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, 2010





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, 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  ̈ No x


(the
registrant is 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 March 31, 2010, the Registrant had
100,201,572 shares of common stock issued and outstanding.














TABLE OF CONTENTS




Item
                            
                            Description
                            
                            PagePART
      I - FINANCIAL INFORMATIONITEM
      1.
                            
                            FINANCIAL
      STATEMENTS.
                            
                            3ITEM
      2.
                            
                            MANAGEMENT'S
      DISCUSSION AND ANALYSIS AND RESULTS OF OPERATION.
                            
                            3ITEM
      3.
                            
                            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                            
                            4ITEM
      4.
                            
                            CONTROLS
      AND PROCEDURES.
                            
                            5PART
      II - OTHER INFORMATIONITEM
      1.
                            
                            LEGAL
      PROCEEDINGS.
                            
                            5ITEM
      1A.
                            
                            RISK
      FACTORS
                            
                            5ITEM
      2.
                            
                            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
                            
                            5ITEM
      3.
                            
                            DEFAULT
      UPON SENIOR SECURITIES.
                            
                            5ITEM
      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 STATEMENTSBack to Table of
Contents




The
Registrant's unaudited interim financial statements are attached hereto.
Unaudited Interim Financial Statements




ITEM 2. MANAGEMENT'S DISCUSSION
AND ANALYSIS AND RESULTS OF OPERATION Back to Table of
Contents




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 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 a non-exclusive
license covering a scanning method with LightLab Imaging, Inc., a leader in the
application of OCT in the biomedical field. At present, our plan is not to
fabricate any equipment but instead to outsource the manufacturing of the OCT
System.




Results
of Operations




Three Months Ended
March 31, 2010 Compared to Three Months Ended March 31,
2009.




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, 2010 and 2009.




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
510(k) clearance.




Net loss from operations. For
the three months ended March 31, 2010, our net loss was $213,374 compared to
$304,098 for the same period in the prior year, representing a decrease of
$90,724 or 30%. The decrease in our loss from operations was mainly due to the
decrease in research and development expenses and professional, consulting and
marketing fees. Our research and development expenses decreased to $0 for the
three months ended March 31, 2010 compared to $51,292 for the same period in the
prior year as development was suspended due to lack of funds. Wages and Salaries
decreased to $0 for the 3 months ended March 31, 2010 as compared to $50,000 in
the same quarter in 2009 as no provision was made for management salaries in
light of the Company having the funds to do so. The Company decreased its
professional, consulting and marketing expenses to $9,761 for the three months
ended March 31, 2010, compared to $17,535 for the same period in the prior
year.




3




Total other expenses.Other
expenses were $180,683 for the three months ended March 31, 2010, compared
to $141,957 for the three months ended March 31, 2010. This was due to the
increase in interest expense to $75,462 for the three months ended March 31,
2010 as compared to $31,574 in the comparable period in 2009 as the interest
rate on the 5% Senior Convertible Note increased to 10%, from 5%, as the Company
defaulted by not making the second interest payment for the period March to May,
2009.




Net loss.We had a net loss
applicable to common shares of $213,374, or $0.00 per share, for the three
months ended March 31, 2010, compared to a net loss applicable to common
shareholders of $304,098, or $0.00 per share, for the same period in the prior
year. The reduction in net loss was principally due to the decrease in
research and development, wages and decrease in professional, consulting and
marketing fees and an increase in interest expense.




Liquidity
and Capital Resources




Total assets.On March 31,
2010, we had total assets of $74,817, compared to $113,255 on December 31,
2009.  The Company had no cash and cash equivalents on March 31, 2010
and at December 31, 2009. Prepaid expenses and other current assets were $25,712
on March 31, 2010 compared to $35,566 on December 31, 2009. Our fixed assets,
which did not change significantly, were $41,451 on March 31, 2010, compared to
$47,071 on December 31, 2009. Other assets related to debt issuance costs were
$7,654 on March 31, 2010, compared to $30,618 on December 31, 2009.




