UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q









x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934





For the quarterly period ended March 31, 2011





OR





 ̈
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934





For the transition period from          to





Commission file number 0-53585




LANTIS LASER INC.


(Exact Name Of Registrant As Specified In Its Charter)




Nevada

65-0813656(State of Incorporation)

(I.R.S. Employer Identification No.)11 Stonebridge Court, Denville, NJ

07834(Address of Principal Executive Offices)

(ZIP Code)




Registrant's Telephone Number, Including Area Code: (203) 300-7622




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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No  ̈


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ̈Nox


(theregistrantis not yet required to submit Interactive Data)




Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ̈ No x




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.




Large accelerated filer  ̈

Accelerated filer  ̈

Non-Accelerated filer  ̈

Smaller reporting company x





Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: On May 8, 2011, the Registrant had 158,838,870 shares of common stock issued and outstanding.










TABLE OF CONTENTS





Item

Description

PagePART I - FINANCIAL INFORMATION

3ITEM 1.

FINANCIAL STATEMENTS.

3ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION.

3ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

5ITEM 4.

CONTROLS AND PROCEDURES.

5PART II - OTHER INFORMATION

5ITEM 1.

LEGAL PROCEEDINGS.

5ITEM 1A.

RISK FACTORS

6ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

6ITEM 3.

DEFAULT UPON SENIOR SECURITIES.

6ITEM 4.

SUBMISSION OF MATERS TO A VOTE OF SECURITY HOLDERS.

6ITEM 5.

OTHER INFORMATION.

6ITEM 6.

EXHIBITS.

6




2




PART I - FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




The Registrant's unaudited interim financial statements are attached hereto.




ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION




Forward-Looking Statements; Market Data




As used in this Quarterly Report, the terms "we", "us", "our", "Registrant" and the "Company"means Lantis Laser, Inc., a Nevada corporation, and its wholly-owned subsidiary, Lantis Laser, Inc., a New Jersey corporation. To the extent that we make any forward-looking statements in the "Management's Discussion and Analysis of Financial Condition and Results of Operations"in this Quarterly Report, we emphasize that forward-looking statements involve risks and uncertainties and our actual results may differ materially from those expressed or implied by our forward-looking statements. Our forward-looking statements in this Quarterly Report reflect our current views about future events and are based on assumptions and are subject to risks and uncertainties. Generally, forward-looking statements include phrases with words such as "expect", "anticipate", "intend", "plan", "believe", "seek", "estimate"and similar expressions to identify forward-looking statements.




Overview




The Company was incorporated under the laws of the State of Nevada in February 1998 under the name Beekman Enterprises, Inc. In November 2004, we acquired Lantis Laser, Inc., a New Jersey corporation formed in January 1998 (“Lantis New Jersey”), in a reverse-triangular merger and succeeded to its business as our sole line of business. In connection with the merger, we changed our name to “Lantis Laser Inc.”




We were formed to commercialize the application of novel technologies in the dental industry. As our first product, we are developing and plan to market is an intraoral imaging system for use in dentistry, our “OCT Dental Imaging System.” The OCT Dental Imaging System is based on a diagnostic imaging technology referred to as optical coherence tomography, or OCT. We have the exclusive rights to OCT for applications in the dental field under a license agreement with Lawrence Livermore National Laboratories and an exclusive license for dental applications of Near-infrared Imaging from the Regents of the University of California.  We are a development stage company and are currently seeking our next round of funding to complete development and transition to sales and marketing, subject to obtaining FDA clearance.




On April 22, 2011, the Company signed an agreement to merge with TAG Minerals Inc. (“TAG”). The transaction will be an all stock deal whereby TAG will become a wholly-owned subsidiary of the Company. The transaction is expected to close in the Company’s second fiscal quarter.





TAG is a U.S.-based mineral resource acquisition, exploration and development company with operations conducted through its operating company, TAG Minerals Zimbabwe (Private) Limited. TAG’s business is managed by its directors and officers who have mineral extraction and commercial experience. TAG's management team is augmented by independent financial, geological, and mining professionals who advise the company on its mining and exploration projects throughout Zimbabwe, Africa.




3




Results of Operations




Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010.




The following is derived from, and should be read in conjunction with, our condensed consolidated financial statements, and related notes for the three months ended March 31, 2011 and 2010.




Operating revenues. The Company is a development stage company. To date, the Company has not generated any operating revenues, nor has the Company generated operating revenues since its inception in February 1998. Generation of sales can only commence upon FDA clearance of our OCT and NIR dental imaging systems.




Operating expenses. For the three months ended March 31, 2011, our operating expenses were $19,078 compared to $32,691 for the same period in the prior year, representing a decrease of $13,613 or 42%. The decrease in our operating expenses was mainly due to the decrease in professional, consulting and marketing fees which decreased to $9,138 in the three months ended March 31, 2011 as compared ended $9,761 in the same period last year. General and administrative expenses decreased from $17,310 in the three months ended March 31, 2010 to $4,320 in the same period in 2011 due to the lower level of activity.




Total other expenses.Other expenses were $37,783 for the three months ended March 31, 2011, compared to $180,683 for the three months ended March 31, 2010. This was due to the decrease in interest expense to $37,783 for the three months ended March 31, 2011 from $75,462 in the comparable period in 2010 as almost ninety percent of the 5% Senior Convertible Note notes had been converted to equity by the end of the period.   Interest expense related to the debt discount decreased to $0 in the three months ended March 31, 2011 compared to $82,257 in the same period in 2010 as a result of the discount being fully amortized.  Debt issuance costs reduced to $0 in the three months ended March 31, 2011 compared to $22,964 in the same period in 2010, as the cost was fully amortized.




Net loss.We had a net loss applicable to common shares of $56,861, or $0.00 per share, for the three months ended March 31, 2011, compared to a net loss applicable to common shares of $213,374 or $0.00 per share, for the same period in the prior year. The reduction in net loss was principally due to the reduction in interest expense, a reduction in the interest expense related to the debt discount and a reduction in the debt issuance costs.




Liquidity and Capital Resources




Total assets.On March 31, 2011, we had total assets of $25,009, compared to $33,972 on December 31, 2010.  The Company had cash and cash equivalents of $6,039 on March 31, 2011 compared to $9,382 equivalents at December 31, 2010. There were no prepaid expenses and other current assets as at March 31, 2011 and at December 31. 2010. Our fixed assets, were $18,970 on March 31, 2011, compared to $24,590 on December 31, 2010. This change was due to the depreciation on those assets.




Total liabilities. We had total liabilities of $2,196,652 on March 31, 2011 composed principally of notes for management’s accrued salaries and loans to the company amounting to $1,102,191, current accounts payable and accrued expenses of $460,897 and convertible notes payable, net of discount and beneficial conversion features of $466,266. Accrued interest due on the convertible notes payable amounted to $167,298 at December 31, 2010 as compared to $155,148 as at March 31, 2011.  On March 31, 2011 we had no long-term liabilities. At March 31, 2011, we had a negative working capital of $2,190,613 compared to a negative working capital of $2,174,372 on December31, 2010. There is no guarantee that the Company will be able to raise enough capital or generate revenues to sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period.
  Cash flow from operations.During the three month period ended March 31, 2011, we had cash used in operating activities of $3,343, compared to $37,620 during the same period in the prior year. The decrease of $34,277 in cash used in operating activities was mainly due to the reduction in the net operating loss from $213,374 in the same period in 2010 to $56,861 for the three months ended March 31, 2011; the reduction of amortization of debt issuance costs from $22,964 to $0 and the reduction of interest expense related to the debt discount from $41,456 to $0 as these were fully amortized.  Interest expense related to the beneficial conversion feature was reduced in the period to $0 as compared to March 31, 2010.  Accounts payable and accrued expenses increased $23,600 in the three month period to March 31, 2011 compared to a decrease of $7,238 in the same period in 2010.  Accrued interest on the unconverted portions of the 5% Convertible Note was reduced from $12,150 in the three months to March 31, 2010 compared to $62,297 in the same period last year.


4




Cash flow from investing activities.The Company had no investing activities during the three-month periods ended March 31, 2011 and 2010.




