U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO __________
COMMISSION FILE NUMBER:
L.O.M. MEDICAL INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 98-0178784
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
<CAPTION>
<S> <C>
#3-1482 Springfield Road , Kelowna, British Columbia, Canada V1Y 5V3
(Address of principal executive offices) (Zip Code)
(250) 762-7552(Issuer's Telephone Number, including Area Code)
</TABLE>
Thomas E. Stepp, Jr.
Stepp & Beauchamp LLP
1301 Dove Street, Suite 460
Newport Beach, California 92660
Telephone: 949.660.9700
Facsimile: 949.660.9010
(Name, Address and Telephone Number of Agent for Service)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
[x] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of November 30, 2000, there were
6,072,810 shares of the issuer's $.001 par value common stock issued and
outstanding.
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Interim Consolidated Balance Sheet
($ United States)
November 30, 2000 and May 31, 2000
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
November 30, May 31,
2000 2000
(Unaudited)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 1,121,519 $ 959,318
Accounts receivable 24,945 21,070
Prepaid expenses 11,993 6,820
-------------------------------------------------------------------------------------------------------------------
1,158,457 987,208
Advances and deposits 117,395 42,000
Patent costs 10,420 12,504
Fixed assets (note 2) 44,942 47,124
-------------------------------------------------------------------------------------------------------------------
$ 1,331,214 $ 1,088,836
-------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued liabilities $ 24,112 $ 27,791
Redeemable preferred shares (note 3) 301,727 301,727
Share subscriptions (note 4(b)) 133,711 185,513
Stockholders' equity
Capital stock (note 4) 6,072 5,846
Additional paid in capital 2,853,244 2,201,056
Deficit accumulated during the development stage (2,020,956) (1,666,401)
Accumulated other comprehensive income 33,304 33,304
-------------------------------------------------------------------------------------------------------------------
871,664 573,805
-------------------------------------------------------------------------------------------------------------------
$ 1,331,214 $ 1,088,836
-------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to interim consolidated financial statements
2
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Interim Consolidated Statement of Loss
($ United States)
For the six months ended November 30, 2000 and 1999 and cumulative from
inception (March 17, 1997) to November 30, 2000
(Unaudited - Prepared by Management)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
From Inception
(March 17, 1997) 2000 1999
to November 30, 2000
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expenses
Advertising $ 14,135 $ -- $ 5
Amortization 56,070 9,510 8,247
Automotive 53,217 8,710 8,187
Consulting fees 190,685 66,458 20,981
Conventions and seminars 2,300 2,300 --
Design plans 10,911 -- --
Director's fees 24,528 3,000 1,717
Foreign exchange loss (gain) 14,344 (932) (1,721)
Freight 1,747 1,747 --
Insurance 23,225 10,670 --
Interest and bank charges 12,513 3,622 2,289
Legal and accounting 251,698 77,615 28,331
Licences, fees and dues 4,500 159 185
Management fees and wages 469,874 103,610 76,838
Office and administration 215,292 39,549 20,568
Product development 30,848 4,264 --
Promotion and entertainment 16,666 861 1,482
Prospectus and share issuance 10,271 10,271 --
Rent 141,952 26,910 17,717
Repairs and maintenance 2,445 129 --
Storage 853 853 --
Telephone and utilities 44,318 4,331 6,312
Travel 61,692 8,988 10,250
Video production 26,783 511 2,929
Write down of inventory 55,734 -- --
Write down of product rights and patent costs 374,128 -- --
-------------------------------------------------------------------------------------------------------------------
2,110,729 383,136 204,317
-------------------------------------------------------------------------------------------------------------------
Loss from operations (2,110,729) (383,136) (204,317)
Other income
Interest income 89,773 28,581 6,488
-------------------------------------------------------------------------------------------------------------------
(2,020,956) (354,555) (197,829)
-------------------------------------------------------------------------------------------------------------------
Net loss $(2,020,956) $ (354,555) $ (197,829)
-------------------------------------------------------------------------------------------------------------------
Loss per common share, basic and diluted $ (0.44) $ (0.06) $ (0.03)
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Weighted average common shares, basic diluted 4,543,686 5,971,538 5,668,414
-------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to interim consolidated financial statements
3
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Interim Consolidated Statement of Loss
($ United States)
