UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2001
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 52-2278236
------------------- --------------------------
(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) 633-7047
--------- ----------------
(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 November 12, 2001, the Company had 19,515,620 issued and outstanding
shares of common stock.
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
-------------------------------------
FINANCIAL REPORTS
AT
SEPTEMBER 30, 2001 AND 2000
-------------------------------------
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
Independent Accountants' Report on Interim Financial Information F-2
Balance Sheets at September 30, 2001 (Unaudited) and December 31, 2000 F-3
Statements of Changes in Stockholders' Deficit for the Three
and Nine Months Ended September 30, 2001 and 2000 (Unaudited) F-4 to F-5
Statements of Operations for the Three Months and Nine Months
Ended September 30, 2001 and 2000 and for the Period From
Date of Inception (February 1, 1994) through
September 30, 2001 (Unaudited) F-6 to F-7
Statements of Cash Flows for the Nine Months Ended
September 30, 2001 and 2000 and for the Period
From Date of Inception (February 1, 1994) through
September 30, 2001 (Unaudited) F-8 to F-11
Notes to Financial Statements F-12 to F-14
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,
2001, the related statements of changes in stockholders' deficit and operations
for the three months and nine months ended September 30, 2001 and 2000 and for
the period from date of inception (February 1, 1994) through September 30, 2001,
and the related statements of cash flows for the nine months ended September 30,
2001 and 2000 and for the period from date of inception (February 1, 1994)
through September 30, 2001. 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 in
accordance with auditing standards generally accepted in the United States of
America, 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 such financial statements 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, the balance sheet of L.A.M.
Pharmaceutical, Corp. as of December 31, 2000 (presented herein), and the
related statements of changes in stockholders' deficit, operations, and cash
flows for the year then ended, and for the period from the date of inception
(February 1, 1994) through December 31, 2000 (not presented herein), and in our
report dated February 9, 2001, we expressed an unqualified opinion on those
financial statements. We have not performed any auditing procedures subsequent
to the date of our previous report.
As stated in Note D, the financial statements have been restated to
reclassify the presentation of the loan receivable-officer and the correction of
an error in the statements of cash flows.
/s/ Rotenberg & Co., LLP
Rotenberg & Co., LLP
Rochester, New York
November 5, 2001, Except Note D
Dated December 4, 2001
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
BALANCE SHEETS
- --------------------------------------------------------------------------------
(Unaudited)
September December
30, 31,
2001 2000
- --------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and Cash Equivalents $ 318,705 $ 1,545,692
Cash Held by Broker - Debentures -- 357,250
Accounts Receivable 40,401 75,000
Inventory - Raw Materials 110,750 121,125
Prepaid Expenses -- 2,639
- --------------------------------------------------------------------------------
Total Current Assets 469,856 2,101,706
Property and Equipment - Net of Accumulated Depreciation 116,367 19,601
Other Assets
Patents and Trademarks - Net of Accumulated Amortization 382,948 336,196
- --------------------------------------------------------------------------------
Total Assets $ 969,171 $ 2,457,503
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts Payable and Accrued Expenses $ 344,507 $ 326,762
Convertible Debentures -- 1,658,250
- --------------------------------------------------------------------------------
Total Current Liabilities 344,507 1,985,012
Other Liabilities
Due to Stockholders 1,266,837 1,266,837
Deferred Royalty Revenue 207,360 207,360
- --------------------------------------------------------------------------------
Total Liabilities 1,818,704 3,459,209
- --------------------------------------------------------------------------------
Stockholders' Deficit
Common Stock - $.0001 Par; 50,000,000 Shares Authorized;
19,515,620 and 13,998,930 Shares Issued
and Outstanding as of September 30, 2001 and 1,952 1,400
December 31, 2000, Respectively
