SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For Quarter Ended August 31, 2002 Commission File No. 0-5920
LANCER ORTHODONTICS, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
CALIFORNIA 95-2497155
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
253 Pawnee Street, San Marcos, California 92069
(Address of Principal Executive Offices)
Issuer's telephone number, including area code: (760) 744-5585
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act 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
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 2,196,233
Traditional small business disclosure format (check one):
Yes X No
PART I. FINANCIAL INFORMATION
Item 1. SUMMARIZED FINANCIAL INFORMATION
LANCER ORTHODONTICS, INC.
CONDENSED BALANCE SHEET (UNAUDITED)
8/31/02
ASSETS
CURRENT ASSETS:
Cash $ 208,428
Accounts receivable, less allowances for sales
returns and doubtful receivables of $181,136 1,040,222
Inventories, net of reserve of $203,608 2,019,779
Prepaid expenses 49,231
Total current assets 3,317,660
PROPERTY AND EQUIPMENT, at cost 2,412,486
Less: Accumulated depreciation (2,368,554)
43,932
INTANGIBLE ASSETS:
Marketing and distribution rights, net 53,950
Technology use rights, net 16,207
70,157
OTHER ASSETS 35,546
Total assets $3,467,295
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 280,103
Accrued payroll and related benefits 108,845
Other current liabilities 62,840
Line of credit 1,208
Total current liabilities 452,996
Mandatorily redeemable convertible preferred stock
Series C, $.06 noncumulative annual dividend,
$.75 par value, 250,000 shares authorized;
0 shares issued and outstanding in 2001
($.75 liquidation preference) --
COMMITMENTS AND CONTINGENCIES --
STOCKHOLDERS' EQUITY:
Redeemable convertible preferred stock,
Series D, $.04 noncumulative annual dividend;
$.50 par value: Authorized 500,000 shares;
0 shares issued and outstanding
($.50 liquidation preference per share) --
Common stock, no par value: authorized 50,000,000
shares; issued and outstanding 2,196,233 4,844,345
Prepaid expense ( 7,000)
Accumulated deficit (1,823,046)
Total stockholders' equity 3,014,299
Total liabilities and stockholders' equity $3,467,295
LANCER ORTHODONTICS, INC.
CONDENSED STATEMENTS OF OPERATIONS AND
CONDENSED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)
FOR THE THREE MONTHS ENDED
8/31/02 8/31/01
NET SALES $1,285,499 $1,434,788
COST OF SALES 923,580 1,077,398
--------- ---------
Gross Profit 361,919 357,390
OPERATING EXPENSES:
Selling 282,101 377,447
General & Administrative 110,263 105,818
Product Development 15,186 --
------- -------
TOTAL OPERATING EXPENSES 407,550 483,265
------- -------
LOSS FROM OPERATIONS ( 45,631) (125,875)
OTHER INCOME (EXPENSE):
Interest Expense ( 3,572) ( 3,222)
Other Income (Expense), net 46,272 760
------ ------
TOTAL OTHER INCOME (EXPENSE) 42,700 ( 2,462)
------ -------
LOSS BEFORE INCOME TAXES ( 2,931) (128,337)
INCOME TAXES -- --
------ -------
NET LOSS ( 2,931) (128,337)
OTHER COMPREHENSIVE INCOME -- --
------- -------
COMPREHENSIVE LOSS $( 2,931) $(128,337)
======= =======
NET LOSS PER WEIGHTED AVERAGE OF COMMON SHARES
Weighted average number of common shares 2,196,233 2,098,620
BASIC $( .00) $( .06)
Weighted average number of shares used in
calculation of diluted earnings per share 2,196,233 2,098,620
DILUTED $( .00) $( .06)
LANCER ORTHODONTICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED
8/31/02 8/31/01
Cash flows from operating activities:
Net loss $( 2,931) $(128,337)
Adjustments to reconcile net loss
to net cash (used in) provided
by operating activities:
Depreciation and amortization 24,117 26,856
Provision for losses on accounts receivable 1,136 ( 2,059)
Provision for losses on inventory 15,000 9,000
Common stock issued for services 5,250 --
Net change in operating assets and
liabilities:
Accounts receivable 80,577 ( 56,726)
Inventories 52,980 (150,427)
Prepaid expenses 5,044 24,244
Insurance claim receivable 81,758 --
Accounts payable (139,250) 263,750
Accrued payroll 13,852 ( 23,954)
Other current liabilities 8,835 6,108
------- -------
Net cash provided by (used in)
operating activities 146,368 ( 31,545)
Cash flows from investing activities:
Purchases of property and equipment ( 2,064) --
Other assets -- ( 7,786)
------- -------
Net cash used in investing activities ( 2,064) ( 7,786)
Cash flows from financing activities:
Increase (decrease) in line of credit ( 64,461) 20,000
------- -------
Cash flows provided by (used in)
financing activities ( 64,461) 20,000
------- -------
Net change in cash 79,843 ( 19,331)
Cash, beginning of period 128,585 131,550
------- -------
Cash, end of period $208,428 $112,219
======= =======
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 3,572 $ 3,222
The Company issued 20,000 shares of
common stock valued at $7,000 for
services to be rendered $ 7,000 $ --
LANCER ORTHODONTICS, INC.
