UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934
For the transition period from to
-------------- -----------------
Commission file number: 000-30489
Lifeline Therapeutics, Inc.
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(Exact name of Registrant as specified in its charter)
Colorado 84-1097796
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
6400 South Fiddler's Green Circle, Suite 1750 Englewood, Colorado 80112
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(Address of principal executive offices and Zip Code)
(720) 488-1711
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(Registrant's telephone number)
Yaak River Resources, Inc.,
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes [ X ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the issuer's classes of common stock, as of
November 15, 2004 is 16,374,946 shares.
LIFELINE THERAPEUTICS, INC.
(A Development Stage Company)
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Report on Review by Independent Certified Public Accountant F-1
Balance Sheet - December 31, 2003 and September 30, 2004 (unaudited) F-2
Statement of Operations - For the Three Months Ended September 30, 2003 and
2004 and for the Nine Months Ended September 30, 2003 and 2004 and
Cumulative Amounts from Inception of the Development
Stage through September 30, 2004 (unaudited) F-3
Statement of Cash Flows - For the Nine Months Ended September 30, 2003
and 2004 and Cumulative Amounts from Inception of the Development
Stage through September 30, 2004 (unaudited) F-4
Statement of Stockholders' Equity - For the Nine Months Ended
September 30, 2004 (unaudited) F-5
Notes to Unaudited Financial Statements F-6
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations 1
Item 3: Controls and Procedures 4
PART II. OTHER INFORMATION 4
Signatures
Certification pursuant to Securities Exchange Act of 1934 and Sections 302
and 906 Of the Sarbanes-Oxley Act of 2002
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited Financial Statements for the nine months ended September 30,
2004 are attached hereto and by reference incorporated herein. Please refer to
pages F-1 through F-7 following the signature page.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Material Changes in Financial Condition
The Company had no operations in the nine month period however the Company
recorded a liability in September 2004 for legal and accounting costs of $31,321
incurred in connection with the execution of an Agreement and Plan of
Reorganization.
On September 21, 2004 the Company entered into an Agreement and Plan of
Reorganization with Lifeline Nutraceuticals Corporation whereby Lifeline
Nutraceuticals Corporation agreed to propose to its shareholders an exchange of
at least 80% of its outstanding shares of common stock for 94% of the newly
issued shares of the Company. Lifeline Nutraceuticals Corporation note holders
will become creditors of the Company following the completion of the
transaction.
On September 28, 2004 the Company changed its name to Lifeline Therapeutics,
Inc. and effectuated a 68 for 1 reverse stock split wherein 67,308,857 shares
that were previously outstanding became 989,836 shares.
On October 26, 2004, the Company consummated the Agreement and Plan of
Reorganization with Lifeline Nutraceuticals Corporation whereby the Company
newly issued 15,385,110 shares of its common stock for 81% of the outstanding
shares of Lifeline Nutraceuticals Corporation stock. After the exchange, the
former owners of the Company owned 6% of the outstanding shares of merged
companies. The Company will attempt to exchange all originally issued and
outstanding notes, including warrants, payable by Lifeline Nutraceuticals
Corporation into new notes, including warrants, payable by the Company and the
Company will become a creditor of Lifeline Nutraceuticals to the extent of the
notes exchanged.
Material Changes in Results of Operations
Results of Operations for the Nine Month Period Ended September 30, 2004
Compared to the Nine Month Period Ended September 30, 2003
The Company incurred expenses totaling $47,546 for the nine months ending
September 30, 2004 compared to $8,527 for the same period in 2003. The Company
generated no revenues during this period or during the same period in 2003. The
net loss for the nine months ending September 30, 2004 was $(47,546) as compared
to a loss of $(8,527) during the same period 2003. The increase in expenses and
the corresponding loss is attributable to the incurrence of $31,321 of legal and
accounting costs in connection with the execution of an Agreement and Plan of
Reorganization.
1
The information set forth for the Company for the nine month period ended
September 30, 2004, is not representative of what we anticipate the results of
our operations to be for the future since the reorganization with Lifeline
Nutraceuticals occurred on October 26, 2004.
