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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549
 FORM 10-QSB þ
    
    Quarterly Report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2004
 or
 o
    
    Transition Report under Section 13 or
15 (d) of the Securities Exchange Act of 1934
 Commission file No. 000-30641 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
Toronto, Ontario, Canada M3H 6B4 
  (877) 526-7717 
  Check 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 past 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   
o As of November 9, 2004, we had 64,452,713 issued and outstanding shares of
common stock.




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TABLE OF CONTENTS  CERTIFICATIONS PURSUANT TO SECTION 302CERTIFICATIONS PURSUANT TO SECTION 906    Table of Contents  INDEX PART I FINANCIAL INFORMATIONItem 1 Financial StatementsBalance Sheets at September 30, 2004 (Unaudited) and December 31, 2003
    
    
    4Statements of Changes in Stockholders Equity (Deficit) for the Nine Months Ended September 30, 2004 and 2003 (Unaudited)
    
    
    5Statements of Operations for the Three Months Ended September 30, 2004 and 2003 (Unaudited)
    
    
    6Statements of Operations for the Nine Months Ended September 30, 2004 and 2003 (Unaudited)
    
    
    7Statements of Cash Flows for the Nine Months Ended September 30, 2004 and 2003 (Unaudited)
    
    
    8Notes to Financial Statements
    
    
    10Item 2 Managements Discussion and Analysis or Plan of Operation.
    
    
    12Item 3 Controls and Procedures
    
    
    17PART II OTHER INFORMATIONItem 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    17Item 6 Exhibits
    
    
    17
 2




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PART I
FINANCIAL INFORMATION 
 Item. 1 Financial Statements. L.A.M. PHARMACEUTICAL, CORP. (A DELAWARE CORPORATION)
Lewiston, New York   
 
 3




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L.A.M. PHARMACEUTICAL, CORP.
(A DELAWARE CORPORATION)
Lewiston, New York 
 BALANCE SHEETS (Unaudited)
    
    (Restated)September 30,
    
    December 31,2004
    
    2003ASSETSCurrent AssetsCash and Cash Equivalents
    
    $
    75,151
    
    
    $
    25,132Accounts Receivable, net
    
    
    7,702
    
    
    
    8,936Inventory
    
    
    451,020
    
    
    
    482,667Prepaid Expenses
    
    
    99,523
    
    
    
    73,560Total Current Assets
    
    
    633,396
    
    
    
    590,295Property and Equipment  Net of Accumulated Depreciation
    
    
    80,195
    
    
    
    100,020Other AssetsPatents and Trademarks  Net of Accumulated Amortization
    
    
    650,812
    
    
    
    591,543Total Assets
    
    $
    1,364,403
    
    
    $
    1,281,858LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current LiabilitiesAccounts Payable and Accrued Expenses
    
    $
    717,810
    
    
    $
    1,027,561Current Portion of Deferred Licensing Revenue
    
    
    112,500
    
    
    
    Total Current Liabilities
    
    
    830,310
    
    
    
    1,027,561Other LiabilitiesDue to Stockholders
    
    
    149,545
    
    
    
    149,545Deferred Licensing Revenue
    
    
    57,360
    
    
    
    207,360Total Liabilities
    
    
    1,037,215
    
    
    
    1,384,466Stockholders Equity (Deficit)Common Stock  $.0001 Par; 150,000,000 and 50,000,000 Shares
Authorized, Respectively; 50,724,473 and 45,809,364
Shares Issued and Outstanding, Respectively
    
    
    5,072
    
    
    
    4,581Additional Paid-In Capital
    
    
    32,978,076
    
    
    
    29,022,904Accumulated Deficit
    
    
    (32,655,960
    )
    
    
    (29,130,093
    )Total Stockholders Equity (Deficit)
    
    
    327,188
    
    
    
    (102,608
    )Total Liabilities and Stockholders Equity (Deficit)
    
    $
    1,364,403
    
    
    $
    1,281,858
 The accompanying notes are an integral part of these financial statements. 4




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L.A.M. PHARMACEUTICAL, CORP.
(A DELAWARE CORPORATION)
Lewiston, New York 
 STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (DEFICIT) Additional
    
    
    
    
    
    TotalNumber
    
    Common
    
    Paid-In
    
    Accumulated
    
    Stockholdersof Shares
    
    Stock
    
    Capital
    
    Deficit
    
    Equity (Deficit)Balance  December 31, 2002 (Restated)
    
    
    27,511,412
    
    
    $
    2,751
    
    
    $
    25,952,644
    
    
    $
    (26,411,739
    )
    
    $
    (456,344
    )Capital Contribution  Interest Expense
    
    
    
    
    
    
    
    
    
    
    6,346
    
    
    
    
    
    
    
    6,346Stock Options Granted -
Compensation for Services Rendered
    
    
    
    
    
    
    
    
    
    
    27,148
    
    
    
    
    
    
    