Additional Paid-In Capital 16,536,552 8,812,199
Less: Loan Receivable-Officer (755,000)
Deficit Accumulated During Development Stage (16,633,037) (9,815,305)
- --------------------------------------------------------------------------------
Total Stockholders' Deficit (849,533) (1,001,706)
- --------------------------------------------------------------------------------
Total Liabilities and Stockholders' Deficit $ 969,171 $ 2,457,503
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of this financial statement. See
Accountants' Review Report
Deficit
Accumulated
Additional Loan During Total
Three Months and Nine Months Ended Number Common Paid-In Receivable Development Stockholders
September 30, 2001 and 2000 of Shares Stock Capital from Officer Stage Deficit
- --------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1999 10,392,500 $ 1,039 $3,461,483 $ -- $(5,038,297) $(1,575,775)
Capital Contribution - Interest Expense -- -- 53,846 -- -- 53,846
Conversion Premium on Convertible Debentures -- -- 275,000 -- -- 275,000
Net Loss for the Period - Unaudited -- -- -- -- (916,367) (916,367)
- --------------------------------------------------------------------------------------------------------------------------
Balance - June 30, 2000 (Unaudited) 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 (Unaudited) 11,342,500 $ 1,134 $4,464,614 $ -- $(6,380,433) $(1,914,685)
- --------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of this financial statement. See
Accountants' Review Report
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (UNAUDITED) - continued
Deficit
Accumulated
Additional Loan During Total
Three Months and Nine Months Ended Number Common Paid-In Receivable Development Stockholders
September 30, 2001 and 2000 of Shares Stock Capital from Officer Stage Deficit
- ----------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 2000 13,998,930 $ 1,400 $8,812,199 $ -- $(9,815,305) $(1,001,706)
Capital Contribution - Interest Expense -- -- 55,105 -- -- 55,105
Debentures Converted to Common Stock 127,333 13 207,714 -- -- 207,727
Stock Options Exercised 173,300 17 112,433 -- -- 112,450
Stock Options Issued -- -- 404,700 -- -- 404,700
Common Shares Issued as Compensation for 110,000 11 309,989 -- -- 310,000
Services Rendered
Warrants Issued to Hockbury Limited and GKN -- -- 1,100,000 -- -- 1,100,000
Securities
Sale of Shares Under the Equity Line of Credit 439,021 44 483,592 -- -- 483,636
Agreement
Loan to Officer -- -- -- (1,075,000) -- (1,075,000)
Loan Repayments from Officer -- -- -- 90,000 -- 90,000
Net Loss for the Period - Unaudited -- -- -- -- (2,582,428) (2,582,428)
- ----------------------------------------------------------------------------------------------------------------------------
Balance - June 30, 2001 (Unaudited)
(Restated) 14,848,284 1,485 11,485,732 (985,000) (12,397,733) (1,895,516)
Capital Contribution - Interest Expense -- -- 30,642 -- -- 30,642
Debentures Converted to Common Stock 2,689,230 269 1,403,514 -- -- 1,403,783
Common Shares Issued - Debenture Conversion 1,143,106 114 777,198 -- -- 777,312
Premium 835,000 84 567,716 -- -- 567,800
Common Shares Issued as Compensation for
Services Rendered
Stock Options Issued -- -- 2,271,750 -- -- 2,271,750
Loan Repayments from Officer -- -- -- 230,000 -- 230,000
Net Loss for the Period - Unaudited -- -- -- -- (4,235,304) (4,235,304)
- ----------------------------------------------------------------------------------------------------------------------------
Balance - September 30, 2001 (Unaudited) 19,515,620 $ 1,952 $16,536,552 $(755,000) $(16,633,037) $ (849,533)
(Restated)
- ----------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of this financial statement. See
Accountants' Review Report
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
STATEMENTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
Date of Three Months Ended
Inception
(February 1, 1994) September 30,
Through
September 30, 2001 2001 2000
- --------------------------------------------------------------------------------
Revenues
Licensing Revenue $ 500,000 $ -- $ --
- --------------------------------------------------------------------------------
Expenses
Interest Expense 868,624 82,265 58,600
General and Administrative 2,858,746 349,991 181,980
Research and Development 2,353,264 193,470 97,575
- --------------------------------------------------------------------------------
6,080,634 625,726 338,155
Financial Accounting Expenses
Not Requiring the Use of Cash During
the Period:
Depreciation and Amortization 107,250 10,831 8,785
Stock Options and Awards Granted to
