UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
December 31, 2007
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from [ ] to [ ]
Commission file number
000-50011
LAMPERD LESS LETHAL
INC.
(Name of small business issuer in its charter)
Nevada
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98-0358040
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification No.)
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1200 Michener Road,
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Sarnia, Ontario Canada
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N7S 4B1
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(Address of principal executive offices)
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(Zip Code)
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Issuer's telephone number
519-344-4445
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
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Name of each exchange on which registered
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Nil
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Nil
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Securities registered pursuant to Section 12(g) of the Act:
Common Shares, par value $0.001USD
(Title of
class)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
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Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
Issuer's revenues for its most recent fiscal year ended December
31, 2007 is $295,862
Issuers aggregate market value of the voting common equity
held by non-affiliates at March 31, 2008 was:
44,445,173 common shares @ $0.062
(1)
= USD$2,755,600
(1)
Average of
bid and ask closing prices on March 31, 2008.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's
classes of equity stock, as of the latest practicable date.
59,871,043 common shares issued and outstanding as of March
31, 2008.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference,
briefly describe them and identify the part of the Form 10-KSB (e.g., Part I,
Part II, etc.) into which the document is incorporated: (1) any annual report to
security holders; (2) any proxy or information statement; and (3) any prospectus
filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities
Act"). The listed documents should be clearly described for identification
purposes (e.g., annual report to security holders for fiscal year ended December
24, 1990).
Transitional Small Business Disclosure Format (Check one): Yes [
]; No [X].
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PART I
Item 1.
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Description of Business.
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This annual report contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as may, will,
should, expects, plans, anticipates, believes, estimates,
predicts, potential or continue or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled Risk Factors, that may cause our or our industrys actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.
Our financial statements are stated in Canadian Dollars (CND$)
unless other wise stated and are prepared in accordance with United States
Generally Accepted Accounting Principles.
In this annual report, unless otherwise specified, all
references to "common shares" refer to the common shares in our capital
stock.
As used in this annual report, the terms "we", "us", "our", and
"Lamperd" mean Lamperd Less Lethal Inc., unless otherwise indicated.
Corporate History
We were incorporated in the State of Nevada on October 4, 2001.
On March 21, 2005, we changed our name from "Sinewire Networks Inc." to "Lamperd
Less Lethal Inc". The name change was recorded by the Secretary of State of
Nevada on March 21, 2005, and took effect with the NASD Inc.s Over-the-Counter
Bulletin Board at the opening for trading on March 31, 2005 under our new stock
symbol "LLLI". Other than as set out herein, we have not been involved in any
bankruptcy, receivership or similar proceedings, nor have we been a party to any
material reclassification, merger, consolidation or purchase or sale of a
significant amount of assets not in the ordinary course of our business.
On April 21, 2005, we acquired all of the 100,000,000 issued
and outstanding common stock of 1476246 Ontario Limited, an Ontario corporation,
having effect from April 14, 2004, pursuant to the terms of a share exchange
agreement dated March 24, 2005 between us, the Ontario Company, Patrick Ward,
Hani Zabaneh and the shareholders of the Ontario company.
As consideration for the shares of the Ontario Company, we
issued 26,000,000 shares of our common stock to the shareholders of the Ontario
Company on the basis of one share of our company for every 3.8461538 common
shares of the Ontario Company. As a result of this transaction, the Ontario
Company became a wholly-owned subsidiary of our Company. For financial statement
purposes, the Ontario Company (the acquired entity) is regarded as the
predecessor entity as of April 14, 2005.
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Our original business plan was to become actively engaged as a
start-up wireless communications service provider. We planned to implement our
business strategy by supplying wireless high-speed Internet services, and other
complementary Internet and telecommunications services. We intended to provide a
telecommunications delivery service to businesses, Internet Service Providers
and telecommunication companies in underserved markets in North America.
Management investigated opportunities and challenges in the business of becoming
a wireless communications service provider and concluded that this business was
not in our best interest.
Our Current Business
Our company is now a developer and manufacturer of civil
defense products that are designed as a less lethal alternative to conventional
weapons. The products include weapon systems and munitions that are designed to
incapacitate as opposed to kill opponents, and at the same time, ensure the
safety of the personnel using the products. In addition, our company also
manufactures shields, service equipment, training gear and accessories. The
products are primarily designed for the use by military and law enforcement
organizations. Our company also offers less lethal training to police, military
and private sector security personnel. Training can be provided by experienced
military and police contractors in addition to trained civilian contractors
which are retained as required by our company with permission from their
respective agencies. The training programs offered by our company incorporate
the most current less lethal techniques and equipment, including our own
products.
The launchers consist of a hand held model called the Defender
I, a longer version called the Defender II, a revolving shotgun launcher
called the RSG-20, Homeland Defender 2 shot, and the Military Peace Keeper, or
MPK version, that combines lethal and less lethal technologies in one launcher.
The launchers fire 5 rounds except for our new product the Homeland Defender
which fires 2 rounds. The five types of munitions developed for use by the
launchers, as well as certain conventional weapons, consist of sock rounds, WASP
synthetic rounds, distractionary rounds, liquid incapacitant rounds, and
training rounds.
Our market is primarily comprised of military forces and law
enforcement organizations in Canada and the United States. In Canada, our
products are primarily sold to distributors who distribute its products to end
users on an exclusive basis. We have been granted a Canadian Business Firearms
License, which allows the company to manufacture, repair, store, import, export
and sell its proprietary products.
Our products are sold in the United States through a network of
distributors. Our munitions have been approved by the Joint Less-lethal Weapons
program in the United States. The program was established in order to provide
certain personnel with a variety of non-lethal weapons products. In furtherance
of the marketing and sales of our products, we have been assigned a NATO
Commercial and Government Entity Code which enables us to sell military supplies
to NATO member countries.
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Our Products
Launchers
We have developed five proprietary projectile launchers. Each
of the launchers is compatible with our line of proprietary less lethal
munitions including the WASP composite rounds, sock rounds, training rounds,
distractionary rounds and liquid incapacitant rounds. Four launchers fire 5
rounds and one launcher fires 2 rounds. The ability of an operator to fire more
than a single round provides greater security in hostile situations.
1.
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Defender I: The Defender I is our standard launcher
product. The launcher fires munitions from a cylinder that holds five
rounds. The launcher is a compact and lightweight product that fires 20
gauge rounds.
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2.
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Defender II: The Defender II is a longer version than the
Defender I and also fires munitions from a cylinder that holds 5 rounds.
The launcher fires 20 gauge rounds and has a longer barrel which provides
for improved accuracy and greater effectiveness at longer
ranges.
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3.
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RSG-20: The RSG-20 is a revolving shotgun version
developed for the United States market and designed to fire five 20 gauge
cartridges.
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4.
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Military Peace Keeper: The MPK version combines lethal
and less lethal technologies in one launcher and fires five rounds. The
launcher is lightweight and contains a laser system for increased
accuracy.
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5.
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Homeland Defender: The Homeland Defender is our 2 shot
launcher. This launcher is light weight and small enough to be carried as
second weapon.
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Munitions
We manufacture six types of proprietary munitions used by the
launchers. Each of the munitions is made in 20 gauge, 12 gauge, 37mm and 40mm
and 50 caliber sizes. In addition, our munitions are compatible with other 20
gauge, 12 gauge, 37mm, 40mm and 50 caliber conventional weapons delivery systems.
The munitions are designed to ensure the safety of the operator and incapacitate
rather than kill an opponent.
WASP Composite Rounds
The WASP round is our most technologically advanced product.
The round consists of a projectile made from a rubber composite material that
does not harden in colder climates and possesses energy dissipation attributes,
resulting in a safer and more accurate projectile. The composite material allows
it to be used in temperatures ranging from minus 50 degrees Celsius to 100
degrees Celsius. The chemical composition of the projectile dissipates energy
upon impact, thus inflicting a level of force that is sufficient to temporarily
incapacitate but not kill the intended opponent. The projectile is patent
pending in Canada and the United States. The projectile was developed in
partnership with the University of Western Ontario. The University of Western
Ontario granted us an exclusive world-wide license to the technology pursuant to
a
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license agreement dated January 30, 2005. The license agreement
is effective for the term the patent rights are protected, subject to certain
conditions. In consideration for the grant of license, weve agreed to pay all
out-of-pocket expenses incurred by the University of Western Ontario, assume
responsibility for future patent prosecution and rights and pay the University a
royalty commencing on April 1, 2006 of three percent of revenue directly
attributable to the projectile. The royalty is subject to minimum royalty
obligations of $5,000 per year for each of the second and third years following
the entry into the license agreement, $10,000 per year for the fourth to sixth
years, and $20,000 thereafter.
Sock Rounds
The sock round fires a pouch or beanbag projectile filled
with lead pellets. Each sock round contains a proprietary tail attached to the
end of the round which stabilizes the round for increased accuracy. The
composition of the projectile allows for the dissipation of energy upon impact
which reduces the chances of injury of the intended target. The projectile is
intended to be aimed at the abdomen and hits the intended target with sufficient
force to knock the opponent down, but generally not enough to cause permanent
injury.
Distractionary Rounds
The distractionary round is an alternative to conventional stun
grenades and provides a bright flash combined with a 135 decibel noise, used to
disorient and temporarily blind opponents without causing permanent damage.
Liquid Incapacitant Rounds
Incapacitant rounds fire either a liquid or powder form of
pepper spray designed to temporarily blind and incapacitate opponents without
the need for officer contact. Firing the incapacitant rounds from a launcher
provides greater safety to the operator and provides more range than traditional
spray delivery methods.
Training Rounds
Training rounds are non-lethal munitions used by military and
law enforcement organizations to carry out training exercises amongst themselves
in preparation for hostile or combat situations.
Additional Products
We manufacture and distribute products in addition to launchers
and munitions, including the Specialized Mobil Armed Robot Technology System or
SMART System which combines the Defender launcher technology with an integrated
human-robot interface control platform. The SMART System is designed to deliver
less lethal, lethal and chemical weapon systems. Communication is facilitated by
a 360 degree camera and a proprietary sighting system mounted to the robotic
platform. The product can also be customized in accordance with the requirements
of the end-user.
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Our Firearm Training System, (FTS) is a simulation training
systems, to develop both fundamental basic and judgmental skills for lethal /
less lethal applications through computerized video hit projections. The FTS
product scenario can be customized to the customer needs.
Lumenyte Lamperd Undercarriage Camera Inspection System
(LLUCIS) is a powerful camera systems to assist security personal in carrying
out detailed vehicle inspections from a safe distance. This is a portable system
utilizes 5 digital video cameras along with a patent pending LED lighting array
which provides full non glare illumination. Images, are digitally recorded to a
computerized control system.
Employees
As at December 31, 2007, we have 5 full-time employees and 3
part-time employee.
Research and Development
For the fiscal years ended December 31, 2007 and 2006 we
expended approximately $29,142 and $4,369 on research and development activities
respectively.
Competition
The primary competitive factors in the demand for less lethal
products by military forces and law enforcement organizations include a weapons
cost, effectiveness and ease of use. There are several established competitors
offering less lethal products that directly complete with our companys
products, some of which are substantially more established than our company.
Regulation
In Canada, our launcher products are considered a firearm and
are regulated under federal law. The federal government has granted 1476246
Ontario Limited a Canadian Business Firearm License which permits our company to
manufacture, repair, store, import, export and sell our proprietary products. In
addition, in Canada we must also be registered under, and be in compliance with,
the Controlled Goods Program which sets requirement for possession/storage and
transport of our products. Our operating subsidiary is registered with the
Controlled Goods Program in accordance with the Defence Production Act.
In the US, the manufacture, sale and purchase of firearms are
subject to extensive federal governmental regulation. The basic federal laws are
the National Firearms Act and the Federal Firearms Act, which were originally
enacted in the 1930s and which have been amended from time to time, and the Gun
Control Act of 1968. Federal laws generally place certain restrictions on the
interstate sale of firearms unless certain licenses are obtained. The Defender
Series of products are considered to be a firearm by the United States Bureau
of Alcohol, Tobacco, Firearms and Explosives. Therefore, all firearms-related
regulations apply to the sale and distribution of our devices within the United
States.
In addition, we are subject to ITAR, the International Trade
and Arms Regulations.
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We believe that existing federal regulations regarding firearms
and ammunition will not have a material adverse effect on sales of our products.
However, there can be no assurance that federal, state, local or foreign
regulation of firearms and/or ammunition will not become more restrictive in the
future and that any such development would not have a material adverse effect on
our business whether directly or by placing additional burdens on those who
distribute and sell our products.
Foreign Regulation
Foreign regulations which may affect the sale of our products
are numerous and unclear. We prefer to work with foreign distributors who are
familiar with the applicable import regulations of their jurisdiction and who
are in a position to acquire the necessary approvals to sell our companys
products in the specified jurisdictions.
Raw Materials And Principal Suppliers
The principal components of our products are readily available
from a variety of sources. The prices for these components are subject to market
forces largely beyond our control. The prices for these components have varied
in the past and may vary significantly in the future. The WASP synthetic round
is made from a proprietary rubber compound. The aluminum for our launchers is
readily available from a number of local sources.
Compliance With Environmental Laws
To our knowledge, neither the production nor the sale of our
products constitute activities or generate materials, in a material manner, that
requires compliance with federal, state or local environmental laws in any
jurisdiction of our operation.
Intellectual Property
We currently protect our intellectual property with a variety
of trademarks and trade secrets. In Canada and the United States, Lamperd has
applied for a patent of the underlying technology used in its WASP composite
round, which patent is currently pending. The patent application was filed by
the University of Western Ontario under United States Provisional Patent
Application No. 60/507,491.
The following names are trademarks of 1476246 Ontario Limited:
Lamperd Less Lethal, Defender I, Defender II, Enforcer Suit I, Enforcer Suit II
and Pinetree Law Enforcement.
Our company owns and operates the duly registered internet
domain name: www.lamperdlesslethal.com. The information contained in our
companys website is not part of this annual report.
RISK FACTORS
Much of the information included in this current report
includes or is based upon estimates, projections or other "forward looking
statements". Such forward looking statements include any projections or
estimates made by us and our management in connection with our business
operations. While these forward-looking statements, and any assumptions upon
which they are based, are made in good faith and reflect our current judgment
regarding the
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direction of our business, actual results will almost always
vary, sometimes materially, from any estimates, predictions, projections,
assumptions or other future performance suggested herein.
Such estimates, projections or other "forward looking
statements" involve various risks and uncertainties as outlined below. We
caution the reader that important factors in some cases have affected and, in
the future, could materially affect actual results and cause actual results to
differ materially from the results expressed in any such estimates, projections
or other "forward looking statements".
Risks Related To Our Business
We operate in a highly-competitive industry and our failure
to compete effectively may adversely affect our ability to generate
revenue.
Management is aware of similar products which compete directly
with our products and some of the companies developing these products have
significantly greater financial, technical and marketing resources, larger
distribution networks, and generate greater revenue and have greater name
recognition than us. These companies may develop products superior to those of
our company. Such competition will potentially affect our chances of achieving
profitability, and ultimately adversely affect our ability to continue as a
going concern. Some of our competitors conduct more extensive promotional
activities and offer lower prices to customers than we do, which could allow
them to gain greater market share or prevent us from increasing our market
share. In the future, we may need to decrease our prices if our competitors
continue to lower their prices. Our competitors may be able to respond more
quickly to new or changing opportunities, technologies and customer
requirements. To be successful, we must carry out our business plan, establish
and strengthen our brand awareness through marketing, effectively differentiate
our product line from those of our competitors and build our distribution
network. To achieve this we may have to substantially increase our marketing
research and development in order to compete effectively. Such competition will
potentially affect our chances of achieving profitability, and ultimately
adversely affect our ability to continue as a going concern. Due to minimal
revenue and lack of cash flow we have cancelled the product liability insurance
policy. The Company is researching other insurance agencies that are more
competitive with their price coverage. We plan to implement our product
liability insurance in 2008.
Rapid technological changes in our industry could render our
products non-competitive or obsolete and consequently affect our ability to
generate revenues.
Currently, we derive substantially all of our revenues from the
sale of civil defense products and related products using less lethal alternatives
to conventional weapons, including launchers and munitions. Such products are
characterised and affected by rapid technological change, evolving industry
standards and regulations and changing client preferences. Our success will
depend, in significant part, upon our ability to make timely and cost-effective
enhancements and additions to our technology and to introduce new products and
services that meet customer demands. We expect new products and services to
be developed and introduced by other companies that compete with our products
and services. The proliferation of new and established companies offering less
lethal alternative products may reduce demand for our particular products. There
can be no assurance that we will be successful in responding to these or other
technological changes, to evolving industry standards or regulations or to new
products and services offered by
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our current and future competitors. In addition, we may not
have access to sufficient capital for our research and development needs in
order to develop new products and services.
