UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 September 30, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
Commission file No. 0-30641
L.A.M. PHARMACEUTICAL CORP.
---------------------------
(Exact name of registrant as specified in its charter)
Delaware Applied for
------------------- --------------------------
(State of incorporation) (I.R.S. Employer Identification Number)
800 Sheppard Avenue West,
Commercial Unit 1
North York, Ontario, Canada M3H 6B4
(address of principal executive offices) (Zip Code)
(416) 633-3004
--------- ----------------
(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 proceeding 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 [ ]
As of September 30, 2000, the Company had 11,342,500 issued and outstanding
shares of common stock.
PART I
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
September 30, 2000 and 1999
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Independent Accountants' Report on Unaudited Interim
Financial Data F-2
Balance Sheets at September 30, 2000 (Unaudited) and
December 31, 1999 F-3
Statements of Changes in Stockholders' Deficit for the Period
From the Date Of Inception (February 1, 1994) Through
September 30, 2000 (Unaudited) F-4 to F-6
Statements of Operations for the Three Months and Nine
Months Ended September 30, 2000 and 1999 (Unaudited) and
for the Period From the Date of Inception (February 1, 1994)
Through September 30, 2000 (Unaudited) F-7
Statements of Cash Flows for the Three Months and Nine
months Ended September 30, 2000 and 1999 (Unaudited) and
for the Period From the Date of Inception (February 1, 1994)
Through September 30, 2000 (Unaudited) F8 to F-9
Notes to Financial Statements F-9
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
L.A.M. Pharmaceutical, Corp.
Miami, Florida
We have reviewed the accompanying balance sheet of L.A.M. Pharmaceutical,
Corp. (a Development Stage Company) (A Delaware Corporation) as of September 30,
2000 and the related statements of operations, changes in stockholders' deficit
and cash flows for the three months and nine months ended September 30, 2000 and
1999 and for the period from the date of inception (February 1, 1994) through
September 30, 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 sheet as of December 31, 1999 (presented herein), and the
related statements of operations, changes in stockholders' deficit and cash
flows for the two years in the period then ended, and for the period from the
date of inception (February 1, 1994)) through December 31, 1999 (not presented
herein), and in our report dated March 15, 2000, we expressed an unqualified
opinion on those financial statements. We have not performed any auditing
procedures subsequent to the date of our previous report.
Rotenberg & Company, LLP
Rochester, New York
November 2, 2000
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
BALANCE SHEETS
(Unaudited)
September 30, 2000 December 31, 1999
ASSETS
Current Assets
Cash and Cash Equivalents $ 544,025 $ 558,710
Cash Held by Broker - Debentures 1,300,000 465,000
Note Receivable - Debentures 50,000 50,000
Accounts Receivable 75,000 75,000
Inventory - Raw Materials 125,375 --
Prepaid Expenses 5,278 --
Total Current Assets 2,099,678 1,148,710
Property and Equipment - Net of
Accumulated Depreciation 19,082 4,922
Other Assets
Patents and Trademarks - Net of Accumulated
Amortization 319,252 232,417
Total Assets $ 2,438,012 $ 1,386,049
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts Payable and Accrued Expenses $ 371,000 $ 111,627
Convertible Debentures 2,507,500 1,252,000
Total Current Liabilities 2,878,500 1,363,627
Non-Current Liabilities
Due to Stockholders 1,266,837 1,390,837
Deferred Royalty Revenue 207,360 207,360
Total Liabilities 4,352,697 2,961,824
Stockholders' Deficit
Common Stock - $.0001 Par; 50,000,000 Shares
Authorized;
11,342,500 and 10,392,500 Shares Issued and
Outstanding as of September 30, 2000 and
December 31,1999, Respectively 1,134 1,039
Additional Paid in Capital 4,464,614 3,461,483
Deficit Accumulated During
Development Stage (6,380,433) (5,038,297)
Total Stockholders' Deficit (1,914,685) (1,575,775)
Total Liabilities and Stockholders'
Deficit $ 2,438,012 $ 1,386,049
The accompanying notes are an integral part of the financial
statement.
