SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB/A
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS
ISSUERS UNDER SECTION 12(b) OR 12(g) OF THE SECURITIES ACT OF 1934
L.A.M. PHARMACEUTICAL, CORP.
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(Name of Small Business Issuer in Its Charter)
Delaware Applied For
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
800 Sheppard Avenue West, Commercial Unit 1,
North York, Ontario, Canada M3H 6B4
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(Address of Principal Executive Offices) (Zip Code)
1-877-526-7717 or (416) 633-3004
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(Company's Telephone Number, Including Area Code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name Of Each Exchange On Which
To Be So Registered Each Class Is To Be Registered
Securities to be registered pursuant to Section 12(g) of the Act:
Common stock, $0.0001 par value
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(Title of Class)
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TABLE OF CONTENTS
PART I........................................................................
Item 1..Description of Business.
Item 2..Management's Discussion and Analysis and Plan of Operation.
Item 3..Description of Property.
Item 5..Directors, Executive Officers, Promoters and Control Persons.
Item 6..Executive Compensation.
Item 7..Certain Relationships and Related Transactions.
Item 8..Description of Securities.
PART II.......................................................................
Item 1. Market Price of and Dividends on the Company's Common Equity and Other
Shareholder Matters.
Item 2..Legal Proceedings.
Item 3..Changes in and Disagreements with Accountants.
Item 4..Recent Sales of Unregistered Securities.
Item 5..Indemnification of Directors and Officers.
PART F/S......................................................................
Index to Financial Statements...............................................
PART III......................................................................
Index to Exhibits...........................................................
SIGNATURES....................................................................
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PART I
Item 1. Description of Business.
L.A.M, Pharmaceutical, Corp. (the "Company") was incorporated in Delaware
in July 1998. In September 1998 the Company acquired all of the issued and
outstanding shares of LAM Pharmaceuticals LLC ("LAM") for 6,000,000 shares of
the Company's common stock. LAM was organized in Florida in 1994 (initially as a
partnership) to commercialize a new drug delivery system which offers patients,
among other benefits, safer and more effective treatment for a number of serious
diseases. Unless otherwise indicated, all references to the Company include LAM.
In September 1998 the Company sold 3,930,000 shares of its common stock to
twelve persons for $0.01 per share and sold 63,000 shares of its common stock to
61 persons for $0.10 per share. Between October 1998 and October 1999 the
Company sold 399,500 shares of its common stock to 18 persons for $1.00 per
share.
Between June 1999 and February 2000 the Company sold convertible notes in
the principal amount of $1,517,000 to 29 persons. The notes are unsecured, bear
interest at 9.5% per year, and are due and payable at various dates between June
2000 and February 2001. At the option of the holder, each $1.00 of unpaid note
principal may be converted into two shares of the Company's common stock.
The objective of the Company is to develop, license, produce and sell
novel and proprietary pharmaceuticals. Notwithstanding the above, the Company
has not obtained U.S. Food and Drug Administration (FDA) approval for any of its
products.
All of the Company's products are in various stages of development and
testing and the commercial sale of any of these products may not occur until
December 2000 at the earliest. As a result, the Company expects to incur
substantial losses for the foreseeable future.
During the years ended December 31, 1997, 1998 and 1999 the Company had
losses of $(499,626), $(458,807 and $(2,557,643) respectively. During the three
months ended March 31, 2000 the Company had a loss of $(724,566). As of March
31, 2000 the Company had a shareholders' deficit of $(2,008,418). Accordingly
there can be no assurance that the Company will be profitable.
The Company is the owner of a proprietary drug delivery technology that
involves the use of an original Ionic Polymer Matrix (IPM) for the purpose of
delivering, enhancing and sustaining the action of certain established
therapeutic agents.
The IPM technology is not a drug in and of itself, but rather a new system
for carrying, delivering and releasing drugs in a manner that can extend and/or
improve their efficacy and safety.
In order to fully understand and appreciate the significance and
effectiveness of the Company's drug delivery technology it is important to
understand how various drug-based
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formulations are applied to the skin and the ways that substances applied to the
skin are absorbed by the skin and other structures of the body.
For many years lotions, creams, suspensions and solutions of various
natural (herbal) and therapeutic (drug) substances have been applied to the
skin. When it comes to treating pain, sexual dysfunction and other disease
states which emanate from structures of the body below the skin, topical therapy
is not effective unless the therapeutic agent can penetrate the outer layer of
the skin (stratum corneum) which acts as a protective barrier. This layer
consists of numerous dead cells and cells in transition, which collectively form
an effective barrier to penetration of substances, such as bacteria, in the air
or in water. Thus the stratum corneum plays an important role in protecting the
body from invasion by harmful substances.
It is this same protective role which has posed a major challenge over the
years regarding devising a mechanism that can effectively penetrate the stratum
corneum for the purpose of delivering therapeutic substances to structures deep
within the body.
In 1994 the Company's scientists discovered that certain molecules, called
polymers were found to possess strong electrical charges which, when combined
with other polymers of a specific electrical charge, are able to effectively
penetrate the outer layers of the skin. In addition, these molecules are able to
attach or surround other molecules such as therapeutic drug molecules and carry
them within a matrix through the outer layers of the skin into the deeper
structures below. The Company's scientists recognized that these discoveries
would be of great significance in regard to the delivery of therapeutic agents.
This phenomenon, the ionic polymer matrix (IPM) delivery system, is covered by
eight U.S. patents which are owned by the Company.
IPM technology combines in a matrix, in a novel manner, those drugs which
are well-established and generally regarded by the public, the regulatory
authorities and the pharmaceutical industry as safe. Based on preliminary
studies conducted to date, the Company believes that its IPM technology when
combined with an active drug ingredient, will facilitate the delivery of greater
amounts of drug to structures within the body than is otherwise possible. IPM
therefore offers potential benefits by providing faster and more prolonged
therapeutic activity, less intrusive and less painful methods of delivery and
faster onset of therapeutic process.
The Company's products are regulated in the United States by the FDA. The
Company is of the opinion that the products being developed by the Company will
be classified as a cosmetic, an OTC drug, or a new drug. Products classified as
cosmetics or OTC drugs may be marketed without FDA approval. New drugs that are
not cosmetics and that are considered an OTC drug must be approved by the FDA
prior to marketing in the United States. Before human testing can begin with
respect to a new drug in the United States preclinical studies are conducted in
laboratory animals to evaluate the potential efficacy and the safety of a
product. Human clinical studies generally involve a three-phase process. The
initial clinical evaluation, Phase I, consists of administering the product and
testing for safe and tolerable dosage levels. Phase II trials continue the
evaluation of safety and determine the appropriate dosage for the product,
identify possible side effects and risks in a larger group of subjects, and
provide
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preliminary indications of efficacy. Phase III trials consist of testing for
actual clinical efficacy within an expanded group of patients at geographically
dispersed test sites.
The Company believes that its IPM technology, when used with prescription
drugs will be regulated as an unapproved new drug and will require approval by
the FDA. Conversely, the Company's IPM technology, when used with a cosmetic or
an OTC drug, could be marketed without FDA approval.
The Company's initial approach has been and continues to be to research
and develop applications of the IPM technology using well known and FDA approved
or licensed drugs the patents for which have expired or which are not otherwise
proprietary. This approach has a number of benefits:
o The properties, safety and efficacy of the drug that is to be delivered
are well established and regulatory approvals or licenses for them have
been granted in most or all important markets.
o The matrix materials used with the IPM technology are considered by the
FDA to be safe for use in humans.
o The regulatory process required to gain approval or licenses for the
drug-IPM delivery matrix should be substantially shorter than for a
drug-IPM matrix where the drug is not approved or licensed.
The Company plans to evaluate a limited number of IPM/drug formulations
that have shown promise during preliminary clinical investigation. The Company's
preferred course is to negotiate licensing agreements and/or joint ventures with
larger pharmaceutical companies which have the financial resources to fund the
research and/or clinical trials necessary to complete the development of the
Company products.
If the results of the clinical trials are promising, the Company may then
be in a position to negotiate licenses which would generate sufficient revenue
so as to allow the Company to exploit the IPM technology using a variety of
other drugs. It should be emphasized that a number of risks may be associated
with this approach. While preliminary results have been promising, there is no
certainty that the efficacy of the IPM/drug formulations currently being tested
will be borne out in subsequent clinical trials. In addition, more clinical
studies may be requested by a potential licensee before it is willing to enter
into an agreement.
The Company's objective is to raise sufficient capital to enable it to
sustain ongoing research and administrative overhead as well as to enable it to
undertake the work necessary to obtain FDA approval for its products.
The longer the Company is able to fund development and the clinical trials
for its products and thereby establish their efficacy, the greater their value
will be to a potential licensee given the reduced risk of failure. Consequently,
the longer the Company retains sole ownership of the products the greater will
be its bargaining position with prospective licensees and strategic alliance
partners. Indeed, the industry places incrementally larger different values on
drugs as they progress through the clinical trials required by the FDA.
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The Company plans to market its products in any country where a suitable
market exists and which has approved the Company's products for sale.
In July 1996, the Company entered into a joint venture agreement with
South Florida Bio-availability Clinic ("SFBC"), a private company located in
Miami, Florida. SFBC is a contract research firm which has conducted over 300 in
Phase I, Phase II and Phase III clinical studies for major pharmaceutical
corporations. Under the terms of the agreement, SFBC has conducted a number of
studies in human patients for the purpose of the Company's FDA drug approval
submissions.
The agreement between the Company and SFBC provides that SFBC will provide
office and laboratory space to the Company in it's Miami facilities. As part of
this agreement, the Company has transferred its equipment and research
activities from Toronto to Miami. SFBC also agreed to provide certain support
staff and office infrastructure to the Company.
This arrangement benefits the Company because it allows its researchers
the ability to work in close proximity to SFBC staff. In addition, by obtaining
studies at cost, the Company is able to move its research along at a faster pace
than would have otherwise been possible.
At the present time the Company is focusing its efforts on the following
projects:
ARTHRITIC PAIN
The Company has developed a transdermal (through the skin) IPM drug
designed to be used in topical form for the relief of arthritic pain and pain
caused by related conditions.
At the present time, an effective transdermal preparation containing an
NSAID (nonsteroidal anti-inflammatory drug) for the treatment of arthritis is
not available on the market. The reasons for this are apparent when one
considers the technical challenges that must be overcome to effectively
penetrate the outer barrier of the skin.
Under the terms of the Canada Health Act and regulations, specialist
physicians are permitted a compassionate prescribing prerogative. This
prerogative allows for the prescribing of drugs which have not yet been approved
for sale in Canada, on a compassionate basis, for patients for whom no other
available medication has provided relief. Administration of the Diclofenac-IPM
on a compassionate basis at the Rothbart Pain Clinic in Toronto have yielded
positive results in the treatment of arthritis.
The Company's Diclofenac-IPM is a therapeutic preparation containing 30
mg. of diclofenac per ml. This clear, aqueous and highly absorbent gel is
applied to the skin adjacent to the affected area. Within several minutes the
preparation dries and therapeutic levels of diclofenac are delivered to the
affected structures below the skin. In the case of a patient suffering from
osteoarthritis of the knee, for example, the outer layer of the knee would be
treated by the application of a small amount of the Company's Diclofenac matrix
to the skin covering the knee and gently massaged for 20-30 seconds. After
several minutes, the patient is able to resume his or her activities.
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In cases where the patient is experiencing acute pain, relief is apparent
within ten minutes. Relief of the symptoms of arthritis often lasts for 4-6
hours. In many cases one application of several doses of diclofenac will settle
or reduce the pain for longer periods. Thus the application of repeated doses is
required only when it becomes necessary to control pain.
The Company's Diclofenac matrix leaves no film or residue on the surface
of the skin and therefore can be applied to clean skin at any time of the day or
night. In addition to the gel matrix, the Company is currently working on a
Diclofenac patch for long-term relief (up to 3 days) for symptoms of arthritis.
The Company's Diclofenac-IPM gel is especially important for the treatment
of arthritis in sufferers who experience acute inflammation and pain (flares).
This is a common condition that occurs frequently in the joints and surrounding
structures of patients suffering from osteoarthritis. Management of these acute
flares is especially important for individuals who need to return to their daily
activities in the shortest possible time. Clinical experience has demonstrated
that when the Company's Diclofenac matrix is used for acute flares, relief of
pain can occur in fifteen to twenty minutes and can last as long as twelve hours
due to the ability of the IPM technology to deliver Diclofenac to affected
structures beneath the skin.
