, employees and
independent contractors and the directors, employees and independent contractors
of any subsidiary corporation or parent corporation of the Company who are
responsible for the continued growth of the Company an opportunity to acquire a
proprietary interest in the Company, and, therefore, to create in such
directors, employees and independent contractors an increased interest in and a
greater
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concern for the welfare of the Company.
The Company, by means of this L.O.M. Medical International, Inc., 2000
Stock Option Plan (the "Plan"), seeks to retain the services of persons now
serving in certain capacities and to secure the services of persons capable of
serving in similar capacities.
1.02 The stock options ("Options") offered pursuant to the Plan are a
matter of separate inducement and are not in lieu of any salary or other
compensation for the services of any director, employee or independent
contractor.
1.02 The Options granted pursuant to the Plan are intended to be either
incentive stock options ("Incentive Options") within the meaning of Section 422A
of the Internal Revenue Code of 1986, as amended (the "Code"), or options that
do not satisfy the requirements for Incentive Options ("Non-Qualified Options"),
but the Company makes no warranty as to the qualification of any Option as an
Incentive Option.
II. AMOUNT OF STOCK SUBJECT TO THE PLAN
2.01 The total number of shares of common stock of the Company which either
may be purchased pursuant to the exercise of Options shall not exceed, in the
aggregate, ten million (10,000,000) shares of the authorized common stock, $.001
par value per share, of the Company (the "Shares").
2.02 Shares which may be acquired pursuant to the Plan may be either
authorized but unissued Shares, Shares of issued stock held in the Company's
treasury, or both, at the discretion of the Company. If and to the extent that
Options expire or terminate without having been exercised, new Options may be
granted with respect to Shares subject to such expired or terminated Options;
provided, however, that the grant and the terms of such new Options shall in all
respects comply with the provisions of the Plan.
III. EFFECTIVE DATE AND TERM OF THE PLAN
3.01 The Plan is shall become effective on the date (the "Effective Date")
on which it is adopted by the Board of Directors of the Company (the "Board of
Directors"); provided, however, that if the Plan is not approved by a vote of
the shareholders of the Company within twelve (12) months before or after the
Effective Date, the Plan and any Options granted pursuant thereto shall
terminate.
3.02 The Company may, from time to time during the period beginning on the
Effective Date and ending on May 31, 2010 ("Termination Date"), grant Options to
persons
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eligible to participate in the Plan, pursuant to the terms of the Plan. Options
granted prior to the Termination Date may extend beyond that date, in accordance
with the terms thereof.
3.03 As used in the Plan, the terms "subsidiary corporation" and "parent
corporation" shall have the meanings ascribed to such terms, respectively, in
Sections 425(f) and 425(e) of the Code.
3.04 A director, employee or independent contractor to whom Options are
granted may be referred to herein as a "Participant."
IV. ADMINISTRATION
4.01 The Board of Directors shall designate an option committee (the
"Committee") which shall consist of no fewer than three (3) directors, each of
whom shall be a "disinterested person" within the meaning of Rule 16b-3 (or any
successor rule or regulation) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), to administer the Plan. A majority of the
members of the Committee shall constitute a quorum, and the act of a majority of
the members of the Committee shall be the act of the Committee. Any member of
the Committee may be removed at any time either with or without cause by
resolution adopted by the Board of Directors, and any vacancy on the Committee
may at any time be filled by resolution adopted by the Board of Directors.
4.02 Any or all powers and functions of the Committee may at any time and
from time to time be exercised by the Board of Directors; provided, however,
that, with respect to the participation in the Plan by members of the Board of
Directors, such powers and functions of the Committee may be exercised by the
Board of Directors only if, at the time of such exercise, a majority of the
members of the Board of Directors, as the case may be, and a majority of the
directors acting in the particular matter, are "disinterested persons" within
the meaning of Rule 16b-3 (or any successor rule or regulation) promulgated
pursuant to the Exchange Act. Any reference in the Plan to the Committee shall
be deemed also to refer to the Board of Directors, to the extent that the Board
of Directors is exercising any of the powers and functions of the Committee.
4.03 Subject to the express provisions of the Plan, the Committee shall
have the authority, in its discretion,
(i) to determine the directors, employees and independent contractors to
whom Options shall be granted, the time when such Options shall be
granted, the number of Shares which shall be subject to each Option;
the purchase price or exercise price of each Share which shall be
subject to each Option, the
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period(s) during which such Options shall be exercisable (whether in
whole or in part), and the other terms and provisions of the
respective Options (which need not be identical);
(ii) to construe the Plan and Options granted pursuant thereto;
(iii) to prescribe, amend and rescind rules and regulations relating to the
Plan; and
(iv) to make all other determinations necessary or advisable for
administering the Plan.
4.04 Without limiting the generality of the foregoing, the Committee also
shall have the authority to require, in its discretion, as a condition of the
granting of any Option, that the Participant agree (i) not to sell or otherwise
dispose of Shares acquired pursuant to the Option for a period of twelve (12)
months following the date of acquisition of such Shares and (ii) that in the
event of termination of directorship, employment, term of any independent
contractor relationship or agreement, or term of any consulting relationship
agreement of such Participant, other than as a result of dismissal without
cause, such Participant will not, for a period to be determined at the time of
the grant of the Option, enter into any employment or participate directly or
indirectly in any business or enterprise which is competitive with the business
of the Company or any subsidiary corporation or parent corporation of the
Company, or enter into any employment or participate directly or indirectly in
any business or enterprise in which such person will be called upon to utilize
special knowledge obtained through directorship, employment, term of any
independent contractor relationship or agreement, or term of any consulting
relationship agreement with the Company or any subsidiary corporation or parent
corporation thereof.
The determination of the Committee on matters referred to in this Article
IV shall be conclusive.