Notes to Financial Statements
(A) Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with the instructions to Form 10-QSB and
therefore do not include all information and notes necessary for a
fair presentation of financial position, results of operations, and
cash flows in conformity with generally accepted accounting principles.
The unaudited condensed financial statements include the accounts of
Lancer Orthodontics, Inc. (the "Company"). The operating results for
interim periods are unaudited and are not necessarily an indication of
the results to be expected for the full fiscal year. In the opinion
of management, the results of operations as reported for the interim
periods reflect all adjustments which are necessary for a fair
presentation of operating results.
Reference is made to Note 2 of the Notes to Financial Statements
contained in the Company's Annual Report on Form 10-KSB for the
fiscal year ended May 31, 2002, for a summary of significant
accounting policies utilized by the Company.
(B) Organization
The Company was incorporated on August 25, 1967, in the state of
California, for the purpose of engaging in the design, manufacture,
and distribution of orthodontic products. The Company has a
manufacturing facility in Mexico where a majority of its inventory is
manufactured (Note F). The facility is incorporated and is a
wholly-owned and consolidated subsidiary of the Company. This
subsidiary now also administers services previously provided by an
independent manufacturing contractor. The conversion had no material
effect on manufacturing operations. The Company also purchases certain
orthodontic and dental products for purposes of resale. Sales are made
directly to orthodontists world-wide through Company representatives
and independent distributors. The Company also sells certain of its
products on a private label basis.
(C) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America ("GAAP"),
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during
the reporting period. Significant estimates made by the Company's
management include, but are not limited to, allowances for doubtful
accounts, allowances for sales returns, the valuation of inventories,
and the realizeability of property and equipment through future
operations. Actual results could materially differ from those estimates.
(D) Stock Based Compensation
The Company accounts for stock based compensation under Statement of
Financial Accounting Standards No. 123 ("SFAS 123"). SFAS 123 defines
a fair value based method of accounting for stock based compensation.
However, SFAS 123 allows an entity to continue to measure compensation
cost related to stock and stock options issued to employees using the
intrinsic method of accounting prescribed by Accounting Principles
Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to
Employees". Entities electing to remain with the accounting method of
APB 25 must make pro forma disclosures of net income and earnings per
share, as if the fair value method of accounting defined in SFAS 123
had been applied. The Company has elected to account for its stock
based compensation to employees under APB 25.
(E) Line of Credit
At August 31, 2002, the Company has a $400,000 line of credit with a
financial institution, through October 24, 2003. Borrowings are made
at prime plus 2.0%, however not less than 8.0%, (8.0% at August 31, 2002)
and are limited to specified percentages of eligible accounts receivable.
The outstanding balance at August 31, 2002 was $1,208 and the unused
portion available was approximately $312,000. The Company was in
compliance with its debt covenants at August 31, 2002.
The line of credit is collateralized by substantially all the assets of
the Company, including inventories, receivables, and equipment. The
lending agreement for the line of credit requires, among other things,
that the Company maintain a tangible net worth of $2,100,000 and that
receivables payments be sent to a controlled lockbox. In addition to
interest, a management fee of 0.25% of the average monthly outstanding
loan balance and an unused balance fee of .0425% on the average monthly
unused portion available are required. The Company is not required to
maintain compensating balances in connection with this lending agreement.
(F) Commitments and Contingencies
In May 1990, Lancer entered into a manufacturing subcontractor agreement
whereby the subcontractor agreed to provide manufacturing services to
Lancer through its affiliated entities located in Mexicali, B.C., Mexico.
Effective April 1, 1996, Lancer leased the Mexicali facility
under a separate agreement. Since October 2000, the manufacturing
agreement was operated on a month to month basis.