We could lose our competitive advantages if we are not able
to protect our proprietary technology and intellectual property rights against
infringement, and any related litigation could be time-consuming and
costly.
Our success and ability to compete depends in part on our
proprietary technology incorporated in our products. If any of our competitors
copy or otherwise gain access to our proprietary technology or develop similar
technologies independently, we would not be able to compete as effectively. We
consider our technologies invaluable to our ability to continue to develop and
maintain the goodwill and recognition associated with our brand. The measures we
take to protect our technologies, and other intellectual property rights, which
presently are based upon registered trade marks in addition to trade secrets,
may not be adequate to prevent their unauthorized use. Although we rely, in
part, on contractual provisions to protect our trade secrets and proprietary
know-how, there is no assurance that these agreements will not be breached, that
we would have adequate remedies for any breach or that our trade secrets will
not otherwise become known or be independently developed by competitors.
Further, the laws of foreign countries may provide inadequate protection of
intellectual property rights. We may need to bring legal claims to enforce or
protect our intellectual property rights. Any litigation, whether successful or
unsuccessful, could result in substantial costs and a diversion of corporate
resources. In addition, notwithstanding any rights we have secured to our
intellectual property, other persons may bring claims against us claiming that
we have infringed on their intellectual property rights, including claims that
our intellectual property rights are not valid. Adverse determinations in
litigation in which we may become involved could subject us to significant
liabilities to third parties, require us to grant licenses to or seek licenses
from third parties and prevent us from manufacturing and selling our products.
Any claims against us, with or without merit, could be time-consuming and costly
to defend or litigate, divert our attention and resources, result in the loss of
goodwill associated with our trademarks or require us to make changes to our
technologies. Furthermore, we cannot assure you that any pending patent
application made by us will result in an issued patent, or that, if a patent is
issued, it will provide meaningful protection against competitors or competitor
technologies.
We may not be able to hire and retain qualified personnel to
support our growth and if we are unable to retain or hire such personnel in the
future, our ability to improve our products and implement our business
objectives could be adversely effected.
To continue our growth, we will need to recruit additional
senior management personnel, including persons with financial and sales
experience. In addition, we must hire, train and retain a significant number of
other skilled personnel, including persons with experience in less lethal
munitions engineering and manufacturing. We have encountered competition for
these personnel. We may not be able to find or retain qualified personnel, which
will have a material adverse impact on our business.
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Our growth could be impaired if we are not able to develop
and maintain the relationships we need to implement our international
strategy.
Our growth will depend, in large part, on the success of our
international distribution strategy. We have limited experience in marketing and
selling our products outside of Canada and the United States. We will depend on
partnerships and/or joint ventures in international markets to help us build our
international operations and distribution networks. We will depend upon
international partners to provide marketing and relationship building expertise,
and a base of existing customers. If we are unable to develop and maintain these
relationships, or to develop additional relationships in other countries, our
ability to penetrate, and successfully compete in foreign markets will be
adversely affected.
We intend to expand our business internationally, and
therefore, we are subject to additional financial and regulatory risks.
Our current and future international operations are and will be
subject to various risks, including: foreign import controls (which may be
arbitrarily imposed and enforced and which could interrupt our supplies or
prohibit customers from purchasing our products); exchange rate fluctuations;
the necessity of obtaining government approvals for both new and continuing
operations; and legal systems of decrees, laws, taxes, regulations,
interpretations and court decisions that we are not familiar with. One component
of our strategy is to expand our operations into selected international markets.
Foreign countries in which we are actively marketing include the United States
and Israel; we intend to commence marketing efforts in Nigeria in the near
future. We, however, may be unable to execute our business model in this market
or new markets. Further, foreign providers of competing products and services
may have a substantial advantage over us in attracting consumers and businesses
in their country due to earlier established businesses in that country, greater
knowledge with respect to the cultural differences of consumers and businesses
residing in that country and/or their focus on a single market. As a result, we
expect to experience higher costs as a percentage of any revenues that we may
generate in the future in connection with the development and maintenance of
international sales. In pursuing our international expansion strategy, we face
several additional risks, including:
- foreign laws and regulations, which may vary country by
country, that may impact how we conduct our business;
- higher costs of doing business in foreign countries;
- potential adverse tax consequences if taxing authorities in
different jurisdictions worldwide disagree with our interpretation of various
tax laws or our determinations as to the income and expenses attributable to
specific jurisdictions, which could result in our paying additional taxes,
interest and penalties;
- technological differences that vary by marketplace, which we
may not be able to support;
- longer payment cycles and foreign currency fluctuations; and
- economic downturns.
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We propose to operate in areas where local government policies
regarding foreign entities and the regulation of less lethal products are often
uncertain. We therefore cannot, be certain that we are in compliance with, or
will be protected by, all relevant local laws and taxes at any given point in
time. A subsequent determination that we failed to comply with relevant local
laws and taxes could have a material adverse effect on our business, financial
condition, results of operations and liquidity. One or more of these factors
could adversely affect our future international operations and, consequently,
could have a material adverse effect on our business, financial condition,
results of operation and liquidity.
Many of our customers have fluctuating budgets, which may
cause substantial fluctuations in our results of operations.
The potential customers for our products may include federal,
state, municipal, foreign and military, law enforcement and other governmental
agencies. Government tax revenues and budgetary constraints, which fluctuate
from time to time, can affect budgetary allocations from these customers. Many
domestic and foreign government agencies have in the past experienced budget
deficits that have led to decreased spending in defense, law enforcement and
other military and security areas. Any future revenues that our company may
generate may be subject to substantial periodic fluctuations because of these
and other factors affecting military, law enforcement and other governmental
spending. A reduction of funding for federal, state, municipal, foreign and
other governmental agencies could have a material adverse effect on any future
revenues that we may generate.
Our WASP synthetic round is costly to compound, and our
company may not be able to find other subcontractors who are willing to supply
our company with this service.
The WASP synthetic round is made from a proprietary rubber
compound and is costly to compound. It may be difficult to find other
contractors willing to compound our material. If we are unable to find
contractors willing to compound and deliver our material, our revenues will be
reduced.
Risks Related To Our Industry
The products we sell are inherently risky and could give
rise to product liability and other claims.
The products that we manufacture are typically used in
applications and situations that involve a high level of risk of personal
injury. Failure to use our products for their intended purposes, failure to use
or care for them properly, or their malfunction, or, in some limited
circumstances, even correct use of our products, could result in serious bodily
injury or death. Given this potential risk of injury, proper maintenance of our
products is critical. Our products consist of less lethal products such as
launchers, munitions, pepper sprays and distraction devices. The manufacture and
sale of less-lethal products may be the subject of product liability claims
arising from the design, manufacture or sale of such goods. If these claims are
decided against our company and we are founds liable, we may be required to pay
substantial damages and our insurance costs, if any, may increase significantly
as a result. Also, a significant or extended lawsuit could also divert
significant amounts of managements time and energy. We cannot
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assure you that our insurance coverage, if any, would be
sufficient to cover the payment of any potential claim. In addition, we cannot
assure you that this or any other insurance coverage will continue to be
available or, if available, that we will be able to obtain it at a reasonable
cost. Any material uninsured loss could have a material adverse effect on our
business, financial condition and results of operations.
We are subject to extensive government regulation, and our
failure or inability to comply with these regulations could materially restrict
our operations and subject us to substantial penalties.
We are subject to many requirements with respect to the sale in
foreign and/or domestic countries of certain of our products. In addition, we
are obligated to comply with a variety of federal, state and local regulations,
both domestically and abroad, governing certain aspects of our operations and
workplace. The inability of our company to comply with such regulations may
limit our operations and subject us to substantial penalties and fines.
Risks Related To Our Common Stock
A decline in the price of our common stock could affect our
ability to raise further working capital and adversely impact our
operations.
A prolonged decline in the price of our common stock could
result in a reduction in the liquidity of our common stock and a reduction in
our ability to raise capital. Because our operations have been financed through
the sale of equity securities, a decline in the price of our common stock could
be especially detrimental to our liquidity and our continued operations. Any
reduction in our ability to raise equity capital in the future would force us to
reallocate funds from other planned uses and would have a significant negative
effect on our business plans and operations, including our ability to develop
new products and continue our current operations. If the stock price declines,
there can be no assurance that we can raise additional capital or generate funds
from operations sufficient to meet our obligations. We believe the following
factors could cause the market price of our common stock to continue to
fluctuate widely and could cause our common stock to trade at a price below the
price at which you purchase your shares:
- actual or anticipated variations in our quarterly operating
results;
- announcements of new services, products, acquisitions or
strategic relationships by us or our competitors;
- trends or conditions in the less lethal products
industry;
- changes in accounting treatments or principles;
- changes in earnings estimates by securities analysts and in
analyst recommendations;
- changes in market valuations of other less lethal product
companies; and
- general political, economic, regulatory and market conditions.
- 14 -
The market price for our common stock may also be affected by
our ability to meet or exceed expectations of analysts or investors. Any failure
to meet these expectations, even if minor, could materially adversely affect the
market price of our common stock.
If we issue additional shares in the future, it will result
in the dilution of our existing shareholders.
Our certificate of incorporation authorizes the issuance of
1,000,000,000 shares of common stock. Our board of directors has the authority
to issue additional shares up to the authorized capital stated in the
certificate of incorporation. Our board of directors may choose to issue some or
all of such shares to acquire one or more businesses or to provide additional
financing in the future. The issuance of any such shares will result in a
reduction of the book value or market price of the outstanding shares of our
common stock. If we do issue any such additional shares, such issuance also will
cause a reduction in the proportionate ownership and voting power of all other
shareholders. Further, any such issuance may result in a change of control of
our corporation.
If a market for our common stock does not develop,
shareholders may be unable to sell their shares.
There is currently a limited market for our common stock, which
trades through the Over-the-Counter Bulletin Board quotation system. Trading of
stock through the Over-the-Counter Bulletin Board is frequently thin and highly
volatile. There is no assurance that a sufficient market will develop in the
stock, in which case it could be difficult for shareholders to sell their stock.
Trading of our stock may be restricted by the Securities and
Exchange Commissions penny stock regulations which may limit a stockholders
ability to buy and sell our stock.
The Securities and Exchange Commission has adopted regulations
which generally define penny stock to be any equity security that has a market
price (as defined) less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain exceptions. Our securities are covered by
the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
accredited investors. The term accredited investor refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the Securities and
Exchange Commission which provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customers account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customers confirmation. In addition, the penny stock
rules require that prior to a
- 15 -
transaction in a penny stock not otherwise exempt from these
rules; the broker-dealer must make a special written determination that the
penny stock is a suitable investment for the purchaser and receive the
purchasers written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of, our common stock.
The National Association of Securities Dealers Inc., or
NASD, has adopted sales practice requirements, which may limit a stockholders
ability to buy and sell our shares.
In addition to the penny stock rules described above, the
NASD has adopted rules requiring that in recommending an investment to a
customer, a broker-dealer must have reasonable grounds for believing that the
investment is suitable for that customer. Prior to recommending speculative
low-priced securities to their non-institutional customers, broker-dealers must
make reasonable efforts to obtain information about the customers financial
status, tax status, investment objectives and other information. Under
interpretations of these rules, the NASD believes that there is a high
probability that speculative low-priced securities will not be suitable for at
least some customers. The NASD requirements make it more difficult for
broker-dealers to recommend that their customers buy our common stock, which may
limit our shareholders ability to buy and sell our stock and which may have an
adverse effect on the market for our shares.
Most of our assets and a majority of our directors and
officers are outside the United States, with the result that it may be difficult
for investors to enforce within the United States any judgments obtained against
us or any of our directors or officers.
Although we are organized under the laws of the State of
Nevada, our principal executive office is located in Sarnia, Ontario, Canada.
Outside the United States, it may be difficult for investors to enforce
judgments against us obtained in the United States in any such actions,
including actions predicated upon civil liability provisions of federal
securities laws. In addition, some of our officers and directors reside outside
the United States, and a majority of the assets of these persons and our assets
are located outside of the United States. As a result, it may not be possible
for investors to effect service of process within the United States upon such
persons or to enforce against us or such persons judgments predicated upon the
liability provisions of the United States securities laws. There is substantial
doubt as to the enforceability against us or any of our directors and officers
located outside the United States in original actions or in actions of
enforcement of judgments of United States courts or liabilities predicated on
the civil liability provisions of United States federal securities laws.
Item 2.
|
Description of Property.
|
Our principal executive offices are located at 1200 Michener
Road, Sarnia, Ontario, Canada. The 10,000 square foot space is leased for $6,400
per month for an additional three year term that commenced on January 1, 2008.
The Company also leases another 3,000 square feet for $1,000 a month. There is
no signed agreement for the additional leased space. We believe that our
principal office will be adequate for our needs for the next 2-3 years. In
addition to our principal office, we periodically lease a 15 acre property which
our company utilizes as a training facility to hold our diverse training
programs. The property is leased as required for a fluctuating daily fee.
- 16 -
Item 3.
|
Legal Proceedings.
|
A Statement of Claim on February 1, 2007 has been filed against
our company by Mintz & Partners LLP for the amount of $103,248. Our company
is disputing this amount and plans to defend itself and is counter claiming
against Mintz. Our company and Mintz are in a settlement discussion. Proceedings
have being requested to be held in the City of Toronto, in the Province of
Ontario at the Ontario Superior Court of Justice.
Item 4.
|
Submissions of Matters to a Vote of Security
Holders.
|
There were no matters submitted to a vote of our security
holders either through solicitation of proxies or otherwise in the fourth
quarter of the fiscal year ended December 31, 2008.
PART II
Item 5.
|
Market for Common Equity and Related
Stockholder Matters.
|
On June 5, 2003, our common stock received approval for
quotation on the National Association of Securities Dealers Inc.'s
Over-the-Counter Bulletin Board under the name "Sinewire Networks Inc." and
under the symbol "SNTW". On March 21, 2005, we changed our name from "Sinewire
Networks Inc." to "Lamperd Less Lethal Inc". The name change took effect with
the NASD Inc.s Over-the-Counter Bulletin Board at the opening for trading on
March 31, 2005 under our new stock symbol "LLLI".The following table reflects
the high and low bid information for our common stock for each fiscal quarter
during the fiscal years ended 2006 and 2005. The bid information was obtained
from Stock-watch and reflects inter-dealer prices, without retail mark-up,
markdown or commission, and may not necessarily represent actual
transactions.
Quarter Ended
(1)
|
High
($)
|
Low
($)
|
March 31, 2005
|
1.30
|
0.985
|
June 30, 2005
|
4.56
|
1.25
|
September 29, 2005
|
1.99
|
0.47
|
December 31, 2005
|
1.07
|
0.36
|
March 31, 2006
|
0.52
|
0.20
|
June 30, 2006
|
0.42
|
0.14
|
September 29, 2006
|
0.22
|
0.08
|
December 31, 2006
|
0.16
|
0.08
|
March 31, 2007
|
0.11
|
.10
|
June 29, 2007
|
0.08
|
0.07
|
September 28, 2007
|
0.08
|
0.06
|
December 31, 2007
|
0.04
|
0.03
|
(1)
Our common stock
received approval for quotation on June 5, 2003. The first trade occurred March
31, 2005.
On March 31, 2008, the closing price for the common stock as
reported by the quotation service operated by the OTC Bulletin Board was
$0.062
- 17 -
As of March 31, 2008, there were 33 holders of record of our
common stock. As of such date, 59,871,043 common shares were issued and
outstanding.
Our common shares are issued in registered form. The Nevada
Agency and Trust Company, 50 Liberty Street, Suite 880, Reno, Nevada 89501
(Telephone: 775.322.0626; Facsimile 775.322.5623) is the registrar and transfer
agent for our common shares. We have no other classes of securities.
Dividend Policy
We have not paid any cash dividends on our common stock and
have no present intention of paying any dividends on the shares of our common
stock. Our current policy is to retain earnings, if any, for use in our
operations and in the development of our business. Our future dividend policy
will be determined from time to time by our board of directors.