For the three months ended November 30, 2000 and 1999 (Unaudited - Prepared by
Management)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
2000 1999
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Expenses
Advertising $ -- $ 5
Amortization 4,755 4,205
Automotive 4,078 5,401
Consulting fees 39,136 12,903
Conventions and seminars -- --
Design plans -- --
Director's fees 3,000 1,717
Foreign exchange loss (gain) (907) (2,550)
Freight 665 --
Insurance 5,113 --
Interest and bank charges 1,789 1,494
Legal and accounting 51,751 11,592
Licences, fees and dues 159 185
Management fees and wages 43,176 42,434
Office and administration 9,529 5,122
Product development 1,729 --
Promotion and entertainment 334 1,029
Prospectus and share issuance 6,921 --
Rent 8,734 7,452
Repairs and maintenance 64 --
Storage 386 --
Telephone and utilities 1,922 3,679
Travel 7,268 9,603
Video production -- 2,929
Write down of inventory -- --
Write down of product rights and patent costs -- --
---------------------------------------------------------------------------------------------------------
189,602 107,200
---------------------------------------------------------------------------------------------------------
Loss from operations (189,602) (107,200)
Other income
Interest income 14,922 3,604
---------------------------------------------------------------------------------------------------------
(174,680) (103,596)
---------------------------------------------------------------------------------------------------------
Net loss $ (174,680) $ (103,596)
---------------------------------------------------------------------------------------------------------
Loss per common share, basic and diluted $ (0.03) $ (0.02)
Weighted average common shares, basic diluted 6,034,358 5,557,782
---------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to interim consolidated financial statements
4
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Interim Consolidated Statement of Cash Flows
($ United States)
For the six months ended November 30, 2000 and 1999 and cumulative from
inception (March 17, 1997) to November 30, 2000
(Unaudited - Prepared by Management)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
From inception
(March 17, 1997) 2000 1999
to November 30, 2000
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net loss for the period $(2,020,956) (354,555) $ (197,829)
Items not involving cash
Amortization 56,070 9,510 8,247
Gain on sale of capital asset (2,659) -- --
Write down of inventory 55,734 -- --
Write down of product rights 374,128 -- --
Changes in non-cash working capital
Accounts receivable (24,945) (3,875) 2,474
Prepaid expenses (11,993) (5,173) 1
Accounts payable and accrued liabilities 24,112 (3,679) (16,388)
Inventory purchases (55,734) -- --
-----------------------------------------------------------------------------------------------------------------------
(1,606,243) (357,772) (203,495)
Financing
Issuance of capital stock 2,006,072 466,901 166,171
Proceeds from subscriptions for shares 986,955 133,711 20,150
----------------------------------------------------------------------------------------------------------------------
2,993,027 600,612 186,321
Investing
Acquisition of fixed assets (96,963) (5,244) --
Acquisition of product rights (90,577) -- --
Proceeds on disposition of capital asset 6,189 -- 44
Advances and deposits (117,395) (75,395) --
-----------------------------------------------------------------------------------------------------------------------
(298,746) (80,639) 44
Foreign currency translation adjustment 177 -- --
Other comprehensive income 33,304 -- --
-----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash 1,121,519 162,201 (17,130)
Cash and cash equivalents, beginning of period -- 959,318 346,646
-----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 1,121,519 $ 1,121,519 $ 329,516
-----------------------------------------------------------------------------------------------------------------------
Supplementary information:
Interest paid $ -- $ -- $ --
Income taxes paid -- -- --
Non-cash financing and investing activities:
Issuance of redeemable preferred shares
for product rights 309,677 -- --
-----------------------------------------------------------------------------------------------------------------------
Common shares issued for conversion of
share subscriptions $ 248,244 $ 185,513 $ 62,731
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to interim consolidated financial statements
5
<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 November 30, 2000 (Unaudited
- Prepared by Management)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Deficit
Capital Stock Accumulated Accumulated
---------------------- Additional During the Other Total
Number Paid in Development Comprehensive Stockholders'
of Shares Amount Capital Stage Income Equity
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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>
6
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Equity and Comprehensive Income
