UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2
to
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of The Securities
Exchange Act of 1934
GALEA LIFE SCIENCES, INC.
(Exact name of registrant as specified in its charter)
Florida 90-0515860
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10151 University Blvd, Suite 508, Orlando, FL 32817
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 877-576-8872
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Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
- --------------------------- ------------------------------
- --------------------------- ------------------------------
Securities to be registered pursuant to Section 12(g) of the Act:
Common Shares Par Value $.0001
- --------------------------------------------------------------------------------
(Title of Class)
- --------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
EXPLANATORY NOTE
We are filing this General Form for Registration of Securities on Form 10 to
register our common stock, par value $0.0001 per share (the "Common
Stock"),pursuant to Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
Once this registration statement is deemed effective, we will be subject to the
requirements of Regulation 13A under the Exchange Act, which will require us to
file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current
reports on Form 8-K, and we will be required to comply with all other
obligations of the Exchange Act applicable to issuers filing registration
statements pursuant to Section 12(g) of the Exchange Act.
Unless otherwise noted, references in this registration statement to "Galea Life
Sciences, Inc.," the "Company," "we," "our" or "us" means Galea Life Sciences,
Inc.
FORWARD LOOKING STATEMENTS
There are statements in this registration statement that are not historical
facts. These "forward-looking statements" can be identified by use of
terminology such as "believe," "hope," "may," "anticipate," "should," "intend,"
"plan," "will," "expect," "estimate," "project," "positioned," "strategy" and
similar expressions. You should be aware that these forward-looking statements
are subject to risks and uncertainties that are beyond our control. For a
discussion of these risks, you should read this entire Registration Statement
carefully, especially the risks discussed under "Risk Factors." Although
management believes that the assumptions underlying the forward looking
statements included in this Registration Statement are reasonable, they do not
guarantee our future performance, and actual results could differ from those
contemplated by these forward looking statements. The assumptions used for
purposes of the forward-looking statements specified in the following
information represent estimates of future events and are subject to uncertainty
as to possible changes in economic, legislative, industry, and other
circumstances. As a result, the identification and interpretation of data and
other information and their use in developing and selecting assumptions from and
among reasonable alternatives require the exercise of judgment. To the extent
that the assumed events do not occur, the outcome may vary substantially from
anticipated or projected results, and, accordingly, no opinion is expressed on
the achievability of those forward-looking statements. In the light of these
risks and uncertainties, there can be no assurance that the results and events
contemplated by the forward-looking statements contained in this Registration
Statement will in fact transpire. You are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of their dates. We do
not undertake any obligation to update or revise any forward-looking statements.
GALEA LIFE SCIENCES, INC.
TABLE OF CONTENTS
Page
No.
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Item 1. Business 1
Item 1A. Risk Factors 3
Item 2. Financial Information 10
Item 3. Properties 15
Item 4. Security Ownership of Certain Beneficial Owners and Management 15
Item 5. Directors and Executive Officers 16
Item 6. Executive Compensation 16
Item 7. Certain Relationships and Related Transactions, and Director
Independence 16
Item 8. Legal Proceedings 17
Item 9. Market Price of and Dividends on the Registrant's Common
Equity and Related Stockholder Matters 17
Item 10. Recent Sales of Unregistered Securities 17
Item 11. Description of Securities to be Registered 18
Item 12. Indemnification of Directors 19
Item 13. Financial Statements and Supplementary Data 19
Item 14. Changes in Disagreements with Accountants on Accounting and
Financial Disclosure 19
Item 15. Financial Statements and Exhibits 20
i
Item 1. Business
Business Development & History
Galea Life Sciences, Inc. ("we", "us", "our", the "Company" or the
"Registrant"), formerly known as Value Holdings, Inc., was incorporated in the
State of Florida in December 1992. The Company is considered to be in the
developmental stage. On August 10, 2007 the Company acquired Innovative
Technology Acquisition Corporation ("ITAQ") in exchange for 23,567,624 shares of
its restricted common stock.
Business of Issuer
The Company is a life sciences company devoted to acquiring, developing and
delivering specialized therapeutic nutritional supplement products that may
complement and support prescribed drug therapy regimens such Highly Active
Antiretroviral Therapy (HAART) for people living with HIV/AIDS, and
chemotherapy. These are conditions that compromise basic body functions,
including the immune system. Our initial product is Nutraplete(TM), a
therapeutic multi-nutritional dietary supplement drink mix. Nutraplete has been
formulated specifically to benefit people living with HIV/AIDS. Micronutrient
deficiency is common in people living with HIV/AIDS. This can be a result of the
HIV infection itself, poor absorption of nutrients, changes in metabolism, HIV
drugs, poor appetite, diarrhea, infections or damage in the gut. While
micronutrients can be found in foods, most HIV-positive people cannot meet all
their nutritional needs through diet alone.
Nutraplete is currently available in two flavors: Lemon-Lime and Green Grape.
New flavors, and a sugar-free formulation, are currently under development.
Nutraplete(TM) is the Company's initial product. We intend to develop other
nutritional supplement products in the future.
Nutraplete(TM)includes supplements that can address common nutritional
deficiencies sometimes found in people living with HIV/AIDS. In addition,
Nutraplete contains Immunolin, a bioactive protein supplement that provides
high-quality lactose-free immunoglobulins that support friendly intestinal
bacteria. It also contains transferring and other acute-phase proteins that help
provide immune system support. ImmunoLin is included under license from AMPC,
Inc. d/b/a Proliant Health and Biologicals. The license is cancellable at any
time by Proliant, is not exclusive and does not set a price for Immunolin.
Nutraplete can be prescribed and reimbursed by Medicaid in six states, including
the three that comprise its largest target market; New York, New Jersey and
Connecticut.
"New York City is the epicenter of the HIV/AIDS epidemic in the U.S. More than
100,000 New Yorkers are living with HIV, but thousands don't know they are
infected". This is according to the New York Department of Health and Hygiene:
(http://www.nyc.gov/html/doh/html/ah/ah.shtml)
Additionally, Nutraplete is Medicaid-approved in Nevada, Washington State and
Illinois. We are also seeking Medicaid approval in Florida, the District of
Columbia, California, Maryland, Texas and Pennsylvania.