    27,148Common Shares Issued -
Compensation for Services Rendered
    
    
    4,215,172
    
    
    
    421
    
    
    
    368,829
    
    
    
    
    
    
    
    369,250Sale of Shares Under the Stock Subscription Agreements
    
    
    
    
    
    
    
    
    
    
    684,265
    
    
    
    
    
    
    
    684,265Conversion of Convertible Notes
    
    
    1,736,734
    
    
    
    174
    
    
    
    510,426
    
    
    
    
    
    
    
    510,600Collection of Receivable on Option Exercise
    
    
    
    
    
    
    
    
    
    
    25,000
    
    
    
    
    
    
    
    25,000Net Loss for the Period (Unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,846,140
    )
    
    
    (1,846,140
    )Balance  September 30, 2003 (Unaudited and Restated)
    
    
    33,463,318
    
    
    $
    3,346
    
    
    $
    27,574,658
    
    
    $
    (28,257,879
    )
    
    $
    (679,875
    )Balance
 December 31, 2003 (Restated)
    
    
    45,809,364
    
    
    $
    4,581
    
    
    $
    29,022,904
    
    
    $
    (29,130,093
    )
    
    $
    (102,608
    )Capital Contribution  Interest Expense
    
    
    
    
    
    
    
    
    
    
    5,764
    
    
    
    
    
    
    
    5,764Stock Options Granted -
Compensation for Services Rendered
    
    
    
    
    
    
    
    
    
    
    752,564
    
    
    
    
    
    
    
    752,564Common Shares Issued -
Compensation for Services Rendered
    
    
    481,560
    
    
    
    48
    
    
    
    416,189
    
    
    
    
    
    
    
    416,237Sale of Shares Under the Stock Subscription Agreements
    
    
    300,000
    
    
    
    30
    
    
    
    1,239,480
    
    
    
    
    
    
    
    1,239,510Premium on the Issuance of Warrants
    
    
    
    
    
    
    
    
    
    
    627,635
    
    
    
    
    
    
    
    627,635Proceeds from Warrant Exercise
    
    
    2,133,549
    
    
    
    213
    
    
    
    259,160
    
    
    
    
    
    
    
    259,373Collection of Receivable on Option Exercise
    
    
    
    
    
    
    
    
    
    
    580
    
    
    
    
    
    
    
    580Collection of Receivable on Sale of Stock
Subscription Agreements
    
    
    
    
    
    
    
    
    
    
    94,000
    
    
    
    
    
    
    
    94,000Common Stock Issued in Settlement of Lawsuit
    
    
    2,000,000
    
    
    
    200
    
    
    
    559,800
    
    
    
    
    
    
    
    560,000Net Loss for the Period (Unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,525,867
    )
    
    
    (3,525,867
    )Balance  September 30, 2004 (Unaudited)
    
    
    50,724,473
    
    
    $
    5,072
    
    
    $
    32,978,076
    
    
    $
    (32,655,960
    )
    
    $
    327,188
 The accompanying notes are an integral part of these financial statements. 5




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L.A.M. PHARMACEUTICAL, CORP.
(A DELAWARE CORPORATION)
Lewiston, New York 
 STATEMENTS OF OPERATIONS (UNAUDITED) Three Months EndedSeptember 30,2004
    
    2003RevenuesLicensing and Royalty Revenue
    
    $
    37,500
    
    
    $
    Net Sales
    
    
    18,057
    
    
    
    26,163Total Revenue
    
    
    55,557
    
    
    
    26,163ExpensesCost of Sales
    
    
    4,754
    
    
    
    7,571General and Administrative
    
    
    174,804
    
    
    
    196,064Marketing and Business Development
    
    
    189,656
    
    
    
    183,833Research and Development
    
    
    16,016
    
    
    
    32,885Depreciation and Amortization
    
    
    18,400
    
    
    
    17,717Total Expenses
    
    
    403,630
    
    
    
    438,070Loss Before Other Expenses
    
    
    (348,073
    )
    
    
    (411,907
    )Other ExpensesInterest Expense
    
    
    2,026
    
    
    
    2,058Provision for Arbitration Settlement
    
    
    
    
    
    
    3,000Total Other Expenses
    
    
    2,026
    
    
    
    5,058Net Loss for the Period
    
    $
    (350,099
    )
    
    $
    (416,965
    )Net Loss
per Common Share  Basic and Diluted
    
    $
    (0.01
    )
    
    $
    (0.01
    )Weighted Average Number of Common SharesOutstanding  Basic and Diluted
    
    
    50,724,473
    
    
    
    31,488,867
 The accompanying notes are an integral part of these financial statements. 6




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L.A.M. PHARMACEUTICAL, CORP.
(A DELAWARE CORPORATION)
Lewiston, New York 
 STATEMENTS OF OPERATIONS (UNAUDITED) Nine Months EndedSeptember 30,2004
    