(continued)
$ United States
For the period from inception on March 17, 1997 to November 30, 2000 (Unaudited
- Prepared by Management)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Deficit
Capital Stock Accumulated Accumulated
------------------------- Additional During the Other Total
Number Paid in Development Comprehensive Stockholders'
of Shares Amount Capital Stage Income Equity
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, May 31, 2000,
carried forward 5,846,459 $ 5,846 $ 2,201,056 $(1,666,401) $ 33,304 $ 573,805
Common shares issued for
cash net of share issue
costs of $83,227 169,270 169 466,732 -- -- 466,901
Common shares issued on
conversion of share
subscriptions 57,081 57 185,456 -- -- 185,513
Comprehensive income:
Loss -- -- -- (354,555) -- (354,555)
Foreign currency translation -- -- -- -- -- --
-----------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) -- -- -- (354,555) -- (354,555)
-----------------------------------------------------------------------------------------------------------------------------
Balance, Nov 30, 2000 6,072,810 $ 6,072 $ 2,853,244 $(2,020,956) $ 33,304 $ 871,664
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
($ United States)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------
L.O.M. Medical International Inc. was incorporated on March 17, 1997 under the
General Corporation Laws of Delaware. It conducts research and development on
new products in the medical field and has filed a patent application on a
retractable syringe. Operations effectively commenced on June 1, 1997. These
interim consolidated financial statements should be read in conjunction with the
annual financial statements for the year ended May 31, 2000 filed under cover of
Form 10-KSB.
1. Significant accounting policies:
a) Going concern
These financial statements have been prepared by management on the
going concern basis in accordance with generally accepted accounting
principles in the United States, which assumes the realization of
assets and liquidation of liabilities and commitments 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 $2,020,956. This factor, among others
raises substantial doubt about the Company's ability to continue as a
going concern. The Company's ability to continue as a going concern is
dependent on its ability to generate future profitable operations and
receive continued financial support from its stockholders and other
investors.
Management's plans with respect to generating future profitable
operations include future sales of the retractable syringe as well as
additional funding from stockholders in the form of additional share
subscriptions. There can be no assurance that any such financings will
be available. Failure to obtain adequate financing will cause the
Company to curtail operations.
b) Basis of presentation and consolidation
The consolidated financial statements include the accounts of the
Company and its 96% owned subsidiary, L.O.M. Laboratories Inc. All
significant inter-company transactions and balances have been
eliminated.
c) Translation of financial statements
The Company's functional currency is the United States dollar.
The Company's subsidiary, L.O.M. Laboratories Inc., has a Canadian
dollar functional currency.
d) Patent costs
Patent costs relate to amounts paid to acquire the rights to produce
and distribute products as well as the costs associated with patent
applications.
8
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 2
($ United States)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------
1. Significant accounting policies (continued):
d) Patent costs (continued)
These costs are being amortized on a straight-line basis over five
years.
e) Fixed assets
Fixed assets are recorded at cost. Amortization is provided using the
following methods and annual rates which are intended to amortize the
cost of the assets over their estimated useful life:
--------------------------------------------------------------------------------
Asset Method Rate
--------------------------------------------------------------------------------
Leasehold improvements Straight-line 20%
Computer software Straight-line 100%
Equipment Declining balance 30%
Furniture and fixtures Declining balance 20%
--------------------------------------------------------------------------------
f) Income taxes
The Company accounts for income taxes by the asset and liability
method. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
g) Management estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
h) Financial instruments
The fair values of the Company's cash, accounts receivable and
accounts payable and accrued liabilities approximate their carrying
values due to the relatively short periods to maturity of the
instruments. It is not possible to arrive at a fair value for
redeemable preferred shares as a public market for this stock does not
exist. The maximum credit risk exposure for all financial assets is
the carrying amount of those assets.