Officers, Directors, Investors and
Investor Relations Consultants 5,285,592 2,839,550 --
Conversion Premium on Convertible 4,424,405 777,312 85,260
Debentures
Warrants Issued on Equity Line of Credit 1,100,000 -- --
- --------------------------------------------------------------------------------
Total Expenses 16,997,881 4,253,419 432,220
- --------------------------------------------------------------------------------
Loss Before Other Income
and (Expenses) (16,497,881) (4,253,419) (432,220)
- --------------------------------------------------------------------------------
Other Income and (Expenses)
Interest Income 72,204 18,115 6,431
Loss on Investment in Affiliate (207,360) -- --
- --------------------------------------------------------------------------------
Total Other Income and (Expenses) (135,156) 18,115 6,431
- --------------------------------------------------------------------------------
Net Loss for the Period $(16,633,037) $(4,235,304) $(425,769)
- --------------------------------------------------------------------------------
Weighted Average Number
of Common Shares Outstanding 15,366,725 10,929,910
Loss per Common Share - Basic and $ (0.28) $ (0.04)
Diluted
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of this financial statement. See
Accountants' Review Report
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
STATEMENTS OF OPERATIONS (UNAUDITED) - continued
- --------------------------------------------------------------------------------
Nine Months Ended
September 30,
--------------------------
2001 2000
- --------------------------------------------------------------------------------
Revenues
Licensing Revenue $ 300,000 $ --
- --------------------------------------------------------------------------------
Expenses
Interest Expense 203,601 178,976
General and Administrative 1,159,621 553,525
Research and Development 334,195 247,564
- --------------------------------------------------------------------------------
1,697,417 980,065
Financial Accounting Expenses
Not Requiring the Use of Cash During
the Period:
Depreciation and Amortization 28,332 21,907
Stock Options and Awards Granted to
Officers, Directors, Investors and
Investor Relations Consultants 3,554,250 --
Conversion Premium on Convertible 777,312 360,260
Debentures
Warrants Issued on Equity Line of Credit 1,100,000 --
- --------------------------------------------------------------------------------
Total Expenses 7,157,311 1,362,232
- --------------------------------------------------------------------------------
Loss Before Other Income and (Expenses) (6,857,311) (1,362,232)
- --------------------------------------------------------------------------------
Other Income and (Expenses)
Interest Income 39,579 20,095
Loss on Investment in Affiliate -- --
- --------------------------------------------------------------------------------
Total Other Income and (Expenses) 39,579 20,095
- --------------------------------------------------------------------------------
Net Loss for the Period $ (6,817,732) $(1,342,137)
- --------------------------------------------------------------------------------
Weighted Average Number
of Common Shares Outstanding - Basic and Diluted 14,673,967 10,572,944
Loss per Common Share - Basic and $ (0.47) $ (0.13)
Diluted
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of this financial statement. See
Accountants' Review Report
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
STATEMENTS OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
Date of Three Months Ended
Inception
(February 1, 1994) September 30,
Through
September 30, 2001 2001 2000
- --------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net Loss for the Period
$(16,633,037) $(4,235,304) $(425,769)
Adjustments to Reconcile Net Loss for
the Period
to Cash Flows from Operating
Activities:
Depreciation and Amortization 107,250 10,831 8,785
Capital Contributions:
Interest Expense 553,908 30,642 26,920
Stock Options and Awards - Officers, --
Directors,
Investors and Investor Relations 5,285,592 2,839,550 --
Consultants
Warrants Issued - Equity Line of Credit 1,100,000 -- --
Conversion Premium on Convertible 4,424,405 777,312 85,260
Debentures
Loss on Investment in Affiliate 207,360 -- --
Changes in Assets and Liabilities:
Accounts Receivable (40,401) (19,470) --
Inventory - Raw Materials (110,750) 4,000 (100,375)
Prepaid Expenses -- -- 2,639
Accounts Payable and Accrued Expenses 420,929 (85,801) 101,770
- --------------------------------------------------------------------------------
Net Cash Flows from Operating Activities (4,684,744) (678,240) (300,770)
