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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2002.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 0-31152
LIFEN, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 76-0585701
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
455 Market Street, Suite 1220, San Francisco, CA 94105
(Address of principal executive offices)
(415) 543-1535
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
10,998,166 shares of Common Stock, $.0001 par value, outstanding on January 10,
2003.
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LIFEN, INC.
Form 10-QSB Quarterly Report
For Quarterly Period Ended November 30, 2002
Table of Contents
Page
----
PART I -- FINANCIAL INFORMATION 1
Item 1. Financial Statements 1
Unaudited Balance Sheet at November 30, 2002 and
Audited Balance Sheet at August 31, 2002 1
Unaudited Statements of Operations
For Three Months Ended November 30, 2002 and November 30, 2001 2
Unaudited Statements of Cash Flows
For Three Months Ended November 30, 2002 and November 30, 2001 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Item 3. Controls and Procedures 15
PART II -- OTHER INFORMATION 16
SIGNATURE 17
CERTIFICATIONS 18
i
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS November 30, 2002 August 31, 2002
(Unaudited) (Audited)
----------------- -----------------
Current Assets:
Cash $ 189,905 $ 440,517
Prepaid Expenses 4,560 -
Other Receivables 2,643 2,700
----------------- -----------------
Total Current Assets: 197,108 443,217
----------------- -----------------
Long Term Assets:
Fixed assets, net 6,795 -
Prepaid rent 36,476 -
Website development, net 3,354 -
Security deposit 9,119 -
----------------- -----------------
Total Long Term Assets: 55,744 -
----------------- -----------------
TOTAL ASSETS $ 252,852 $ 443,217
----------------- -----------------
----------------- -----------------
LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities:
Accounts Payable $ 27,623 $ 82,709
----------------- -----------------
Total Liabilities: 27,623 82,709
----------------- -----------------
Stockholders' Equity:
Preferred Stock, par value $.0001
Authorized 10,000,000 shares,
No shares issued and outstanding - -
Common Stock, par value $.0001
Authorized 50,000,000 shares
Issued and outstanding
10,998,166 shares
and 9,998,286 shares 1,001 1,000
Additional paid in capital,
net of costs incurred in
obtaining financing 821,443 814,677
Accumulated deficit during
development stage (597,215) (455,169)
Total Stockholders' Equity: 225,229 360,508
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 252,852 $ 443,217
----------------- -----------------
----------------- -----------------
The accompanying Notes are an integral part of these Financial Statements.
1
LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED NOVEMBER 30
AND FROM INCEPTION NOVEMBER 10, 1997 TO NOVEMBER 30, 2002
From Inception
Nov. 10, 1997 to
2002 2001 Nov. 30, 2002
------------- ------------- ----------------
(Unaudited) (Unaudited) (Unaudited)
Revenue: $ - $ - $ -
------------- ------------- ----------------
Expenses:
Market Research 6,620 - 31,620
Consulting 92,673 4,837 244, 039
Write Off of Offering Costs - - 15,546
Professional Fees 25,678 - 73,733
Rent and Occupancy 4,017 3,000 36,017
Administrative 12,296 6,000 82,296
Cancellation of Management
Service Agreement - - 94,165
Other Operating Expenses 762 2,201 19,799
------------- ------------- ----------------
Total Expenses 142,046 16,038 597,215
------------- ------------- ----------------
Net Loss before Provision
For Income Taxes (142,046) (16,038) (597,215)
Provision for Income Taxes - - -
------------- ------------- ----------------
Net Loss $ (142,046) $ (16,038) $ (597,215)
------------- ------------- ----------------
------------- ------------- ----------------
Basic Loss per Share $ (0.01) $ (0.00)
------------- -------------
------------- -------------
Weighted Average Number
Shares Outstanding 10,349,896 7,241,000
------------- -------------
------------- -------------
The accompanying Notes are an integral part of these Financial Statements.