9
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 3
($ United States)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------
1. Significant accounting policies (continued):
i) Loss per share
Loss per share has been calculated using the weighted average number
of common shares outstanding during the period.
j) Quarterly financial reporting
In the opinion of management, all adjustments (consisting of normal
recurring items) necessary for the fair presentation of these
unaudited financial statements in conformity with generally accepted
accounting principles have been made.
2. Fixed assets:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
November 30, May 31,
2000 2000
-------------------------------------------------------------------------------------------------------------------
Accumulated Net book Net book
Cost amortization value value
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Leasehold improvements $ 27,919 $ 13,959 $ 13,960 $ 16,752
Computer software 5,446 2,302 3,144 4,192
Equipment 29,844 16,368 13,476 12,588
Furniture and fixtures 23,354 8,992 14,362 13,592
-------------------------------------------------------------------------------------------------------------------
$ 86,563 $ 41,621 $ 44,942 $ 47,124
-------------------------------------------------------------------------------------------------------------------
</TABLE>
3. Redeemable preferred shares:
The Company's subsidiary has redeemable preferred shares outstanding as
follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
November 30, May 31,
2000 2000
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Issued:
4,000 Class C preferred shares with a par
value of $100 Cdn redeemable at $110.16 Cdn per share
at the option of the holder. Each share is entitled
to a fixed non-cumulative dividend at the rate of 9% per annum
payable at such times as determined by the Directors. 301,727 301,727
-------------------------------------------------------------------------------------------------------------------
</TABLE>
4. Capital stock:
a) Authorized:
50,000,000 Common shares with a par value of $.001 each
5,000,000 Preferred shares with a par value of $.001 each
10
<PAGE>
L.O.M. MEDICAL INTERNATIONAL INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements, page 4
($ United States)
(Unaudited - Prepared by Management)
--------------------------------------------------------------------------------
4. Capital stock (continued):
b) Share subscriptions:
Subsequent to November 30, 2000, the Company issued 41,142 common
shares at $3.25 per share for net proceeds of $133,711 which were
received prior to November 30, 2000.
c) Stock option plan:
3,000,000 common shares of the Company are reserved for issuance upon
exercise of stock options. As at November 30, 2000, no stock options
have been granted.
5. Related party transactions:
During the period the Company entered into the following transactions with
related parties:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
2000 1999
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accounting fees paid to a director $ 24,120 $ 6,718
Management fees paid to president 60,918 60,000
Office and administration fees paid to president's spouse 18,275 18,000
Office and administration fees paid to an individual
related to the president 10,008 8,040
Management fees to a company controlled by the president 20,000 --
Rent paid to a company controlled by the president 18,885 17,717
-------------------------------------------------------------------------------------------------------------------
</TABLE>
These transactions are in the normal course of operations and are measured
at the exchange amount of consideration established and agreed to by the
related parties.
6. Commitments:
The Company is obligated to make future lease payments for it's offices as
follows:
2001 $ 10,536
2002 $ 21,072
2003 $ 21,072
2004 $ 21,072
2005 $ 21,072
11
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
Development of the Company
L.O.M. Medical International Inc., a Delaware corporation ("Company"), was
incorporated in the State of Delaware on March 17, 1997. Our executive offices
are located at #3-1482 Springfield Road, Kelowna, B. C., Canada V1Y 5V3. The
Company's telephone number is 250.762.7552.
For purposes of clarification, anytime the symbol "US" is used within this
Annual Report of Form 10-KSB, it refers to the currency of the United States.