4.05 The Committee may employ such legal counsel, consultants and agents as
it may deem desirable for the administration of the Plan and may rely upon any
opinion received from any such counsel or consultant and any computation
received from any such consultant or agent. Expenses incurred by the Committee
in the engagement of such counsel, consultant or agent shall be paid by the
Company. No member or former member of the Committee or of the Board of
Directors shall be liable for any action or determination made in good faith
with respect to the Plan or any Option.
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V. ELIGIBILITY
5.01 Non-Qualified Options may be granted only to directors, employees and
independent contractors of the Company, or of any subsidiary corporation or
parent corporation of the Company now existing or hereafter formed or acquired,
except as hereinafter provided. Any person who shall have retired from active
employment by the Company, including such person having entered into an
independent contractor agreement with the Company shall also be eligible to
receive an Option.
VI. LIMITATION ON EXERCISE OF INCENTIVE OPTIONS
6.01 Except as otherwise provided pursuant to the Code, to the extent that
the aggregate fair market value of Shares with respect to which Incentive
Options are exercisable for the first time by an employee or independent
contractor during any calendar year (pursuant to all stock options plans of the
Company and any parent corporation or subsidiary corporation of the Company)
exceeds One Hundred Thousand Dollars ($100,000), such Options shall be treated
as Non-Qualified Options. For purposes of this limitation, (i) the fair market
value of Shares is determined as of the time the Option is granted, and (ii) the
limitation will be applied by taking into account Options in the order in which
they were granted.
VII. OPTIONS: PRICE AND PAYMENT
7.01 The purchase price for each Share purchasable under any Non-Qualified
Option granted pursuant to the Plan shall be such amount as the Committee shall
deem appropriate.
7.02 The purchase price for each Share purchasable pursuant to any
Incentive Option shall be such amount as the Committee shall, in its best
judgment, determine to be not less than one hundred percent (100%) of the fair
market value per Share on the date the option is granted; provided, however,
that in the case of an Incentive Option granted to a Participant who, at the
time such Incentive option is granted, owns stock of the Company or any
subsidiary corporation or parent corporation of the Company possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or of any subsidiary corporation or parent corporation of the
Company, the purchase price for each Share shall be such amount as the Committee
shall, in its best judgment, determine to be not less than one hundred ten
percent (110%) of the fair market value per Share at the date such Option is
granted.
7.03 If the Shares are listed on a national securities exchange in the
United States on any date on which the fair market value per Share is to be
determined, the fair market value
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per Share shall be deemed to be the average of the high and low quotations at
which such Shares are sold on such national securities exchange on such date. If
the Shares are listed on a national securities exchange in the United States of
America on such date but the Shares are not traded on such date, or such
national securities exchange is not open for business on such date, the fair
market value per Share shall be determined as of the closest preceding date on
which such exchange shall have been open for business and the Shares were
traded. If the Shares are listed on more than one national securities exchange
in the United States of America on the date any such Option is granted, the
Committee shall determine which national securities exchange shall be used for
the purpose of determining the fair market value per Share.
7.04 If a public market exists for the Shares on any date on which the fair
market value per Share is to be determined, but the Shares are not listed on a
national securities exchange in the United States of America, the fair market
value per Share shall be deemed to be the mean between the closing bid and asked
quotations in the over-the-counter market for the Shares on such date. If there
are no bid and asked quotations for the Shares on such date, the fair market
value per Share shall be deemed to be the mean between the closing bid and asked
quotations in the over-the-counter market for the Shares on the closest date
preceding such date for which such quotations are available.
7.05 If no public market exists for the Shares on any date on which the
fair market value per Share is to be determined, the Committee shall, in its
sole discretion and best judgment, determine the fair market value of a Share.
For purposes of the Plan, the determination by the Committee of the fair
market value of a Share shall be conclusive.
7.06 Upon the exercise of an Option, the Company shall cause the purchased
Shares to be issued only when it shall have received the full and complete
purchase price for the Shares in cash or by certified check; provided, however,
that in lieu of cash or certified check, the Participant may, if and to the
extent the terms of the option so provide and to the extent permitted by
applicable law, exercise an option in whole or in part, by delivering to the
Company shares of common stock of the Company (in proper form for transfer and
accompanied by all requisite stock transfer tax stamps or cash in lieu thereof)
owned by such Participant having a fair market value equal to the purchase price
of the Shares as to which the Option is being exercised. The fair market value
of the stock so delivered shall be determined as of the date immediately
preceding the date on which the Option is exercised, or as may be required in
order to comply with or to conform to the requirements of any applicable laws or
regulations.
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VIII. USE OF PROCEEDS
8.01 The cash proceeds of the sale of Shares subject to Options are to be
added to the general funds of the Company and used for its general corporate
purposes as the Board of Directors shall determine.
IX. TERM OF OPTIONS AND LIMITATIONS
ON THE RIGHT OF EXERCISE
9.01 Any Option shall be exercisable at such times, in such amounts and
during such period or periods as the Committee shall determine at the date of
the grant of such Option; provided, however, that an Incentive option shall not
be exercisable after the expiration of five (5) years from the date such Option
is granted; and provided, further, that, in the event that an Incentive Option
granted to a Participant who, at the time such Option is granted, owns stock of
the Company or any subsidiary corporation or parent corporation of the Company
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of any subsidiary corporation or parent
corporation of the Company, such Option shall not be exercisable after the
expiration of three (3) years from the date such option is granted.
9.02 Subject to the provisions of Article XX of the Plan, the Committee
shall have the right to accelerate, in whole or in part, from time to time,
conditionally or unconditionally, rights to exercise any option.
9.03 To the extent that an Option is not exercised within the period of
exerciseability specified therein, it shall expire as to the then unexercised
part.
In no event shall an option granted pursuant to the Plan be exercisable for
a fraction of a Share.