1
Nutraplete is distributed exclusively by Allion Healthcare, Inc. , operator of
MOMS (Mail Order Medication Systems) Pharmacy. MOMS is a nationwide pharmacy
provider specializing in the treatment of HIV/AIDS, serving over 24,000 people
living with HIV/AIDS daily, about 90% of which are Medicaid recipients. By
working with the biotechnology and pharmaceutical industries, and the HIV
community, MOMS provides advanced, clinically comprehensive and cost effective
treatment and care to this chronically ill population.
Our relationship with MOMS Pharmacy is a key factor in moving Nutraplete and
Galea forward in this market. We envision our growth will be primarily organic -
through both the increased market share that we will experience as MOMS itself
gains market share, and word of mouth within HIV/AIDS communities. MOMS Pharmacy
is building physical pharmacies inside HIV/AIDS clinics through pharmacy/clinic
partnerships in the heart of major HIV/AIDS population areas. The Company's
agreement with MOMS Pharmacy is for an exclusive five year term that commenced
in November, 2007.
MOMS has the exclusive right to purchase, inventory, promote and re-sell
Nutraplete in the United States. All sales of the Company's products are
established at prices and terms the Company determines from time to time on at
least a 30 day notice. The agreement can be terminated by either party on at
least a 90 day notice.
MOMS will help facilitate introducing Nutraplete to these populations through
medical professionals, case managers, strategic sponsorships and
person-to-person marketing methods.
Based on the Nutraplete formulation platform, we are in the process of planning
and conducting clinical product evaluations in Miami and Seattle in cooperation
with MOMS Pharmacy and local HIV/AIDS clinics serving targeted patient
communities.
Nutraplete has thus far been approved for Medicaid reimbursement in six U.S.
States: New York, Connecticut, New Jersey, Washington, Illinois and Nevada.
Medicaid approval is also being sought in California, Maryland, Texas,
Pennsylvania, Florida and Washington, D.C. Assuming we complete Medicaid
pharmacy approval in all key states with significant HIV/AIDS populations, we
estimate that Nutraplete will be available to the majority of people living with
HIV/AIDS in the US.
The Company is exploring other potential markets for Nutraplete that may include
chemotherapy, infirmity (elderly), gastric bypass and other immune
system-comprised conditions based upon those patients similar nutritional
deficits for which Nutraplete may have application.
The Company has not generated any revenues to date from sales of its products to
retail customers. We expect to commence retail sales in the third quarter 2010.
From February 8, 1996 to January 31, 2010 the Company had an aggregate of
$98,918 in revenues, all of which were from sales of products purchased for
clinical evaluations and not sold at retail. As of January 31, 2010, we had a
stockholder's deficit of $5,162,306.
2
We are voluntarily filing this Registration Statement with the U.S. Securities
and Exchange Commission and we're under no obligation to do so under the
Securities Exchange Act of 1934.
Trademark
Nutraplete(TM) is currently in the trademark registration process with the
United States Patent and Trademark Office.
Government Regulation
The Food and Drug Administration (FDA) regulates dietary supplements
(Nutraplete(TM) is considered a dietary supplement) under a different set of
regulations than those covering "conventional" foods and drug products
(prescription and Over-the-Counter). Under the Dietary Supplement Health and
Education Act of 1994 (DSHEA), the dietary supplement manufacturer is
responsible for ensuring that a dietary supplement is safe before it is
marketed. FDA is responsible for taking action against any unsafe dietary
supplement product after it reaches the market. Generally, manufacturers do not
need to register their products with FDA nor get FDA approval before producing
or selling dietary supplements. Manufacturers must make sure that product label
information is truthful and not misleading.
Employees
Our only full time employee is Paul Zuromski, our President. Consultants are
used on an as-needed basis.
Item 1A. Risk Factors.
An investment in the Company is highly speculative in nature and involves a high
degree of risk.
Risks Related to Our Business
THE EXTENT OF OUR SOURCING AND MANUFACTURING MAY ADVERSELY AFFECT OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
If there is a delay in the delivery of goods and delivery schedules cannot be
met, then our customers may cease doing business with us which would cause
negative gross profits and therefore, our profitability. We may also incur extra
costs to meet delivery dates, which would also reduce our company's
profitability. We have not experienced any significant delays in delivery of
goods.
OUR BUSINESS DEPENDS ON THE ABILITY TO SOURCE MERCHANDISE IN A TIMELY AND
COST-EFFECTIVE MANNER.
The merchandise intended to be sold by us will be sourced from vendors. Our
business depends on being able to find qualified vendors and access products in
a timely and efficient manner. All of the vendors must comply with applicable
laws. The inability to access suitable merchandise on acceptable terms could
adversely impact our results of operations.
3
WE FACE SIGNIFICANT INVENTORY RISKS.
We are exposed to significant inventory risks that may adversely affect our
operating results as a result of new product launches, rapid changes in product
cycles, changes in consumer tastes with respect to our products and other
factors. We must accurately predict these trends and avoid overstocking or
under-stocking product. Demand for product, however, can change significantly
between the time inventory is ordered and the date of sale. The acquisition of
certain types of inventory, or inventory from certain sources, may require
significant lead-time and prepayment, and such inventory may not be returnable.
Any of the inventory risk factors set forth above may adversely affect our
operating results.
WE DEPEND ON THIRD PARTIES TO MANUFACTURE THE PRODUCT WE SELL, AND WE DON'T HAVE
ANY CONTRACTS WITH ANY OF THE MANUFACTURERS OF OUR PRODUCTS. IF WE ARE UNABLE TO
MAINTAIN THESE MANUFACTURING RELATIONSHIPS OR ENTER INTO ADDITIONAL OR DIFFERENT
ARRANGEMENTS, WE MAY FAIL TO MEET CUSTOMER DEMAND AND OUR NET SALES AND
PROFITABILITY MAY SUFFER AS A RESULT.
Our products are contract manufactured. We don't have any contracts with any of
the manufacturers of our product. The fact that we do not have long-term
contracts with our third-party manufacturers means that they could cease
manufacturing products for us at any time and for any reason. In addition, our
third-party manufacturers are not restricted from manufacturing our competitor's
products. If we are unable to obtain adequate supplies of suitable product, our
business and results of operations would suffer. In addition, identifying and
selecting alternative vendors would be time-consuming and expensive, and we
might experience significant delays in production during this selection process.