The most common form of arthritis is osteoarthritis, which affects an
estimated 20+ million people in the United States and Canada. The most common
form of medication used and prescribed for osteoarthritis is NSAID's. Examples
of non prescription NSAID's are ASA and ibuprofen. The world's best selling
prescription NSAID is diclofenac.
A risk faced by all users of orally administered NSAIDs, in particular
regular users, is NSAID-induced ulcers. NSAIDs are the most frequently used
class of drug by those suffering from arthritis. It is estimated that over
20,000 deaths occur annually in Canada and the United States resulting from
complications of NSAID-induced ulcers. One of the compassionate uses of the
Company's Diclofenac-IPM has been to treat patients suffering from gastric side
effects associated with the oral form of diclofenac. The topical administration
of diclofenac through the Company's Diclofenac-IPM mechanism would obviate many
of these risks and problems.
The Company is proceeding with the development of a long acting form of an
Diclofenac-IPM anti-inflammatory and analgesic. The Company is prioritizing its
activities on the development of the previously mentioned patch and is in the
process of conducting pilot studies on animals and on a compassionate basis in
humans. Once these trials are concluded, the Company plans on filing the
appropriate data for regulatory approval and enlarging the scope of its IPM
patch research.
SEXUAL DYSFUNCTION DRUG
The Company technology has been successfully used to develop a topical gel
which, when applied to the genitals, provides a safe and effective treatment for
male impotency, a problem affecting 140 million men worldwide. The gel is
applied easily and without discomfort to the outside skin of the male genitals a
few minutes before sexual intercourse. The side-effects experienced with tablets
or intra-urethral treatments are minimized and are of a minor and infrequent
nature. The Company's IPM matrix utilizes an established agent which has been
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approved for over 15 years. Pilot clinical trials conducted under the
compassionate provisions of the Canada Health Act are currently being conducted
in Toronto Canada.
The Company's gel offers several major advantages over current treatments,
(Viagra, Muse, etc.). Firstly, the gel is applied directly to the outside skin
of the male genitals. Thus pain associated with invasive therapy is eliminated.
Furthermore, side-effects associated with tablets (drug interactions) are
reduced to a very low incidence and are very mild when they infrequently occur.
Sexual activity can commence almost immediately after application of the gel
(within 2 to 3 minutes).
In December 1997, the Company granted an exclusive worldwide license to
Ixora Bio-Medical Co. ("Ixora"), for the marketing, sale and distribution of
certain of its transdermal drugs for the treatment of male and female sexual
dysfunction. The Company has received licensing payments of $200,000 from Ixora
and is to receive a further payment of $300,000 in September 2000. Ixora is
required to reimburse the Company for all costs of clinical studies and related
research required by the FDA or other government agencies as well as patent
procurement and maintenance costs, provided however that after January 1, 2000
Ixora is not, without its consent, obligated to reimburse the Company for costs
in excess of $10,000 per quarter. The Company will receive the following
royalties on sales by Ixora:
o 9% of all Net Sales of licensed products approved by the FDA and for
which the patent rights have not expired.
o 6.5% of all Net Sales of all licensed products which did not require
FDA approval and for which the patent rights have not expired.
o 4.5% of all Net Sales of all licensed products for which the patent
rights have expired or have been held to be invalid.
For purposes of the license agreement the term "Net Sales" means gross
sales less advertising/promotion expenses not exceeding 8% of gross sales and
sales taxes.
In January 1998 the Company acquired a 45% interest in Ixora for $207,360.
As a result of subsequent sales by Ixora of its common stock to other persons,
the Company, as of June 30, 2000, owned 37% of Ixora's common stock.
Following completion in the latter part of 2000 of pilot trials for its
sexual dysfunction drugs, and assuming these trials are successful, the Company
plans to file the necessary applications with various regulatory authorities to
commence Phase II and Phase III trials for the purpose of gaining marketing
approval for these drugs. The trials should take approximately 12-18 months on
an accelerated basis.
SKIN CARE
The Company's IPM matrix spreads easily over large areas of skin, making
it ideal for use as a cosmetic in various applications to the skin. Cosmetics
are a multi-billion dollar a year industry that do not require approval before
marketing, although cosmetics must be safe, contain appropriate cosmetic
ingredients and be labeled properly. Various uses for the Company's
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product include controlling body odors, relief of dryness, and for
moisturization. For example, the IPM matrix could be used as a lubricant, to
replenish moisture and general skin conditioning, particularly because it is
non-staining and non-irritating. When used with a fragrance, it could control
odor. When combined with certain over-the-counter (OTC) drugs, the Company's
IPM-drug matrix could be marketed as a cosmetic.
Certain products marketed in the United States are considered cosmetics
and OTC drugs because they make cosmetic claims as well as therapeutic claims
and are intended to treat or prevent disease. Examples of such products include,
but are not limited to, anti-dandruff shampoos; sunscreens; make-ups,
moisturizers and skin care products that bear sunscreen, skin protectant or acne
claims; products that make breath-freshening or whitening claims;
antiperspirants that bear deodorant claims; and anti-microbial soaps. These
products must comply with the FDA requirements for both cosmetics and OTC drugs.
As a cosmeceutical, a combination of an OTC drug and a cosmetic product,
the IPM matrix can be used for a variety of topical and other uses. These
include use with certain antibiotic first aid products, antifungal drugs,
dandruff, dermatitis and psoriasis control products, external analgesics, skin
protectant-type products, such as for poison ivy and fever blisters and cold
sores, first aid antiseptics, and anorectal products. Presently one cutaneous
surgeon and dermatologist is conducting preliminary IPM skin care trials on
approximately twenty patients in the Redding, California area. Since the Company
is of the opinion that its skin care products will be classified as a cosmetic
or an OTC drug, these skin care trials are being conducted without FDA approval.
GOVERNMENT REGULATION
The Company's drug and cosmetic products are regulated in the United
States under the Federal Food, Drug and Cosmetic Act (FD&C Act), the Public
Health Service Act, and the laws of certain states. The FDA exercises
significant regulatory control over drugs manufactured and/or sold in the United
States, including those that are unapproved.
Federal laws such as the FD&C Act cover the testing, manufacture,
distribution, marketing, labeling, advertising (for prescription drugs), of all
new drugs. Drug registration and listing requirements also exist.
The Company is of the opinion that the products being developed by the
Company will be subject to one or more of the following FDA classifications:
Cosmetics
Cosmetics are generally the least regulated by the FDA compared to other
products subject to the FD&C Act. The legal distinction between cosmetics and
drugs is typically based on the intended use of the product, which is normally
discerned from its label or labeling. Cosmetic products are those intended for
"cleansing, beautifying, promoting attractiveness, or altering appearance"
whereas drugs are those intended for "diagnosis, cure, mitigation, treatment, or
prevention of disease", or that "affect the structure or any function of the
body".
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A claim suggesting that a product affects the body in some "physiological"
way usually renders the product a drug - even if the effect is temporary. A
claim that the product penetrates and affects layers beneath the skin's surface
most likely would be viewed by the FDA as a drug claim. However, claims that a
product affects appearance through a "physical" effect are generally considered
cosmetic claims. The FDA's rationale for this distinction is that a claim of a
physiological effect is a claim that the product "affects" the structure or
function of the body, which is one element of the statutory definition of a
drug. A claim indicating that a product's effects are on the surface of the skin
can be a cosmetic claim.
Although cosmetics may be marketed without FDA approval, in order to be
marketed lawfully as a cosmetic, the product must be properly labeled and each
ingredient and each finished cosmetic product must be adequately substantiated
for safety prior to marketing.
Products which are not cosmetics, and which are marketed in the United
States, must either comply with specified OTC drug regulations (monographs) or
be specifically approved through the New Drug Application (NDA) or biologic
licensure process.
OTC Drugs
OTC drugs generally are defined as those drug products that can be used
safely and effectively by the general public without seeking treatment by a
physician or other health care professional. Thus, they do not require a
prescription by a health care professional and are available at retail
establishments. An OTC drug may be marketed without FDA approval if it conforms
to a particular product monograph as described below and otherwise meets the
requirements of the FD&C Act.
OTC monographs lists active ingredients, their dosage levels, and uses
(claims) for which OTC drug products are considered generally recognized as safe
and effective for specific use and are not misbranded. If a particular level of
an active ingredient and claim are allowed by a monograph, then a manufacturer
may market a product containing that ingredient and bearing that claim without
specific FDA approval - subject to compliance with other requirements of the
monographs and FD&C Act, including drug registration and listing obligations.
Aspirin is a common drug allowed by a monograph.
If a drug product does not conform to a particular OTC monograph, then
typically an New Drug Application must be reviewed and approved by the FDA prior
to marketing. Unlike prescription drugs, OTC drugs must bear adequate directions
for safe and effective use and warnings against misuse.
New Drug Applications and Biologic License Applications
New drugs and products that are not cosmetics or devices and that are not
covered by an OTC monograph must be approved by the FDA prior to marketing in
the United States. Pre-clinical testing programs on animals, followed by three
phases of clinical testing on humans, are typically required by the FDA in order
to establish product safety and efficacy. The Company believes that its IPM
technology, when used with approved or unapproved prescription drugs or
biologics, will be regulated as an unapproved new drug or unapproved biologic
and will require approval by the FDA.
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It is also possible that the IPM technology may be regulated as a
combination drug and medical device, in which case it would be subject both to
medical device and drug regulation.
Medical device regulation is based on classification of the device into
three classes, I, II, or III. Class III medical devices are regulated much like
drugs, whereas Class I and II devices are subject to abbreviated clearance
procedures. It is also possible that the use of the IPM technology with a
monographed OTC drug could render the product an unapproved new drug, which
would mean that the product is subject to new drug application approval
requirements before marketing.
The FDA may choose to regulate certain uses of the IPM technology as a
medical device if it determines that the mechanism by which the IPM technology
exerts its effects meets the definitional requirements of a medical device. A
medical device is a product that, among other requirements, does not achieve its
primary intended purposes through chemical action within or on the human body
and is not dependent upon being metabolized for the achievement of its primary
intended purposes. Although the Company expects that most uses of the IPM
technology will be regulated as a drug, which is in essence a product that
usually achieves its effects by chemical action or physiological action in or on
the body, to the extent that the IPM technology is used to deliver
pharmaceutically active ingredients, it can be subject to both medical device
and drug regulation.
The first stage of evaluation, pre-clinical testing, must be conducted in
animals. After safety has been demonstrated, the test results are submitted to
the FDA (or a state regulatory agency) along with a request for authorization to
conduct clinical testing, which includes the protocol that will be followed in
the initial human clinical evaluation. If the applicable regulatory authority
does not object to the proposed study, the investigator can proceed with Phase I
trials. Phase I trials consist of pharmacological studies on a relatively few
number of human subjects under rigidly controlled conditions in order to
establish lack of toxicity and a safe dosage range.
After Phase I testing is completed, one or more Phase II trials are
conducted in a limited number of patients to continue to test the product's
safety and also its efficacy, i.e. its ability to treat or prevent a specific
disease. If the results appear to warrant further studies, the data are
submitted to the applicable regulatory authority along with the protocol for a
Phase III trial. Phase III trials consist of extensive studies in large
populations designed to assess the safety of the product and the most desirable
dosage in the treatment or prevention of a specific disease. The results of the
clinical trials for a new drug are submitted to the FDA as part of a New Drug
Application ("NDA").
Biological drugs, such as vaccines, are subject to Biologics License
Applications (BLAs), not NDAs as are other drugs. They must be safe, pure and
potent. Generic competition does not exist for biologics, as it does for other
drugs. Biological drugs are generally subject to the same testing,
manufacturing, distribution, marketing, labeling, advertising and other
requirements for other drugs.
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To the extent all or a portion of the manufacturing process for a product
is handled by an entity other than the Company, the manufacturing entity is
subject to inspections by the FDA and by other Federal, state and local agencies
and must comply with FDA Good Manufacturing Practices ("GMP") requirements. In
complying with GMP regulations, manufacturers must continue to expend time,
money and effort in the area of production, quality control and quality
assurance to ensure full compliance.