Anytime the symbol "CDN" is used, it refers to the currency of Canada.
Business of the Company
The Company was incorporated for the purpose of researching and developing
health care products. Our goal is to become an innovator and provider of a
retractable syringe ("Syringe") and related products and technologies to the
health care market. We also hope to successfully market and distribute a line of
eye care products. We have successfully patented and licensed products in
seventy countries including the United States and Canada. We plan to develop new
and improved products and provide the health care industry with better, safer
products throughout the world.
The Retractable Syringe
We believe the Syringe will change standard disposal methods for used syringes.
We have developed a product designed to function as a standard hypodermic
syringe that we believe is safer to the caregiver or health care worker. We
believe that the Syringe's unique design will allow health care providers to
avoid direct contact with used needles. The Syringe is covered by United States
Patent No. 5,868,713 dated February 9, 1999, and international patents have been
filed in 24 different countries.
Once the needle is injected, the user simply has to press the plunger top gently
with his or her thumb to automatically retract the needle into its own sealed
chamber. The needle is now hidden where it remains locked in place and cannot be
used again. The Syringe does not require a health care worker to use both hands
to retract the needle after it has been used and withdrawn from the patient. The
Syringe will be produced in standard industry sizes from 1CC to 20 CC,
inclusive.
We intend to promote the Syringe as a safer and less risk-oriented instrument
for hospital staff and health care workers. We are optimistic that doctors,
nurses, and health care workers alike will recognize and appreciate the safety
features of the Syringe because of its ease of "use-and-disposal" and its unique
"contaminate-prevention" characteristics.
It is anticipated that the products and technologies developed by us will be
offered to distributors on a worldwide basis, with an initial emphasis in Canada
and the United States. It is hoped that new product and technology ideas will be
generated through active dialogues among our potential customers, and our
network of scientific advisors. We will also participate in national and
international conferences, and reviews of selected scientific literature.
Our management interacts with a network of scientific advisors within the
industry, including members of academic institutions, as well as potential
customers. We anticipate that these interactions will enable us to identify the
specialized needs of those potential customers and to provide innovative and
commercially acceptable products and technologies. At this time, our
relationship with scientific advisors and academic institutions is limited to an
advisory relationship. We currently perform all of our own research and
development. We have currently entered into agreements with B.C. Tech And
Phillips Corporation for production of produce the prototype Syringe as well as
100,000 test units. The contract price is in the range of US$400,000.00. These
funds will be paid out over the next five months.
During the next five months there may be significant increases to staffing
levels. Dr. Simon Wood will run the research and development department. We are
currently interviewing mid level engineers to assist with computer product
design requirements.
We anticipate testing the Syringe in conjunction with teaching universities in
Canada, Britain, and other constituents of the United Kingdom.
12
<PAGE>
We are not currently producing commercial quantities of products or currently
supplying any services to any third parties. No assurance can be given that we
will, on a timely basis, be able to make the transition from manufacturing
testing quantities of the Syringe to commercial production quantities
successfully or be able to arrange for contract manufacturing.
We anticipate contracting out the first two years of production of the Syringe.
At the end of the second year of production, we anticipate engaging in
significant discussions regarding the potential for the construction of our own
production facility. We recognize that the construction of a production facility
will be contingent upon us having reached our sales and profit projections. We
anticipate this issue will be presented for vote by the Board of Directors and
shareholders. We have begun negotiations to set up a manufacturing plant in
Ireland. However, such negotiations have not progressed beyond the preliminary
discussions discussed in our previous filings.
The Eye Care System
We have invented and developed an insertion and storage device for contact
lenses (the "Eye Care System"), which is a method of handling and inserting
contact lenses. We have developed the following components and solutions that
will be used together with the Eye Care System insertion and storage products:
o a medical inserter that will remove contact lenses in a medical
emergency situation for use by hospital medical staff and paramedics;
o disposable and replacement inserter ends;
o additional storage cups and caps; and
o all soaking and disinfecting solutions that are to be used with the
Eye Care System inserter.