Our inability to secure adequate and timely supplies of product would harm
inventory levels, net sales and gross profit, and ultimately our results of
operations.
Our manufacturers also may increase the cost of the products we purchase from
them. If our manufacturers increase our costs, our margins would suffer unless
we were able to pass along these increased costs to our customers. We may not be
able to develop relationships with new vendors and manufacturers at the same
prices or at all, and even if we do establish such relationships, such new
vendors and manufacturers might not allocate sufficient capacity to us to meet
our requirements. Furthermore, products from alternative sources, if any, may be
of a lesser quality or more expensive than those we currently purchase. In
addition, if we increase our product orders significantly from the amounts we
have historically ordered from our manufacturers, our manufacturers might be
unable to meet this increased demand. To the extent we fail to obtain additional
products from our manufacturers, we may not be able to meet customer demand,
which could harm our net sales and profitability.
OUR THIRD-PARTY MANUFACTURERS MAY NOT CONTINUE TO PRODUCE PRODUCTS THAT ARE
CONSISTENT WITH OUR STANDARDS OR APPLICABLE REGULATORY REQUIREMENTS, WHICH COULD
HARM OUR BRAND, CAUSE CUSTOMER DISSATISFACTION AND REQUIRE US TO FIND
ALTERNATIVE SUPPLIERS OF OUR PRODUCTS.
Our third-party manufacturers may not maintain adequate controls with respect to
product specifications and quality and may not continue to produce products that
are consistent with our standards or applicable regulatory requirements, as
described below. If we are forced to rely on products of inferior quality, then
our customer satisfaction and brand reputation would likely suffer, which would
lead to reduced net sales. In addition, we may be required to find new
third-party manufacturers to supply our products. There can be no assurance that
we would be successful in finding third-party manufacturers that make products
meeting our standards of quality.
4
In accordance with the Federal Food, Drug and Cosmetic Act, or FDC Act, and
regulations enforced by the Food and Drug Administration, or FDA, the
manufacturing processes of our third party manufacturers must comply with the
FDA's current Good Manufacturing Practices, or cGMPs, for manufacturing drug
products. The FDA may inspect our facilities and those of our third-party
manufacturers periodically to determine if we and our third-party manufacturers
are complying with cGMPs and the FDC Act. A history of past compliance is not a
guarantee that future FDA regulatory manufacturing requirements will not mandate
other compliance steps with associated expense.
We have not experienced any problems or issues relating to regulatory or quality
issues.
If we or our third-party manufacturers fail to comply with federal, state or
foreign regulations, we could be required to suspend manufacturing operations,
change product formulations, suspend the sale of products with non-complying
specifications, initiate product recalls or change product labeling, packaging
or advertising or take other corrective action. In addition, sanctions under the
FDC Act may include seizure of products, injunctions against future shipment of
products, restitution and disgorgement of profits, operating restrictions and
criminal prosecution. If any of the above events occurs, we would be required to
expend significant resources to comply with FDA requirements and we might need
to seek the services of alternative third-party manufacturers. Obtaining the
required regulatory approvals, including from the FDA, to use alternative
third-party manufacturers may involve a lengthy and uncertain process. A
prolonged interruption in the manufacturing of one or more of our products as a
result of non-compliance could decrease our supply of products available for
sale which could reduce our net sales, gross profits and market share, as well
as harm our overall business, prospects, financial condition and results of
operations.
FLUCTUATIONS IN THE PRICE, AVAILABILITY AND QUALITY OF MATERIALS USED IN OUR
PRODUCTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR COST OF GOODS SOLD AND OUR
ABILITY TO MEET OUR CUSTOMER'S DEMANDS.
We compete with numerous entities for supplies of materials. We may not be able
to pass on all or any portion of higher material prices to our customers.
REGULATORY MATTERS GOVERNING OUR INDUSTRY COULD DECREASE OUR NET SALES AND
INCREASE OUR OPERATING COSTS.
We are affected by extensive laws, governmental regulations, administrative
determinations, court decisions and similar constraints. Such laws, regulations
and other constraints may exist at the federal, state or local levels in the
United States.
5
The formulation, manufacturing, packaging, labeling, distribution, importation,
sale and storage of our products are subject to extensive regulation by various
federal agencies, including the FDA, the Federal Trade Commission, or FTC, state
attorneys general in the U.S. If we or our manufacturers fail to comply with
those regulations, we could become subject to significant penalties or claims,
which could harm our results of operations or our ability to conduct our
business. In addition, the adoption of new regulations or changes in the
interpretations of existing regulations may result in significant compliance
costs or discontinuation of product sales and may impair the marketing of our
products, resulting in significant loss of net sales.
In addition, our failure to comply with FTC or state regulations, or with
regulations in foreign markets that cover our product claims and advertising,
including direct claims and advertising by us, may result in enforcement actions
and imposition of penalties or otherwise harm the distribution and sale of our
products.
IF WE DO NOT SUCCEED IN OUR EXPANSION STRATEGY, WE MAY NOT ACHIEVE OUR
ANTICIPATED RESULTS.
Our business strategy is designed to expand the sales of our products. Our
ability to implement our plans will depend primarily on the ability to attract
customers and products. We can give you no assurance that any of our expansion
plans will be successful or that we will be able to establish additional
favorable relationships for the marketing and sales of products and services. If
we are unable to expand our business, our business operations could be adversely
affected.
WE ARE DEPENDANT ON ONE PRODUCT
It present, our business is dependent on one product: Nutraplete. We intend to
develop other nutritional supplement products in the future.
WE ARE DEPENDENT ON ONE DISTRIBUTOR
MOMS Pharmacy is our exclusive distributor for Nutraplete in the US. The
Company's agreement with MOMS Pharmacy terminates in October 31, 2012. During
the time of the agreement, either party may terminate it with a 90 day notice.
The Company could have difficulty locating another suitable distributor which
would materially affect operating results, financial condition and adversely
affect future prospects.
CURRENT REVENUES ARE NOT ADEQUATE TO SUSTAIN BUSINESS OPERATIONS
Our revenues from February 8, 1996 through January 31, 2010 were $98,918 and
were from sales of products purchased for clinical evaluations and not sold at
retail. The Company must raise new investment in the Company to continue
operations.