The process of biologic and new drug development and regulatory approval
or licensure requires substantial resources and many years. There can be no
assurance that regulatory approval will ever be obtained for products developed
by the Company. Authorization for testing, approval for marketing of drugs,
including biologics, by regulatory authorities of most foreign countries must
also be obtained prior to initiation of clinical studies and marketing in those
countries. The approval process varies from country to country and the time
period required in each foreign country to obtain approval may be longer or
shorter than that required for regulatory approval in the United States.
There are no assurances that clinical trials conducted in foreign
countries will be accepted by the FDA for approval in the United States. Product
approval or licensure in a foreign country does not mean that the product will
be approved or licensed by the FDA and there are no assurances that the Company
will receive any approval or license by the FDA or any other governmental entity
for the marketing of a drug product. Likewise product approval by the FDA does
not mean that the product will be approved or licensed by any foreign country.
Product Status
All of the Company's products are in various stages of development and
testing and the commercial sale of any of these products may not occur until
December 2000 at the earliest. As a result, the Company expects to incur
substantial losses for the foreseeable future. The Company's estimates of the
costs associated with future research and clinical studies may be substantially
lower than the actual costs of these activities. If the Company's cost estimates
are incorrect, the Company will need additional funding for its research
efforts. There can be no assurance that the Company's products will prove to
have any therapeutic or other value.
The following is a summary of the status of the products which are being
developed by the Company:
Projected Cost Projected Date
Anticipated FDA Needed to Complete of Completion
Product Name Classification Studies/Trials
of Studies/Trials
Arthritic Pain New Drug Application $1,500,000 (1)
Sexual Dysfunctio New Drug Application $1,500,000 January 2002 (2)
Skin Care Cosmetic/OTC Drug $1,500,000 (1)
(1) The Company plans to fund the majority of the costs of these studies by
licensing the rights to these products to a joint venture partner. As of
June 30, 2000 the Company had not entered into any agreements with any
third party with respect to the further development of these products.
Clinical studies are expected to last 18 to 24 months.
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(2) The Company has licensed this product to Ixora Bio-Medical Co. See Page 8
of this registration statement. Pursuant to the terms of the Licensing
Agreement Ixora is responsible for all the costs required to obtain
regulatory approval of this product.
As of June 30, 2000 the Company the Company had not applied to the FDA to
obtain clearance to begin any clinical trials.
Research and Development
As part of its ongoing research and development program the Company
intends to develop and commercialize as many products based on its IPM
technology as possible. The Company is in the early stages of developing
formulations involving morphine, and other compounds. Its long-range goal is to
exploit every possible use of the IPM technology where the matrix delivery
system improves therapeutic effects of the drug that is being delivered.
During the years ended December 31, 1998 and 1999 the Company spent
$41,372 and $185,143 respectively on research and development. The Company's
research and development expenditures do not include research and development
expenses relating to the Company's Sexual Dysfunction Drug which were paid by
Ixora Biomedical Co.
Patents and Trademarks
As of June 30, 2000, the Company owned eight U.S. patents, two U.S.
patents applications and twelve international patent applications designating
over 100 foreign countries with claims relating to its sustained release
delivery matrix system, systems containing drug preparations, uses of the
systems for various treatment therapies and addiction therapeutic program.
The Company's patents will expire between 2015 and 2017.
Employees
As of June 30, 2000 the Company had four full time employees and one part
time employee.
Item 2. Management's Discussion and Analysis and Plan of Operations
All of the Company's products are in the development stage. As a result,
the Company has not generated any revenues from the sale of its products.
Revenues since its inception represent payments received from Ixora. See Page 8
of this Registration Statement for further information concerning the Company's
agreement with Ixora.
Due to the lack of any significant revenues, the Company has relied upon
proceeds realized from the public and private sale of its common stock and
convertible notes to meet its funding requirements. Funds raised by the Company
have been expended primarily in
<PAGE>
connection with research, development, clinical studies and administrative
costs. Since the Company does not anticipate realizing revenues until such time
as it begins the commercial sale of its products or enters into licensing
arrangements regarding these products (which could take a number of years), the
Company will be required, through the sale of securities, debt financing or
other arrangements, to fund its operations. However, there can be no assurance
that such financing will be available or be available on favorable terms.
The primary components of general and administrative expenses during the
last two years were:
1999 1998
---- ----
Officer's salary $110,000 $120,000
Employee salaries and benefits $91,830 $63,662
Less: Salaries classified as
Research & Development ($135,494) ($181,143)
Investor Relations $91,941 $15,000
Stock Options and Awards $526,316 --
Commissions paid on sales of
Convertible Notes $27,471 --
Financial Consulting $42,876 $36,000
Legal and Auditing $92,802 $106,851
Other Supplies and Expenses $58,315 $29,682
Total $906,057 $190,052
During the year ended December 31, 1999 the Company recorded an expense of
$449,656 (which did not require the use of cash) associated with the grant of
options to consultants and employees and common stock issued in consideration
for services.
During the three months ended March 31, 2000 research and development
expenses increased due to the start of clinical trials in Toronto, Canada as
well as deferred compensation paid to the Company's president. The clinical
trials pertain to the Company's arthritic pain drug. During this same period
general and administrative expenses increased as the result of sales commissions
paid in connection with the sale of the Company's convertible notes, additional
administrative personnel and increased legal expenses.
Liquidity and Sources of Capital
The Company's operations used approximately $55,000 in cash during the
period ended December 31, 1998. During this period the Company also spent
approximately $55,000 on patent and trademark applications. Cash required during
1998 was generated through sales of the Company's common stock ($378,785) and
convertible notes ($125,000).
During the year ended December 31, 1999 the Company's operations used
approximately $348,000 in cash and the Company spent approximately $166,000 on
patent and trademark applications. Cash required during the year was generated
through sales of the Company's common stock ($60,000) and convertible notes
($1,077,000).
<PAGE>
The Company's operations used approximately $442,000 in cash during the
quarter ended March 31, 2000. During this same period the Company purchased
equipment having a cost of $13,204 and spent $54,434 on patents. Cash required
during this period was derived from the sale of convertible notes ($265,000) and
from the Company's cash on hand at December 31, 1999.
During fiscal 2000, the Company expects that it will spend between
$110,000 and $150,000 on research, development, and clinical studies, which is
exclusive of amounts to be paid by Ixora Medical Co. for clinical studies
relating to the Company's sexual dysfunction drug. As of June 30, 2000 the
Company had working capital of approximately $587,000 (exclusive of the
convertible debentures that are expected to be converted to equity and
liabilities due to shareholders of the Company). The Company plans to use its
existing financial resources as well as the proceeds from the sale of its common
stock to fund its capital requirements during this period. The Company does not
have any commitments from any third party to provide any capital to the Company
It should be noted that substantial funds may be needed for more extensive
research and clinical studies which may be necessary before the Company will be
able to sell any of its products on a commercial basis.
Other than funding its research and development activities and operating
losses, the Company does not have any material capital commitments.
Plan of Operation
During the twelve months ending December 31, 2000 the Company:
o will attempt to license or joint venture the technology relating to
its Arthritic Pain Drug to a larger corporation which has the
financial resources required to perform the clinical studies required
for FDA approval.
o with the funding received from Ixora apply to the FDA for clearance
to begin Phase I clinical trials to test the Company's Sexual
Dysfunction Drug.
o plans to continue testing the Company's skin care products with a
view to licensing the IPM technology to third parties for use in
products which will be classified as cosmetics or OTC drugs.
During this twelve month period the Company does not anticipate hiring
more than two employees.
Item 3. Description of Property.
The Company's executive offices are located at 800 Sheppard Avenue West,
Commercial Unit 1, North York, Ontario, Canada. The Company leases this space at
a rate of $1,200 per month pursuant to the lease which expires in 2003.
The Company's research facilities are located at SFBC in Miami Florida.
The Company's laboratories are registered and licensed by the State of Florida
and are in compliance with the FDA's Good Manufacturing Practices. The state of
the art equipment in these facilities
<PAGE>
include: three Cafano mixing systems, a 20 foot commercial depyrogenating oven,
sterilized fume hood autoclaves, and a Milipure sterile manufacturing water
system.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information as of March 31, 2000
concerning the common stock owned by each officer and director of the Company,
and each other person known to the Company to be the beneficial owner of more
than five percent (5%) of the Company's common stock.
Name and Address Shares Owned Percentage Ownership
Alan Drizen 2,524,924 (1) 24%
1201-100 Canyon Avenue
Toronto, Ontario, Canada M3H 5T9
Peter Rothbart 2,679,924 (2) 26%
274 St. Clements Avenue.
Toronto, Ontario, Canada M4R 1H5
Gary Nath 1,848,226 18%
6106 Goldtree Way,
Bethesda, Maryland 20817
Lisa Krinsky 1,127,240 (3) 11%
11190 Biscayne Blvd.
Miami, Florida 33181
Arnold Hantman 498,389 5%
11190 Biscayne Blvd.
Miami, Florida 33181
(All Officers and Directors as
a group, 3 persons) 7,053,074 68%
(1) Includes shares held by the Canyon Trust, a discretionary trust, of which
Mr. Drizen may be deemed the beneficial owner.
(2) Includes shares held by the Shirlaine Establishment Trust, of which Mr.
Rothbart may be deemed the beneficial owner.
(3) Includes shares held by the South Florida Bioavailability Clinic of which
Lisa Krinsky is the majority shareholder.
There are no arrangements known to the Company which may result in a change in
control of the Company.
<PAGE>
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors and executive officers of the Company are as follows:
Name Age Position
Alan Drizen 60 President and Director
Peter Rothbart, M.D. 61 Treasurer and Director
Gary M. Nath 54 Secretary and Director
Alan Drizen has been President and a director of the Company since its
inception. He has spent 30 years in senior positions including Chairman of the
Board and a director of a number of pharmaceutical companies. He was educated in
England, the United States and Canada and trained as a biochemist. Mr. Drizen
has both technical and managerial expertise in the development and
commercialization of new drugs. In the late 1980's, Mr. Drizen and his team of
scientists characterized molecules known as mucopolysaccharides which led to the
founding of Hyal Pharmaceutical Corporation, a public company listed on the
Toronto Stock Exchange and NASDAQ. The analytical standard, developed by his
team, for one particular molecule, sodium hyaluronate, now a component of many
pharmaceutical preparations, is still used by the Canada Health Protection
Branch as the official standard for this drug. Mr. Drizen's interest in polymer
chemistry eventually led to his collaboration with Dr. Peter Rothbart and to the
discoveries on which the Companys technologies are based.
Peter Rothbart, M.D., Medical Director, has been a director and Treasurer
of the Company since its inception. He has been a consulting anesthetist for
over 20 years and is a leading pain specialist and principal of the Rothbart
Pain Management Clinic in Toronto, Canada. Dr. Rothbart is currently President
of the North American Cervicogenic Headache Society, an association of
specialists in the treatment of cervicogenic headaches. He was also recently
elected Chair of the Chronic Pain Section of the Ontario Medical Association. In
collaboration with Alan Drizen, Dr. Rothbart discovered the IPM delivery system.
In addition to his role as a director of the Company and Medical Director, Dr.
Rothbart is using the Company's diclofenac matrix in his Toronto clinic on a
compassionate basis.
Gary M. Nath, has been Secretary and a director of the Company since its
inception. He has a BS degree in Biology and Chemistry, two years of
post-graduate work in Biochemistry and a law degree. Mr. Nath has worked in the
patent and trademark law departments of FMC Corporation, NL Industries, and
Warner Lambert Company in the capacities of patent attorney, group patent and
trademark counsel and general patent counsel, respectively. Mr. Nath is the
founding and managing partner of the intellectual property law firm Nath &
Associates located in Washington, DC. He counsels a wide range of domestic and
international clients across a broad range of technologies, including chemical,
pharmaceutical, biotechnical and mechanical fields. He has published extensively
and has spoken on intellectual property law procurement, enforcement and
transfer before numerous professional and lay groups in the United States and
Japan. He is a member of the American Bar Association, the New Jersey Bar
Association, the American Intellectual Property Law Association, the
International Patent Association, the Association of University Technology
Managers, and is admitted to practice before the U.S. Patent and Trademark
Office, Canadian Patent Office and numerous courts around the United States.
<PAGE>
Item 6. Executive Compensation.
The following table sets forth in summary form the compensation earned
or received by (i) the Chief Executive Officer of the Company and (ii) by each
other executive officer of the Company who earned or received in excess of
$100,000 during the fiscal years ended December 31, 1998 and 1999.