The Eye Care System is designed so that the practitioner will no longer have
direct hand or finger contact with the contact lens when fitting the patient. We
believe that the design of the system will reduce the risk of contamination and
infection to the patient. We have developed a liquid cleaner for the Eye Care
System that quickly cleans contact lenses. We have obtained Food and Drug
Administration Approval ("FDA") for the Eye Care System product.
We have completed market testing and believe that the Eye Care System was well
received at the American Optometrists Association. convention in Montreal,
Canada, where approximately 30,000 units were distributed to opticians,
optometrists and pharmacies. We have completed the formulation of contact lens
solutions and copyrights covering these products have been registered. We have
completed the design and labeling of the Eye Care System. We believe that the
eye-care products are ready for marketing and distribution.
The target markets for the distribution for the Eye Care System product include,
but are not necessarily limited to, hospitals and clinics, including and
optometrists and opticians.
The eye care products are currently produced in Canada. We own all of the
necessary injection molds. We will contract out for the production of components
needed for the assembly and packaging of the eye care products. The actual
assembly and packaging will be subcontracted out at this time.
We have produced 33,000 units of our eye care inserters, which will be used for
demonstrations. As such, we have not inventoried the units but expensed them in
the past financial statements and net realizable value is anticipated to be nil.
We currently have the ability to subcontract out for the production of
commercial quantities of our eye care products. We currently have dies with an
output capacity of 150,000 units. There is a second set of dies designed that
will have a 300,000 unit capacity which would allow the production of a total of
450,000 units of eye care products per month.
We have FDA approval to market our line of eye care products in the United
States and have the necessary Canadian approval to market eye-care products in
Canada. We are reviewing various contracts with third parties to market the Eye
Care System in Canada as well as the United States.
We will focus our activities over the next several months on the production and
launch of the syringe. When that is finalized, we will implement our marketing
plan for the Eye Care System products.
13
<PAGE>
Skin Care Products
We are currently in the first phase of licensing agreements with Neuro-Skin in
Germany the owners of the rights to a line of skin care products. We have
invested approximately $117,000 to date to pay for licensing agreements and
patents in North America. We are sending Dr. Simon Wood to Germany to perform
additional due diligence with regards to licensing rights.
Business of the Company's Subsidiary
There has been no activity in the subsidiary this quarter. For the foreseeable
future the subsidiary will be inactive.
Future Capital Requirements
We will require additional cash to implement our business strategies, including
cash for (i) payment of increased operating expenses and (ii) further
implementation of our business strategies. No assurance can be given, however,
that we will have access to the capital markets in the future, or that financing
will be available on acceptable terms to satisfy our cash requirements necessary
to implement the business strategies. The inability to access the capital
markets or obtain acceptable financing could have a material adverse effect on
our results of operations and financial condition.
Our forecast of the period of time through which the financial resources will be
adequate to support the operations is a forward-looking statement that involves
risks and uncertainties, and actual results could vary as a result of a number
of factors.
We anticipate having to raise additional capital over the next several months in
order to develop, promote, produce and distribute our proposed products. Such
additional capital may be raised through additional public or private
financings, as well as borrowings and other resources. To the extent that
additional capital is raised through the sale of equity or equity-related
securities, the issuance of such securities could result in dilution of the
stockholders.
There can be no assurance that additional funding will be available on favorable
terms, if at all. If adequate funds are not available within the next 12 months,
we may be required to curtail operations significantly or to obtain funds
through entering into arrangements with collaborative partners or others that
may require us to relinquish rights to certain of our products that we would not
otherwise relinquish. However, we believe that we are poised to maintain
long-term liquidity.
Business Risks
L.O.M. Medical International Inc. is exposed to a variety of business risks,
some of which are inherent to all competitive commercial enterprises and others
that are specific to the medical products industry. Management endeavors to
limit all specific risk factors through its disciplined management of operation
and financial strategies.