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
For the Period From the Date of Inception (February 1, 1994) Through
September 30, 2000
- -------------------------------------------------------------------------------------------------
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)
-continued-
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
For the Period From the Date of Inception (February 1, 1994) Through September
30, 2000 - Continued
- -------------------------------------------------------------------------------------------------
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 -- -- -- (458,807) (458,807)
- -------------------------------------------------------------------------------------------
Balance - December
31, 1998 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 Options and Awards Granted
- - Compensation for Services
Rendered -- -- 526,316 -- 526,316
Conversion Premium on
Convertible Debentures -- -- 1,252,000 -- 1,252,000
Net Loss
-- -- -- (2,557,643) (2,557,643)
- -------------------------------------------------------------------------------------------
Balance - December
31, 1999 10,392,500 1,039 3,461,483 (5,038,297) (1,575,775)
Capital Contribution - Interest
Expense -- -- 26,923 -- 26,923
Conversion Premium on
Convertible Debentures -- -- 265,000 -- 265,000
Net Loss for the Period -
(Unaudited) -- -- -- (724,566) (724,566)
- -------------------------------------------------------------------------------------------
Balance - March
31, 2000 10,392,500 $1,039 $3,753,406 $(5,762,863) $(2,008,418)
-continued-
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
STATEMENTS OF CHANGES IN STOCKHOLDERS'
DEFICIT
For the Period From the Date of Inception (February 1, 1994) Through September
30, 2000 - Continued
- -------------------------------------------------------------------------------------------------
Deficit
Accumulated
Additional During Total
Common Paid-In Development Stockholders
Shares Stock Capital Stage Equity/(Deficit)
- -------------------------------------------------------------------------------------------------
Balance - March 31, 2000 10,392,500 $1,039 $3,753,406 $(5,762,863) $(2,008,418)
Capital Contribution - Interest
Expense -- -- 26,923 -- 26,923
Conversion Premium on
Convertible Debentures -- -- 10,000 -- 10,000
Net Loss for the Period -
(Unaudited) -- -- -- (191,801) (191,801)
- -------------------------------------------------------------------------------------------
Balance - June 30, 2000 10,392,500 1,039 3,790,329 (5,954,664) (2,163,296)
- -------------------------------------------------------------------------------------------
Capital Contribution - Interest
Expense -- -- 26,920 -- 26,920
Conversion Premium on
Convertible Debentures -- -- 85,260 -- 85,260
Debentures Converted to Common
Stock 780,000 78 439,922 -- 440,000
Stock Options Exercised 170,000 17 122,183 -- 122,200
Net Loss for the Period -
(Unaudited) -- -- -- (425,769) (425,769)
- --------------------------------------------------------------------------------------------
Balance - September 30, 2000 11,342,500 $1,134 $4,464,614 $(6,380,433) (1,914,685)
- --------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial
statement.
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended September 30, 2000 and 1999 and for
the Period From the Date of Inception (February 1, 1994) Through
September 30, 2000
- --------------------------------------------------------------------------------
Date of
(Unaudited) (Unaudited) Inception
(February 1,
Nine Months Ended Three Months Ended 1994)
September 30, September 30, Through
September 30,
2000 1999 2000 1999 2000
- --------------------------------------------------------------------------------
Total Revenue $ -- $ -- $ -- $ -- $ 200,000
- --------------------------------------------------------------------------------
Expenses
Research and Development 247,564 119,178 183,575 60,891 1,958,343
General and Administrative 553,525 185,044 145,980 56,222 2,209,817
Interest Expense 178,976 83,786 58,600 29,940 552,395
Conversion Premium 360,260 225,000 85,260 225,000 1,612,260
Depreciation and
Amortization 21,907 5,303 8,785 2,213 64,717
- --------------------------------------------------------------------------------
Total Expenses 1,362,232 618,311 432,200 374,266 6,397,532
- --------------------------------------------------------------------------------
Loss From Operations (1,362,232) (618,311) (432,200) (374,266) (6,197,532)
- --------------------------------------------------------------------------------
Other Income (Expense)
Interest Income 20,095 4,569 6,431 -- 24,459
Loss on Investment in
Affiliate -- -- -- -- (207,360)
- --------------------------------------------------------------------------------
Total Other Income
(Expense) 20,095 4,569 6,431 -- (182,901)
- --------------------------------------------------------------------------------
Net Loss $(1,342,137)$(613,742)$(425,769)$(374,266)$(6,380,433)
- --------------------------------------------------------------------------------
Loss Per Common
Share - Basic
and Diluted $ (0.13) $ (0.06) $ (0.04) $(0.04) $ (0.58)
- --------------------------------------------------------------------------------
Weighted Average Number
of Common Shares
Outstanding 10,572,944 10,332,500 10,929,910 10,332,500
- ------------------------------------------------------------------------
The accompanying notes are an integral part of the financial
statement.