    2003RevenuesLicensing and Royalty Revenue
    
    $
    75,000
    
    
    $
    Net Sales
    
    
    53,959
    
    
    
    79,784Total Revenue
    
    
    128,959
    
    
    
    79,784ExpensesCost of Sales
    
    
    12,976
    
    
    
    20,856General and Administrative
    
    
    821,420
    
    
    
    547,003Marketing and Business Development
    
    
    1,493,411
    
    
    
    537,046Research and Development
    
    
    80,150
    
    
    
    156,767Depreciation and Amortization
    
    
    53,470
    
    
    
    51,616Total Expenses
    
    
    2,461,427
    
    
    
    1,313,288Loss Before Other Expenses
    
    
    (2,332,468
    )
    
    
    (1,233,504
    )Other ExpensesInterest Expense
    
    
    5,764
    
    
    
    6,504Lawsuit Settlement
    
    
    560,000
    
    
    
    Provision for Arbitration Settlement
    
    
    
    
    
    
    606,132Warrant Premium
    
    
    627,635
    
    
    
    Total Other Expenses
    
    
    1,193,399
    
    
    
    612,636Net Loss for the Period
    
    $
    (3,525,867
    )
    
    $
    (1,846,140
    )Net Loss per Common Share  Basic and Diluted
    
    $
    (0.07
    )
    
    $
    (0.06
    )Weighted Average Number of Common SharesOutstanding  Basic and Diluted
    
    
    49,675,416
    
    
    
    30,107,786
 The accompanying notes are an integral part of these financial statements. 7




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L.A.M. PHARMACEUTICAL, CORP.
(A DELAWARE CORPORATION)
Lewiston, New York 
 STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months EndedSeptember 30,2004
    
    2003Cash Flows from Operating ActivitiesNet Loss for the Period
    
    $
    (3,525,867
    )
    
    $
    (1,846,140
    )Adjustments to Reconcile Net Loss for the Period
to Net Cash Flows from Operating Activities:Depreciation and Amortization
    
    
    53,470
    
    
    
    51,616Capital Contributions:Premium on the Issuance of Warrants
    
    
    627,635
    
    
    
    Deemed Interest Expense on
Loans from Stockholders
    
    
    5,764
    
    
    
    6,346Deferred Licensing Revenue
    
    
    (37,500
    )
    
    
    Share and Option Grants to Consultants
    
    
    1,105,696
    
    
    
    396,398Share Issuance for Lawsuit Settlement
    
    
    560,000
    
    
    
    Provision for Arbitration Settlement
    
    
    
    
    
    
    606,132Changes in Assets and Liabilities:Accounts Receivable
    
    
    1,234
    
    
    
    2,415Inventory
    
    
    31,647
    
    
    
    50,257Prepaid Expenses
    
    
    (25,963
    )
    
    
    (89,295
    )Accounts Payable and Accrued Expenses
    
    
    (246,646
    )
    
    
    276,141Net Cash Flows from Operating Activities
    
    
    (1,450,530
    )
    
    
    (546,130
    )Cash Flows from Investing ActivitiesPurchase of Property and Equipment
    
    
    
    
    
    
    (1,495
    )Investment in Patents and Trademarks  Net
    
    
    (92,914
    )
    
    
    (88,735
    )Net Cash Flows from Investing Activities
    
    
    (92,914
    )
    
    
    (90,230
    )Cash Flows from Financing ActivitiesProceeds from Exercise of Stock Options
    
    
    580
    
    
    
    25,000Proceeds from the Sale of Shares Under
Share Subscription Agreements
    
    
    1,333,510
    
    
    
    400,315Proceeds from Exercise of Warrants
    
    
    259,373
    
    
    
    Advances from Stockholders
    
    
    
    
    
    
    163,898Repayments to Stockholders
    
    
    
    
    
    
    (103,390
    )Net Cash Flows from Financing Activities
    
    
    1,593,463
    
    
    
    485,823Net Change in Cash and Cash Equivalents
    
    
    50,019
    
    
    
    (150,537
    )Cash and Cash Equivalents  Beginning of Period
    
    
    25,132
    
    
    
    210,214Cash and Cash Equivalents  End of Period
    
    $
    75,151
    
    
    $
    59,677
 The accompanying notes are an integral part of these financial statements. -continued- 8




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L.A.M. PHARMACEUTICAL, CORP.
(A DELAWARE CORPORATION)
Lewiston, New York STATEMENTS OF CASH FLOWS (UNAUDITED)  continued Nine Months EndedSeptember 30,2004
    
    2003Non-Cash Investing and Financing ActivitiesDebentures Converted to Common Stock
    
    $
    
    
    
    
    
    
    
    $
    510,600Stock Subscriptions  Offset Against Due to Stockholder
    
    $
    
    
    
    
    
    
    
    $
    75,000SUPPLEMENTAL DISCLOSUREInterest Paid
    
    $
    
    
    
    
    