Cash flow from financing activities.During the three months ended March 31, 2011, the Company received no proceeds from financing activities compared to $37,620, which for the most part was the result of proceeds received from related parties in the three months ended March 31, 2010.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




Not applicable.




ITEM 4. CONTROLS AND PROCEDURES




Evaluation of disclosure controls and procedures.We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. As of March 31, 2011, the reporting period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, who are same person, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15 Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are not effective as of March 31, 2011 due to the fact that we have not been funded effectively for us to separate these two functions. We plan on making changes in the upcoming year to become more effective and properly segregate these functions.




Our internal controls are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. We maintain records that, in reasonable detail, accurately and fairly reflect the transactions that are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles, and that our expenditures are being made only in accordance with authorizations of our management and directors.


As soon as feasible Management intends to engage a Chief Financial Officer to ensure that internal controls and procedures are fully effective.  For the three months ended March 31, 2011, management feels that our internal controls over financial reporting was not effective.




Changes in internal controls. During the quarterly period covered by this report, no changes occurred in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.




PART II - OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS




None.


5




ITEM 1A. RISK FACTORS




Not applicable.




ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS




None




ITEM 3. DEFAULTS UPON SENIOR SECURITIES




In March, April and May 2007, the Company issued 5% Senior Convertible 3 Year Notes to investors in the amount of $2,526,500, which equaled the gross proceeds raised by the Company (the “Convertible Notes”).  The Convertible Notes are convertible to shares of the Company’s common stock anytime in the three-year period at a fixed conversion price of $.15.  In May 2009, convertible notes of $125,000 were converted, at a fixed conversion rate of $.15 per share, into 833,334 shares of common stock.  This conversion reduced the outstanding principal to a balance of $2,401,500. In an effort to reduce the liabilities of the Company, on July 1, 2010, the Company offered the Noteholders the opportunity to convert their Notes to common stock at a price of $0.05 (originally a $0.15 conversion price), including any and all outstanding interest.  In addition, the Company offered to reset the exercise price of the warrants attached to the Notes to $0.075 from $0.15, and to extend the warrants for a further three years from the original date for all warrant holders. As at March 31, 2011, 90% have accepted the offer and new certificates amounting to 38,840,000 shares have been issued in conversion of $1,942,000 out of the $2,401,500, the total amount of the note.




The Notes were issued in four closings in 2007: $1,722,500 on March 30; $407,000 on April 20; 315,000 on April 30, and $82,000 on May 17.  The Company is in default on the redemption of all these Notes which were due to be redeemed three years after the date of issue, and payment of interest, due to lack of sufficient cash resources.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS




None.




ITEM 5. OTHER INFORMATION




None.




ITEM 6. EXHIBITS




(a) The following documents are filed as exhibits to this report on Form 10-Q or incorporated by reference herein. Any document incorporated by reference is identified by a parenthetical reference to the SEC filing that included such document.




Exhibit No.

Description31

Certification of CEO and CFO pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32

Certification of CEO and CFO pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


6




SIGNATURES




Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.




Dated: May 13, 2011
/s/ Stanley B. BaronStanley B. BaronCEO and CFO


7




LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


THREE MONTHS ENDED MARCH 31, 2011 AND 2010





INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





Page(s)INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2011 (UNAUDITED) AND DECEMBER 31, 2010

3CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHD ENDED MARCH 31, 2011 AND 2010 (UNAUDITED) WITH CUMULATIVE TOTALS SINCE JANUARY 14, 1998 (INCEPTION)

4CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010 (UNAUDITED) WITH CUMULATIVE TOTALS SINCE JANUARY 14, 1998 (INCEPTION)

5NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2011 AND 2010 (UNAUDITED)

6-27




F-2




LANTIS LASER INC.
 (A DEVELOPMENT STAGE COMPANY)
 CONDENSED CONSOLIDATED BALANCE SHEETS
 MARCH 31, 2011 (UNAUDITED) AND DECEMBER 31, 2010
 
 (UNAUDITED)MARCH 31,


DECEMBER 31,2011


2010ASSETSCurrent Assets:Cash and cash equivalents

$
6,039


$
9,382Prepaid expenses and other current assets


-



-Total Current Assets


6,039



9,382Fixed assets, net of depreciation


18,970



24,590Other Assets:Debt issuance costs, net of amortization


-



-Total Other Assets


-



-TOTAL ASSETS

$
25,009


$
33,972LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)LIABILITIESCurrent Liabilities:Accrued interest - convertible notes

$
167,298


$
155,148Accounts payable and accrued expenses


460,897



438,946Related party payable


1,102,191



1,100,542Convertible notes payable, net of discount and beneficial conversion feature


466,266



489,118Total Current Liabilities


2,196,652



2,183,754Total Liabilities


2,196,652



2,183,754STOCKHOLDERS’ EQUITY (DEFICIT)Preferred stock, $.001 Par Value; 10,000,000 shares authorized and 0 shares issued and outstanding


-



-Common stock, $.001 Par Value; 990,000,000 shares authorized and 151,561,441 and 139,874,905 shares issued and outstanding


151,561



139,874Additional paid-in capital


6,973,120



6,949,807Additional paid-in capital - warrants


1,167,987



1,167,987Deficits accumulated during the development stage


(10,464,311
)


(10,407,450
)Total Stockholders’ Equity (Deficit)


(2,171,643
)


(2,149,782
)TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

$
25,009


$
33,972
 
 The accompanying notes are an integral part of the consolidated financial statements
  F-3
 
 LANTIS LASER INC.
 (A DEVELOPMENT STAGE COMPANY)
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010
 WITH CUMULATIVE TOTALS SINCE JANUARY 14, 1998 (INCEPTION)
 
 CUMULATIVETOTALS SINCETHREE MONTHS ENDED


INCEPTIONMARCH 31,


JANUARY 14,2011


2010


1998OPERATING REVENUESSales

$
-


$
-


$
-OPERATING EXPENSESResearch and development


-



-



2,129,906Wages and wage related expenses


-



-



979,981Professional, consulting and marketing fees


9,138



9,761



4,443,075Other general and administrative expenses


4,320



17,310



581,994Depreciation


5,620



5,620



119,349Total Operating Expenses


19,078



32,691



8,254,305LOSS BEFORE OTHER INCOME (EXPENSE)


(19,078
)


(32,691
)


(8,254,305
)Amortization of debt issuance costs


-



(22,964
)


(287,571
)Loss in investment under equity method


-



-



(167,664
)Interest expense - debt discount


-



(82,257
)


(1,017,246
)Interest income (expense), net


(37,783
)


(75,462
)


(737,525
)Total Other Income (expense)


(37,783
)


(180,683
)


(2,210,006
)NET LOSS BEFORE PROVISION FOR INCOME TAXES


(56,861
)


(213,374
)


(10,464,311
)Provision for Income Taxes


-



-



-NET LOSS APPLICABLE TO COMMON SHARES

$
(56,861
)

$
(213,374
)

$
(10,464,311
)NET LOSS PER BASIC AND DILUTED SHARES


(0.00
)


(0.00
)


(0.25
)WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING


142,452,356



100,201,572



41,907,308
 
 The accompanying notes are an integral part of the consolidated financial statements
  F-4
  LANTIS LASER INC.
 (A DEVELOPMENT STAGE COMPANY)
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 FOR THE THREE MONTHS ENDED MARCH 31, 2011 AND 2010
 WITH CUMULATIVE TOTALS SINCE JANUARY 14, 1998 (INCEPTION)
 
 CUMULATIVETHREE MONTHS ENDED


TOTALS SINCEMARCH 31,


INCEPTION2011


2010


JANUARY 14, 1998CASH FLOWS FROM OPERATING ACTIVITIESNet loss

$
(56,861
)

$
(213,374
)

$
(10,464,311
)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation


5,620



5,620



119,349Amortization of debt issuance costs


-



22,964



287,571Interest expense - debt discount


-



41,456



504,606Interest expense - beneficial conversion feature


12,148



40,801



524,789Loss on investment under equity method


-



-



167,664License fees payable for research and development


-



-



605,000Warrants issued to former noteholders and consultants


-



-



469,897Common stock issued for consulting services


-



-



879,050Changes in assets and liabilitiesDecrease (increase) in prepaid expenses


-



9,854



2,205,000Increase (decrease) in accounts payable and and accrued expenses


23,600



(7,238
)


