UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from …………… to ……………
Commission File No._______________
LUNA MEDICAL TECHNOLOGIES, INC.
(Exact name of the Registrant as specified in its charter)
NEVADA
98-0207745
(State of other jurisdiction of
(I.R.S. Employer Identification Number)
incorporation or organization)
c/o Suite 677, 999 Canada Place
Vancouver, British Columbia, Canada V6C 3E1
(Address of principal executive offices)
(604) 682-8439
(Registrant’s Telephone Number, including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and, (2) has been subject to such filing requirements for the past 90 days.
YES [X]
NO[ ]
The number of shares of the Registrant’s common stock outstanding as of December 31, 2001 was 8,095,660.
LUNA MEDICAL TECHNOLOGIES, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
AS AT DECEMBER 31, 2001
------INDEX------
Notice to Reader
Balance Sheet
Statement of Operations
Statement of Shareholders’ Equity/(Deficit)
Cash Flow Statement
Notes to Financial Statements
T.A. ST. DENIS & ASSOCIATES INC.
677 – 999 Canada Place
Vancouver, British Columbia
V6C 3E1
NOTICE TO READER
I have compiled the balance sheet of Luna Medical Technologies, Inc. as at December 31, 2001, the statement of operations, the statement of shareholders’ equity/(deficit), and the cash flow statement for the nine months ended from information provided by the company’s management. I have not audited, reviewed, or otherwise attempted to verify the accuracy or completeness of such information. Readers are cautioned that these statements may not be appropriate for their purposes.
“Tracey St. Denis”
Tracey St. Denis
Certified General Accountant
Vancouver, British Columbia
July 24, 2002
LUNA MEDICAL TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEET
AS AT DECEMBER 31, 2001
(Unaudited – See Notice to Reader)
(Note 2) | ||
December 31, 2001 | March 31, 2001 | |
ASSETS | ||
CURRENT ASSETS | ||
Cash (Note 3(viii)) | $ - | $ 3 |
Total Assets | $ - | $ 3 |
LIABILITIES AND SHAREHOLDERS’ EQUITY/(DEFICIT) | ||
CURRENT LIABILITIES | ||
Accounts payable | $ 82,676 | $ 72,002 |
Accrued expenses | 7,133 | 7,133 |
Short-term loans (Note 4) | 32,704 | 32,704 |
Advances from shareholders (Notes 5 and 9) | 240,674 | 205,068 |
Total Liabilities | 363,187 | 316,907 |
SHAREHOLDERS’ EQUITY/(DEFICIT) | ||
Preferred shares, 5,000,000 shares authorized, $0.001 par value; | ||
no shares issued and outstanding (Note 6) | ||
Common shares, 50,000,000 shares authorized, $0.001 par value; | ||
8,095,660 and 8,095,660 shares issued and outstanding respectively (Note7) | 8,096 | 8,096 |
Additional paid-in capital | 434,459 | 434,459 |
Accumulated deficit | (805,742) | (759,459) |
(363,187) | (316,904) |
Total Liabilities and Shareholders’ Equity/(Deficit) | $ - | $ 3 |
Approved by the Directors:
/s/ Brent Shaw__________________
/s/ Brad Hofstad_________________
The accompanying notes are an integral part of these financial statements.
LUNA MEDICAL TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED DECEMBER 31, 2001
(Unaudited – See Notice to Reader)
(Note 2) | ||
December 31, 2001 | March 31, 2001 | |
EXPENSES | ||
Management fees | $ 26,750 | $ 17,389 |
Bank charges and interest | 8,859 | 11,256 |
Legal | 5,761 | 66,206 |
Auditing and accounting | 3,413 | 33,108 |
Transfer agent | 1,500 | 5,910 |
Office and telephone | - | 15,139 |
Promotion and entertainment | - | 13,391 |
Marketing expenses | - | 9,862 |
Rent | - | 8,898 |
Travel | - | 3,142 |
Regulatory authorities | - | 200 |
LOSS FROM CONTINUING OPERATIONS | 46,283 | 184,501 |
OTHER EXPENSES | ||
Foreign exchange loss (Note 3(xi)) | - | 8,213 |
Consulting fees | - | 114,623 |
- | 122,836 |
INCOME/(LOSS) BEFORE INCOME TAXES FROM CONTINUING OPERATIONS | 46,283 | 307,337 |
INCOME TAXES | - | - |
DISCONTINUED OPERATIONS | ||
Loss from Luna Fertility Indicator, Inc. disposed of on November 30, 2000 | - | 3,743 |
NET LOSS | $ 46,283 | $ 311,080 |
Net income/(loss) per common share from continuing operations | $ (0.01) | $ (0.04) |
Net income/(loss) per common share from discontinued operations | - | (0.00) |
NET LOSS PER COMMON SHARE | $ (0.01) | $ (0.04) |
WEIGHTED AVERAGE NUMBER OF BASIC AND DILUTED COMMON SHARES OUTSTANDING | 8,095,660 | 8,091,441 |
The accompanying notes are an integral part of these financial statements.