    
    
    $
    Income Taxes Paid
    
    $
    
    
    
    
    
    
    
    $
    
 The accompanying notes are an integral part of these financial statements. 9




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L.A.M. PHARMACEUTICAL, CORP.
(A DELAWARE CORPORATION)
Lewiston, New York 
 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 Form 10-KSB and other reports filed with the SEC.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
fiscal year 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 market
launch of new products, costs incurred to raise capital,
acquisitions of patents and trademarks, and stock options and
awards.ReclassificationsCertain amounts in the prior year financial statements have been
reclassified to conform with the current year presentation. The
reclassifications made to the prior year have no impact on the net loss,
or overall presentation of the financial statements. Note B  Accounting Policies  Revenue RecognitionRoyalty Revenue RecognitionThe Company recognizes royalty revenue based on royalty reports or
related information received from the licensee and when collectibility
is reasonably assured.Sales Revenue RecognitionThe Company recognizes sales revenue when it is realized or realizable
and earned. The Company considers revenue realized or realizable when
the product has been shipped to the customer, the sales price is fixed
or determinable and collectibility is reasonably assured. The Company
reduces revenue for estimated customer returns.Method of AccountingThe Company maintains its books and prepares its financial statements on
the accrual basis of accounting. Note C   Inventory  Inventory at period end consisted of the following: September 30,
    
    December 31,2004
    
    2003IPM Wound Gel
    
    $
    448,895
    
    
    $
    480,542Raw Materials
    
    
    2,125
    
    
    
    2,125Inventory
    
    $
    451,020
    
    
    $
    482,667
 10




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L.A.M. PHARMACEUTICAL, CORP.
(A DELAWARE CORPORATION)
Lewiston, New York

NOTES TO FINANCIAL STATEMENTS

Note D  Share and Option Grants



| |  |  | The Company has stock option plans under which employees, non-employee
directors, consultants and investors may be granted options to purchase
shares of the Companys common stock. Options have varying vesting and
expiration dates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The Company has elected to follow Accounting Principles Board Opinion
(APB) No. 25 and related interpretations in accounting for its
stock-based compensation made to its employees. APB No. 25 requires no
recognition of compensation expense for most of the stock-based
compensation arrangements provided by the Company, namely, broad-based
employee stock purchase plans and option grants where the exercise price
is equal to or less than the market value at the date of grant. However,
APB No. 25 requires recognition of compensation expense for variable
award plans over the vesting periods of such plans, based upon the
then-current market values of the underlying stock. In contrast,
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting
for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure  an amendment of
FASB Statement No. 123, requires recognition of compensation expense for
grants of stock, stock options, and other equity instruments, over the
vesting periods of such grants, based on the estimated grant-date fair
values of those grants. The Company generally uses the straight-line
method of amortization for stock based compensation.
|
| |  |  | Had compensation cost for these plans been determined consistent with
SFAS No. 123, the Companys net loss and net loss per share would have
been adjusted to the following pro forma amounts:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

For the three months ended
    
    For the nine months endedSeptember 30,
    
    September 30,2004
    
    2003
    
    2004
    
    2003Net lossAs reported
    
    $
    350,099
    
    
    $
    416,965
    
    
    $
    3,525,867
    
    
    $
    1,846,140Pro forma
    
    $
    350,099
    
    
    $
    424,791
    
    
    $
    3,525,867
    
    
    $
    1,857,484Net Loss per shareAs reported
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.07
    
    
    $
    0.06Pro forma
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.07
    
    
    $
    0.06


Note E  Restatement



| |  |  | The Companys Balance Sheets and Statements of Changes in Stockholders
Equity have been restated to reflect a correction to a mechanical error
that was discovered in the calculation of the Companys non-cash
compensation expense on the issuance of option grants and the non-cash
premium expense on warrants issued in connection with the Companys
private placement in 2003 and 2002. The restatements in the share and
option grants compensation expense and in the warrant premium resulted
in the following restatements. The restatements had no effect on the
net loss for the three and nine months ended September 30, 2004 and 2003
and on total stockholders equity at September 30, 2004 or 2003.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As at December 31, 2003
    
    As at December 31, 2002Restated
    
    Originally Reported
    
    Restated
    
    Originally ReportedAdditional Paid-In Capital
    
    
    29,022,904
    
    
    
    26,605,165
    
    
    
    25,952,644
    
    
    
    24,054,187Accumulated Deficit
    
    
    29,130,093
    
    
    
    26,712,354
    
    
    
    26,411,739
    
    
    
