SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A-1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: October 27, 2004
LIFELINE THERAPEUTICS, INC.
---------------------------
(Exact name of registrant as specified in its charter)
Colorado 000-30489 84-1097796
-------- --------- ----------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
6400 South Fiddler's Green Circle, Englewood, CO 80111
--------------------------------------------
(New address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (720) 488-1711
YAAK RIVER RESOURCES, INC.
-----------------------------------------------------------
(former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Section 1 - Registrant's Business and Operations
Item 1.01 Entry into a Material Definitive Agreement
Lifeline Therapeutics, Inc. (the "Company") has entered into employment
agreements to be with new management as approved by the Company's former board
of directors. The employment agreements will provide for a term through April
15, 2005, will be terminable for cause or upon a change of control, and will
provide for base salaries as follows:
William Driscoll -- $180,000 per year
Paul Myhill -- $120,000 per year
Daniel W. Streets -- $120,000 per year
Following the completion of the reorganization, the Company expects to
obtain normal employee benefits (such as health insurance and life insurance),
and may provide its executives and other employees additional benefits.
Item 1.02 Termination of a Material Definitive Agreement
None
Item 1.03 Bankruptcy or Receivership
None
Section 2 - Financial Information
Item 2.01 Completion of Acquisition or Disposition of Assets
On October 26, 2004, the Company has completed the reorganization by which it
acquired approximately 81% of the outstanding capital stock of Lifeline
Nutraceuticals Corporation ("Lifeline Nutraceuticals") pursuant to a Plan of
Reorganization that was previously announced. The Company also assumed $240,000
of convertible indebtedness and $559,000 of bridge capital financing that had
previously been issued by Lifeline Nutraceuticals.
The Company needs to raise a significant amount of additional equity or debt
financing to implement its business plan. The Company will be negotiating for
such financing which may result in significant and substantial dilution to its
shareholders. The Company can offer no assurance that it will be able to obtain
the needed financing on commercially-reasonable terms, if at all. Therefore, the
Company advises a high degree of caution regarding any transactions in its
common stock.
The following table sets forth (and as adjusted for the issuance of shares to
shareholders of Lifeline Nutraceuticals holding 81% of the outstanding Lifeline
Nutraceuticals common stock), certain information with respect to the common
stock beneficially owned by: (i) each Director, nominee and executive officer of
the Company; (ii) each person who owns beneficially more than 5% of the common
stock; and (iii) all Directors, nominees and executive officers as a group. If
the Company acquires more than 80% of the outstanding shares, the ownership
interests of each of the named persons will be diluted.
(i) each Director, nominee and executive officer of the Company:
Pre-Transaction Amount
and nature of Number Post
Name and Address of Beneficial Post Transaction
of Beneficial Owner Ownership Shares Transaction % of Class
------------------- ---------------- ----------- ----------
Blaize N. Kaduru (1) 0 0 0%
423 Baybridge Drive
Sugarland, TX 77478
Robert Pike (1) 10,000 10,000 .06%
423 Baybridge Drive
Sugarland, TX 77478
William Driscoll (2) 0 5,623,800 34.34%
6400 South Fiddler's
Green Circle, Suite 1750
Englewood, CO 80111
Paul Myhill (2) 0 4,699,890 28.70%
6400 South Fiddler's
Green Circle, Suite 1750
Englewood, CO 80111
Daniel W. Streets (2)(3) 0 2,008,500 12.27%
6400 South Fiddler's
Green Circle, Suite 1750
Englewood, CO 80111
Christopher J. Micklatcher (2) 0 562,380 3.43%
6400 South Fiddler's
Green Circle, Suite 1750
Englewood, CO 80111
(1) Resigning Director
(2) New Director
(3) Does not includes shares that may be acquired by Mr. Streets' wife's Roth
IRA if she should chose to convert the $82,000 she has invested through
Bridge Loan financing into the Private Placement or exercise the warrants
attached to the Private Placement or the warrants attached to the Bridge
Loan financing. Conversion price and the exercise price of the attached
warrants cannot be determined until the Private Placement share price is
determined.
All of the above disclaim any beneficial ownership in shares of the Company
owned by other family members.
(ii) each person who owns beneficially more than 5% of the common stock (based
on the Company acquiring approximately 81% of the outstanding common stock of
Lifeline Nutraceuticals as described above):
Pre-Transaction Amount
and nature of Number of Post
Name and Address Beneficial Ownership Post Transaction
of Beneficial Owner Shares (post-reverse split) Transaction % of Class
------------------- --------------------------- ----------- ----------
Eric Sunsvold 98,450 98,450 .60%
423 Baybridge Drive
Sugarland, TX 77478
Donald J. Smith 405,617 (1) 456,618 2.80%
2501 E. Third Street
Casper, WY 82609
Darrell Benjamin 63,603 63,603 .39%
6658 S. Starlight Rd.
Morrison, CO 80465
William Driscoll (2) 0 5,623,800 34.34%
6400 South Fiddler's
Green Circle, Suite 1750
Englewood, CO 80111
Paul Myhill (2) 0 4,699,890 28.70%
6400 South Fiddler's
Green Circle, Suite 1750
Englewood, CO 80111
Daniel Streets(2) 0 2,008,500 12.27%
6400 South Fiddler's
Green Circle, Suite 1750
Englewood, CO 80111
Joseph McCord 0 1,928,160 11.78%
6400 South Fiddler's
Green Circle, Suite 1750
Englewood, CO 80111
(1) The figure shown includes 147 shares held in the name of Suvo Corp. Mr.
Smith is the beneficial owner of Suvo Corp.
(2) New Director
As a result of the completion of the reorganization, the Company will be engaged
in the business of marketing unique antioxidant therapies involving the body's
first line of defense against oxidative stress - its three primary antioxidant
enzymes: Superoxide Dismutase (SOD), Catalase (CAT) and Glutathione Peroxidase
(GPX.) The Company is in the process of developing, testing and acquiring
technologies that target these three enzymes.
Item 2.02 Results of Operations and Financial Condition
None
Item 2.03 Creation of a Direct Financial Obligation or an Obligation Under an
Off-Balance Sheet Arrangement of a Registrant
None
Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial
Obligation or an Obligation Under and Off-Balance Sheet Arrangement
None
Item 2.05 Costs Associated with Exit or Disposal Activities
None
Item 2.06 Material Impairments
None
Section 3 - Securities Trading Markets
Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or
Standard; Transfer of Listing
None
Item 3.02 - Unregistered Sales of Equity Securities
(a)(1) On October 26, 2004, the Company completed an Agreement and Plan of
Reorganization with Lifeline Nutraceuticals Corporation whereby the shareholders
holding approximately 81% of the outstanding stock of Lifeline Nutraceuticals
exchanged their stock in Lifeline Nutraceuticals for 15,385,110 shares of newly
issued stock in the Company. The newly issued shares represent approximately 94%
of the outstanding stock of the Company.