Footnote 4 of the accompanying financial statements presents a Condensed
Proforma of Combined Statement of Operations for Lifeline Therapeutics Inc. and
Lifeline Nutraceuticals Corporation as if the Agreement and Plan of
Reorganization had been consummated as of the beginning of the periods
presented. On a proforma basis the combined Company generated no revenues for
the nine months ending September 30, 2004 as well as for the same period in
2003. The proforma combined net loss for the nine months ending September 30,
2004 was $(753,158) as compared to a loss of $(33,021) in the same period 2003.
The increase in loss is attributable to the incurrence of payroll, interest,
professional fees and other overhead expenses by Lifeline Nutraceuticals
Corporation for the nine months ending September 30, 2004 that it did not incur
in the same period of 2003 as it did not commence operations until its inception
on July 1, 2003
Following the consummation of the Agreement and Plan of Reorganization we do not
expect to be able to generate revenues until we have raised sufficient funds to
permit us to market our product in accordance with our plan of operations,
produce sufficient inventory to fulfill any orders that may be received, and
continue to maintain our other financial obligations. Because of our lack of
financial resources as described below under "Liquidity and Capital Resources,"
we cannot offer any assurance that we will be able to achieve our goals as
expressed above. Even if we do generate revenues, we cannot offer any assurance
that the revenues generated will be greater than the expenses incurred. These
results will depend on the selling price of the product, the number of units of
product sold, the costs of manufacturing and distributing the product, the costs
of advertising, and the other costs we will be incurring during that period of
time.
Liquidity and Capital Resources
The Company had a net working capital (deficit) at September 30, 2004 of
$(49,330). There were no cash flows provided from operations during the
year-to-date ended September 30, 2004.
Cash and cash equivalents at September 30, 2004 were $167, a decrease of $2,052
from September 30, 2003. During the three-month period ended, September 30,
2004, the Company used ($4,052) net cash in operating activities as compared to
($3,017) for the same period 2003. This increase of cash used in operations of
$4,052 was as a result of administrative expenses.
We had, at September 30, 2004, cash of $167. We anticipate that there will be no
cash generated from operations in the current year necessary to fund our current
and anticipated cash requirements. We plan to obtain additional financing from
equity and debt placements, although we cannot offer any assurance that we will
be able to do so. We have been able to raise capital in a series of equity and
debt offerings in the past.
Prior to the completion of the reorganization, which occurred on October 26,
2004, the Company had nominal assets and liabilities in excess of assets, and we
engaged in no business operations. We were wholly dependent on loans from
shareholders to permit us to meet our regulatory obligations.
As a result of the reorganization, our liabilities exceeded our assets by
approximately $311,000 on a pro-forma combined basis at September 30, 2004, and
we had a working capital deficit of approximately $436,000 on a pro-forma
combined basis at September 30, 2004. We are currently unable to pay our bills
2
as they become due, and we continue to be wholly dependent upon loans from
accredited investors to meet our obligations and to pursue our business plan.
Prior to the reorganization, Lifeline Nutraceuticals Corporation had financed
its operations and negative cash flow through loans from investors. As a part of
the reorganization, the Company will assume these loans.
If we are not able to achieve sufficient liquidity to meet our regulatory
obligations and to pursue our business plan (which we estimate will require at
least $450,000 during the next 3 months and $1,800,000 over the next twelve
months for minimal operations), we will be unable to produce or market any of
our products, we will unable to pay salaries to our employees, and we will be
unable to retain professional advisors to assist us in complying with our
regulatory obligations.
GOING CONCERN
The Company's auditor has issued a "going concern" qualification as part of his
opinion in his review which is a part of this Report. There is substantial doubt
about the ability of the Company to continue as a "going concern." The Company
has no business, limited capital, debt in excess of $49,497, all of which is
current, $167 in cash, no other liquid assets, and no capital commitments. The
effects of such conditions could easily be to cause the Company's bankruptcy.
