##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549
 FORM 10-QSB [X]
    
    Quarterly Report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
   [   ]
    
    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.  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 [   ] As of April 30, 2004, we had 59,072,570 issued and outstanding shares of
common stock. 1




---



INDEX PART I FINANCIAL INFORMATIONItem 1 Financial StatementsBalance Sheets at March 31, 2004 (Unaudited) and December 31, 2003Statements of Changes in Stockholders Equity (Deficit) for the Three Months Ended March 31, 2004 and 2003 (Unaudited)Statements of Operations for the Three Months Ended March 31, 2004 and 2003 (Unaudited)Statements of Cash Flows for the Three Months Ended March 31, 2004 and 2003 (Unaudited)Notes to Financial StatementsItem 2 Managements Discussion and Analysis of Financial Condition and Results of OperationItem 3 Controls and ProceduresPART II OTHER INFORMATIONItem 1 Legal ProceedingsItem 2 Changes in SecuritiesItem 4 Submission of Matters to a Vote of Security HoldersItem 6 Exhibits and Reports on Form 8-KSec 302 Chief Executive Officer CertificationSec 906 Chief Executive Officer Certification
  2




---



##### Table of Contents



PART I
FINANCIAL INFORMATION 
 Item. 1 Financial Statements L.A.M. PHARMACEUTICAL, CORP. (A DELAWARE CORPORATION)
Lewiston, New York FINANCIAL REPORTS
AT
MARCH 31, 2004 3




---



##### Table of Contents



L.A.M. PHARMACEUTICAL, CORP.(A DELAWARE CORPORATION)Lewiston, New York 
 BALANCE SHEETS (Unaudited)March 31,
    
    December 31,2004
    
    2003ASSETSCurrent AssetsCash and Cash Equivalents
    
    $
    782,846
    
    
    $
    25,132Accounts Receivable, net
    
    
    7,746
    
    
    
    8,936Inventory
    
    
    474,768
    
    
    
    482,667Prepaid Expenses
    
    
    73,560
    
    
    
    73,560Total Current Assets
    
    
    1,338,920
    
    
    
    590,295Property and Equipment  Net of Accumulated Depreciation
    
    
    93,411
    
    
    
    100,020Other AssetsPatents and Trademarks  Net of Accumulated Amortization
    
    
    615,870
    
    
    
    591,543Total Assets
    
    $
    2,048,201
    
    
    $
    1,281,858LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current LiabilitiesAccounts Payable and Accrued Expenses
    
    $
    817,417
    
    
    $
    1,027,561Total Current Liabilities
    
    
    817,417
    
    
    
    1,027,561Other LiabilitiesDue to Stockholders
    
    
    149,545
    
    
    
    149,545Deferred Royalty Revenue
    
    
    207,360
    
    
    
    207,360Total Liabilities
    
    
    1,174,322
    
    
    
    1,384,466Stockholders Equity (Deficit)Common Stock  $.0001 Par; 150,000,000 and 50,000,000 Shares
Authorized, Respectively; 48,850,473 and 45,809,364
Shares Issued and Outstanding, Respectively
    
    
    4,885
    
    
    
    4,581Additional Paid-In Capital
    
    
    28,557,928
    
    
    
    26,605,165Accumulated Deficit
    
    
    (27,688,934
    )
    
    
    (26,712,354
    )Total Stockholders Equity (Deficit)
    
    
    873,879
    
    
    
    (102,608
    )Total Liabilities and Stockholders Equity (Deficit)
    
    $
    2,048,201
    
    
    $
    1,281,858
 The accompanying notes are an integral part of these financial statements. 4




---



##### Table of Contents



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
    
    
    27,511,412
    
    
    $
    2,751
    
    
    $
    24,054,187
    
    
    $
    (24,513,282
    )
    
    $
    (456,344
    )Capital Contribution  Interest Expense
    
    
    
    
    
    
    
    
    
    
    2,153
    
    
    
    
    
    
    
    2,153Stock Options Granted -
Compensation for Services Rendered
    
    
    
    
    
    
    
    
    
    
    10,440
    
    
    
    
    
    
    