(2) In addition the Company exchanged $240,000 in new promissory notes for a
like amount of convertible debt obligations of Lifeline Nutraceuticals. The new
promissory notes contain the same privilege as the original notes to convert to
shares of stock in the Company at the rate of fifty cents per share. These notes
bear a 10% rate of interest and mature December 15, 2005, if not earlier
converted.
(3) The Company also exchanged $559,000 in new promissory notes for a like
amount of bridge note obligations of Lifeline Nutraceuticals. The bridge notes
bear interest at 10% per annum and are due the earlier of six months from the
date of the exchange or the closing of the first $1,000,000 of the Company's
proposed private placement offering. The bridge note holder shall also receive
warrants to purchase common stock to be issued in the private placement equal to
the principal amount divided by the per-share offering price, with an exercise
price equal to the offering pricing. The warrants shall be exercisable for a
period of one year after the closing of the offering. By way of example, if the
bridge note is for $100,000 and the private placement offering occurs at $2.00
per share (of which there can be no assurance), then the bridge note holder
would have a warrant allowing for the purchase of 50,000 shares of Lifeline
Therapeutics, Inc. common stock at $2.00.
(b) The Company used no underwriter to complete this transaction. No finders'
fee, commission, or other compensation was paid. The persons who received the
Company's securities are all persons who represented to the Company that they
were accredited investors and who were previously securities holders associated
with Lifeline Nutraceuticals.
(c) None of the securities were sold for cash, but were issued in exchange for
other securities in the reorganization described above.
(d) The Company relied on the exemption from registration provided by Sections
4(2) and 4(6) under the Securities Act of 1933 for this transaction. The Company
did not engage in any public advertising or general solicitation in connection
with this transaction. The Company provided the accredited investor with
disclosure of all aspects of our business, including providing the accredited
investor with the Company's reports filed with the Securities and Exchange
Commission, press releases, access to the Company's auditors, and other
financial, business, and corporate information. Based on the Company's
investigation, the Company believes that the accredited investors obtained all
information regarding the Company they requested, received answers to all
questions the posed, and otherwise understood the risks of accepting the
Company's securities for investment purposes.
(e) The common stock issued is not convertible or exchangeable. The notes issued
by the Company are convertible into common stock on the terms described above in
paragraphs (a)(2) and (a)(3).
(f) Since the Company received no cash proceeds from the issuance of the
securities, there is no use of proceeds to report.
Item 3.03 Material Modification to Rights of Security Holders
None
Section 4 - Matters Related to Accountants and Financial Statements
Item 4.01 Changes in Registrant's Certifying Accountants
None
Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review
None.
Section 5 - Corporate Governance and Management
Item 5.01 Changes in Control of Registrant
Subject to compliance with Section 14(f) of the Securities and Exchange Act
of 1934, Blaize N. Kaduru and Robert Pike acknowledged their intention to submit
their resignations from the Board of Directors of the Company. Notice to
Shareholders pursuant to Section 14(f) was mailed on October 20, 2004. The
Company anticipates that the resignations will be executed and shall be
effective ten days after the Schedule 14(f) notification was mailed to
shareholders. Upon the closing of the plan of reorganization, Mr. Kaduru and Mr.
Pike expanded the Company's board of directors to four persons and they
appointed William Driscoll and Paul Myhill. Upon the effectiveness of the
resignations, Messrs. Driscoll and Myhill will appoint Daniel W. Streets and
Christopher J. Micklatcher to fill the two vacancies created by Messrs. Kaduru's
and Pike's resignation.
Robert Pike and Blaize N. Kaduru executed their resignations on November 2, 2004
and November 3, 2004, respectively, and Messrs. Streets and Micklatcher became
directors of the Company.
Stock ownership of New Directors:
William Driscoll 5,623,800 34.34%
Paul Myhill 4,699,890 28.70%
Daniel W. Streets 2,008,500 12.27%
Christopher J. Micklatcher 562,380 3.43%
Item 5.02 Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers
The following sets forth the names and ages of the current Directors, nominees
for directors and executive officers of the Company, the principal positions
with the Company held by such persons and the date such persons became a
Director or executive officer. The Directors serve one year terms or until their
successors are elected. The Company has not had standing audit, nominating or
compensation committees of the Board of Directors or committees performing
similar functions. All such applicable functions have been by the Board of
Directors as a whole. During the fiscal year ended December 31, 2003, the Board
of Directors held no formal meeting. There are no family relationships among any
of the Directors, nominees or executive officers.
BLAIZE N. KADURU. Mr. Kaduru is an Adjunct Professor, teaching economics and
business related college courses at Wharton Junior College in Sugarland, Texas,
since January 2003. Previously, he was Executive Vice President of Business
Development for Wireless Communications Technology, Inc., a spin-off of Prodigy
Communications Inc. in Houston, Texas. Mr. Kaduru will resign as CEO, President
and Secretary/Treasurer of Yaak River Resources, Inc. at the completion of the
transactions contemplated in the Plan and Agreement of Reorganization and will
resign as Director effective 10 days after the Notice to Shareholders is mailed,
in compliance with Section 14f of the Securities Exchange Act of 1934.
ROBERT PIKE. Mr. Pike has been Vice President and a Director of the Company
since December 21, 1999. Mr. Pike is a retired banker. For more than the past
five years, he has been an investor. Also for more than the past five years, Mr.
Pike has been President and sole owner of Bob Pike Associates, Inc., a real
estate consulting and inspection firm, based in Englewood, Colorado, that serves
financial institutions. Mr. Pike will resign as Vice President of Yaak River
Resources, Inc. at the completion of the transactions contemplated in the Plan
and Agreement of Reorganization and will resign as Director effective 10 days
after the Notice to Shareholders is mailed, in compliance with Section 14f of
the Securities Exchange Act of 1934.
WILLIAM J. DRISCOLL, will become PRESIDENT AND a DIRECTOR. Mr. William Driscoll
has a background in management and marketing. At 25 he was the plant manager or
United Solder Wrap and became the President of Union Petroleum in 1987. He
entered the financial industry in 1988 and within three years was promoted to
branch manager, regional manager and finally national sales manager of L. F.
Thomson.