Lifeline Nutraceuticals' auditors issued a "going concern" qualification as a
part of its opinion included with Lifeline Nutraceuticals' June 30, 2004,
audited financial statements, and no circumstances have occurred to change their
opinion.
Management hopes to seek and obtain debt and equity funding for operations and
to provide working capital. Management has plans to seek capital in the form of
loans or stock private placements. If management is not able to obtain the
necessary capital, the Company may not be able to continue as a going concern.
PLAN OF OPERATION
Lifeline Nutraceuticals Corporation's focus to date has been to support
development and documentation of intellectual property (held by Lifeline
Nutraceuticals) and to create products from that intellectual property that we
expect to be marketable as non-prescription nutritional supplements for the
reduction of oxidative stress and mitigation of the adverse effects of the aging
process.
We believe that our strength is our ability to bring the necessary resources
together to identify, evaluate, develop, engineer and successfully commercialize
our intellectual property. We believe that we are positioning Lifeline
Therapeutics, Inc., as a result of the merger, to benefit from increasing demand
for nutritional supplements that effectively address issues relating to aging
and oxidative stress.
At the present time, we do not have sufficient financial assets to carry our
business plan through to completion. We are dependent upon the completion of
this offering, or obtaining a significant amount of financing from other sources
(which cannot be assured) to:
o Complete our testing and analysis at Webb-Waring and documenting the
results;
o Obtaining all governmental licenses necessary in the United States for
the distribution of nutritional supplements such as Protandim;
o Obtaining a marketing plan designed for the roll-out of Protandim as
our initial product;
o Commence manufacturing and packaging Protandim for sale; and
o Marketing Protandim as our first product based on the results from the
Webb-Waring testing and other work performed by consultants.
3
This may also require that we enter into distribution agreements with stores for
the marketing and distribution of Protandim, and this will likely require that
we engage in additional marketing efforts with prospective distributors. It is
likely that these distributors will require that they review our test reports
and they may want to perform some of their own tests.
We have also given consideration to the development of other products, such as
Protandim PET (a nutritional supplement for dogs and cat pets) and SuperSOD
(2/3). We are only in the beginning stages of the development of these products
and do not have licensing rights to either of them. Consequently we cannot offer
any assurance that we will be able to obtain the rights to develop or market
these products.
Item 3. Controls and Procedures
As required by Rule 13a - 15 under the Securities Exchange Act of 1934, within
the 90 days prior to the filing date of this report, we carried out an
evaluation of the effectiveness of the design and operation of the Company's
disclosure controls and procedures. This evaluation was carried out under the
supervision and with the participation of our Chief Executive Officer who is
also our Principal Financial and Accounting Officer. Following this inspection,
this officer concluded that the Company's disclosure controls and procedures are
effective. There have been no significant changes in the Company's internal
controls or in other factors which could significantly affect internal controls
subsequent to the date the Company carried out its evaluation. Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in the Company reports filed or
submitted under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in the Company reports filed under the Exchange Act is
accumulated and communicated to management, including the Company's Chief
Executive Officer and the Company's Principal Financial Officer, as appropriate,
to allow timely decisions regarding required disclosure.
PART II Other Information
Item 1. Legal Proceedings.
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a)(1) On October 26, 2004, the Company completed a Plan and Agreement 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.
4
(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. Defaults upon senior securities.
Not applicable.
Item 4. Submission of matters to a vote of security holders.
Not applicable.
Item 5. Other information.
Not applicable.
5
Item 6. Exhibits
A. Exhibits
31.1 Certification of the principal executive officer pursuant to
Rule 13a - 14(a).
31.2 Certification of the principal financial officer pursuant to
Rule 13a - 14(a).
32.1 Certification of the principal executive officer pursuant to
18 U.S.C. ss.1350.
32.2 Certification of the principal financial officer pursuant to
18 U.S.C. ss.1350.
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 15, 2004 /s/ William Driscoll
---------------------------------
William Driscoll, President
Principal Executive Officer
Date: November 15, 2004 /s/ Daniel W. Streets
---------------------------------
Daniel W. Streets, Treasurer
Principal Accounting Officer,
Principal Financial Officer
6
Lifeline Therapeutics, Inc.