L.A.M. PHARMACEUTICAL CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
STATEMENTS OF CASH FLOWS
For the Three Months and Nine Months Ended September 30, 2000 and 1999 and for
the Period From the Date of Inception (February 1, 1994) Through September 30,
2000
- --------------------------------------------------------------------------------
Date of
(Unaudited) (Unaudited) Inception
(February 1,
Nine Months Ended Three Months Ended 1994)
September 30, September 30, Through
September 30,
2000 1999 2000 1999 2000
- --------------------------------------------------------------------------------
Cash Flows from
Operating Activities
Net Loss $(1,342,137) $(613,742) $(425,769) $(374,266) $(6,380,433)
Adjustments to
Reconcile Net Loss to
Net Cash Flows From
Operating Activities:
Depreciation and
Amortization 21,907 5,303 8,785 2,213 64,717
Capital Contributions:
Interest Expense 80,766 83,786 26,920 29,940 441,241
Conversion Premium
on Debentures 360,260 225,000 85,260 225,000 1,612,260
Loss on Investment
in Affiliate -- -- -- -- 207,360
Changes in Assets
and Liabilities:
Accounts Receivable -- (18,700) -- 8,000 (75,000)
Inventory - Raw
Materials (125,375) -- (100,375) -- (125,375)
Prepaid Expenses (5,278) -- 2,639 -- (5,278)
Accounts Payable
and Accrued Expenses 259,373 92,853 101,770 (95,763) 371,000
Due to Stockholders (124,000) -- -- -- 1,266,837
Other -- -- 466 -- (669)
Net Cash Flows from
Operating Activities (874,484) (225,034) (300,770) (205,545) (2,622,671)
-------------------------------------------------------
Cash Flows from
Investing Activities
Equipment (17,165) -- (5,319) -- (22,251)
Patents and Trademarks (105,736) (94,769) (47,760) (3,143) (346,779)
-------------------------------------------------------
Net Cash Flows from
Investing Activities (122,901) (94,769) (53,079) (3,143) (369,029)
-------------------------------------------------------
Cash Flows from
Financing Activities
Cash Capital Contributions -- -- -- -- 162,200
Distributions to Stockholders -- -- -- -- (68,660)
Proceeds from Issuance of
Common Stock -- -- -- -- 438,785
Proceeds from Convertible
Debentures 1,695,500 125,000 1,420,500 225,000 2,897,500
Stock Options and
Awards Granted -- -- -- -- 1,283,700
Note Payable -- -- -- (10,640) --
Proceeds from the
Exercise of Stock
Options 122,200 -- 122,200 -- 122,200
------------------------------------------------------
Net Cash Flows from
Financing Activities 1,817,700 125,000 1,542,700 214,360 4,835,725
--------------------------------------------------------
Net Increase in Cash
and Cash Equivalents 820,315 (194,803) 1,188,851 5,672 1,844,025
Cash and Cash
Equivalents -
Beginning 1,023,710 410,577 655,174 210,102 --
--------------------------------------------------------
Cash and Cash
Equivalents - Ending 1,844,025 215,774 1,844,025 215,774 1,844,025
--------------------------------------------------------
L.A.M. PHARMACEUTICAL CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
NON-CASH INVESTING AND FINANCING ACTIVITIES
- --------------------------------------------------------------------------------
Date of
(Unaudited) (Unaudited) Inception
(February 1,
Nine Months Ended Three Months Ended 1994)
September 30, September 30, Through
September 30,
2000 1999 2000 1999 2000
- --------------------------------------------------------------------------------
Issuance of Common
Stock in Exchange
for Property and
Equipment $ -- $ -- $ -- $ -- $ 34,020
Debentures Converted
to Common Stock $ 440,000 $ -- 440,000 $ -- $440,000
Investment in Affiliate $ -- $ -- $ -- $ -- $207,360
Deferred Revenue $ -- $ -- $ -- $ -- $207,360
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial
statement.
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
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 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 or 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.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Quarterly Report on Form 10-QSB contains certain statements of a
forward-looking nature relating to future events or the future financial
performance of the Company. Such statements are only predictions and the actual
events or results may differ materially from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below as well as those discussed in other
filings made by the Company with the Securities and Exchange Commission,
including the Company's Annual Report included in its initial registration
statement on Form 10-SB.
Overview
Since its inception in 1994, the Company has been engaged in research and
development activities and organizational efforts, including:
o Identification and licensing of novel and proprietary pharmaceuticals;
o Development of a proprietary drug delivery system;
o Conducting pre-clinical studies and clinical trials;
o Recruiting scientific and management personnel;
o Establishing laboratory facilities; and
o Raising capital.
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 pharmaceutical products.