Mr. Driscoll has worked at such nationally-respected firms as Dean Witter and
Merrill Lynch. Mr. Driscoll has held speaking engagements at several Fortune 500
companies including American Airlines, Alcatel, E Systems, 3M and Rockwell
International. From 1998 until 2003 he was President of Destiny Advisors, a
"Strategic Management" consulting firm who assisted companies with writing
business plans and news releases, in addition to recruiting key personnel for
client companies, including CEO's, CFO's, directors and qualified marketing
persons.
PAUL R. MYHILL, will become VICE PRESIDENT and a DIRECTOR. Paul Myhill received
his MBA from the University of Texas at Austin in 1990, in Marketing Brand
Management). As a self-employed entrepreneur and consultant since 1989, he has
been involved in planning, funding, and launching business ventures. During that
period, he has led six different business ventures which all required
significant capital investment and bottom-line management. Mr. Myhill's
specialization is in the area of business and product marketing. He is the
former owner of an advertising and media placement agency, USAboards, Inc.,
co-owner of a financial public relations firm, Fair Market Value, LLC, and
founder and President of NABO, Inc., a specialty distribution business with
multiple warehouse operations. Mr. Myhill has developed and overseen many
marketing and product distribution plans. Mr. Myhill filed for personal
bankruptcy in Texas in November 1997, and received a discharge in April 1998.
The personal bankruptcy resulted from the failure of a business he was managing
where personal and business funds and expenses were co-mingled.
Mr. Myhill has served on numerous corporate boards (for-profit and non-profit)
and presently sits on the board of directors for Brookstone Christian Academy of
Colorado as an organizational and promotional advisor. From December of 1998 to
April of 2002 Mr. Myhill was Director of Missions at Bent Tree Bible Fellowship
and then from April of 2002 to November of 2002 he became Director of Projects
at Chinese Children's Charities. In November of 2002 he was Pastor of Missions
and Membership at Faith Baptist Church until September of 2003.
CHRISTOPHER J. MICKLATCHER, will become a DIRECTOR. Mr. Micklatcher has been a
certified public accountant and attorney practicing in the state of Michigan
since 1990. Mr. Micklatcher graduated from the University of Michigan in 1980
with a BBA in Finance and Accounting, and (in 1984) from Wayne State Law School
with a J.D. specializing in Tax Law. He is currently licensed as both a
certified Public Accountant and Attorney. Mr. Micklatcher has specialized in
implementing accounting, compliance and tax systems for clients ranging from
Fortune 100 companies to small start up operations. He is the President of
Alternative Tax Solutions, a full service legal, accounting, tax preparation and
consulting practice specializing in assisting small businesses and individuals.
Mr. Micklatcher is a member of the American Institute of Certified Public
Accountants as well as the Michigan Bar Association. Mr. Micklatcher was
Director of Triad Innovations, Inc. (2001-2002) and President in 2002.
DANIEL W. STREETS, will become SECRETARY, TREASURER and a DIRECTOR. Mr. Streets
was a Manager of KPMG Peat Marwick (from June 1975 to June 1983) and has served
as the CFO of six corporations, including high-volume companies with annual
revenues in excess of $400,000,000. A few of these companies include Vista
Travel Ventures from May of 1999 to February of 2001 and Sopris Development
Group from May 2001 to December of 2003. Mr. Streets graduated from The Ohio
State University in 1975 with a bachelor's degree in business administration.
The Company does not have an audit committee, nominating committee, or other
committees of the board. Since the Company has not historically had a nominating
committee, all directors participated in determining who the nominees to the
board of directors would be. All directors review the financial statements and
interact with the Company's auditors. The new board of directors believes that
at this current stage of development and financial capability, it would be cost
prohibitive to establish a nominating committee or an audit committee.
Consequently the entire board of directors will continue to perform those
functions.
The board of directors has established a process to communicate with the
directors. All communications should be sent to one of the named directors at
the Company's address, Lifeline Therapeutics, Inc., Suite 1750, 6400 South
Fiddler's Green Circle, Englewood, CO 80111.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal
Year
The Board has approved amended and restated articles of incorporation which
will be presented to the shareholders for approval at a meeting expected to be
held in January or February 2005.
The Board has also approved amended and restated bylaws that became
effective on approval.
Item 5.04 Temporary Suspension of Trading Under Registrant's Employee Benefit
Plans
None
Item 5.05 Amendments to the Registrant's Code of Ethics, or Waiver of a Provi-
sion of the Code of Ethics.
None
Section 6 - [Reserved]
Section 7 - Regulation FD
Item 7.01 Regulation FD Disclosure
None
Section 8 - Other Events
Item 8.01 Other Events
None
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired.
Lifeline Nutraceuticals Corporation (a Development Stage Company)
Report of Independent Registered Public Accounting Firm
Balance Sheet as of June 30, 2004
Statement of Operations for the year ended June 30, 2004
Statement of Stockholders' (Deficit) for the year ended June 30, 2004
Statement of Cash Flows for the year ended June 30, 2004
Notes to Financial Statements
(b) Pro Forma financial information.
Unaudited pro forma combined financial information of Lifeline
Therapeutics, Inc. giving effect to the issuance of approximately
15,385,110 shares of Lifeline Therapeutics in exchange for shares
representing 81% of Lifeline Nutraceuticals as if such transaction
was consummated on:
o June 30, 2004 for the Unaudited Pro Forma Combined Balance Sheet,
and
o July 1, 2003 for the Unaudited Pro Forma Combined Statement of
Operations for the year ended June 30, 2004.
o Notes to Unaudited Pro Forma Combined Financial Statements
(c) Exhibits
The following exhibits were previously filed.
3.01 Amended and restated articles of incorporation (not yet
effective, subject to shareholder approval)
3.02 Amended and restated bylaws of Lifeline Therapeutics, Inc.
10.01 Employment contract between William Driscoll and Lifeline
Therapeutics, Inc.
10.02 Employment contract between Paul Myhill and Lifeline
Therapeutics, Inc.
10.03 Employment contract between Dan Streets and Lifeline
Therapeutics, Inc.
10.04 Plan of Reorganization
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 10, 2004
LIFELINE THERAPEUTICS, INC.