X. EXERCISE OF OPTIONS
10.01 Any Option shall be exercised by the Participant holding such option
as to all or part of the Shares contemplated by such Option by giving written
notice of such exercise to the Secretary of the Company at the principal
business office of the Company, specifying the number of Shares to be purchased
and specifying a business day not more than fifteen (15) days from the date such
notice is given, for the payment of the purchase price against delivery of the
Shares being purchased. Subject to the terms of Articles XV, XVII and XVIII
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of the Plan, the Company shall cause certificates for the Shares so purchased to
be delivered to the Participant at the principal business office of the Company,
in exchange for payment of the full and complete purchase price, on the date
specified in the notice of exercise.
XI. NONTRANSFERABILITY OF OPTIONS
AND STOCK APPRECIATION RIGHTS
11.01 No Option shall be transferable, whether by operation of law or
otherwise, other than by will or the laws of descent and distribution, and any
Option shall be exercisable, during the lifetime of the Participant, only by
such Participant.
XII. TERMINATION OF DIRECTORS, EMPLOYEES
AND INDEPENDENT CONTRACTORS
12.01 Upon termination of the directorship, employment, term of any
independent contractor relationship or agreement, or term of any consulting
relationship agreement of any Participant with the Company and all subsidiary
corporations and parent corporations of the Company, unless specified to the
contrary in the respective Stock Option Agreement to which the Company and such
Participant are parties and which relates to such Option, any Option previously
granted to such Participant, shall, to the extent not theretofore exercised,
terminate and become null and void, provided that:
(a) if such Participant shall die while serving as a director, while in
the employ of such corporation, during the term of any independent
contractor relationship or agreement, or during the term of any
consulting relationship agreement or during either the three (3) month
or one (1) year period, whichever is applicable, specified in clause
(b) below and at a time when such Participant was entitled to exercise
an Option as provided in the Plan, the legal representative of such
Participant, or such person who acquired such Option by bequest or
inheritance or by reason of the death of such Participant, may, not
later than one (1) year from the date of death, exercise such Option,
to the extent not theretofore exercised, in respect of any or all of
such number of Shares as specified by the Committee in such Option;
and
(b) if the directorship, employment, term of any independent contractor
relationship or agreement, or term of any consulting relationship
agreement any Participant to whom such Option shall have been granted
shall terminate by reason of the Participant's retirement (at such age
or upon such conditions as shall be specified by the Committee),
disability (as described in Section 22(e)(3) of the Code) or dismissal
by the Company or any subsidiary
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corporation or parent corporation of the Company now existing or
hereafter formed or acquired other than for cause (as defined below),
and while such Participant is entitled to exercise such Option as
herein provided, such Participant shall have the right to exercise
such Option, to the extent not theretofore exercised, in respect of
any or all of such number of Shares as specified by the Committee in
such Option, at any time up to and including (i) three (3) months
after the date of such termination of directorship, employment, term
of any independent contractor relationship or agreement, or term of
any consulting relationship agreement in the case of termination by
reason of retirement or dismissal other than for cause and (ii) one
(1) year after the date of termination of directorship, employment,
term of any independent contractor relationship or agreement, or term
of any consulting relationship agreement in the case of termination by
reason of disability.
In no event, however, shall any person be entitled to exercise any Option
after the expiration of the period of exerciseability of such Option as
specified therein.
12.02 If a Participant voluntarily terminates his directorship, employment,
term of any independent contractor relationship or agreement, or term of any
consulting relationship agreement, or is discharged for cause, unless specified
to the contrary in the respective Stock Option Agreement to which the Company
and such participant are parties, and which relates to such Option, any Option
shall forthwith terminate with respect to any unexercised portion thereof.
12.03 If an Option shall be exercised by the legal representative of a
deceased Participant, or by a person who acquired an Option by bequest or
inheritance or by reason of the death of any Participant, written notice of such
exercise shall be accompanied by a certified copy of letter testamentary or
equivalent proof of the right of such legal representative or other person to
exercise such Option.
12.04 For the purposes of the Plan, the term "for cause" shall mean (i)
with respect to an employee who is a party to a written agreement with, or,
alternatively, participates in a compensation or benefit plan of the Company or
a subsidiary corporation or parent corporation of the Company, which agreement
or plan contains a definition of "for cause" or "cause" (or words of similar
import) for purposes of termination of employment pursuant thereto by the
Company or such subsidiary corporation or parent corporation of the Company,
"for cause" or "cause" as defined in the most recent of such agreements or
plans, or (ii) a party to any independent contractor relationship or agreement
or any consulting relationship or agreement, whether oral or written, or (iii)
in all other cases, as determined by the Board of Directors, in its sole
discretion, (a) the willful commission by an employee or
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independent contractor of a criminal or other act that causes or probably will
cause substantial economic damage to the Company or a subsidiary corporation or
parent corporation of the Company or substantial injury or damage to the
business reputation of the Company or a subsidiary corporation or parent
corporation of the Company; (b) the commission by an employee or independent
contractor of an act of fraud in the performance of such employee's duties on
behalf of the Company or a subsidiary corporation or parent corporation of the
Company; (c) the continuing willful failure of an employee or independent
contractor to perform the duties of such employee or independent contractor to
the Company or a subsidiary corporation or parent corporation of the Company
(other than such failure resulting from the employee's or independent
contractor's incapacity due to physical or mental illness) after written notice
thereof (specifying the particulars thereof in reasonable detail) and a
reasonable opportunity to be heard and cure such failure are given to the
employee or independent contractor by the Board of Directors; or (d) the order
of a court of competent jurisdiction requiring the termination of the employee's
employment, or term of any independent contractor relationship or agreement, or
term of any consulting relationship agreement. For purposes of the Plan, no act,
or failure to act, on the employee's or independent contractor's part shall be
considered "willful" unless done or omitted to be done by the employee or
independent contractor not in good faith and without reasonable belief that the
employee's or independent contractor's action or omission was in the best
interest of the Company or a subsidiary corporation or parent corporation of the
Company.