Annual Compensation Long Term Compensation
All
Re- Other
Other stric- Com-
Name and Compen- Stock Options pensa-
Principal Fiscal Salary Bonus sation Awards Granted tion
Position Year (1) (2) (3) (4) (5) (6)
------------ ------- ------ ----- ------ ------ ------- ------
Alan Drizen,
President and 1999 $110,000 -- -- -- -- --
Chief Executive 1998 $120,000 -- -- -- -- --
Officer
(1) The dollar value of base salary (cash and non-cash) received or earned.
(2) The dollar value of bonus (cash and non-cash) received.
(3) Any other annual compensation not properly categorized as salary or bonus,
including perquisites and other personal benefits, securities or property.
(4) During the period covered by the foregoing table, the shares of restricted
stock issued as compensation for services. The table below shows the number
of shares of the Company's common stock owned by the officers listed above,
and the value of such shares as of December 31, 1999.
Name Shares Value
Alan Drizen 2,524,924 $10,100,000
(5) The shares of Common Stock to be received upon the exercise of all stock
options granted during the period covered by the table
(6) All other compensation received that the Company could not properly report
in any other column of the table.
The following shows the amounts which the Company expects to pay to its
officers during the twelve month period ending December 31, 2000, and the time
which the Company's executive officers plan to devote to the Company's business.
The Company does not have employment agreements with any of its officers.
<PAGE>
Proposed Time to be Devoted
Name Compensation To Company's Business
Alan Drizen $120,000 100%
Petar Rothbart ----- 5%
Gary M. Nath ----- 15%
(1) The compensation to be paid to these persons will depend upon funding the
Company receives separate and apart from this offering.
Gary Nath provides legal services to the Company. See Part I, Item 7 of
this registration statement. During the year ending December 31, 2000 the
Company expects that it will continue to use the services of Mr. Nath's law
firm.
The Company's Board of Directors may increase the compensation
paid to the Company's officers depending upon the results of the Company's
future operations.
The Company does not have any employment agreements with any of its
executive officers.
The Company has not granted any options to any of its officers or
directors.
Long Term Incentive Plans - Awards in Last Fiscal Year
None.
Employee Pension, Profit Sharing or Other Retirement Plans
The Company does not have a defined benefit, pension plan, profit
sharing or other retirement plan, although the Company may adopt one or more of
such plans in the future.
Compensation of Directors
Standard Arrangements. At present the Company does not pay its
directors for attending meetings of the Board of Directors, although the Company
expects to adopt a director compensation policy in the future. The Company has
no standard arrangement pursuant to which directors of the Company are
compensated for any services provided as a director or for committee
participation or special assignments.
Other Arrangements. During the year ended December 31, 1999, and except
as disclosed elsewhere in this registration statement, no director of the
Company received any form of compensation from the Company.
See " Stock Option and Bonus Plans" below for information concerning
stock options and stock bonuses granted to the Company's officers and directors.
<PAGE>
Stock Option and Bonus Plans
The Company has an Incentive Stock Option Plan, a Non-Qualified Stock
Option Plan and a Stock Bonus Plan. A summary description of each Plan follows.
In some cases these three Plans are collectively referred to as the "Plans".
Incentive Stock Option Plan. The Incentive Stock Option Plan authorizes
the issuance of options to purchase up to 600,000 shares of the Company's Common
Stock, less the number of shares already optioned under both this Plan and the
Non-Qualified Stock Option Plan. The Incentive Stock Option Plan became
effective on March 15, 2000 and will remain in effect until March 15, 2010
unless terminated earlier by action of the Board. Only officers, directors and
key employees of the Company may be granted options pursuant to the Incentive
Stock Option Plan.
In order to qualify for incentive stock option treatment under the
Internal Revenue Code, the following requirements must be complied with:
1. Options granted pursuant to the Plan must be exercised no later than:
(a) The expiration of thirty (30) days after the date on which an
option holder's employment by the Company is terminated.
(b) The expiration of one year after the date on which an option
holder's employment by the Company is terminated, if such termination is due to
the Employee's disability or death.
2. In the event of an option holder's death while in the employ of the
Company, his legatees or distributees may exercise (prior to the option's
expiration) the option as to any of the shares not previously exercised.
3. The total fair market value of the shares of Common Stock
(determined at the time of the grant of the option) for which any employee may
be granted options which are first exercisable in any calendar year may not
exceed $100,000.
4. Options may not be exercised until one year following the date of
grant. Options granted to an employee then owning more than 10% of the Common
Stock of the Company may not be exercisable by its terms after five years from
the date of grant.
5. The purchase price per share of Common Stock purchasable under an
option is determined by the Committee but cannot be less than the fair market
value of the Common Stock on the date of the grant of the option (or 110% of the
fair market value in the case of a person owning the Company's stock which
represents more than 10% of the total combined voting power of all classes of
stock).
Non-Qualified Stock Option Plan. The Non-Qualified Stock Option Plan
authorizes the issuance of options to purchase up to 600,000 shares of the
Company's Common Stock less the number of shares already optioned under both
this Plan and the Incentive Stock Option Plan. The Non-Qualified Stock Option
Plan became effective on March 15, 2000 and
<PAGE>
will remain in effect until March 15, 2010 unless terminated earlier by the
Board of Directors. The Company's employees, directors, officers, consultants
and advisors are eligible to be granted options pursuant to the Plan, provided
however that bona fide services must be rendered by such consultants or advisors
and such services must not be in connection with the offer or sale of securities
in a capital-raising transaction. The option exercise price is determined by the
Committee but cannot be less than the market price of the Company's Common Stock
on the date the option is granted.
Options granted pursuant to the Plan not previously exercised terminate
upon the date specified when the option was granted.
Stock Bonus Plan. Up to 300,000 shares of Common Stock may be granted
under the Stock Bonus Plan. Such shares may consist, in whole or in part, of
authorized but unissued shares, or treasury shares. Under the Stock Bonus Plan,
the Company's employees, directors, officers, consultants and advisors are
eligible to receive a grant of the Company's shares; provided, however, that
bona fide services must be rendered by consultants or advisors and such services
must not be in connection with the offer or sale of securities in a
capital-raising transaction.
Other Information Regarding the Plans. The Plans are administered by
the Company's Board of Directors. The Board of Directors has the authority to
interpret the provisions of the Plans and supervise the administration of the
Plans. In addition, the Board of Directors is empowered to select those persons
to whom shares or options are to be granted, to determine the number of shares
subject to each grant of a stock bonus or an option and to determine when, and
upon what conditions, shares or options granted under the Plans will vest or
otherwise be subject to forfeiture and cancellation.
In the discretion of the Board of Directors, any option granted
pursuant to the Plans may include installment exercise terms such that the
option becomes fully exercisable in a series of cumulating portions. The Board
of Directors may also accelerate the date upon which any option (or any part of
any options) is first exercisable. Any shares issued pursuant to the Stock Bonus
Plan and any options granted pursuant to the Incentive Stock Option Plan or the
Non-Qualified Stock Option Plan will be forfeited if the "vesting" schedule
established by the Board of Directors at the time of the grant is not met. For
this purpose, vesting means the period during which the employee must remain an
employee of the Company or the period of time a non-employee must provide
services to the Company. At the time an employee ceases working for the Company
(or at the time a non-employee ceases to perform services for the Company), any
shares or options not fully vested will be forfeited and cancelled. In the
discretion of the Board of Directors payment for the shares of Common Stock
underlying options may be paid through the delivery of shares of the Company's
Common Stock having an aggregate fair market value equal to the option price,
provided such shares have been owned by the option holder for at least one year
prior to such exercise. A combination of cash and shares of Common Stock may
also be permitted at the discretion of the Board of Directors.
Options are generally non-transferable except upon death of the option
holder. Shares issued pursuant to the Stock Bonus Plan will generally not be
transferable until the person receiving the shares satisfies the vesting
requirements imposed by the Board of Directors when the shares were issued.
<PAGE>
The Board of Directors of the Company may at any time, and from time to
time, amend, terminate, or suspend one or more of the Plans in any manner it
deems appropriate, provided that such amendment, termination or suspension
cannot adversely affect rights or obligations with respect to shares or options
previously granted. The Board of Directors may not, without shareholder
approval: make any amendment which would materially modify the eligibility
requirements for the Plans; increase or decrease the total number of shares of
Common Stock which may be issued pursuant to the Plans except in the case of a
reclassification of the Company's capital stock or a consolidation or merger of
the Company; reduce the minimum option price per share; extend the period for
granting options; or materially increase in any other way the benefits accruing
to employees who are eligible to participate in the Plans.
The Plans are not qualified under Section 401(a) of the Internal
Revenue Code, nor are they subject to any provisions of the Employee Retirement
Income Security Act of 1974.
Summary. The following sets forth certain information as of June 30,
2000, concerning the stock options and stock bonuses granted by the Company.
Each option represents the right to purchase one share of the Company's common
stock.
Total Shares Remaining
Shares Reserved for Shares Options/
Reserved Outstanding Issued As Shares
Name of Plan Under Plan Options Stock Bonus Under Plan
------------ ---------- ------------ ----------- ----------
Incentive Stock Option Plan 600,000 -- N/A 600,000
Non-Qualified Stock Option
Plan 600,000 -- N/A 600,000
Stock Bonus Plan 300,000 N/A -- 300,000
Other Options
Between September 1998 and April 30, 2000 the Company granted options to
employees, consultants and third parties which collectively allow for the
purchase of 1,310,466 shares of the Company's common stock. The options are
exercisable at prices ranging between $0.65 and $4.00 per share and expire at
various dates between September 2000 and December 2002.
Item 7. Certain Relationships and Related Transactions.
In September 1998 the Company sold shares of its common stock to the
persons, in the amounts, and for the consideration set forth below:
Number
Name of Shares Consideration
Alan Drizen 1,076,308 (1) $10,763
Petar Rothbart 1,076,308 (2) $10,763
Gary M. Nath 742,784 $7,423
<PAGE>
In September 1998 the Company issued 6,000,000 shares of its common stock
in consideration for all of issued and outstanding shares of LAM Pharmaceuticals
LLC, a Florida limited liability company. See Part I, Item 1 of this
registration statement. The following officers, directors and other persons
received shares of the Company's common stock in connection with this
transaction.
Name Shares Acquired
Alan Drizen 1,603,616 (1)
Petar Rothbart 1,603,616 (2)
Gary M. Nath 1,105,942
Lisa Krinsky 674,510 (3)
Arnold Hantman 376,019
All Other Sellers as a Group 636,297
----------
6,000,000
(1) Includes shares held by the Canyon Trust, a discretionary trust, of which
Mr. Drizen may be deemed the beneficial owner.
(2) Includes shares held by the Shirlaine Establishment Trust, of which Mr.
Rothbart may be deemed the beneficial owner.
(3) Includes shares held by the South Florida Bioavailability Clinic of which
Lisa Krinsky is the majority shareholder.
Subsequent to September 1998 Mr. Drizen sold a portion of his shares in
transactions which were exempt pursuant to Rule 144 of the Securities and
Exchange Commission, and gifted a portion of his shares to his relatives.
The Company has received advances from Alan Drizen ($548,361), Peter
Rothbart ($187,500) and Gary Nath ($654,976) that were used to fund the
Company's operations, research and development and clinical trials. These
advances will be repaid, without interest, out of 25% of any net income
generated by the Company. Net income will be determined under generally accepted
accounting principles and on a quarterly, after tax basis.
During 1998 and 1999 the Company paid Gary Nath, an officer and director
of the Company, $10,721 and $63,210 respectively for legal services provided to
the Company. As of December 31, 1999 the Company owed Mr. Nath approximately
$124,000 for legal services, which amount is included in the $654,976 which the
Company owes Mr. Nath.
Item 8. Description of Securities
Common Stock
The Company is authorized to issue 50,000,000 shares of Common Stock (the
"Common Stock"). As of March 31, 2000 the Company had 10,392,500 shares of
Common Stock issued and outstanding. Holders of Common Stock are each entitled
to cast one vote for each share held of record on all matters presented to
shareholders. Cumulative voting is not allowed; hence, the holders of a majority
of the outstanding Common Stock can elect all directors.
<PAGE>
Holders of Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefore and,
in the event of liquidation, to share pro rata in any distribution of the
Company's assets after payment of liabilities. The Board of Directors is not
obligated to declare a dividend and it is not anticipated that dividends will be
paid until the Company is in profit.