During fiscal 2002, the facility in Mexico was incorporated as Lancer
Orthodontics de Mexico, ("Lancer de Mexico"), a wholly-owned and
consolidated subsidiary of the Company. This subsidiary now administers
services previously provided by an independent manufacturing
contractor. A new lease was negotiated in the name of Lancer de Mexico,
effective April 1, 2001, for the 16,000 square foot facility already in
use for the Mexican operations. Mexican utilities and vendor obligations
were also converted to the Lancer de Mexico name. This conversion
eliminated the expense of an administrative fee and is expected to
provide better control in meeting future obligations. The conversion had
no material effect on manufacturing operations. The potential impact for
the use of our own facility, in terms of a corporate entity with legal
standing in Mexico, is that over a fiscal year Lancer would save
approximately $100,000 in service fees over a Mexican contracted
corporate entity.
Should Lancer discontinue operations in Mexico, it is responsible for
accumulated employee seniority obligations as prescribed by Mexican law.
At August 31, 2002, this obligation was approximately $246,000. Such
obligation is contingent in nature and accordingly has not been accrued
in Lancer's financial statements.
Leases - The Company leases its corporate facility under a non-
cancelable operating lease expiring December 31, 2003, as extended,
which requires monthly rentals that increase annually, from $2,900 per
month in 1994 to $6,317 per month in 2004. The lease expense is being
recognized on a straight-line basis over the term of the lease. The
excess of the expense recognized over the cash paid aggregates $7,951
at August 31, 2002, and is included in accrued liabilities in the
accompanying balance sheet. Total rental expense for this facility for
the three months ended August 31, 2002 was approximately $17,000.
The Company has entered into a non-cancelable operating lease for its
Mexico facility which expires in March 2006 and requires average monthly
rentals of approximately $6,000. Total expense for this facility for
the three months ended August 31, 2002 was approximately $18,000.
At May 31, 2002, future aggregate minimum lease payments are as follows:
Years ending May 31,
2003 $144,545
2004 114,659
2005 70,440
2006 58,700
-------
Total $388,344
Common Stock - The Company's stock is now traded on the OTC Bulletin Board.
(G) Income Taxes
At May 31, 2002, the Company had net tax operating loss carryforwards
of approximately $2,037,000 and business tax credits of approximately
$80,000 available to offset future Federal taxable income and tax
liabilities, respectively. The Federal carryforwards expire in varying
amounts through the year 2021. As of May 31, 2002, the Company had net
tax operating loss carryforwards of approximately $185,000 and business
tax credits of approximately $24,000 available to offset future state
income tax liabilities. The state carryforwards expire through the
year 2011.
(H) Stockholders' Equity
The Company has incentive stock option and non-qualified stock option
plans for directors, officers, and key employees. The plans provide
for the granting of options for common shares at exercise prices equal
to or exceeding the fair market value at the date of grant, as
determined by the Board of Directors. Options may become exercisable
over a period of up to four years from the date of grant and may be
exercised over a period of three to seven years from the date of the
grant, as determined by the Board of Directors. The Company's
shareholders have authorized a total of 357,143 shares to be available
for grant under the Company's stock option plan. Options granted
prior to May 31, 1995, generally vested on the date of grant and
expired through August 1999.
During the quarter ended August 31, 2002, 35,000 shares of common
stock valued at $12,250 were issued to the Company's Chief Executive
Officer for certain management services. The Board of Directors
authorized this stock issuance as partial compensation to Mr Irani
for services as CEO and Chairman of the Board for the calendar year 2002.
General and administrative expense of $5,250 was recognized for the
quarter ended August 31, 2002 and $7,000 is shown as prepaid expense
in the stockholders equity section of the balance sheet.
The Company issued non-qualified options granted to the Chief Executive
Officer to purchase 113,000 shares of Common Stock at $.30. These
options were granted on December 1, 2001 and are exercisable at the
rate of one-third per year and have a term of five years.
(I) Net Loss per Common Share and Dividends
The Company calculates earnings per share in accordance with Statement
of Financial Accounting Standards ("SFAS 128"). SFAS 128 replaces the
presentation of primary and fully diluted earnings per share with the
presentation of basic and diluted earnings per share. Basic earnings
per share excludes dilution and is calculated by dividing income
available to common stockholders by the weighted-average number of
common shares outstanding for the period.
Diluted earnings per share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance
of common stock that then shared in the earnings of the entity. For
all periods presented, no common stock equivalents have been included
in the computation of diluted earnings per share as they were determined
to be anti-dilutive.