1,588,382Accrued interest on convertible notes


12,150



62,297



477,939Total adjustments


53,518



175,754



7,829,247Net cash used in operating activities


(3,343
)


(37,620
)


(2,635,064
)CASH FLOWS FROM INVESTING ACTIVITIESAcquisitions of fixed assets


-



-



(138,319
)Investment under equity method


-



-



(167,664
)Net cash used in investing activities


-



-



(305,983
)CASH FLOWS FROM FINANCING ACTIVITESProceeds from notes payable


-



-



197,000Proceeds from exercise of warrants


-



-



34,984Increase (decrease) in bank overdraft


-



(545
)


-Proceeds from convertible notes and warrants,net of debt issuance costs


-



-



2,284,310Payments of license fee payable


-



-



(225,000
)Proceeds from private placement, net of fees


-



-



521,500Proceeds (payments) from related parties


-



38,165



134,292Net cash provided by financing activities


-



37,620



2,947,086NET INCREASE (DECREASE) INCASH AND CASH EQUIVALENTS


(3,343
)


-



6,039CASH AND CASH EQUIVALENTS -BEGINNING OF PERIOD


9,382



-



-CASH AND CASH EQUIVALENTS - END OF PERIOD

$
6,039


$
-


$
6,039CASH PAID DURING THE YEAR FOR:Income taxes

$
-


$
-


$
-Interest expense

$
-


$
-


$
93,517SUPPLEMENTAL NONCASH INFORMATION:Conversion of notes and interest for common stock, net of discounts and issuance costs

$
35,000


$
-


$
2,771,305Conversion of license fee payable into capital

$
-


$
-


$
380,000Common stock issued for consulting services

$
-


$
-


$
879,050Warrants issued to former noteholders and consultants

$
-


$
-


$
469,897Common stock issued for prepaid expenses

$
-


$
-


$
2,205,000Conversion of accrued expenses for note payable-related parties

$
-


$
-


$
960,000
 
 The accompanying notes are an integral part of the consolidated financial statements
  F-5





LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 1 -
ORGANIZATION AND BASIS OF PRESENTATION





The unaudited condensed consolidated financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  The condensed consolidated financial statements and notes are presented as permitted on Form 10-Q and do not contain information included in the Company’s annual consolidated financial statements and notes thereto.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America 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.  It is suggested that these condensed consolidated financial statements be read in conjunction with the December 31, 2010 audited financial statements and the accompanying notes thereto.  While management believes the procedures followed in preparing these condensed consolidated financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year.





These condensed consolidated unaudited financial statements reflect all adjustments, including normal recurring adjustments which, in the opinion of management, are necessary to present fairly the consolidated operations and cash flows for the periods presented.





Lantis Laser, Inc. (the “Company”) was incorporated in the State of New Jersey on January 14, 1998. On November 3, 2004, the Company was acquired by Hypervelocity, Inc., a Nevada corporation.





In the transaction, the Company exchanged 100% of their stock in exchange for 127,718,500 shares of common stock of Hypervelocity, Inc.  The transaction was treated for accounting purposes as a reverse merger by Lantis Laser, Inc. being the accounting acquirer.  Included in the 127,718,500 shares issued to the shareholders of Lantis Laser, Inc. in the transaction, 6,422,500 shares were issued in conversion of convertible notes payable the Company had entered into in 2001 and 2003.  The shares represent the conversion of the original notes, the interest accrued on those notes as well as warrants that were offered and paid for by the note holders.  The value of the convertible notes, interest and warrants were $259,529.





On December 9, 2004, Hypervelocity, Inc. changed its name to Lantis Laser Inc. which is domiciled in Nevada.





On June 16, 2006, the Company authorized a 1 for 2 reverse stock split for all issued shares.  All shares reflected herein have been retroactively adjusted to account for the reverse stock split.





In October 2006, the Company completed a private placement for the sale of 5,850,000 shares of its common stock at a price per share of $.10.  For every 1.8 share of stock purchased, the investors received 1 warrant.


F-6


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 1 -
ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)





In April and May 2007, the Company issued 5% Senior Convertible 3 Year Notes to investors in the amount of $2,526,500, which equaled the gross proceeds raised by the Company (the “Convertible Notes”).  The Convertible Notes are convertible to shares of the Company’s common stock anytime in the three-year period at a fixed conversion price of $.15.  The Convertible Notes will convert into 16,843,333 shares of the Company’s common stock.  The convertible noteholders received 6,737,333 detachable warrants with their notes.  The warrants are exercisable for five years from date of issue at an exercise price of $.25.  The Company separately valued the warrants at $513,132, and recorded a debt discount in that amount which is being amortized to interest expense over the three-year Convertible Notes period.  The Company has recorded an additional discount of $505,300 as the value of the beneficial conversion option.  In May 2009, convertible notes of $125,000 were converted to 833,334 shares of common stock ($.15).





In an effort to reduce the liabilities of the Company, on July 1, 2010 the Company offered noteholders the opportunity to convert their Notes to common stock at $0.05 per share including any and all outstanding interest that has been accrued from the original $0.15 conversion price.  In addition, the Company offered to reset the exercise price of the warrants that were issued with the Notes to $0.075 from $0.25 and extend the warrants for a further three years from the original date of issue for all warrant holders. Through December 31, 2010, convertible notes of $1,942,000, including $386,687 of accrued interest was converted to 39,173,333 shares of common stock.





The Company determined that there was no material modification to the debt instrument under ASC 470-50-40, as the embedded conversion option immediately before and after the modification of the debt instrument was under the 10% threshold.





On December 19, 2007, HyGeniLase, Inc., (“HyGeniLase”) a Delaware corporation was formed.  HyGeniLase is a joint venture between the Company and Laser Energetics, Inc., (“LEI”), an Oklahoma corporation, with each party owning 50% of the company.  HyGeniLase was formed to develop, manufacture, market, sell and distribute dental laser process technology to the dental markets worldwide (see Note 10).





The Company in June 2008, entered into a strategic agreement with AXSUN Technologies whereby AXSUN will manufacture and supply the Integrated Optical Coherence Tomography Engine for the Company’s OCT Dental Imaging System.  Under the terms of the agreement, the Company has exclusive rights to the OCT Engine for use in diagnostic imaging of teeth and soft tissue in human and animal dentistry.  The Company issued 500,000 shares of stock to AXSUN in connection with this agreement (see Note 7).





The Company was formed to commercialize the application of novel technologies in the dental industry.  The criteria for selected products include competitive edge, exclusivity and large market potential.  The Company is in development of its Optical Coherence Tomography ("OCT") "Dental Imaging" as its first product.  The Company has licensed the exclusive rights for the dental field for the OCT patented technology from Lawrence Livermore National Laboratories. OCT was invented in the early 1990’s at Massachusetts Institute of Technology and it is currently being commercialized in ophthalmology and cardiovascular imaging..


F-7


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 1 -
ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)





On May 31, 2007, the Company entered into an exclusive licensing agreement for the field of dentistry with The University of Florida Research Foundation for novel technology relevant to the imaging probe of its Dental Imaging System; the Agreement carries a $1,000 initial licensing fee with royalty payments to commence in 2008.





On July 9, 2008, the Company entered into an exclusive license agreement for the field of dentistry for a patent pending technology known as Near Infrared Transillumination Imaging (NIR). The Company paid the initial licensing fee of $10,000.  This technology is synergistic with the OCT technology and the Company intends to sell it in a combination OCT/NIR platform and also as a standalone product.





Management of the Company has extensive experience in the dental industry, including technology, development, marketing and distribution, clinical and research dentistry.





OCT is a new diagnostic imaging technology that is based on advanced photonics and fiber optics.  It enables the capture of cross-sectional images of tissue with an axial resolution of up to ten times that of x-ray, providing tissue characterization and images that cannot be obtained by any other means, including x-ray.  Information is captured by shining a near- infrared light through a single optical fiber only .006” diameter deep into the internal structures of the subject tissue.