Holders of Common Stock do not have preemptive rights to subscribe to
additional shares if issued by the Company. There are no conversion, redemption,
sinking fund or similar provisions regarding the Common Stock.
Preferred Stock
The Company is authorized to issue up to 5,000,000 shares of Preferred
Stock. The Company's Articles of Incorporation provide that the Board of
Directors has the authority to divide the Preferred Stock into series and,
within the limitations provided by Delaware statute, to fix by resolution the
voting power, designations, preferences, and relative participation, special
rights, and the qualifications, limitations or restrictions of the shares of any
series so established. As the Board of Directors has authority to establish the
terms of, and to issue, the Preferred Stock without shareholder approval, the
Preferred Stock could be issued to defend against any attempted takeover of the
Company.
PART II
Item 1. Market Price of and Dividends on the Company's Common Equity and Other
Shareholder Matters.
As of June 30, 2000, there were 89 record owners of the Company's common
stock. The Company's common stock is traded in the over-the-counter market under
the symbol "LAMP". Set forth below are the range of high and low bid quotations
for the periods indicated as reported by the National Quotation Bureau. The
market quotations reflect interdealer prices, without retail mark-up, mark-down
or commissions and may not necessarily represent actual transactions. The
Company's common stock began trading in August 1999.
Quarter Ending High Low
9/30/99 $ 1.38 $0.60
12/31/99 $ 4.00 $0.88
3/31/00 $10.00 $4.00
6/30/00 $ 9.25 $4.75
Holders of Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor and,
in the event of liquidation, to share pro rata in any distribution of the
Company's assets after payment of liabilities. The Board of Directors is not
obligated to declare a dividend. The Company has not paid any dividends and the
Company does not have any current plans to pay any dividends.
<PAGE>
Between September 1998 and April 30, 2000 the Company granted options to
employees, consultants and third parties which collectively allow for the
purchase of 1,310,466 shares of the Company's common stock. The options are
exercisable at prices ranging between $0.65 and $4.00 per share and expire at
various dates between September 2000 and December 2002.
Item 2. Legal Proceedings.
None
Item 3. Changes in and Disagreements with Accountants.
Effective November 8, 1999 the Company retained Rotenberg & Company, LLP
to act as the Company's independent certified public accountants. In this regard
Rotenberg & Company replaced Ernst & Young, LLP ("Ernst & Young") which audited
the Company's financial statements for the fiscal year ended December 31, 1997.
The Company replaced Ernst & Young since the Company's accounting functions were
transferred from Florida to Ontario, Canada. The report of Ernst & Young for
this fiscal year did not contain an adverse opinion, or disclaimer of opinion
and was not qualified or modified as to audit scope or accounting principles.
However, the report of Ernst & Young for this fiscal year was qualified with
respect to uncertainty as to the Company's ability to continue as a going
concern. During the Company's two most recent fiscal years and subsequent
interim period ending November 8, 1999, there were no disagreements with Ernst &
Young on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedures, which disagreements, if not resolved
to the satisfaction of Ernst & Young would have caused it to make reference to
such disagreements in its reports.
The Company has authorized Ernst & Young to discuss any matter relating to
the Company and its operations with Rotenberg & Company.
The change in the Company's auditors was recommended and approved by the
board of directors of the Company. The Company does not have an audit committee.
During the two most recent fiscal years and subsequent interim period
ending November 8, 1999, the Company did not consult with Rotenberg & Company
regarding the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on the Company's financial statements, or any matter that was the
subject of a disagreement or a reportable event as defined in the regulations of
the Securities and Exchange Commission.
Item 4. Recent Sales of Unregistered Securities.
A. In September 1998 the Company acquired all of the issued and
outstanding shares of LAM Pharmaceuticals LLC ("LAM") for 6,000,000 shares of
the Company's common stock. At the time of acquisition LAM had the rights to the
proprietary drug delivery technology and pharmaceuticals that are being
developed by the Company.
<PAGE>
B. In September 1998 the Company sold 3,930,000 shares of its common stock
to twelve persons for $39,300, or $0.01 per share, and sold 63,000 shares of its
common stock to 61 persons for $6,300, or $0.10 per share. Between October 1998
and October 1999 the Company sold 399,500 shares of its common stock to 18
persons for $399,500, or $1.00 per share.
C. Between June 1999 and February 2000 the Company sold convertible notes
in the principal amount of $1,517,000 to 29 persons. The notes are unsecured,
bear interest at 9.5% per year, and are due and payable at various dates between
June 2000 and February 2001. At the option of the holder, each $1.00 of (unpaid
not) principal may be converted into two shares of the Company's common stock.
The sales of shares referenced in Note B were exempt from registration
pursuant to Rule 504 of the Securities and Exchange Commission. At the time of
these sales the Company was not subject to the reporting requirements of the
Securities Exchange Act of 1934 and the total amount received by the Company
from the sale of these shares was less than $1,000,000. No underwriters were
involved with the sale of these securities and no commissions or other forms of
remuneration were paid to any person in connection with these sales.
The sale of the common stock and convertible notes referenced in Notes A
and C were exempt transactions under Section 4(2) of the Securities Act of 1933
as transactions by an issuer not involving a public offering. The shareholders
of LAM and the holders of the convertible notes acquired these securities for
investment purposes only and without a view to distribution. At the time the
shareholders of Lam and the holders of the convertible notes acquired these
securities, all were fully informed and advised about matters concerning the
Company, including its business, financial affairs and other matters. The
shareholders of LAM and the holders of the convertible note acquired the
securities for their own account. The certificates evidencing the securities
purchased by the shareholders of LAM bear a legend stating that they may not be
offered, sold or transferred other than pursuant to an effective registration
statement under the Securities Act of 1933, or pursuant to an applicable
exemption from registration. The shares purchased by the shareholders of LAM and
the holders of the convertible note are "restricted" securities as defined in
Rule 144 of the Securities and Exchange Commission. Although no underwriters
were involved with the sale of these securities, the Company paid sales
commissions of $74,600 to an unrelated third party in connection with the sale
of its convertible notes.
Item 5. Indemnification of Directors and Officers.
The Delaware Corporation Law and the Company's Bylaws provide that the
Company may indemnify any and all of its officers, directors, employees or
agents or former officers, directors, employees or agents, against expenses
actually and necessarily incurred by them, in connection with the defense of any
legal proceeding or threatened legal proceeding, except as to matters in which
such persons shall be determined not to have acted in good faith and in the best
interest of the Company. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers, or
persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act of 1933 and is therefore unenforceable.
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
TABLE OF CONTENTS
------------------------------------------------------------------------------
Independent Auditors' Report F-2
Balance Sheets at December 31, 1999 and 1998 F-3
Statements of Changes in Stockholders' Deficit
for the Period From the Date Of Inception
(February 1, 1994) Through December 31, 1999 F-4 to F-5
Statements of Operations for the Years Ended
December 31, 1999, 1998 and 1997 and for the
Period From the Date of Inception (February 1, 1994)
Through December 31, 1999 F-6
Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 and for the
Period From the Date of Inception (February 1,
1994) Through December 31, 1999 F-7 to F-8
Notes to Financial Statements F-9 to F-16
Interim Unaudited Financial Statements F-17 to F-25
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Shareholders
L.A.M. Pharmaceutical, Corp.
Miami, Florida
We have audited the accompanying balance sheets of L.A.M. Pharmaceutical,
Corp. (A Development Stage Company) as of December 31, 1999 and 1998, and the
related statements of changes in stockholders' deficit, operations and cash
flows for each of the three years in the period ended December 31, 1999 and for
the period from the date of inception (February 1, 1994) through December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about 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 financial position of L.A.M. Pharmaceutical, Corp.
as of December 31, 1999 and 1998 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1999 and for
the period of inception (February 1, 1994) through December 31, 1999, in
conformity with generally accepted accounting principles.
As discussed in Note L, the financial statements have been restated to give
effect to changes in accounting for investment in affiliate, deferred royalty
revenue, beneficial conversion feature on convertible securities, stock options
issued to consultants and the additional accrual of employee compensation.
Rotenberg & Company, LLP
Rochester, New York
March 15, 2000
(Except Note L, dated August 23, 2000)
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
BALANCE SHEET
--------------------------------------------------------------------------------
(Restated) (Restated)
December 31, 1999 1998
--------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and Cash Equivalents $ 558,710 $ 410,577
Cash Held by Broker - Debentures 465,000 --
Note Receivable - Debentures 50,000 --
Accounts Receivable 75,000 114,349
Investment in Affiliate -- 85,260
Prepaid Expenses -- 5,320
--------------------------------------------------------------------------------
Total Current Assets
1,148,710 615,506
Property and Equipment - Net of
Accumulated Depreciation 4,922 3,648
Other Assets
Patents and Trademarks - Net of
Accumulated Amortization 232,417 74,178
--------------------------------------------------------------------------------
Total Assets $1,386,049 $693,332
--------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts Payable and Accrued Expenses $111,627 $52,944
Convertible Debentures 1,252,000 --
Deposit on Debentures -- 125,000
Note Payable -- 5,320
--------------------------------------------------------------------------------
Total Current Liabilities 1,363,627 183,264
Non-Current Liabilities
Due to Stockholders 1,390,837 1,266,837
Deferred Royalty Revenue 207,360 207,360
--------------------------------------------------------------------------------
Total Liabilities 2,961,824 1,657,461
Stockholders' Deficit
Common Stock - $.0001 Par; 50,000,000 Shares
Authorized; 10,392,500 and
10,332,500 Shares Issued
and Outstanding as of
December 31, 1999 and 1998,
Respectively 1,039 1,033
Additional Paid in Capital 3,461,483 1,515,492
Deficit Accumulated During Development Stage (5,038,297) (2,480,654)
--------------------------------------------------------------------------------
Total Stockholders' Deficit (1,575,775) (964,129)
--------------------------------------------------------------------------------
Total Liabilities and Stockholders' Deficit $1,386,049 $693,332
--------------------------------------------------------------------------------
The accompanying notes are an integral part of this financial statement.
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
For the Period From the Date of Inception (February 1, 1994) Through December
31, 1999
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Deficit
Accumulated
Additional During Total
Common Paid-In Development Stockholders
Shares Stock Capital Stage Equity/(Deficit)
-----------------------------------------------------------------------------------------
Inception - February 1, 1994 -- $ -- $ -- $ -- $ --
Capital Contribution - Services
Rendered -- -- 22,799 -- 22,799
Capital Contribution - Laboratory
Equipment
-- -- 24,245 -- 24,245
Net Loss
-- -- -- (356,393) (356,393)
-----------------------------------------------------------------------------------------
Balance - December 31, 1994 -- -- 47,044 (356,393) (309,349)
Capital Contribution - Services
Rendered -- -- 172,020 -- 172,020
Net Loss -- -- -- (522,095) (522,095)
-----------------------------------------------------------------------------------------
Balance - December 31, 1995 -- -- 219,064 (878,488) (659,424)
Capital Contribution - Services
Rendered -- -- 185,495 -- 185,495
Capital Contribution - Leasehold
Improvements -- -- 9,775 -- 9,775
Capital Contribution - Interest
Expense -- -- 49,738 -- 49,738
Capital Contribution in Cash -- -- 51,001 -- 51,001
Net Loss -- -- -- (643,733) (643,733)
-----------------------------------------------------------------------------------------
Balance December 31, 1996 -- $ -- $515,073 $(1,522,221) $(1,007,148)
</TABLE>
- continued -
The accompanying notes are an integral part of this financial statement.
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
For the Period From the Date of Inception (February 1, 1994) Through December
31, 1999 - Continued
-------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Deficit
Accumulated
Additional During Total
Common Paid-In Development Stockholders
Shares Stock Capital Stage Equity/(Deficit)
-------------------------------------------------------------------------------------------
Balance - December 31, 1996 -- $-- $515,073 (1,522,221) (1,007,148)
Capital Contribution - Services
Rendered -- -- 377,072 -- 377,072
Capital Contribution - Interest
Expense -- -- 99,477 -- 99,477
Capital Contribution in Cash -- -- 111,199 -- 111,199
Distribution -- -- (30,000) -- (30,000)
Net Loss -- -- -- (499,626) (499,626)
-------------------------------------------------------------------------------------------
Balance - December 31, 1997 -- -- 1,072,821 (2,021,847) (949,026)
Recapitalization as L.A.M.