    10,440Common Shares Issued -
Compensation for Services Rendered
    
    
    335,000
    
    
    
    33
    
    
    
    (79,295
    )
    
    
    
    
    
    
    (79,262
    )Conversion of Convertible Notes
    
    
    1,736,734
    
    
    
    174
    
    
    
    510,426
    
    
    
    
    
    
    
    510,600Receivable on Option Exercise
    
    
    
    
    
    
    
    
    
    
    15,708
    
    
    
    
    
    
    
    15,708Net Loss for the Period (Unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (917,707
    )
    
    
    (917,707
    )Balance  March 31, 2003 (Unaudited)
    
    
    29,583,146
    
    
    $
    2,958
    
    
    $
    24,513,619
    
    
    $
    (25,430,989
    )
    
    $
    (914,412
    )Balance  December 31, 2003
    
    
    45,809,364
    
    
    $
    4,581
    
    
    $
    26,605,165
    
    
    $
    (26,712,354
    )
    
    $
    (102,608
    )Capital Contribution  Interest Expense
    
    
    
    
    
    
    
    
    
    
    1,869
    
    
    
    
    
    
    
    1,869Stock Options Granted -
Compensation for Services Rendered
    
    
    
    
    
    
    
    
    
    
    4,454
    
    
    
    
    
    
    
    4,454Common Shares Issued -
Compensation for Services Rendered
    
    
    607,560
    
    
    
    61
    
    
    
    110,979
    
    
    
    
    
    
    
    111,040Sale of Shares Under the Stock Subscription Agreements
    
    
    300,000
    
    
    
    30
    
    
    
    958,480
    
    
    
    
    
    
    
    958,510Premium on the Issuance of Warrants
    
    
    
    
    
    
    
    
    
    
    25,241
    
    
    
    
    
    
    
    25,241Warrant Exercise
    
    
    2,133,549
    
    
    
    213
    
    
    
    259,160
    
    
    
    
    
    
    
    259,373Receivable on Option Exercise
    
    
    
    
    
    
    
    
    
    
    580
    
    
    
    
    
    
    
    580Receivable on Sale of Stock Subscription Agreements
    
    
    
    
    
    
    
    
    
    
    32,000
    
    
    
    
    
    
    
    32,000Subscription of Stock in Settlement of Lawsuit
    
    
    
    
    
    
    
    
    
    
    560,000
    
    
    
    
    
    
    
    560,000Net Loss for the Period (Unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (976,580
    )
    
    
    (976,580
    )Balance  March 31, 2004 (Unaudited)
    
    
    48,850,473
    
    
    $
    4,885
    
    
    $
    28,557,928
    
    
    $
    (27,688,934
    )
    
    $
    873,879
 The accompanying notes are an integral part of these financial statements. 5




---



##### Table of Contents



L.A.M. PHARMACEUTICAL, CORP.(A DELAWARE CORPORATION)Lewiston, New York 
 STATEMENTS OF OPERATIONS (UNAUDITED) Three Months EndedMarch 31,2004
    
    2003RevenuesNet Sales
    
    $
    18,636
    
    
    $
    30,844ExpensesCost of Sales
    
    
    3,963
    
    
    
    6,788General and Administrative
    
    
    175,152
    
    
    
    159,997Marketing and Business Development
    
    
    128,194
    
    
    
    152,105Research and Development
    
    
    31,239
    
    
    
    79,323338,548
    
    
    
    398,213Financial Accounting ExpensesNot Requiring the Use of Cash During the Period:Depreciation and Amortization
    
    
    17,169
    
    
    
    16,867Interest Expense
    
    
    1,869
    
    
    
    2,293Warrant Premium
    
    
    25,241
    
    
    
    Share and Option Grants to Consultants
    
    
    52,389
    
    
    
    (68,822
    )Total Expenses
    
    
    435,216
    
    
    
    348,551Loss Before Other Expenses
    
    
    (416,580
    )
    
    
    (317,707
    )Other ExpensesProvision for Lawsuit Settlement
    
    
    (560,000
    )
    
    
    Provision for Arbitration Settlement
    
    
    
    
    