Total liabilities. We had
total liabilities of $4,201,470 on March 31, 2010, composed principally of notes
for management’s accrued salaries and loans to the company amounting to
$1,102,457, current accounts payable and accrued expenses of $375,335 and
convertible notes payable, net of discount and beneficial conversion features of
$2,373,851. Accrued interest due on the convertible notes payable amounted to
$349,827 as compared to $287,530 as at December 31, 2010.  On March
31, 2010 we had no long-term liabilities. On March 31, 2010, we had a negative
working capital of $4,175,758 compared to a negative working capital of
$3,990,968 on December 31, 2009. 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, 2010, we had a negative
cash flow from operations of $37,620, compared to negative cash flow from
operations of $85,242 during the same period in the prior year. Our lower
negative cash flow from operations was mainly due to the reduction in the net
operating loss from $304,098 in the same period in 2009 to $213,374 for the
three months ended March 31, 2010;  the decrease in prepaid expenses
of $9,854 for the three months to March 31, 2010 compared to the increase of
$96,254 in the comparable period in 2009; and, the non-issuance of common stock
in the three month period to March 31, 2010 for consulting services compared to
the issuance of stock valued at $115,000 in the prior year.  Accounts
payable and accrued expenses of $7,238 decreased in the three month period to
March 31, 2010 compared to an increase of $52,610 in the same period in
2009.




Cash flow from investing activities.The Company had no investing activities during the three-month periods
ended March 31, 2010 and 2009.




Cash flow from financing activities.During the three months ended March 31, 2010, the Company received
proceeds totaling $38,165 from a related party compared to $12,500 for the three
months ended March 31, 2009.




ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK Back to Table of
Contents




Not
applicable.




4




ITEM 4. CONTROLS AND
PROCEDURESBack to
Table of Contents




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, 2010, 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, 2010 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, 2010, management believes that our internal
controls over financial reporting were 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 PROCEEDINGSBack to Table of
Contents




None.




ITEM 1A. RISK FACTORS Back to Table of
Contents




Not
applicable.




ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS Back to Table of
Contents




None




ITEM 3. DEFAULTS UPON SENIOR
SECURITIESBack to Table of
Contents




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.


5





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 defaulted
on the redemption of the Notes issued on March 30, 2007, due to be redeemed by
March 30, 2010, due to lack of sufficient cash resources.  No
noteholders have called up the Note and the Company intends to enter into
discussions with Noteholders to renegotiate the terms of the Note.




ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Back to Table of
Contents




None.




ITEM 5. OTHER INFORMATIONBack to Table of
Contents




None.




ITEM 6. EXHIBITSBack to Table of
Contents




(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.




/s/ Stanley B. BaronStanley
      B. BaronCEO
      and CFODated:
      May 5., 2010




7




LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS


THREE
MONTHS ENDED MARCH 31, 2010 AND 2009


8


INDEX
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




Page(s)INDEX
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSREPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMCONDENSED
      CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2010 (UNAUDITED) AND DECEMBER
      31, 2009
                            
                            F-2CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31,
      2010 AND 2009 (UNAUDITED) WITH CUMULATIVE TOTALS SINCE JANUARY 14, 1998
      (INCEPTION)
                            
                            F-3CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31,
      2010 AND 2009 (UNAUDITED) WITH CUMULATIVE TOTALS SINCE JANUARY 14, 1998
      (INCEPTION)
                            
                            F-4NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2010 AND 2009
      (UNAUDITED)
                            
                            F-5-F-26


9





LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


CONDENSED
CONSOLIDATED BALANCE SHEETS


MARCH
31, 2010 (UNAUDITED) AND DECEMBER 31, 2009





MARCH
      31,
                      
                      
                      DECEMBER
      31,2010
                      
                      
                      2009(Unaudited)ASSETSCurrent
      Assets:Cash
      and cash equivalents
                      
                      $
                      -
                      
                      
                      $
                      -Prepaid
      expenses and other current assets
                      
                      
                      25,712
                      
                      
                      
                      35,566Total
      Current Assets
                      
                      
                      25,712
                      
                      
                      
                      35,566Fixed
      assets, net of depreciation
                      
                      
                      41,451
                      
                      
                      
                      47,071Other
      Assets:Debt
      issuance costs, net of amortization
                      
                      
                      7,654
                      
                      
                      
                      30,618Total
      Other Assets
                      
                      
                      7,654
                      
                      
                      
                      30,618TOTAL
      ASSETS
                      
                      $
                      74,817
                      
                      
                      $
                      113,255LIABILITIES AND STOCKHOLDERS' EQUITY
      (DEFICIT)LIABILITIESCurrent
      Liabilities:Accrued
      interest - convertible notes
                      
                      $
                      349,827
                      
                      
                      $
                      287,530Accounts
      payable and accrued expenses
                      
                      
                      375,335
                      
                      
                      
                      383,118Related
      party payable
                      
                      
                      1,102,457
                      
                      
                      