When the light becomes scattered in the dense biological tissue, a certain component of the reflected light remains unscattered and thus contains good quantitative and structural image information.  The OCT technology maps the changing intensities of reflections from the tissue to form an image of the subject area.  This image, displayed on a monitor in real time, has an unprecedented amount of diagnostic information and can be manipulated, printed out and stored in a digital format.





Effective July 1, 2009, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted Accounting Principles – Overall (“ASC 105-10”). ASC 105-10 establishes the FASB Accounting Standards Codification (the “Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with U.S. GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Positions or Emerging Issue Task Force Abstracts. Instead, it will issue Accounting Standards Updates (“ASUs”).





The FASB will not consider ASUs as authoritative in their own right. ASUs will serve only to update the Codification, provide background information about the guidance and provide the basis for conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.


F-8


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 1 -
ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)





Going Concern


As shown in the accompanying consolidated financial statements the Company has incurred recurring losses of $56,861 and $213,374 for the three months ended March 31, 2011 and 2010 respectively, and has incurred a cumulative loss of $10,464,311 since inception (January 14, 1998).  The Company has a working capital deficit in the amount of $2,190,613 as of March 31, 2011.  The Company is currently in the development stage and has been spending a majority of their time in the development of the OCT technology for which they currently hold exclusive licenses for dental applications.





There is no guarantee that the Company will be able to raise enough capital or generate revenues to sustain its operations.  These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period.





Management believes that the Company’s capital requirements will depend on many factors.  These factors include the final phase of development being successful as well as product implementation and distribution first nationally, then internationally.  The Company entered into a convertible promissory note for $50,000 in August 2010 (of which $35,000 was converted in the three months ended March 31, 2011 and completely converted in April 2011) and in the debt offering completed in 2007, the noteholders have started the conversion of these notes, on amended and agreed terms and converted $1,942,000 through March 31, 2011. The Company still hopes to complete development of their technology. They have amended certain license agreements in July and December 2010 and extended the dates as to which minimum royalty payments are due.





The Company will continue to pursue traditional forms of financing, in addition to the approximately $3,300,000 it raised through convertible notes and the issuance of common stock to assist them in meeting their current working capital needs.  The Company’s ability to continue as a going concern for a reasonable period is dependent upon management’s ability to raise additional interim capital and, ultimately, achieve profitable operations.  There can be no assurance that management will be able to raise sufficient capital, under terms satisfactory to the Company, if at all.





The consolidated financial statements do not include any adjustments relating to the carrying amounts of recorded assets or the carrying amounts and classification of recorded liabilities that may be required should the Company be unable to continue as a going concern.





NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Development Stage Company





The Company is considered to be in the development stage as defined in ASC 915.The Company has devoted substantially all of its efforts to the development of their OCT technology.  Additionally, the Company has allocated a substantial portion of their time and investment in bringing their services to the market, and the raising of capital.





Principles of Consolidation


The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary.  All significant intercompany accounts and transactions have been eliminated in consolidation.


F-9


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Use of Estimates





The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to derivative liabilities, bad debts, income taxes and contingencies.  The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.  Actual results could differ from those estimates.





Cash and Cash Equivalents





The Company considers all highly liquid debt instruments and other short-term investments with an initial maturity of three months or less to be cash equivalents.  Any amounts of cash in financial institutions over FDIC insured limits, exposes the Company to cash concentration risk.





Fair Value of Financial Instruments (other than Derivative Financial Instruments)





The carrying amounts reported in the consolidated balance sheet for cash and cash equivalents, and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments.  For the notes payable, the carrying amount reported is based upon the incremental borrowing rates otherwise available to the Company for similar borrowings.





Research and Development





The Company annually incurs costs on activities that relate to research and development of new technology and products.  Research and development costs are expensed as incurred.  Certain of these costs would be reduced by government grants and investment tax credits where applicable.  The Company has expensed its payments in connection with the license agreement as research and development costs.





Revenue Recognition





The Company has not recognized revenues to date.  The Company anticipates recognizing revenue in accordance with the contracts it enters into for the distribution of the products that are currently in development.


F-10


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Accounts Receivable





The Company when it will conduct business it will extend credit based on an evaluation of the customers’ financial condition, generally without requiring collateral.  Exposure to losses on receivables is expected to vary by customer due to the financial condition of each customer.  The Company monitors exposure to credit losses and maintains allowances for anticipated losses considered necessary under the circumstances.  The Company has not recorded any receivables, and therefore no allowance for doubtful accounts at March 31, 2011 and 2010, respectively.





Accounts receivable will generally be due within 30 days and collateral is not required.





Income Taxes





Under ASC 740 the liability method is used in accounting for income taxes.  Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.





Uncertainty in Income Taxes





Under ASC 740-10-25 recognition and measurement of uncertain income tax positions is required using a “more-likely-than-not” approach.  Management evaluates their tax positions on an annual basis and has determined that as of March 31, 2011 no additional accrual for income taxes is necessary.





Advertising Costs




The Company expenses the costs associated with advertising as incurred.  Advertising expenses for the three months ended March 31, 2011 and 2010 are included in professional, consulting and marketing fees in the consolidated statements of operations.





Fixed Assets




Fixed assets are stated at cost.  Depreciation is computed using the straight-line method over the estimated useful lives of the assets; computer and medical equipment - 5 years, and furniture and fixtures - 5 years.





When assets are retired or otherwise disposed of, the costs and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in income for the period.  The cost of maintenance and repairs is charged to income as incurred; significant renewals and betterments are capitalized.  Deduction is made for retirements resulting from renewals or betterments.


F-11


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)




Impairment of Long-Lived Assets




Long-lived assets, primarily fixed assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable.  The Company does not perform a periodic assessment of assets for impairment in the absence of such information or indicators.  Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable.  For long-lived assets to be held and used, the Company recognizes an impairment loss only if its carrying amount is not recoverable through its undiscounted cash flows and measures the impairment loss based on the difference between the carrying amount and estimated fair value.





Subsequent Events




In accordance with ASC 855 “Subsequent Events”, the Company is required to disclose the date through which subsequent events have been evaluated and whether that date is the date the financial statements were issued or the date the financial statements were available to be issued.





(Loss) Per Share of Common Stock




Basic net (loss) per common share is computed using the weighted average number of common shares outstanding.  Diluted earnings per share ("EPS") include additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants.  Common stock equivalents were not included in the computation of diluted earnings per share on the consolidated statement of operations due to the fact that the Company reported a net loss and to do so would be anti-dilutive for the periods presented.





The following is a reconciliation of the computation for basic and diluted EPS:


CumulativeTotals sinceMarch 31,


March 31,


January 14, 19982011


2010


(Inception)Net loss

$
(56,861
)

$
(213,374
)

$
(10,464,311
)Weighted-average common sharesOutstanding (Basic)


142,452,356



100,201,572



41,907,308Weighted-average common stockEquivalentsConvertible Notes


9,490,000



16,009,999



9,490,000Stock options


-



-



-Warrants


14,486,066



14,486,066



14,486,066Weighted-average commons sharesOutstanding (Diluted)


166,428,422



130,697,637



65,883,374




F-12


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Stock-Based Compensation





In 2006, the Company adopted the provisions of ASC 718-10 “Share Based Payments”. The adoption of this principle had no effect on the Company’s operations.





ASC 718-10 requires recognition of stock-based compensation expense for all share-based payments based on fair value.  Prior to January 1, 2006, the Company measured compensation expense for all of its share-based compensation using the intrinsic value method.





The Company has elected to use the modified-prospective approach method.  Under that transition method, the calculated expense in 2006 is equivalent to compensation expense for all awards granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair values.  Stock-based compensation expense for all awards granted after January 1, 2006 is based on the grant-date fair values.  The Company recognizes these compensation costs, net of an estimated forfeiture rate, on a pro rata basis over the requisite service period of each vesting tranche of each award.  The Company considers voluntary termination behavior as well as trends of actual option forfeitures when estimating the forfeiture rate.