(Formerly known as Yaak River Resources, Inc.)
Financial Statements
For the Nine Months Ended September 30, 2004
(Unaudited)
REPORT ON REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors
Lifeline Therapeutics, Inc.
Englewood, Colorado
We have reviewed the accompanying balance sheet of Lifeline Therapeutics, Inc.
(formerly known as Yaak River Resources, Inc.) as of September 30, 2004 and the
related statements of operations for the three months and nine month periods
ended September 30, 2004 and 2003, and the related cash flows for the nine
months ended September 30, 2004 and 2003 included in the accompanying Securities
and Exchange Commission Form 10-QSB for the period ended September 30, 2004.
These financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants and the standards of PCAOB .
A review of interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of persons
responsible for financial and accounting matters. It is substantially less in
scope than an audit conducted in accordance with auditing standards generally
accepted in the United States, the objective of which is the expression of an
opinion regarding the financial statements as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with accounting principles generally accepted in the United States and the
standards of PCAOB.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2, conditions
exist which raise substantial doubt about the Company's ability to continue as a
going concern unless it is able to generate sufficient cash flows to meet its
obligations and sustain its operations. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the balance sheet as of December 31, 2003, and
the related statements of operations, stockholders' equity and cash flows for
the year then ended (not presented herein). In our report dated March 24, 2004,
we expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying balance sheet as of
September 30, 2004 is fairly stated in all material respects in relation to the
balance sheet from which it has been derived.
Michael Johnson & Co., LLC.
Denver, Colorado
October 11, 2004
F-1
LIFELINE THERAPEUTICS, INC.
Formerly Known as Yaak River Resources, Inc.
(A Development Stage Company)
BALANCE SHEET
(Unaudited)
September 30, December 31,
2004 2003
------------- ------------
ASSETS:
Current Assets:
Cash $ 167 $ 2,219
--------- ---------
Total Current Assets 167 2,219
--------- ---------
Other Assets:
Investment - Properties 25,275 35,743
--------- ---------
Total Other Assets 25,275 35,743
--------- ---------
TOTAL ASSETS $ 25,442 $ 37,962
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 42,997 $ 9,971
Advances from shareholders' 6,500 4,500
--------- ---------
Total Current Liabilities 49,497 14,471
--------- ---------
Stockholders' Equity:
Preferred stock, $.0001 par value, 50,000,000
share authorized, issued and outstanding - none -- --
Series A -Common stock, $.0001 par value; 250,000,000
shares authorized; issued and outstanding - 989,836 shares 99 99
Series B -Common stock, $.0001 par value; 250,000,000
shares authorized; issued and outstanding - none -- --
Capital paid-in excess of par value 384,730 384,730
Deficit accumulated during the development stage (408,884) (361,338)
--------- ---------
Total Stockholders' Equity (24,055) 23,491
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,442 $ 37,962
========= =========
See accountant's review report.
F-2
LIFELINE THERAPEUTICS, INC.
Formerly Known as Yaak River Resources, Inc.