12.05 For the purposes of the Plan, an employment relationship shall be
deemed to exist between a person and a corporation if, at the time of the
determination, the individual was an "employee" of such corporation for purposes
of Section 422A(a) of the Code. If a person is on maternity, military, or sick
leave or other bona fide leave of absence, such person shall be considered an
"employee" for purposes of the exercise of an Option shall be entitled to
exercise such Option during such leave if the period of such leave does not
exceed ninety (90) days, or, if longer, so long as such person's right to
reemployment with his employer is guaranteed either by statute or by contract.
If the period of leave exceeds ninety (90) days, the employment relationship
shall be deemed to have terminated on the ninety-first (91) day of such leave,
unless such person's right to reemployment is guaranteed by statute or contract.
12.06 An employee or independent contractor shall not be deemed terminated
by reason of (i) the transfer of a Participant from the Company to a subsidiary
corporation or a parent corporation of the Company or (ii) the transfer of a
Participant from a subsidiary corporation or a parent corporation of the Company
by the Company or by another subsidiary corporation or parent corporation of the
Company.
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XIII. ADJUSTMENT OF SHARES; EFFECT OF CERTAIN TRANSACTIONS
13.01 In the event of any change in the outstanding Shares as a result of
merger, consolidation, reorganization, recapitalization, stock dividend, stock
split, split-up, split-off, spin-off, combination or exchange of shares, or
other similar change in capital structure of the Company, an adjustment shall be
made to each outstanding Option such that each such Option shall thereafter be
exercisable for such securities, cash or other property as would have been
received in respect of the Shares subject to such Option had such Option been
exercised in full immediately prior to such change, and such an adjustment shall
be made successively each time any such change shall occur. The term "Shares"
after any such change shall refer to the securities, cash or property then
receivable upon exercise of an Option. In addition, in the event of any such
change, the Committee shall make any additional adjustment as may be appropriate
to the maximum number of Shares subject to the Plan, the maximum number of
Shares, if any, for which Options may be granted to any one employee or
independent contractor, and the number of Shares and price per Share subject to
outstanding Options as shall be appropriate to prevent dilution or enlargement
of rights under such Options, and the determination of the Committee as to these
matters shall be conclusive. Notwithstanding the foregoing, (i) each such
adjustment with respect to an Incentive Option shall comply with the rules of
Section 425(a) of the Code, and (ii) in no event shall any adjustment be made
which would render any Incentive Option other than an "incentive stock option"
for purposes of Section 422A of the Code.
13.02 For purposes of the Plan, a "change in control" of the Company occurs
if: (a) any "person" (defined as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act, as amended) other than the current owner is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing ten percent (10%) or more of the combined voting power of
the Company's outstanding securities then entitled to vote for the election of
directors; or (b) during any period of two consecutive years, persons who at the
beginning of such period constitute the Board of Directors cease for any reason
to constitute at least a majority thereof; or (c) the Board of Directors shall
approve the sale of all or substantially all of the assets of the Company or any
merger, consolidation, issuance of securities or purchase of assets, the result
of which would be the occurrence of any event described in clause (a) or (b)
above.
13.03 In the event of a change in control of the Company (defined above),
the Committee, in its discretion, may determine that, upon the occurrence of a
transaction described in the preceding paragraph, each Option outstanding
pursuant to the Plan shall terminate within a specified number of days after
notice to the holder, and such holder shall receive, with respect to each Share
subject to such Option, an amount of cash equal to the excess of the fair market
value of such Share immediately prior to the occurrence of such
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transaction increases the exercise price per Share of such Option. The
provisions specified in the preceding sentence shall be inapplicable to an
Option granted within six (6) months before the occurrence of a transaction
described above if the holder of such Option is a director or officer of the
Company or a beneficial owner of the Company who is described in Section 16(a)
of the Exchange Act, unless such holder dies or becomes disabled (within the
meaning of Section 22(e)(3) of the Code) prior to the expiration of such
six-month period.
Alternatively, the Committee may determine, in its discretion, that all
then outstanding Options shall immediately become exercisable upon a change of
control of the Company.
XIV. RIGHT TO TERMINATE EMPLOYEES
AND INDEPENDENT CONTRACTORS
14.01 The Plan shall not impose any obligation on the Company or on any
subsidiary corporation or parent corporation thereof to continue the retention
of any Participant; and it shall not impose any obligation on the part of any
Participant to remain in the employ of the Company or of any subsidiary
corporation or parent corporation thereof.
XV. PURCHASE FOR INVESTMENT
15.01 Except as provided otherwise in the Plan, a Participant shall, upon
any exercise of an Option, execute and deliver to the Company a written
statement, in form satisfactory to the Company, in which such Participant
represents and warrants that such Participant is purchasing or acquiring the
Shares acquired pursuant thereto for such Participant's own account, for
investment only and not with an intention of the resale or distribution thereof,
and agrees that any subsequent offer for sale or sale or distribution of any of
such Shares shall be made only pursuant to either (a) a Registration Statement
on an appropriate form pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), which Registration Statement has become effective and is
current with regard to the Shares being offered or sold, or (b) a specific
exemption from the registration requirements of the Securities Act, but in
claiming such exemption the holder shall, if so requested by the Company, prior
to any offer for sale or sale of such Shares, obtain a prior favorable written
opinion, in form and substance satisfactory to the Company, from counsel for or
approved by the Company, as to the applicability of such exemption thereto. The
foregoing restriction shall not apply to (i) issuances by the Company so long as
the Shares being issued are registered pursuant to the Securities Act and a
prospectus in respect thereof is current or (ii) reofferings of Shares by
affiliates of the Company (as defined in Rule 405 or any successor rule or
regulation promulgated pursuant to the Securities Act) if the Shares being
reoffered are registered pursuant to the Securities Act and a prospectus in
respect thereof is current.