The Company measures compensation expense for its non-employee stock-based compensation under ASC 505-50, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services".The fair value of the option issued is used to measure the transaction, as this is more reliable than the fair value of the services received.  The fair value is measured at the value of the Company’s common stock on the date that the commitment for performance by the counterparty has been reached or the counterparty’s performance is complete.





The fair value of the equity instrument is charged directly to compensation expense and additional paid-in capital. For common stock issuances to non-employees that are fully vested and are for future periods, the Company classifies these issuances as prepaid expenses and expenses the prepaid expenses over the service period.





Segment Information





The Company follows the provisions of ASC 280-10, "Disclosures about Segments of an Enterprise and Related Information”.This standard requires that companies disclose operating segments based on the manner in which management disaggregates the Company in making internal operating decisions.  The Company only operates in one reporting segment as of March 31, 2011 and for the three months ended March 31, 2011 and 2010.





Debt Issuance Costs





Debt issuance costs relate to the fees paid in connection with the Convertible Notes.  These fees are being amortized over the life of the Convertible Notes which is three years.  Should the notes be converted prior to the maturity date of three years, then the debt issuance costs will be amortized sooner.  The Company amortized $0 and $22,964 for the three months ended March 31, 2011 and 2010, respectively.


F-13


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Beneficial Conversion Features




ASC 470-20 applies to convertible securities with beneficial conversion features that must be settled in stock and to those that give the issuer a choice in settling the obligation in either stock or cash.  ASC 470-20 requires that the beneficial conversion feature should be valued at the commitment date as the difference between the conversion price and the fair market value of the common stock into which the security is convertible, multiplied by the number of shares into which the security is convertible.  ASC 470-20 further limits this amount to the proceeds allocated to the convertible instrument.





Recent Accounting Pronouncements




In September 2006, ASC issued 820, Fair Value Measurements. ASC 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is encouraged. The adoption of ASC 820 is not expected to have a material impact on the financial statements.





In February 2007, ASC issued 825-10, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of ASC 320-10, (“ASC 825-10”) which permits entities to choose to measure many financial instruments and certain other items at fair value at specified election dates. A business entity is required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. This statement is expected to expand the use of fair value measurement. ASC 825-10 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.





In December 2007, the ASC issued ASC 810-10-65, Noncontrolling Interests in Consolidated Financial Statements. ASC 810-10-65 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, changes in a parent’s ownership of a noncontrolling interest, calculation and disclosure of the consolidated net income attributable to the parent and the noncontrolling interest, changes in a parent’s ownership interest while the parent retains its controlling financial interest and fair value measurement of any retained noncontrolling equity investment.





ASC 810-10-65 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. Management is determining the impact that the adoption of ASC 810-10-65 will have on the Company’s financial position, results of operations or cash flows.





In December 2007, the Company adopted ASC 805,Business Combinations (“ASC 805”). ASC 805 retains the fundamental requirements that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. ASC 805 defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control.  ASC 805 will require an entity to record separately from the business combination the direct costs, where previously these costs were included in the total allocated cost of the acquisition.


F-14


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Recent Accounting Pronouncements (Continued)





ASC 805 will require an entity to recognize the assets acquired, liabilities assumed, and any non-controlling interest in the acquired at the acquisition date, at their fair values as of that date.





ASC 805 will require an entity to recognize as an asset or liability at fair value for certain contingencies, either contractual or non-contractual, if certain criteria are met.  Finally, ASC 805 will require an entity to recognize contingent consideration at the date of acquisition, based on the fair value at that date.  This will be effective for business combinations completed on or after the first annual reporting period beginning on or after December 15, 2008.  Early adoption is not permitted and the ASC is to be applied prospectively only.  Upon adoption of this ASC, there would be no impact to the Company’s results of operations and financial condition for acquisitions previously completed.  The adoption of ASC 805 is not expected to have a material effect on the Company’s financial position, results of operations or cash flows.





In March 2008, ASC issued ASC 815, Disclosures about Derivative Instruments and Hedging Activities”, (“ASC 815”). ASC 815 requires enhanced disclosures about an entity’s derivative and hedging activities. These enhanced disclosures will discuss: how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted for and its related interpretations; and how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. ASC 815 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company does not believe that ASC 815 will have an impact on their results of operations or financial position.





In April 2008, ASC issued ASC 350, “Determination of the Useful Life of Intangible Assets”. This amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under ASC 350. The guidance is used for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after adoption, and the disclosure requirements shall be applied prospectively to all intangible assets recognized as of, and subsequent to, adoption. The Company does not believe ASC 350 will materially impact their financial position, results of operations or cash flows.





ASC 470-20, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“ASC 470-20”) requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer’s non-convertible debt borrowing rate. ASC 470-20 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis. The Company does not believe that the adoption of ASC 470-20 will have a material effect on its financial position, results of operations or cash flows.


F-15


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)





Recent Accounting Pronouncements (Continued)





ASC 815-40, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock” (“ASC 815-40”), provides guidance for determining whether an equity-linked financial instrument (or embedded feature) is indexed to an entity’s own stock and it applies to any freestanding financial instrument or embedded feature that has all the characteristics of a derivative., ASC 815-40 also applies to any freestanding financial instrument that is potentially settled in an entity’s own stock. The Company is determining what impact, if any, ASC 815-40 will have on its financial position, results of operations and cash flows.





ASC 470-20-65, “Transition Guidance for Conforming Changes to, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios” (“ASC 470-20-65”). ASC 470-20-65 is effective for years ending after December 15, 2008. The overall objective of ASC 470-20-65 is to provide for consistency in application of the standard. The Company has computed and recorded a beneficial conversion feature in connection with certain of their prior financing arrangements and does not believe that ASC 470-20-65 will have a material effect on that accounting.





Effective July 1, 2009, the Company adopted FASB ASU No. 2009-05, Fair Value Measurement and Disclosures (Topic 820) (“ASU 2009-05”). ASU 2009-05 provided amendments to ASC 820-10, Fair Value Measurements and Disclosures – Overall, for the fair value measurement of liabilities. ASU 2009-05 provides clarification that in circumstances in which a quoted market price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using certain techniques. ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required for Level 1 fair value measurements. Adoption of ASU 2009-05 did not have a material impact on the Company’s results of operations or financial condition.





In January 2010, the Company adopted FASB ASU No. 2010-06, Fair Value Measurement and Disclosures (Topic 820)- Improving Disclosures about Fair Value Measurements(“ASU 2010-06”). These standards require new disclosures on the amount and reason for transfers in and out of Level 1 and 2 fair value measurements. The standards also require new disclosures of activities, including purchases, sales, issuances, and settlements within the Level 3 fair value measurements. The standard also clarifies existing disclosure requirements on levels of disaggregation and disclosures about inputs and valuation techniques. These new disclosures are effective beginning with the first interim filing in 2010. The disclosures about the rollforward of information in Level 3 are required for the Company with its first interim filing in 2011. The Company does not believe this standard will impact their financial statements.





Other ASU’s that have been issued or proposed by the FASB ASC that do not require adoption until a future date and are not expected to have a material impact on the financial statements upon adoption.


F-16


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 3 -
FIXED ASSETS





Fixed assets as of March 31, 2011 (unaudited) and December 31, 2010 were as follows:


Estimated

(unaudited)Useful Lives

March 31,


December 31(Years)

2011


2010Computer and medical equipment

5

$
126,319


$
126,319Software

3


12,000



12,000138,319



138,319Less: accumulated depreciation




(119,349
)


(113,729
)Fixed assets, net



$
18,970


$
24,590





There was $5,620 and $5,621 charged to operations for depreciation expense for the three months ended March 31, 2011 and 2010, respectively.