EARNINGS PER SHARE (UNAUDITED)
FOR THE THREE MONTHS ENDED
8/31/02 8/31/01
Basic Loss per Share:
Net loss $( 2,931) $(128,337)
Net loss applicable to common shareholders $( 2,931) $(128,337)
Weighted average number of common shares 2,196,233 2,098,620
Basic loss per Share $( .00) $( .06)
Diluted Loss per Share:
Net loss from primary income per
common share $( 2,931) $(128,337)
Net loss for diluted earnings per share $( 2,931) $(128,337)
Weighted average number of shares used in
Calculation of diluted earnings per share 2,196,233 2,098,620
Diluted loss per share $( .00) $( .06)
The computation of diluted loss per share excludes the effect of
incremental common shares attributable to the exercise or outstanding
common stock options and warrants because their effect was anti-
dilutive due to losses incurred by the Company.
As of August 31, 2002, there was a total of 344,000 potential dilutive
shares of common stock.
(J) Financial Information About Foreign and Domestic Operations and
Export Sales
FOR THE THREE MONTHS ENDED
8/31/02 8/31/01
Sales to unaffiliated customers:
United States $754,597 $742,271
Europe 288,435 439,879
Central and South America 59,240 91,889
Middle East 72,163 48,372
Other Foreign 111,064 112,377
--------- ---------
$1,285,499 $1,434,788
No other geographic concentrations exist where net sales exceed
10% of total net sales.
Sales or transfers between geographic areas none none
(K) Insurance Claim Receivable
Management of the Company completed an assessment of two occurrences
of theft of inventory located at its wholly-owned and consolidated
subsidiary, Lancer de Mexico, in January and April of 2002. The
carrying value of the inventory stolen approximated $81,758, valued
at standard cost, which was reflected in the May 31, 2002 financial
statements as a reduction in inventories and an addition to insurance
claim receivable. During the three months ended August 31, 2002,
the Company received $134,413 from the insurance carrier; the
estimated value of the stolen inventory at net average selling price,
less commissions and royalties. The Company recorded other income of
$52,655 from the proceeds received in excess of standard cost. In
order to deter future thefts, a new security company has been hired
and a new security system installed.
(L) Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141 ("SFAS 141"),
"Business Combinations", which eliminates the pooling method of
accounting for business combinations initiated after June 30, 2001.
In addition, SFAS 141 addresses the accounting for intangible assets
and goodwill acquired in a business combination. This portion of SFAS
141 is effective for business combinations completed after June 30,
2001. The Company does not expect SFAS 141 will have a material
impact on the Company's financial position or results of operations.
In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 142 ("SFAS 142"), "Goodwill and Intangible Assets",
which revises the accounting for purchased goodwill and intangible
assets. Under SFAS 142, goodwill and intangible assets with indefinite
lives will no longer be amortized and will be tested for impairment
annually. SFAS 142 is effective for fiscal years beginning after
December 15, 2001, with earlier adoption permitted. The adoption
of SFAS 142 did not have a material impact on the Company's financial
position or results of operations.
In August 2001, the FASB issued FAS No. 143, "Accounting for Asset
Retirement Obligations." This statement addresses financial accounting
and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs.
It applies to all entities and legal obligations associated with the
retirement of long-lived assets that result from the acquisition,
construction, development and/or normal operation of long-lived assets,
except for certain obligations of lessees. This statement amends FAS
No. 19, "Financial Accounting and Reporting by Oil and Gas Producing
Company," and is effective for financial statements issued for fiscal
years beginning after June 15, 2002. Management has not yet determined
the impact of the adoption of FAS No. 143 on the Company's financial
position or results of operations.
In October 2001, the FASB issued FASB Statement No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets," or SFAS 144.
SFAS No. 144 requires that those long-lived assets be measured at the
lower of carrying amount or fair value less cost to sell, whether
reported in continuing operations or in discontinued operations.
Therefore, discontinued operations will no longer be measured at net
realizable value or include amounts for operating losses that have
not yet occurred. SFAS No. 144 is effective for financial statements
issued for fiscal years beginning after December 15, 2001 and,
generally, is to be applied prospectively. The adoption of SFAS 144
did not have a material impact on the Company's financial position
or results of operations.
In April 2002, the Financial Accounting Standards Board ("FASB")
issued FASB Statement No. 145, "Rescission of FASB Statements No. 44
and 64, Amendment of FASB Statement No. 13, and Technical Corrections,"
to update, clarify and simplify existing accounting pronouncements.