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XVI. ISSUANCE OF CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES
16.01 Upon any exercise of an Option and, in the case of an Option, payment
of the purchase price, a certificate or certificates for the Shares as to which
such Option has been exercised shall be issued by the Company in the name of the
person exercising such Option and shall be delivered to or upon the order of
such person or persons.
16.02 The Company may endorse such legend or legends upon the certificates
for Shares issued upon exercise of an Option granted pursuant to the Plan and
may issue such "stop transfer" instructions to its transfer agent in respect of
such Shares as, in its discretion, it determines to be necessary or appropriate
to (i) prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act, (ii) implement the provisions of the Plan
and any agreement between the Company and the optionee with respect to such
Shares, or (iii) permit the Company to determine the occurrence of a
disqualifying disposition, within the meaning of Section 421(b) of the Code, of
Shares transferred upon exercise of an Incentive Option.
16.03 The Company shall pay all issue or transfer taxes with respect to the
issuance or transfer of Shares, as well as all fees and expenses incurred by the
Company in connection with such issuance or transfer.
All Shares issued as provided in the Plan shall be fully paid and
non-assessable to the extent permitted by law.
XVII. WITHHOLDING TAXES
17.01 The Company may require an employee or independent contractor
exercising a Non-Qualified Option granted pursuant to the Plan or disposing of
Shares acquired pursuant to the exercise of an Incentive Option in a
disqualifying disposition (within the meaning of Section 421(b) of the Code), to
reimburse the corporation that employs such employee for any taxes required by
any government to be withheld or otherwise deducted and paid by such corporation
in respect of the issuance or disposition of such Shares. In lieu thereof, the
employer corporation shall have the right to withhold the amount of such taxes
from any other amounts due or to become due from such corporation to the
employee or independent contractor upon such terms and conditions as the
Committee shall prescribe. The employer corporation may, in its discretion, hold
the stock certificate to which such employee or independent contractor is
entitled upon the exercise of an Option as security for the payment of such
withholding tax liability, until cash sufficient to pay that liability has been
accumulated.
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XVIII. LISTING OF SHARES AND RELATED MATTERS
18.01 If at any time the Board of Directors shall determine in its
discretion that the listing, registration or qualification of the Shares subject
to the Plan upon any national securities exchange or pursuant to any state or
federal law, or the consent or approval of any governmental regulatory agency,
is necessary or desirable as a condition of, or in connection with, the sale or
purchase of Shares pursuant to the Plan, no Shares shall be issued unless and
until such listing, registration, qualification, consent or approval shall have
been effected or obtained, or otherwise provided for, free of any conditions not
acceptable to the Board of Directors.
XIX. AMENDMENT OF THE PLAN
19.01 The Board of Directors or the Committee may, from time to time, amend
the Plan, provided that, notwithstanding anything to the contrary in the Plan,
no amendment shall be made, without the approval of the shareholders of the
Company, that will (i) increase the total number of Shares reserved for Options
pursuant to the Plan (other than an increase resulting from an adjustment
provided for in Article XII), (ii) reduce the exercise price of any Incentive
Option granted pursuant to the Plan to an amount less than the price required by
Article VI, (iii) modify the provisions of the Plan relating to eligibility, or
(iv) materially increase the benefits accruing to participants pursuant to the
Plan. The Board of Directors or the Committee shall be authorized to amend the
Plan and the Options to permit the Incentive Options to qualify as "incentive
stock options" within the meaning of Section 422A of the Code. The rights and
obligations pursuant to any Option granted before amendment of the Plan or any
unexercised portion of such Option shall not be adversely affected by amendment
of the Plan or the Option without the consent of the holder of the Option.
XX. TERMINATION OR SUSPENSION OF THE PLAN
20.01 The Board of Directors or the Committee may at any time and for any
or no reason suspend or terminate the Plan. The Plan, unless sooner terminated
pursuant to Article III of the Plan or by action of the Board of Directors,
shall terminate at the close of business on the Termination Date. An Option may
not be granted while the Plan is suspended or after it is terminated. Options
granted while the Plan is in effect shall not be altered or impaired by
suspension or termination of the Plan, except upon the consent of the person to
whom the Option was granted. The power of the Committee pursuant to Article IV
of the Plan to construe and administer any Options granted prior to the
termination or suspension of the Plan shall continue after such termination or
during such suspension.
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<PAGE>
XXI. GOVERNING LAW
21.01 The Plan and such Options as may be granted pursuant thereto and all
related matters shall be governed by, and construed and enforced in accordance
with, the laws of the State of Delaware, as from time to time amended.
XXII. PARTIAL INVALIDITY
22.01 The invalidity or illegality of any provision of the Plan shall not
be deemed to affect the validity of any other provision of the Plan.
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<PAGE>
Appendix A
To our Stockholders:
The following is a summary of the Company's most recent amendment to its
Registration Statement on Form 10-SB ("Amendment") filed with the Securities &
Exchange Commission ("SEC") on May 17, 2000. A complete copy of the Annual
Report is available without charge to our stockholders and may be obtained by
writing to the Company at #3-1482 Springfield Road, Kelowna, British Columbia,
Canada V1Y 5V3, Attention: Information Agent. In addition, all of the Company's
filings with the SEC may be viewed at the SEC's Public Reference Room at 450
Fifth Street N.W., Washington, D.C. 20549, or by accessing the SEC's website at
http://www.sec.gov.
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 B 1482 Springfield
Road, Kelowna, B. C., Canada V1Y 5V3. The Company's telephone number is
250.762.7552.
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
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<PAGE>
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.
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
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<PAGE>
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 (AFDA") 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 AA" 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.
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
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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 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.
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
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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
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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 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.
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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 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 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.
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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.
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.
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
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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
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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 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.
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II. Financial Statements For Year-Ended May 31, 1998
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 $1,152,030.