    24,513,282


11



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Item 2 Managements Discussion and Analysis or Plan of Operation. The following sets forth certain financial data with respect to us and is
qualified in its entirety by reference to the more detailed financial
statements and notes included elsewhere in this quarterly report on form
10-QSB. The following contains statements that constitute forward looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934. In some cases, you can also identify forward-looking statements by
terminology such as may, should, could, would, predicts, potential,
continue, expects, anticipates, future, intends, plans, believes,
estimates and similar expressions. All forward-looking statements are based
on assumptions that we have made based on our experience and perception of
historical trends, current conditions, expected future developments and other
factors that we believe are appropriate. These statements are subject to
numerous risks and uncertainties, many of which are beyond our control. No
forward-looking statement can be guaranteed, and actual results may differ
materially from those projected. We undertake no obligation to publicly update
any forward-looking statement, whether as a result of new information, future
events or otherwise. Overview We are the owner of a proprietary wound healing and transdermal drug
delivery technology that involves the use of an original L.A.M. Ionic Polymer
Matrix technology that we developed for the purpose of delivering, enhancing
and sustaining the action of certain established therapeutic agents. Our
corporate objective is to develop, market and license wound healing and
transdermally delivered drugs, both prescription and over-the-counter, using
our patented L.A.M. Ionic Polymer Matrix technology. We intend to seek out
corporate alliances and co-marketing partnerships where other drugs and topical
products can be enhanced by our L.A.M. IPM technology. We intend to acquire
complementary products, technologies or companies by identifying and evaluating
potential products and technologies developed by third parties that we believe
fit within our overall objective. Acquisitions may be funded through a
combination of issuance of shares and/or cash, in which case we would be
required to raise additional funding through debt instruments or equity
financing. We currently do not have any agreements to acquire any
complementary products, technologies or companies. We received clearance of our L.A.M. IPM Wound Gel 510(k) pre-market
notification from the FDA in April 2002 and commenced limited commercial sales
in August of 2002. Since August 2002, we have continued efforts to develop
commercial sales in the United States market. In addition, we have pursued a
strategy of seeking regulatory approval to sell our L.A.M. IPM Wound Gel in
additional markets outside of the United States. In March 2004, we received regulatory approval to import and sell our
L.A.M. IPM Wound Gel in China. We also entered into an agreement with a
distributor in the Chinese market. Subsequent to the agreement entered into in
December 2003 with a distributor in the Latin America market, application for
our regulatory approval to market our product in a number of Latin American
countries have been filed by our distributor. As our marketing plans are
currently in the process of being developed, we have received minimal orders
for our product to date from the above distributors and will only receive
payments to the extent that sales are made to the distributors. In May 2004, Ixora Bio-Medical Co. (Ixora) announced that it had
commenced commercial sales of Ixora for Women. Upon commencement of
commercial sales of this OTC product, Ixora is required to pay us royalties of
6.5% of all net sales with a minimum royalty payment of $75,000 for the first
year. As of September 30, 2004 we have received royalty payments of $37,500. In January 2004, we announced the veterinary application of our L.A.M. IPM
Wound Gel targeting Pyotraumatic dermatitis, commonly known as hot spots
suffered by dogs. We are currently seeking licensing or partnership
opportunity with companies already well established in the veterinary field and
presently do not intend on marketing this application under our own brand. Our revenue in the first nine months of 2004 increased to $129,000
compared to $80,000 in the same period in the prior year. This increase in
revenue is primarily attributable to licensing and royalty revenue that did not
occur in 2003. Our operating expenses increased from $1,313,000 in 2003 to
$2,461,000 in 2004 primarily as a result of investor relations expenditures and
non-cash consulting expenses relating to potential acquisitions and partnering
opportunities. Net loss for the nine months increased to $3,526,000 in 2004
compared to $1,846,000 in 2003. 12




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Selected Financial Data The summary financial data set forth below with respect to the statements
of operations for the three and nine months ended September 30, 2004 and 2003
and with respect to the balance sheets as at September 30, 2004 and December
31, 2003, are derived from, and should be read in conjunction with the
financial statements and the related notes. Income Statement Data For the Three Months Ended
    
    For the Nine Months EndedSeptember 30,
    
    September 30,Percentage
    
    
    
    
    
    
    
    
    
    Percentage2004
    
    2003
    
    Change
    
    2004
    
    2003
    
    ChangeRevenue
    
    $
    55,557
    
    
    
    26,163
    
    
    
    112
    %
    
    $
    128,959
    
    
    $
    79,784
    
    
    
    62
    %Operating Expenses
    
    
    403,630
    
    
    
    438,070
    
    
    
    (8
    )%
    
    
    2,461,427
    
    
    
    1,313,288
    
    
    
    87
    %Other Expenses
    
    
    2,026
    
    
    
    5,058
    
    
    
    
    
    
    
    1,193,399
    
    
    
    612,636Net Loss
    
    $
    (350,099
    )
    
    $
    (416,965
    )
    
    
    
    
    
    $
    (3,525,867
    )
    
    $
    (1,846,140
    )
 Balance Sheet Data: As atSeptember 30, 2004
    December 31, 2003Current Assets
    
    $
    633,396
    
    
    
    
    
    
    $
    590,295Total Assets
    
    
    1,364,403
    
    
    