- --------------------------------------------------------------------------------
Cash Flows from Investing Activities
Purchases of Property and Equipment (128,237) (383) (5,319)
(Purchases of) Disposals of
Patents and Trademarks, Net (369,305) (77,660) (47,760)
- --------------------------------------------------------------------------------
Net Cash Flows from Investing Activities (497,542) (78,043) (53,079)
- --------------------------------------------------------------------------------
- continued -
The accompanying notes are an integral part of this financial statement. See
Accountants' Review Report
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
STATEMENTS OF CASH FLOWS (UNAUDITED) - continued
- --------------------------------------------------------------------------------
Date of Three Months Ended
Inception
(February 1, 1994) September 30,
Through
September 30, 2001 2001 2000
- --------------------------------------------------------------------------------
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 (Repayment of) Convertible
Debentures 3,671,593 (108,500) 1,420,500
Proceeds from Exercise of Stock Options 301,600 -- 122,200
Proceeds from Sale of Shares Under
the Equity Line of Credit Agreement 483,636 -- --
(Issuance of) Repayment of
Loan Receivable - Officer, Net (755,000) 230,000 --
(Repayment to) Advances from Stockholders 1,266,837 25,000 --
- --------------------------------------------------------------------------------
Net Cash Flows from Financing Activities 5,500,991 146,500 1,542,700
- --------------------------------------------------------------------------------
Net Increase (Decrease)
in Cash and Cash Equivalents 318,705 (609,783) 1,188,851
Cash and Cash Equivalents - Beginning of -- 928,488 655,174
Period
- --------------------------------------------------------------------------------
Cash and Cash Equivalents - End of Period $ 318,705 $ 318,705 $1,844,025
- --------------------------------------------------------------------------------
NON-CASH INVESTING AND FINANCING ACTIVITIES
- --------------------------------------------------------------------------------
Issuance of Common Stock in
Exchange for Property and Equipment $ 34,020 $ -- $ --
Debentures Converted to Common Stock $ 3,651,593 $1,404,510 $ 440,000
Investment in Affiliate $ 207,360 $ -- $ --
Deferred Royalty Revenue $ (207,360) $ -- $ --
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of this financial statement. See
Accountants' Review Report
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
STATEMENTS OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
Nine Months Ended
September 30,
-------------------------------
2001 2000
- --------------------------------------------------------------------------------
Cash Flows from Operating Activities
Net Loss for the Period $ (6,817,732) $ (1,342,137)
Adjustments to Reconcile Net Loss for
the Period
to Cash Flows from Operating
Activities:
Depreciation and Amortization 28,332 21,907
Capital Contributions:
Interest Expense 85,747 80,766
Stock Options and Awards - Officers,
Directors,
Investors and Investor 3,554,250 --
Relations Consultants
Warrants Issued - Equity Line of Credit 1,100,000 --
Conversion Premium on Convertible 777,312 360,260
Debentures
Loss on Investment in Affiliate -- --
Changes in Assets and Liabilities:
Accounts Receivable 34,599 --
Inventory - Raw Materials 10,375 (125,375)
Prepaid Expenses 2,639 (5,278)
Accounts Payable and Accrued Expenses 139,505 259,373
- --------------------------------------------------------------------------------
Net Cash Flows from Operating Activities (1,084,973) (750,484)
- --------------------------------------------------------------------------------
Cash Flows from Investing Activities
Purchases of Property and Equipment (107,998) (17,165)
(Purchases of) Disposals of
Patents and Trademarks, Net (63,852) (105,736)
- --------------------------------------------------------------------------------
Net Cash Flows from Investing Activities (171,850) (122,901)
- --------------------------------------------------------------------------------
- continued -
The accompanying notes are an integral part of this financial statement. See
Accountants' Review Report
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
STATEMENTS OF CASH FLOWS (UNAUDITED) - continued
- --------------------------------------------------------------------------------
Nine Months Ended
September 30,
-------------------------------
2001 2000
- --------------------------------------------------------------------------------