2
LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED NOVEMBER 30
AND FROM INCEPTION NOVEMBER 10, 1997 TO NOVEMBER 30, 2002
From Inception
Nov. 10, 1997 to
2002 2001 Nov. 30, 2002
------------- ------------- ----------------
(Unaudited) (Unaudited) (Unaudited)
Operating Activities:
Net Loss $ (142,046) $ (16,038) $ (597,215)
------------- ------------- ----------------
Adjustments to reconcile net
(loss) to net cash used in
operating activities:
Market Research - - 25,000
Consulting - 36 5,682
Depreciation and amortization 146 59 559
Changes in operating assets &
liabilities:
Accounts payable &
accrued expenses (55,086) - 27,623
Prepaid expenses &
other current assets (4,503) (14,360) (7,203)
------------- ------------- ----------------
Net Cash Flows from
Operating Activities: (201,489) (30,303) (545,554)
------------- ------------- ----------------
Investing Activities:
Purchase of fixed assets (6,795) - (7,975)
Long term prepaid expenses (45,595) - (45,595)
Acquisition of intangible assets (3,500) - (3,500)
Disposal of Equipment - - 767
------------- ------------- ----------------
Net Cash Flows from
Investing Activities: (55,890) - (56,303)
Financing Activities:
Common Stock Issued 6,767 - 847,917
Offering Expenses - - (56,155)
------------- ------------- ----------------
Net Cash Flow from
Financing Activities: 6,767 - 791,762
------------- ------------- ----------------
Net cash (decrease)/increase
for period (250,612) (30,303) 189,905
Cash at beginning of period 440,517 30,529 -
------------- ------------- ----------------
Cash at end of period $ 189,905 $ 226 $ 189,905
------------- ------------- ----------------
------------- ------------- ----------------
The accompanying notes are an integral part of these financial statements.
3
LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2002
The accompanying financial statements of Lifen, Inc. (the "Company") have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B. In the opinion of
management, the financial statements reflect all adjustments considered
necessary for a fair presentation. For further information, refer to the
financial statements and footnotes thereto included in our annual report on
Form 10-KSB for the year ended August 31, 2002 as filed with the Securities and
Exchange Commission on November 27, 2002.
Note 1. Organization
- ---------------------
Lifen, Inc. (the "Company") was incorporated under the laws of the state of
Delaware on November 10, 1997 under the name Digivision International, Ltd.
The Company's name was changed to Lifen, Inc. on June 22, 2000. To date, the
Company has had no commercial operations and has been engaged in the
development of its business plan, market research, initial website
development, and seeking initial financing in order to commence commercial
operations.
Note 2. Summary of Significant Accounting Policies
- ---------------------------------------------------
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amount of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. The most significant
estimate relates to the valuation allowance in connection with deferred tax
assets. Actual results could differ from those estimates.
Fixed Assets
- ------------
Fixed assets are stated at cost. Depreciation is provided for utilizing the
straight-line method over the estimated useful life of the asset. The cost of
maintenance and repairs is charged to operations as incurred.
4
LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2002
Accounting for Impairment of Long-Lived Assets
- ----------------------------------------------
In accordance with SFAS 121, the Company has adopted a policy of recording an
impairment loss on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. Adoption of this
statement will not have an impact on these financial statements.
Organization Costs
- ------------------
The Company has adopted SOP 98-5, "Reporting on the Costs of Start-up
Activities", which requires that all costs of start-up activities and
organization costs be expensed as incurred. The Company expects that the
adoption of SOP 98-5, which is effective for fiscal years beginning after
December 15, 1998, will not have a material effect on its financial statements.
Website Development
- -------------------
In March 2000, the Emerging Issues Task Force issued No. 00-02 ("EITF 00-02"),
"Accounting for Website Development Costs." EITF 00-02 states that all costs
relating to software used to operate a website and relating to development of
initial graphics and web page design should be accounted for using Statement of
Position ("SOP") 98-1. Under this SOP, costs incurred in the preliminary
project stage should be expensed as incurred, as should most training and data
conversion costs. External direct costs of materials and services and internal
direct payroll-related costs should be capitalized once certain criteria are
met. EITF 00-02 is effective for all fiscal quarters beginning after June 30,
2000. The Company's accounting policy for internal-use software, as required by
SOP 98-1, incorporated the requirements of EITF 00-02. To date, no significant
costs have been incurred.