By: /s/ William J. Driscoll
-----------------------------
William J. Driscoll, CEO/President
LIFELINE NUTRACEUTICALS CORPORATION
(A Development Stage Company)
Financial Statements
June 30, 2004
LIFELINE NUTRACEUTICALS CORPORATION
(A DEVELOPMENT STAGE COMPANY)
INDEX TO FINANCIAL STATEMENTS
Page(s)
-------
Report of Independent Registered Public Accounting Firm 1
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' (Deficit) 4
Statement of Cash Flows 5
Notes to Financial Statements 6 - 13
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Lifeline Nutraceuticals Corporation
Englewood, Colorado
We have audited the accompanying balance sheet of Lifeline Nutraceuticals
Corporation (a development stage company) as of June 30, 2004 and the related
statements of operations, stockholders' (deficit), and cash flows for the year
July 1, 2003 (inception) to June 30, 2004. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with 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 financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes 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 financial statements referred to above present fairly, in
all material respects, the financial position of Lifeline Nutraceuticals
Corporation at June 30, 2004 and the results of its operations and its cash
flows for the year July 1, 2003 (inception) to June 30, 2004 in conformity with
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company is in the development stage, is wholly reliant
upon its shareholders for future financing needs and at present has sold no
product or service. These factors raise substantial doubt about its ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Gordon, Hughes & Banks, LLP
Greenwood Village, Colorado
August 18, 2004
1
LIFELINE NUTRACEUTICALS CORPORATION
(A Development Stage company)
Balance Sheet
As of June 30, 2004
ASSETS
------
Current Assets
Cash and cash equivalents $ 49,663
Prepaid expenses 7,813
---------
Total current assets 57,476
Property and equipment
Office equipment 18,906
Accumulated depreciation (208)
---------
Total property and equipment 18,698
Other Assets
Debt issuance costs, net of amortization of $1,778 15,222
Deferred stock offering costs 15,000
Deposits 6,166
---------
Total other assets 36,388
---------
TOTAL ASSETS $ 112,562
=========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
---------------------------------------
Current Liabilities
Accounts payable $ 28,218
Accrued payroll and payroll taxes 50,549
Accrued interest 10,736
Notes payable - related party,
less discount of $47,670 2,330
Notes payable, less discount of $95,330 244,670
---------
Total current liabilities 336,503
Stockholders' (Deficit)
Preferred Stock - no par value,
10,000,000 shares authorized
no shares issued or outstanding --
Common Stock - no par value, 50,000,000 shares authorized
18,300,000 shares issued and outstanding 242,550
Stock subscription receivable (13,050)
(Deficit) accumulated during the development stage (453,441)
---------
Total stockholders' (deficit) (223,941)
---------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 112,562
=========
The accompanying notes are an integral part of these financial statements.
Page 2
LIFELINE NUTRACEUTICALS CORPORAITON
(A Development Stage Company)
Statement of Operations
For the Year July 1, 2003 (Inception to June 30, 2004
REVENUES $ --
-----------
OPERATING EXPENSES
Payroll and payroll tax expense 261,568
Contributed services 79,500
General and administrative 92,859
-----------
Total operating expenses 433,927
-----------
OPERATING (LOSS) (433,927)
OTHER INCOME (EXPENSE)
Interest (expense) (19,514)
-----------
Net (loss) $ (453,441)
===========
Loss per share, basic and diluted $ (0.05)
===========
Weighted average shares outstanding 9,789,695
===========
Pro forma loss per share, basic and diluted $ (0.06)
===========
Pro forma weighted average shares outstanding 7,865,041
===========
The accompanying notes are an integral part of these financial statements.
Page 3
LIFELINE NUTRACEUTICALS CORPORAITON
(A Development Stage Company)
Statement of Stockholders' (Deficit)
For the Year July 1, 2003 (Inception to June 30, 2004
(Deficit)
Accumulated
Common Stock Stock Development
-------------------------- Subscriptions During
Shares Amount Receivable Stage
--------- ---------- ------------- ---------
July 1, 2003 (Inception) -- $ -- $ -- $ --
Sale of common stock
($.0005 per share) 9,000,000 4,500 (4,500) --
Private placement of common stock
($.0005 per share) 1,500,000 750 (750) --
Private placement of common stock
($.001 per share) 7,800,000 7,800 (7,800) --
Contribution of services -- 79,500 -- --
Warrants issued with convertible debt -- 71,550 -- --
Rights of beneficial conversion of debt -- 78,450 -- --
Net (loss) -- -- -- (453,441)
---------- ---------- ---------- ----------
June 30, 2004 18,300,000 $ 242,550 $ (13,050) $ (453,441)
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
Page 4
LIFELINE NUTRACEUTICALS CORPORAITON
(A Development Stage Company)
Statement of Cash Flows
For the Year July 1, 2003 (Inception to June 30, 2004
Cash Flows from Operating Activities:
Net (loss) $(453,441)
Adjustments to reconcile net (loss) to net cash (used)
by operating activities
Depreciation 208
Contributed capital 79,500
Amortization of debt issuance costs 1,778
Amortization of debt discount 7,000
(Increase) prepaid expenses and other assets (13,979)
Increase in accounts payable and accrued expenses 89,503
---------
Net Cash (Used) by Operating Activities (289,431)
---------
Cash Flows from Investing Activities:
Purchase of equipment (18,906)
---------
Cash Flows from Financing Activities
Proceeds from notes payable 340,000
Proceeds from convertible notes payable - related party 50,000
Payment of stock offering costs (15,000)
Payment of debt issuance costs (17,000)
---------
Net Cash from Provided by Financing Activities 358,000
---------
Increase in Cash 49,663
Cash and Cash Equivalents - Beginning of Period --
---------
Cash and Cash Equivalents - End of Period $ 49,663
=========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest expense $ --
=========
Cash paid for income taxes $ --
=========
The accompanying notes are an integral part of these financial statements.
Page 5
LIFELINE NUTRACEUTICALS CORPORATION
(A Development Stage Company)
Notes to Financial Statements
Note 1 - Organization and Summary of Significant Accounting
Organization
-------------
Lifeline Nutraceuticals Corporation (a development stage company,
"Lifeline" or the "Company") was incorporated on July 1, 2003. As of
June 30, 2004, the Company was in the development stage with no active
operations.
For the year July 1, 2003 (inception) to June 30, 2004, the Company
has been in the development stage. The Company's activities since
inception have consisted of organizing the Company, developing a
business plan, formulation and testing of product and raising capital.
For the near term, the Company is dependent on its ability to raise
additional financial support from notes payable and the contributions
of time from its officers and directors. Subsequent to year end, the
Company intends to consummate a plan of reorganization with an
existing public company that has limited or no operations, raise
additional capital through a private placement for the public company,
and file a registration statement for the private placement shares
thus providing liquidity afforded by the stock market to the private
placement shareholders as well as convertible debt and warrant
holders.
Going Concern Considerations
----------------------------
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. At present, the Company
is in the development stage, is wholly reliant upon its ability to
raise additional capital for future financing needs and has no
product, service or other business operations. These factors raise
substantial doubt about its ability to continue as a going concern.
The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Use of Estimates
----------------
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with accounting principles
generally accepted in the United States of America. Actual results
could differ from those estimates.