SHAREHOLDER DEFICIT
As of January 31,2010, we have a stockholder's deficit of $5,162,306.
6
IF WE ARE UNABLE TO ATTRACT ADDITIONAL QUALIFIED AND SKILLED PERSONNEL, OUR
ABILITY TO GROW OUR BUSINESS MAY BE HARMED.
If we are unable to continue to attract, retain and motivate highly qualified
management and personnel and develop and maintain important third party
relationships, we may not be able to achieve our objectives. Competition for
skilled personnel is intense. If we are unable to hire and retain skilled
personnel, our business, financial condition, operating results and future
prospects could be materially adversely affected. We don't anticipate difficulty
in acquiring qualified employees, however, the healthcare field is highly
competitive and we may find difficulty attracting personnel due our situation as
a business start-up.
A DISPUTE CONCERNING THE INFRINGEMENT OR MISAPPROPRIATION OF OUR PROPRIETARY
RIGHTS OR THE PROPRIETARY RIGHTS OF OTHERS COULD BE TIME CONSUMING AND COSTLY,
AND AN UNFAVORABLE OUTCOME COULD HARM OUR BUSINESS.
We may be exposed to future litigation by third parties based on claims that our
programs infringe the intellectual property rights of others. If we become
involved in litigation, it could consume a substantial portion of our managerial
and financial resources, regardless of whether we win or lose. We may not be
able to afford the costs of litigation. Any legal action against us or our
collaborators could lead to:
o payment of damages, potentially treble damages, if we are found to
have willfully infringed a party's patent rights;
o injunctive or other equitable relief that may effectively block our
ability to further develop, commercialize and sell products; or
o we or our collaborators having to enter into license arrangements that
may not be available on commercially acceptable terms, if at all.
As a result, we could be prevented from commercializing current or future
products. There are no claims or litigation regarding our current product.
WE MAY MAKE ACQUISITIONS AND STRATEGIC INVESTMENTS, WHICH WILL INVOLVE NUMEROUS
RISKS. WE MAY NOT BE ABLE TO ADDRESS THESE RISKS WITHOUT SUBSTANTIAL EXPENSE,
DELAY OR OTHER OPERATIONAL OR FINANCIAL PROBLEMS.
Although we have a limited history of making acquisitions or strategic
investments, we may acquire or make investments in related businesses or
products in the future. Acquisitions or investments involve various risks, such
as:
o higher than expected acquisition and integration costs;
o the difficulty of integrating the operations and personnel of the
acquired business;
o the potential disruption of our ongoing business, including the
diversion of management time and attention;
o the possible inability to obtain the desired financial and strategic
benefits from the acquisition or investment;
7
o assumption of unanticipated liabilities;
o incurrence of substantial debt or dilutive issuances of securities to
pay for acquisitions;
o impairment in relationships with key suppliers and personnel of any
acquired businesses due to changes in management and ownership;
o the loss of key employees of an acquired business; and
o the possibility of our entering markets in which we have limited prior
experience.
Future acquisitions and investments could also result in substantial cash
expenditures, potentially dilutive issuance of our equity securities, our
incurring of additional debt and contingent liabilities, and amortization
expenses related to other intangible assets that could adversely affect our
business, operating results and financial condition.
GOING CONCERN
Our auditor has expressed concern regarding the Company's ability to continue as
a going concern.
The Company has experienced significant losses from operations aggregating
$2,251,952 since inception. In addition, the Company had working capital and
stockholders' deficits as of January 31, 2010, of $5,162,396 and has no
significant revenue generating operations. The Company's ability to continue as
a going concern is contingent upon its ability to secure additional financing,
increase ownership equity and attain profitable operations. In addition, the
Company's ability to continue as a going concern must be considered in light of
the problems, expenses and complications frequently encountered in established
markets and the competitive environment in which the Company operates.
The Company is pursuing financing for its operations and seeking additional
investments. In addition, the Company is seeking to establish a revenue base.
Failure to secure such financing or to raise additional equity capital and to
establish a revenue base may result in the Company depleting its available funds
and not being able pay its obligations.
WE ARE DEPENDENT ON FUNDING FROM EXISTING DEBT HOLDERS
Throughout 2009 and continuing into 2010, the Company has been dependent upon
funding from its existing debt holders. Funding decisions have typically not
extended beyond thirty days at any given time, and the Company does not
currently have a defined funding source. Funding delays and uncertainties have
seriously damaged vendor relationships, new product development and revenues. In
the absence of continued funding by its current debt holders, the Company would
have insufficient funds to continue operations. There is no assurance that
additional funding from the current debt holders will be available or available
on terms and conditions acceptable to the Company.
8
PRIVATE PLACEMENT MEMORANDUM
The company is preparing a Private Placement Memorandum to raise $2,500,000 to
fund operations. $50,000 has been raised from a single accredited investor. The
terms of the funding are:
Conversion Rights:
Each Preferred Share is convertible into two (2) shares of the
Company's Common stock.
Voting Rights:
All Preferred shares are convertible into two (2) shares of the
Company's Common Stock, which will have voting rights as provided by
the Company's Bylaws.
Warrants:
Purchasers of this class of Preferred shares will be entitled to
receive one warrant to purchase one share of the Company's Common stock
at $0.50 per share, which will be exercisable within the period ending
three (3) years from the purchase date.
DEFAULT ON DEBENTURES
In February 2008, the Company received proceeds of $275,000 from the issuance of
a convertible debenture. The debenture is payable on February 2010 and bears
interest at 12% per annum. The debenture requires monthly principal and interest
beginning in the fourth month after issuance. Beginning 60 days after issuance
the debenture is convertible into the Company's common stock at the lower of
100% of the volume weighted average price of the stock as reported by Bloomberg
on the closing date or at a 20% discount to the lowest daily closing bid price
of the common stock during the five trading days prior to the conversion date.
In addition, warrants were issued to one debenture holder to purchase 275,000
shares of common stock at an exercise price equal to the closing price for the
shares on the day prior to the closing and a term of three years which shall be
exercised on a cash basis provided that the Company is not in default and the
shares underlying the warrant are subject to an effective registration statement
At January 31, 2010 the Company was in default on the debentures that have been
issued.