Income Taxes
- ------------
The Company records deferred income taxes using the liability method. Under the
liability method, deferred tax assets and liabilities are recognized for the
expected future tax consequences of temporary differences between the financial
statement and income tax basis of the Company's assets and liabilities. An
allowance is recorded, based on currently available information, when it is more
likely than not that any or all of a deferred tax asset will not be realized.
The provision for income taxes includes taxes currently payable, if any, plus
the net change during the period presented in deferred tax assets and
liabilities recorded by the Company.
5
LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2002
Per Share Data
- --------------
The Company has adopted the standards set by the Financial Accounting Standards
Board and computes earnings per share data in accordance with SFAS No. 128
"Earning per Share." The basis per share data has been computed on the loss for
the period divided by the historic weighted average number of shares of common
stock outstanding. There are no potentially dilutive securities which would be
included in computation of fully diluted earnings per share.
Note 3. Income Taxes
- ---------------------
There is no provision for Federal or State Income Taxes for the three month
period ended November 30, 2002 and 2001, since the Company has incurred losses
from inception. Additionally, the Company has reserved fully for any potential
tax benefits resulting from its carryforward operating losses. Deferred tax
assets at November 30, 2002 and 2001 consist of the following:
2002 2001
-------------- --------------
Net Operating loss carryforward $ 239,000 $ 78,700
Valuation allowance (239,000) (78,700)
-------------- --------------
$ -0- $ -0-
As of November 30, 2002, the Company has net operating loss carryfowards of
approximately $597,215 which expire in various years from 2012 through 2017.
Note 4. Common Stock
- ---------------------
On January 9, 1998, the Company issued 2,250,000 shares of its common stock to
two founders of the Company for services valued at $225.
On October 30, 1998, the Company issued 2,750,000 shares of its common stock to
four individuals for services to be performed. The agreement was canceled and
the shares of common stock were returned and canceled.
On November 5, 1998, the Company completed a private placement offering of its
common stock, Pursuant to Rule 504 under Regulation D, the Company issued
500,000 shares of its common stock in satisfaction of $25,000 owed to four
parties who had performed services on behalf of the Company.
6
LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2002
On March 3, 1999, the Company issued 2,325,200 shares of its common stock to
eight parties for services performed on behalf of the Company, valued at $232.
On March 15, 2000, the Company issued 1,219,800 to ten parties for services
performed on behalf of the Company, valued at $122.
During April 2000, the Company sold 45,000 shares of its common stock at $1.00
per share to three investors in a private placement, pursuant to Rule 504 under
Regulation D, and received total proceeds of $45,000.
On October 2, 2000, the Company issued 660,000 shares of its common stock to six
individuals for consulting services performed, valued at $.0001 per share, or
$66. On October 6, 2000, the Company sold 10,000 shares of its Company stock
to one investor at $1.00 per share. The Company received $5,000 in cash and
services totaling $5,000.
In November 2000, the Company sold 30,000 shares of its common stock to two
individual investors at a price of $.50 per share and received total proceeds
of $15,000.
In January 2001, the Company sold 48,000 shares of its common stock to five
individual investors at a price of $.50 per share and received total proceeds
of $24,000.
In May 2001, the Company sold 500,000 shares of its common stock to one
individual investor at a price of $.50 per share. The Company received
proceeds in the amount of $100,000 in May, 2001, $50,000 in June, $50,000 in
July, and $50,000 in August, 2001, for a total of $250,000. These shares were
sold in reliance on the exemption provided by Section 4(2) of the Act.
In July 2001, 530,000 shares of the Company's common stock were returned to the
Company for no consideration and were cancelled.
On November 16, 2001, the Company issued 366,000 shares of its common stock to
nine parties who had performed services on behalf of the Company. The shares
were issued in consideration of debt owed by the Company, at the agreed upon
rate of $.0001 per share, and the shares were sold in reliance on the exemption
provided by Section 4(2) of the Act.
In August, 2002, the Company sold 574,286 shares of its common stock to one
foreign investor at a price of $.70 per share and received total proceeds of
$402,000. The shares were sold pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended.
7
LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2002
In August, 2002, the Company sold 2,000,000 shares of its common stock to two
investors at a price of $.05 per share and received total proceeds of $100,000,
pursuant to a Common Stock Purchase Agreement, executed effective May 15, 2002.