This factor, as discussed in Note 1 a) raises substantial doubt about the
Company's ability to continue as a going concern. 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
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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)
-----------------------------------------------------------------------------------
<S> <C> <C>
Assets
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
Minority interest (5,536) (5,536)
Stockholders' equity
Capital stock (note 6) 5,538 5,483
Additional paid in capital 1,233,721 1,074,283
Deficit accumulated during the development stage (1,152,030) (425,975)
Accumulated other comprehensive income 23,326 6,288
---------------------------------------------------------------------------------
110,555 660,079
-----------------------------------------------------------------------------------
$ 443,150 $ 985,524
===================================================================================
</TABLE>
See accompanying notes to financial statements
27
<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 $ 8,225 $ 4,729 $ 3,496
Amortization 21,531 17,661 3,870
Automotive 26,511 15,865 10,646
Consulting fees 20,889 20,889 --
Design plans 10,911 -- 10,911
Director's fees 15,424 6,904 8,520
Foreign exchange (gain) loss (2,462) 6,187 (8,649)
Insurance 1,981 376 1,605
Interest and bank charges 1,971 1,034 937
Legal and accounting 81,979 42,575 39,404
Licences, fees and dues 865 575 290
Management fees 214,513 70,654 143,859
Office and administration 91,216 63,750 27,466
Product development 1,582 -- 1,582
Promotion and entertainment 10,152 4,265 5,887
Rent 64,289 33,751 30,538
Repairs and maintenance 2,150 177 1,973
Telephone and utilities 23,211 13,706 9,505
Travel 14,953 4,792 10,161
Video production 17,488 9,915 7,573
-----------------------------------------------------------------------------------------
627,379 317,805 309,574
-------------------------------------------------------------------------------------------
Loss from operations (627,379) (317,805) (309,574)
Other income
Interest income 37,947 21,612 16,335
-----------------------------------------------------------------------------------------
(589,432) (296,193) (293,239)
Write down of inventory (note 8) 55,734 55,734 --
Write down of product rights and
patent costs (note 3) 374,128 374,128 --
-------------------------------------------------------------------------------------------
Net loss $(1,019,294) $ (726,055) $ (293,239)
-------------------------------------------------------------------------------------------
Loss per share $ (0.13) $ (0.05)
-------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
28
<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 $(1,019,294) $ (726,055) $ (293,239)
Items not involving cash
Amortization 21,531 17,661 3,870
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 55,558 (14,996) 70,554
Prepaid expenses (3,353) 8,532 (11,885)
Accounts payable and accrued liabilities 10,180 15,100 (4,920)
Inventory purchases (55,834) (55,834) --
----------------------------------------------------------------------------------------------------
(561,350) (325,730) (235,620)
Financing
Issuance of capital stock 634,259 159,493 474,766
Issuance of redeemable preferred shares
of subsidiary 309,677 -- 309,677
----------------------------------------------------------------------------------------------------
943,936 159,493 784,443
Investing
Acquisition of capital assets (53,787) (53,787) --
Acquisition of product rights and patents (381,336) -- (381,336)
Acquisition of shares 374,952 -- 374,952
----------------------------------------------------------------------------------------------------
(60,171) (53,787) (6,384)
Other comprehensive income 24,231 18,473 5,758
---------------------------------------------------------------------------------------------------------
Increase (decrease) in cash 346,646 (201,551) 548,197
Cash, beginning of year -- 548,197 --
---------------------------------------------------------------------------------------------------------
Cash, end of year $ 346,646 $ 346,646 $ 548,197
---------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Statement of Stockholders' Equity and Comprehensive Income
$ United States
Years ended May 31, 1999 and 1998
<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
Foreign currency translation -- -- -- -- 6,288 6,288
Excess of consideration
given over carrying amount
of net assets of subsidiary
acquired (note 2) -- -- -- (132,736) -- (132,736)
Net loss -- -- -- (293,239) -- (293,239)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, May 31, 1998
(Unaudited) 5,483,247 5,483 1,074,283 (425,975) 6,288 660,079
Common shares issued
net of shares 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
Foreign currency translation -- -- -- -- 17,038 17,038
Net loss -- -- -- (726,055) -- (726,055)
-----------------------------------------------------------------------------------------------------------------------------------
Balance, May 31, 1999 5,519,547 $ 5,538 $ 1,233,721 $(1,152,030) $ 23,326 $ 110,555
===================================================================================================================================
</TABLE>
30
<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 $1,152,030. 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.
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 $1.4605
(1998 - $1.4365).
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. 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.
31
<PAGE>
1. Significant accounting policies (continued):
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.
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.
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:
32
<PAGE>
---------------------------------------------------------------------------
(Unaudited)
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
---------------------------------------------------------------------------
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>
33
<PAGE>
5. Redeemable preferred shares:
The Company's subsidiary has redeemable preferred shares outstanding as
follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
1999 1998
(Unaudited)
---------------------------------------------------------------------------------------------------------------
<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. 301,727 309,677
---------------------------------------------------------------------------------------------------------------
</TABLE>
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
(Unaudited)
--------------------------------------------------------------------------------------------------
<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>
34
<PAGE>
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. 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. 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
10. Uncertainty due to the Year 2000 Issue:
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using Year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
35
<PAGE>
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
----------------------------------------------------------------------------------
<S> <C> <C>
Assets
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
36
<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
Licences, 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>
37
<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
--------------------------------------------------------------------------
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 29,370 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 -- 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
--------------------------------------------------------------------------
See accompanying notes to financial statements
38
<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>
39
<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>
40
<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.
41
<PAGE>
--------------------------------------------------------------------------------
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.
42
<PAGE>
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
43
<PAGE>
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
------------------------------------------------------------------------------------------------
</TABLE>
5. Redeemable preferred shares:
The Company's subsidiary has redeemable preferred shares outstanding as
follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
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>
44
<PAGE>
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.
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.