Equity Compensation Plan Information
On December 4, 2006, our directors adopted a stock option plan
(the 2006 Option Plan) for our directors and employees, reserving a total of
2,000,000 shares of our common stock for issuance pursuant to grants made under
the 2006 Option Plan. The 2006 Option Plan was effective October 1, 2006
The following table provides a summary of the securities
authorized for issuance under Equity Compensation Plans, the weighted average
price and number of securities remaining available for issuance, all as at
December 31, 2007.
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
securities
|
|
|
|
Number of
|
|
|
|
|
|
remaining available
|
|
|
|
securities to be
|
|
|
|
|
|
for future issuance
|
|
|
|
issued upon
|
|
|
Weighted average
|
|
|
under equity
|
|
|
|
exercise of
|
|
|
exercise price of
|
|
|
compensation plans
|
|
|
|
outstanding
|
|
|
outstanding
|
|
|
(excluding
|
|
|
|
options, warrants
|
|
|
options, warrants
|
|
|
securities reflected
|
|
|
|
and rights
|
|
|
and rights
|
|
|
in column (a))
|
|
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Equity compensation plans
|
|
|
|
|
|
|
|
|
|
approved by security
|
|
|
|
|
|
|
|
|
|
holders
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
Equity compensation plans
|
|
|
|
|
|
|
|
|
|
not approved by security
|
|
|
|
|
|
|
|
|
|
holders
|
|
200,000
|
|
$
|
0.10
|
|
|
1,800,000
|
|
|
|
650,000
|
|
$
|
0.08
|
|
|
1,150,000
|
|
|
|
250,000
|
|
$
|
0.10
|
|
|
900,000
|
|
|
|
500,000
|
|
$
|
0.04
|
|
|
400,000
|
|
Total
|
|
1,600,000
|
|
$
|
117,000
|
|
|
|
|
Purchase of Equity Securities by the Issuer and Affiliated
Purchasers
We did not purchase any of our shares of common stock or other
securities during the year ended December 31, 2007.
- 18 -
Recent Sales of Unregistered Securities
On March 18, 2005, the Company (formerly known as Sinewire
Networks Inc.) entered into a reverse acquisition transaction (transaction)
with privately held 1476246 Ontario Limited (1476246), an Ontario corporation.
The transaction was effected pursuant to a Share Exchange Agreement dated March
18, 2005 (the Agreement). Prior to the reverse takeover transaction 1476246
issued 99,996,000 common shares for nominal consideration. In accordance with
the Agreement the Company acquired all 100,000,000 issued and outstanding common
stock of 1476246 in exchange for the issuance by the Company of 26,000,000
shares of common stock to the shareholders of 1476246. Under the agreement, one
share of the Company was issued for every 3.8461538 common stock of 1476246. As
a result, 1476246 legally became a wholly owned subsidiary of the Company and
the former shareholders of 1476246 hold greater than 50% of the Companys
outstanding shares. Under the Agreement and as a result of the forward stock
split, 44,516,000 outstanding common shares of the Company were exchanged for
222,580,000 common shares, 199,580,000 common shares of the Company were
surrendered immediately for cancellation without consideration.
On April 13, 2005, we sold 1,500,000 units at a price of US
$1.00 per unit for an aggregate purchase price of US$1,500,000 to one non-U.S.
investor relying on the promulgated there exemption from the registration
requirements of the Securities Act of 1933 provided by Regulation S under. Each
unit was exercisable into one common share and two common share purchase
warrants. Each common share purchase warrant was immediately exercisable and
entitles the holder to purchase one common share for a period of 24 months
commencing from April 14, 2005. The warrants are exercisable at a price per
share of US $1.25 for twelve months following April 14, 2005, and at US$1.40
thereafter. On March 2, 2006, we issued an aggregate of 500,000 shares to two
individuals in an offshore transaction for which we relied on the exemption from
the registration requirements of the Securities Act of 1933 provided by
Regulation S promulgated there under.
On July 14, 2006 we agreed to issue 1,000,000 common shares to
an investor at a price of US$0.06 per share. Total consideration received was
US$60,000 that was used to pay for operating expenses. The securities were
issued pursuant to the exemption from registration under the United States
Securities Act of 1933 provided by Section 4(2), Section 4(6) and/or Rule 506 of
Regulation D promulgated under the 1933 Act to the investor who is an
accredited investor within the respective meanings ascribed to that term in
Rule 501(a) under the 1933 Act. No advertising or general solicitation was
employed in offering the securities.
Effective December 4, 2006, we granted stock options to two (2)
employees to purchase an aggregate of 200,000 shares of our common stock at
an exercise price of $0.10 per share, exercisable until December 4, 2013. We
issued the stock options to two (2) non-U.S. persons (as that term is defined
in Regulation S of the Securities Act of 1933), in an offshore transaction relying
on Regulation S and/or Section 4(2) of the Securities Act of 1933.
On March 2, 2006, we issued an aggregate of 500,000 shares to
two individuals in an offshore transaction for which we relied on the exemption
from the registration requirements of the Securities Act of 1933 provided by
Regulation S promulgated there under.
Effective May 1, 2007, we issued in a private placement
offering for 750,000 shares at US $.10 a unit which included a common stock
purchase warrant entitling the holder to acquire up to 1,000,000 common shares
in the company at US $0.08 per share, expiring April 30, 2010.
Effective June 30, 2007, we granted stock options to one (1)
director one (1) employee and one (1) Consultant to purchase an aggregate of
650,000 shares of our common stock at an exercise price of $0.08 per share,
exercisable until June 30, 2012. We issued the stock options to two (3) non-U.S.
persons (as that term is defined in Regulation S of the Securities Act of 1933),
in an offshore transaction relying on Regulation S and/or Section 4(2) of the
Securities Act of 1933.
Effective July 20, 2007, we granted stock options to one (1)
consultant to purchase an aggregate of 250,000 shares of our common stock at an
exercise price of $0.10 per share, exercisable until
- 19 -
July 20, 2012. Stock options were issued to one U.S. person (as
that term is defined in Regulation S of the Securities Act of 1933) relying
on the exemptions from registration provided by Section 4(2) of the Securities
Act of 1933 and upon Rule 506 of Regulation D of the Securities Act of 1933
Effective December 31, 2007 we granted stock options to one (1)
employee to purchase an aggregate of 500,000 shares of our common stock at an
exercise price of $0.04 per share, exercisable until December 31, 2012. We
issued the stock options to two (1) non-U.S. persons (as that term is defined in
Regulation S of the Securities Act of 1933), in an offshore transaction relying
on Regulation S and/or Section 4(2) of the Securities Act of 1933.
On December 31, 2006, we issued 250,000 shares of common stock
to Edward Ferguson, a director of our company, for services rendered in lieu of
a cash payment. The common stock was issued to one U.S. person (as that term is
defined in Regulation S of the Securities Act of 1933) relying on the exemptions
from registration provided by Section 4(2) of the Securities Act of 1933 and
upon Rule 506 of Regulation D of the Securities Act of 1933.
On December 31, 2006, we issued an aggregate of 1,570,158
shares of common stock to two (2) directors and one (1) consultant as payment
for services or supplies provided to our company for the period ending December
31, 2006. The common stock was issued to three (3) non-U.S. persons (as that
term is defined in Regulation S of the Securities Act of 1933), in an offshore
transaction relying on Regulation S and/or Section 4(2) of the Securities Act of
1933.
On March 31, 2007, we issued an aggregate of 422,982 shares of
common stock to one (1) director for services or supplies provided to our
company for the period ending June 30, 2007. The common stock was issued to one
(1) non-U.S. person (as that term is defined in Regulation S of the Securities
Act of 1933), in an offshore transaction relying on Regulation S and/or Section
4(2) of the Securities Act of 1933.
On June 30, 2007, we issued an aggregate of 374,900 shares of
common stock to one (1) director for services or supplies provided to our
company for the period ending June 30, 2007. The common stock was issued to one
(1) non-U.S. person (as that term is defined in Regulation S of the Securities
Act of 1933), in an offshore transaction relying on Regulation S and/or Section
4(2) of the Securities Act of 1933.
On December 31, 2007, we issued an aggregate of 4,503,003
shares of common stock to two (2) directors one (1) employee and one (1)
consultant as payment for services or supplies provided to our company for the
period ending December 31, 2007. The common stock was issued to three (4)
non-U.S. persons (as that term is defined in Regulation S of the Securities Act
of 1933), in an offshore transaction relying on Regulation S and/or Section 4(2)
of the Securities Act of 1933.
- 20 -
Item 6.
|
Managements Discussion and Analysis or Plan
of Operation.
|
Overview
You should read the following discussion of our financial
condition and results of operations together with the consolidated audited
financial statements and the notes to the consolidated audited financial
statements included elsewhere in this filing prepared in accordance with
accounting principles generally accepted in the United States.
Our financial statements are stated in Canadian Dollars unless
otherwise stated and are prepared in accordance with United States Generally
Accepted Accounting Principles. All financial information contained herein is in
Canadian Dollars unless otherwise stated.
This discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those anticipated in these forward-looking statements.
General Explanation of Comparative Periods
The acquisition of 1476246 Ontario Limited was accounted for
using the purchase method of accounting as applicable to reverse acquisitions
because the former stockholders of 1476246 Ontario Limited controlled a majority
of our shares of common stock immediately upon conclusion of the transaction and
the continuing business is that of 1476246 Ontario Limited. Under reverse
acquisition accounting, the post-acquisition entity is accounted for as a
recapitalization of 1476246 Ontario Limited. After completion of the
acquisition, we changed our name to Lamperd Less Lethal Inc. to affect our
newly acquired business.
The previous audited financial statements of Sinewire Networks
Inc. for the fiscal periods ended December 31, 2004 and 2003 were included in
our annual report on Form 10-KSB, filed with the Securities and Exchange
Commission on April 7, 2005. Prior to the share exchange with 1476246 Ontario
Limited, Sinewire Networks Inc. (the inactive public company) was not operating,
had minimal assets and liabilities and had minimal revenue from its inception
through the date of its reorganization on April 14, 2005.
Plan of Operation
Results of Operations
Year Ended December 31, 2007 compared with year ended
December 31, 2006
We posted losses of $792,863 for the year ended December 31,
2007 compared to losses of $842,016 for the year ended December 31, 2006, and
losses of $3,024,376 since inception to December 31, 2007. The principal
component of the loss was for general and administrative expenses.
Operating expenses for the year ended December 31, 2007 were
$876,392 compared to $895,413 for the year ended December 31, 2006.
Financial Condition, Liquidity and Capital Resources
Cash used in operating activities was $261,332 during the year
ended December 31, 2007. Cash of $35,918 was used in the purchase of equipment
and leaseholds. There was a net cash inflow of $295,088 from financing
activities during the year ended December 31, 2007, which was mostly derived
from proceeds from promissory notes and advances.
- 21 -
From inception on October 4, 2001 to April 13, 2005, the Company
was engaged as a start-up wireless internet service provider. Since April 14,
2005, the Company has been engaged in the business of developing and manufacturing
of civil defense products that are designed as a less lethal alternative to
conventional weapons. Our principal capital resources have been acquired through
the issuance of common stock.
Year Ended December 31, 2007 compared with year ended
December 31, 2006
At December 31, 2007, we had a working capital deficit of
$608,677 compared to working capital deficit of $288,189 at December 31, 2006.
At December 31, 2007, we had assets of $426,274 compared to our
assets at December 31, 2006 of $487,313.
At December 31, 2007, our total liabilities were $765,269
compared to our liabilities of $486,564 as at December 31, 2006.
At December 31, 2007, we have bank indebtedness of $7,410
compared to cash on hand of $1,443 as at December 31, 2006.
We have no long-term debt as at December 31, 2007.
While we expect to meet our financial obligations, the
continuation of our business is dependent upon obtaining further financing, a
successful program of acquisition and development, and, finally, achieving a
profitable level of operations. The issuance of additional equity securities by
us could result in a significant dilution in the equity interests of our current
stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.
There are no assurances that we will be able to obtain further
funds required for our continued operations. As noted herein, we are pursuing
various financing alternatives to meet our immediate and long-term financial
requirements. There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to obtain the additional
financing on a timely basis, we will be unable to conduct our operations as
planned, and we will not be able to meet our other obligations as they become
due. In such event, we will be forced to scale down or perhaps even cease our
operations.
Product Research and Development
We anticipate that we will expend $55,000 on research and
development over the twelve months ending December 31, 2008.
Purchase of Significant Equipment
No significant purchases are being planned for the next 12
months.
Going Concern
Not having generated significant revenues, in the consolidated
financial statements for the year ended December 31, 2007, our independent
auditor included in their Report to Shareholders dated May 13, 2008 an
explanatory
- 22 -
paragraph regarding concerns about our ability to continue as a
going concern. Our consolidated financial statements contain additional note
disclosures describing the circumstances that lead to this disclosure.
The continuation of our business is dependent upon us raising
additional financial support. The issuance of additional equity securities by us
could result in a significant dilution in the equity interests of our current
stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.
We incurred losses in our first three years of business totaling
of $3,189,649. Because of these losses and potential future losses, we will
require additional working capital to develop our business operations.
We intend to raise additional working capital through private
placements, public offerings and/or bank financing.
There are no assurances that we will be able to either (1)
achieve a level of revenues adequate to generate sufficient cash flow from
operations; or (2) obtain additional financing through either private
placements, public offerings and/or bank financing necessary to support our
working capital requirements. To the extent that funds generated from operations
and any private placements, public offerings and/or bank financing are
insufficient, we will have to raise additional working capital. No assurance can
be given that additional financing will be available, or if available, will be
on terms acceptable to us. If adequate working capital is not available we may
not increase our operations.
These conditions raise substantial doubt about our ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might be necessary
should we be unable to continue as a going concern.
Related Party Transactions
During the year ended December 31, 2007 the Company entered into
various transactions with related parties. For a complete description, see the
financial statements.
Recently Issued Accounting Standard
See Note 2 in the financial statements for a discussion of
recent accounting pronouncements affecting the Company.
Application of critical accounting policies
Our financial statements and accompanying notes are prepared in
accordance with generally accepted accounting principles in the United States.
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
and expenses. These estimates and assumptions are affected by management's
application of accounting policies. We believe that understanding the basis and
nature of the estimates and assumptions involved with the following aspects of
our consolidated financial statements is critical to an understanding of our
financial position.
- 23 -
Item 7.
|
Financial Statements.
|
Our financial statements are stated in Canadian dollars unless
otherwise stated and are prepared in accordance with United States Generally
Accepted Accounting Principles.
The following consolidated financial statements are filed as
part of this annual report:
|
Independent Auditors' Report, May
13, 2008
|
|
|
|
Consolidated Balance Sheets at
December 31, 2007 and December 31, 2006
|
|
|
|
Consolidated Statements of
Operations for the years ended December 31, 2007, and December 31, 2006
|
|
|
|
Consolidated Statements of
Changes in Stockholders' Equity for the years ended December 31, 2007, and
December 31, 2006
|
|
|
|
Consolidated Statements of Cash
Flows for the years ended December 31, 2007, and December 31, 2006
|
|
|
|
Notes to the Consolidated
Financial Statements
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Lamperd Less Lethal Inc.