On October 22, 2002, the Company authorized issuance of 300,000 restricted
shares of the Company's common stock, 100,000 shares to each of three directors
in exchange for providing services to the Company as a member of the Board of
Directors, which were valued at $700 ($0.007 per share) for each of the three
directors.
On November 1, 2002, the Company authorized issuance of 399,931 restricted
shares of the Company's common stock to the Company's President and 299,949
restricted shares of the Company's common stock to the Company's Chief
Financial Officer and secretary. These shares will be issued in exchange for
providing services as officers of the Company, which were valued at $2,666.66
and 2,000.00, respectively.
Note 5. Related Party Transactions
- -----------------------------------
The Company's Chief Executive Officer and Chief Financial Officer also hold
similar positions with First Medical Resources Corporation ("FMRC"). When the
Company was relocated to its new office in October, 2002, certain moving and
equipment installation costs were incurred. These costs were advanced by the
Company for the benefit of itself and FMRC. That portion advanced for the
benefit of FMRC was repaid in full to the Company in December 2002.
Ameristar Group Incorporated ("Ameristar") is a corporation that is an affiliate
of two corporate shareholders of the Company and is considered to be a related
party. During the quarter ended November 30, 2002, the Company paid Ameristar
consulting fees totaling $15,000.
During the first quarter of fiscal 2002, the Company reached agreement with
Ameristar to provide the Company with management services needed for its
continuing development. Accordingly, on November 1, 2001, a Management Services
Agreement was executed with Ameristar to provide consulting services, office
space, and administrative services for a two-year period. The monthly cost of
these services is $5,500, consisting of $2,500 for consulting services, $1,000
for rent, and $2,000 for administrative services. The consulting services
include such activities as business plans; introductions to financial community;
strategic planning; evaluation of potential business relationships, such as
joint ventures, mergers and acquisitions; business projections; review of
marketing plans; and general advisory and management services as required.
8
LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2002
Effective August 15, 2002, the Management Services Agreement with Ameristar was
terminated in accordance with a Termination Agreement executed between the
Company and Ameristar on that date. As part of the Termination Agreement, the
debt owed to the Company by Ameristar in the amount of $94,165 was cancelled in
full payment of compensation owed to Ameristar for additional services provided
to the Company.
Note 6. Commitments and Contingencies
- --------------------------------------
Effective August 14, 2002, the Company entered into an employment agreement with
Mr. James D. Durham in the position as Chairman of the Board and Chief Executive
Officer. The term of the agreement is for a period of two years with a base
annual salary at the rate of $200,000 per annum.
On September 26, 2002, the Company entered into a sublease as successor in
interest to premises at 455 Market Street, San Francisco, California. The
premise includes 2,487 square feet of office space and furniture. The term of
the lease is through July 31, 2004 with a monthly rental through the term of
the lease of $4,559.50. The first, second, and final eight months of the lease
were prepaid as an inducement to the lessee to enter into this sublease.
On October 30, 2002 the Company entered into an agreement with a consulting
firm to generate a list of businesses that met the Company's acquisition
criteria. The Company agreed to pay the consulting firm $14,250 for these
services plus an additional $42,750 for each business identified by the
consulting firm that was acquired by the Company. To date, no businesses
identified by the consulting firm have resulted in a consummated acquisition.
The Company paid $5,000 of the $14,250 liability to the consulting firm during
the fiscal quarter.
On November 15, 2002, the Company entered into an agreement with a consultant to
identify businesses that met the Company's acquisition criteria. The Company
agreed to pay the consultant five per cent of the first $1,000,000 in the
aggregate purchase price paid by the Company to the seller. This percentage
declines by one per cent for each additional $1,000,000 in aggregate purchase
price paid by the Company to the seller at which time the consultant is paid one
per cent of the excess of $5,000,000 in aggregate purchase price. To date, no
businesses identified by the consultant has resulted in a consummated
acquisition. Should such a transaction occur, the consultant's fee will be paid
75% in cash less the $14,250 paid to the consulting firm previously referenced
and 25% in the Company's common stock based upon the average closing price of
the stock over the previous 20 days.