45
<PAGE>
III Financial Statements For Year-Ended May 31, 2000
AUDITORS' REPORT TO THE STOCKHOLDERS
We have audited the consolidated balance sheets of L.O.M. Medical International
Inc. and subsidiary, a development stage enterprise, as at May 31, 2000 and 1999
and the consolidated statements of loss, cash flows and stockholders' equity and
comprehensive income for the years 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 audits.
We conducted our audits 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of L.O.M. Medical
International Inc. and subsidiary as at May 31, 2000 and 1999 and the
consolidated results of its operations and its cash flows for each of the years
in the period ended May 31, 2000, 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 $1,666,401.
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
June 22, 2000
46
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Balance Sheets
$ United States
May 31, 2000 and 1999
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
2000 1999
--------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash $ 959,318 $ 346,646
Accounts receivable 21,070 26,442
Inventory -- 100
Prepaid expenses 6,820 3,353
--------------------------------------------------------------------------------------
987,208 376,541
Advances and deposits 42,000 --
Product rights and patent costs (note 2) 12,504 16,740
Capital assets (note 3) 47,124 49,869
--------------------------------------------------------------------------------------
$ 1,088,836 $ 443,150
--------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 27,791 $ 36,404
Redeemable preferred shares (note 4) 301,727 301,727
Share subscriptions (note 5 (b)) 185,513 62,731
Stockholders' equity
Capital stock (note 5) 5,846 5,519
Additional paid in capital 2,201,056 1,171,009
Deficit accumulated during the development stage (1,666,401) (1,157,566)
Accumulated other comprehensive income 33,304 23,326
--------------------------------------------------------------------------------------
573,805 42,288
--------------------------------------------------------------------------------------
$ 1,088,836 $ 443,150
--------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
47
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Statements of Loss
$ United States
Years ended May 31, 2000 and 1999
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
From Inception
(March 17, 1997) 2000 1999
to May 31, 2000
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expenses
Advertising $ 14,135 $ 2,017 $ 4,729
Amortization 46,560 17,991 17,661
Automotive 44,507 17,580 15,865
Consulting fees 124,227 56,441 20,889
Design plans 10,911 -- --
Director's fees 21,528 6,104 6,904
Foreign exchange loss 15,276 12,646 6,187
Insurance 12,555 9,131 376
Interest and bank charges 8,891 5,604 1,034
Legal and accounting 174,083 84,574 42,575
Licences, fees and dues 4,341 3,476 575
Management fees and wages 366,264 151,751 70,654
Office and administration 175,743 68,043 63,750
Product development 26,584 17,785 --
Promotion and entertainment 15,805 2,977 4,265
Rent 115,042 35,350 33,751
Repairs and maintenance 2,316 -- 177
Telephone and utilities 39,987 12,787 13,706
Travel 52,704 19,360 4,792
Video production 26,272 6,232 9,915
Write down of inventory 55,734 -- 55,734
Write down of product rights and
patent costs 374,128 -- 374,128
---------------------------------------------------------------------------------------
1,727,593 529,849 747,667
---------------------------------------------------------------------------------------
Loss from operations (1,727,593) (529,849) (747,667)
Other income
Interest income 61,192 21,014 21,612
---------------------------------------------------------------------------------------
Net loss $(1,666,401) $ (508,835) $ (726,055)
---------------------------------------------------------------------------------------
Loss per share $ (0.09) $ (0.13)
---------------------------------------------------------------------------------------
Weighted average shares used 5,611,927 5,503,339
---------------------------------------------------------------------------------------
</TABLE>
48
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
$ United States
Years ended May 31, 2000 and 1999
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
From inception
(March 17, 1997) 2000 1999
to May 31, 2000
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net loss $(1,666,401) $ (508,835) $ (726,055)
Items not involving cash
Amortization 46,560 17,991 17,661
Gain on sale of capital assets (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 (21,070) 5,372 (14,996)
Inventory (55,734) 100 (55,834)
Prepaid expenses (6,820) (3,467) 8,532
Accounts payable and accrued liabilities 27,791 (8,613) 15,100
------------------------------------------------------------------------------------------------
(1,248,471) (497,452) (325,730)
Financing
Issuance of capital stock 1,539,171 967,643 96,762
Proceeds from share subscriptions 853,244 185,513 62,731
------------------------------------------------------------------------------------------------
2,392,415 1,153,156 159,493
Investing
Acquisition of capital assets (91,719) (11,187) (52,352)
Acquisition of product rights (90,577) -- --
Proceeds on disposition of capital assets 6,189 -- --
Advances and deposits (42,000) (42,000) --
------------------------------------------------------------------------------------------------
(218,107) (53,187) (52,352)
Foreign currency translation adjustment 177 177 --
Other comprehensive income 33,304 9,978 17,038
------------------------------------------------------------------------------------------------
Increase (decrease) in cash 959,318 612,672 (201,551)
Cash, beginning of year -- 346,646 548,197
------------------------------------------------------------------------------------------------
Cash, end of year $ 959,318 $ 959,318 $ 346,646
------------------------------------------------------------------------------------------------
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 share subscriptions
received in prior year $ 62,731 $ 62,731 $ --
------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements
49
<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 May 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 $ 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 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>
50
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
$ United States
Years ended May 31, 2000 and 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 generated
no revenues and has accumulated a deficit since inception of
$1,666,401. 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) Assets and liabilities are translated at the rate of exchange in
effect at the balance sheet date, being US $1.00 per Cdn $1.4715
(1999 - $1.4605).
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.
51
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 2
$ United States
Years ended May 31, 2000 and 1999
--------------------------------------------------------------------------------
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 charged 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 operating losses and to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. 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.
52
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 3
$ United States
Years ended May 31, 2000 and 1999
--------------------------------------------------------------------------------
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.
2. Product rights and patent costs:
---------------------------------------------------------------------------
2000 1999
---------------------------------------------------------------------------
Product rights $ -- $ 68
Patent costs 12,504 16,672
---------------------------------------------------------------------------
$12,504 $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.