Financial Risks
Our business plans are aggressive in nature. Continued rapid business expansion
will consume valuable working capital and result in significant demand on cash
flow from operations over the next few quarters. We expect that existing capital
resources and contributions from profits will not be sufficient to fund the
business plans as represented without assembling additional funds from external
sources.
Business Cycles and Risks of Cost Overruns
The sale and implementation of our products involves a reasonable market
penetration. Failure to secure reasonable market penetration could have adverse
effects on the general business of L.O.M. Medical International Inc., results of
operations and our financial condition.
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Fluctuations in Financial Results
Our operating results will fluctuate, depending on factors such as the demand
for products, the size and timing of contracts, new products and enhancements,
price competition, changes in operating expenses and personnel and general
economic factors. Therefore, actual financial results may vary significantly
from those projected by management.
Third-Party Claims for Infringement
We are not aware that any of our products infringe on the proprietary rights of
third parties. There can be no assurance, however, that third parties will not
claim such infringements by us with respect to current or future products. Any
such claims, with or without merit, could be time consuming, result in costly
litigation, or cause product or shipment delays. Any of the foregoing could have
adverse effects on our business, results of operations or financial condition.
Dependence of Single Product Line
Concentration of sales in a single product line for the medical health industry
represents a substantial risk should market conditions deteriorate.
Foreign Currency
Our business plans of L.O.M. Medical International Inc. are primarily focused on
the penetration in the United States and subsequently worldwide markets,
therefore, we will be subject to the risk of foreign currency fluctuations.
Competition and Sales Channels
Several companies compete with us. in the syringe market and there are a few
competitors in the safety syringe market. Most are substantially larger and
possess greater financial resources than us. Our future success, however, relies
on achieving superior product development through greater focus on the needs of
the market and faster response to evolving customer requirements. There can be
no assurance, however, that competitors will not develop products superior to
our products or achieve greater market acceptance due to marketing, sales
channels or other factors.
Dependence on Large Distributors
We will rely in part on business partners for the distribution of our products.
This includes a few large distributors in the United States. We ay be impacted
by negative business cycles or events experienced by these distributors. This
may lead to a short or long term reduction in revenue.
Human Resource Risks and Growth
Our success is largely dependent on the performance of our key employees.
Failure to attract and retain key employees with necessary skills could have an
adverse impact upon our growth and profitability. Our business is expected to
grow rapidly over the next three years. This expansion will result in
substantial growth in the number of employees, the scope of our operating and
financial systems and the geographic area of its operations. This increases the
responsibilities for both existing and new management personnel. Our ability to
support the projected growth of our business will be dependent upon having
highly trained personnel in place to conduct pre-sales activities, product
implementation and other customer support services. Future operating results
will depend on the ability of our key managers and employees to continue to
implement and improve our operational, customer support and financial systems.
There can be no assurance that we will be able to manage any future expansion
successfully, which could adversely affect the our results of operations and the
financial health.
Production and Quality Control
The manufacturing of products involves a number of steps and requires compliance
with stringent quality control specifications imposed on us by various
regulators. We may not be able to quickly replace manufacturing capacity if we
were unable to use our manufacturing facilities as a result of a fire, natural
disaster (including earthquake), equipment failure or other difficulty, or if
such facilities are deemed not in compliance with the various regulators'
requirements and
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the non-compliance could not be rapidly rectified. The inability or reduced
capacity to manufacture or have manufactured any of our products would have a
material adverse effect on the business and results of operations.
Government Standards and Regulations
Our products will be subject to numerous foreign government standards and
regulations that are continually being amended. Although we will endeavor to
satisfy foreign technical and regulatory standards, there can be no assurance
that our products will comply with foreign government standards and regulations,
or changes thereto, or that it will be cost effective to redesign our products
to comply with such standards or regulations. The inability to design or
redesign products to comply with foreign standards could have a material adverse
effect on our business, financial condition and results of operations.