                      1,064,292Convertible
      notes payable, net of discount and beneficial conversion
      feature
                      
                      
                      2,373,851
                      
                      
                      
                      2,291,594Total
      Current Liabilities
                      
                      
                      4,201,470
                      
                      
                      
                      4,026,534Long-term
      Liabilities:Convertible
      notes payable, net of discount and beneficial conversion
      feature
                      
                      
                      -
                      
                      
                      
                      -Total
      Long-term Liabilities
                      
                      
                      -
                      
                      
                      
                      -Total
      Liabilities
                      
                      
                      4,201,470
                      
                      
                      
                      4,026,534STOCKHOLDERS’
      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 100,201,572 and
      100,201,572 shares issued and outstanding
                      
                      
                      100,201
                      
                      
                      
                      100,201Additional
      paid-in capital
                      
                      
                      4,604,586
                      
                      
                      
                      4,604,586Additional
      paid-in capital - warrants
                      
                      
                      1,167,987
                      
                      
                      
                      1,167,987Deficits
      accumulated during the development stage
                      
                      
                      (9,999,427
                      )
                      
                      
                      (9,786,053
                      )Total
      Stockholders’ Equity (Deficit)
                      
                      
                      (4,126,653
                      )
                      
                      
                      (3,913,279
                      )TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
                      
                      $
                      74,817
                      
                      
                      $
                      113,255





The
accompanying notes are an integral part of the consolidated financial
statements




F-2





LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


WITH
CUMULATIVE TOTALS SINCE JANUARY 14, 1998 (INCEPTION)





CUMULATIVETOTALS
      SINCETHREE
      MONTHS ENDED
                
                
                INCEPTIONMARCH
      31,
                
                
                JANUARY
      14,2010
                
                
                2009
                
                
                1998OPERATING
      REVENUESSales
                
                $
                -
                
                
                $
                -
                
                
                $
                -OPERATING
      EXPENSESResearch
      and development
                
                
                -
                
                
                
                51,292
                
                
                
                2,109,869Wages
      and wage related expenses
                
                
                -
                
                
                
                50,000
                
                
                
                979,981Professional,
      consulting and marketing fees
                
                
                9,761
                
                
                
                17,535
                
                
                
                4,366,762Other
      general and administrative expenses
                
                
                17,310
                
                
                
                37,693
                
                
                
                558,029Depreciation
                
                
                5,620
                
                
                
                5,621
                
                
                
                96,868Total
      Operating Expenses
                
                
                32,691
                
                
                
                162,141
                
                
                
                8,111,509LOSS
      BEFORE OTHER INCOME (EXPENSE)
                
                
                (32,691
                )
                
                
                (162,141
                )
                
                
                (8,111,509
                )Amortization
      of debt issuance costs
                
                
                (22,964
                )
                
                
                (24,349
                )
                
                
                (279,917
                )Loss
      in investment under equity method
                
                
                -
                
                
                
                -
                
                
                
                (167,664
                )Interest
      expense - debt discount
                
                
                (82,257
                )
                
                
                (86,034
                )
                
                
                (973,774
                )Interest
      income (expense), net
                
                
                (75,462
                )
                
                
                (31,574
                )
                
                
                (466,563
                )Total
      Other Income (expense)
                
                
                (180,683
                )
                
                
                (141,957
                )
                
                
                (1,887,918
                )NET
      LOSS BEFORE PROVISION FOR INCOME TAXES
                
                
                (213,374
                )
                
                
                (304,098
                )
                
                
                (9,999,427
                )Provision
      for Income Taxes
                
                
                -
                
                
                
                -
                
                
                
                -NET
      LOSS APPLICABLE TO COMMON SHARES
                
                $
                (213,374
                )
                
                $
                (304,098
                )
                
                $
                (9,999,427
                )NET
      LOSS PER BASIC AND DILUTED SHARES
                
                
                (0.00
                )
                
                
                (0.00
                )
                
                
                (0.28
                )WEIGHTED
      AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
                
                
                100,201,572
                
                
                
                98,453,794
                
                
                
                35,500,577





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 CASH FLOWS (UNAUDITED)


FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009


WITH
CUMULATIVE TOTALS SINCE JANUARY 14, 1998 (INCEPTION)





THREE
      MONTHS ENDED
                
                
                CUMULATIVEMARCH
      31,
                
                
                TOTALS
      SINCE2010
                
                
                2009
                
                
                JANUARY 14, 1998CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                
                $
                (213,374
                )
                