    
    (600,000
    )Total Other Expenses
    
    
    (560,000
    )
    
    
    (600,000
    )Net Loss for the Period
    
    $
    (976,580
    )
    
    $
    (917,707
    )Net Loss per Common Share  Basic and Diluted
    
    $
    (0.02
    )
    
    $
    (0.03
    )Weighted Average Number of Common Shares
Outstanding  Basic and Diluted
    
    
    47,886,434
    
    
    
    29,267,371
 The accompanying notes are an integral part of these financial statements. 6




---



##### Table of Contents



L.A.M. PHARMACEUTICAL, CORP.(A DELAWARE CORPORATION)Lewiston, New York 
 STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months EndedMarch 31,2004
    
    2003Cash Flows from Operating ActivitiesNet Loss for the Period
    
    $
    (976,580
    )
    
    $
    (917,707
    )Adjustments to Reconcile Net Loss for the Period
to Net Cash Flows from Operating Activities:Depreciation and Amortization
    
    
    17,169
    
    
    
    16,867Capital Contributions:Premium on the Issuance of Warrants
    
    
    25,241
    
    
    
    Deemed Interest Expense on
Loans from Stockholders
    
    
    1,869
    
    
    
    2,153Share and Option Grants to Consultants
    
    
    52,389
    
    
    
    (68,822
    )Provision for Lawsuit Settlement
    
    
    560,000
    
    
    
    Provision for Arbitration Settlement
    
    
    
    
    
    
    600,000Changes in Assets and Liabilities:Accounts Receivable
    
    
    1,190
    
    
    
    4,066Inventory
    
    
    7,899
    
    
    
    16,470Prepaid Expenses
    
    
    
    
    
    
    (3,045
    )Accounts Payable and Accrued Expenses
    
    
    (147,039
    )
    
    
    131,306Net Cash Flows from Operating Activities
    
    
    (457,862
    )
    
    
    (218,712
    )Cash Flows from Investing ActivitiesInvestment in Property and Equipment
    
    
    
    
    
    
    (1,495
    )Investment in Patents and Trademarks  Net
    
    
    (34,887
    )
    
    
    (27,113
    )Net Cash Flows from Investing Activities
    
    
    (34,887
    )
    
    
    (28.608
    )Cash Flows from Financing ActivitiesProceeds from Exercise of Stock Options
    
    
    580
    
    
    
    15,708Proceeds from the Sale of Shares Under
Share Subscription Agreements
    
    
    990,510
    
    
    
    Proceeds from Exercise of Warrants
    
    
    259,373
    
    
    
    Advances from Stockholders
    
    
    
    
    
    
    139,390Net Cash Flows from Financing Activities
    
    
    1,250,463
    
    
    
    155,098Net Change in Cash and Cash Equivalents
    
    
    757,714
    
    
    
    (92,222
    )Cash and Cash Equivalents  Beginning of Period
    
    
    25,132
    
    
    
    210,214Cash and Cash Equivalents  End of Period
    
    $
    782,846
    
    
    $
    117,992
 The accompanying notes are an integral part of these financial statements. -continued- 7




---



##### Table of Contents



L.A.M. PHARMACEUTICAL, CORP.(A DELAWARE CORPORATION)Lewiston, New York STATEMENTS OF CASH FLOWS (UNAUDITED)  continued Three Months EndedMarch 31, 20042004
    
    2003Non-Cash Investing and Financing ActivitiesDebentures Converted to Common Stock
    
    $
    
    
    
    
    
    
    
    $
    510,600SUPPLEMENTAL DISCLOSUREInterest Paid
    
    $
    
    
    
    
    
    
    
    $
    Income Taxes Paid
    
    $
    
    
    
    
    
    
    
    $
    
 The accompanying notes are an integral part of these financial statements. 8




---



##### Table of Contents



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. Note B   Accounting Policies Revenue Recognition The Company recognizes 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 Accounting The 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: March 31,
    
    December 31,2004
    
    2003IPM Wound Gel
    
    $
    472,643
    
    
    $
    480,542Raw Materials
    
    
    2,125
    
    
    