9
LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2002
Note 7. Concentration of Credit Risk
- -------------------------------------
The Company maintains a bank account at one bank as of November 30, 2002 with
a balance of $189,715 on deposit, only $100,000 of which is insured under
Federal law.
Note 8. Going Concern
- ----------------------
Lifen, Inc. is considered to be a development stage company. Since inception,
the Company has been engaged in the development of its business plan, market
research, initial website development and seeking financing in order to commence
commercial operations. At November 30, 2002, the Company had incurred losses
during the development stage of $597,000. Approximately $36,000 of the
cumulative losses have been non-cash services in exchange for common stock in
the Company. The balance of the losses, approximately $561,000, was funded by
the private placements of common stock, which totaled $841,000 as of November
30, 2002.
Management recognizes the need to raise additional funds to continue its planned
operations. Primary to the Company's solvency in the coming year is the sale
of additional equity in the Company, continuing the Company's strategy of
funding development through additional equity financing. These funds will be
used to manage working capital requirements and to fund ongoing development
costs. Capital commitments for the next twelve months are minimal, and
additional funds raised through private placements should be sufficient to
meet the Company's obligations for that period and until the various planned
activities are able to create significant cash flow. The Company plans to raise
any necessary capital through the sale of additional equity.
If additional capital is not readily available, the Company will be forced to
scale back its development activities such that its income will exceed its
expenses. Although this will greatly slow the Company's development, it will
allow for the Company's survival. Notwithstanding the foregoing, there is
substantial doubt regarding the Company's ability to continue as a going
concern, and as such, the Company is substantially dependent upon its ability
to raise sufficient capital to cover its development costs.
10
LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 2002
Note 9. Supplemental Disclosure to Cash Flow Statement
- -------------------------------------------------------
From Inception
For Quarter Ended For Quarter Ended Nov. 10, 1997 to
Nov. 30, 2002 Nov. 30, 2001 Nov. 30, 2002
----------------- ----------------- ----------------
Cash paid during
the period for:
Interest $ - $ - $ -
Income Taxes $ - $ - $ -
Non Cash Transactions:
Common stock issued
for consulting
services and
market research $ 6,767 $ 36 $ 37,449
11
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of Operations
The following discussion and analysis should be read in conjunction with the
unaudited financial statements and notes thereto included in Part I - Item 1 of
this report, and Management's Discussion and Analysis of Financial Conditions
and Results of Operations and Risk Factors contained in the Company's Annual
Report on Form 10-KSB for the fiscal year ended August 31, 2002 as filed with
the Securities and Exchange Commission on November 27, 2002.
Forward-Looking Statements
Some of the information contained in this report may constitute forward-looking
statements or statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Any such forward-looking statements are based on current
expectations and projections about future events. The words estimate, plan,
intend, expect, anticipate and similar expressions are intended to identify
forward-looking statements which involve, and are subject to, known and unknown
risks, uncertainties and other factors which could cause the Company's actual
results, financial or operating performance, or achievements to differ
materially from future results, financial or operating performance, or
achievements expressed or implied by such forward-looking statements.
Projections and assumptions contained and expressed herein were reasonably
based on information available to the Company at the time so furnished and as
of the date of this filing. All such projections and assumptions are subject to
significant uncertainties and contingencies, many of which are beyond the
Company's control, and no assurance can be given that the projections will be
realized. Readers are cautioned not to place undue reliance on any such forward-
looking statements, which speak only as of the date hereof. Careful
consideration should be given to the Risk Factors contained in the Company's
Form 10-KSB for the fiscal year ended August 31, 2002. The Company undertakes no
obligation to publicly release any revisions to these forward-looking statements
to reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
Change of Fiscal Year End
On October 22, 2002, the Company's Board of Directors approved a change in the
Company's fiscal year end from August 31st to December 31st, as reported in Form
8-K filed on November 6, 2002. This change became effective on December 31,
2002 and this Form 10-QSB for the quarterly period ended November 30, 2002 is
being filed to comply with transition reporting requirements. Additionally, the
Company will file on Form 10-KSB the report covering the transition period from
September 1, 2002 to December 31, 2002.