Cash Equivalents
----------------
For purposes of the statements of cash flows, the Company considers
all highly liquid debt instruments with original maturities of three
months or less to be cash equivalents.
Page 6
LIFELINE NUTRACEUTICALS CORPORATION
(A Development Stage Company)
Notes to Financial Statements
(Continued)
Note 1 - Organization and Summary of Significant Accounting (continued)
Property and Equipment
----------------------
Property and equipment are recorded at cost. Depreciation of property
and equipment are expensed in amounts sufficient to relate the
expiring costs of depreciable assets to operations over estimated
service lives, principally using the straight-line method. Estimated
service lives range from three to seven years. When such assets are
sold or otherwise disposed of, the cost and accumulated depreciation
are removed from the accounts and any resulting gain or loss is
reflected in operations in the period realized. The cost of normal
maintenance and repairs is charged to expense as incurred. Significant
expenditures that increase the useful life of an asset are capitalized
and depreciated over the estimated useful life of the asset.
Impairment of Long-Lived Assets
-------------------------------
Long-lived assets of the Company are reviewed annually as to whether
their carrying value has become impaired, pursuant to guidance
established in Statement of Financial Accounting Standards ("SFAS")
No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets." The Company assesses impairment whenever events or changes in
circumstances indicate that the carrying amount of a long-lived asset
may not be recoverable. When an assessment for impairment of
long-lived assets, long-lived assets to be disposed of and certain
identifiable intangibles related to those assets is performed, the
Company is required to compare the net carrying value of long-lived
assets on the lowest level at which cash flows can be determined on a
consistent basis to the related estimates of future undiscounted net
cash flows for such properties. If the net carrying value exceeds the
net cash flows, then impairment is recognized to reduce the carrying
value to the estimated fair value, generally equal to the future
discounted net cash flow.
Discounts on Notes Payable
--------------------------
In June 2004, the Company issued debt (1) convertible into common
stock and (2) with detachable warrants to purchase common stock. Both
the debt conversion rate and warrant exercise price are not known with
certainty since both will equal the stock purchase price of a private
placement whose terms will be established by management in the near
future. See Note 11. However, management expects to establish the
stock offering price, and hence the debt conversion rate and the
warrant exercise price, at less than the 50% of the stock trading
price at that time. Presently, management expects that offering price
to be approximately $2.00 per share. Based on that expectation, the
Company has recorded as a discount to the related debt (1) an
estimated relative value of the warrants based on the Black-Scholes
model and (2) the beneficial conversion benefit to the debt holders
based on estimated intrinsic value. The amount of the discount has
been added to common stock. The discounts will be amortized as
interest expense over the period of the debt. Once the final private
placement price is established, the Company will record a final
measurement of the warrant and beneficial conversion values. In June
2004, the initial recording of warrants and beneficial conversion was
$71,550 and $78,450, respectively.
Page 7
LIFELINE NUTRACEUTICALS CORPORATION
(A Development Stage Company)
Notes to Financial Statements
(Continued)
Note 1 - Organization and Summary of Significant Accounting (continued)
Debt issuance costs
-------------------
Costs incurred in connection with obtaining financing are capitalized
and amortized over the maturity period of the debt, expected to be one
year. If debt instruments are converted into common stock, any
unamortized cost will be immediately expensed as interest.
Deferred stock offering costs
-----------------------------
Stock offering costs are cumulative costs of a proposed private
placement stock offering. These costs will reduce the net proceeds of
the private placement stock offering if it is successful. If the
offering is not successful, the costs will be expensed.
Net income (loss) per share
---------------------------
Basic earnings (loss) per common share is computed by dividing net
income (loss) by the weighted average number of shares of common stock
outstanding during the year. Diluted earnings per common share for the
year is normally determined on the assumption that the convertible
equity instruments, such as stock warrants, are converted. However,
such conversion would be anti-dilutive and hence, basic and dilutive
loss per share are the same.
See Note 11 for a description of the merger and reorganization. The
pro forma (loss) per common share presentation for the year ended June
30, 2004 is computed based on the actual weighted average number of
common shares outstanding during the period restated at the conversion
ratio into the post merger shares at .8034 per Company share for every
newly issued post merger share. No dilution has been considered for
any warrants or convertible debt since such adding such equivalent
shares would produce an anti-dilutive effect due the net loss.
Income Taxes
------------
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
statutory tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities from a
change in tax rates is recognized in income in the period that
includes the effective date of the change.
Page 8
LIFELINE NUTRACEUTICALS CORPORATION
(A Development Stage Company)
Notes to Financial Statements
(Continued)
Note 1 - Organization and Summary of Significant Accounting (continued)
Concentration of Credit Risk
----------------------------
Statement of Financial Accounting Standard ("SFAS") No. 105,
"Disclosure of Information About Financial Instruments with
Off-Balance Sheet Risk and Financial Instruments with Concentrations
of Credit Risk", requires disclosure of significant concentrations of
credit risk regardless of the degree of such risk. Financial
instruments with significant credit risk include cash. The Company
attempts to deposit its cash with high quality financial institutions
in amounts less than the federal insurance limit of $100,000 in order
to limit credit risk.
Stock-Based Compensation
------------------------
The Company adheres to SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 provides an alternative method of
accounting for stock-based compensation arrangements, based on fair
value of the stock-based compensation utilizing various assumptions
regarding the underlying attributes of the options and stock, rather
than the intrinsic method of accounting for stock-based compensation
which is proscribed in Accounting Principles Board Opinion ("APB") No.
25, "Accounting for Stock Issued to Employees". The Financial
Accounting Standards Board encourages entities to adopt the fair-value
based method but does not require adoption of this method. The Company
will account for stock based compensation to employees and directors
under APB No. 25 and will utilize the disclosure-only provisions of
FAS No. 123 for any options and warrants issued to these individuals.
As of June 30, 2004, the Company had no outstanding stock options
outstanding.
Organization Costs
------------------
The Company accounts for organization costs under the provisions of
Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities" which requires that all organization costs be expensed as
incurred.
Effect of New Accounting Pronouncements
---------------------------------------
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure" ("SFAS No.
148"), which (i) amends SFAS No. 123, "Accounting for Stock-Based
Compensation," to provide alternative methods of transition for an
entity that voluntarily changes to the fair value based method of
accounting for stock-based compensation (ii) amends the disclosure
provisions of SFAS No. 123 to require prominent disclosure about the
effects on reported net income of an entity's accounting policy
decisions with respect to stock-based employee compensation and (iii)
amends APB Opinion No. 28, "Interim Financial Reporting," to require
disclosure about those effects in interim financial information. Items
(ii) and (iii) of the new requirements in SFAS No. 148 are effective
for financial statements for fiscal years ending after December 15,
2002. The adoption of SFAS No. 148 has no effect on the financial
statements as of June 30, 2004.