                $
                (304,098
                )
                
                $
                (9,999,427
                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
                
                
                5,620
                
                
                
                5,621
                
                
                
                96,868Amortization
      of debt issuance costs
                
                
                22,964
                
                
                
                24,349
                
                
                
                279,917Interest
      expense - debt discount
                
                
                41,456
                
                
                
                43,348
                
                
                
                490,673Interest
      expense - beneficial conversion feature
                
                
                40,801
                
                
                
                42,687
                
                
                
                483,102Loss
      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
                
                
                -
                
                
                
                115,000
                
                
                
                859,050Changes
      in assets and liabilitiesDecrease
      (increase) in prepaid expenses
                
                
                9,854
                
                
                
                (96,254
                )
                
                
                2,179,288Increase
      (decrease) in accounts payable and and accrued expenses
                
                
                (7,238
                )
                
                
                52,610
                
                
                
                1,496,545Accrued
      interest on convertible notes
                
                
                62,297
                
                
                
                31,495
                
                
                
                267,532Total
      adjustments
                
                
                175,754
                
                
                
                218,856
                
                
                
                7,395,536Net
      cash (used in) operating activities
                
                
                (37,620
                )
                
                
                (85,242
                )
                
                
                (2,603,891
                )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
                )
                
                
                -
                
                
                
                4,623Proceeds
      from convertible notes and warrants, net of debt issuance
      costs
                
                
                -
                
                
                
                -
                
                
                
                2,234,310Payments
      of license fee payable
                
                
                -
                
                
                
                -
                
                
                
                (225,000
                )Proceeds
      from private placement, net of fees
                
                
                -
                
                
                
                -
                
                
                
                521,500Proceeds
      (payments) from related parties including interest
                
                
                38,165
                
                
                
                12,500
                
                
                
                142,457Net
      cash provided by financing activities
                
                
                37,620
                
                
                
                12,500
                
                
                
                2,909,874NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                
                
                -
                
                
                
                (72,742
                )
                
                
                -CASH
      AND CASH EQUIVALENTS - BEGINNING OF PERIOD
                
                
                -
                
                
                
                72,858
                
                
                
                -CASH
      AND CASH EQUIVALENTS - END OF PERIOD
                
                $
                -
                
                
                $
                116
                
                
                $
                -CASH
      PAID DURING THE PERIOD FOR:Income
      taxes
                
                $
                -
                
                
                $
                -
                
                
                $
                -Interest
      expense
                
                $
                -
                
                
                $
                -
                
                
                $
                93,517SUPPLEMENTAL
      NONCASH INFORMATION:Conversion
      of notes and interest for common stock, net of discounts and issuance
      costs
                
                $
                -
                
                
                $
                -
                
                
                $
                371,411Conversion
      of license fee payable into capital
                
                $
                -
                
                
                $
                -
                
                
                $
                380,000Common
      stock issued for consulting services
                
                $
                -
                
                
                $
                19,746
                
                
                $
                859,050Warrants
      issued to former noteholders and consultants
                
                $
                -
                
                
                $
                -
                
                
                $
                469,897Common
      stock issued for prepaid expenses
                
                $
                -
                
                
                $
                95,254
                
                
                $
                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-4





LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (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,
2009 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-5





LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (UNAUDITED)





NOTE
      1 -
            ORGANIZATION AND BASIS
      OF PRESENTATION (CONTINUED)





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.  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).





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 (dental application patents) and the non-exclusive rights
from LightLab Imaging (scanning patents).  OCT was invented in the
early 1990’s at Massachusetts Institute of Technology and it is currently being
commercialized by LightLab Imaging for cardiovascular imaging, cancer detection
and Carl Zeiss Meditec in ophthalmology.  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.




F-6


LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (UNAUDITED)





NOTE
      1 -
            ORGANIZATION AND BASIS
      OF PRESENTATION (CONTINUED)





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.





Going
Concern





As shown
in the accompanying condensed consolidated financial statements the Company has
incurred recurring losses of $213,374 and $304,098 for the three months ended
March 31, 2010 and 2009 respectively, and has incurred a cumulative loss of
$9,999,427 since inception (January 14, 1998).  The Company has a
working capital deficit in the amount of $4,175,758 as of March 31,
2010.  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 and non-exclusive licenses of the patents
for.