NOTE 4 -
CONVERTIBLE NOTES





In April and May 2007, the Company issued 5% Senior Convertible 3 Year Notes to investors in the amount of $2,526,500, which equaled the gross proceeds raised by the Company (the “Convertible Notes”).  The Convertible Notes are convertible to shares of the Company’s common stock anytime in the three-year period at a fixed conversion price of $.15.  The Convertible Notes will convert into 16,843,333 shares of the Company’s common stock.  In May 2009, convertible notes of $125,000 were converted, at a fixed conversion rate of $.15 per share, into 833,334 shares of common stock.  This conversion reduced the outstanding principal to a balance of $2,401,500. In an effort to reduce the liabilities of the Company, on July 1, 2010 the Company offered noteholders the opportunity to convert their Notes to common stock at $0.05 per share including any and all outstanding interest that has been accrued from the original $0.15 conversion price.  In addition, the Company offered to reset the exercise price of the warrants that were issued with the Notes to $0.075 from $0.25 and extend the warrants for a further three years from the original date of issue for all warrant holders. Approximately 90% of noteholders have agreed to accept the terms of the conversion. Through March 31, 2011, convertible notes of $1,942,000 were converted at a fixed conversion rate of $0.05 per share, into 39,173,333 shares of common stock.  This conversion reduced the outstanding principal balance to a balance of $459,500.  The Company determined that there was no material modification to the debt instrument under ASC 47-50-40, as the embedded conversion option immediately before and after the modification of the debt instrument was under the 10% threshold.





The convertible noteholders received 6,737,333 detachable warrants with their notes.  The warrants were exercisable for 5 years at an exercise price of $.25.  The Placement Agent received 2,947,583 exercisable at $.25 for 5 years.  The Company separately valued the warrants at $513,132, and recorded a debt discount in that amount which is being amortized to interest expense over the three-year Convertible Notes period.  The Company has recorded an additional discount of $505,300 as the value of the beneficial conversion option.





Proceeds of the $2,526,500 were allocated as follows:


i) Convertible Notes - $2,013,368; and


ii) Warrants (also Debt Discount) - $513,132.


F-17


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 4 -
CONVERTIBLE NOTES (CONTINUED)


The debt discount of $1,018,432 was amortized using the effective interest method over the life of the Convertible Notes of three years.  As part of the transaction, the Company incurred $292,190 of debt issuance costs.





Interest expense on the Convertible Notes for the three months ended March 31, 2011 and 2010 was $11,330 and $62,297, respectively and $164,823 is accrued at March 31, 2011.  A total of $386,687 of accrued interest was converted into common stock at the time of the note conversions in 2010. Interest expense on the debt discount was $0 and $82,257 for the three months ended March 31, 2011 and 2010, respectively, and amortization of the discount on the beneficial conversion feature was $0 and $40,801, respectively for the three months ended March 31, 2011 and 2010.





As a result of the Company’s failure to timely pay the interest in May 2009, the convertible notes are in technical default.  Therefore, the Company has reclassified the debt to current liabilities.  The summary of the Convertible Notes is as follows at March 31, 2011:





$459,500 Convertible Debenture at 10% interest per annum due on demand

$
459,500





In August 2010, the Company entered into a Convertible Promissory Note with Asher Enterprises Inc. in the amount of $50,000.  The Convertible Note is convertible to shares of the company’s common stock anytime in the nine-month period at a variable conversion price meaning 58% multiplied by the market price, the average of the lowest three trading prices.  The Company has recorded a discount of $36,207 as the value of the beneficial conversion option. In the three months ended March 31, 2011, the Company converted $35,000 of the note into 11,686,536 shares of stock. The remaining $15,000 of the note and $2,000 of interest was converted in April 2011 into 5,444,096 shares of common stock.





Interest expense on the Convertible Note for the three months ended March 31, 2011 and 2010 was $820 and $0, respectively and $2,475 is accrued at March 31, 2011.





$15,000 Convertible Debenture at 8% interest per annum due May 5, 2011

$
6,766





NOTE 5 -
RELATED PARTY LOANS


The Company has unsecured loans with two of its directors.  There was $142,191 outstanding as of March 31, 2011.  These loans were made to fund the Company with working capital during the development stage.  The loans are accruing interest at a rate of 5% per annum.  Interest expense during the three months ended March 31, 2011 and 2010 was $1,649 and $1,329, respectively and $10,527 is accrued at March 31, 2011.





The Company has entered into employment agreements with its two senior officers through December 31, 2009.  The agreements obligated the Company to pay these officers $200,000 per year through December 31, 2009.  Total commitment for the Company is $960,000 through December 31, 2009.  The amount owed to these officers, through December 31, 2009, will be paid in the form of a three-year convertible note bearing interest at 5% per annum, convertible into shares of common stock at a conversion price equal to the average bid price for 10 days prior to conversion.  The amount is due in three-years (December 31, 2012, however, there is no prepayment penalty). The $960,000 plus $59,836 in accrued interest remains outstanding at March 31, 2011.


F-18


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 6 -
LICENSE AND ROYALTY FEES




Lawrence Livermore




The Company on September 14, 2001, entered into a Limited Exclusive Patent License Agreement for Optical Coherence Tomography for Human and Animal Dentistry with The Regents of the University of California (Lawrence Livermore National Laboratories).  Pursuant to this license agreement, the Company entered into an installment note with Lawrence Livermore National Laboratories.  In the license agreement, the Company agreed to pay to Lawrence Livermore a total of $175,000 in installments commencing September 2001.  The $175,000 note did not include annual minimum royalty fees or interest.  The first installment was a license issue fee of $15,000 which was paid by the Company.  The second installment of $50,000 was the second part of the issue fee that was to be paid in nine monthly installments commencing April 2003 was partially paid by the Company ($26,000).  The last installment was originally due December 31, 2005 but it was extended by Lawrence Livermore to October 1, 2006 in the amount of $110,000.  The total due under the license agreement was $134,000, prior to a payment made by the Company in October 2006 of $50,000.





Upon payment of this amount, the parties agreed to amend the agreement they had for payment of the balance of $84,000 along with the unpaid royalty fees of $380,000 for 2003, 2004 and 2005 as noted below.  The Company incurred $10,000 of maintenance fees in February 2007, and paid these on February 28, 2007.





In addition to the license fee, the Company agreed to pay minimum royalties to Lawrence Livermore beginning in 2004.  The Company prior to the amendment to the agreement had not paid any of the royalties to Lawrence Livermore.





The royalties due were for 2003 $30,000, for 2004 $100,000 and $250,000 for 2005.  These fees were to be paid February 28 of each year for the prior calendar year.  The royalties due were $380,000.




The parties agreed on December 22, 2006 to amend the agreement.  The Company agreed to pay Lawrence Livermore a total of $144,000 in three installments; $10,000 by February 28, 2007 (which was for maintenance fees for 2007 and paid by the Company), $84,000 by July 28, 2007 (which was paid by the Company on July 9, 2007), and the final $50,000 by December 31, 2007 (which was paid by the Company on December 11, 2007).  The $380,000 of minimum royalties have been forgiven by Lawrence Livermore and reclassified to additional paid in capital as of December 22, 2006.





On January 1, 2008, the Company paid minimum annual royalty fees of $20,000 for 2008.





On February 18, 2009, the Company and Lawrence Livermore entered into an Amended License Agreement, and again amended on October 7, 2009, and again on July 22, 2010 and in December 2010 whereby, the Company is obligated to pay minimum royalty fees of $20,000 by December 15, 2009 (for 2009, which has been deferred until June 30, 2011by Lawrence Livermore and is included in accounts payable at December 31, 2009), $20,000 by February 28, 2010 (for 2010, which has been deferred until June 30, 2011 by Lawrence Livermore), $60,000 by December 15, 2011 (for 2011), $100,000 by February 28, 2012 (for 2012), and $250,000 by February 28, 2013 and February 28 each thereafter (for 2013 and each year thereafter).




The $40,000 remains outstanding to Lawrence Livermore as of March 31, 2011.


F-19


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 6 -
LICENSE AND ROYALTY FEES (CONTINUED)





LightLab




The Company, other than its obligations under the License Agreement with Lawrence Livermore as well as its obligations under the Non-Exclusive License Agreement for Imaging Patents between themselves and LightLab Imaging, LLC entered into August 8, 2001, has no other commitments.