Page 9
LIFELINE NUTRACEUTICALS CORPORATION
(A Development Stage Company)
Notes to Financial Statements
(Continued)
Note 1 - Organization and Summary of Significant Accounting (continued)
Effect of New Accounting Pronouncements (continued)
---------------------------------------------------
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
No. 133 on Derivative Instruments and Hedging Activities". SFAS No.
149 amends certain portions of SFAS No. 133 and is effective for all
contracts entered into or modified after June 30, 2003 on a
prospective basis. SFAS No. 149 is not expected to have a material
effect on our results of operations or financial position since we
currently have no derivatives or hedging contracts.
In June 2003, the FASB approved SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity". SFAS No. 150 establishes standards for how an issuer
classifies and measures certain financial instruments with
characteristics of both liabilities and equity. This Statement is
effective for financial instruments entered into or modified after May
31, 2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. SFAS No. 150 is not
expected to have an effect on the Company's financial position.
Note 2 - Debt issuance costs
The Company paid a 10% fee for four loans obtained during the year
ended June 30, 2004. The fees totaled $17,000 and will be amortized
over the life of the related debt. All debt has an amortized life of
one year. Amortization expense of $1,778 was recorded for the year
ended June 30, 2004 and is included in interest expense on the
statement of operations.
Note 3 - Stock Offering costs
The Company has entered an agreement with an underwriter to raise up
to $8 million. The agreement called for a nonrefundable payment of
$15,000 upon execution of the agreement and $15,000 upon completion of
the Private Placement Memorandum. See Note 5. The payments to the
underwriter are considered offering costs and are expected to be
offset against the proceeds of the Private Placement Memorandum.
Note 4 - Notes Payable and Notes Payable - Related Party
Notes Payable to unrelated parties consist of the following:
Unsecured note payable bearing interest at 10% per
annum, principal and any accrued interest is due
September 9, 2004. The note holder has an option
to convert each $1.00 of note into two shares of
common stock ($.50 per share). Subsequent to
year-end, the company received an extension to
repay until November 9, 2005. $ 50,000
Unsecured note payable bearing interest at 10% per
annum, principal and any accrued interest is due
December 10, 2004. The note holder has an option
to convert each $1.00 of note into two shares of
common stock ($.50 per share). 60,000
Page 10
LIFELINE NUTRACEUTICALS CORPORATION
(A Development Stage Company)
Notes to Financial Statements
(Continued)
Note 4 - Notes Payable and Notes Payable - Related Party (continued)
Unsecured note payable bearing interest at 10% per
annum, principal and any accrued interest is due
March 2, 2005. The note holder has an option to
convert each $1.00 of note into two shares of
common stock ($.50 per share). 25,000
Unsecured note payable bearing interest at 10% per
annum, principal and any accrued interest is due
April 7, 2005. The note holder has an option to
convert each $1.00 of note into two shares of
common stock ($.50 per share). 35,000
Unsecured note payable bearing interest at 10% per
annum, principal and any accrued interest is due
April 24, 2005. The note holder has an option to
convert each $1.00 of note into two shares of
common stock ($.50 per share). 20,000
Unsecured note payable bearing interest at 10% per
annum, principal and any accrued interest is due
April 28, 2005. The note holder has an option to
convert each $1.00 of note into two shares of
common stock ($.50 per share). 50,000
Unsecured note payable, bearing interest at 10%
per annum, principal and any accrued interest is
due June 9, 2005. The note holder has an option to
convert all or part of the principal balance to
units in the private offering of common stock. In
addition, the note has a warrant attached to
purchase shares of common stock equal to their
outstanding principal loan amount divided by the
per share offering price in the private placement. 50,000
Unsecured note payable, bearing interest at 10%
per annum, principal and any accrued interest is
due June 16, 2005. The note holder has an option
to convert all or part of the principal balance to
units in the private offering of common stock. In
addition, the note has a warrant attached to
purchase shares of common stock equal to their
outstanding principal loan amount divided by the
per share offering price in the private placement. 50,000
---------
340,000
Less discounts on debt:
Unamortized warrant (45,474)
Unamortized beneficial conversion interest (49,856)
---------
Notes payable, net of discounts $ 244,670
=========
Page 11
LIFELINE NUTRACEUTICALS CORPORATION
(A Development Stage Company)
Notes to Financial Statements
(Continued)
Note 4 - Notes Payable and Notes Payable - Related Party (continued)
Related party notes payable are as follows:
Unsecured note payable from the spouse of an
executive officer, bearing interest at 10% per
annum, principal and any accrued interest is due
June 14, 2005. The note holder has an option to
convert all or part of the principal balance to
units in the private offering of common stock. In
addition, the note has a warrant attached to
purchase shares of stock equal to their loan
amount divided by the per share offering price in
the private placement, upon the receipt of a
subscription agreement and private placement
memorandum from the Company. $ 50,000
Less discounts on debt:
Unamortized warrant (22,681)
Unamortized beneficial conversion interest (24,989)
---------
Notes payable, net of discounts $ 2,330
=========
Subsequent to year-end, the Company issued additional notes payable
totaling $409,000, bearing interest at 10% per annum, principal and
any accrued interest is due August 31, 2005. Of the total amount of
additional notes issued subsequent to year-end, $32,000 was from the
related party discussed above. The note holders have an option to
convert all or part of the principal balance to units in the private
offering into public equity at the private offering price. In
addition, the notes have a warrant attached to purchase shares of
common stock equal to their loan amount divided by the per share
offering price in the private placement. (Unaudited)
Future minimum debt payments, including related party debt and debt
entered subsequent to year-end, are as follows:
Year ending June 30,
2005 $ 390,000
2006 559,000
---------
$ 949,000
============
Interest expense related to the notes payable totaled $10,517 for the
year ended June 30, 2004. Interest expense related to the related
party note payable totaled $219 for the year ended June 30, 2004.
Page 12
LIFELINE NUTRACEUTICALS CORPORATION
(A Development Stage Company)
Notes to Financial Statements
(Continued)
Note 5 - Stockholders' Equity
During the fiscal year ended June 30, 2004, the Company sold a total
of 18,300,000 shares of common stock for $13,050 in the aggregate at
prices ranging from $.0005 to $.001 per share. All of these shares of
common stock were subscribed to and issued.
The Company's articles of incorporation authorize the issuance of
preferred shares. However, at this time none have been issued nor have
any rights or preferences been assigned to the preferred shares by the
Board of Directors.
Subsequent to year-end, all subscription receivables were collected.
