UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2002
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number: ____________
LUNA MEDICAL TECHNOLOGIES, INC.
_______________________________________________________________________________
(Exact name of registrant as specified in its charter)
Nevada | 98-0207745 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
c/o Suite 677, 999 Canada Place, Vancouver, British Columbia, Canada V6C 3E1
(604) 682-8439
_______________________________________________________________________________
(Address and telephone number of registrant’s principal executive offices and principal
place of business)
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), or (2) has been subject to such filing requirements for the past 90 days.
Yes
[ X ]
No
[ ]
The number of outstanding common shares, $ .001 par value, of the Registrant at:
December 31, 2002: 33,095,660
LUNA MEDICAL TECHNOLOGIES, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
AS AT DECEMBER 31, 2002
------INDEX------
Auditor Review
Balance Sheet
Statement of Operations
Statement of Shareholders’ Equity/(Deficit)
Cash Flow Statement
Notes to Financial Statements
CHARTERED
1100 – 1177 West Hastings Street
ACCOUNTANTS
Vancouver, BC V6E 4T5
MacKay LLP
Tel: 604-687-4511
Fax: 604-687-5805
Toll Free: 1-800-351-0426
www.MacKayLLP.ca
September 22, 2003
Our file No. 823 01233
INDEPENDENT ACCOUNTANT'S REPORT
Luna Medical Technologies Inc.
(A Development Stage Company)
We have reviewed the accompanying balance sheet of Luna Medical Technologies Inc. (a development stage company) as of December 31, 2002 and the related statement of operations for the three and nine months ended December 31, 2002 and the statement of cash flows for the three and nine month periods ended December 31, 2002. These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted 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 financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the balance sheet of Luna Medical Technologies Inc. (a development stage company) as of March 31, 2002, and the related statements of operations, cash flows, and stockholders' equity for the year then ended (not presented herein); and in our report dated July 24, 2002, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying balance sheet as of March 31, 2002, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived.
Note 1 of the Company's audited financial statements as of March 31, 2002, and for the year then ended discloses that the Company has suffered recurring losses from operations and has no established source of revenue at March 31, 2002. Our auditors' report on those financial statements includes an explanatory paragraph referring to the matters in Note 1 of those financial statements and indicating that these matters raised substantial doubt about the Company's ability to continue as a going concern. As indicated in Note 1 of the Company's unaudited interim financial statements as 5 of December 31, 2002, and for the three and nine months then ended, the Company has continued to suffer recurring losses from operations and still has no established source of revenue at December 31, 2002. The accompanying interim consolidated financial statements do not include any adjustments that might resu lt from the outcome of this uncertainty.
Respectfully Submitted,
\s\ MacKay LLP, Chartered Accountants
Vancouver, British Columbia, Canada
September 22, 2003
LUNA MEDICAL TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
AS AT DECEMBER 31, 2002 WITH AUDITED FIGURES AT MARCH 31, 2002
(Stated in US Dollars)
| | December 31, 2002 | March 31, 2002 |
| | | |
ASSETS | | |
CURRENT ASSETS | | |
Prepaid expenses | $ 682 | $ 682 |
| | | |
Total Assets | $ 682 | $ 682 |
| | | |
LIABILITIES AND SHAREHOLDERS’ EQIUTY/(DEFICIT) | | |
CURRENT LIABILITIES | | |
Accounts payable | $ 86,986 | $ 80,926 |
Accrued expenses | 7,133 | 7,133 |
Short-term loans (Note 4) | 2,704 | 32,704 |
Convertible notes payable (Note 5) | 34,272 | - |
Advances from shareholders (Notes 6, 8, and 10) | 164,959 | 268,212 |
| | | |
Total Liabilities | 296,054 | 388,975 |
| | | |
SHAREHOLDERS’ EQUITY/(DEFICIT) | | |
Preferred shares, 5,000,000 shares authorized, $0.001 par value; | | |
no shares issued and outstanding (Note 7) | | |
Common shares, 50,000,000 shares authorized, $0.001 par value; | | |
33,095,660 and 8,095,660 shares issued and outstanding respectively (Note 8) | 33,096 | 8,096 |
Additional paid-in capital | 534,459 | 434,459 |
Accumulated deficit | (862,927) | (830,848) |
| | | |
Total Shareholders’ Equity/(Deficit) | (295,372) | (388,293) |
| | | |
Total Liabilities and Shareholders’ Equity/(Deficit) | $ 682 | $ 682 |
Approved by the Directors:
“Cameron King”
_______________________________
Cameron King
“Gordon McDougall”
_______________________________
Gordon McDougall
The accompanying notes are an integral part of these financial statements.