Risks Related to the Securities
OUR COMMON STOCK MAY BE SUBJECT TO THE "PENNY STOCK" RULES.
The Company's Common Stock is not currently being traded. If we begin to trade,
our common stock may be subject to the SEC's "penny stock" rules. The term
"penny stock" generally refers to low-priced (below $5), speculative securities
of very small companies. While penny stocks generally are quoted
over-the-counter, such as on the OTC Bulletin Board or in the Pink Sheets, they
may also trade on securities exchanges, including foreign securities exchanges.
In addition, penny stocks include the securities of certain private companies
with no active trading market.
9
Before a broker-dealer can sell a penny stock, SEC rules require the firm to
first approve the customer for the transaction and receive from the customer a
written agreement to the transaction. The firm must furnish the customer a
document describing the risks of investing in penny stocks. The firm must tell
the customer the current market quotation, if any, for the penny stock and the
compensation the firm and its broker will receive for the trade. Finally, the
firm must send monthly account statements showing the market value of each penny
stock held in the customer's account.
Penny stocks may trade infrequently, which means that it may be difficult to
sell penny stock shares once you own them. Because it may be difficult to find
quotations for certain penny stocks, they may be impossible to accurately price.
Investors in penny stocks should be prepared for the possibility that they may
lose their whole investment.
THE PRICE OF OUR SHARES OF COMMON STOCK IN THE FUTURE MAY BE VOLATILE.
The market price of our Common Stock will likely be volatile and could fluctuate
widely in price in response to various factors, many of which are beyond our
control, including: technological innovations or new products and services by us
or our competitors; additions or departures of key personnel; sales of our
Common Stock; our ability to integrate operations, technology, products and
services; our ability to execute our business plan; operating results below
expectations; loss of any strategic relationship; industry developments;
economic and other external factors; and period-to-period fluctuations in our
financial results. In addition, the securities markets have from time to time
experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. These market fluctuations may
also materially and adversely affect the market price of our Common Stock.
OUR PREFERRED STOCK MAY BE USED TO AVOID A CHANGE IN CONTROL OF THE COMPANY.
Our Certificate of Incorporation authorizes the issuance of 20,000,000 million
shares of preferred stock with designations, rights and preferences determined
from time to time by the Board of Directors. Accordingly, the Board of Directors
is empowered, without stockholder approval, to issue additional Preferred Stock
with dividend, liquidation, conversion, voting or other rights that could be
used to avoid a change of control of the Company and which suppress the value of
our Common Stock
Item 2. Financial Information
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion and analysis should be read in conjunction with the
financial statements, and the notes thereto included herein. The information
contained below includes statements of our management's beliefs, expectations,
hopes, goals and plans that, if not historical, are forward-looking statements
subject to certain risks and uncertainties that could cause actual results to
differ materially from those anticipated in the forward-looking statements. For
a discussion on forward-looking statements, see the information set forth in the
Introductory Note to this registration statement under the caption "Forward
Looking Statements", which information is incorporated herein by reference.
10
Overview
Galea Life Sciences, Inc. is focused on bringing Nutraplete(TM) to the HIV/AIDS
marketplace as the first Nutraplete(TM), a specialized therapeutic
multi-nutritional dietary supplement, drink mix. Nutraplete is formulated
specifically to benefit people living with HIV/AIDS. Micronutrient deficiency is
common in people living with HIV/AIDS. This may be a result of the HIV infection
itself, poor absorption of nutrients, changes in metabolism, HIV drugs, poor
appetite, diarrhea, infections or damage in the gut. While micronutrients can be
found in foods, most HIV-positive people cannot meet all their nutritional needs
through diet alone. The potential therapeutic benefits of Nutraplete(TM) results
from a proprietary combination of nutritional supplements.
Nutraplete is manufactured by third party contract suppliers. The original
Nutraplete formulation was manufactured by Bactolac Pharmaceutical, Inc. of
Hauppauge, NY. The Company is currently in the process of reviewing contract
suppliers to gain optimum product quality and price advantage.
Nutraplete can be prescribed by medical professionals and is available for
Medicaid reimbursement in a number of key states including New York, New Jersey,
Connecticut, Nevada, Illinois and Washington State. The Company is seeking
Medicaid approvals in other key states.
We have a five-year, exclusive distribution agreement with industry leader
Allion Healthcare, operator of MOMS (Mail Order Medication Systems) Pharmacy.
MOMS is a nationwide pharmacy provider specializing in the treatment of
HIV/AIDS, presently providing discreet medication delivery services to more than
24,000 HIV/AIDS patients, nearly 90% of whom are Medicaid recipients.
MOMS is also a marketing partner which positions Nutraplete directly in front of
the medical professionals, pharmacists and patients who form our primary market.
In October, 2008, the company has accepted an offer of settlement with the U.S.
Securities and Exchange Commission (SEC) in connection with an administrative
proceeding instituted pursuant to Section 12(j) of the Securities and Exchange
Act of 1934. This resulted in revocation of the registration of each class of
the Company's securities, and therefore, halted trading of the Company's stock.
The Company is filing this new Form 10 registration statement with the SEC. The
Company is intending to have its stock to begin trading on the OTC Bulletin
Board, if, and when, the company clears SEC comments on the Form 10, and FINRA
has accepted the Company's stock for quotation. The Company has not submitted an
application for trading on the OTC Bulletin Board.
As of May 3, 2010, there are 41,342,854 outstanding common shares.
Organizational History
On August 10, 2007 ITAQ was acquired by Galea Life Sciences, Inc. (a shell
Company) ("Galea") and to consummate the transaction Galea issued 23,567,624
shares of restricted common stock to the ITAQ stockholders. This transaction was
accounted for as a reverse acquisition, or a recapitalization of Galea, meaning
that the Galea, the legal acquirer, is considered, for accounting purposes, to
be the acquiree and whereby ITAQ issued 7,504,778 shares of common stock and
750,000 shares of preferred stock in exchange for the net liabilities of the
Galea of $4,274,522. Upon completion of the transaction the stockholders of the
ITAQ owned the controlling interest of the combined company and the Company's
financial statements reflect those of ITAQ.