Product Liability Risk
Our business will expose us to potential product liability risks that are
inherent in the testing, manufacturing and marketing of medical products. We do
not currently have product liability insurance, and there can be no assurance
that we will be able to obtain or maintain such insurance on acceptable terms
or, if obtained, that such insurance will provide adequate coverage against
potential liabilities.
We face an inherent business risk of exposure to product liability and other
claims in the event that the development or use of our technology or products is
alleged to have resulted in adverse effects. Such risk exists even with respect
to those products that are manufactured in licensed and regulated facilities or
that otherwise possess regulatory approval for commercial sale. There can be no
assurance that we will avoid significant product liability exposure. There can
be no assurance that insurance coverage will be available in the future on
commercially reasonable terms, or at all, or that such insurance will be
adequate to cover potential product liability claims or that a loss of insurance
coverage or the assertion of a product liability claim or claims would not
materially adversely affect our business, financial condition and results of
operations.
While we have taken, and will continue to take, what we believe are appropriate
precautions, there can be no assurance that we will avoid significant liability
exposure. An inability to obtain product liability insurance at acceptable cost
or to otherwise protect against potential product liability claims could prevent
or inhibit the commercialization of the products. A product liability claim
could have a material adverse effect on the business, financial condition and
results of operations.
Liquidity
We believe that we are poised to maintain our liquidity over the next twelve
months. Our business plan indicates significant demand on cash flow. This is
based upon cash flow projections prepared by us. Additional funds will be
required to fulfill our projected business plans. However, we will curtail our
plans if necessary to maintain the liquidity of the company. However, the
forecast for the period of time through which the financial resources will be
adequate to support our operations is a forward-looking statement that involves
risks and uncertainties, and actual results could fail as a result of a number
of factors.
We had cash resources of $1,121,519 at November 30, 2000. At May 31, 2000, and
had cash resources of $959,318. At November 30, 2000, total current assets were
$1,158,457 and total current liabilities were $24,112. At November 30, 2000,
total current assets exceeded total current liabilities by $1,134,345. At May
31, 2000, total current assets were $987,208 and total current liabilities were
$27,791. At May 31, 2000, total current assets exceeded total current
liabilities by $959,417. Because we are not generating any significant revenues,
our only external source of liquidity is the sale of our capital stock.
Results of Operations
We have not yet realized any significant revenue from operations. The net loss
from operations from March 17, 1997 (inception) to November 30, 2000, was
$2,020,956. The net loss for the 6-month period ended November 30, 2000, was
$354,555 compared to a loss of $197,829 for the 6-month period ended November
30, 1999. The net loss for the 3-month period ended November 30, 2000 was
$174,680 compared to a loss of $103,596 for the 3-month period ended
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November 30, 1999. The net loss for the 12-month period ended May 31, 2000, was
$508,835. Such losses were primarily the result of operational expenditures.
Item 2. Changes in Securities
We have offered to all shareholders of record, one warrant for every two shares
held by each shareholder. Each warrant entitles the holder of such warrant to
purchase one share of our common stock for $5.00 per share. Each warrant expires
by its own terms ninety days after the first transaction in the Company's shares
occurs on the Over-the-Counter Bulletin Board. We have sold 107,111 of common
shares in the last quarter. Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
On November 3, 2000, the Registrant accepted the resignation of Dr. John Gergely
as a director. Dr. Gergely left to honor other career commitments, and the
Registrant is not aware of any disagreements on any matter relating to
operation, policies or practice. The Form 8-K has been filed.
On December 1, 2000, the Registrant accepted the resignation of Mr. Peter
McFadden as a director. Mr. McFadden left to honor other career commitments, and
the Registrant is not aware of any disagreements on any matter relating to
operation, policies or practice. The Form 8-K has been filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: December 18, 2000 L.O.M. Medical International, Inc.
By: /s/ John Klippenstein
--------------------------
John Klippenstein
Its: President
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