LUNA MEDICAL TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED DECEMBER 31, 2002
WITH AUDITED FIGURES FOR THE YEAR ENDED MARCH 31, 2002
(Stated in US Dollars)
| | December 31, 2002 | March 31, 2002 |
| | | |
EXPENSES | | |
Legal | $ 15,137 | $ 5,761 |
Bank charges and interest | 9,782 | 11,811 |
Auditing and accounting | 5,075 | 8,449 |
Transfer agent | 2,085 | 2,568 |
Management fees | - | 42,800 |
| | | |
| | 32,079 | 71,389 |
| | | |
NET LOSS FOR THE PERIOD | $ (32,079) | $ (71,389) |
| | | |
NET LOSS PER COMMON SHARE | $ (0.00) | $ (0.01) |
| | | |
WEIGHTED AVERAGE NUMBER OF BASIC AND | | |
DILUTED COMMON SHARES OUTSTANDING | 24,935,086 | 8,095,660 |
The accompanying notes are an integral part of these financial statements.
LUNA MEDICAL TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF SHAREHOLDERS’ EQUITY/(DEFICIT)
AS AT DECEMBER 31, 2002
(Stated in US Dollars)
| | Common
Number of Shares | Shares
Amount |
Additional Paid-In Capital |
Share Subscriptions Receivable |
Comprehensive Income |
Accumulated Deficit |
Total Shareholders’ Equity/(Deficit) |
| | | | | | | | |
Balance, March 31, 2001 | 8,095,660 | $ 8,096 | $ 434,459 | $ - | $ - | $ (759,459) | $ (316,904) |
| | | | | | | | |
Net loss for the year ended March 31, 2002 |
- |
- |
- |
- |
- |
(71,389) |
(71,389) |
| | | | | | | | |
Balance, March 31, 2002 | 8,095,660 | 8,096 | 434,459 | - | - | (830,848) | (388,293) |
| | | | | | | | |
Issuance of common shares in exchange for debt at $0.005 per share |
25,000,000 |
25,000 |
100,000 |
- |
- |
- |
125,000 |
| | | | | | | | |
Net loss for the period ended December 31, 2002 |
- |
- |
- |
- |
- |
(32,079) |
(32,079) |
| | | | | | | | |
Balance, December 31, 2002 | 33,095,660 | $ 33,096 | $ 534,459 | $ - | $ - | $ (862,927) | $ (295,372) |
The accompanying notes are an integral part of these financial statements.
LUNA MEDICAL TECHNOLOGIES, INC.
(A Development Stage Company)
CASH FLOW STATEMENTS
FOR THE NINE MONTH PERIOD ENDED DECEMBER 31, 2002
WITH AUDITED FIGURES AT MARCH 31, 2002
(Stated in US Dollars)
| | December 31, 2002 | March 31, 2002 |
| | | |
OPERATING ACTIVITIES | | |
Net loss for the period | $ (32,079) | $ (71,389) |
| | | |
Changes in non-cash working capital items | | |
Prepaid expenses | - | (682) |
Accounts payable | 6,060 | 8,924 |
| | | |
Cash provided/(used) by operating activities | (26,019) | (63,147) |
| | | |
FINANCING ACTIVITIES | | |
Short-term loans | (30,000) | - |
Convertible notes payable | 34,272 | - |
Advances from shareholders | 21,747 | 63,144 |
| | | |
Cash provided/(used) by financing activities | 26,019 | 63,114 |
| | | |
CASH INCREASE/(DECREASE) | - | (3) |
| | | |
CASH, BEGINNING OF PERIOD | - | 3 |
| | | |
CASH, END OF PERIOD | $ - | $ - |
| | | |
| | | |
SUPPLEMENTAL DISCLOSURE: | | |
Interest paid | $ - | $ 11,808 |
Income taxes paid | $ - | $ - |
| | | |
NON-CASH ACTIVITIES: | | |
Exchanged office equipment for release from payable | $ - | $ - |
Loss on disposal of subsidiary | $ - | $ - |
Issued stock for subscription receivable | $ - | $ - |
Issued stock for reduction in debt | $ 125,000 | $ - |
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, 2002
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 is seeking a major transaction.
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, 2002. 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, 2002, the Company had net operating losses of approximately $838,000 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, 2002, 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, 2002, there were no cash equivalents.