Cash Flows from Financing Activities
Cash Capital Contributions $ -- $ --
Distributions to Stockholders -- --
Proceeds from Issuance of Common Stock -- --
Proceeds from (Repayment of)
Convertible Debentures (168,500) 1,695,500
Proceeds from Exercise of Stock Options 112,450 122,200
Proceeds from Sale of Shares Under
the Equity Line of Credit Agreement 483,636 --
(Issuance of) Repayment of
Loan Receivable - Officer, Net (755,000) --
(Repayment to) Advances from Stockholders -- (124,000)
- --------------------------------------------------------------------------------
Net Cash Flows from Financing Activities (327,414) 1,693,700
- --------------------------------------------------------------------------------
Net Increase (Decrease)
in Cash and Cash Equivalents (1,584,237) 820,315
Cash and Cash Equivalents - Beginning of 1,902,942 1,023,710
Period
- --------------------------------------------------------------------------------
Cash and Cash Equivalents - End of Period $ 318,705 $ 1,844,025
- --------------------------------------------------------------------------------
NON-CASH INVESTING AND FINANCING ACTIVITIES
- --------------------------------------------------------------------------------
Issuance of Common Stock in
Exchange for Property and Equipment $ -- $ --
Debentures Converted to Common Stock $ 1,611,510 $ 440,000
Investment in Affiliate $ -- $ --
Deferred Royalty Revenue $ -- $ --
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of this financial statement. See
Accountants' Review Report
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Note A -Basis of Presentation
The financial statements of L.A.M. Pharmaceutical, Corp. (L.A.M.)
included herein have been prepared by L.A.M., 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 L.A.M. 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
L.A.M.'s annual report on Form 10-KSB.
The accompanying unaudited interim financial statements reflect all
adjustments of a normal and recurring nature that are, in the opinion of
management, necessary to present fairly the financial position, results
of operations and cash flows of L.A.M. 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 fiscal 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 L.A.M.'s registration with the Securities and Exchange Commission,
costs incurred to raise capital, acquisitions of patents and trademarks
and stock options and awards.
Reclassifications
Certain amounts in the prior year financial statements have been
reclassified to conform with the current year presentation.
Note B -Loan Receivable - Director
Between February and April 2001, Alan Drizen, the Company's President,
borrowed $1,075,000 from L.A.M. The amounts borrowed were used by Mr.
Drizen to purchase shares of L.A.M.'s common stock in an effort to
stabilize the share price in the face of extensive short selling of the
shares. Mr. Drizen has agreed to pay this amount to L.A.M., together
with interest at 6% per year, in accordance with the terms of a
promissory note. The note provides for a series of periodic payments
with the unpaid amount of the note, together with any accrued and unpaid
interest, due on March 31, 2002.
Although Mr. Drizen agreed to secure the repayment of this note,
L.A.M.'s Board of Directors, in view of the fact that proceeds from the
sale of Mr. Drizen's shares of L.A.M.'s common stock would be the
primary source of funds which would be used to repay the Note, did not
require Mr. Drizen to secure the repayment of the Note. Accordingly, the
Note from Mr. Drizen is unsecured. As of September 30, 2001, all
payments required under the terms of Mr. Drizen's promissory note have
been paid and the outstanding principal balance of the note was
$755,000.
As a result of Mr. Drizen's purchases and sales of L.A.M.'s common stock
between October, 2000 and May 2001, L.A.M. is entitled to a recoverable
profit from Mr. Drizen, computed in accordance with 16(b) of the
Securities Exchange Act of 1934, in the amount of $443,565.
Section 16(b) of the Exchange Act allows a corporation to recover any
profits realized by officers, directors, and principal shareholders of a
corporation from the purchase and sale (or sale and purchase) of equity
securities of the corporation within a six-month period. Although
Section 16(b) was designed to prevent the unfair use of information that
may have been obtained by insiders through their relationship to a
corporation, Section 16(b) nevertheless imposes strict liability which
does not depend upon the actual use or possession of inside information
by an insider.