Results of Operations
The Company did not have any revenue during the three month period ended
November 30, 2002, or during the comparable period for the prior year, and
has not had any revenue since its inception in November 1997.
12
The net loss for the three month period ended November 30, 2002 was $142,046
compared to a net loss of $16,038 for the comparable period in the prior year,
an increased loss of $126,008 resulting primarily from the payment of consulting
fees to the Company's executives and administrative personnel as well as legal
fees incurred for both general representation and assistance in various filings
with the Securities and Exchange Commission.
The total cash and cash equivalents at November 30, 2002 were $189,905 compared
to $440,517 at August 31, 2002, a decrease of $250,612, resulting primarily from
the aforementioned payment of consulting and legal fees, prepaid rent and
acquisition of business equipment.
During this quarter, the Company began implementation of its new strategic
direction by opening initial discussions with several companies that meet the
Company's desired acquisition criteria. Although there can be no assurances
that these discussions will result in the consummation of one or more
acquisitions, the Company remains confident that the strategic direction chosen
remains sound. Toward this end, during the current fiscal quarter, the Company
entered into two consulting agreements regarding the identification of potential
acquisitions. Refer to Financial Statements, Note 6, "Commitments and
Contingencies."
Company Overview
The Company was duly incorporated under the laws of the state of Delaware on
November 10, 1997 as Digivision International, Ltd., and the corporation name
was changed to Lifen, Inc. (the Company) on June 22, 2000. To date, the Company
has had no commercial operations and has been engaged in the development of its
business plan, initial market research activities, initial web site development,
and seeking initial funding in order to commence commercial operations.
Plan of Operation
The Company's success in achieving profitability will depend on its ability to
consummate acquisitions of healthcare companies. During the implementation of
its business plan, the Company will be subject to all of the risks inherent in
an emerging business, including the need to provide reliable and effective
products and services, to develop marketing expertise, and to generate sales.
In the event that the Company's projected market does not develop as
anticipated, the Company's business, financial condition and results of
operations could be materially adversely affected.
During the next twelve months, the Company intends to perform the activities
required to establish its business operations. In executing its current plans,
the Company's objectives will include the following:
. Find healthcare companies to acquire and consummate acquisitions
. Raise necessary funding for its business operations
. Develop brand awareness
. Build an operations structure to support the business
. Develop management information systems and technology to support operations
. Attract and retain qualified personnel
13
According to the Company's estimates, from $1,000,000 to $3,000,000 will be
needed through the twelve months ending August 31, 2003 to establish these
business operations, not including revenues from operations, which are not
expected to materialize in significant amounts until the second or third
calendar quarters of 2003 at the earliest. Primary to the Company's solvency in
the coming year is raising additional equity.
Capital commitments for the next twelve months are minimal, and additional funds
raised through various equity offerings should be sufficient to meet the
Company's obligations for that period and until the various planned activities
described herein are able to create significant cash flow. The Company has
received an audit opinion which includes a "going concern" risk. The Company is
aware of this risk and plans to raise any necessary capital through the sale of
additional equity. If additional capital is not readily available, the Company
will be forced to scale back its development activities such that its income
will exceed its expenses. Although this will slow the Company's development, it
will allow for the Company's survival. Notwithstanding the foregoing, there is
substantial doubt regarding the Company's ability to continue as a going
concern, and as such, the Company is substantially dependent upon its ability
to raise sufficient capital to cover its development costs.
The Company plans to perform market research and development during the next
twelve months regarding such considerations as additional definition of services
to be offered, and pricing of services. The Company's planned business does not
require the purchase of plants, factories, extensive capital equipment, or
inventory.
The Company has no employees as of the date of this Report. There are
intentions to hire employees during the next twelve months as its business plan
is executed, which will be dependent on the Company's ability to raise the
required funds. In the interim, the Company will rely on its management to
perform the activities required for preliminary business development. The
failure to attract and retain the required personnel would have a material
adverse effect on the Company's business and results of operations.
Related Party Transaction
The Company's Chief Executive Officer and Chief Financial Officer also hold
similar positions with First Medical Resources Corporation ("FMRC"). The
Company advanced certain moving and equipment installation costs for the benefit
of itself and FMRC. That portion advanced for the benefit of FMRC was repaid in
full to the Company in December, 2002. (See Note 5 to Financial Statements,
Related Party Transactions.)