(ix)
Derivative Instruments
At December 31, 2002, 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 $32,079 and has negative working capital for the nine months ended December 31, 2002. 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 from new debt and equity issuances that will provide funds needed to increase liquidity, fund internal growth, and fully implement its business plan.
(xiii)
Fair Value of Financial Instruments
The carrying amounts of prepaid expenses, accounts payable, accrued expenses, short term loans, convertible notes payable, and advances from shareholders approximate their fair value.
4.
SHORT-TERM LOANS
There is one short-term loan payable which is due on demand and without interest (see Note 10).
5.
CONVERTIBLE NOTES PAYABLE
There are three convertible notes payable dated June 1, 2002 totalling $30,000 with interest at 2% per month compounded semi-annually, due and payable on May 31, 2003. The principal and interest is convertible into common shares at a conversion price of $0.01 per share, at the option of the lender, with the conversion price of $0.01 based on the Company’s share structure as of June 1, 2002.
6.
ADVANCES FROM SHAREHOLDERS
Advances from shareholders consist of the following at December 31, 2002:
(i)
There was an advance from Campbell Capital Advisory, Inc. totalling $74,697 (March 31, 2002 - $131,864). The amount is unsecured and bears 10% interest per annum. Campbell Capital Advisory, Inc. is a related company under the control of the Company’s former president (see Note 10).
(ii)
There is a note payable to Javelin Enterprises totalling $2,474 (March 31, 2002 - $2,297). The note payable is unsecured, has no stated maturity, and bears 10% interest per annum. Total interest accrued during the nine months ended December 31, 2002 was $177. 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 10).
(iii)
There was an advance from Dr. James Swanney in the amount of $200 (March 31, 2002 – $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 10).
(iv)
There was an advance from King Capital Corporation totalling $87,588 (March 31, 2002 – $133,851). The amount is unsecured and bears no interest. King Capital Corporation is a shareholder of the Company (see Note 10).
7.
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.
8.
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.
No shares were issued by the Company during the year ended March 31, 2002. During the nine months ended December 31, 2002, the Company issued 25,000,000 shares at $0.005 per share for a total of $125,000.
9.
WARRANTS AND OPTIONS
No warrants or options were issued by the Company during the year ended March 31, 2002. As of December 31, 2002, no warrants had been exercised and all warrants have expired.
10.
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, 2002, the Company owes CCA $74,697 (see Note 6).
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, 2002, the balance owing on the note was $2,474 (see Note 6).
As of December 31, 2002, the Company owes Dr. James Swanney, a former president of the Company, $200 (see Note 6).
As at December 31, 2002, the Company also received an advance from a corporation owned by a shareholder of the Company totalling $87,588 (see Note 6).
11.
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 PERIOD ENDED DECEMBER 31, 2002
The Company is actively seeking merger candidates and has entered into Agreements to acquire Netopia Internet Café of Vancouver, British Columbia, and LiveWire Leisure Ltd (operating as PC Arena) of Clouchester, England.
Netopia is a computer LAN game centre with 50 high-speed computer terminals and each having the latest game software. Netopia has been operating on the campus of the University of British Columbia in Vancouver, British Columbia, Canada since January 2002. The terms of the transaction are to acquire all the assets of Netopia for 800,000 common shares of LanWerX Entertainment Inc., with a deemed value of $200,000. The transaction was completed on September 23, 2003.
LiveWire Leisure Ltd. (PC Arena) operates four locations, one corporate store, and three franchises around the communities of London, England. The computer LAN centres are operated with 25 to 30 high-speed computer terminals and the latest game playing software. On the premises of each PC Arena, the principals operate “the Computer Store” where new and refurbished computer and components are sold. The Company is now in the final stages of completing the transaction whereby the founders and investors of LiveWire will receive 4,000,0000 common shares of LanWerX Entertainment Inc. and a one time financial payment of US$100,000. The Company is expected to close the transaction on or about September 30, 2003.
On July 1, 2003 the Company issued 15,000,000 common shares at $0.005 per share for a total of $75,000 for a reduction of debt to related parties.
On August 1, 2003, the Company authorized the issuance of 1,500,000 common shares at $0.25 per share to consultants to be hired for professional services.
Effective September 24, 2003 the Company changed its name to GameState Entertainment, Inc.
SIGNATURE
The registrant hereby certifies that it meets all of the requirements for filing on Form 10-QSB and that it has duly caused and authorized the undersigned to sign this Quarterly Report in its behalf.
LUNA MEDICAL TECHNOLOGIES, INC.
By: (Signed) CAMERON KING
Chief Executive Officer
Date: September 29, 2003