Pharmaceutical, Corp. 6,000,000 600 (600) -- --
Capital Contribution - Interest
Expense -- -- 103,579 -- 103,579
Issuance of Common Stock
for Cash 4,332,500 433 378,352 -- 378,785
Distribution -- -- (38,660) -- (38,660)
Net Loss - Restated -- -- -- (458,807) (458,807)
-------------------------------------------------------------------------------------------
Balance - December 31, 10,332,500 1,033 1,515,492 (2,480,654) (964,129)
1998 - Restated
Capital Contribution - Interest
Expense -- -- 107,681 -- 107,681
Issuance of Common Stock
for Cash 60,000 6 59,994 -- 60,000
Stock Option and Awards
Granted - Compensation
for Services Rendered -- -- 526,316 -- 526,316
Conversion Premium on
Convertible Debentures -- -- 1,252,000 -- 1,252,000
Net Loss - Restated
-- -- -- (2,557,643) (2,557,643)
-------------------------------------------------------------------------------------------
Balance - December 31, 1999 -
Restated 10,392,500 $1,039 $3,461,483 $(5,038,297) $(1,575,775)
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1999, 1998, 1997 and for the Period From the
Date of Inception (February 1, 1994) Through December 31, 1999
--------------------------------------------------------------------------------
Date of
Inception
(February 1,
1994)
Through
(Restated) (Restated) December 31,
1999
1999 1998 1997 (Restated)
--------------------------------------------------------------------------------
Total Revenue $ -- $ -- $200,000 $ 200,000
--------------------------------------------------------------------------------
Expenses
Research and Development
185,143 41,372 434,103 1,710,799
General and Administrative
906,057 190,052 153,523 1,595,274
Interest Expense
120,625 103,579 99,477 373,419
Conversion Premium on
Convertible Debentures
1,252,000 -- -- 1,252,000
Depreciation and Amortization
11,159 3,467 12,523 27,149
--------------------------------------------------------------------------------
Total Expenses
2,474,984 338,470 699,626 4,958,641
--------------------------------------------------------------------------------
Income From Operations $(2,474,984) $(338,470) $(499,626) $(4,758,641)
--------------------------------------------------------------------------------
Other Income (Expense)
Interest Income
2,601 1,763 -- 4,364
Loss on Investment in
Affiliate (85,260) (122,100) -- (207,360)
--------------------------------------------------------------------------------
Total Other Income (Expense) (82,659) (120,337) -- (202,996)
--------------------------------------------------------------------------------
Net Loss (2,557,643) (458,807) (499,626) (4,961,637)
--------------------------------------------------------------------------------
Loss Per Common Share - Basic
and Diluted $(0.25) $(0.03) $ (0.08) $ (0.42)
--------------------------------------------------------------------------------
Weighted Average Number of
Common Shares Outstanding 10,392,500 10,047,917 6,000,000
--------------------------------------------------------------------------------
The accompanying notes are an integral part of this financial statement.
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998, 1997 and for the Period
From the Date of Inception (February 1, 1994) Through December 31,
1999
--------------------------------------------------------------------------------
Date of
Inception
(February 1,
1994)
Through
(Restated) (Restated) December 31,
1999
1999 1998 1997 (Restated)
--------------------------------------------------------------------------------
Cash Flows from Operating
Activities
Net Loss $(2,557,643) $(458,807) $(499,626) $(5,038,297)
Adjustments to Reconcile Net Loss
to Net Cash Flows From Operating
Activities:
Depreciation and
Amortization 11,159 3,467 12,523 42,810
Capital Contributions:
Services Rendered
Including Stock
Options and Awards Granted 526,316 -- 377,072 1,283,702
Conversion Premium on
Convertible Debentures 1,252,000 -- -- 1,252,000
Interest Expense 107,681 103,579 99,477 360,475
Loss on Investment in Affiliate 85,260 122,100 -- 207,360
Changes in Assets and
Liabilities:
Accounts Receivable 39,349 85,651 (200,000) (75,000)
Prepaid Expenses 5,320 (3,225) (2,095) --
Accounts Payable and Accrued
Expenses 58,683 (4,443) 49,187 111,627
Due to Stockholders 124,000 96,525 85,911 1,390,837
--------------------------------------------------------------------------------
Net Cash Flows from Operating
Activities (347,875) (55,153) (77,551) (464,486)
--------------------------------------------------------------------------------
Cash Flows from Investing
Activities
Equipment (4,274) (812) -- (5,086)
Patents and Trademarks (166,398) (31,091) (27,461) (241,043)
--------------------------------------------------------------------------------
Net Cash Flows from Investing
Activities (170,672) (31,903) (27,461) (246,129)
--------------------------------------------------------------------------------
The accompanying notes are an integral part of this financial statement.
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999, 1998, 1997 and for the Period
From the Date of Inception (February 1, 1994) Through December 31,
1999
--------------------------------------------------------------------------------
Date of
Inception
(February 1,
1994)
Through
(Restated) (Restated) December 31,
1999
1999 1998 1997 (Restated)
--------------------------------------------------------------------------------
Cash Flows from Financing
Activities
Cash Capital Contributions -- -- 111,199 162,200
Proceeds from Issuance of
Common Stock 60,000 378,785 -- 438,785
Proceeds from (Repayment)
of Notes Payable (5,320) 3,225 2,095 --
Proceeds from Convertible
Debentures 1,077,000 125,000 -- 1,202,000
Distributions to Stockholders -- (38,660) (30,000) (68,660)
--------------------------------------------------------------------------------
Net Cash Flows from Financing
Activities 1,131,680 468,350 83,294 1,734,325
--------------------------------------------------------------------------------
Net Increase in Cash and Cash
Equivalents 613,133 381,294 (21,718) 1,023,710
Cash and Cash Equivalents -
Beginning of Year 410,577 29,283 51,001 --
--------------------------------------------------------------------------------
Cash and Cash Equivalents - $ 1,023,710 $410,577 $29,283 $1,023,710
End of Year
--------------------------------------------------------------------------------
NON-CASH INVESTING AND
FINANCING ACTIVITIES
Issuance of Common Stock
in Exchange for Property
and Equipment $ -- $ -- $ -- $ 34,020
Acquisition of Investment in
Affiliate $ -- $207,360 $ -- $207,360
Deferred Royalty Revenue $ -- $(207,360) $ -- $(207,360)
The accompanying notes are an integral part of this financial statement.
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Note A - Summary of Transaction
L.A.M. Pharmaceutical, Corp. (the Company) was initially formed as
L.A.M. Pharmaceutical, LLC (the LLC) on February 4, 1997. From February
1, 1994 to February 4, 1997 the Company conducted its activities under
the name RDN. In September 1998, the members of L.A.M. Pharmaceuticals
LLC, a Florida Limited liability company, exchanged all of their
interests in the LLC for 6,000,000 shares of the Company's common stock.
The stock exchange between the Company and the members of the LLC is
considered a recapitalization or reverse acquisition. Under reverse
acquisition accounting, the LLC was considered the acquirer for
accounting and financial reporting purposes, and acquired the assets and
assumed the liabilities of the Company. The accompanying financial
statements include the historical accounts of the Company, the LLC and
RDN since February 1, 1994. All inter-company accounts and transactions
have been eliminated.
Note B - Nature of Operations and Summary of Significant Accounting Policies
L.A.M. Pharmaceutical, Corp. was incorporated on July 24, 1998 under the laws of
the State of Delaware. The Company has the authority to issue 50,000,000 shares
of common stock, $.0001 par value. The Company is engaged in the research and
development of Novel, Proprietary, Long Lasting Injectable Drugs and Delivery
Systems for Transdermal and Topical Drugs.
Development Stage
The Company has operated as a development stage enterprise since its
inception by devoting substantially all of its efforts to financial
planning, raising capital, research and development, and developing
markets for its products. Accordingly, the financial statements of the
Company have been prepared in accordance with the accounting and
reporting principles prescribed by Statement of Financial Accounting
Standards No. 7, "Accounting and Reporting by Development Stage
Enterprises," issued by the Financial Accounting Standards Board.
Revenue Recognition
Revenues are recognized when earned. On December 31, 1997 the Company
entered into an exclusive world-wide license agreement (the License
Agreement) with Ixora Bio-Medical Company Inc. (Ixora). Under the
License Agreement, Ixora will pay the Company $500,000 for the exclusive
rights of the Company's male and female sexual dysfunction product
technology. In addition, the Company will own 37% of Ixora and will
receive a royalty equal to 9% of the net sales under the License
Agreement. A payment of $200,000, which is non-refundable, has been made
by Ixora to the Company with the balance to be paid in the next quarter.
Such payments will be recorded when received by the Company. Ixora will
also pay for all costs for the full development, registration and
protection of intellectual property, including but not limited to patent
costs, raw material costs, clinical development costs and compensation
of all Company personnel involved in the sexual dysfunction product
technology.
Method of Accounting
The corporation maintains its books and prepares its financial
statements on the accrual basis of accounting.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expense
during the reporting period. Actual results can differ from those
estimates.
- continued -
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Note B -Nature of Operations and Summary of Significant Accounting Policies -
continued
Concentrations of Credit Risk
Financial instruments which potentially expose the Corporation to
significant concentrations of credit risk consist principally of bank
deposits. Cash is placed primarily in high quality short-term interest
bearing financial instruments.
Cash and Cash Equivalents
Cash and cash equivalents include time deposits, certificates of
deposit, and all highly liquid debt instruments with original maturities
of three months or less. The company maintains cash and cash equivalents
at financial institutions that periodically may exceed federally insured
amounts.
Cash Held by Brokers - Debentures
Cash held by brokers- debentures consist of interest bearing term
deposit accounts having maturity dates of three months or less.
Property, Equipment and Depreciation
Property and equipment are stated at cost, less accumulated depreciation
computed using the straight-line method over the estimated useful lives
as follows:
Furniture and Fixtures 5 - 7 Years
Computer Equipment 5 - 7 Years
Leasehold Improvements 5 Years
Maintenance and repairs are charged to expense. The cost of the assets
retired or otherwise disposed of and the related accumulated
depreciation are removed from the accounts.
Patents and Trademarks
Patents are carried at cost and are amortized using the straight-line method
over their estimated useful lives, not to exceed 17 years from the date
of issuance of the patent. Amortization expense for the years ended
December 31, 1999, 1998 and 1997 was $8,159, $467 and $-0-,
respectively.
Research and Development Costs
Research and development expenditures are expensed as incurred.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed in accordance with SFAS No.
128, "Earnings Per Share". Basic earnings per common share is calculated
by dividing income available to common shareholders by the
weighted-average number of common shares outstanding for each period.
Diluted earnings per common share is calculated by adjusting the
weighted-average shares outstanding assuming conversion of all
potentially dilutive stock options, warrants and convertible securities.
Diluted earnings per share is the same as basic earnings per share for
all of the periods presented since the effect of the conversion of the
debentures and the stock options and awards granted would have an
anti-dilutive effect on earnings per share.
- continued -
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Note B - Nature of Operations and Summary of Significant Accounting Policies -
continued
Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes," using the asset and liability approach,
which requires recognition of deferred tax liabilities and assets for
the expected future tax consequences of temporary differences between
the carrying amounts and the tax basis of such assets and liabilities.
This method utilizes enacted statutory tax rates in effect for the year
in which the temporary differences are expected to reverse and gives
immediate effect to changes in income tax rates upon enactment. Deferred
tax assets are recognized, net of any valuation allowance, for temporary
differences and net operating loss and tax credit carryforwards.
Deferred income tax expense represents the change in net deferred assets
and liability balances. The Company had no material deferred tax assets
or liabilities for the periods presented. Deferred tax assets arising
from the net operating losses incurred during the development stage have
been fully reserved against due to the uncertainty as to when or whether
the tax benefit will be realized.
Stock Options and Awards
As described in Note K, the corporation has elected to follow the
accounting provisions of Accounting Principles Board Opinion (APBO) No.
25 Accounting for Stock Issued to Employees, for stock-based
compensation and awards made to employees. Pro forma disclosures
required under SFAS No. 123, Accounting for Stock-Based Compensation has
not been furnished due to the history of the Company. Stock options
granted to investors and consultants are subject to the provisions of
SFAS No. 123.