We have audited the accompanying consolidated balance sheet of
Lamperd Less Lethal Inc. as of December 31, 2007, and the related consolidated
statements of operations, changes in stockholders equity (deficiency)
and cash flows for the year ended December 31, 2007. These consolidated financial
statements are the responsibility of the Companys management. Our responsibility
is to express an opinion on these consolidated financial statements based on
our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. Our audit included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Companys internal
control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated financial statements, assessing the accounting
principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Lamperd Less Lethal Inc. as of December 31, 2007, and the results of its operations
and its cash flows for the year ended December 31, 2007, in conformity with
accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As more
fully described in Note 1 to the consolidated financial statements, the Company
has incurred a working capital deficiency and has an accumulated deficit. These
conditions raise substantial doubt about its ability to continue as a going
concern. Managements plans in regard to these matters are also described
in Note 1. These financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Danziger Hochman Partners LLP
Toronto, Canada
May 13, 2008
- 24 -
Source: LAMPERD LESS LETHAL, 10KSB, April 17, 2007
LAMPERD LESS LETHAL INC.
|
CONSOLIDATED BALANCE SHEETS
|
(Canadian Funds)
|
As at December 31
|
|
|
2007
|
|
|
2006
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
-
|
|
$
|
1,443
|
|
Accounts receivable
|
|
23,580
|
|
|
70,095
|
|
Inventories
|
|
131,900
|
|
|
120,559
|
|
Sundry
|
|
1,512
|
|
|
6,278
|
|
Total Current Assets
|
|
156,992
|
|
|
198,375
|
|
|
|
|
|
|
|
|
Property and equipment net
|
|
241,657
|
|
|
255,721
|
|
Intangible assets
|
|
27,625
|
|
|
33,217
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
$
|
426,274
|
|
$
|
487,313
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
Bank indebtedness
|
$
|
7,410
|
|
$
|
-
|
|
Accounts payable
|
|
216,203
|
|
|
228,373
|
|
Accrued liabilities
|
|
252,274
|
|
|
182,024
|
|
Due to shareholders, directors,
officers and employees
|
|
289,382
|
|
|
76,167
|
|
Total Current Liabilities
|
|
765,269
|
|
|
486,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS EQUITY (DEFICIENCY)
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
Authorized 1,000,000,000
common stock, US dollar
|
|
|
|
|
|
|
$0.001 par value
|
|
|
|
|
|
|
Issued and outstanding
59,871,043 common stock
|
|
|
|
|
|
|
(2006 - 53,820,158)
|
|
72,087
|
|
|
65,947
|
|
Additional paid-in capital
|
|
2,778,567
|
|
|
2,331,588
|
|
Accumulated Deficit and Comprehensive Loss
|
|
(3,189,649
|
)
|
|
(2,396,786
|
)
|
Total Stockholders Equity (Deficiency)
|
|
(338,995
|
)
|
|
749
|
|
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
(DEFICIENCY)
|
$
|
426,274
|
|
$
|
487,313
|
|
GOING CONCERN
CONTINGENCIES AND COMMITMENTS
SUBSEQUENT EVENTS
The accompanying notes are an integral part of these consolidated
financial statements
LAMPERD LESS LETHAL INC.
|
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS
EQUITY (DEFICIENCY)
|
(Canadian Funds)
|
|
|
Number of
|
|
|
Par value
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Common
|
|
|
Common
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Stockholders
|
|
|
|
Shares
|
|
|
Shares
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
Balance December 31, 2005
|
|
50,750,000
|
|
$
|
62,696
|
|
$
|
1,937,738
|
|
$
|
(1,554,770
|
)
|
$
|
445,664
|
|
Issuance of common shares
|
|
3,070,158
|
|
|
3,251
|
|
|
393,850
|
|
|
-
|
|
|
397,101
|
|
Net loss for the year
|
|
|
|
|
|
|
|
|
|
|
(842,016
|
)
|
|
(842,016
|
)
|
Balance December 31, 2006
|
|
53,820,158
|
|
$
|
65,947
|
|
$
|
2,331,588
|
|
$
|
(2,396,786
|
)
|
$
|
749
|
|
Issuance of common shares
|
|
6,050,885
|
|
|
6,140
|
|
|
344,091
|
|
|
-
|
|
|
350,231
|
|
Net loss for the year
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(792,863
|
)
|
|
(792,863
|
)
|
Share-based compensation
costs
|
|
-
|
|
|
-
|
|
|
102,888
|
|
|
-
|
|
|
102,888
|
|
Balance December 31, 2007
|
|
59,871,043
|
|
$
|
72,087
|
|
$
|
2,778,567
|
|
$
|
(3,189,649
|
)
|
$
|
(338,995
|
)
|
The accompanying notes are an integral part of these consolidated
financial statements
LAMPERD LESS LETHAL INC.
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(Canadian Funds)
|
Years ended December 31
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
REVENUE
|
$
|
295,862
|
|
$
|
368,747
|
|
COST OF GOODS SOLD
|
|
212,333
|
|
|
315,350
|
|
GROSS MARGIN
|
|
83,529
|
|
|
53,397
|
|
EXPENSES
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
752,964
|
|
|
849,862
|
|
Research and development
|
|
29,142
|
|
|
4,369
|
|
Interest
loans and advances
|
|
29,222
|
|
|
-
|
|
Interest other
|
|
9,489
|
|
|
689
|
|
Depreciation
and amortization
|
|
55,575
|
|
|
40,493
|
|
TOTAL EXPENSES
|
|
876,392
|
|
|
895,413
|
|
NET LOSS
|
$
|
(792,863
|
)
|
$
|
(842,016
|
)
|
|
|
|
|
|
|
|
LOSS PER SHARE
|
$
|
(0.01
|
)
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON
|
|
|
|
|
|
|
SHARES OUTSTANDING
|
|
54,845,781
|
|
|
51,551,104
|
|
The accompanying notes are an integral part of these consolidated
financial statements
LAMPERD LESS LETHAL INC.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(Canadian Funds)
|
Years ended December 31
|
|
|
2007
|
|
|
2006
|
|
CASH FLOWS PROVIDED BY (USED IN):
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
Net loss
|
$
|
(792,863
|
)
|
$
|
(842,016
|
)
|
Depreciation and amortization
|
|
55,575
|
|
|
40,493
|
|
Stock-based compensation
|
|
102,888
|
|
|
-
|
|
Net changes in non-cash operating assets
and liabilities:
|
|
|
|
|
|
|
Accounts
receivable
|
|
46,515
|
|
|
(52,167
|
)
|
Inventories
|
|
(11,341
|
)
|
|
61,054
|
|
Sundry
|
|
4,766
|
|
|
105,021
|
|
Accounts payable and
accrued liabilities
|
|
333,128
|
|
|
258,465
|
|
Net cash used in operating
activities
|
|
(261,332
|
)
|
|
(429,150
|
)
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
Purchase
of equipment and leaseholds
|
|
(35,919
|
)
|
|
(19,248
|
)
|
Purchase of intangibles
|
|
-
|
|
|
(4,868
|
)
|
Net cash used in investing
activities
|
|
(35,919
|
)
|
|
(24,116
|
)
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
Borrowings
under bank indebtedness - net
|
|
7,410
|
|
|
-
|
|
Proceeds from promissory
notes and advances
|
|
227,000
|
|
|
76,167
|
|
Repayment
of promissory note
|
|
(25,000
|
)
|
|
-
|
|
Proceeds of share
issues
|
|
86,398
|
|
|
67,932
|
|
Net cash provided by financing
activities
|
|
295,808
|
|
|
144,099
|
|
DECREASE IN CASH AND CASH EQUIVALENTS
|
|
(1,443
|
)
|
|
(309,167
|
)
|
CASH AND CASH EQUIVALENTS, beginning of
year
|
|
1,443
|
|
|
310,610
|
|
CASH AND CASH EQUIVALENTS, end of year
|
$
|
-
|
|
$
|
1,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental financial information
|
|
|
|
|
|
|
Shares issued on settlement of
liabilities
|
$
|
263,763
|
|
$
|
329,169
|
|
Income taxes paid
|
$
|
-
|
|
$
|
-
|
|
Interest paid
|
$
|
12,588
|
|
$
|
1,603
|
|
The accompanying notes are an integral part of these consolidated
financial statements
LAMPERD LESS LETHAL INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
(Canadian Funds)
|
Years ended December
31, 2007 and 2006
|
1.
|
BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS AND GOING
CONCERN
|
|
|
|
History:
Lamperd Less Lethal Incorporated
(Lamperd or the Company) was incorporated under
the laws of the State of Nevada under the name "Sinewire Networks Inc."
on October 4, 2001. On March 21, 2005, the Company changed its name to
"Lamperd Less Lethal Inc." The name change was recorded by the Secretary
of State of the State of Nevada on March 21, 2005, and took effect with
the National Association of Securities Dealers Inc. (NASD)
Over-the-Counter Bulletin Board at the opening of trading on March 31,
2005 under the new stock symbol "LLLI".
|
|
|
|
On April 14, 2005 the Company entered into a reverse
acquisition with 1476246 Ontario Limited, a company incorporated pursuant
to the laws of Ontario, Canada.
|
|
|
|
Products:
The Company is a developer and
manufacturer of civil defense products that are designed as less lethal
alternatives to conventional weapons. The products include weapon systems
and munitions that are designed to incapacitate (as opposed to kill) opponents,
and at the same time, ensure the safety of the personnel using the products.
In addition, the Company also manufactures shields, service equipment,
training gear and accessories. The products are primarily designed for
the use by military and law enforcement organizations. The Company also
provides less lethal training to police, military and private sector security
personnel.
|
|
|
|
Going concern
:
The accompanying
consolidated financial statements have been prepared in accordance with
United States generally accepted accounting principles that are applicable
to a going concern, meaning that the Company will be able to realize its
assets and discharge its liabilities in the normal course of operations.
The Company has sustained operating losses sustained in 2007, 2006 and
2005, and has a working capital deficiency of $608,277 and an accumulated
deficit of $3,189,649 at December 31, 2007. The Companys ability
to realize its assets and discharge its liabilities depends on its continued
ability to raise additional debt or equity and to reach a profitable level
of operations, the outcomes of which cannot be determined at this time.
The use of United States generally accepted accounting principles that
are applicable to a going concern therefore may not be appropriate. These
consolidated financial statements do not reflect adjustments that would
be necessary if the going concern assumption were not appropriate.
|
|
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
|
|
These consolidated financial statements have been prepared
by management in accordance with the significant accounting policies in
accordance with United States general accepted accounting principles:
|
|
|
|
Consolidation
:
The accompanying
consolidated financial statements of the Company include the financial
position, results of operations and cash flows of the Company and its
wholly-owned subsidiary, 1476246 Ontario Limited. All inter-company transactions
have been eliminated.
|
|
|
|
Cash and cash equivalents
:
Cash
and cash equivalents include cash and all highly liquid investments purchased
with original maturities of three months or less at the date of purchase.
At December 31, 2007 and 2006, the Company had no cash equivalents.
|
|
|
|
Inventories
:
Inventories are valued
at the lower of cost and net realizable value with cost being determined
using the first-in, first-out method.
|
LAMPERD LESS LETHAL INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
(Canadian Funds)
|
Years ended December
31, 2007 and 2006
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES (continued)
|
|
|
|
Revenue recognition:
Revenue from product
sales is recognized in accordance with Securities and Exchange Commission
(SEC) Staff Accounting Bulletin No. 104 (SAB 104),
Revenue Recognition.
Under SAB 104, revenue is recognized when
persuasive evidence of an arrangement exists, delivery has occurred or
services have been rendered, the sales price is fixed or determinable
and collectibility is reasonably assured. Generally, these criteria are
met upon shipment to customers. Revenues are recorded net of discounts,
rebates and estimated returns. Customer payments received in advance of
product shipments are recorded as unearned revenue and are presented in
the accompanying consolidated financial statements as a component of accrued
liabilities. Shipping and handling costs incurred are included in the
cost of revenue.
|
|
|
|
The Company provides standard warranties for its product
for a period of one year from the date of shipment. Estimated warranty
obligations are recorded at the time of sale.
|
|
|
|
Allowance for doubtful accounts
: The allowance
for doubtful accounts is based on the Companys assessment of the
collectibility of customer accounts. The Company regularly reviews the
allowance by considering factors such as historical experience, credit
quality, the age of the accounts receivable balances and current economic
conditions that may affect a customers ability to pay. The allowance
for doubtful accounts was $1,760 at December 31, 2007 (2006 - $4,154).
|
|
|
|
Property and equipment
:
Property
and equipment are carried at cost less accumulated depreciation. Expenditures
for maintenance and repairs are charged to operations when incurred, while
additions and betterments are capitalized. The Company depreciates the
costs of these assets over their estimated useful lives. When assets are
retired or disposed, the assets original cost and related accumulated
depreciation are eliminated from accounts and any gain or loss is reflected
in income. Depreciation and amortization are generally provided for by
the straight-line method over the estimated useful lives of the assets
as follows:
|
|
Office, protective and demonstration, and computer
equipment
|
4 years
|
|
Manufacturing equipment
|
10 years
|
|
Leasehold improvements
|
over the term of the lease
|
Intangibles
:
The
Companys intangible assets comprise a license, trademarks and patents
which are accounted for at cost. The license is amortized straight-line over
17 years which is the life of the agreement, and the trademarks and patents
are amortized straight-line over 5 years. Should the Company determine that
there is permanent impairment in the value of the unamortized portion of an
intangible asset, an appropriate amount of the unamortized balance of the intangible
asset would be charged to income at that time.
Impairment of long-lived assets
and long-lived assets to be disposed of:
In accordance with Statement
of Financial Accounting Standard (SFAS) No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, the Company reviews its long-lived
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an
asset to future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized would
be measured by the amount by which the carrying amount of the assets exceeds
the fair value of the assets. Assets to be disposed of would be reported at
the lower of the carrying amount or fair value less costs to sell.
LAMPERD LESS LETHAL INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
(Canadian Funds)
|
Years ended December
31, 2007 and 2006
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES (continued)
|
|
|
|
Advertising expenses:
These costs are
charged to expense in the period in which they are incurred. Advertising
expenses for 2007 amounted to $4,383 (2006 - $8,568).
|
|
|
|
Use of estimates
:
The preparation
of financial statements in conformity with United States generally accepted
accounting principles 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. Financial statement items subject to significant management judgment
include revenue recognition; the valuation of accounts receivable and
inventories; the valuation of property and equipment and intangible assets;
the completeness of accounts payable and accrued liabilities; the valuation
of share compensation expense and warrants; and, deferred income taxes.
Actual results may differ from these estimates.
|
|
|
|
Income taxes:
The Company accounts for
income taxes in accordance with SFAS No. 109, Accounting for Income Taxes.
Under SFAS No. 109, deferred tax assets and liabilities are determined
based on temporary differences between the financial statement and tax
bases of assets and liabilities and net operating loss and credit carry
forwards, using enacted tax rates in effect for the year in which the
differences are expected to reverse. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to
be realized. A provision for income tax expense is recognized for income
taxes payable for the current period, plus the net changes in deferred
tax amounts when applicable.
|
|
|
|
Research and development:
Research and
development costs are expensed as incurred in accordance with SFAS No.
2, Accounting for Research and Development Costs. Materials and equipment
are capitalized and amortized over their estimated useful lives should
management determine that such expenditures meet the criteria under SFAS
No. 2 for the capitalization of development costs.
|
|
|
|
Any approved Canadian government tax credits are recorded
as a reduction of the related expense or cost of the asset acquired. The
benefits are recognized when the Company has complied with the terms and
conditions of the approved grant program or applicable tax legislation.
|
|
|
|
Accounting for stock-based compensation:
Beginning
in fiscal 2006, the Company adopted Statement of Financial Accounting
Standards No. 123 (Revised 2004), Share-based Payment (SFAS 123R),
which revises SFAS No. 123, Accounting for Stock-based Compensation, and
supersedes Accounting Principles Board Opinion No. 25 (APB 25),
Accounting for Stock Issued to Employees. SFAS 123R requires all share-based
payments, including grants of employee stock options, be measured at fair
value and expensed in the statement of operations over the service period.
Prior to fiscal 2006, the Company accounted for its stock-based compensation
plans using the intrinsic value method initially prescribed by APB 25.
In applying APB 25, no expense was recognized upon grant of stock options
under the Companys stock option plan.
|
|
|
|
Financial instruments
:
The Companys
financial instruments comprise cash and cash equivalents, accounts receivable,
accounts payable and accrued liabilities, promissory notes and due to
shareholders. The fair value of the Companys financial instruments
approximates their carrying value due to the short maturity of these instruments.
|
LAMPERD LESS LETHAL INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
(Canadian Funds)
|
Years ended December
31, 2007 and 2006
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES (continued)
|
|
|
|
|
Earnings (loss) per common share:
The
Company computes net income (loss) per share in accordance with SFAS No.
128, Earnings per Share. The standard requires presentation of both basic
and diluted earnings per share (EPS) on the face of the statement
of operations. Basic EPS is computed by dividing net income (loss) available
to common shareholders by the weighted average number of shares outstanding
during the reporting period. Diluted EPS gives effect to all dilutive
potential common shares outstanding during the reporting period using
the treasury stock method and convertible preferred stock using the if-
converted method. In computing diluted EPS, the average stock price for
the period is used in determining the number of shares assumed to be purchased
from the exercise of convertible debt, stock options or warrants. Diluted
EPS excludes all dilutive potential shares if their effect is anti-dilutive.