(A Development Stage Company)
STATEMENT OF OPERATIONS
(Unaudited)
June 18, 1988
Three Months Ended Nine Months Ended (Inception)
September 30, September 30, to
---------------------------- -------------------------- September 30,
2004 2003 2004 2003 2004
--------- ---------- ----------- ---------- -----------
REVENUES: $ -- $ -- $ -- $ -- $ --
OPERATING EXPENSES:
Amortization -- -- -- -- 1,500
Bank charges 18 18 54 49 703
Legal and accounting 31,321 1,500 32,321 5,506 146,086
Director fees -- -- -- -- 800
Office expenses -- 1,000 -- 1,000 8,990
Stock fees and other costs 300 -- 1,993 962 15,296
Administration and consulting 240 -- 240 1,010 128,629
Mining assessments and fees 1,450 -- 1,450 -- 76,929
Bad debt -- -- -- -- 6,250
Rent/telephone -- -- -- -- 12,213
--------- --------- --------- --------- ---------
Total Operating Expenses 33,329 2,518 36,058 8,527 397,396
--------- --------- --------- --------- ---------
Net Loss from Operations (33,329) (2,518) (36,058) (8,527) (397,396)
--------- --------- --------- --------- ---------
Other Income and expenses:
Interest income -- -- -- -- --
Interest expense (1,020) -- (1,020) -- (1,020)
Write-down of lots (10,468) -- (10,468) -- (10,468)
--------- --------- --------- --------- ---------
(11,488) -- (11,488) -- (11,488)
--------- --------- --------- --------- ---------
Net Loss $ (44,817) $ (2,518) $ (47,546) $ (8,527) $(408,884)
========= ========= ========= ========= =========
Weighted average number of
shares outstanding 989,836 989,836 989,836 989,836
========= ========= ========= =========
Basic and diluted net loss per share $ (0.045) $ (0.002) $ (0.048) $ (0.009)
========= ========= ========= =========
See accountant's review report.
F-3
LIFELINE THERAPEUTICS, INC.
Formerly Known as Yaak River Resources, Inc.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited)
June 10, 1988
Nine Months Ended (Inception)
September 30, to
----------------------------- September 30,
2004 2003 2004
---------- --------- ----------
Cash Flows From Operating Activities:
Net (Loss) $ (47,546) $ (8,527) $(408,884)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization and depreciation -- -- 1,500
Organization costs -- -- (1,500)
Write-down of lots 10,468 -- 10,468
Stock issued for services -- -- 8,800
Changes in assets and liabilities:
Increase in accounts payable and accrued expenses 33,026 5,510 42,997
--------- --------- ---------
Total adjustments 43,494 5,510 62,265
--------- --------- ---------
Net Cash Used in Operating Activities (4,052) (3,017) (346,619)
--------- --------- ---------
Cash Flow From Investing Activities:
Exchange of properties - net -- -- 147,167
Investment purchase -- -- (305,410)
--------- --------- ---------
Net Cash Provided By Investing Activities -- -- (158,243)
--------- --------- ---------
Cash Flow From Financing Activities:
Proceeds from long-term debt -- -- 189,500
Payment of long-term debt -- -- (45,000)
Issuance of common stock -- -- 354,029
Advance from shareholder 2,000 2,500 6,500
--------- --------- ---------
Net Cash Provided By Financing Activities 2,000 2,500 505,029
--------- --------- ---------
Increase (Decrease) in Cash (2,052) (517) 167
Cash and Cash Equivalents - Beginning of period 2,219 754 --
--------- --------- ---------
Cash and Cash Equivalents - End of period $ 167 $ 237 $ 167
========= ========= =========
Supplemental Cash Flow Information:
Interest paid $ -- $ -- $ --
========= ========= =========
Taxes paid $ -- $ -- $ --
========= ========= =========
Noncash Investing and financing activities:
In 1999, the Company exchanged properties with
a book value of $182,910 to a related party
in lieu of payment of liabilities of $147,167 and
land with book value of $35,743 $ -- $ -- $ 182,910
========= ========= =========
See accountant's review report.
F-4
LIFELINE THERAPEUTICS, INC.
Formerly Known as Yaak River Resources, Inc.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
Deficit
Capital Paid Accum. During
Common In Excess of the Development
# of Shares Stock Par Value Stage Totals
----------- --------- --------- ---------- ---------
Balance - December 31, 2000 953,071 95 367,234 (323,316) 44,013
Issuance of common stock for cash 22,059 2 10,498 -- 10,500
Net Loss for year -- -- -- (16,350) (16,350)
--------- --------- --------- --------- ---------
Balance - December 31, 2001 975,130 97 377,732 (339,666) 38,163
--------- --------- --------- --------- ---------
Issuance of common stock for cash 14,706 2 6,998 -- 7,000
Net Loss for year -- -- -- (9,430) (9,430)
--------- --------- --------- --------- ---------
Balance - December 31, 2002 989,836 99 384,730 (349,096) 35,733
--------- --------- --------- --------- ---------
Net Loss for year -- -- -- (12,242) (12,242)
--------- --------- --------- --------- ---------
Balance - December 31, 2003 989,836 99 384,730 (361,338) 23,491
--------- --------- --------- --------- ---------
Net Loss for period -- -- -- (47,546) (47,546)
--------- --------- --------- ---------
---------
Balance - September 30, 2004 989,836 $ 99 $ 384,730 $(408,884) $ (24,055)
========= ========= ========= ========= =========
See accountant's review report.