It could be several years, if ever, before the Company may recognize revenues
from royalties received pursuant to any license agreements since the Company
does not expect to sell its products directly to the public. Revenues since the
Company's inception have been limited to payments received from a licensee
pursuant to a research and development cost reimbursement agreement and interest
income on invested cash balances.
Due to the lack of any significant revenues, the Company has relied upon
proceeds from the private sale of its common stock and convertible debentures to
meet its funding requirements. Funds raised by the Company have been expended
primarily in 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 to fund its operations through the sale of
securities, debt financing or other arrangements. However, there can be no
assurance that such financing will be available or be available on favorable
terms.
Results of Operations
Three months ended September 30, 2000 as compared to the three months ended
September 30, 1999
Research and Development Expenses
Research and development expenses increased by $72,684 (119.4%) to $133,575 for
the three months ended September 30, 2000 from $60,891 for the three months
ended September 30, 1999. The increase is primarily attributable to an increase
in contracted research costs incurred in conducting clinical trials. These costs
tend to fluctuate from period to period depending on the status of the Company's
research projects and the timing of clinical trials.
General and Administrative Expenses
General and administrative expenses increased by $89,758 (159.6%) to $145,980
for the three months ended September 30, 2000 from $56,222 for the three months
ended September 30, 1999. The increase in general and administrative expenses
was attributable to the Company's efforts in raising capital, restructuring its
business activities, and registering the Company's common stock.
The primary components of general and administrative expenses for the three
months ended September 30, 2000 and 1999 were as follows:
2000 1999
---- ----
Officer's salary $ 30,000 $ 30,000
Employee salaries and benefits 36,928 2,658
Less: Salaries classified as
Research & Development (74,642) (30,890)
Investor Relations 16,640 16,254
Commissions paid on sales of
Convertible Notes 14,000 ---
Financial Consulting 7,000 7,000
Legal and Auditing 74,763 10,248
Other Supplies and Expenses 41,291 20,952
----------- ------------
Total $ 145,980 $ 56,222
========= ==========
Interest Expense
Interest expense for the three months ended September 30, 2000 increased by
$28,660 (95.7%) to $58,600 as compared with $29,940 for the three months ended
September 30, 1999. The increase represents the interest accrued for the quarter
on the convertible debentures that were issued during the fourth quarter of 1999
and the nine months ended September 30, 2000.
Conversion Premium
Conversion premium on the convertible debentures for the three months ended
September 30, 2000 decreased by $139,740 (62.1%) to $85,260 as compared with
$225,000 for the three months ended September 30, 1999.
The decrease reflects the difference between the fair value of the common stock
and the conversion price based on the amount of convertible debentures sold in
each respective quarter.
Depreciation and Amortization
Depreciation and amortization increased by $6,572 (297.0%) to $8,785 for the
three months ended September 30, 2000 as compared with $2,213 for the three
months ended September 30, 1999. The increase was attributable primarily to the
amortization of patents and trademarks acquired during 1999.
Other Income
Other income, which is comprised only of interest income, was $6,432 for the
three months ended September 30, 2000 as compared with $0 for the three months
ended September 30, 1999. The increase was attributed to the increase in
invested cash as a result of the debentures that were issued during the fourth
quarter of 1999 and the nine months ended September 30, 2000.
Nine months ended September 30, 2000 as compared to the nine months ended
September 30, 1999
Research and Development Expenses
Research and development expenses increased by $128,386 (107.7%) to $247,564 for
the nine months ended September 30, 2000 from $119,178 for the nine months ended
September 30, 1999. The increase is primarily attributable to an increase in
contracted research costs incurred in conducting clinical trials. These costs
tend to fluctuate from period to period depending on the status of the Company's
research projects and the timing of clinical trials.
General and Administrative Expenses
General and administrative expenses increased by $368,481 (199.1%) to $553,525
for the nine months ended September 30, 2000 from $185,044 for the nine months
ended September 30, 1999. The increase in general and administrative expenses
was attributable to the Company's efforts in raising capital, restructuring its
business activities, and registering the Company's common stock.
The primary components of general and administrative expenses for the nine
months ended September 30, 2000 and 1999 were as follows:
2000 1999
---- ----
Officer's salary $ 90,000 $ 90,000
Employee salaries and benefits 225,186 51,249
Less: Salaries classified as
Research & Development (212,287) (134,878)
Investor Relations 84,239 49,294
Commissions paid on sales of
Convertible Notes 88,600 --
Financial Consulting 31,500 32,261
Legal and Auditing 133,109 65,073
Other Supplies and Expenses 113,178 32,045
---------- ------------
Total $ 553,525 $ 185,044
========= =========
Interest Expense
Interest expense for the nine months ended September 30, 2000 increased by
$95,190 (113.6%) to $178,976 as compared with $83,786 for the nine months ended
September 30, 1999. The increase represents the interest accrued for the nine
months on the convertible debentures that were issued during the fourth quarter
of 1999 and the nine months ended September 30, 2000.