(Unaudited)
For a period of time various officers of the Company were not paid any
salary for services rendered. The Company has estimated the fair value
of the forgone salary for the year ended June 30, 2004 at $79,500,
which has been recorded as a contribution of services to capital.
As disclosed in Note 4, three notes payable were issued with warrants
to purchase common stock of the Company at the price of a future
private placement and conversion rights equal to their loan amount
divided by the per share offering price in the private placement.
Because the stock purchase price of the private placement can be
estimated, an initial value has been recorded as a discount to the
debt and an addition to equity. Once the final stock purchase amount
is known with certainty, the exercise price and number of shares
subject to exercise will be adjusted to a final valuation using the
Black-Scholes valuation model and recorded as an adjustment to equity
and to the amortizable discount related to the related debt
instruments.
Note 6 - Fair Value of Financial Instruments
SFAS No. 107 requires disclosures about the fair value for all
financial instruments, whether or not recognized, for financial
statement purposes. Disclosures about fair value of financial
instruments are based on pertinent information available to management
as of June 30, 2004. Accordingly, the estimates presented in these
statements are not necessarily indicative of the amounts that could be
realized on disposition of the financial instruments.
Management has estimated the fair values of cash, accounts payable,
and accrued expenses to be approximately their respective carrying
values reported on these statements because of their short maturities.
Note 7 - Income Taxes
At June 30, 2004, the Company had a net operating loss carryforward of
approximately $361,600 that may be offset against future taxable
income, if any, until 2020. These carryforwards are subject to review
by the Internal Revenue Service.
The Company has fully reserved the approximate $71,600 tax benefit of
the operating loss carryforward, by a valuation allowance of the same
amount, because the Company has determined that the probability of
realization of the tax benefit is less than likely to occur.
Page 13
LIFELINE NUTRACEUTICALS CORPORATION
(A Development Stage Company)
Notes to Financial Statements
(Continued)
Note 8 - Operating Lease Commitments
Effective July 1, 2004, the Company entered into a month-to-month
lease for its office facilities. The office facility lease requires
monthly payments of approximately $5,400. Included in such payments
are charges each month for common area maintenance charges, property
tax, bookkeeping, insurance and management fees.
Note 9 - Commitments
The Company has entered into multiple employment agreements, as
follows:
Position Term Salary
-------- ---- ------
President and CEO January 2004 - July 14, 2006 $180,000 per annum
Chief Development Officer January 2004 - July 14, 2006 $120,000 per annum
Chief Financial Officer April 15, 2004 - April 15, 2006 $120,000 per annum
The CEO's contract provides for a severance payment of an amount equal
to the pro rata distributable portion of any supplemental and or
incentive compensation at three times the sum of the president's base
salary.
As disclosed in Note 3, the Company has entered an agreement with an
underwriter to raise up to $8 million. The agreement requires a
nonrefundable payment of $15,000 upon execution of the agreement and
$15,000 upon completion of the Private Placement Memorandum.
Additionally, under the agreement, the Company must pay a 10%
commission from all proceeds raised and a fee for expenses of 3% of
all proceeds raised.
The Company entered into an agreement for the manufacturing of its
products. The agreement provides for negotiation of pricing on the
date of the first purchase order. That price will be in effect for one
year or less if raw material costs increase. The Company will be
wholly dependent on this manufacturer for product to sell.
The Company entered an agreement with a research institute for animal
(mice) testing of the Company's product at a total cost of $23,838.
The testing was concluded and the final installment of $11,838 paid on
September 30, 2004. (Unaudited)
Note 10 - Related party transactions
As disclosed in Note 4, the Company issued notes payable to the spouse
of one of its officers.
The Company paid an officer $2,000 for securing $20,000 third party
note funding.
Page 14
LIFELINE NUTRACEUTICALS CORPORATION
(A Development Stage Company)
Notes to Financial Statements
(Continued)
Note 11 - Events Subsequent to June 30, 2004 (Unaudited)
As disclosed in Note 4, subsequent to year-end, the Company issued
additonal notes payable totaling $409,000.
Subsequent to year-end, the Company entered a Plan of Reorganization
and Agreement with Yaak River Resources, Inc. ("YAAK") whereby the
Company agreed to exchange 81% of the outstanding shares of Lifeline
Nutraceuticals Corporation stock for 15,385,110 shares of YAAK. After
the exchange, the former owners of the Company will own 95% of the
outstanding shares of merged companies. The exchange will occur at a
ratio of .8034 shares of Lifeline Nutraceuticals Corporation common
stock for one share of YAAK common stock, subject to the approval and
acceptance of Lifeline Nutraceuticals Corporation shareholders holding
at least 80% of the outstanding stock of Lifeline Nutraceuticals
Corporation. The Company expects that the transaction will qualify as
a tax-free event. In addition, YAAK will change its name to Lifeline
Therapeutic, Inc. Following the closing of this transaction, Lifeline
Therapeutic, Inc. will attempt to exchange all originally issued and
outstanding notes payable by Lifeline Nutraceuticals Corporation into
new notes payable by Lifeline Therapeutics, Inc. In addition, Lifeline
Therapeutics, Inc. will exchange stock purchase warrants issued by
Lifeline Nutraceuticals Corporation into stock purchase warrants for
the common stock of Lifeline Therapeutics, Inc.
Subsequent to year-end, the Company issued an additional 5,350,000
shares of common stock for cash.
Page 15
LIFELINE NUTRACEUTICALS CORPORATION
Unaudited Pro Forma Combined Statement of Operations
Year Ended June 30, 2004
Historical
Lifeline Lifeline Proforma Proforma
Therapeutics, Inc. Nutraceuticals, Inc. Adjustments Combined
------------------ -------------------- ----------- ----------
REVENUES $ -- $ -- $ -- $ --
----------- ----------- ----------- -----------
OPERATING EXPENSES
Payroll and payroll tax expense 261,568 261,568
Contributed services 79,500 79,500
General and administrative 8,962 92,859 28,000 (a) 129,821
----------- ----------- ----------- -----------
Total operating expenses 8,962 433,927 28,000 470,889
----------- ----------- ----------- -----------
OPERATING (LOSS) (8,962) (433,927) (28,000) (470,889)
OTHER INCOME (EXPENSE)
Interest expense -- (19,514) -- (19,514)
----------- ----------- ----------- -----------
Net (loss) $ (8,962) $ (453,441) $ (28,000) $ (490,403)
=========== =========== =========== ===========
Basic and fully diluted (loss) per Share $ (0.06)
===========
Weighted average shares outstanding 8,854,877
===========
The accompanying notes are an integral part of these financial statements.