    
    
    
    
    1,281,858Current Liabilities
    
    
    830,310
    
    
    
    
    
    
    
    1,027,561Total Liabilities
    
    
    1,037,215
    
    
    
    
    
    
    
    1,384,466Working Capital (Deficiency)
    
    
    (196,914
    )
    
    
    
    
    
    
    (437,266
    )Stockholders Equity (Deficit)
    
    
    327,188
    
    
    
    
    
    
    
    (102,608
    )
 Results of Operations Three months Ended September 30, 2004 compared with Three Months Ended September 30, 2003 Revenues In May 2004 Ixora Bio-Medical Co. (Ixora) announced that it had
commenced commercial sales of Ixora for Women. Upon commencement of
commercial sales of this OTC product, Ixora is required to pay us royalties of
6.5% of all net sales with a minimum royalty payment of $75,000 for the first
year. During the three months ended September 30, 2004 we received royalty
payments of $18,750 and have taken into income a portion of the deferred
licensing revenue equal to the royalty payments received. Although sales of our IPM Wound Gel during the third quarter of 2004
decreased by $8,000 to $18,000 from sales in the same quarter of 2003 of
$26,000, sales have increased $1,000 over the second quarter of 2004. We
believe that the concentration of our efforts in signing distribution
agreements in China and Latin America will lead to increased sales as these
markets become established. Cost of Goods Sold Cost of Goods Sold for the three months ended September 30, 2004 were
$5,000, representing a decrease of $3,000 from $8,000 in 2003. The gross profit
percentage of 75% for the third quarter of 2004 increased slightly when
compared to 71% for the third quarter of 2003. The increase in the gross
profit percentage resulted from special pricing offered to our customers on the
L.A.M. IPM Wound Gel during part of 2003 which did not occur in 2004. General and Administrative Expenses General and administrative expenses for the three months ended September
30, 2004 decreased $21,000 to $175,000 from $196,000 for the three months ended
September 30, 2003. The decrease is primarily related to financial consulting
costs incurred in the third quarter of 2003 in regards to our private
placement. 13




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The primary components of general and administrative expenses for the
three months ended September 30, 2004 and 2003 were as follows: Three months endedSeptember 30,2004
    
    2003Officers salaries
    
    $
    11,875
    
    
    $
    9,375Employee salaries and benefits
    
    
    26,088
    
    
    
    29,650Investor relations
    
    
    9,960
    
    
    
    33,460Legal and auditing (including SEC filings)
    
    
    46,207
    
    
    
    43,325Insurance
    
    
    19,048
    
    
    
    9,694Shares issued to consultants
    
    
    12,188
    
    
    
    16,788Other expenses
    
    
    49,438
    
    
    
    53,772Total
    
    
    174,804
    
    
    
    196,064
 Marketing and Business Development Expense Marketing and business development expense for the three months ended
September 30, 2004 increased $6,000 to $190,000 from $184,000 for the three
months ended September 30, 2003. The increase included expenditures relating
to the launch of our I.P.M. Wound Gel in Central America. Research and Development Expense Research and development expenses for the three months ended September 30,
2004 decreased $17,000 to $16,000 from $33,000 for the three months ended
September 30, 2003. We have chosen to reduce our research and development
expenditures in order to focus on establishing our existing products in the
market place. Costs incurred during the quarter represent fixed costs of
running our R&D department. As our products obtain acceptance we will increase
our research and development expenditures and accelerate the development of
additional products. Nine months Ended September 30, 2004 compared with Nine Months Ended September 30, 2003 Revenues In May 2004 Ixora Bio-Medical Co. (Ixora) announced that it had
commenced commercial sales of Ixora for Women. Upon commercial sales of this
OTC product, Ixora is required to pay us royalties of 6.5% of all net sales
with a minimum royalty payment of $75,000 for the first year. In the first
nine months of 2004 we received royalty payments of $37,500 and have taken into
income a portion of the deferred licensing revenue equal to the royalty
payments received. Although sales of our IPM Wound Gel during the nine months ended
September 30, 2004 amounted to $54,000, a decrease of $26,000 over sales in the
same period of 2003 of $80,000, we believe that the concentration of our
efforts in the signing of distribution agreements in China and Latin America we
will lead to increased sales as these markets become established. Cost of Goods Sold Cost of Goods Sold for the nine months ended September 30, 2004 were
$13,000, representing a decrease of $8,000 from $21,000 in 2003. The gross
profit percentage of 77% for the first nine months of 2004 increased slightly
when compared to 75% the first nine months of 2003. The increase in the
gross profit percentage resulted from special pricing offered to our customers
on the L.A.M. IPM Wound Gel during part of 2003 which did not recur in 2004. General and Administrative Expenses General and administrative expenses for the nine months ended September
30, 2004 increased $274,000 to $821,000 from $547,000 for the nine months ended
September 30, 2003. The increase included costs attributable to investor
relation services performed in the second quarter of 2004, cash expenses and
shares issuances relating to our private placement and increase in compensation
relating to bonuses paid for obtaining regulatory approval in 14