53
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 4
$ United States
Years ended May 31, 2000 and 1999
--------------------------------------------------------------------------------
3. Capital assets:
---------------------------------------------------------------------------
2000
---------------------------------------------------------------------------
Accumulated Net book
Cost amortization value
---------------------------------------------------------------------------
Leasehold improvements $27,919 $11,167 $16,752
Computer software 5,446 1,254 4,192
Equipment 26,842 14,254 12,588
Furniture and fixtures 21,113 7,521 13,592
---------------------------------------------------------------------------
$81,320 $34,196 $47,124
---------------------------------------------------------------------------
---------------------------------------------------------------------------
1999
---------------------------------------------------------------------------
Accumulated Net book
Cost amortization value
---------------------------------------------------------------------------
Leasehold improvements $27,919 $ 5,584 $22,335
Computer software 520 390 130
Equipment 20,948 10,122 10,826
Furniture and fixtures 20,746 4,168 16,578
---------------------------------------------------------------------------
$70,133 $20,264 $49,869
---------------------------------------------------------------------------
4. Redeemable preferred shares:
The Company's subsidiary has redeemable preferred shares outstanding as
follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
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>
5. 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
54
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 5
$ United States
Years ended May 31, 2000 and 1999
--------------------------------------------------------------------------------
5. Capital stock (continued):
b) Share subscriptions:
Subsequent to May 31, 2000, the Company issued 57,081 common shares at
$3.25 per share for net proceeds of $185,513, which were received
prior to May 31, 2000. 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, 2000, no stock options have
been granted.
6. Related party transactions:
The Company entered into the following transactions with related parties:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
2000 1999
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Accounting fees paid to a director $ 14,997 $ 7,307
Management fees and wages paid to president 151,751 70,654
Office and administration fees paid to president's spouse 38,810 36,325
Office and administration fees paid to an individual related
to the President 17,041 17,557
Rent paid to a company controlled by the president 19,397 18,420
Inventory purchased from the President - 55,834
Leasehold improvements on premises rented from a company
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.
7. Income taxes:
At May 31, 2000, the Company had a net operating loss carryforward for
income tax purposes of approximately $1,600,000. 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.
8. Commitments:
The Company is obligated to make future lease payments for its offices as
follows:
2001 $ 19,453
2002 $ 19,453
2003 $ 19,453
55
<PAGE>
L.O.M. MEDICAL INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF L.O.M. MEDICAL
INTERNATIONAL, INC., A DELAWARE CORPORATION ("COMPANY").
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE PROPOSALS INDICATED, AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXY
HOLDER REGARDING ANY OTHER BUSINESS. ALL OTHER PROXIES HERETOFORE GIVEN BY THE
UNDERSIGNED IN CONNECTION WITH THE ACTIONS PROPOSED HEREIN ARE HEREBY EXPRESSLY
REVOKED. THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED BY WRITTEN
NOTICE TO THE SECRETARY OF THE COMPANY, BY ISSUANCE OF A SUBSEQUENT PROXY OR BY
VOTING AT THE ANNUAL MEETING IN PERSON.
INSTRUCTIONS. Except with respect to the election of directors, to vote in favor
of a proposal, circle the phrase "FOR approval". To vote against a proposal,
circle the phrase "AGAINST approval". To abstain from voting on a proposal,
circle the phrase "ABSTAIN".
The undersigned stockholder of L.O.M. Medical International, Inc., (the
"Company"), hereby constitutes and appoints John Klippenstein, with the power to
appoint his substitute, as attorney and proxy, to appear, attend and vote all of
the shares of common stock of the Company standing in the name of the
undersigned on the record date at the Annual Meeting of Stockholders of the
Company to be held at 6:30 p.m. Pacific Standard Time, on July 21, 2000, at The
Coast Capri Hotel located at 1171 Harvey Avenue, Kelowna, British Columbia,
Canada, V1Y 5V3 and at any adjournment thereof, upon the following:
1. To elect six (6) directors as follows:
FOR all nominees listed below, except WITHHOLD AUTHORITY
as marked to the contrary below to vote for all nominees listed below
Additional Instructions: To withhold authority to vote for any individual
nominee, strike a line through that nominee's name specified below.
John Klippenstein Peter McFadden David Gramlich
Dr. Colin Lee Dr. John Gergley Dr. Jeffrey Berg
2. To approve and adopt the Company's Stock Option Plan;
FOR approval AGAINST approval ABSTAIN
<PAGE>
3. To approve, adopt and ratify the actions taken by the Company's officers and
directors during the most recent fiscal year;
FOR approval AGAINST approval ABSTAIN
4. To approve the Company entering into Indemnification Agreements with its
executive officers and directors;
FOR approval AGAINST approval ABSTAIN
5. To approve the selection of KPMG LLP to audit the financial statements of the
Company for the fiscal year ended May 31, 2001;
FOR approval AGAINST approval ABSTAIN
6. To vote in his or her discretion on such other business as may properly come
before the meeting, or any adjournment thereof.
Please mark, date, sign and return this proxy promptly in the enclosed envelope.
When shares of the Company's $.001 par value common stock are held by joint
tenants, both joint tenants should sign this proxy. When signing as attorney,
executor, administrator, trustee, or guardian, please specify your complete
title as such. If shares of the Company's $.001 par value common stock are held
by a corporation, please sign in full that corporation's name and execute this
proxy by the President or other authorized officer of that corporation. If
shares of the Company's $.001 par value common stock are held by a partnership,
please execute this proxy in that partnership's name by an authorized general
partner or other authorized representative of that partnership.
Dated:________________ ----------------------------------
(Signature of Shareholder)
__________________________________
(Printed Name of Shareholder)
PLEASE CHECK IF YOU ARE PLANNING TO ATTEND THE MEETING.