LIFELINE THERAPEUTICS, INC.
Unaudited Pro Forma Combined Balance Sheet
As of June 30, 2004
Historical
ASSETS Lifeline Lifeline Proforma Proforma
------ Therapeutics, Inc. Nutraceuticals, Inc. Adjustments Combined
------------------ -------------------- ----------- -----------
Current Assets
Cash and cash equivalents $ 185 $ 49,663 $ -- $ 49,848
Prepaid expenses -- 7,813 -- 7,813
--------- --------- --------- ---------
Total current assets 185 57,476 -- 57,661
--------- --------- --------- ---------
Property and equipment
Investment in real estate, land 35,743 -- -- 35,743
Office equipment -- 18,906 -- 18,906
Accumulated depreciation -- (208) -- (208)
--------- --------- --------- ---------
Total property and equipment 35,743 18,698 -- 54,441
Other Assets
Debt issuance costs, net of amortization -- 15,222 -- 15,222
Deferred stock offering costs -- 15,000 -- 15,000
Deposits -- 6,166 -- 6,166
--------- --------- --------- ---------
Total other assets -- 36,388 -- 36,388
--------- --------- --------- ---------
TOTAL ASSETS $ 35,928 $ 112,562 $ -- $ 148,490
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
---------------------------------------
Current Liabilities
Accounts payable and accrued expenses $ 5,666 $ 89,503 $ 28,000 (a) $ 123,169
Advances from Shareholder 9,500 -- -- 9,500
Notes payable - related party -- 2,330 -- 2,330
Notes payable -- 244,670 -- 244,670
--------- --------- --------- ---------
Total current liabilities 15,166 336,503 28,000 379,669
--------- --------- --------- ---------
Stockholders' Equity (Deficit)
Common Stock 6,730 242,550 (247,642)(c) 1,638
Additional paid in capital 378,099 -- 247,642 (c) 261,674
(364,067)(b)
Stock subscription receivable -- (13,050) -- (13,050)
Accumulated (deficit) (364,067) (453,441) 364,067 (b) (481,441)
(28,000)(a)
--------- --------- --------- ---------
Total stockholders' equity (deficit) 20,762 (223,941) (28,000) (231,179)
--------- --------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 35,928 $ 112,562 $ -- $ 148,490
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
LIFELINE THERAPEUTICS, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information of
Lifeline Therapeutics, Inc. ("LTI") gives effect to the issuance of
approximately 15,385,110 shares of LTI in exchange for shares representing 81%
of Lifeline Nutraceuticals Corporation ("LNC") as if such transaction was
consummated June 30, 2004 for the Unaudited Pro Forma Combined Balance Sheet and
as if such transaction was consummated on July 1, 2003 for the Unaudited Pro
Forma Combined Statement of Operations for the year ended June 30, 2004. The
Unaudited Pro Forma Combined Balance Sheet as of June 30, 2004 includes LNC
historical information as of June 30, 2004. The Unaudited Pro Forma Combined
Statement of Operations for the year ended June 30, 2004 includes LNC historical
information for the year ended June 30, 2004. The exchange of shares between LTI
and LNC was completed on October 26, 2004 resulted in LTI acquiring an 81%
interest in LNC in exchange for 15,385,110 shares of LTI stock which represents
94% of the issued and outstanding shares of LTI. All related adjustments are
described in the accompanying notes. In the opinion of management, all
adjustments have been made that are necessary to present fairly the pro forma
data.
The following unaudited pro forma combined financial information is
presented for illustrative purposes only, does not purport to be indicative of
our financial position or results of operations as of the date hereof, or as of
or for any other future date, and is not necessarily indicative of what our
actual financial position or results of operations would have been had the
foregoing transaction been consummated on such dates, nor does it give effect to
(i) any transactions other than the foregoing transaction and those described in
the accompanying Notes to Unaudited Pro Forma Combined Financial Information or
(ii) LTI's or LNC's results of operations since June 30, 2004. Actual amounts
could differ from those presented. T
he following unaudited pro forma combined financial information is based
upon the historical financial statements of LTI and LNC, and should be read in
conjunction with such historical financial statements, the related notes and the
Notes to Unaudited Pro Forma Combined Financial Information.
In the preparation of the unaudited pro forma combined financial
information, management has estimated that the historical book value of the LNC
assets and liabilities approximates the fair value thereof.
LIFELINE THERAPEUTICS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
June 30, 2004
(1) Basis of Presentation
---------------------
The accompanying combined pro forma financial statements are presented to
reflect the acquisition of Lifeline Nutraceuticals Corporation ("LNC") by
Lifeline Therapeutics, Inc. ("LTI").
On October 26, 2004, LTI acquired 81% of the outstanding shares of common
stock of LNC from LNC's shareholders in exchange for 15,385,110 shares of
LTI's common stock. Prior to the merger, LTI had enacted a 68 for 1 reverse
stock split wherein 67,308,857 shares became 989,836 shares. After the
merger, outstanding shares totaled 16,374,946.
The accompanying pro forma combined statements of operations combines the
historical operations of LTI and LNC of the year ended June 30, 2004 as if
the acquisition had occurred on July 1, 2003.
(2) Pro Forma Adjustments
---------------------
The reorganization will be recorded as a recapitalization effected by a
reverse acquisition wherein LTI is treated as the acquiree for accounting
purposes, even though it is the legal acquirer. Since LTI is a
non-operating entity with limited business activities, goodwill will not be
recorded and is not reflected in the pro forma combined financial
statements.
(a) Accrual of $28,000 in estimated legal and accounting costs in
connection with the acquisition.
(b) Eliminate accumulated (deficit) of LTI as part of the recapitalization
of LNC with 989,836 shares of LTI stock outstanding on the date of
merger.
(c) Adjust common stock to reflect the issuance of 15,385,110 shares of
LTI common stock for 81% of the outstanding shares of LNC and
completing the recapitalization. The adjustment also reduces the
amount recorded as no par value common stock of LNC to reflect the
$.0001 par value of LTI.
(3) Basic and Fully Diluted (Loss) Per Common Share
-----------------------------------------------
Pro forma (loss) per common share for the year ended June 30, 2004 is
computed based on the weighted average number of common shares outstanding
during the period, assuming (1) that the post-split 989,836 shares of LTI
outstanding as of the date of the reorganization were outstanding as of the
beginning of the year and (2) that the weighted average shares outstanding
of LNC during the year ended June 30, 2004 are restated at the conversion
ratio into LTI shares at .8034 LTI share for every LNC share. No dilution
has been considered for any warrants or convertible debt since such adding
such equivalent shares would produce an anti-dilutive effect due the net
losses of the combined companies.