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China. The increase was offset by the reduction in legal and auditing
expenditures due to decreased business activity in these areas and decrease in
insurance as we reduced our product liability coverage from $3,000,000 to
$1,000,000. In May 2004 we increased our product liability coverage to
$3,000,000. The primary components of general and administrative expenses for the nine
months ended September 30, 2004 and 2003 were as follows: Nine months endedSeptember 30,2004
    
    2003Officers salaries
    
    $
    51,500
    
    
    $
    25,000Employee salaries and benefits
    
    
    73,742
    
    
    
    86,227Investor relations
    
    
    277,505
    
    
    
    57,108Legal and auditing (including SEC filings)
    
    
    126,741
    
    
    
    156,819Insurance
    
    
    34,051
    
    
    
    38,864Shareholder special meeting expenses
    
    
    7,496
    
    
    
    Options and Shares issued to consultants
    
    
    101,355
    
    
    
    40,052Other expenses
    
    
    149,030
    
    
    
    142,933Total
    
    
    821,420
    
    
    
    547,003
 Marketing and Business Development Expense Marketing and business development expense for the nine months ended
September 30, 2004 increased $956,000 to $1,493,000 from $537,000 for the nine
months ended September 30, 2003. The increase included a non-cash charge for
the issuance of shares to companies for services rendered regarding potential
acquisitions and partnership opportunities. Research and Development Expense Research and development expenses for the nine months ended September 30,
2004 decreased $77,000 to $80,000 from $157,000 for the nine months ended
September 30, 2003. We have chosen to reduce our research and development
expenditures in order to focus on establishing our existing products in the
market place. Costs incurred during this period represent fixed costs of
running our R&D department. As our products obtain acceptance we will increase
our research and development expenditures and accelerate the development of
additional products. Warrant Premium The expense of $628,000 for the nine months ended September 30, 2004
represents the fair value of the warrants issued to shareholders in connection
with our private placement. Legal Settlement In March 2004, a consultant filed a lawsuit against us and one of our
directors with the District Court of Montreal in Quebec, Canada in the amount
of $2.8 million alleging that we failed to issue shares of our common stock to
the individual for services rendered during the periods of 2001 and 2002. On
April 26, 2004 we reached an out of court settlement of the lawsuit with the
consultant which resulted in the issuance of two million shares of our common
stock. We have recorded $560,000, the effect of the settlement, in the
financial statements for the period ended September 30, 2004. Provision for Arbitration Settlement Capital Research Group, Inc. (CRG) an investor relations firm formerly
used by us filed a claim against us with the American Arbitration Association
alleging that we failed to pay Capital Research Group in accordance with the
terms of an agreement between the parties. On November 19, 2003 we reached an
agreement with Capital Research Group to settle all amounts owed by us to CRG.
A provision for the arbitration settlement was recorded in the financial
statements for the nine months ended September 30, 2003. 15




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Liquidity and Sources of Capital Nine Months ended September 30, 2004 Our cash and cash equivalents as of September 30, 2004 was $75,000. Our
working capital improved by 240,000 from a deficiency of $437,000 as of
December 31, 2003 to a deficiency of $197,000 as of September 30, 2004. Our operations used approximately $1,211,000 in cash during the nine
months ended September 30, 2004 compared to $786,000 used in the same period in
the prior year. This was primarily due to increased expenditures on investor
relations and costs related to the development of the Chinese and Latin
American markets and the reduction in accounts payable of $247,000. During this period we also invested $93,000 in patents and trademarks. During the nine months ended September 30, 2004, funds were raised
principally from subscription agreements for the issuance of our common stock
in the amount of $1,334,000 and the exercise of warrants in the amount of
$259,000. During the nine months ended September 30, 2004 we sold units of our
common stock in which each unit consists of 1,000 shares of our common stock
plus 750 warrants. The sales were conduced by us through a private placement to
a group of accredited investors, pursuant to Regulation D, promulgated the
Securities Act of 1933, as amended. Through private placements we sold
5,594,000 shares of our common stock, plus warrants for the purchase of an
additional 4,195,500 shares to 36 investors for proceeds amounting to
$1,250,000, of which $1,243,000 was received prior to September 30, 2004. As
of September 30, 2004 we have not issued the common stock in relation to the
private placement. Each warrant will entitle the holder to purchase one share
of common stock as follows:  
    
    One third of warrants may be exercised at any time
prior to June 30, 2005 at prices ranging from $0.35 to $0.60 per
share;
    
    One third of warrants may be exercised at any time
prior to December 31, 2005 at prices ranging from $0.35 to $0.75
per share; and
    