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The formula most frequently used by a corporation to recover profits is
known as the "lowest price in/highest price out" method, by which profit
is computed by matching the highest sale price with the lowest purchase
price within six months, the next highest sale price with the next
lowest purchase price within six months, and so forth, until all shares
have been included in the computation. Although this profit computation
allows for the maximum recovery to the corporation, in the case of
multiple sales and purchases within a six month period, it often results
in a higher profit than the profit actually realized by the insider, and
in some cases may result in a profit when the insider actually incurred
losses from the sales and purchases.
Note C -Equity Line of Credit Agreement
On January 24, 2001, L.A.M. entered into an equity line of credit
agreement with Hockbury Limited in order to establish a source of
funding for the development of L.A.M.'s technology. The equity line of
credit agreement establishes what is sometimes also referred to as an
equity drawdown facility.
Under the equity line of credit agreement, Hockbury Limited has agreed to
provide L.A.M. with up to $20,000,000 of funding during the twenty-month
period following the date of an effective registration statement. During
this twenty-month period, L.A.M. may request a drawdown under the equity
line of credit by selling shares of its common stock to Hockbury Limited,
and Hockbury Limited will be obligated to purchase the shares. L.A.M. may
request a drawdown once every 27 trading days, although L.A.M. is under no
obligation to request any drawdowns under the equity line of credit. L.A.M.
has issued 439,021 shares of common stock and received $483,636 in net
proceeds as of September 30, 2001 under the equity line of credit
agreement.
During the 22 trading days following a drawdown request, L.A.M. will
calculate the amount of shares it will sell to Hockbury Limited and the
purchase price per share. The purchase price per share of common stock
is based on the daily volume weighted average price of L.A.M.'s common
stock during each of the 22 trading days immediately following the
drawdown date, less a discount of 10%. L.A.M. will receive the purchase
price less a placement agent fee payable to GKN Securities equal to 7%
of the aggregate purchase price. Hockbury Limited may then resell all or
a portion of these shares. GKN Securities is the placement agent which
introduced Hockbury Limited to L.A.M. and is a registered broker-dealer.
The minimum amount L.A.M. can draw down at any one time is $100,000. The
maximum amount L.A.M. can draw down at any one time is the lesser of
$1,000,000 or the amount equal to:
o 4.5% of the weighted average price of L.A.M.'s common stock for the sixty
calendar days prior to the date of the drawdown request
o multiplied by the total trading volume of L.A.M.'s common stock for the
sixty calendar days prior to the date of the drawdown request.
Upon closing of the equity line of credit Agreement, L.A.M. paid to
Hockbury Limited's legal counsel,Epstein Becker & Green P.C., $25,000 to
cover its legal and administrative expenses.
Grant of Warrants
As consideration for extending the equity line of credit, L.A.M. granted
Hockbury Limited warrants to purchase 482,893 shares of common stock at
a price of $ 4.56 per share at any time prior to January 24, 2004. As
partial consideration for GKN Securities' services as placement agent in
connection with this offering, L.A.M. granted GKN Securities warrants to
purchase 455,580 shares of
L.A.M. PHARMACEUTICAL, CORP.
(A DEVELOPMENT STAGE COMPANY)
(A DELAWARE CORPORATION)
Miami, Florida
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
common stock at a price of $4.83 per share at any time prior to January
24, 2006. GKN Securities subsequently assigned warrants to purchase
209,500 shares to four employees of GKN Securities.
The fair value of these warrants using customary pricing models was
approximately $1,100,000 on January 24, 2001 and is reflected in
L.A.M.'s financial statements and recorded as an expense during the
three months ended March 31, 2001.