LUNA MEDICAL TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS’ EQUITY/(DEFICIT)
AS AT DECEMBER 31, 2001
(Unaudited – See Notice to Reader)
Common Number of Shares | Shares Amount | Additional Paid-In Capital | Share Subscriptions Receivable | Comprehensive Income | Accumulated Deficit | Total Shareholders’ Equity/(Deficit) | |
Balance, March 31, 2000 | 8,040,660 | $ 8,041 | $ 434,459 | $ - | $ 7,252 | $ (448,379) | $ 1,373 |
Issuance of common shares for subscription at $0.001 per share | 55,000 | 55 | - | (55) | - | - | - |
Subscription received | - | - | - | 55 | - | - | 55 |
Net loss for the year ended March 31, 2001 | - | - | - | - | (7,252) | (311,080) | (318,332) |
Balance, March 31, 2001 | 8,095,660 | 8,096 | 434,459 | - | - | (759,459) | (316,904) |
Net loss for the nine months ended December 31, 2001 | - | - | - | - | - | (46,283) | (46,283) |
Balance, December 31, 2001 | 8,095,660 | $ 8,096 | $ 434,459 | $ - | $ - | $ (805,742) | $ (363,187) |
The accompanying notes are an integral part of these financial statements.
LUNA MEDICAL TECHNOLOGIES, INC.
(A Development Stage Company)
CASH FLOW STATEMENT
FOR THE NINE MONTH PERIOD ENDED DECEMBER 31, 2001
(Unaudited – See Notice to Reader)
(Note 2) | ||
December 31, 2001 | March 31, 2000 | |
OPERATING ACTIVITIES | ||
Net loss | $ (46,283) | $ (311,080) |
Add items not involving cash | ||
Loss on disposal of subsidiary | - | 3,743 |
Office equipment exchanged for debt | - | 5,541 |
(46,283) | (301,796) | |
Changes in non-cash working capital items | ||
Goods and services tax receivable | - | 3,501 |
Prepaid expenses | - | 9,421 |
Accounts payable | 10,674 | 59,811 |
Accrued liabilities | - | 3,794 |
Cash provided/(used) by operating activities | (35,609) | (225,269) |
INVESTING ACTIVITIES | ||
Advances to subsidiary | - | (8,646) |
Cash provided/(used) by investing activities | - | (8,646) |
FINANCING ACTIVITIES | ||
Advances from shareholders | 35,606 | 202,985 |
Advances from related parties | - | (59,169) |
Proceeds from short-term loans payable | - | 32,704 |
Proceeds from sale of common shares | - | 55 |
Cash provided/(used) by financing activities | 35,606 | 176,575 |
CASH INCREASE/(DECREASE) | (3) | (57,340) |
CASH, BEGINNING OF PERIOD | 3 | 57,343 |
CASH, END OF PERIOD | $ - | $ 3 |
SUPPLEMENTAL DISCLOSURE: | ||
Interest paid | $ 2,952 | $ 10,813 |
Income taxes paid | $ - | $ - |
NON-CASH ACTIVITIES: | ||
Exchanged office equipment for release from payable | $ - | $ 5,541 |
Loss on disposal of subsidiary | $ - | $ 3,743 |
Issued stock for subscription receivable | $ - | $ - |
The accompanying notes are an integral part of these financial statements.
LUNA MEDICAL TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTH PERIOD ENDED DECEMBER 31, 2001
(Unaudited – See Notice to Reader)
1.