The License Agreement had an original term of 5 years, commencing 2 years after the original agreement date, which would expire August 8, 2008, and the license could be renewed.  The minimum royalty requirements were based on Net Sales by the Company.  Since the Company generated no sales in the periods, there were no amounts due.  On December 19, 2006, the Company and LightLab Imaging, Inc. negotiated an amendment whereby the new term of the agreement is, unless terminated by either party to remain in effect for three years following whichever of the following events occurs first: i) the Company’s release of a licensed product; ii) the Company’s first commercial sale of a licensed product, or; iii) July 1, 2007 (July 1, 2010).  The Company on September 18, 2007 paid LightLab Imaging, LLC $50,000.  This Agreement has terminated and will not be renewed as the main scanning patent licensed in this Agreement expires in 2011, before the Company intends to introduce its OCT product into the market.





There were no amounts outstanding to LightLab as of March 31, 2011.





University of Florida





On May 31, 2007, the Company entered into an exclusive licensing agreement for the field of dentistry with The University of Florida Research Foundation for novel technology relevant to the imaging probe of its Dental Imaging System.  The Agreement carries a $1,000 initial licensing fee with royalty payments to commence in 2008.





The Company has paid the minimum fees in 2008 and the minimum royalty for 2009 originally due by December 31, 2009 has been deferred until July 31, 2011 and is in accounts payable as it is unpaid as of March 31, 2011. The Company did pay some patent fees of $123 in 2009 to the University of Florida. In addition, the first year of sale under the agreement has been amended to 2011 from 2009.





University of California – San Francisco





On July 9, 2008, the Company entered an exclusive license agreement for near-infrared transillumination for the imaging of early dental decay with The Regents of the University of California.  The agreement requires the payment of an initial non-refundable license fee of $10,000 and annual maintenance fees of $5,000.  The agreement also requires the payment of certain milestone payments based on patent allowance and FDA approval.





On August 4, 2009, the Company and The Regents of the University of California entered into an Amended License Agreement (Amendment No. 1) again on July 26, 2010 whereby milestones were updated to provide adequate time for the Company to complete development, obtain FDA clearance and transition to marketing and manufacturing.  Minimum royalties are required as follows:


F-20


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 6 -
LICENSE AND ROYALTY FEES (CONTINUED)





University of California – San Francisco (Continued)





First year of sales, or no later than 2012

$
10,000Second year


50,000Third year


100,000Fourth year


150,000Fifth and subsequent years


200,000





Earned royalties of 5% of net sales of the product or method are required to the extent that they exceed the minimum royalties.  The agreement continues in effect until terminated by the parties or the patent rights expire or are abandoned. The Company paid $5,359 in license fees and other patent and legal expenses in 2010.





NOTE 7 -
COMMITMENTS





AXSUN





In June 2008, the Company entered into a strategic agreement with AXSUN Technologies, Inc. (“AXSUN”) whereby AXSUN will manufacture and supply the integrated OCT engine for the OCT System. Under the terms of the agreement, the Company has exclusive rights to the OCT engine for use in diagnostic imaging of teeth and soft tissue in human and animal dentistry. The exclusivity is subject to the Company’s purchasing a minimum number of OCT engines in each year, commencing in 2009.  Minimum annual purchases are required to maintain exclusivity. The Company will be required to order 1,000 OCT engines over an 18 month period at a per unit price of $5,000. This agreement is for a period of 4 years, to be renewed annually thereafter.





The Company was in default of this agreement by not making development progress payments according to the agreed schedule and received confirmation of termination of the agreement on March 17, 2010. The parties have agreed on the conditions to enter into a new agreement.  The Company also issued 500,000 shares of stock to AXSUN in connection with the agreement.


F-21


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 8 -
STOCKHOLDERS’ EQUITY (DEFICIT)





Common Stock and Preferred Stock





As of March 31, 2011, the Company has 990,000,000 shares of common stock authorized with a par value of $.001.  On December 9, 2004, Lantis Laser Inc. increased the authorized shares from 250,000,000 to 990,000,000.  They also removed the 1,000,000 shares of preferred stock from its charter, and on January 23, 2007, amended their articles of incorporation to create a class of preferred stock, and authorized the issuance of 10,000,000 shares of preferred stock at $.001 par value.  No shares have been issued to date.





The Company has 151,561,441 shares issued and outstanding as of March 31, 2011.





During the three months ended March 31, 2011, the Company issued 11,686,536 shares of common stock in conversion of $35,000 in convertible notes.





During the year ended December 31, 2010, the Company issued 500,000 shares to Agoracom for consulting services.  These shares were valued at $.05 per share or $20,000.





The Company also converted $1,942,000 of convertible notes, at a fixed conversion rate of $0.05 per share, less discount, net of accrued interest, into 39,173,333 shares of common stock at a fixed conversion price of $0.05 per share.  The Company also converted $386,687 of accrued interest on these converted notes to additional paid in capital.





During the year ended December 31, 2009:





The Company issued 2,000,000 shares to various consultants for administrative services and public and investor relation services.  These shares were valued at various prices between $.10 and $.04 per share or $150,000.  In addition, the Company issued 250,000 shares to convert a payable to a consultant ($12,500).





The Company converted $125,000 of convertible notes, at a fixed conversion rate of $.15 per share, less discount, beneficial conversion feature and issuance costs net of accrued interest, into 833,334 shares of common stock at a fixed conversion price of $.15 per share.  The Company incurred additional charges to interest expense and amortization of debt issuance costs to reflect the conversion of these notes.  This resulted in a reduction of additional paid in capital in the amount of $13,118.





The Company received 3,000,000 shares of stock in settlement of its complaints against Ice Cold Stocks, LLC and DC International Consulting LLC.  These shares were returned to the Treasury and retired (see Note 11).





During the year ended December 31, 2008, the Company issued 575,000 shares to various consulting companies for public and investor relation services and 500,000 shares to a vendor in connection with a strategic supply agreement related to an Optical Coherence Tomography (OCT) engine for use in future products.  These shares were valued between $.21 and $.26 per share or $229,500.  In addition, a former noteholder who received warrants in 2006 exercised his warrants at $.15 per share for 69,850 shares of common stock for a cash value paid to the Company of $10,478.


F-22


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 8 -
STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)





Common Stock and Preferred Stock (Continued)




In addition, two former noteholders who received warrants in 2006 exercised their warrants at $.15 per share in 2007 for a cash value paid to the Company of $24,506.





During the year ended December 31, 2006, the Company completed a private placement resulting in the sale of 5,850,000 shares of its common stock at a price per share of $.10.  For every 1.8 share of common stock purchased, the investors received 1 warrant.  The Company valued each component in accordance with APB 14.  The Company received, net of fees, $521,500 through December 31, 2006.  The Company also issued 1,500,000 to a  consulting company for public and investor relation services.  These shares were valued at $.10 per share or $150,000.





On June 16, 2006, the Company authorized a reverse 1 for 2 stock split on all issued shares.  All shares herein have been reflected retroactive to the stock split.





For the year ended December 31, 2005, the Company issued no shares of common stock.





During 2004, the only shares issued were in connection with the reverse merger between Lantis Laser, Inc. and Hypervelocity, Inc.  The total shares issued were 127,718,500 which included the 6,422,500 shares issued for the conversion of the notes, done simultaneously with the merger.





Warrants




The Company granted 3,250,000 warrants to the investors who took part in the private placement of $585,000 based on a 1: 1.8 conversion ratio.  The warrants were valued in accordance with APB 14 at a value of $208,143 utilizing the Black-Scholes method.





The Company granted 1,605,625 warrants to former noteholders that had previously converted their notes into shares of common stock in 2004.  The Company valued these warrants utilizing the Black-Scholes method and expensed them in their consolidated statements of operations.  The warrants have a fair value of $159,610.  Two of these former noteholders who received these warrants exercised their warrants at $.15 per share in 2008 and 2007 for a cash value paid to the Company of $34,984.





The Company granted 178,750 warrants to a consultant who assisted the Company in their private placement.  The Company valued these warrants utilizing the Black-Scholes method and expensed them in their consolidated statements of operations.  The warrants have a fair value of $17,769.





The Company granted 6,737,333 warrants to the convertible noteholder investors who took part in the debt offering based on a 4:10 conversion ratio.  The warrants were valued in accordance with APB 14 at a value of $513,132 utilizing the Black-Scholes method.