11
Management Discussion and Analysis and Plan of Operation
Management Discussion and Analysis for the Period Ended January 31, 2010
- ------------------------------------------------------------------------
REVENUES. During three-month period ended January 31,2010 and 2009 we had gross
revenues of $7,500 and $26,618 respectively. The sales are attributable to
product sold to Allion as samples and for the Clinical Evaluations being
conducted in Seattle in Miami.
OPERATING EXPENSES. Our operating expenses consist primarily of professional and
consulting services, expenses for executive and administrative personnel and,
investor and public relations, research and development, telephone and
communications, facilities expenses, travel and related expenses, and other
general corporate expenses. Our operating expenses for the period January
31,2010 were $29,045 compared to operating expenses of $12,842 for the same
period in 2009.
LOSS FROM OPERATIONS. We had an operating loss of ($40,034)) for the period
ended 2010 as compared to an operating loss of ($12,438) for the same period in
2009. After provisions for preferred dividends we had a net loss of $(58,784)
and $(31,188) for the period ended January 31, 2010 and 2009 respectively.
LIQUIDITY AND CAPITAL RESOURCES
ASSETS. At January 31, 2010, we had total assets of $5,575 compared to total
assets of $ $20,505 as of October 31, 2009. The decrease is due to a reduction
in cash on hand.
The current assets at January 31, 2010, were $3,125 compared to $18,055 at
October 31, 2009.
LIABILITIES. At January 31, 2010, we had total liabilities of $5,598,449
compared to total liabilities of $5,124,040 as of October 31, 2009.
We had no long term liabilities as at January 31, 2010 and October 31, 2009.
CASH FLOWS. Our cash used in operating activities was $3,920 compared to $43,097
for the prior period.
During the period ended January 31, 2010, there was net cash used in financing
activities of $(18,850) related to payment of dividends on preferred shares
compared to $(43,256) in 2009 used in investing activities which was related to
dividends on preferred shares and debentures payable.
12
Management Discussion and Analysis for the Fiscal Year Ended October 31, 2009
- -----------------------------------------------------------------------------
and 2008
- --------
REVENUES. During fiscal 2009 and 2008, we had revenues of $91,418 and $0
respectively. The sales are attributable to product sold to Allion as samples
and for the Clinical Evaluations being conducted in Seattle in Miami.
OPERATING EXPENSES. Our operating expenses consist primarily of professional and
consulting services, expenses for executive and administrative personnel and
insurance, investor and public relations, research and development, telephone
and communications, facilities expenses, travel and related expenses, and other
general corporate expenses. Our operating expenses for fiscal 2009 were $77,402
compared to fiscal year 2008 operating expenses of $256,869. The decrease is
related to a transition from final research and development activities as well
as preparation for the clinical evaluations to providing product for the
clinical evaluations.
LOSS FROM OPERATIONS. We had an operating loss of ($3,165)) for fiscal year 2009
as compared to an operating loss of ($256,869) for fiscal 2008, primarily due to
decreased operating expenses as described above.
OTHER INCOME (EXPENSE). We had net other expenses totaling ($ 81,682) during
fiscal year 2009 compared to ($128,669) during fiscal 2008. Other expenses
consisted of interest expenses.
NET LOSS. We had a net loss of ($159,847) in fiscal year 2009 compared to a net
loss of $(460,538) in fiscal 2008. The decrease in net loss is primarily
attributable to the decrease in the operating expenses as discussed above and
lower interest expense.
LIQUIDITY AND CAPITAL RESOURCES
ASSETS. At October 31, 2009, we had total assets of $20,505 compared to total
assets of $159 as of October 31, 2008.
LIABILITIES. At October 31, 2009, we had total liabilities of $5,554,608
compared to total liabilities of $4,944,097 as of October 31, 2008.
CASH FLOWS. Our cash provided by operating activities was $117,302 compared to
cash used in operating activities of ($189,903) for the prior year.
During 2009, there was ($99,406) used in investing activities compared to
($189,812) in 2008 used in investing activities.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. As reflected in
the accompanying financial statements, the Company had a net loss of $(58,784)
for the three-month period ended January 31, 2010, and a stockholders' deficit
of $ (5,162,306) at January 31, 2010. These factors raise substantial doubt
about the Company's ability to continue as a going concern. The ability of the
Company to continue as a going concern is dependent upon the Company's ability
to raise additional funds and implement its business plan. The financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
13
Throughout 2009 and continuing into 2010, the Company has been dependent upon
funding from shareholders. Funding decisions have typically not extended beyond
thirty days at any given time, and the Company does not currently have a defined
funding source. Funding delays and uncertainties have seriously damaged vendor
relationships, new product development and revenues. In the absence of continued
funding by shareholders, the Company would have insufficient funds to continue
operations. There is no assurance that additional funding will be available or
available on terms and conditions acceptable to the Company.
Plan of Operation
- -----------------
Our relationship with MOMS Pharmacy is key to moving Nutraplete forward in this
market. We envision our growth will be primarily organic - through both the
increased market share that we will experience as MOMS itself gains market
share, experience with the product within the target population and the
resulting word of mouth within HIV/AIDS communities. MOMS Pharmacy is building
physical pharmacies inside HIV/AIDS clinics through pharmacy/clinic partnerships
in the heart of major HIV/AIDS populations. The first three pharmacy/clinic
partnerships, serving more than a combined 24,000 HIV/AIDS patients, are located
in Seattle, San Diego and San Francisco. This year MOMS Pharmacy intends to
expand this program to New York and Florida. MOMS introduces our product to
these populations through case managers, strategic sponsorships and other
person-to-person marketing methods. Additionally, we are in the process of
planning and conducting clinical evaluations in Miami and Seattle. The Seattle
Nutraplete Evaluation is comprised of 20 participants. The objective is to
assess the efficacy of adding Nutraplete to stable HIV-1 infected individuals.
The evaluation period is from 60 to 90 days, depending on the individual.
Results will be based physical examination, lab results and quality of life
data. This evaluation portion has been completed and we are currently in the
final data evaluation stages. The Miami evaluation is currently in the
planning/protocol development stages.
In addition to our current Medicaid reimbursement approvals in New York,
Connecticut, New Jersey, Nevada, Washington State and Illinois (these states
represent the major share of the HIV/AIDS population currently in the U.S.), we
are seeking approvals in Florida, Texas, Washington, DC, Pennsylvania and
Maryland.