All potentially dilutive securities have been excluded from the computation
of loss per share in the accompanying consolidated financial statements
at December 31, 2007 and 2006 as the effect would have been antidilutive.
|
|
|
|
|
Foreign currency translation:
The
accompanying consolidated financial statements are expressed in Canadian
dollars, which is the Companys functional currency. All transactions
in foreign currencies have been converted to Canadian dollars as at the
date of the transaction. Gains and losses arising upon settlement of foreign
currency denominated transactions or balances are included in the determination
of net and other comprehensive income. Transactions in foreign currency
are translated into Canadian dollars in accordance with the SFAS No. 52,
Foreign Currency Translation, as follows:
|
|
|
|
|
i.
|
monetary items at the rate prevailing at the balance
sheet date;
|
|
ii.
|
non-monetary items at the historical exchange rate;
|
|
iii.
|
revenue and expenses at the average rate in effect during
the applicable reporting period.
|
|
|
|
|
Comprehensive income (loss)
:
The Company has adopted SFAS No. 130, Reporting Comprehensive Income
(FAS No. 130), which establishes standards for reporting and
the display of comprehensive income, its components and accumulated balances.
Comprehensive income (loss) is defined to include all changes in equity
except those resulting from investments by owners or distributions to
owners. Among other disclosures, FAS No. 130 requires that all items that
are required to be recognized under the current accounting standards as
a component of comprehensive income be reported in a financial statement
that is displayed with the same prominence as other financial statements.
Comprehensive income (loss) is displayed in the accompanying consolidated
statements of stockholders' deficiency and balance sheet as a component
of shareholders' deficiency. At December 31, 2007 and 2006, there had
been no transactions affecting other comprehensive income (loss).
|
|
|
|
Comparative figures:
Certain
comparative figures have been restated to conform to the basis of presentation
adopted for the current year.
|
|
|
|
|
Recent accounting pronouncements
:
|
|
|
|
|
In June 2006, the Financial Accounting Standards
Board (FASB) issued FASB Interpretation No. 48, "Accounting for Uncertainty
in Income Taxes - an interpretation of FASB Statement No. 109" (FIN 48),
which clarifies the accounting for uncertainty in tax positions. This
Interpretation requires issuers to recognize the benefit of a tax position
if that position is more likely than not of being sustained on a tax audit,
based on the technical merits of the position. The provisions of FIN 48
become effective as of the beginning of the Companys 2008 fiscal
year, with the cumulative effect of the change in accounting principle
recorded as an adjustment to opening retained earnings. Management does
not expect the adoption of this statement to have a material effect on
the Company's future reported financial position or results of operations.
|
LAMPERD LESS LETHAL INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
(Canadian Funds)
|
Years ended December
31, 2007 and 2006
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES (continued)
|
|
|
|
Recent accounting pronouncements (continued)
:
|
|
|
|
In September 2006, the FASB issued Statement No. 157,
Fair Value Measurements (FAS 157). The objective of FAS 157
is to increase consistency and comparability in fair value measurements
and to expand disclosures about fair value measurements. FAS 157 defines
fair value, establishes a framework for measuring fair value in generally
accepted accounting principles, and expands disclosures about fair value
measurements. FAS 157 applies under other accounting pronouncements that
require or permit fair value measurements and does not require any new
fair value measurements. The provisions of FAS 157 are effective for fair
value measurements made in fiscal years beginning after November 15, 2007.
In November 2007, the FASB announced an option to defer implementation
of some of the requirements of this standard for certain non-financial
assets and liabilities. Management does not expect the adoption of this
statement to have a material effect on the Company's future reported financial
position or results of operations.
|
|
|
|
In September 2006, the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 108 (Topic 1N), Considering the Effects
of Prior Year Misstatements when Quantifying Misstatements in Current
Year Financial Statements (SAB 108), which addresses how the
effect of prior year uncorrected misstatements should be considered when
quantifying misstatements in current year financial statements. The provisions
of SAB 108 become effective as of the end of the 2007 fiscal year. SAB
108 requires SEC registrants (i) to quantify misstatements using a combined
approach which considers both the balance sheet and income statement approaches;
(ii) to evaluate whether either approach results in quantifying an error
that is material in light of relevant quantitative and qualitative factors;
and (iii) to adjust their financial statements if the new combined approach
results in a conclusion that an error is material. SAB No. 108 addresses
the mechanics of correcting misstatements that include effects from prior
years. It indicates that the current year correction of a material error
that includes prior year effects may result in the need to correct prior
year financial statements even if the misstatement in the prior year or
years is considered immaterial. Any prior year financial statements found
to be materially misstated in years subsequent to the issuance of SAB
108 would be restated in accordance with FAS No. 154, Accounting Changes
and Error Corrections. SAB 108 is effective for fiscal years ending after
November 15, 2006. The adoption of SAB 108 did not have a material effect
on the Company's reported financial position or results of operations.
|
|
|
|
In February 2007, the FASB issued Statement No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities -
Including an Amendment of FASB Statement No. 115 (FAS 159).
This statement permits entities to choose to measure many financial instruments
and certain other items at fair value. Most of the provisions of FAS 159
apply only to entities that elect the fair value option. However, the
amendment to FAS 115, Accounting for Certain Investments in Debt and Equity
Securities, applies to all entities with available-for-sale and trading
securities. FAS 159 is effective as of the beginning of an entity's first
fiscal year that begins after November 15, 2007. Early adoption is permitted
as of the beginning of a fiscal year that begins on or before November
15, 2007, provided the entity also elects to apply the provisions of FAS
157, Fair Value Measurements. Management does not expect the adoption
of this statement to have a material effect on the Company's future reported
financial position or results of operations.
|
LAMPERD LESS LETHAL INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
(Canadian Funds)
|
Years ended December
31, 2007 and 2006
|
2.
|
SIGNIFICANT ACCOUNTING POLICIES (continued)
|
|
|
|
Recent accounting pronouncements (continued)
:
|
|
|
|
In December 2007, the FASB issued Statement No. 141(R),
Business Combinations (FAS 141R), replacing FAS 141, Business
Combinations (FAS 141). This statement retains the fundamental
requirements in FAS 141 that the acquisition method of accounting (which
FAS 141 termed the
purchase method
) be used for all business combinations
and for an acquirer to be identified for each business combination. This
Statement also establishes principles and requirements for how the acquirer:
a) recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any noncontrolling interest
in the acquiree; b) recognizes and measures the goodwill acquired in the
business combination or a gain from a bargain purchase; and c) determines
what information to disclose to enable users of the financial statements
to evaluate the nature and financial effects of the business combination.
This Statement clarifies that acquirers are required to expense costs
related to any acquisitions. FAS 141R will apply prospectively to business
combinations for which the acquisition date is on or after fiscal years
beginning December 15, 2008. Early adoption is prohibited. The Company
has not yet evaluated the impact, if any, that FAS 141R will have on its
financial statements. Determination of the ultimate effect of this statement
will depend on the Companys structure at the date of adoption.
|
|
|
|
In December 2007, the FASB issued SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements An Amendment of
ARB No. 51 (FAS 160). FAS 160 establishes new accounting and
reporting standards for the noncontrolling interest in a subsidiary and
for the deconsolidation of a subsidiary. Specifically, this statement
requires the recognition of a noncontrolling interest (minority interest)
as equity in the consolidated financial statements and separate from the
parents equity. The amount of net income attributable to the noncontrolling
interest will be included in consolidated net income on the face of the
income statement. FAS 160 clarifies that changes in a parents ownership
interest in a subsidiary that do not result in deconsolidation are equity
transactions if the parent retains its controlling financial interest.
In addition, this statement requires that a parent recognize a gain or
loss in net income when a subsidiary is deconsolidated. Such gain or loss
will be measured using the fair value of the noncontrolling equity investment
on the deconsolidation date. FAS 160 also includes expanded disclosure
requirements regarding the interests of the parent and its noncontrolling
interest. FAS 160 is effective for fiscal years beginning on or after
December 15, 2008, with retrospective presentation and disclosure for
all periods presented. Early adoption is prohibited. The Company currently
has no entities or arrangements that will be affected by the adoption
of FAS 160. However, determination of the ultimate effect of this pronouncement
will depend on the Companys structure at the date of adoption.
|
|
|
2007
|
|
|
2006
|
|
Raw materials
|
$
|
82,849
|
|
$
|
40,519
|
|
Work in process
|
|
27,519
|
|
|
53,466
|
|
Finished goods
|
|
21,532
|
|
|
26,574
|
|
|
$
|
131,900
|
|
$
|
120,559
|
|
LAMPERD LESS LETHAL INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
(Canadian Funds)
|
Years ended December
31, 2007 and 2006
|
4.
|
PROPERTY AND EQUIPMENT
|
|
|
2007
|
|
|
2006
|
|
Office equipment
|
$
|
23,547
|
|
$
|
23,547
|
|
Manufacturing equipment
|
|
218,508
|
|
|
216,509
|
|
Protective and demonstration equipment
|
|
78,046
|
|
|
43,362
|
|
Computer equipment
|
|
9,565
|
|
|
9,565
|
|
Leasehold improvements
|
|
24,577
|
|
|
24,577
|
|
|
|
354,243
|
|
|
317,560
|
|
Accumulated depreciation
|
|
112,586
|
|
|
61,839
|
|
|
$
|
241,657
|
|
$
|
255,721
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Cost
|
|
|
Amortization
|
|
|
Net
|
|
|
Cost
|
|
|
Amortization
|
|
|
Net
|
|
License
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
agreement
|
$
|
22,122
|
|
$
|
3,904
|
|
$
|
18,218
|
|
$
|
22,122
|
|
$
|
2,603
|
|
$
|
19,519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademarks
|
|
822
|
|
|
307
|
|
|
515
|
|
|
822
|
|
|
224
|
|
|
598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents
|
|
16,607
|
|
|
7,715
|
|
|
8,892
|
|
|
17,373
|
|
|
4,273
|
|
|
13,100
|
|
|
$
|
39,551
|
|
$
|
11,926
|
|
$
|
27,625
|
|
$
|
40,317
|
|
$
|
7,100
|
|
$
|
33,217
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Customer payments received in advance
|
$
|
23,123
|
|
$
|
2,147
|
|
|
Legal and accounting
|
|
176,245
|
|
|
170,677
|
|
|
Payroll
|
|
-
|
|
|
5,600
|
|
|
Interest
|
|
27,009
|
|
|
-
|
|
|
Royalties
|
|
5,000
|
|
|
-
|
|
|
Other
|
|
20,897
|
|
|
3,600
|
|
|
|
$
|
252,274
|
|
$
|
182,024
|
|
LAMPERD LESS LETHAL INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
(Canadian Funds)
|
Years ended December
31, 2007 and 2006
|
7.
|
CONTINGENCIES AND COMMITMENTS
|
|
|
|
|
(a)
Litigation:
An
action has been commenced against the Company for costs relating to professional
services of approximately $130,000. Included as a component of accrued
liabilities in the accompanying consolidated financial statements is an
amount of $113,937 at December 30, 2007 (2006 - $114,677). Management
feels that the balance of the claim action is without merit. Subsequent
to December 31, 2007, the Company paid $20,000 to the claimant.
|
|
|
|
(b)
Employment Contract:
The Company has an employment contract with an executive, expiring
December 31, 2009, which stipulates that in the event of termination other
than for just cause, the Company would be obligated to pay to the executive
the aggregate of any unpaid salary and an amount equal to the lesser of:
(1) three times the annual salary of the executive, and (2) an amount
equal to the annual salary multiplied by the number of days between the
date of termination and the executives normal retirement date divided
by 365.
|
|
|
|
(c)
License Agreement:
The Company entered into a license agreement with the University
of Western Ontario (UWO), effective April 1, 2005, granting
the Company the exclusive rights to make, use, lease, sell, etc. a UWO
invention, known as the Less Lethal Ammunitions Projectile (the Projectile),
as well as any associated trade secrets, for which the Company incurred
an initial licence fee of $5,000 which has been accrued for and is included
as a component of accrued liabilities in the accompanying consolidated
financial statements. Lamperd has agreed to pay all approved out-of-pocket
expenses incurred by UWO, assume responsibility for future patent prosecution
and rights and pay UWO a quarterly royalty commencing April 1, 2006 of
three percent of revenue directly attributable to the Projectile. The
royalty is subject to minimum royalty obligations as detailed below.
|
Year
|
|
Minimum Annual License Fee per Year
|
|
|
|
|
|
2008 - 2010
|
$
|
10,000
|
|
2011 and thereafter
|
$
|
20,000
|
|
Included as a component of accrued liabilities
in the accompanying consolidated financial statements is an amount of $5,000
at December 30, 2007 (2006 - $Nil).
(d)
Operating Leases:
The
Company is committed to minimum payments under an operating lease for the land
and building that it occupies. The lease expired December 31, 2007 and required
annual minimum lease payments of $76,800, exclusive of occupancy charges. The
lessor was 1109630 Ontario Ltd., a company owned by a director and vice-president
of the Company. On January 1, 2008 the Company renewed its lease with 1109630
Ontario Ltd. for an additional three years, expiring, Dec 31, 2010, under the
same terms and conditions. The Company leases additional space from the same
company on a month-to-month basis for a monthly rental of $1,000.
In addition, the Company is committed
to minimum payments for a vehicle lease, ending February 2009, requiring annual
lease payments of $6,696.
LAMPERD LESS LETHAL INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
(Canadian Funds)
|
Years ended December
31, 2007 and 2006
|
7.
|
CONTINGENCIES AND COMMITMENTS (continued)
|
|
|
|
|
(e)
Industry Risk:
Products manufactured by Lamperd are typically used in applications
and situations that involve a high level of risk of personal injury. Failure
to use the Companys products for their intended purposes could result
in serious bodily harm or death. As a result, less-lethal products may
be subject to product liability claims arising from their design, manufacture
or sale. If any such claims are decided against the Company, substantial
payments for damages and increases in the cost insurance coverage may
result. Any substantial uninsured loss could have a materially adverse
effect on the Companys business, financial condition, and results
of operations. Management is not aware of any lawsuits ongoing or threatened
in regards to products manufactured and sold by the Company other than
those disclosed in the notes to the accompanying consolidated financial
statements.
|
|
|
|
The Company cancelled its product liability
insurance coverage during 2006. This coverage has not been reinstated.
The Company cannot provide assurances that resources will be available
in the foreseeable future to reinstate product liability insurance coverage
or, failing that, that adequate resources will be available to cover any
potential product liability litigation or claims should any arise.
|
|
|
|
(f)
Concentrations
of Risk and Economic Dependence
: The Company performs ongoing
credit evaluations of its customers and, with the exception of certain
financing transactions, does not require collateral from its customers.
The Companys customers are primarily in the enterprise, service
provider and commercial markets. The Company receives certain of its components
from sole suppliers. Additionally, the Company relies on a limited number
of contract manufacturers and suppliers to provide manufacturing services
for its products. The inability of a contract manufacturer or supplier
to fulfill supply requirements of the Company could materially impact
future operating results.
|
|
|
|
|
During 2007, three customers represented 85%
of the Companys gross revenues (2006 three; 81%).
|
|
|
|
8.
|
FINANCIAL INSTRUMENTS
|
|
|
|
|
Credit risk:
The Company is engaged
in the sale of less lethal products, other protective gear,
and accessories typically to a small number of major customers, although
the composition of this group of customers changes from year to year.
Concentration of credit risk may arise from exposures to a single debtor
or to a group of debtors having similar characteristics such that their
ability to meet their current obligations is expected to be affected similarly
by changes in economic or other conditions. The Company performs ongoing
credit evaluation of its customers' financial condition and, generally,
requires no collateral. At December 31, 2007, 34% (2006 - 66%) of total
accounts receivable was due from one customer.
|
|
|
|
|
Currency risk:
The Company is subject
to currency risk through its activities in the United States. Unfavorable
changes in the exchange rate may affect the operating results of the Company.
At December 31, 2007 the Company had United States dollar accounts receivable
of $6,462 (2006 - $20,777) and $20,707 of United States dollar accounts
payable and accrued liabilities (2006 - $68,672). The Company does not
actively use derivative instruments to reduce its exposure to foreign
currency risk. However, depending upon the nature, amount and timing of
foreign currency receipts and payments, the Company may enter into forward
exchange contracts to mitigate the associated risks. There were no forward
exchange contracts outstanding at December 31, 2007 or 2006.
|
LAMPERD LESS LETHAL INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
(Canadian Funds)
|
Years ended December
31, 2007 and 2006
|
8.
|
FINANCIAL INSTRUMENTS (continued)
|
|
|
|
|
Market risk:
The Company is exposed
to certain market risk that the value of a financial instrument will fluctuate
due to changes in market prices whether those changes are caused by factors
specific to an individual security or its issuer or factors affecting
all securities traded in the market.
|
|
|
|
|
Interest rate risk:
The Company is
exposed to interest rate risk arising from fluctuations in interest rates
on its short-term investments. The Companys notes receivable and
bridge loans bear interest at fixed rates. Management is of the opinion
that the Company is not exposed to significant interest rate risks in
respect of these instruments due to their short maturities.
|
|
|
|
9.
|
RELATED PARTY TRANSACTIONS
|
|
|
|
|
(i)
|
A company controlled by a director and vice president
of the Company is a subcontractor of parts for certain of the Companys
products. The Company purchased from this corporation $2,807 in 2007 and
$6,431 in 2006 for the manufacturing of various components and purchases
for the Company. At December 31, 2007, $6,327 was outstanding to this
company (2006 - $7,177) and is included as a component of accounts payable
in the accompanying consolidated financial statements.
|
|
|
|
|
(ii)
|
As discussed in note 7(d) to the accompanying consolidated
financial statements, the Company rents its premises from a corporation
controlled by a director and vice president of the Company. Total rent
purchased from this corporation in 2007 was $88,800 (2006 - $88,800).