F-7


LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (UNAUDITED)





NOTE
      1 -
            ORGANIZATION AND BASIS
      OF PRESENTATION (CONTINUED)





Going Concern
(continued)





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.  In March, April and May 2007, the Company
completed a debt offering in the form of a 5% Senior Convertible Note in the
amount of $2,526,500 as well as a private placement for $585,000 with the issue
of 5,850,000 of its stock of which the Company received, net of fees, $2,786,785
from both offerings.  The proceeds received will be utilized in the
Phase 2 and final stages of development.





The
Company also renegotiated both of their license agreements and Lawrence
Livermore agreed to forgive accrued royalty fees in the amount of $380,000 as
the Company was not sufficiently capitalized to further develop its
technology.





The
Company will continue to pursue traditional forms of financing, in addition to
the approximately $3,250,000 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
condensed 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-8


LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (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 condensed 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-9


LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (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, 2010 and December 31, 2009, 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, 2010 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,
2010 and 2009 are included in professional, consulting and marketing fees in the
condensed 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-10


LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (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.  ASC 855 is effective for
financial periods ending after June 15, 2009.  Management has
evaluated subsequent events through May 5, 2010, the date the condensed
consolidated financial statements were 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, 19982010
                  
                  
                  2009
                  
                  
                  (Inception)Net
      loss
                  
                  $
                  (213,374
                  )
                  
                  $
                  (304,098
                  )
                  
                  $
                  (9,999.427
                  )Weighted-average
      common shares Outstanding (Basic)
                  
                  
                  100,201,572
                  
                  
                  
                  98,453,794
                  
                  
                  
                  35,500,577Weighted-average
      common stock EquivalentsConvertible
      Notes
                  
                  
                  16,009,999
                  
                  
                  
                  16,843,333
                  
                  
                  
                  16,009,999Stock
      options
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Warrants
                  
                  
                  14,486,066
                  
                  
                  
                  14,486,066
                  
                  
                  
                  14,486,066Weighted-average
      commons shares Outstanding (Diluted)
                  
                  
                  130,697,637
                  
                  
                  
                  129,783,193
                  
                  
                  
                  65,996,642




F-11


LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (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.  At no time has the Company issued common stock for a period
that exceeds one year.





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, 2010 and for the three months ended March 31, 2010 and
2009.





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 $22,964 and $24,349 for the
three months ended March 31, 2010 and 2009, respectively.


F-12





LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (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-13


LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (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-14


LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (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-15


LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (UNAUDITED)





NOTE
      3 -
            FIXED
      ASSETS





Fixed
assets as of March 31, 2010 and December 31, 2009 were as follows:





EstimatedUseful
      Lives
                        
                        
                        March
      31,
                        
                        
                        December
      31(Years)
                        
                        
                        2010
                        
                        
                        2009Computer
      and medical equipment
                        
                        5
                        
                        
                        $
                        126,319
                        
                        
                        $
                        126,319Software
                        
                        3
                        
                        
                        
                        12,000
                        
                        
                        
                        12,000138,319
                        
                        
                        
                        138,319Less:
      accumulated depreciation
                        
                        
                        
                        
                        
                        
                        (96,868
                        )
                        
                        
                        (91,294
                        )Fixed
      assets, net
                        
                        
                        
                        
                        
                        $
                        41,451
                        
                        
                        $
                        47,071





There was
$5,620 and $5,621 charged to operations for depreciation expense for the three
months ended March 31, 2010 and 2009, respectively.





NOTE
      4 -
            CONVERTIBLE
      NOTES





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. 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. The convertible noteholders received
6,737,333 detachable warrants with their notes. The warrants are 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 allocated as follows:





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


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





The debt
discount of $1,018,432 is being 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, 2010 and
2009 was $62,297 and $31,495, respectively and $349,827 is accrued at March 31,
2010.  Interest expense on the debt discount was $41,456 and $43,348
for the three months ended March 31, 2010 and 2009, respectively, and
amortization of the discount on the beneficial conversion feature was $40,801
and $42,687, respectively for the three months ended March 31, 2010 and
2009.


F-16


LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (UNAUDITED)





NOTE
      4 -
            CONVERTIBLE
      NOTES (CONTINUED)





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, 2010:





$2,401,500
      Convertible Debenture, net of discount of $27,649 at 10% interest per
      annum due on demand
                          
                          $
                          2,373,851





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 defaulted
on the redemption of the Notes issued on March 30, 2007, due to be redeemed by
March 30, 2010, due to lack of sufficient cash resources.  No
noteholders have called up the Note and the Company intends to enter into
discussions with Noteholders to renegotiate the terms of the Note.