During the quarter ended November 30, 2002, the Company paid consulting fees
totaling $15,000 to Ameristar Group Incorporated ("Ameristar"). Ameristar is an
affiliate of Remsen Group, Ltd. and Wilmont Holding Corp., two corporate
shareholders of the Company. (See Note 5 to Financial Statements, Related Party
Transactions.)
14
Liquidity and Capital Resources
At November 30, 2002, the Company had cash totaling $189,905. There is no
assurance that the Company will be able to raise the amount of capital required
to meet its working capital needs.
Item 3. Controls and Procedures
Based on their evaluation, as of a date within 90 days of the filing of this
Form 10-Q, the Company's Chief Executive Officer and Chief Financial Officer
have concluded the Company's disclosure controls and procedures (as defined in
Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934) are
effective.
There have been no significant changes in internal controls or in other factors
that could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There is no material litigation currently pending against us.
Item 2. Change in Securities
(c) At the Company's Board Meeting on October 22, 2002, the issuance
of 100,000 shares of common stock was authorized to each of the
Company's three Directors, valued at $.007 per share and vesting over a
three year period, with a vesting start date of October 22, 2002. The
Board also authorized the issuance of 399,931 and 299,949 shares of
common stock to the Company's President and Chief Financial Officer,
respectively. Said shares were valued at $2,666.66 and $2,000.00
respectively and vest over a four year period with a vesting start date
of November 1, 2002. All of the total of 999,880 shares are restricted
and were issued in exchange for providing services to the Company.
(Refer to Form 10-KSB for the fiscal year ended August 31, 2002,
PART II, "Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.")
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
There have been no matters submitted to a vote of security holders
during the period from September 1, 2002 to November 30, 2002 through
the solicitation of proxies or otherwise.
Item 5. Other Information
None.
16
Item 6. Exhibits and Reports of Form 8-K
(a) Exhibits
Exhibit No. Description
99.1 Certification under Section 906 of the Sarbanes-Oxley
Act of 2002 of Chief Executive Officer
99.2 Certification under Section 906 of the Sarbanes-Oxley
Act of 2002 of Chief Financial Officer
(b) Reports on Form 8-K
As previously reported in Registrant's Form 10-KSB for the fiscal
year ended August 31, 2002, Registrant filed Form 8-K on November 6,
2002 regarding the change of its fiscal year end from August 31st to
December 31st, such change to take effect on December 31, 2002. This
change was approved by the Board of Directors on October 22, 2002 and
Registrant will file on Form 10-KSB the report covering the transition
period from September 1, 2002 to December 31, 2002.
SIGNATURES
In accordance with the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
in its behalf by the undersigned, thereunto duly authorized.
Date: January 14, 2003 By: /s/ James D. Durham
-------------------------------------------
James D. Durham
Chief Executive Officer
Date: January 14, 2003 By: /s/ Lawrence M. Davis
-------------------------------------------
Lawrence M. Davis
Chief Financial Officer
17
CERTIFICATION PURSUANT TO RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, James D. Durham, Chief Executive Officer and Chairman of Board of the
Registrant, Lifen, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Lifen, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days of the
filing date of this quarterly report (the "Evaluation Date");
and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the Registrant's auditors and the audit
committee of the Registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal controls; and
6. The Registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: January 14, 2003 By: /s/ James D. Durham
-------------------------------------------
James D. Durham
Chief Executive Officer
18
CERTIFICATION PURSUANT TO RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Lawrence M. Davis, Chief Financial Officer and Secretary of the Registrant,
Lifen, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Lifen, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this quarterly report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days of the
filing date of this quarterly report (the "Evaluation Date");
and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the Registrant's auditors and the audit
committee of the Registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Registrant's
ability to record, process, summarize and report financial data
and have identified for the Registrant's auditors any material
weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Registrant's
internal controls; and
6. The Registrant's other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: January 14, 2003 By: /s/ Lawrence M. Davis
-------------------------------------------
Lawrence M. Davis
Chief Financial Officer
19