FASB Statement No. 4, which required all gains and losses from debt
extinguishment to be aggregated and, if material, classified as an
extraordinary item, net of related tax effect, was rescinded.
Consequently, FASB Statement No. 64, which amended FASB Statement
No. 4, was rescinded because it was no longer necessary. The adoption
of SFAS 145 did not have a material impact on the Company's financial
position or results of operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS 146 addresses
accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and
Other Costs to Exit an Activity (Including Certain Costs Incurred in
a Restructuring)." SFAS No. 146 requires that a liability for a
cost associated with a exit or disposal activity be recognized and
measured initially at fair value when the liability is incurred.
SFAS No. 146 is effective for exit or disposal activities that are
initiated after December 31, 2002, with early application encouraged.
We do not expect the adoption of this statement to have a material
effect on our financial statements.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the three months ended August 31, 2002, net loss decreased $125,406
as compared to the three months ended August 31, 2001. The decrease in
net loss is primarily attributable to higher gross margins, lower
selling expenses, and other income from insurance proceeds.
For the three months ended August 31, 2002, net sales decreased
$149,289 (10.4%) as compared to the three months ended August 31, 2001.
International net sales decreased $161,615, primarily in Europe.
European sales are generally lower in the first fiscal quarter because
of office closings for the summer months. The backlog of international
orders at May 31, 2001 was approximately $109,230 so some of these
orders were shipped in the quarter ended August 31, 2001, which made
sales for that quarter (the first fiscal quarter of 2002) higher than
usual. The backlog at May 31, 2002 was approximately $57,485 so the
sales for the quarter ended August 31, 2002 were lower in comparison.
The general economic conditions in Europe during the quarter ended
August 31, 2002 also contributed to the decrease. Domestic net sales
increased $12,326.
For the three months ended August 31, 2002, cost of sales as a
percentage of sales totaled 71.9%, a decrease of 3.2% as compared to
the three months ended August 31, 2001, which totaled 75.1%. This
decrease is attributable to a reduction in scrap and other
manufacturing efficiencies.
For the three months ended August 31, 2002, selling expenses decreased
$95,346 (25.3%) as compared to the three months ended August 31, 2001.
The decrease is primarily attributable to a decrease in labor and
travel costs.
For the three months ended August 31, 2002, general and administrative
expenses increased $4,445 (4.2%) as compared to the three months ended
August 31, 2001. The increase is primarily attributable to an increase
in labor and insurance costs. Of the labor costs increase, $5,250
represents the period expense attributable to 60,000 shares of common
stock to be issued to the Chief Executive officer for partial
compensation of services, amortized over calendar year 2002, (see
Note H in Results of Operations), offset by a decrease in labor costs
of other employees.
For the three months ended August 31, 2002, product development
expenses increased $15,186 from no expense in the three months ended
August 31, 2001. The increase is attributable to the resumption of
product development.
For the three months ended August 31, 2002, interest expense increased
$350 (10.9%) as compared to the three months ended August 31, 2001.
The increase is primarily attributable to the method of computing
interest by the financing company using "float" days.
For the three months ended August 31, 2002, other income of $52,655 was
realized from the insurance claim settlement of $134,413 for the theft
of inventory at the Company's Mexicali facility, less $81,758 insurance
claim receivable valued at cost.
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
The Company's financial condition at August 31, 2002 and its previous
two fiscal year ends was as follows:
08/31/02 05/31/02 05/31/01
Current Assets $3,317,660 $3,474,312 $3,476,962
Current Liabilities 452,996 634,021 779,462
Working Capital 2,864,664 2,840,291 2,697,500
Line of Credit 1,208 65,669 140,000
Shareholder Equity 3,014,299 3,011,979 2,957,174
Total Assets 3,467,295 3,646,000 3,736,636
Cash increased $79,843 during the three months ended August 31, 2002.