NOTE
      5 -
            RELATED PARTY
      LOANS





The
Company has unsecured loans with two of its directors.  There was
$130,621 outstanding as of March 31, 2010.  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, 2010
and 2009 was $1,329 and $94, respectively and $3,871 is accrued at March 31,
2010.





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 $11,836 in accrued interest remains outstanding at March 31,
2010.





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.


F-17


LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (UNAUDITED)





NOTE
      6 -
            LICENSE AND ROYALTY
      FEES (CONTINUED)





Lawrence Livermore
(Continued)





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, whereby, the Company is
obligated to pay minimum royalty fees of $20,000 by December 15, 2009 (for 2009,
which has been deferred until July 31, 2010 by 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 July 31, 2010 by Lawrence Livermore),
$60,000 by February 28, 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).





There
were no amounts outstanding to Lawrence Livermore as of March 31,
2010.





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.  There were
no amounts outstanding to LightLab as of March 31, 2010 and
2009.


F-18


LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (UNAUDITED)





NOTE
      6 -
            LICENSE AND ROYALTY
      FEES (CONTINUED)





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, 2010, and
is in accounts payable as it is unpaid as of March 31, 2010. 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 2010 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 license 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) 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:





First
      year of sales, or no later than 2011
                  
                  $
                  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 $1,611 in license fees and other patent and legal
expenses in 2010, and there are no amounts accrued for as of March 31,
2010.





F-19




LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (UNAUDITED)





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 to enter
a new agreement to take into account the anticipated timeline of the OCT System
development and currently discussing the terms and conditions of a new
agreement. The Company also issued 500,000 shares of stock to AXSUN in
connection with the agreement.





Employment
Agreements





The
Company has entered into employment agreements with its two senior officers
through December 31, 2009. The agreements obligate 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 Company and the officers can
terminate these agreements, and can adjust compensation at anytime during the
length of the contracts. 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).





NOTE
      8 -
            STOCKHOLDERS’ EQUITY
      (DEFICIT)





Common Stock and Preferred
Stock





As of
March 31, 2010, 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 100,201,572 shares issued and outstanding as of March 31,
2010.





There
were no shares issued during the three months ended March 31, 2010.





F-20




LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (UNAUDITED)





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





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.





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.


F-21




LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (UNAUDITED)





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





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.





The
following is a breakdown of the warrants:




Exercise
            
            DateWarrants
            
            Price
            
            Issued
            
            Term3,250,000
            
            $
            0.15
            
            09/28/2006
            
            5
      Years1,372,400
            
            $
            0.15
            
            09/28/2006
            
            5
      Years178,750
            
            $
            0.15
            
            09/28/2006
            
            5
      Years6,737,333
            
            $
            0.25
            
            05/01/2007
            
            5
      Years2,947,583
            
            $
            0.25
            
            05/17/2007
            
            5
      Years14,486,066


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


F-22




LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (UNAUDITED)





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, 2010, deferred tax assets consist of the following:





Net
      operating losses
                    
                    $
                    3,105,102Valuation
      allowance
                    
                    
                    (3,105,102
                    )$
                    -





At March
31, 2010, the Company had a net operating loss carryforward in the amount of
$9,132,652 available to offset future taxable income through
2030.  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, 2010 and 2009 is summarized as
follows:





2010
                  
                  
                  2009Federal
      statutory rate
                  
                  
                  (34.0
                  )%
                  
                  
                  (34.0
                  )%State
      income taxes, net of federal benefits
                  
                  
                  3.3
                  
                  
                  
                  3.3Valuation
      allowance
                  
                  
                  30.7
                  
                  
                  
                  30.70
                  %
                  
                  
                  0
                  %





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.


F-23


LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (UNAUDITED)





NOTE
      10 -
            JOINT VENTURE
      AGREEMENT WITH LEI
(CONTINUED)





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.





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.


F-24


LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (UNAUDITED)





NOTE
      11 -
            LITIGATION
      (CONTINUED)





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-25




LANTIS
LASER INC.


(A
DEVELOPMENT STAGE COMPANY)


NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


MARCH
31, 2010 AND 2009 (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,
2010:




Level 1
                    
                    
                    Level 2
                    
                    
                    Level 3
                    
                    
                    TotalConvertible
      debentures, net of discount
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,373,851
                    
                    
                    
                    2,373,851Total
      liabilities
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,373,851
                    
                    
                    
                    2,373,851


F-26