Note D -Restatement
Statement of Cash Flows for the Nine Months Ended September 30, 2001 The
investing activities section of the statement of cash flows has been
restated to correct a clerical error in which the corresponding numbers
for the three month period were incorrectly repeated for the nine month
period ended September 30, 2001 as illustrated below:
------------------------------------------------------------------------
As Originally
Reported Restated
------------------------------------------------------------------------
Purchases of Property and Equipment $ (383) $(107,998)
(Purchases of) Disposals of Patents
and Trademarks - Net (2,660) 11,148
------------------------------------------------------------------------
Net Cash Flows from Investing Activities $(3,043) $(96,850)
------------------------------------------------------------------------
Additional reclassifications on the Balance Sheet and Statements of Cash
Flow for the three and nine months ended September 30, 2001 were made in
the following accounts: Patents and Trademarks, Accounts Payable, and
Accrued Expenses, and Convertible Debentures.
Loan Receivable-Officer
The financial statements have been restated to reclassify the loan
receivable-officer from a current asset to a reduction of stockholders'
equity pursuant to the interpretation of "Staff Accounting Bulletin"
4(G). As repayment of the loan is received capital will be credited
accordingly.
These restatements have no effect on net income (loss) for the periods
restated.
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 L.A.M. 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 L.A.M. with the Securities and Exchange Commission, including
L.A.M.'s Annual Report included in its annual filing on Form 10-KSB.
Overview
The Company's principal present business activities comprise:
o Development of proprietary wound healing and trans-dermal drug delivery
systems; and
o Conducting related pre-clinical studies and clinical trials.
All of L.A.M's products are in the development stage. As a result, L.A.M. has
not generated any significant revenues from the sale of pharmaceutical products.
It could be several years, if ever, before the Company realizes significant
revenue from royalties received pursuant to any license agreements.
Due to the lack of any significant revenues, L.A.M. has relied upon proceeds
realized from the public and private sale of its common stock and convertible
debentures to meet its funding requirements. Funds raised by L.A.M. have been
expended primarily in connection with research, development, clinical studies
and administrative costs. L.A.M. 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, and in the interim it 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, 2001 as compared to the three months ended
September 30, 2000
Research and Development Expenses
Research and development expenses increased during the three months ended
September 30, 2001 as compared with the three months ended September 30, 2000,
primarily as a result of increased clinical studies activity. Costs associated
with these activities tend to fluctuate from period to period depending on the
status and timing of the individual projects in progress.
General and Administrative Expenses
General and administrative expenses increased for the three months ended
September 30, 2001 as compared with the three months ended September 30, 2000,
primarily as a result of costs incurred in connection with additions to senior
management personnel, additional investor relations costs and general overhead
expenses.
The primary components of general and administrative expenses for the three
months ended September 30, 2001 and 2000 were as follows:
2001 2000
---- ----
Officers' salaries $ 105,500 $ 30,000
Employee salaries and benefits 34,665 16,287
Less: Salaries classified as
Research & Development (40,000) (18,000)
Investor Relations 99,208 14,505
Commissions paid on sales of
Convertible Notes 16,697 14,000
Financial Banking and Consulting 10,000 7,000
Filing and Registration Fees 2,541 --
Legal and Auditing 7,977 74,763
Marketing and Business Development 55,662 8,257
Other Supplies and Expenses 57,741 35,168
--------- -----------
Total $ 349,991 $ 181,980
========= =========
Liquidity and Sources of Capital
L.A.M's primary source of liquidity as of September 30, 2001 is cash and cash
equivalent investments of $318,705. Working capital, exclusive of convertible
debentures expected to be converted, decreased from approximately $1,775,000 as
of December 31, 2000 to $125,350 as of September 30, 2001.
L.A.M.'s operations and reductions in current liabilities used approximately
$678,000 in cash during the three months ended September 30, 2001. During this
period L.A.M. also spent $78,043 for patents, trademarks, and equipment
purchases.
Cash required during the three months ended September 30, 2001 came from the use
of existing cash balances and repayment of advances to an officer in the amount
of $230,000. L.A.M. converted the balance of the outstanding debentures into
common shares and issued additional shares and options as an incentive to those
debenture holders that elected to convert during the three months ended
September 30, 2001.