Conversion Premium
Conversion premium on the convertible debentures for the nine months ended
September 30, 2000 increased by $135,260 (60.1%) to $360,260 as compared with
$225,000 for the nine months ended September 30, 1999. The increase reflects the
difference between the fair value of the common stock and the conversion price
based on the amount of convertible debentures sold in each respective period.
Depreciation and Amortization
Depreciation and amortization increased by $16,604 (313.1%) to $21,907 for the
nine months ended September 30, 2000 as compared with $5,303 for the nine months
ended September 30, 1999. The increase was attributable primarily to the
amortization of patents and trademarks acquired during 1999.
Other Income
Other income, which is comprised only of interest income, was $20,095 for the
nine months ended September 30, 2000 as compared with $4,569 for the nine months
ended September 30, 1999. The increase was attributed to the increase in
invested cash as a result of the debentures that were issued during the fourth
quarter of 1999 and the nine months ended September 30, 2000.
Liquidity and Sources of Capital
The Company's primary source of liquidity as of September 30, 2000 is cash and
cash equivalent investments of approximately $544,000 and cash held by brokers
on the sale of convertible debentures of $1,300,000. The deficiency in working
capital, net of the liability for the convertible debentures, increased from a
negative $215,000 as of December 31, 1999 to a negative $779,000 as of September
30, 2000.
The Company's operations used approximately $874,000 in cash during the nine
months ended September 30, 2000. During this period the Company also spent
approximately $106,000 on patent and trademark applications and $17,000 for
equipment purchases. Cash required during the nine months ended September 30,
2000 was generated through sales of convertible debentures of $1,695,500 and
$122,200 in proceeds from the exercise of stock options.
During the nine months ended September 30, 1999 the Company's operations used
approximately $225,000 in cash and the Company spent approximately $95,000 on
patent and trademark applications. Cash required during this period was
generated through sales of the Company's convertible debentures of $125,000 and
the use of existing cash balances.
The Company's operations used approximately $301,000 in cash during the quarter
ended September 30, 2000 as compared with $204,000 for the quarter ended
September 30, 1999. The Company spent approximately $48,000 and $3,000 on
patents and trademark applications and $5,000 and $1,000 on equipment purchases
for the quarters ended September 30, 2000 and 1999, respectively. Cash required
during these periods was derived primarily from the sale of convertible
debentures of $1,420,500 and $225,000, respectively.
During the next twelve months, the Company expects that it will spend between
$110,000 and $150,000 on research, development, and clinical studies, exclusive
of amounts which the Company expects to be paid by a licensee for clinical
studies relating to the Company's sexual dysfunction drug. As of September 30,
2000 the Company had working capital of approximately $1,700,000 (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 and convertible debentures to fund its research and development activities
and its capital requirements during the next twelve months. 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 that 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 next twelve months 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 a licensee, 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 the next twelve months the Company does not anticipate hiring more
than two employees.
PART II
OTHER INFORMATION
Item 2. Changes in Securities
During the three months ending September 30, 2000, the Company:
1. Issued 780,000 shares of its common stock as a result of the conversion of
certain convertible notes previously sold by the Company and
2. Issued 170,000 shares of its common stock as the result of the exercise of
certain options previously granted by the Company.
With respect to the foregoing, the shares issued upon the conversion of
the notes were issued in reliance upon the exemption provided by Section 3(a)(9)
of the Securities Act of 1933.
The shares issued upon the exercise of the options during the quarter
ending September 30, 2000 were not registered under the Securities Act of 1933
but were sold in reliance upon the exemption provided by Section 4(2) of the
Act. The persons who acquired these shares were either accredited or
sophisticated investors. The shares of common stock were acquired for investment
purposes only and without a view to distribution. The persons who acquired these
shares were fully informed and advised about matters concerning the Company,
including the Company's business, financial affairs and other matters. The
persons acquired these shares for their own accounts. The certificates
representing the shares of common stock bear legends stating that the shares 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 are "restricted" securities
as defined in Rule 144 of the Securities and Exchange Commission.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter ending
September 30, 2000.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized
L.A.M. PHARMACEUTICAL CORP.
By: /s/ Alan Drizen
--------------------------------------------
Alan Drizen, Chief Executive Officer
By: /s/ Avi Bodenstein
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Avi Bodenstein, Principal Financial Officer
Date: November 16, 2000