Working capital increased $24,373 during the three months ended
August 31, 2002, primarily attributable to a decrease in accounts
payable. The Company expects to meet all of its cash requirements for
the foreseeable future out of its cash reserves, cash flow, and line
of credit. We may face interruption of production and services due to
increased security measures in response to terrorism. Our business
depends on the free flow of products and services through the channels
of commerce. Recently, in response to terrorists' activities and
threats aimed at the United States, transportation, mail, financial
and other services have been slowed or stopped altogether. Further
delays or stoppages in transportation, mail, financial or other
services could have a material adverse effect on our business, results
of operations and financial condition. Furthermore, we may experience
an increase in operating costs, such as costs for transportation,
insurance and security as a result of the activities and potential
activities. We may also experience delays in receiving payments from
payers that have been affected by the terrorist activities and
potential activities. The U. S. economy in general is being adversely
affected by the terrorist activities and potential activities and any
economic downturn could adversely impact our results of operations,
impair our ability to raise capital or otherwise adversely affect our
ability to grow our business.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following is intended to highlight certain factors that may
affect the financial condition and results of operations of Lancer
and are not meant to be an exhaustive discussion of risks that apply
to companies such as Lancer. Like other businesses, Lancer is
susceptible to macroeconomic downturns in the United States or
abroad, as were experienced in fiscal year 2002, that may affect the
general economic climate and performance of Lancer or its customers.
Aside from general macroeconomic downturns, the additional material
factors that could affect future financial results include, but are
not limited to: Terrorist attacks and the impact of such events;
diminished access to raw materials that directly enter into our
manufacturing process; shipping labor disruption or other major
degradation of the ability to ship our products to end users;
inability to successful control our margins which are affected by
many factors including competition and product mix; protracted
shutdown of the US border due to an escalation of terrorist or
counter terrorist activity; the operating and financial covenants
contained in our credit line which could limit our operating
flexibility, any changes in our business relationships with
international distributors or the economic client they operate in;
any event that has a material adverse impact on our foreign
manufacturing operations may adversely affect our operations as a
whole, failure to manage the future expansion of our business could
have a material adverse affect on our revenues and profitability;
possible costs in complying with government regulations and the
delays in receiving required regulatory approvals or the enactment
of new adverse regulations or regulatory requirements; numerous
competitors, some of which have substantially greater financial
and other resources than we do; potential claims and litigation
brought by patients or dental professionals alleging harm caused
by the use of or exposure to our products; quarterly variations in
operating results caused by a number of factors, including business
and industry conditions and other factors beyond our control. All
these factors make it difficult to predict operating results for
any particular period.
Item 4. PROCEDURES AND CONTROLS
Within the 90 days prior to the date of this report, the Company
carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Company's
Chief Executive Officer and Director of Financial Planning, of the
effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Exchange Act Rule 13a-14. Based
upon that evaluation, the Chief Executive Officer and Director of
Financial Planning concluded that the Company's disclosure controls
and procedures are effective. There were no significant changes in
the Company's internal controls or in other factors that could
significantly affect these controls subsequent to the date of their
evaluation.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS Not Applicable
Item 2. CHANGES IN SECURITIES Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
Item 5. OTHER INFORMATION Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
There were no Form 8-k reports filed during the quarter.
(a) Exhibits
99.1 Certifications of Chief Executive Officer and Director of
Financial Planning pursuant to 18 U.S. Section 135D is adopted
pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2002.
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.
LANCER ORTHODONTICS, INC.
Registrant
Date May 16, 2003 By /s/ Zackary Irani
Zackary Irani,
Chief Executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Statement Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 by Principal Executive Officer and Principal Financial
Officer Regarding Facts and Circumstances Relating to Exchange
Act Filings
I, Zackary Irani, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Lancer Orthodontics, 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 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 statements, 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 period presented in this
quarterly report;
4. The registrant's other certifying officer 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 we 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 this 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 as of the Evaluation Date;
5. The registrant's other certifying officer 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 weaknesses 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 officer 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.
Date: May 16, 2003
/s/Zackary Irani
Chief Executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Statement Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 by Principal Executive Officer and Principal Financial
Officer Regarding Facts and Circumstances Relating to Exchange
Act Filings
I, John Dodge, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Lancer Orthodontics, 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 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 statements, 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 period presented in this
quarterly report;
4. The registrant's other certifying officer 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 we 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 this 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 as of the Evaluation Date;
5. The registrant's other certifying officer 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 weaknesses 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 officer 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.
Date: May 16, 2003
/s/John Dodge
Director of Financial Planning
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-QSB of Lancer
Orthodontics, Inc. for the annual period ended May 31, 2002
(the Report) as filed with the Securities and Exchange Commission
on the date hereof, I, Zackary Irani, Chief Executive Officer of
the Company, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
/s/ Zackary Irani
Zackary Irani
Chief Executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-QSB of Lancer
Orthodontics, Inc. for the annual period ended May 31, 2002 (the
Report) as filed with the Securities and Exchange Commission on
the date hereof, I, John Dodge, Director of Financial Planning,
of the Company, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results
of operations of the Company.
/s/ John Dodge
John Dodge
Director of Financial Planning