Note C - Investment in Affiliate
Investment in Affiliate consists of a 37% interest in Ixora Biomedical
Company, Inc. The investment consists of the following at December 31,
Original Investment, January 1, 1998 $ 207,360
Investor's Share of Loss for the Year
ending December 31, 1998 $ (122,100)
Carrying value of Investment, December 31, 1998 $ 85,260
Investor's Share of Loss for the Year
ending December 31, 1999 $ (85,260)
Carrying value of Investment December 31, 1999 $ --
Note D - Licensing Agreement
The Company has an exclusive license agreement (the License Agreement)
with Ixora Bio-Medical Company, Inc. (Ixora). Under the License
Agreement, Ixora has agreed to pay the Company $500,000 for the
exclusive rights of the Company's male and female sexual dysfunction
product technology. Ixora has also agreed to pay all costs for the
development, registration and protection of intellectual property,
including but not limited to patent costs, raw material costs, clinical
development costs and compensation of all Company personnel involved in
the sexual dysfunction product technology.
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Note E - Property and Equipment
Property and equipment are recorded at cost and consisted of the
following:
------------------------------------------------------------------------
December 31, 1999 1998
------------------------------------------------------------------------
Furniture and Fixtures $25,960 $25,057
Computer Equipment 3,371 --
Leasehold Improvements 9,775 9,775
------------------------------------------------------------------------
$39,106 34,832
Less: Accumulated Depreciation 34,184 31,184
------------------------------------------------------------------------
Net Property and Equipment $4,922 $ 3,648
------------------------------------------------------------------------
Depreciation expense for the years ended December 31, 1999, 1998 and
1997 was $3,000, $3,000, and $12,523, respectively.
Note F - Due to Stockholders
The Company has a liability for 1996 salaries and other expenses due to
three of its stockholders totaling $1,050,000 and $216,837,
respectively. In addition, the Company is indebted to a principal
stockholder for legal services rendered during 1999 of $124,000. The
Company has agreements with these stockholders, which provides for
payment of this obligation without interest, not to exceed 25% of the
profits realized by the Company in any year. The Company has imputed
interest at 8.5% and charged operations for each of the periods
presented with an offsetting credit to additional paid in capital.
Note G - Deferred Royalty Revenue
Deferred Royalty Revenue represents amounts due to the Company from
Ixora Biomedical pursuant to the worldwide license agreement. The
$207,360 of Deferred Royalty Revenue approximated the value of the
Company's original investment in the affiliate. The balance will be
amortized to income upon commencement of Ixora's sale of the Company's
products.
Note H - Income Taxes
The Company has approximately $2,900,000 of net operating loss
carryforwards for federal tax purposes as of December 31, 1999, which is
available to offset future taxable income and will begin to expire
during the year 2013. The Corporation has fully reserved for any future
tax benefits from the net operating loss carryforwards since it has not
generated any revenues to date.
Note I - Common Stock
The Company's securities are not registered under the Securities Act of
1933 and, therefore, no offering may be made which would constitute a
"Public Offering" within the meaning of the United States Securities Act
of 1933, unless the shares are registered pursuant to an effective
registration statement under the Act.
The stockholders may not sell, transfer, pledge or otherwise dispose of
the common shares of the company in the absence of either an effective
registration statement covering said shares under the 1933 Act and
relevant state securities laws, or an opinion of counsel that
registration is not required under the Act or under the securities laws
of any such state.
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Note J - Convertible Debentures
The Company issued convertible debentures during 1999 having an
aggregate principal balance of $1,252,000. These debentures are
unsecured obligations of the Company that mature during the next twelve
months and bear interest at an annualized rate of 9.5% payable at
maturity. The debentures are convertible into common shares of the
Company at $.50 per share (2 shares for each $1 of principal) at any
time, at the option of the holder. The common shares issued on
conversion have a restriction as to resale for a period of 1 year from
the date that the original debenture was issued. The Company may also
redeem the debentures at any time upon written notice and payment to the
holder of all unpaid principal and interest. The debentures are not
subject to any sinking fund requirements. The Company anticipates that
the holders of the debentures will exercise their conversion options
during 2000.
The excess of the fair market value of the common stock into which the
notes can be converted by the holders at the earliest conversion date,
over the proceeds of the convertible debentures is as follows:
Excess of Fair
Number of Conversion Value of Common
Shares Premium over Debentures
$ 450,000 $ 0.50 $ 225,000
580,000 1 365,400
1,474,000 4 5,159,000
---------
Total $ 5,749,400
==============
The excess fair value of the common stock into which the notes can
convert at the conversion date, over the proceeds is limited to the
amount of the proceeds of the debentures. Accordingly, $1,252,000 has
been recorded as a charge to interest expense and a credit to additional
paid-in-capital in the accompanying financial statements.
Note K - Stock Options and Awards The Corporation has elected to follow APBO
No.25, Accounting for Stock Issued to Employees, and related
Interpretations in accounting for its stock-based compensation made to its
employees. APBO No. 25 requires no recognition of compensation expense for
most of the stock-based compensation arrangements provided by the
Corporation, namely, broad-based employee stock purchase plans and option
grants where the exercise price is equal to or less than the market value
at the date of grant. However, APBO No. 25 requires recognition of
compensation expense for variable award plans over the vesting periods of
such plans, based upon the then-current market values of the underlying
stock. In contrast, SFAS No. 123 requires recognition of compensation
expense for grants of stock, stock options, and other equity instruments,
over the vesting periods such as grants, based on the estimated grant-date
fair values of those grants. Stock options and awards made to investors and
consultants are subject to the provisions of SFAS No. 123. Pro forma
Disclosure under SFAS No. 123 Accounting for Stock-Based Compensation has
not been made to the short history of the Company and the thin nature of
the trading volume.
- continued -
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Note K - Stock Options and Awards - continued
Employees
During 1998, the Company granted stock options for 135,000 shares of
common stock to employees in connection with the original issuance of
shares at exercise prices that were not less than the fair value of the
common stock at the date of grant. During 1999, the Company granted
stock options for 100,000 shares of common stock to employees as
compensation for services rendered at exercise prices that were below
the fair value of the common stock at the date of grant. Accordingly,
the Company recognized compensation expense of $48,000 as a charge
against operations during 1999 for the difference between the fair value
and the exercise price of the common stock at the date of grant.
Consultants
During 1998, the Company granted stock options for 238,000 shares of
common stock to consultants in connection with the original issuance of
shares at exercise prices that were not less than the fair value of the
common stock at the date of grant. The fair market value of the options
was determined by using a Black Scholes option pricing model. Due to the
short trading history, the low and infrequent volume of trades, and the
market volatility of the company's stock the calculated fair value at
the date of the grant was zero.
During 1999, the Company granted stock options for 358,333 shares of
common stock to consultants as compensation for services rendered at
exercise prices that were below the fair value of the common stock at
the date of grant. Accordingly, the Company recognized compensation
expense as a charge against operations during 1999 of $272,057 for the
fair value of the options at the date of grant using a Black Scholes
option pricing model. The assumptions used were as follows:
1999 1998
------ -----
Weighted Average Fair Value of
Common Stock $2.23 $.50
Weighted Average Exercise Price $1.53 $.70
Expected Market Volatility 10.0% 5.0%
Risk Free Interest Rates 4.66%-5.50% 5.0%
Terms 3-36 Months 24-36 Months
In December 1999, the Company granted an award of 25,000 shares of
common stock as compensation to an outside consultant. The Company has
charged operations for the fair value of the common stock awarded on the
date of the grant in the amount of $106,250.
Investors
During 1998, the Company granted stock options for 367,500 shares of
common stock to investors in connection with the original issuance of
shares at exercise prices that were not less than the fair value of the
common stock at the date of grant. The fair market value of the options
was determined by using a Black Scholes option pricing model. Due to the
short trading history, the low and infrequent volume of trades, and the
market volatility of the company's stock the calculated fair value at
the date of the grant was zero.
- continued -
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Note K - Stock Options and Awards - continued
During 1999, the Company granted stock options for 61,633 shares of
common stock to investors. The Company recognized a charge against
operations during 1999 of $100,009 for the fair value of the options at
the date of grant using a Black Scholes option pricing model. The
assumptions used were as follows:
1999 1998
Weighted Average Fair Value of
Common Stock $2.23 $.50
Weighted Average Exercise $1.53 $.70
Expected Market Volatility 10.0% 5.0%
Risk Free Interest Rates 4.66%-5.50% 5.0%
Terms 3-24 Months 24-36 Months
Stock options outstanding and exercisable at December 31, 1998 and 1999
are as follows:
Grant Exercise
Shares Date Term Price
Options Issued: 218,000 Sept 1998 24 Months $.65
185,500 Sept 1998 36 Months .65
162,000 Oct 1998 24 Months .65
75,000 Nov 1998 24 Months .65
100,000 Dec 1998 36 Months 1.00
-------
Outstanding at
December 31, 1998 740,500
Options Issued:
30,000 Mar 1999 24 Months .65
250,000 Oct 1999 18 Months .65
100,000 Nov 1999 36 Months .65
39,966 Dec 1999 3 Months 1.50
100,000 Dec 1999 36 Months 4.00
-------
Outstanding at
December 31, 1999 1,260,466
=========
All of the above outstanding options are fully vested.
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Note L - Restatement
Investment in Affiliate
The financial statements for the years ended December 31, 1999 and 1998 have
been restated to record the effects of the Company's investment in Ixora
Biomedical Co. and it proportionate share of Ixora's loss under the equity
method of accounting. (See Note C)
Deferred Royalty Revenue
In connection with granting an exclusive license to Ixora Biomedical, the
Company will receive royalty payments of 9% of Ixora's net sales of the
Company's products. Deferred royalty revenue of $207,360 was recorded in
conjunction with the recording of the investment in affiliate. (See Note G)
Beneficial Conversion Premium on Convertible Debentures
The financial statements have been restated to account for a beneficial premium
embedded into the convertible debenture which allows the holder to exchange the
debenture into common stock at a 2 for 1 conversion ratio. (See Note I)
Stock Options Granted to Consultants and Investors
The financial statements have been restated to adjust the compensation
recorded on stocks options granted to consultants and investors to the
fair value of the options.
Accrued Officer's Compensation
The financial statements have been restated to accrue additional
compensation to an officer in the amount of $50,000.
A summary of the effect of the retroactive restatements on net income
for the years 1999 and 1998 and stockholders' equity at December 31,
1999 are as follows:
As Originally Reported $(1,083,723) $(336,707) $(1,318,415)
Effect of Restated Items
Investment in Affiliate -- -- 207,360
Deferred Royalty Revenue -- -- (207,360)
Loss on Investment in
Affiliate (85,260) (122,100) (207,360)
Stocks Options (76,660) -- --
Conversion Feature on
Debenture (1,252,000) -- --
Officer's Compensation (50,000) -- (50,000)
---------- ------- ---------
As Restated $ (2,547,643) $(458,807) $(1,575,775)
============= ========== ============
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
TABLE OF CONTENTS
------------------------------------------------------------------------------
Independent Accountants' Report on Interim
Financial Statements F-18
Balance Sheets at March 31, 2000 (Unaudited)
and December 31, 1999 F-19
Statements of Changes in Stockholders' Deficit
for the Period From the Date Of Inception
(February 1, 1994) Through March 31, 2000
(Unaudited) F-20 to F-21
Statements of Operations for the Three Months
Ended March 31, 2000 and 1999 (Unaudited)
and for the Period From the Date of Inception
(February 1, 1994) Through March 31, 2000
(Unaudited) F-22
Statements of Cash Flows for the Thre Months
Ended March 31, 2000 and 1999 (Unaudited)
and for the Period From the Date of
Inception (February 1, 1994)
Through March 31, 2000 (Unaudited) F-23 to F-24
Notes to Financial Statements F-25
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
and Shareholders
L.A.M. Pharmaceutical, Corp.
Miami, Florida
We have reviewed the accompanying balance sheet of L.A.M. Pharmaceutical,
Corp. (a Development Stage Company) as of March 31, 2000 and the related
statements of operations, changes in stockholders' deficit and cash flows for
the three months ended March 31, 2000 and 1999 and for the period from the date
of inception (February 1, 1994) through March 31, 2000, in accordance with
standards established by the American Institute of Certified Public Accountants.
All information included in these financial statements is the representation of
the Company's management.
A review consists principally of inquiries of Company personnel and
analytical procedures applied to the financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheets as of December 31, 1999 and 1998, and the related
statements of operations, changes in stockholders' deficit and cash flows for
the years then ended, and for the period from the date of inception (February 1,
1994)) through December 31, 1999 (presented elsewhere herein); and in our report
dated March 15, 2000, we expressed an unqualified opinion on those financial
statements.