ORGANIZATION AND DESCRIPTION OF THE BUSINESS
Luna Medical Technologies, Inc., formerly Luna Technologies, Inc., (the “Company”) was incorporated on January 19, 1999 under the laws of the State of Nevada for the purpose of engaging in any lawful activity. On May 31, 1999 the Company amended its articles of incorporation to reflect the name change to Luna Medical Technologies, Inc.
The financial statements include all activity of the Company. The Company maintains an office in Vancouver, British Columbia. The Company has elected a fiscal year-end of March 31.
2.
COMPARATIVE FIGURES
The figures presented for comparative purposes are the annual amounts for the year ended March 31, 2001. The figures presented include only the accounts of the Company.
All figures reported are in US dollars.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist the reader in understanding the Company’s financial statements. The financial statements and notes are representative of the Company’s management which is responsible for their integrity and objectivity.
(i)
Accounting Method
The Company’s financial statements are prepared using the accrual method of accounting.
(ii)
Loss Per Share
Basic loss per share was computed by dividing the net loss by the weighted average number of shares outstanding during the year. The weighted average number of shares was calculated by taking the number of shares outstanding and weighting them by the amount of time that they were outstanding. Diluted loss per share is the same as basic loss per share, as the inclusion of common stock equivalents would be anti-dilutive.
(iii)
Provision for Taxes
At March 31, 2001, the Company had net operating losses of approximately $766,000 that may be offset against operating income through 2015. No provision for taxes or tax benefits has been reported in the financial statements as there is not a measurable means of assessing future profits or losses.
(iv)
Use of Estimates
The process of preparing financial statements requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues, and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.
(v)
Allowance for Doubtful Accounts
The Company maintains an adequate allowance for doubtful accounts to cover anticipated bad debts. Accounts receivable are charged against the allowance when it is determined by the Company that payment will not be received.
(vi)
Advertising
Advertising costs are charged to operations in the year incurred.
(vii)
Impairment of Long-Lived Assets
The Company evaluates the recoverability of long-lived assets when events and circumstances indicate that such assets might be impaired. The Company determines impairment by comparing the undiscounted future cash flows estimated to be generated by these assets to their respective carrying amounts. At December 31, 2001, there were no long-lived assets.
(viii)
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less at the date of acquisition to be cash equivalents. At December 31, 2001, there were no cash equivalents.
(ix)
Derivative Instruments
At December 31, 2001, the Company has not engaged in any transactions that would be considered derivative instruments or hedging activities.
(x)
Compensated Absences
The Company has no employees. At such time as the Company hires personnel, its employees will be entitled to paid vacation, paid sick days, and personal days off depending on job classification, length of service, and other factors. The Company’s policy will be to recognize the cost of compensated absences when actually paid to employees.
(xi)
Foreign Currency Transactions
All figures presented are in US dollars. Foreign currency transactions are translated to US dollars using the exchange rate in effect at the time of the transaction.
(xii)
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, the Company incurred a net loss of $46,283 and has negative working capital for the nine months ended December 31, 2001. The Company is currently seeking a major transaction, which will, if successful, mitigate these factors which raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence. Management intends to seek additional capital.
(xiii)
Fair Value of Financial Instruments
The carrying amounts of cash, receivables, payables, and accrued expenses approximate their fair value.
4.
SHORT-TERM LOANS
There are four short-term loans payable which are due on demand and without interest (see Note 9).
5.
ADVANCES FROM SHAREHOLDERS
Advances from shareholders consist of the following at September 30, 2001:
(i)
There was an advance from Campbell Capital Advisory, Inc. totalling $124,696 (March 31, 2001 - $115,997). The amount is unsecured and bears 10% interest per annum. The Company intends to issue shares for the amount of this advance. Campbell Capital Advisory, Inc. is a related company under the control of the Company’s former president (see Note 9).
(ii)
There is a note payable to Javelin Enterprises totalling $2,245 (March 31, 2001 - $2,089). The note payable is unsecured, has no stated maturity, and bears 9% interest per annum. Total interest accrued during the nine months ended December 31, 2001 was $156. During December of 1999, the Company issued 80,000 common shares as partial satisfaction of the note. Javelin Enterprises is a shareholder of the Company (see Note 9).