There is no balance owing to this related party at December 31, 2007 or
2006. The balance otherwise payable for 2007 was satisfied by the issuance
of stock in the Company.
|
|
|
|
|
(iii)
|
The Company purchased consulting services from certain
of its directors and officers during 2007 in the amount of $Nil (2006
- $12,000).
|
|
|
|
|
(iv)
|
During 2007 the Company received legal services from
a shareholder in the amount of $18,500, (2006 - $9,000) of which $9,500
is outstanding and is included as a component of due to shareholders,
officers and employees in the accompanying consolidated financial statements.
The corresponding expenses for 2006 were satisfied by the issuance of
stock in the Company.
|
LAMPERD LESS LETHAL INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
(Canadian Funds)
|
Years ended December
31, 2007 and 2006
|
10.
|
DUE TO SHAREHOLDERS, OFFICERS DIRECTORS AND EMPLOYEES
|
|
|
|
|
|
2007
|
|
|
2006
|
|
(i)
|
|
Promissory notes due to shareholders,
unsecured, bearing interest at 15% per
annum, due December 2007. The notes contain a penalty provision on failure
to pay at the maturity date of 2% on the unpaid balance. The penalty and
interest
have been accrued for and are included as a component of accrued liabilities
in
the accompanying consolidated financial statements.
|
|
|
$ 50,000
|
|
|
$ 50,000
|
|
(ii)
|
|
Promissory notes due to a shareholder, unsecured,
bearing interest at 15% per
annum, and are repayable April 2008. The note contains a penalty provision
on
failure to pay at the maturity date of 2% on the unpaid balance. The interest
has
been accrued for and is included as a component of accrued liabilities in
the
accompanying consolidated financial statements.
|
|
|
30,000
|
|
|
-
|
|
(iii)
|
|
Demand promissory note with a
principal of $50,000 due to a shareholder,
bearing interest at 8% per annum and secured by a General Security Agreement
over all assets of the Company. This note bore a lenders fee of $6,000,
which
was expensed during 2007, resulting in net proceeds to the Company of
$44,000. The interest rate increases to 12% on January 1, 2008, plus an
additional $2,000 lenders fee, on any unpaid balance. The Company
repaid
$25,000 of the loan during 2007.
|
|
|
25,000
|
|
|
-
|
|
(iv)
|
|
Promissory notes due to a shareholder, unsecured,
bearing interest at 15% per
annum, repayable as to principal and interest on April 11, 2008. The interest
has been accrued for and is included as a component of accrued liabilities
in the
accompanying consolidated financial statements.
|
|
|
20,000
|
|
|
-
|
|
(v)
|
|
Demand promissory note with a
principal of $80,000 due to a director, bearing
interest at 10% per annum. Principal payments are due in monthly installments
commencing June 30, 2007 of not less than $750. This note bore a lenders
fee
of $5,000, which was expensed during 2007, resulting in net proceeds to
the
Company of $75,000. No principal payments were made on the loan to
December 31, 2007. Unpaid interest of $1,506 has been accrued for and is
included as a component of accrued liabilities in the accompanying consolidated
financial statements.
|
|
|
80,000
|
|
|
-
|
|
(vi)
|
|
Promissory note to shareholder, bearing interest
at 12% per annum and due
April 12, 2009.
|
|
|
2,000
|
|
|
-
|
|
(vii)
|
|
At December 31, 2007, the Company
owes certain employees, a director and a
shareholder a total of $15,456 for non-interest bearing loans, unpaid expenses
and services and $9,500 for unpaid consulting fees. These amounts are
repayable on demand.
|
|
|
24,956
|
|
|
8,309
|
|
(viii)
|
|
Amount owing to the Companys president in
respect of unpaid wages and
miscellaneous expenses.
|
|
|
57,426
|
|
|
17,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
289,382
|
|
|
76,167
|
|
LAMPERD LESS LETHAL INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
(Canadian Funds)
|
Years ended December
31, 2007 and 2006
|
11.
|
STOCK INCENTIVE PLAN
|
|
|
|
Effective October 1, 2006, the Company adopted the 2006
Stock Option Plan (SOP), amending the Companys 2005
SOP under with no stock-based compensation had ever been awarded. The
2006 SOP is designed to reward directors, employees and consultants for
their long-term contributions to the Company and provide incentives for
them to remain with the Company. The number and frequency of stock-based
awards are determined by the Companys board of directors based on
competitive practices, operating results of the Company, and government
regulations.
|
|
|
|
The maximum number of common shares issuable over the
term of the 2006 SOP is limited to 2 million shares. The SOP permits the
granting of stock options to directors, employees and consultants of the
Company and its subsidiaries and affiliates. Options granted under the
SOP have an exercise price of at least 100% of the fair market value of
the underlying stock on the grant date and expire no later than ten years
from the grant date. The stock options under the SOP generally become
exercisable for 25% of the option shares one year from the date of grant
and then rateably over the following 36 months. However, the administrator
of the SOP has the authority to modify these terms.
|
|
|
|
The following SOP table summarizes the changes in options
outstanding and the related prices for the shares of the Companys
common stock issued as of December 31, 2007:
|
|
|
Number of
|
|
|
Weighted Average
|
|
|
|
Options
|
|
|
Exercise
Price US dollars
|
|
January 1, 2006
|
|
-
|
|
|
-
|
|
Granted December 2006
|
|
200,000
|
|
$
|
0.10
|
|
January 1, 2007
|
|
200,000
|
|
|
0.10
|
|
Granted June 2007
|
|
650,000
|
|
|
0.08
|
|
July 2007
|
|
250,000
|
|
|
0.10
|
|
December 2007
|
|
500,000
|
|
|
0.04
|
|
December 31, 2007
|
|
1,600,000
|
|
$
|
0.07
|
|
Options Outstanding and Exercisable at
December 31, 2007:
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
|
|
Range of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
|
|
|
Exercise
|
|
|
|
Prices US
|
|
|
|
|
|
Remaining
|
|
|
Price US
|
|
|
|
|
|
Price -
|
|
|
|
dollars
|
|
|
Shares
|
|
|
Life (years)
|
|
|
dollars
|
|
|
Shares
|
|
|
US dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.04
|
|
|
500,000
|
|
|
5.0
|
|
$
|
0.04
|
|
|
250,000
|
|
$
|
0.04
|
|
|
|
0.10
|
|
|
250,000
|
|
|
4.8
|
|
|
0.10
|
|
|
187,500
|
|
|
0.10
|
|
|
|
0.08
|
|
|
650,000
|
|
|
4.9
|
|
|
0.08
|
|
|
650,000
|
|
|
0.08
|
|
|
|
0.10
|
|
|
200,000
|
|
|
7.0
|
|
|
0.10
|
|
|
133,334
|
|
|
0.10
|
|
|
|
|
|
|
1,600,000
|
|
|
|
|
$
|
0.07
|
|
|
1,220,834
|
|
|
0.08
|
|
During 2007, the Company recognized $102,888
as stock-based compensation expense, with a corresponding increase in additional
paid-in capital. Management is of the opinion that stock-based compensation
expense for the year ended December 31, 2006 was not material.
LAMPERD LESS LETHAL INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
(Canadian Funds)
|
Years ended December
31, 2007 and 2006
|
11.
|
STOCK INCENTIVE PLAN (continued)
|
|
|
|
The fair value of the options has been estimated using
the Black-Scholes pricing option model. The assumptions used for the valuation
of the options were: dividend yield 0%; expected volatility
144%; risk-free interest rate 4.1%; and an expected life of 5 -7 years
(2006 0%; 25%; 4.25%; 10 years, respectively). Total stock-based
compensation costs for 2007 amounted to $102,888. Management is of the
opinion that the 2006 fiscal year stock-based compensation costs were
not material.
|
|
|
12.
|
CAPITAL STOCK
|
|
|
|
Transactions during the year in the Companys capital
stock are as follows:
|
|
|
Number of shares
|
|
|
Par value
|
|
|
Additional paid-in
|
|
Date
|
|
issued
|
|
|
common shares
|
|
|
capital
|
|
Balance January 1, 2006
|
|
50,750,000
|
|
$
|
62,696
|
|
$
|
1,937,738
|
|
March 2, 2006 (i)
|
|
500,000
|
|
|
584
|
|
|
203,212
|
|
September 14, 2006 (ii)
|
|
1,000,000
|
|
|
1,100
|
|
|
66,832
|
|
December 12, 2006 (iii)
|
|
1,570,158
|
|
|
1,567
|
|
|
123,806
|
|
Balance January 1, 2007
|
|
53,820,158
|
|
$
|
65,947
|
|
$
|
2,331,588
|
|
March 31, 2007 (iv)
|
|
422,982
|
|
|
488
|
|
|
53,233
|
|
May 1, 2007 (v)
|
|
750,000
|
|
|
750
|
|
|
85,718
|
|
June 30, 2007 (vi)
|
|
374,900
|
|
|
399
|
|
|
29,523
|
|
December 31, 2007 (vii)
|
|
3,077,528
|
|
|
3,078
|
|
|
120,023
|
|
December 31, 2007 (viii)
|
|
250,000
|
|
|
250
|
|
|
9,750
|
|
December 31, 2007 (ix)
|
|
250,000
|
|
|
250
|
|
|
9,750
|
|
December 31, 2007 (x)
|
|
925,475
|
|
|
925
|
|
|
36,094
|
|
2007 stock-based compensation
|
|
0
|
|
|
0
|
|
|
102,888
|
|
Balance December 31, 2007
|
|
59,871,043
|
|
$
|
72,087
|
|
$
|
2,778,567
|
|
|
(i)
|
Shares issues for services received during 2005, based
on the stock price at close of business on March 2, 2006.
|
|
|
|
|
(ii)
|
Shares issued in a private placement offering at $0.06
per share.
|
LAMPERD LESS LETHAL INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
(Canadian Funds)
|
Years ended December
31, 2007 and 2006
|
12.
|
CAPITAL STOCK (continued)
|
|
(iii)
|
Shares issued to related parties (two suppliers
to the Company and the Companys president) in lieu of $125,373 due
to these parties at an issue price of $0.08 per share.
|
|
|
|
|
(iv)
|
Shares issued to a corporation owned by a director
of the Company in lieu of repayment of loans outstanding at March 31, 2007.
|
|
|
|
|
(v)
|
Issued in a private placement offering at US $0.10
a unit which included a common stock purchase warrant entitling the holder
to acquire up to 1,000,000 common shares in the company at US $0.08 per
share, expiring April 30, 2010.
|
|
|
|
|
(vi)
|
Shares issued to a corporation owned by a director
of the Company in lieu of repayment of loans outstanding at June 30, 2007.
|
|
|
|
|
(vii)
|
Shares issued to a corporation owned by a director
of the Company in lieu of payment for services rendered to the Company during
2007.
|
|
|
|
|
(viii)
|
Shares issued to an employee of the Company as
an incentive bonus.
|
|
|
|
|
(ix)
|
Shares issued to a consultant in lieu of payment
for services rendered to the Company during 2007.
|
|
|
|
|
(x)
|
Shares issued to the president of the Company
in lieu of payment for services rendered during 2007.
|
13.
|
WARRANTS
|
|
|
|
At January 1 2006, the Company had issued and outstanding
3,000,000 common stock purchase warrants for the purchase of stock in
the Company at US $1.25 - $1.40. These warrants expired in 2007.
|
|
|
|
As part of the unit issuance described in note 12 (v),
the Company issued 1,000,000 common stock purchase warrants for the purchase
of stock in the Company at US $0.08. These warrants expire in May of 2010.
|
|
|
14.
|
DEFERRED INCOME TAXES
|
|
|
|
The parent company, Lamperd Less Lethal Inc., is a US
corporation and is responsible for the filing of United States Federal
income tax returns. There have been no taxable transactions in this company
in 2007 or in 2006. Separate income tax returns are filed for the Canadian
subsidiary, 1476246 Ontario Limited, which contains all of the reported
operations for the consolidated entity. There was no taxable income and,
consequently no provision for income taxes, for the years ended December
31, 2007 and 2006.
|
LAMPERD LESS LETHAL INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
(Canadian Funds)
|
Years ended December
31, 2007 and 2006
|
14.
|
DEFERRED INCOME TAXES (continued)
|
|
|
|
The total provision for income taxes may differ from
that amount which would be computed by applying the income tax rate to
income (loss) before provision for income taxes. The reasons for these
differences are as follows:
|
|
|
2007
|
|
|
2006
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
Income tax computed at
|
|
|
|
|
|
|
|
|
|
|
|
|
statutory income tax rate
|
|
|
|
|
|
|
|
|
|
|
|
|
(recovery)
|
$
|
(278,000
|
)
|
|
(35
|
)
|
$
|
(303,000
|
)
|
|
(36
|
)
|
Non-deductible and temporary
|
|
|
|
|
|
|
|
|
|
|
|
|
differences
|
|
56,000
|
|
|
7
|
|
|
15,000
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation adjustment
|
|
222,000
|
|
|
28
|
|
|
288,000
|
|
|
34
|
|
Net taxes (recovery) and
|
|
|
|
|
|
|
|
|
|
|
|
|
effective rate
|
$
|
0
|
|
|
0
|
|
$
|
0
|
|
|
0
|
|
Temporary differences and carry-forwards,
which gives rise to deferred tax assets and liabilities are as follows:
|
|
2007
|
|
|
2006
|
|
|
|
Amount
|
|
|
Tax Effect (33%)
|
|
|
Amount
|
|
|
Tax Effect
(36%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cumulative
|
|
|
|
|
|
|
|
|
|
|
|
|
operating losses
|
|
|
|
|
|
|
|
|
|
|
|
|
for Canadian
|
|
|
|
|
|
|
|
|
|
|
|
|
subsidiary
|
$
|
2,760,000
|
|
$
|
911,000
|
|
$
|
1,967,000
|
|
$
|
708,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporary
|
|
|
|
|
|
|
|
|
|
|
|
|
differences
|
|
(202,000
|
)
|
|
(67,000
|
)
|
|
(42,000
|
)
|
|
(15,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share issue costs
|
|
204,000
|
|
|
67,000
|
|
|
204,000
|
|
|
73,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less valuation
|
|
|
|
|
|
|
|
|
|
|
|
|
allowance
|
|
(2,762,000
|
)
|
|
(911,000
|
)
|
|
(2,129,000
|
)
|
|
(766,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax
|
|
|
|
|
|
|
|
|
|
|
|
|
asset
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cumulative
|
|
|
|
|
|
|
|
|
|
|
|
|
operating losses
|
|
|
|
|
|
|
|
|
|
|
|
|
US parent
|
$
|
104,000
|
|
$
|
37,000
|
|
$
|
104,000
|
|
$
|
37,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less valuation
|
|
|
|
|
|
|
|
|
|
|
|
|
allowance
|
|
(104,000
|
)
|
|
(37,000
|
)
|
|
(104,000
|
)
|
|
(37,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax
|
|
|
|
|
|
|
|
|
|
|
|
|
asset
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
$
|
0
|
|
LAMPERD LESS LETHAL INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
(Canadian Funds)
|
Years ended December
31, 2007 and 2006
|
14.
|
DEFERRED INCOME TAXES (continued)
|
|
|
|
In assessing the realizability of future tax assets,
management considers whether it is more likely than not that some portion
or all of the future tax assets will not be realized. The ultimate realization
of future tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of future tax
liabilities, projected future taxable income and tax planning strategies
in making this assessment. Management has provided for a valuation allowance
on all of its losses as there is no assurance that future tax benefits
will be realized.
|
|
|
|
At December 31, 2007 the Company had cumulative net
operating loss carry-forwards of approximately $2,762,000 (2006 - $2,129,000)
with respect to its Canadian subsidiary and $104,000 (2006 - $104,000)
in the United States for the parent.
|
|
|
|
With respect to the Canadian amount, $634,000 will expire
in 2027, $800,000 will expire in 2026 and $1,328,000 in 2015.
|
|
|
|
The U.S. net operating loss expires in 2021 through
2024. The provisions of Internal Revenue Code Section 382 will apply to
the use of the US net operating losses originated before 2005.
|
|
|
15.
|
SUBSEQUENT EVENTS
|
|
|
|
(i) On March 19, 2008 a shareholder advanced $20,000
to the Company under a promissory note bearing interest at 15% per annum,
with principal due in March 2009. The notes are secured by certain purchase
orders that the Company has received from its customers.
|
|
|
|
(ii) On April 9, 2008 a shareholder advanced $40,000
to the Company under a promissory note bearing interest at 12% per annum,
with principal due in April 2009. The notes are secured by certain purchase
orders that the Company has received from its customers.
|
|
|
|
(iii) In January and March 2008, shareholders advanced
approximately $10,000 to the Company. These advances are non-interest
bearing, unsecured, and repayable on demand.
|
- 25 -
LAMPERD LESS LETHAL INC.