    2,125Inventory
    
    $
    474,768
    
    
    $
    482,667
 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. -continued- 9




---



##### Table of Contents



L.A.M. PHARMACEUTICAL, CORP.(A DELAWARE CORPORATION)Lewiston, New York NOTES TO FINANCIAL STATEMENTS Note D  Share and Option Grants  continued The Company applies Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations
in accounting for its employee stock option plans. Accordingly, no
compensation expense has been recognized for its employee stock option
plans. The Company adopted the disclosure provisions of SFAS No. 148,
Accounting for Stock-Based Compensation  Transition and Disclosure. The following table illustrates the effect on net earnings and earnings
per share had the Company adopted the fair value based method of
accounting for stock-based employee compensation for all periods
presented: For the three months endedMarch 31,2004
    
    2003Net lossAs reported
    
    $
    976,580
    
    
    $
    917,707Pro forma
    
    $
    976,580
    
    
    $
    909,708Net Loss per shareAs reported
    
    $
    0.02
    
    
    $
    0.03Pro forma
    
    $
    0.02
    
    
    $
    0.03
 Note E  Common Stock During the three months ended March 31, 2004 the Company sold units of
the Companys common stock in which each unit consists of 1,000 shares
of the Companys common stock plus 750 warrants. Each warrant will
entitle the holder to purchase one share of the Companys 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
    
    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 As of March 31, 2004 the Company sold 5,512,000 shares of its common
stock, plus warrants for the purchase of an additional 4,134,000 shares
for proceeds amounting to $1,229,760 to 33 investors. As of March 31,
2004 the Company has not issued the common stock in relation to the
subscription agreements. Note F   Commitments & Contingencies In March 2004, a consultant filed a lawsuit with the District
Court of Montreal in Quebec, Canada in the amount of $2.8 million
against the Company and one of its directors alleging that the
Company failed to issue shares of its common stock to the
individual for services rendered during the periods of 2001 and
2002. On April 26, 2004 the Company and the consultant reached an
out of court settlement of the lawsuit which resulted in the
issuance of two million shares of its common stock. The Company
has recorded $560,000, the effect of the settlement, in the
financial statements for the three months ended March 31, 2004. 10




---



##### Table of Contents



Item 2 Managements Discussion and Analysis of Financial Condition and
Results 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,
including the statements set forth under Risk Factors. 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 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 received clearance of our 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 learned that we received
approval to import and sell our L.A.M. IPM Wound Gel in China. Our revenue in the first quarter of 2004 decreased to $19,000 compared to
$31,000 in the prior year and our operating expenses decreased from $398,000 in
2003 to $339,000 in 2004. Net loss for the quarter increased to $977,000 in
2004 compared to $918,000 in 2003. Selected Financial Data The summary financial data set forth below with respect to the statements
of operations for the three months ended March 31, 2004 and 2003 and with
respect to the balance sheets as at March 31, 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 EndedMarch 31,
    
    March 31,
    
    Percentage2004
    
    2003
    
    ChangeSales
    
    $
    18,636
    
    
    $
    30,844
    
    
    
    (40
    %)Operating ExpensesCost of Goods Sold
    
    
    3,963
    
    
    
    6,788
    
    
    
    (42
    %)General and Administration
    
    
    175,152
    
    
    
    159,997
    
    
    
    9.5
    %Marketing
and Business Development
    
    
    128,194
    
    
    
    152,105
    
    
    
    (16
    %)Research and Development
    
    
    31,239
    
    
    
    79,323
    
    
    
    (61
    %)Total Operating Expenses
    
    
    338,548
    

    
    
    398,213
    
    
    
    (15
    %)Financial Accounting Expenses
    
    
    96,668
    
    
    
    (49,662
    )Provision for Lawsuit Settlement
    
    
    560,000
    
    
    
    Provision for Arbitration Settlement
    
    
    
    
    
    
    600,000Net Loss
    
    $
    (976,580
    )
    
    $
    (917,707
    )
 11




---



##### Table of Contents



Balance Sheet Data: As atMarch 31, 2004
    
    December 31, 2003Current Assets
    
    $
    1,338,920
    
    
    $
    590,295Total Assets
    
    
    2,048,201
    
    
    