(iii)
There was an advance from Dr. James Swanney in the amount of $200 (March 31, 2001 – $200). The amount is unsecured and bears no interest. The Company intends to pay this amount when funds become available. Dr. Swanney was the president of the Company (see Note 9).
(iv)
There was an advance from King Capital Corporation totalling $113,533 (March 31, 2001 – $86,782). The amount is unsecured and bears no interest. The Company intends to issue shares for the amount of this advance. King Capital Corporation is a shareholder of the Company (see Note 9).
6.
PREFERRED SHARES
The Company is authorized to issue up to 5,000,000 preferred shares with a par value of $0.001 per share. The preferred shares do not carry any pre-emptive or preferential rights to subscribe to any unissued stock or any other securities which the Company may be authorized to issue and does not carry voting rights.
7.
COMMON SHARES
The Company is authorized to issue up to 50,000,000 common shares with a par value of $0.001 per share. The voting rights of the common shares are non-cumulative.
During the year ended March 31, 2001, the Company issued 55,000 shares at $0.001 per share for a subscription receivable that was subsequently paid.
8.
WARRANTS AND OPTIONS
The Company issued one warrant with each share of common stock subscribed for during a subscription year in the fall of 1999. The warrants had an exercise price of $1.00 per share which expired on December 1, 2000. As of December 31, 2001, no warrants had been exercised and all warrants have expired.
The Company does not have a formal stock option plan; however, the Company issued options to two consultants during the year ended March 31, 2000. The options had no value due to the fact that the exercise price was in excess of the fair market value on the date of grant. On May 8, 2000, the Company cancelled this agreement with the required 30 days notice, and the consultants relinquished their claim to these options.
9.
RELATED PARTIES
The former president and chief executive officer of the Company, Gordon C. McDougall, is also the president and shareholder of Campbell Capital Advisory, Inc. (“CCA”) which had advanced funds to the Company for operations and to retain the services of an attorney. As of December 31, 2001, the Company owes CCA $124,696 (see Note 5).
The Company executed a promissory note in favour of a shareholder for funds advanced to the Company. As partial satisfaction of the note, common shares were issued. As of December 31, 2001, the balance owing on the note was $2,193 (see Note 5).
The former president of the Company, Dr. James Swanney, is also the president of Menathen Services Inc. o/a Women’s Health Centre. As of December 31, 2001, the Company owes Dr. Swanney $200 (see Note 5).
As at December 31, 2001, the Company also received an advance from a corporation owned by a shareholder of the Company totalling $113,533 (see Note 5).
10.
FOREIGN OPERATIONS
The accompanying balance sheet includes the Company’s assets in Canada. Although Canada is considered politically and economically stable, it is always possible that unanticipated events in foreign countries could disrupt the Company’s operations.
LUNA MEDICAL TECHNOLOGIES, INC.
(A Development Stage Company)
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE NINE MONTH PERIOD ENDED DECEMBER 31, 2001
Effective November 30, 2000, Luna Medical Technologies, Inc., (the “Company”) disposed of its wholly-owned subsidiary, Luna Fertility Indicator, Inc., for $1. The Company is currently seeking a major transaction.
As discussed in Note 2 to the financial statements, the Company is in the development stage, has no established source of revenue and is dependent on its ability to raise capital from shareholders or other sources to sustain operations. These factors, along with other matters as set forth in Note 2, raise substantial doubt that the Company will be able to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date:
February 26, 2003
LUNA MEDICAL TECHNOLOGIES, INC.
By:
/s/ Brent Shaw
Name:
Brent Shaw
Title:
President
(Principal Executive Officer and Principal Financial Officer)
CERTIFICATIONS
I, Brent Shaw, certify that:
1. I have reviewed this quarterly report of Luna Medical Technologies, Inc.
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statement, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the quarterly report is being prepared;
b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation of the Evaluation Date;
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weakness in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls, and
6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
By:
/s/ Brent Shaw
Name:
Brent Shaw
Title:
President
(Acting Principal Executive Officer)
I, Brent Shaw, certify that:
1. I have reviewed this quarterly report of Luna Medical Technologies, Inc.
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statement, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the quarterly report is being prepared;
b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation of the Evaluation Date;
5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weakness in internal controls; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls, and
6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
By:
/s/ Brent Shaw
Name:
Brent Shaw
Title:
President
(Acting Principal Financial Officer)