    One third of warrants may be exercised at any time
prior to June 30, 2006 at prices ranging from $0.55 to $1.00 per
share Application of Critical Accounting Policies Our financial statements and accompanying notes are prepared in accordance
with generally accepted accounting principles in the United States. Preparing
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue, and expenses.
These estimates and assumptions are affected by managements application of
accounting policies. Critical accounting policies include revenue recognition,
inventory valuation and accounting for income taxes. We recognize revenue in accordance with Staff Accounting Bulletin No. 101,
Revenue Recognition in Financial Statements. We recognize revenue when it is
realized or realizable and earned. We consider revenue realized or realizable
when the product has been shipped to the customer, the sales price is fixed or
determinable and collectibility is reasonably assured. We reduce our revenue
for estimated customer returns. We recognize royalty revenue based on royalty
reports or related information received from the licensee and when
collectibility is reasonably assured. Inventory is comprised of finished goods and raw materials and is stated
at the lower of cost or market. Cost is determined by the first-in, first-out
method and market is based on the lower of replacement cost or net realizable
value. If the cost of the inventories exceeds their expected market value,
provisions are recorded currently for the difference between the cost and the
market value. These provisions are determined based on estimates. The valuation
of inventories also requires us to estimate excess inventories and inventories
that are not saleable. The determination of excess or non-saleable inventories
requires us to estimate the future demand for our product and consider the
shelf life of the inventory. If actual demand is less than our estimated
demand, we could be required to record inventory reserves, which would have an
adverse impact on our results of operations. 16




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Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes, establishes financial accounting and reporting standards for the
effect of income taxes. The objectives of accounting for income taxes are to
recognize the amount of taxes payable or refundable for the current year and
deferred tax liabilities and assets for the future tax consequences of events
that have been recognized in an entitys financial statements or tax returns.
All deferred tax assets have been fully reserved against due to the uncertainty
as to when or whether the tax benefit will be realized. 
 Item 3 Controls and Procedures. Joseph T. Slechta, our President, Chief Executive Officer, Principal
Financial Officer and Chief Accounting Officer, has evaluated the effectiveness
of our disclosure controls and procedures as of a date within 90 days prior to
the filing date of this report; and in his opinion our disclosure controls and
procedures ensure that material information relating to us, is made known to
him by others within our entity, particularly during the period in which this
report is being prepared, so as to allow timely decisions regarding required
disclosure. To the knowledge of Mr. Slechta there have been no significant
changes in our internal controls or in other factors that could significantly
affect our internal controls subsequent to the date of their evaluation. As a
result, no corrective actions with regard to significant deficiencies or
material weakness in our internal controls were required. 
 PART II
OTHER INFORMATION 
 Item 2 Unregistered Sales of Equity Securities and Use of Proceeds During the nine months ended September 30, 2004 we sold units of our
common stock in which each unit consists of 1,000 shares of our common stock
plus 750 warrants. The sales were conduced by us through a private placement to
a group of accredited investors, pursuant to Regulation D, promulgated the
Securities Act of 1933, as amended. Through the private placement we sold
5,594,000 shares of our common stock, plus warrants for the purchase of an
additional 4,195,500 shares to 36 investors for proceeds amounting to
$1,250,000, of which $1,243,000 was received prior to September 30, 2004. As
of September 30, 2004 we have not issued the common stock in relation to the
private placement. Each warrant will entitle the holder to purchase one share
of common stock as follows:  
    
    One third of warrants may be exercised at any time
prior to June 30, 2005 at prices ranging from $0.35 to $0.60 per
share;
    
    One third of warrants may be exercised at any time
prior to December 31, 2005 at prices ranging from $0.35 to $0.75
per share; and
    
    One third of warrants may be exercised at any time
prior to June 30, 2006 at prices ranging from $0.55 to $1.00 per
share On May 4, 2004 we filed a registration statement with the United States
Securities and Exchange Commission (Commission File No. 333-115126) to register
the common shares issued as a result of this private placement. On July 27,
2004 we filed Amendment No. 1 to this registration statement, on September 9,
2004 we filed Amendment No. 2 to this registration statement and on October 13,
2004 we filed Amendment No. 3 to this registration statement. The
registration statement was declared effective by the SEC on October 15, 2004. 
 Item 6 Exhibits Number
    
    Title31.1
    
    
    Certification by Joseph T. Slectha, President, Chief
Executive Officer, Principal Financial Officer and Chief
Accounting Officer, Pursuant to Section 302 of the Sarbanes-Oxley
Act of 200232.1
    
    
    Certification by Joseph T. Slectha, President, Chief
Executive Officer, Principal Financial Officer and Chief
Accounting Officer, Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 17




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SIGNATURES In accordance with the requirements of the Securities Exchange Act, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized L.A.M. PHARMACEUTICAL, CORP.November 11, 2004
    By:
    /s/ Joseph T. SlechtaJoseph T. Slechta, President, Chief ExecutiveOfficer, Principal Financial Officer and
Chief Accounting Officer 18