F-5
LIFELINE THERAPEUTICS, INC.
(Formerly Known As Yaak River Resources, Inc.)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. Presentation of Interim Information
In the opinion of the management of Lifeline Therapeutics, Inc. (the
"Company"), the accompanying unaudited financial statements include all
normal adjustments considered necessary to present fairly the financial
position as of September 30, 2004, and the results of operations for the
three months and nine months ended September 30, 2004 and 2003, and cash
flows for the nine months ended September 30, 2004 and 2003. Interim
results are not necessarily indicative of results for a full year.
The financial statements and notes are presented as permitted by Form
10-QSB, and do not contain certain information included in the Company's
audited financial statements and notes for the fiscal year ended December
31, 2003.
On September 21, 2004 the Company entered into an Agreement and Plan of
Reorganization with Lifeline Nutraceuticals Corporation whereby Lifeline
Nutraceuticals Corporation agreed to propose to its shareholders an
exchange of at least 80% of its outstanding shares of common stock for 94%
of the issued and outstanding shares of the Company. Lifeline
Nutraceuticals Corporation note holders will become creditors of the
Company following the completion of the transaction.
On September 28, 2004 the Company, formerly Yaak River Resources, Inc.,
changed its name to Lifeline Therapeutics, Inc. and effectuated a 68 for 1
reverse stock split wherein 67,308,857 shares became 989,836 shares.
All share and per share amounts in the accompanying financial statements of
the Company and notes thereto have been retroactively adjusted to give
effect to the reverse stock split.
2. Going Concern
The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States, which
contemplates continuation of the Company as a going concern. There is
substantial doubt about the ability of the Company to continue as a "going
concern." The Company's operations generated no income during the current
period ended and the Company's deficit is $408,884.
The future success of the Company is likely dependent on its ability to
attain additional capital to develop its proposed products and ultimately,
upon its ability to attain future profitable operations. There can be no
assurance that the Company will be successful in obtaining such financing,
or that it will attain positive cash flow from operations.
3. Subsequent Events
On October 26, 2004, the Company consummated the Agreement and Plan of
Reorganization with Lifeline Nutraceuticals Corporation whereby the Company
agreed to newly issue 15,385,110 shares of its common stock for 81% of the
outstanding shares of Lifeline Nutraceuticals Corporation stock. After the
exchange, the former owners of the Company will own 6% of the outstanding
shares of merged companies. Following the closing of this transaction, the
Company will attempt to exchange all originally issued and outstanding
notes, including warrants, payable by Lifeline Nutraceuticals Corporation
into new notes, including warrants, payable by the Company.
F-6
LIFELINE THERAPEUTICS, INC.
(Formerly Known As Yaak River Resources, Inc.)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
4. Condensed Proforma of Combined Statement of Operations
The following Condensed Proforma represents the combined operations of
Lifeline Therapeutics Inc. and Lifeline Nutraceuticals Corporation as if
the Agreement and Plan of Reorganization had been consummated as of the
beginning of the periods presented.
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- -----------------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Revenues $ -- $ -- $ -- $ --
Net Loss $ (376,046) $ (27,012) $ (753,158) $ (33,021)
=========== ========== =========== ===========
Weighted average
shares outstanding 16,766,604 9,345,196 11,979,432 9,345,196
=========== ========== =========== ===========
Basic and diluted net
loss per share $ (0.02) $ (0.00) $ (0.06) $ (0.00)
=========== ========== =========== ===========
F-7