    1,281,858Current Liabilities
    
    
    817,417
    
    
    
    1,027,561Total Liabilities
    
    
    1,174,322
    
    
    
    1,384,466Working Capital (Deficiency)
    
    
    521,503
    
    
    
    (437,266
    )Stockholders Equity (Deficit)
    
    
    873,879
    
    
    
    (102,608
    )
 Results of Operations Three months Ended March 31, 2004 compared with Three Months Ended March 31,
2003 Sales Sales during the three months ended March 31, 2004, amounted to $19,000, a
decrease of 40% over sales in the first quarter of 2003 of $31,000, however
sales rose by 7% over sales in three months ended December 31, 2003. In January 2004, we signed a distribution agreement with China National Pharmaceutical
Trade Corporation to distribute our L.A.M. IPM Wound Gel in China. We believe
that through the signing of this distribution agreement we will achieve
increased sales later in 2004. Cost of Goods Sold Cost of Goods Sold for the three months ended 2004 were $4,000,
representing a decrease of $3,000, or approximately 42%, from $7,000 in 2003.
The gross profit percentage of 79% remained constant for the first quarter of
2004 when compared to 78% for the first quarter of 2003. General and Administrative Expenses General and administrative expenses for the three months ended March 31,
2004 increased 9.5% to $175,000 from $160,000 for the three months ended March
31, 2003. The increase included costs attributable to the special
meeting of shareholders held in March 2004 and expenses related to our private placement.
Decreases in investor relations, salaries and benefits and insurance reflected
our continued efforts to reduce operating expenses. The primary components of general and administrative expenses for the
three months ended March 31, 2004 and 2003 were as follows: Three months endedMarch 31,2004
    
    2003Officers salaries
    
    $
    12,750
    
    
    $
    9,375Employee salaries and benefits
    
    
    25,671
    
    
    
    28,332Investor relations
    
    
    7,855
    
    
    
    16,578Financial consulting
    
    
    13,011
    
    
    
    Legal and auditing (including SEC filings)
    
    
    50,380
    
    
    
    46,008Insurance
    
    
    3,231
    
    
    
    15,479Shareholder special meeting expenses
    
    
    7,496
    
    
    
    Other expenses
    
    
    54,758
    
    
    
    44,225Total
    
    
    175,152
    
    
    
    159,997
 12




---



##### Table of Contents



Marketing and Business Development Expense Marketing and business development expense for the three months ended
March 31, 2004 decreased 16% to $128,000 from $152,000 for the three months
ended March 31, 2003. The decrease reflects the reduction in personnel which
occurred in the second quarter of 2003. Research and Development Expense Research and development expenses for the three months ended March 31,
2004 decreased 61% to $31,000 from $79,000 for the three months ended March 31,
2003. We have chosen to reduce our research and development expenditures in
order to focus on establishing our existing products in the market place. As
our products obtain acceptance we will increase our research and development
expenditures and accelerate the development of additional products. Share and Option Grants We are required to recognize non-cash expenses which represent the deemed
fair value of grants of stock options and of stock for services, calculated in
accordance with United States generally accepted accounting principles. These
deemed non-cash costs, which are accounted for by correspondingly increasing
our paid in capital, increased to $52,000 for the three months ended March 31,
2004 from $(69,000) for the three months ended March 31, 2003. The non-cash
expenses in 2004 included costs attributed to options and shares granted to
consultants and directors for services performed. The negative expense in 2003
resulted from our ability to renegotiate a contract with a third party in which
the number of shares to be issued to the third party was reduced. Warrant Premium The expense of $25,000 for the three months ended March 31, 2004
represents the fair value of the warrants issued to shareholders in connection
with our private placement. Provision for 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 March 31, 2004. Liquidity and Sources of Capital Three Months ended March 31, 2004 Our cash and cash equivalents as of March 31, 2004 was $783,000. The
working capital increased from a deficiency of approximately $(437,000) as of
December 31, 2003 to a working capital surplus of approximately $522,000 as of
March 31, 2004. Our operations used approximately $458,000 in cash during the three months
ended March 31, 2004 compared to $219,000 used in the same period in the prior
year. This was primarily due to a reduction of accounts payable in the current
period of $147,000 compared to an increase in accounts payable of $131,000 in
the same period in the prior year. During this period we also invested $35,000 in patents and trademarks. During the three months ended March 31, 2004, funds were raised
principally from the exercise of warrants in the amount of $259,000 and from
subscription agreements for the issuance of our common stock in the amount of
$991,000 as follows: 13