Our new sugar-free Nutraplete formulation will be completed by the third quarter
2010. At that point, aggressive marketing initiatives with MOMS Pharmacy will
commence through direct medical professional sales, internet marketing,
extensive public relations activities and product sampling.
Critical Accounting Policies and Estimates
Management's discussion and analysis of our financial condition and results of
operations are based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires that we make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent asset sand
liabilities. At each balance sheet date, management evaluates its estimates. We
base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances. Actual results may
differ from these estimates under different assumptions or conditions.
14
ACCEPTANCE OF SEC SETTLEMENT
In October, 2008, the company has accepted an offer of settlement with the U.S.
Securities and Exchange Commission (SEC) in connection with an administrative
proceeding instituted pursuant to Section 12(j) of the Securities and Exchange
Act of 1934. This will result in revocation of the registration of each class of
GLSN securities, and therefore, halt trading of the Company's stock. The Company
failed to file periodic filings with the SEC, including 10Q and 10K from 2003 to
2008.
Item 3. Properties
The Company currently utilizes virtual offices at 10151 University Blvd, Suite
508, Orlando, Florida for $15 per month for a term of 12 months. The officers
and directors work individual from their own offices and do not charge the
company for the use of this space.
Item 4. Security Ownership of Certain Beneficial Owners and Management
- ------------------ -------------------------------- --------------- ------------
(3) Amount
and nature
(2) Name and address of of beneficial (4) Percent
(1) Title of class beneficial owner ownership of class
- ------------------ -------------------------------- --------------- ------------
Common Shares Paul Zuromski 2,725,000 5.2%*
10151 University Blvd
Suite 508
Orlando, FL 32817
- ------------------ -------------------------------- --------------- ------------
Trafalgar Capital 5,000,000 12.4%
Specialized Investment Fund (1)
8-10 Rue Mathias Har
L-1030 Luxembourg
- ------------------ -------------------------------- --------------- ------------
- ------------------ -------------------------------- --------------- ------------
Alison Cohen -0-
- ------------------ -------------------------------- --------------- ------------
* Based on 41,342,854 shares of common stock issued and outstanding as May 3,
2010.
(1) To the best of the knowledge of the Company the natural person with voting
control over the shares owned is Andrew Garai who is Chairman of Trafalgar
Capital sarl, the General Partner of Trafalgar Capital Specialized Investment
Fund.
15
Item 5. Directors and Executive Officers
Name Age Position
Paul Zuromski 57 Chairman & President
Alison Cohen 44 Director
Paul Zuromski, President and Director
Mr. Zuromski was founder and president of Island Publishing Company,
Inc.,(1982-1994) publisher of America's preeminent natural living/natural
product magazine: Body, Mind & Spirit. The Company produced this country's
largest consumer health expositions and developed and marketed therapeutic
natural products worldwide. He is a leading expert in consumer marketing and
product development. Mr. Zuromski has consulted with private and public
companies with issues ranging from operations to product development in high
technology, financial publishing and hi-technology materials.(1994-2007)
Valentino Trubiani resigned as Director on December 10th, 2009. He served as
Director from May 2009, to December, 2009.
Alison Cohen, Director
Alison Rosenberg Cohen was elected a Director of the Company in June 1992. Ms.
Cohen graduated from the University of Miami in 1988 with a B.S. in advertising
and marketing.
Item 6. Executive Compensation
- -----------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------
Non-Equity Nonqualified
Name Incentive Deferred
and Stock Option Plan Compensation All Other
principal Salary Bonus Awards Awards Compensation Earnings Compensation Total
position Year ($) ($) ($) ($) ($) ($) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
- -------------- ---- ------ ----- ------ ------ ------------ ------------ ------------ -----
Paul Zuromski 2007 (1)
President 2008 (1)
2009 $250(1)
- -----------------------------------------------------------------------------------------------------
(1) At present the Company is not disbursing any compensation to employees.
Galea intends to enter into an employment agreement with Paul Zuromski. In lieu
of salary Mr. Zuromski has accepted 1,000,000 (one million) shares (on 8/12/09)
and has agreed to accept 125,000 shares per quarter until such time that Galea
can make cash payments. These shares have been issued to Mr. Zuromski. As there
is no current market for the Company's securities, we have valued them at par.
There are no effective employment contracts.
Item 7. Certain Relationships and Related Transactions, and Director
Independence
There have been no transactions or series of transactions which would be
required to be disclosed under Rule 404 of regulation S-K.
16
Item 8. Legal Proceedings
None
Item 9. Market Price of and Dividends on the Registrant's Common Equity
and Related Stockholder Matters
Our Common Stock
As of the date of this Registration Statement, our common stock is not listed
for trading. In October, 2008, the company has accepted an offer of settlement
with the U.S. Securities and Exchange Commission (SEC) in connection with an
administrative proceeding instituted pursuant to Section 12(j) of the Securities
and Exchange Act of 1934. This resulted in revocation of the registration of
each class of GLSN securities, and therefore, halted trading of the Company's
stock.
As of May 3, 2010, there are 41,342,854 shares of common stock issued and
outstanding. Upon the effectiveness of this Registration Statement on Form 10,
the intention is for the company's stock to begin trading on the OTC Bulletin
Board, if and when the company clears SEC comments on the Form 10, and FINRA has
accepted the Company's stock for quotation. The Company has not submitted an
application for trading on the OTC Bulletin Board.
The holders of the Company's common stock are entitled to one vote per share.
The common stock holders do not have preemptive rights to purchase, subscribe
for, or otherwise acquire any shares of common stock.
The ability of individual stockholders to trade their shares in a particular
state may be subject to various rules and regulations of that state. A number of
states require that an issuer's securities be registered in their state or
appropriately exempted from registration before the securities are permitted to
trade in that state. Presently, the Company has no plans to register its
securities in any particular state.
If we fail to meet certain SEC standards, our common stock may become subject to
the "penny stock" rules under the provisions of Section 15(g) and Rule 15g- 9 of
the Exchange Act, commonly referred to as the "penny stock" rule. Section 15(g)
sets forth certain requirements for transactions in penny stocks and Rule
15g-9(d)(1) incorporates the definition of penny stock as that used in Rule
3a51-1 of the Exchange Act.