The Company granted 2,947,583 warrants to the placement agent who managed the issuance of the 5% Senior Convertible Note.  The Company valued these warrants utilizing the Black-Scholes method and expensed them in their consolidated statements of operations.  The warrants have a fair value of $292,518.


F-23


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 8 -
STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)





Warrants (Continued)




In September 2010, the Company agreed to reset the warrant exercise price to $0.075 per share and extend the maturity of the warrant an additional three years.




The following is a breakdown of the warrants:


Exercise

DateWarrants


Price

Issued

Term3,250,000


$
0.075

09/28/2006

8 Years1,372,400


$
0.075

09/28/2006

8 Years178,750


$
0.075

09/28/2006

8 Years6,737,333


$
0.075

05/01/2007

8 Years2,947,583


$
0.075

05/17/2007

8 Years14,486,066





The warrant agreements contain no clauses regarding adjustments to exercise price, net settlement provisions, registration rights or liquidated damages clauses.





NOTE 9 -
PROVISION FOR INCOME TAXES




Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities.  Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return.  Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.





At March 31, 2011, deferred tax assets consist of the following:





Net operating losses

$
3,252,511Valuation allowance


(3,252,511
)$
-




At March 31, 2011, the Company had a net operating loss carryforward in the amount of $9,566,210 available to offset future taxable income through 2031.  The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.  A reconciliation of the Company’s effective tax rate as a percentage of income before taxes and federal statutory rate for the periods ended March 31, 2011 and 2010 is summarized as follows:




2011


2010Federal statutory rate


(34.0
)%


(34.0
)%State income taxes, net of federal benefits


3.3



3.3Valuation allowance


30.7



30.70
%


0
%


F-24


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 10 -
JOINT VENTURE AGREEMENT WITH LEI





On December 19, 2007, HyGeniLase, Inc., ("HyGeniLase") a Delaware corporation was formed.  HyGeniLase is a joint venture between the Company and Laser Energetics, Inc., ("LEI"), an Oklahoma corporation, with each party owning 50% of the company.  HyGeniLase was formed to develop, manufacture, market, sell and distribute dental laser process technology to the dental markets worldwide.





In this joint venture, the Company is responsible for funding HyGeniLase, clinical evaluation, process development, market development, and sales and marketing to the human and animal dental market.  The Company shall be directly compensated by HyGeniLase for these functions at a rate equal to 5% of net sales less discounts.  LEI is responsible for product development, product specifications, quality control, product improvement and manufacturing.  LEI shall be directly compensated by HyGeniLase for these functions at a rate equal to cost plus 10% basis.





The Company is responsible for raising the initial funding of HyGeniLase in the amount of approximately $650,000: approximately $25,000 being allocated to fund a laser cost study to be conducted by LEI (all of which has been advanced); approximately $61,000 being allocated to purchase a reconditioned research laser (of which $42,664 has been advanced); and $550,000 being allocated to fund the development of a pre-production prototype Alexandrite laser system to be provided by LEI (of which $100,000 has been advanced). LEI has cancelled the balance of $18,336 due on the reconditioned laser because of its late delivery, and the Company has suspended additional payments and funding pending delivery of the research prototype by LEI. LEI’s default in delivery of the research prototype occurred for technical reasons experienced by LEI.





Upon delivery of the research prototype by LEI, subject to our satisfactory clinical evaluation, the Company plans to resume performance of its obligations under the terms of the joint venture. Neither party has called the other into default under the agreement. HyGeniLase will repay the Company for all advances it has made in connection with the initial funding after HyGeniLase has received funding of at least $750,000 (in excess of the Company’s initial funding).





The $25,000 allocated to fund the laser cost study and the $550,000 allocated to fund the development of a pre-production prototype will be (or have been) paid to LEI for the benefit of HyGeniLase, and LEI has provided the Company, for the benefit of HyGeniLase, the laser cost study and will deliver the pre-production prototype.





The Company recognized a loss on the investment in HyGeniLase for the year ended December 31, 2007 in the amount of $61,332 and for the year ended December 31, 2008 of $25,000.





As of December 31, 2009, the Company has delayed the joint venture project with LEI due to failure on LEI’s part to comply with their end of the agreement as well as funding. As a result, the Company reserved the remaining $81,332 of the investment on their books.


F-25


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 11 -
LITIGATION





On June 2, 2008, the Company filed a complaint, Case No. CV08-3587, in the U.S. District Court for the Central District of California – Western Division against Ice Cold Stocks, LLC (“Ice Cold”), VAR Growth Corporation (“VAR”), Barry Davis (“Davis”), Debbie Sutz (“Sutz”) and Interwest Transfer Co., Inc. (“Interwest”). In its complaint, the Company seeks to enjoin Interwest from removing restrictive legends and transferring 3,500,000 shares of stock issued in connection with a consulting agreement the Company entered into with VAR in November 2007 and to rescind those shares. The Company alleged breach of contract against Ice Cold and Sutz.





On June 16, 2008, the Company filed a complaint, Docket No. C-212-08, in the Superior Court of New Jersey, Chancery Division, General Equity Part (Bergen County) against Barry Davis (“Davis”), DC International Consulting, LLC (“DC International”), Danny Colon (“Colon”) and Interwest Transfer Co., Inc. (“Interwest”). In its complaint, the Company seeks to enjoin Interwest from removing restrictive legends and transferring 2,500,000 shares of stock issued in connection with a consulting agreement the Company entered into with DC International in November 2007 and to rescind those shares. The Company alleged that DC International, Davis and Colon, breach of contract against DC International. As of November 18, 2008, the Company had reached agreements to settle both of the foregoing actions, pursuant to which the defendants would surrender for cancellation an aggregate of 3,000,000 of the total 6,000,000 shares of stock. On January 28, 2009, half of the 2,500,000 shares (1,250,000 shares) in the DC Consulting transaction have been returned and placed back into treasury.  On February 26, 2009, Davis returned a certificate for 3,165,000 shares. Half of the original 3,500,000 shares (1,750,000) were returned to treasury and a new certificate in the amount of 1,415,000 shares (the 1,750,000 shares less 335,000 shares were unable to be returned as they had been transferred from this group).





During the year ended December 31, 2009 the 3,000,000 shares in the Treasury were retired.





NOTE 12 -
FAIR VALUE MEASUREMENTS





The Company adopted certain provisions of ASC Topic 820. ASC 820 defines fair value, provides a consistent framework for measuring fair value under generally accepted accounting principles and expands fair value financial statement disclosure requirements. ASC 820’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. ASC 820 classifies these inputs into the following hierarchy:





Level 1 inputs: Quoted prices for identical instruments in active markets.





Level 2 inputs: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.





Level 3 inputs: Instruments with primarily unobservable value drivers.


F-26


LANTIS LASER INC.


(A DEVELOPMENT STAGE COMPANY)


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH 31, 2011 AND 2010 (UNAUDITED)





NOTE 12 -
FAIR VALUE MEASUREMENTS (CONTINUED)





The following table represents the fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2011:





Level 1


Level 2


Level 3


TotalCash


6,039



-



-



6,039Total assets


6,039



-



-



6,039Convertible notes


-



-



466,266



466,266Total liabilities


-



-



466,266



466,266





NOTE 13 –
SUBSEQUENT EVENTS





On April 22, 2011, the Company signed an agreement to merge with TAG Minerals Inc. (“TAG”). The transaction will be an all stock deal, whereby TAG will become a wholly-owned subsidiary of the Company. The transaction is expected to close in the Company’s second fiscal quarter.





TAG is a US based mineral resource acquisition, exploration and development company, with operations conducted through its operating company, TAG Minerals Zimbabwe (Private) Limited. TAG’s business is managed by its directors and officers who have mineral extraction and commercial experience and is augmented by independent financial, geological, and mining professionals who advise the company on its mining and exploration projects throughout Zimbabwe, Africa.





In April 2011, the Company issued 5,444,096 shares of stock in conversion of $15,000 of convertible notes and $2,000 of accrued interest. In addition, the Company issued 1,833,333 shares of stock in conversion of $25,000 in convertible notes (500,000 shares) and they wanted to provide a former noteholder the same terms as all the other noteholders who had recently converted their notes (1,333,333).


F-27