---



##### Table of Contents



During the three months ended March 31, 2004 we sold units of our common
stock in which each unit consists of 1,000 shares of our common stock plus 750
warrants. 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 Through this private placement we sold 5,512,000 shares of our common
stock, plus warrants for the purchase of an additional 4,134,000 shares for
proceeds amounting to $1,230,000 to 33 investors of which $991,000 was received
prior to March 31, 2004. As of March 31, 2004 we have not issued the common
stock in relation to the private placement. 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. 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. 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 Under the supervision and with the participation of management, we have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Exchange Act Rule 13a-15(e) and 15d-15(e)
as of the end of the period covered by this report. Based on that evaluation,
our Chief Executive Officer, Joseph T. Slechta, who is also our Principal
Financial Officer has concluded that, as of March 31, 2004, these disclosure
controls and procedures were effective in timely alerting him to material
information relating to our company required to be included in our periodic SEC
reports. Since March 31, 2004, there were no significant changes in our
internal control over financial reporting, or in other factors, that have
materially affected, or are reasonably likely to materially affect, our
internal controls over financial reporting. 14




---



##### Table of Contents



PART II
OTHER INFORMATION 
 Item 1 Legal Proceedings In March 2004, a consultant filed a lawsuit with the District Court of
Montreal in Quebec, Canada in the amount of $2.8 million against us and one of
our directors 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 the lawsuit was settled in full through the issuance of two
million shares of our common stock. 
 Item 2 Changes in Securities During the three months ended March 31, 2004 we sold 5,512,000 shares of
our common stock, plus warrants for the purchase of an additional 4,134,000
shares for proceeds amounting to a total of $1,229,760 to 33 investors. 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 registered the common shares issued to the investors as
a result of the private placement with the United States Securities and
Exchange Commission (Commission File No. 333-115216). The sale and issuances of the common stock referred to above were exempt
transactions under Section 4(2) of the Securities Act of 1933 as transactions
by an issuer not involving a public offering. The shareholders acquired these
securities for investment purposes only and without a view to distribution. At
the time the shareholders acquired these securities the shareholders were fully
informed and advised about matters concerning the Company, including its
business, financial affairs and other matters. The shareholders acquired the
securities for their own account. The shares are restricted securities as
defined in Rule 144 of the Securities and Exchange Commission. No underwriters
were involved with the sale of these shares. 
 Item 4 Submission of Matters to a Vote of Security Holders A special meeting of the stockholders was held on March 9, 2004 for the
purpose of amending our Certificate of Incorporation to increase the authorized
number of shares of common stock to a total of 150,000,000 shares of common
stock. Sixty-one percent or 28,285,773 of the shares outstanding were
represented in person or by proxy at the special meeting. Of these 27,638,856
or ninety-eight percent voted in favor of increasing the authorized number of
shares of common stock to a total of 150,000,000 shares; 623,765 or two percent
voted against increasing the authorized number of shares of common stock and
23,152 abstained from voting. We did not receive any broker non-votes. 
 Item 6 Exhibits and Reports on Form 8-K (a)
    
    ExhibitsNumber
    
    Title31.1
    
    
    Certification by Joseph T. Slectha, President, Chief
Executive Officer, Pursuant to Section 302 of the Sarbanes-Oxley
Act of 200232.1
    
    
    Certification by Joseph T. Slectha, President, Chief
Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(b)
    
    Reports on Form 8-KNone
 15




---



##### Table of Contents



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.May 14, 2004
    
    By:
/s/ Joseph T. SlechtaJoseph T. Slechta, President, Chief Executive Officerand Principal Financial Officer
 16