Item 8.
|
Changes In and Disagreements With
Accountants on Accounting and Financial
Disclosure.
|
On April 3, 2008, we engaged Danziger Hochman Partners LLP
Licensed Public Accountants, as our independent accountants to audit our
financial statements to replace Gregory J. Barber CPA.P.C. Danziger Hochman
Partners LLP were not consulted on any matter relating to accounting principles
to a specific transaction, either completed or proposed, or the type of audit
opinion that might be rendered on our financial statements. Gregory J. Barber
CPA.P.C. performed the 2006 audit and Mintz and Partners LLP performed the 2005
and 2004 audit.
- 26 -
Item 8A.
|
Disclosure Controls and Procedures
|
(a)
Evaluation of
Disclosure Controls and Procedures
The companys management with the participation of its Chief
Executive Officer, has evaluated the effectiveness of the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934) as of December 31, 2007. Based on that evaluation,
the Companys Chief Executive Officer and other Senior Management have
concluded that, as December 31 2007, the Companys disclosure controls
and procedures were not totally effective as a result of the material weakness
in internal control over financial reporting noted in (b) below. A material
weakness is a deficiency, or a combination of deficiencies, in internal control
over financial reporting, such that there is a reasonable possibility that a
material misstatement of the companys annual or interim financial statements
will not be prevented or detected on a timely basis
(b)
Managements Report on
Internal Control Over Financial Reporting
The Companys significant personnel reduction resulting from
low sales volumes has affected the overall control environment.
*provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles.
*receipts and expenditures of the
Company are being made only in accordance with authorizations of management and
directors of the Company.
*effective controls over disclosures to
ensure that all disclosures required are addressed in financial statements.
All internal control system, no matter how will designed, have
inherent limitations. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation. These inherent limitations include the realities
that judgement in decision making can be faulty, and that break down can occur
because of simple error. The design of any system of controls is based upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions.
( c)
Changes in Internal
Control over Financial Reporting
During the quarter ending March 31, 2008, there were no changes
made to our Internal Control Procedures
Item 8B.
|
Other Information
|
None.
- 27 -
PART III
Item 9.
|
Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section
16(a) of the Exchange
Act.
|
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS
As at April 30, 2008, our directors and executive officers,
their ages, positions held, and duration of such, are as follows:
Name
|
Position Held with our
Company
|
Age
|
Date First
Elected or Appointed
|
Barry Lamperd
|
President, Chief Executive Officer
and
Director
|
60
|
April 14, 2005
|
D'arcy David William Bell
|
Director
|
54
|
April 14, 2005
|
Dominic Dicarlo
|
Director
|
59
|
April 14, 2005
|
Edward Ferguson
|
Director
|
60
|
April 14, 2005
|
Terry Smith
|
Director
|
55
|
April 14, 2005
|
Sharon Scott
|
Plant / Operation Manager
|
54
|
June 6, 2005
|
Business Experience
The following is a brief account of the education and business
experience during at least the past five years of each director, executive
officer and key employee, indicating the principal occupation during that
period, and the name and principal business of the organization in which such
occupation and employment were carried out.
Barry Lamperd
Mr. Lamperd became our President, Chief Executive Officer and
Director on April 14, 2005.
In 1989, Mr. Lamperd started Pine Tree Law Enforcement
Products, a company focussed on the design, production and manufacture of
products for a variety of uses by law enforcement, military and corrections
personnel. In January of 2005, Pine Tree Law Enforcement Products was acquired
by Lamperd. Upon the acquisition, Mr. Lamperd was appointed president of Lamperd
and currently supervises product research and development of the company. Mr.
Lamperd is a member of the Police and Military Advisory Board, an organization
that sets the training standards for police and military personnel in
Canada.
- 28 -
D'arcy David William Bell
Mr. Bell was appointed Vice President and Director on April 14,
2005.
Mr. Bell is a partner with the law firm George Murray Shipley
Bell LLP where he has a diverse practice including corporate commercial law. Mr.
Bell graduated with a Bachelor of Laws from the University of Windsor.
Dominic Dicarlo
Mr. Dicarlo was appointed Vice President and Director on April
14, 2005.
Mr. Dicarlo is the president of T.R.E.L. Of Sarnia Limited, a
machine shop. Mr. Dicarlo graduated from Fanshaw College of London, Ontario in
1969.
Terry Smith
Mr. Smith was appointed a director on April 14, 2005.
Terry E. Smith has been involve with the criminal justice
industry since patrolling the streets in Okinawa as a United State Marine
Military Policeman in 1972. In 1975, he ended his MP duties with the Marine
Corps at Quantico, Virginia to attend college in his hometown. His primary
studies there was in criminal justice and a minor in sociology. While attending
college he continued providing educational support to local law enforcement
agencies in the area of police baton certification, which he had certified as an
Instructor while in the Marine Corps. While in college, he also volunteered as
an auxiliary police officer and worked in private security.
Terry moved his family to Indianapolis, Indian to take on
duties as a Deputy Sheriff with the Marion County Sheriff's Department (MCSD) in
February 1978.
He eventually earned his B.S. in Criminal Justice at the
University of Indiana (IUPUI campus), Indiana in 1982. He worked many positions
within the department, but is most proud of his duty as a Senior Training
Officer at the MCSD Training Academy. In 1988, he accepted an offer to become
the Director of Training at a large criminal justice technology manufacturer in
New Hampshire. He continues in that position today. Terry is a Charter member of
several key trainer associations such as the International Law Enforcement
Educators and Trainers Association (ILEETA) and the former American Society of
Law Enforcement Trainers (ASLET). He is an associate member with the
International Association of Women Police (IAWP) and International Association
of Directors of Law Enforcement Standards and Training (IADLEST).
Edward Ferguson
Mr. Edward Ferguson was appointed a director on April 14,
2005
Mr. Edward Ferguson is a United States Navy Combat veteran.
Between 1990 and 1993, Mr Ferguson independently owned and operated E.L.F., and
advertising and marking company. Since 1993, Mr. Ferguson has been associated
with Fox Labs International
- 29-
Inc., and in 1997m Mr. Ferguson became the president and 50%
shareholder of Fox Labs International Inc. As of 1998 Mr. Ferguson held 100% of
shares for Fox Lab International Inc.
Sharon Scott
Mrs. Sharon Scott was appointed Plant / Operation Manager on
June 6, 2005.
Mrs. Scott has over 20 years experience in the injection molding
manufacturing industries. Sharon has extensive knowledge in Production Controls,
Expanded Bill of Material Costing (BOM), Customer Relations, SPC, FMEA, Control
Plans, QS/ISO 9000. Mrs. Scott was the Operations Manager for a Plastic injection
Molding Company in Michigan which supplied production and service parts for
two major automotive companies. Previous to this position she was Production
Manager / Customer Liaison for North American Plastics Inc. a chrome plating
and plastics injection molding corporation in Canada. Mrs. Scott attended Westervelt
Business College and Fanshaw College in London, Ontario.
Committees of the Board
Currently our company has the following committees:
-
Audit Committee;
-
Nominating and Corporate Governance Committee; and
-
Compensation Committee.
The following people make up the Audit Committee: Barry
Lamperd, Dominic Dicarlo, and Darcy Bell. The Audit Committee is governed by the
Audit Committee Charter adopted by the board of directors on February 9,
2004.
Our Nominating and Corporate Governance Committee is currently
made up of all of our directors. The Nominating and Corporate Governance
Committee is governed by the Nominating and Corporate Governance Committee
Charter adopted by the board of directors on February 9, 2004.
Our Compensation Committee is currently made up of all of our
directors. The Compensation Committee is governed by the Compensation Committee
Charter adopted by the board of directors on February 9, 2004.
Family Relationships
There are no family relationships between any of our directors
or executive officers.
Involvement in Certain Legal Proceedings
Other than as discussed below, none of our directors, executive
officers, promoters or control persons have been involved in any of the
following events during the past five years:
- 30 -
1. any bankruptcy petition filed by or
against any business of which such person was a general partner or executive
officer either at the time of the bankruptcy or within two years prior to that
time;
2. any conviction in a criminal
proceeding or being subject to a pending criminal proceeding (excluding traffic
violations and other minor offences);
3. being subject to any order,
judgment, or decree, not subsequently reversed, suspended or vacated, of any
court of competent jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of business,
securities or banking activities; or
4. being found by a court of competent
jurisdiction (in a civil action), the Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or commodities
law, and the judgment has not been reversed, suspended, or vacated.
Audit Committee Financial Expert
Our Board of Directors has determined that it does not have a
member of its audit committee that qualifies as an audit committee financial
expert as defined in Item 401(e) of Regulation S-B, and is independent as the
term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange
Act of 1934, as amended.
We believe that the members of our Board of Directors are
collectively capable of analyzing and evaluating our financial statements and
understanding internal controls and procedures for financial reporting. In
addition, we believe that retaining an independent director who would qualify as
an audit committee financial expert would be overly costly and burdensome and
is not warranted in our circumstances given the early stages of our development
and the fact that we have not generated adequate revenues to date.
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Securities Exchange Act requires our
executive officers and directors, and persons who own more than 10% of our
common stock, to file reports regarding ownership of, and transactions in, our
securities with the Securities and Exchange Commission and to provide us with
copies of those filings. Based solely on our review of the copies of such forms
received by us, or written representations from certain reporting persons, we
believe that during fiscal year ended December 31, 2007, all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with, with the exception of the following:
Name
|
Number of Late
Reports
|
Number of
Transactions Not
Reported on a Timely
Basis
|
Failure to
File
Requested Forms
|
Barry Lamperd
|
1
(1)
|
21
(1)(2)
|
Nil
|
Darcy David William Bell
|
1
(2)
|
9
(1)(2)
|
Nil
|
Dominic Dicarlo
|
1
(2)
|
17
(1)(2)
|
Nil
|
(1)
|
The named officer, director or greater than 10%
stockholder, as applicable, filed a late Form 4 Statement in Changes of
Beneficial Ownership.
|
|
|
(2)
|
The named officer, director or greater than 10%
stockholder, as applicable, is preparing to file a Form 5 Annual
Statement of Changes in Beneficial Ownership of
Securities.
|
- 31 -
Code of Ethics
Effective February 9, 2004, our company's board of directors
adopted a Code of Business Conduct and Ethics that applies to, among other
persons, our company's president (being our principal executive officer) and our
company's chief financial officer (being our principal financial and accounting
officer and controller), as well as persons performing similar functions. As
adopted, our Code of Business Conduct and Ethics sets forth written standards
that are designed to deter wrongdoing and to promote:
(1) honest and ethical conduct, including the ethical handling
of actual or apparent conflicts of interest between personal and professional
relationships;
(2) full, fair, accurate, timely, and understandable disclosure
in reports and documents that we file with, or submit to, the Securities and
Exchange Commission and in other public communications made by us;
(3) compliance with applicable governmental laws, rules and
regulations;
(4) the prompt internal reporting of violations of the Code of
Business Conduct and Ethics to an appropriate person or persons identified in
the Code of Business Conduct and Ethics; and
(5) accountability for adherence to the Code of Business
Conduct and Ethics.
Our Code of Business Conduct and Ethics requires, among other
things, that all of our company's personnel shall be accorded full access to our
president and corporate secretary, as well as persons performing similar
functions, with respect to any matter which may arise relating to the Code of
Business Conduct and Ethics. Further, all of our company's personnel are to be
accorded full access to our company's board of directors if any such matter
involves an alleged breach of the Code of Business Conduct and Ethics by our
president or chief financial officer.
In addition, our Code of Business Conduct and Ethics emphasizes
that all employees, and particularly managers and/or supervisors, have a
responsibility for maintaining financial integrity within our company,
consistent with generally accepted accounting principles, and federal,
provincial and state securities laws. Any employee who becomes aware of any
incidents involving financial or accounting manipulation or other
irregularities, whether by witnessing the incident or being told of it, must
report it to his or her immediate supervisor or to our company's audit
committee. Any failure to report such inappropriate or irregular conduct of
others is to be treated as a severe disciplinary matter. It is against our
company policy to retaliate against any individual who reports in good faith the
violation or potential violation of our company's Code of Business Conduct and
Ethics by another.
Our Code of Business Conduct and Ethics is incorporated by
reference from our Annual Report on Form 10-KSB filed on April 7, 2005. We will
provide a copy of the Code of Business Conduct and Ethics to any person without
charge, upon request. Requests can be sent to: Lamperd Less Lethal, Inc., 1200
Michener Road, Sarnia, Ontario N7T 7H8.
Item 10.
|
Executive Compensation.
|
The particulars of compensation paid to the following
persons:
-
our principal executive officer;
-
each of our two most highly compensated executive officers who were serving
as executive officers at the end of the year ended December 31, 2006; and
-
up to two additional individuals for whom disclosure would have been
provided under (b) but for the fact that the individual was not serving as our
executive officer at the end of the most recently
- 32 -
completed financial year, who we will collectively refer to as
the named executive officers, of our years ended December 31, 2006 and 2005 ,
are set out in the following summary compensation table:
[NTD include footnotes for amounts in columns other
than salary, unless stock was given as part of salary]
SUMMARY COMPENSATION TABLE
|
Name
and Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensa-
tion
($)
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensatio
n Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
Barry Lamperd
President, Chief
Executive Officer
and Director
(1)
|
2007
2006
2005
2004
|
87,981
125,000
125,000
Nil
|
Nil
Nil
Nil
Nil
|
37,019
Nil
Nil
Nil
|
Nil
Nil
Nil
Nil
|
Nil
Nil
Nil
Nil
|
Nil
Nil
Nil
Nil
|
Nil
Nil
Nil
Nil
|
125,000
125,000
125,000
Nil
|
Dominic Dicarlo
Vice President,
Director(2)
|
2007
|
Nil
|
Nil
|
Nil
|
16,000
|
Nil
|
Nil
|
Nil
|
16,000
|
Sharon Scott
Plant / Operation
Manager
(3)
|
2007
2006
2005
2004
|
60,000
60,000
33,462
N/A
|
Nil
Nil
Nil
N/A
|
10,000
Nil
Nil
N/A
|
40,000
10,000
Nil
N/A
|
Nil
Nil
N/A
|
Nil
Nil
N/A
|
Nil
Nil
N/A
|
110,000
60,000
33,462
N/A
|
(1)
|
Mr. Lamperd was appointed President and Chief Executive
Officer on April 14, 2005.
|
(2)
|
Mr. Dominic Dicarlo was appointed Vice President /
Director on April 14, 2005
|
(3)
|
Mrs. Scott was appointed Plant / Operation Manager on
June 6, 2005.
|
Employment/Consulting Agreements
There is one written employment/consulting agreement between
the company and Barry Lamperd, Director and President/CEO.
Long-Term Incentive Plans
There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers, except that
our directors and executive officers may receive stock options at the discretion
of our board of directors. We do not have any material bonus or profit sharing
plans pursuant to which cash or non-cash compensation is or may be paid to our
directors or executive officers, except that stock options may be granted at the
discretion of our board of directors.
We have no plans or arrangements in respect of remuneration
received or that may be received by our executive officers to compensate such
officers in the event of termination of employment (as a result of resignation,
retirement, change of control) or a change of responsibilities following a
change of control, where the value of such compensation exceeds $60,000 per
executive officer.