During the three months ended September 30, 2000 L.A.M.'s operations used
$300,770 in cash and spent $53,079 for patent, trademarks, and equipment
purchases. Cash required during this period was generated through sales of
L.A.M.'s convertible debentures of $1,420,500 and $122,200 in proceeds from the
exercise of stock options and the use of existing cash balances.
Results of Operations
Nine months ended September 30, 2001 as compared to the nine months ended
September 30, 2000
Research and Development Expenses
Research and development expenses increased during the nine months ended
September 30, 2001 as compared with the nine months ended September 30, 2000 due
to a higher level of clinical studies activity during the first quarter of the
current year compared with the same quarter in the previous year.
General and Administrative Expenses
General and administrative expenses increased for the nine months ended
September 30, 2001 as compared with the nine months ended September 30, 2000
primarily as a result of costs incurred in connection with obtaining the equity
line of credit and commissions on the sale of convertible notes, additions to
senior management personnel, professional fees, additional investor relations
costs and general overhead expenses.
The primary components of general and administrative expenses for the nine
months ended September 30, 2001 and 2000 were as follows:
2001 2000
---- ----
Officers' salaries $ 162,612 $ 90,000
Employee salaries and benefits 125,582 66,899
Less: Salaries classified as
Research & Development (76,000) (54,000)
Investor Relations 323,050 84,239
Commissions paid on sales of
Convertible Notes 77,551 88,600
Financial Banking and Consulting 194,333 31,500
Filing and Registration Fees 25,550 --
Legal and Auditing 113,061 133,109
Marketing and Business Development 111,606 29,376
Other Supplies and Expenses 102,276 83,802
------------- -----------
Total $ 1,159,621 $ 553,525
=========== =========
Plan of Operations
During the next twelve months ending September 30, 2002 L.A.M. will continue:
o To seek and develop strategic relationships with companies interested in
using L.A.M.'s technology in conjunction with existing and future ethical,
OTC and cosmetic products
o Its program to commercialize its wound healing technology, including:
o completing negotiations for first manufacture;
o seeking distribution channels; and
o seeking licensees and other strategic partners
o To develop its motion sickness patch systems in cooperation with major
multinational partners
o Supporting the next phase of Ixora's program to commercialize L.A.M.'s
sexual dysfunction products
o Testing L.A.M.'s skin care products with a view to licensing the IPM
technology to third parties for use in products which will be classified as
cosmetics or OTC drugs.
During this twelve-month period L.A.M. anticipates hiring up to four additional
technical and marketing employees.
During the next twelve months, L.A.M. expects that it will spend between
$300,000 and $400,000 on research, development, and clinical studies relating to
L.A.M.'s IPM Matrix technology. As of September 30, 2001, L.A.M. had working
capital of approximately $125,350. L.A.M. plans to use its existing financial
resources as well as the proceeds from the sale of its common stock under the
equity line of credit agreement with Hockbury Limited to fund its capital
requirements during this period. It should be noted that substantial funds may
be needed for more extensive research and clinical studies before L.A.M. will be
able to sell any of its products on a commercial basis.
Other than funding its research and development activities and operating losses,
L.A.M. does not have any material capital commitments.
Due to the lack of any significant revenues, L.A.M. has relied upon proceeds
realized from the public and private sale of its common stock and convertible
debentures to meet its funding requirements. Funds raised by L.A.M. have been
expended primarily in connection with research, development, clinical studies
and administrative costs. L.A.M. 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, and in the interim it 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.
PART II
OTHER INFORMATION
Item 2. Changes in Securities
During the three months ending September 30, 2001, the Company:
1. Issued 3,832,336 shares of common stock as a result of the conversion of
certain notes previously sold by the Company and
2. Issued 835,000 shares of common stock to eleven persons for service
rendered.
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 for services rendered during the quarter ending
September 30, 2001 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 familiar with the business and affairs of
the Company. The shares of common stock were acquired for investment purposes
only and without a view to distribution. The certificates representing the
shares of common stock bear a legend 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
No exhibits are filed with this report
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter ending
September 30, 2001.
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/ Joseph Slechta
--------------------------------------------
Joseph Slechta, President and Principal
Financial Officer
Date: December 12, 2001