Rotenberg & Company, LLP
Rochester, New York
May 12, 2000
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
BALANCE SHEET
--------------------------------------------------------------------------------
(Restated) (Restated)
(Unaudited)
March 31, December
31,
2000 1999
--------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and Cash Equivalents $ 48,486 $ 558,710
Cash Held by Broker - Debentures
750,497 465,000
Note Receivable - Debentures
50,000 50,000
Accounts Receivable
75,000 75,000
Prepaid Expenses
30,000 --
--------------------------------------------------------------------------------
Total Current Assets
953,983 1,148,710
Property and Equipment - Net of Accumulated
Depreciation 17,126 4,922
Other Assets
Patents and Trademarks - Net of Accumulated
Amortization 283,306 232,417
--------------------------------------------------------------------------------
Total Assets
$1,254,415 $1,386,049
--------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts Payable and Accrued Expenses $ 147,636 $ 111,627
Convertible Debentures
1,517,000 1,252,000
--------------------------------------------------------------------------------
Total Current Liabilities 1,664,636 1,363,627
Non-Current Liabilities
Due to Stockholders 1,390,837 1,390,837
Deferred Royalty Revenue 207,360 207,360
--------------------------------------------------------------------------------
Total Liabilities 3,262,833 2,961,824
Stockholders' Deficit
Common Stock - $.0001 Par; 50,000,000 Shares Authorized;
10,392,500 Shares Issued and
Outstanding 1,039 1,039
Additional Paid in Capital 3,676,746 3,461,483
Deficit Accumulated During Development Stage (5,686,203) (5,038,297)
--------------------------------------------------------------------------------
Total Stockholders' Deficit (2,008,418) (1,575,775)
--------------------------------------------------------------------------------
Total Liabilities and Stockholders' Deficit $1,254,415 $1,386,049
--------------------------------------------------------------------------------
The accompanying notes are an integral part of this financial statement.
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
For the Period From the Date of Inception (February 1, 1994) Through March 31,
2000 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Deficit
Accumulated
Additional During Total
Common Paid-In Development Stockholders
Shares Stock Capital Stage Equity/(Deficit)
-----------------------------------------------------------------------------------------
Inception - February 1, 1994 -- $ -- $ -- $ -- $ --
Capital Contribution - Services
Rendered -- -- 22,799 -- 22,799
Capital Contribution - Laboratory
Equipment -- -- 24,245 -- 24,245
Net Loss -- -- -- (356,393) (356,393)
-----------------------------------------------------------------------------------------
Balance - December 31, 1994 -- -- 47,044 (356,393) (309,349)
Capital Contribution - Services
Rendered -- -- 172,020 -- 172,020
Net Loss
-- -- -- (522,095) (522,095)
-----------------------------------------------------------------------------------------
Balance - December 31, 1995 -- -- 219,064 (878,488) (659,424)
Capital Contribution - Services
Rendered -- -- 185,495 -- 185,495
Capital Contribution - Leasehold
Improvements -- -- 9,775 -- 9,775
Capital Contribution - Interest
Expense -- -- 49,738 -- 49,738
Capital Contribution in Cash -- -- 51,001 -- 51,001
Net Loss -- -- -- (643,733) (643,733)
-----------------------------------------------------------------------------------------
Balance December 31, 1996 -- $ -- $515,073 $(1,522,221)$(1,007,148)
Capital Contribution - Services
Rendered -- -- 377,072 -- 377,072
Capital Contribution - Interest
Expense -- -- 99,477 -- 99,477
Capital Contribution in Cash -- -- 111,199 -- 111,199
Distribution -- -- (30,000) -- (30,000)
Net Loss -- -- -- (499,626) (499,626)
-----------------------------------------------------------------------------------------
Balance - December 31, 1997 -- -- 1,072,821 (2,021,847) (949,026)
</TABLE>
- continued -
The accompanying notes are an integral part of this financial statement.
<PAGE>
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
For the Period From the Date of Inception (February 1, 1994) Through March 31,
2000 - Continued
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Deficit
Accumulated
Additional During Total
Common Paid-In Development Stockholders
Shares Stock Capital Stage Equity/(Deficit)
-------------------------------------------------------------------------------------------
Balance - December 31, 1997 -- -- 1,072,821 (2,021,847) (949,026)
Recapitalization as L.A.M.
Pharmaceutical, Corp. 6,000,000 600 (600) -- --
Capital Contribution - Interest
Expense -- -- 103,579 -- 103,579
Issuance of Common Stock
for Cash 4,332,500 433 378,352 -- 378,785
Distribution -- -- (38,660) -- (38,660)
Net Loss - Restated -- -- -- (458,807) (458,807)
-------------------------------------------------------------------------------------------
Balance - December 31, 1998 -
Restated 10,332,500 1,033 1,515,492 (2,480,654) (964,129)
Capital Contribution - Interest
Expense -- -- 107,681 -- 107,681
Issuance of Common Stock
for Cash 60,000 6 59,994 -- 60,000
Stock Option and Awards Granted -
Compensation for Services Rendered -- -- 526,316 -- 526,316
Conversion Premium on
Convertible Debentures -- -- 1,252,000 -- 1,252,000
Net Loss - Restated -- -- -- (2,557,643) (2,557,643)
-------------------------------------------------------------------------------------------
Balance - December 31, 1999 -
Restated 10,392,500 $1,039 $3,461,483 $(5,038,297) $(1,575,775)
Capital Contribution - Interest -- -- 26,923 -- 26,923
Conversion Premium on
Convertible Debentures -- -- 265,000 -- 265,000
Net Loss - Restated (Unaudited) -- -- -- (724,566) (724,566)
-------------------------------------------------------------------------------------------
Balance - March 31, 2000
(Unaudited) 10,392,500 $1,039 $3,753,406 (5,762,863) (2,008,418)
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of this financial
statement.
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1999, 1998, 1997 and for the Period From the
Date of Inception (February 1, 1994) Through March 31, 2000
(Unaudited) (Unaudited)
Quarter Ended Date of
Inception
March 31, (February 1,
1994)
Through
(Restated)(Restated) March 31, 2000
2000 1999 (Restated)
----------------------------------------------------------------------------
Total Revenue $ -- $ -- $ 200,000
----------------------------------------------------------------------------
Expenses
Research and Development
141,065 44,225 1,851,864
General and Administrative
256,515 72,599 1,928,449
Interest Expense
60,188 26,923 433,607
Conversion Premium on
Convertible Debentures
265,000 -- 1,517,000
Depreciation and Amortization
4,545 1,545 31,694
----------------------------------------------------------------------------
Total Expenses
727,313 145,292 5,762,614
----------------------------------------------------------------------------
Income from Operations
Other Income (Expense)
Interest 2,747 1,123 7,111
Loss on Investment in Affiliate -- -- (207,360)
----------------------------------------------------------------------------
Total Other Income 2,747 1,123 (200,249)
----------------------------------------------------------------------------
Net Loss
(724,566) (144,169) (5,762,863)
----------------------------------------------------------------------------
Loss Per Common Share - Basic
and Diluted $(0.07) $ (0.01) $ (0.67)
----------------------------------------------------------------------------
Weighted Average Number of Common
Shares Outstanding 10,392,500 10,392,500
----------------------------------------------------------------------------
The accompanying notes are an integral part of this financial
statement.
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
STATEMENTS OF CASH FLOWS
For the Years Ended March 31, 2000 and 1999 and for the Period From the Date of
Inception (February 1, 1994) Through March 31, 2000
Date of Inception
(Unaudited)
Quarter Ended
(February 1,
1994)
Through
March 31, March 31, 1999
2000 1999 (Restated)
--------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net Loss $ (724,566) $ (144,169) $ (5,762,863)
Adjustments to Reconcile Net Loss to
Net Cash Flows From Operating
Activities:
Depreciation and Amortization 4,545 1,545 47,355
Capital Contributions:
Services Rendered Including
Stock Options and Awards Granted
-- 12,480 1,283,702
Conversion Premium on
Convertible Debentures 265,000 -- 1,517,000
Interest Expense 26,923 26,923 387,398
Changes in Assets and Liabilities:
Accounts Receivable -- -- (75,000)
Prepaid Expenses (30,000) -- (27,975)
Accounts Payable and Accrued 36,009 10,620 67,636
Expenses Due to Stockholders -- -- 1,390,837
--------------------------------------------------------------------------------
Net Cash Flows from Operating
Activities (422,089) (92,601) (1,171,910)
--------------------------------------------------------------------------------
Cash Flows from Investing Activities
Equipment (13,204) -- (18,290)
Patents and Trademarks (54,434) (19,300) (295,477)
--------------------------------------------------------------------------------
Net Cash Flows from Investing
Activities (67,638) (19,300) (313,767)
--------------------------------------------------------------------------------
The accompanying notes are an integral part of this financial
statement.
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2000 and 1999 and for the Period From the
Date of Inception (February 1, 1994) Through March 31, 2000
--------------------------------------------------------------------------------
Date of
(Unaudited) Inception
Quarter Ended (February
1, 1994)
Through
March 31, March 31,
2000
2000 1999 (Restated)
--------------------------------------------------------------------------------
Cash Flows from Financing Activities
Cash Capital Contributions -- -- 162,200
Proceeds from Issuance of Common Stock -- -- 438,375
Proceeds from (Repayment) of Notes Payable -- -- --
Proceeds from Convertible Debentures 265,000 -- 1,467,000
Distributions to Stockholders -- -- (68,660)
--------------------------------------------------------------------------------
Net Cash Flows from Financing Activities 265,000 -- 1,998,915
--------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents (224,727) (111,901) 513,238
Cash and Cash Equivalents - Beginning of
Year 1,023,710 410,577 --
--------------------------------------------------------------------------------
Cash and Cash Equivalents - End of Year $ 798,983 $ 298,676 $ 513,238
--------------------------------------------------------------------------------
NON-CASH INVESTING AND FINANCING ACTIVITIES
Issuance of Common Stock in Exchange
for Property and Equipment $ -- $ -- $ 34,020
Acquisition of Investment in Affiliate $ -- $ 207,360 $207,360
Deferred Royalty Revenue $ -- $(207,360) $(207,360)
The accompanying notes are an integral part of this financial
statement.
<PAGE>
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Note A - Basis of Presentation
The condensed financial statements of L.A.M. Pharmaceutical, Corp. (the
"Company") included herein have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and
Exchange Commission (the "SEC"). Certain information and footnote
disclosures normally included in financial statements prepared in
conjunction with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the
information presented not misleading. These condensed financial
statements should be read in conjunction with the annual audited
financial statements and the notes thereto included elsewhere herein in
the Company's registration statement on Form 10SB.
The accompanying unaudited interim financial statements reflect all
adjustments of a normal and recurring nature which are, in the opinion
of management, necessary to present fairly the financial position,
results of operations and cash flows of the Company for the interim
periods presented. The results of operations for these periods are not
necessarily comparable to, or indicative of, results of any other
interim period of for the calendar year taken as a whole. Factors that
affect the comparability of financial data from year to year and for
comparable interim periods include non-recurring expenses associated
with the Company's registration with the Securities and Exchange
Commission and costs incurred to raise capital and acquisitions of
patents and trademarks.
<PAGE>
PART III
ITEM 1.EXHIBITSExhibitNumber Exhibit Name Page
-------- ------- ------------ ----
NumberExhibit 2Plan of Acquisition, Reorganization,
Arrangement, Liquidation, etc. None
Exhibit 3 Articles of Incorporation and Bylaws *
Exhibit 4 Instruments Defining the Rights of Security Holders
Exhibit 4.1 Incentive Stock Option Plan *
Exhibit 4.2 Non-Qualified Stock Option Plan *
Exhibit 4.3 Stock Bonus Plan *
Exhibit 9 Voting Trust Agreement None
Exhibit 10 Material Contracts
Exhibit 10.1 Agreements with Ixora Bio-Medical Co. *
Exhibit 16. Letter from Former Accountants _____
Exhibit 27 Financial Data Schedules *
* Previously filed
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Company caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
L.A.M. PHARMACEUTICALS, CORP.
Date: September 11, 2000 By: /s/ Alan Drizen
---------------------------
Alan Drizen
President and Chief
Executive Officer