- 33 -
Stock Option Plan
On December 4, 2006 our directors adopted a stock option plan
(the 2006 Option Plan) for our directors and employees, reserving a total of
2,000,000 shares of our common stock for issuance pursuant to grants made under
the 2006 Option Plan. The 2006 Option Plan was effective October 1, 2006.
The following table sets forth for each of the named executive
officers certain information concerning unexercised options, stock that has not
vested; and equity incentive plan awards outstanding as at the year ended
December 31, 2007.
OUTSTANDING EQUITY AWARDS AT FISCAL
YEAR-END
|
|
Option Awards
|
Stock Awards
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expirati
on
Date
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have Not
Vested
($)
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value
of
Unearned
Shares,
Units or
Other
Rights
That Have
Not
Vested
($)
|
Dominic Dicarlo Vice
President and
Director
|
200,000 (3)
|
Nil
|
Nil
|
0.08
|
June 30,
2012
|
Nil
|
Nil
|
Nil
|
Nil
|
Sharon Scott
Plant / Operation
Manager
|
66,666
250,000 (3)
250,000 (4)
|
Nil
Nil
|
33,334
(2)
Nil
250,000
|
0.10
0.08
0.04
|
Dec. 4,
2013
June
30,
2012
Dec 31,
2012
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
(2)
|
Stock Options were granted effective December 4, 2006 and
vest as to 33 1/3% on June 4, 2007, December 4, 2007 and June 4,
2008
|
(3)
|
Stock Option were granted effective June 30, 2007 and
vested as to 50% June 30, 2007, December 30, 2007
|
(4)
|
Stock Options were granted effective December 31, 2007
and vested as to 50% December 31, 2007 and 50% June 30, 2008
.
|
Directors Compensation
Other than disclosed above there was no other directors
compensations.
We reimburse our directors for expenses incurred in connection
with attending board meetings but did not pay director's fees or other cash
compensation for services rendered as a director in the year ended December 31,
2005.
We have no present formal plan for compensating our directors
for their service in their capacity as directors, although in the future, such
directors are expected to receive compensation and options to
- 34 -
purchase shares of common stock as awarded by our board of
directors or (as to future options) a compensation committee which may be
established in the future. Directors are entitled to reimbursement for
reasonable travel and other out-of-pocket expenses incurred in connection with
attendance at meetings of our board of directors. The board of directors may
award special remuneration to any director undertaking any special services on
behalf of our company other than services ordinarily required of a director.
Other than indicated in this annual report, no director received and/or accrued
any compensation for his or her services as a director, including committee
participation and/or special assignments.
Report on Executive Compensation
Our compensation program for our executive officers is
administered and reviewed by our board of directors. Historically, executive
compensation consists of a combination of base salary and bonuses. Individual
compensation levels are designed to reflect individual responsibilities,
performance and experience, as well as the performance of our company. The
determination of discretionary bonuses is based on various factors, including
implementation of our business plan, acquisition of assets, and development of
corporate opportunities and completion of financing.
Item 11.
|
Security Ownership of Certain Beneficial
Owners and Management and Related
Stockholder
Matters.
|
The following table sets forth, as at March 31, 2007, certain
information with respect to the beneficial ownership of our common stock by each
shareholder known by us to be the beneficial owner of more than five percent
(5%) of our common stock, and by each of our current directors and executive
officers. Each person has sole voting and investment power with respect to the
shares of common stock, except as otherwise indicated. Beneficial ownership
consists of a direct interest in the shares of common stock, except as otherwise
indicated.
Name and Address of Beneficial
Owner
|
Amount and Nature of
Beneficial
Ownership
(1)
|
Percentage
of Class
(1)
|
Barry Lamperd
1041 Brimwood Crescent
Sarnia,
Ontario N7S 5E8
|
6,741,795
|
11.26.%
|
Sharon Scott
2332 Kimball Rd.
Courtright N0N 1H0
|
Nil
|
Nil
|
DArcy David William Bell
1280 Marcin
Road
Sarnia, Ontario N7V 3J9
|
5,585,000
|
9.32%
|
Dominic Dicarlo
1981 Rainbow Trial
Sarnia, Ontario N7T 7H6
|
2,849,075
|
4.75%
|
Terry Smith
58 Kennedy Drive
Keene,
New Hampshire 03431
|
Nil
|
Nil
|
Edward Ferguson
20752 Miles St. S.
Clinton Township, Michigan 48036-
1948
|
250,000
|
*
|
- 35 -
Name and Address of Beneficial
Owner
|
Amount and Nature of
Beneficial
Ownership
(1)
|
Percentage
of Class
(1)
|
Mercer Investments Inc.
(2)
1610 Wesbrook
Crescent
Vancouver, British Columbia V6T
1W1
|
2,990,000
|
4.99%
|
Bruce Strebinger
338 North Dollarton
Highway
North Vancouver, British Columbia
V7G 1N1
|
2,990,000
|
4.99%
|
Ernie Taglione
2155 Huron Shores Drive
Sarnia, Ontario N7V 7H6
|
2,849,075
|
4.75%
|
1109630 Ontario Limited
(3)
1165 Confederation St.
Sarnia, Ontario N7S 3Y5
|
4,993,748
|
8.34%
|
Directors and Executive Officers as a
Group
(5 individuals)
|
15,425,870 common
shares
|
25.76%
|
* Less than 1%
(1)
|
Based on 59,871,043 shares of common stock issued and
outstanding as of March 31, 2008. Except as otherwise indicated, we
believe that the beneficial owners of the common stock listed above, based
on information furnished by such owners, have sole investment and voting
power with respect to such shares, subject to community property laws
where applicable. Beneficial ownership is determined in accordance with
the rules of the SEC and generally includes voting or investment power
with respect to securities. Shares of common stock subject to options or
warrants currently exercisable, or exercisable within 60 days, are deemed
outstanding for purposes of computing the percentage ownership of the
person holding such option or warrants, but are not deemed outstanding for
purposes of computing the percentage ownership of any other
person.
|
|
|
(2)
|
The shares of common stock held by Bruce Strebinger and
Mercer Investments Inc. are subject to a voting agreement dated March 18,
2005 (the "Voting Agreement"). Pursuant to the provisions of the Voting
Agreement, Bruce Strebinger and Mercer Investments Inc. vested all voting
power of all shares beneficially owned in the capital of the Company in
favour of Barry Lamperd, D'Arcy David William Bell and Dominic DiCarlo
until April 1, 2008.
|
|
|
(3)
|
Dominic Dicarlo and Ernie Taglione are 50% owners of
1109630 Ontario Limited. This total has not been included in the Directors
and Executive group percentage.
|
Cancellation of Shares, Cancelled Debt
None.
Future Changes in Control
We are unaware of any contract or other arrangement, the
operation of which may, at a subsequent date, result in a change in control of
our company.
- 36 -
Item 12.
|
Certain Relationships and Related
Transactions, and Director Independence.
|
Except as disclosed herein, there have been no transactions or
proposed transactions in which the amount involved exceeds the lesser of
$120,000 or one percent of the average of our total assets at year-end for the
last three completed fiscal years in which any of our directors, executive
officers or beneficial holders of more than 5% of the outstanding shares of our
common stock, or any of their respective relatives, spouses, associates or
affiliates, has had or will have any direct or material indirect interest.
The Company entered into an asset purchase agreement with
Pinetree Law Enforcement Products of Canada Limited (Pinetree) on January 1,
2005 to acquire certain assets of Pinetree in exchange for assumption of
liabilities and note payable. At the time of the agreement, a Director and Vice
President of the Company was owed $102,400 by Pinetree which was paid in full on
April 22, 2005 when the Company retired the note payable. No amounts are owed to
the related party at December 31, 2007.
The Company issued 250,000 shares of common stock to Edward
Ferguson, a director of our company, on December 2006, in lieu of a cash payment
in the amount of $277,500 for services rendered to our company.
A company controlled by a Director and Vice President of the
Company is the primary subcontractor of parts for the Companys weapon
launcher systems. The Company paid this corporation $2,807 in 2007, $6,431 for
the year ended December 31, 2006, $149,413 for the year ended December 31, 2005
and $Nil for the year ended December 31, 2004 for the manufacturing of various
components, and purchases for the Company.
The company rents premises from a corporation controlled by a
Director and Vice President of the Company. $88,800 for years ended 2007 and
2006. $85,400 was paid for the year ended December 31, 2005 and was paid Nil
for the year ended December 31, 2004.
The Company purchased consulting services from certain
directors and officers during 2007, in the amount of $NIL (2006-$12,000).
The Company received legal services from a shareholder in the
amount of $18,500, in 2007, (2006 -$9,000) 115,500 shares of common stock were
issued to satisfy the amount for 2006.
The Company issued 925,475 shares of common stock in 2007, and
336,320 - 2006 to the President and Director in lieu of a cash payment for the
amounts of $37,019 2007, and $26,906 2006 for services and loans
rendered to our company.
The Company issued 3,875,410 shares of common stock in 2007,
and 1,118,338 - 2006 to company controlled by a Vice President and Director
in lieu of a cash payment for the amounts of $206,744– 2007, and $89,167–
2006. for services and loans rendered to our company.
The Company issued 250,000 shares of common stock in 2007, and
NIL - 2006 to a Senior Manager for services provided over and above the salary
paid.
- 37 -
Corporate Governance
We currently act with six (6) directors, consisting of Barry
Lamperd, Darcy David William Bell, Dominic Dicarlo, Alexander Purvis Glenn, Ed
Ferguson and Terry Smith.
We have determined that Darcy David William Bell, Dominic
Dicarlo, Alexander Purvis Glenn, Ed Ferguson and Terry Smith are independent
directors, as that term is used in Rule 4200(a)(15) of the Rules of National
Association of Securities Dealers.
Currently our company has the following committees:
-
Audit Committee;
-
Nominating and Corporate Governance Committee; and
-
Compensation Committee.
The following people make up the Audit Committee: Barry
Lamperd, Dominic Dicarlo, and Darcy Bell. The Audit Committee is governed by the
Audit Committee Charter adopted by the board of directors on February 9,
2004.
Our Nominating and Corporate Governance Committee is currently
made up of all of our directors. The Nominating and Corporate Governance
Committee is governed by the Nominating and Corporate Governance Committee
Charter adopted by the board of directors on February 9, 2004.
Our board of directors presently does not have a separate stock
plan committee.
Exhibit
|
Description
|
3.
|
Articles of Incorporation
and By-laws:
|
3.1
|
Articles of Incorporation (incorporated by reference from
our Registration Statement on Form SB-2, filed on March 27, 2002).
|
3.2
|
Restated Articles of Incorporation (incorporated by
reference from our Registration Statement on Form SB-2, filed on March 27,
2002).
|
3.3
|
Bylaws (incorporated by reference from our Registration
Statement on Form SB-2, filed on March 27, 2002).
|
3.4
|
Certificate of Amendment filed with the Nevada Secretary
of State on January 31, 2005. (incorporated by reference from our Current
Report on Form 8-K, filed on February 1, 2005).
|
3.5
|
Certificate of Amendment filed with the Nevada Secretary
of State on March 21, 2005 (incorporated by reference from our Current
Report on Form 8-K, filed on March 31, 2005).
|
- 38 -
Exhibit
|
Description
|
10.
|
Material Contracts
|
10.1
|
Share Exchange Agreement dated March 18, 2005, among our
company under our former name Sinewire Networks Inc., 1476246 Ontario
Limited doing business as Lamperd Less Lethal, Patrick Ward, Hani Zabaneh
and the principal shareholders as set out in the share exchange agreement
(incorporated by reference from our Current Report on Form 8-K, filed on
March 31, 2005).
|
10.2
|
Employment Agreement dated January 1, 2005 between
1476246 Ontario Limited and Barry Lamperd (incorporated by reference from
our Current Report on Form 8-K, filed on May 13, 2005).
|
10.3
|
Addendum to Employment Agreement made January 1, 2005
between 1476246 Ontario Limited and Barry Lamperd (incorporated by
reference from our Current Report on Form 8-K, filed on May 13, 2005).
|
10.4
|
Asset Transfer Agreement dated January 1, 2005 between
1476246 Ontario Limited and Pinetree Law Enforcement Products Ltd.
(incorporated by reference from our Current Report on Form 8-K, filed on
May 13, 2005).
|
10.5
|
License Agreement dated January 20, 2005 between 1476246
Ontario Limited and The University of Western Ontario (incorporated by
reference from our Current Report on Form 8-K, filed on May 13, 2005).
|
10.6
|
Voting Agreement dated March 1, 2005 between Barry
Lamperd, DArcy Bell, Dominic DiCarlo, Bruce Strebinger, Mercer
Investments Inc. and 1476246 Ontario Limited (incorporated by reference
from our Current Report on Form 8-K, filed on May 13, 2005).
|
10.7
|
Consulting Agreement dated April 23, 2005 between 1476246
Ontario Limited and Dominic DiCarlo (incorporated by reference from our
Current Report on Form 8-K, filed on May 13, 2005).
|
10.8
|
Consulting Agreement dated April 23, 2005 between 1476246
Ontario Limited and 1476232 Ontario Limited (incorporated by reference
from our Current Report on Form 8-K, filed on May 13, 2005).
|
10.9
|
Letter of Intent dated Mary 18, 2005 between Lamperd Less
Lethal Inc. and Taylors & Co. Inc. (incorporated by reference from
our Current Report on Form 8-K filed on May 27, 2005).
|
10.10
|
Geographic Exclusive Commissioned Sales Agent Agreement
dated as of August 2, 2005 (incorporated by reference from our Current
Report on Form 8-K filed on August 8, 2005).
|
- 39 -
* Filed herewith
Item 14.
|
Principal Accountants Fees and Services
|
Audit Fees
The aggregate fees billed by Gregory J. Barber, CPA, P.C. for
professional services rendered for the audit of our annual financial statements
included in our Annual Report on Form 10-KSB for the fiscal year ended December
31, 2006 was $51,520 (US) and by Mintz & Partners LLP for the fiscal year
ended December 31, 2005 was $100,500.
Tax Fees
For the fiscal year ended December 31, 2006, the aggregate fees
billed by Gregory J. Barber, CPA, P.C. for other non-audit professional
services, other than those services listed above, totaled $Nil and by Mintz
& Partners LLP for the fiscal year ended December 31, 2005 was $Nil.
We do not use Gregory J. Barber, CPA, P.C. for financial
information system design and implementation. These services, which include
designing or implementing a system that aggregates source data underlying the
financial statements or generates information that is significant to our
financial statements, are provided internally or by other service providers. We
do not engage Gregory J. Barber, CPA, P.C. to provide compliance outsourcing
services.
Effective May 6, 2003, the Securities and Exchange Commission
adopted rules that require that before Gregory J. Barber, CPA, P.C. is engaged
by us to render any auditing or permitted non-audit related service, the
engagement be:
-
approved by our audit committee (which consists of Barry Lamperd, Dominic
Dicarlo, and Darcy Bell); or
- 40 -
-
entered into pursuant to pre-approval policies and procedures established
by the audit committee, provided the policies and procedures are detailed as
to the particular service, the audit committee is informed of each service,
and such policies and procedures do not include delegation of the audit
committee's responsibilities to management.
The audit committee pre-approves all services provided by our
independent auditors. The pre-approval process has just been implemented in
response to the new rules, and therefore, the audit committee does not have
records of what percentage of the above fees were pre-approved. However, all of
the above services and fees were reviewed and approved by the audit committee
either before or after the respective services were rendered.
The audit committee has considered the nature and amount of
fees billed by Gregory J. Barber, CPA, P.C. and believes that the provision of
services for activities unrelated to the audit is compatible with maintaining
Gregory J. Barber, CPA, P.C.s independence.
- 41 -
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
LAMPERD LESS LETHAL INC.
By:
|
/s/ Barry Lamperd
|
|
|
Barry Lamperd, President and
Chief Executive Officer
|
|
|
(Principal Executive Officer,
Principal Financial
|
|
|
Officer and Principal Accounting
Officer)
|
|
Date: May 15, 2008
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature
|
Title
|
Date
|
|
|
|
/s/ Barry Lamperd
|
|
|
Barry Lamperd
|
President, Chief Executive
|
May 15, 2008
|
|
Officer and Director
|
|
|
|
|
/s/ Darcy David William Bell
|
|
|
Darcy David William Bell
|
Director
|
May 15, 2008
|
|
|
|
/s/ Dominic Dicarlo
|
|
|
Dominic Dicarlo
|
Director
|
May 15, 2008
|
|
|
|
/s/ Terry Smith
|
|
|
Terry Smith
|
Director
|
May 15, 2008
|
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