Item 10. Recent Sales of Unregistered Securities
On March 16, 2010 the Company sold $50,000 of its Series C Preferred shares to
an accredited investor. The Series C Preferred shares have the following
attributes:
Conversion Rights:
Each Preferred Share is convertible into two (2) shares of the Company's Common
stock.
17
Voting Rights:
All Preferred shares are convertible into two (2) shares of the Company's Common
Stock, which will have voting rights as provided by the Company's Bylaws.
Warrants:
Purchasers of this class of Preferred shares will be entitled to receive one
warrant to purchase one share of the Company's Common stock at $0.50 per share,
which will be exercisable within the period ending three (3) years from the
purchase date.
In February 2008, the Company received proceeds of $275,000 from the issuance of
a convertible debenture. The debenture is payable on February 2010 and bears
interest at 12% per annum. The debenture requires monthly principal and interest
beginning in the fourth month after issuance. Beginning 60 days after issuance
the debenture is convertible into the Company's common stock at the lower of
100% of the volume weighted average price of the stock as reported by Bloomberg
on the closing date or at a 20% discount to the lowest daily closing bid price
of the common stock during the five trading days prior to the conversion date.
In addition, warrants were issued to one debenture holder to purchase 275,000
shares of common stock at an exercise price equal to the closing price for the
shares on the day prior to the closing and a term of three years which shall be
exercised on a cash basis provided that the Company is not in default and the
shares underlying the warrant are subject to an effective registration
statement. The debenture was collaterized with shares of the Company's common
stock pledged by certain shareholders. The lender seized these collateral shares
in March 2009.
Item 11. Description of Securities to be Registered
The following description of certain matters relating to our securities does not
purport to be complete and is subject in all respects to applicable Florida law
and to the provisions of our certificate of incorporation ("Certificate of
Incorporation") and By-laws (the "By-Laws").
Common Stock
- ------------
We are authorized to issue 100,000,000 shares of Common Stock, $0.0001 par
value. As of the date of this Registration Statement, there were 41,342,854
shares of Common Stock outstanding. Each share of our Common Stock is entitled
to one vote at all meetings of our stockholders. Our stockholders are not
permitted to cumulate votes in the election of directors. All shares of our
Common Stock are equal to each other with respect to liquidation rights and
dividend rights. There are no preemptive rights to purchase any additional
shares of our Common Stock. In the event of our liquidation, dissolution or
winding up, holders of our Common Stock will be entitled to receive, on a pro
rata basis, all of our assets remaining after satisfaction of all liabilities
and preferences of outstanding preferred stock, if any. Neither our Certificate
of Incorporation nor our By-Laws contain any provisions which limit or restrict
the ability of another person to take over our company.
As of the date of this registration statement, there were 88 shareholders of
record. Of the 41,342,854 shares of Common Stock outstanding, 9,853,929 are
restricted and cannot be resold unless registered under the Securities Act or
pursuant to an exemption thereto.
18
Item 12. Indemnification of Directors
Title 36, Chapter 607, Section 607.850 of the Florida Statutes provide for
indemnification of the Company's officers and directors in certain situations
where they might otherwise personally incur liability, judgments, penalties,
fines and expenses in connection with a proceeding or lawsuit to which they
might become parties because of their position with the Company.
In accordance with the provisions referenced above, the Company shall indemnify
to the fullest extent permitted by its bylaws, and in the manner permissible
under the laws of the State of Florida, any person made, or threatened to be
made, a party to an action or proceeding, whether criminal, civil administrative
or investigative, by reason of the fact that he is or was a director or officer
of the Company, or served any other enterprise as director, officer or employee
at the request of the Company. The Board of Directors, in its discretion, shall
have the power on behalf of the Company to indemnify any other than a director
or officer, made a party to any action, suit or proceeding by reason of the fact
that he/she is or was an employee of the Company.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Company, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceedings) is asserted by such
director, officer or controlling person in connection with any securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issues.
Item 13. Financial Statements and Supplementary Data
The Company's interim financial statements for the period ended January 31, 2010
and audited financial statements for the years ended October 31, 2009 and the
notes thereto.
Item 14. Changes in Disagreements with Accountants on Accounting and Financial
Disclosure
None.
19
Item 15. Financial Statements and Exhibits
(a) Financial Statements
Page
No.
----
Balance Sheets For the Periods Ended January 31, 2010 and October
31, 2009 21
Consolidated Statements of Operations 22
Consolidated Statements of Stockholders' Deficit 23
Consolidated Statements of Cash Flows 24
Notes to Consolidated Financial Statements 26
Report of Independent Registered Public Accounting Firm 28
Balance Sheets For the Periods Ended October 31, 2009 and 2008 29
Consolidated Statements of Operations 30
Consolidated Statements of Stockholders' Deficit 31
Consolidated Statements of Cash Flows 33
Notes to Consolidated Financial Statements 34
20
Galea Life Sciences, Inc.
(A Development Stage Company)
Condensed Balance Sheets
January 31, 2010 and October 31, 2009
ASSETS
2010 2009
----------- -----------
(Unaudited)
Current Assets
Cash $ 3,125 $ 18,055
----------- -----------
Total current assets 3,125 18,055
Furniture and equipment, net -- --
Security deposits 2,450 2,450
----------- -----------
Total Assets $ 5,575 $ 20,505
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued expenses $ 153,606 $ 146,905
Loans payable - other 5,205 5,205
Loans payable - affiliates 495,928 495,928
Accrued interest and dividends 1,849,481 1,812,241
Debentures payable 2,663,661 2,663,661
----------- -----------
Total Liabilities 5,167,881 5,124,040
----------- -----------
Stockholders' Deficit
Preferred stock, $0.0001 par value;
20,000,000,000 shares authorized,
750,000 issued and outstanding at
liquidation value 750,000 750,000
Common stock, $0.0001 par value;
100,000,000 shares authorized;
33,697,402 and 33,572,402 shares
issued and outstanding, respectively 3,370 3,357
Additional paid in capital (1,704,937) (1,704,937)
Accumulated deficit prior to the development stage (1,958,787) (1,958,787)
Accumulated deficit during development stage (2,251,952) (2,193,168)
----------- -----------
Total Stockholders' Deficit (5,162,306) (5,103,535)
----------- -----------
Total Liabilities and Stockholders' Deficit $ 5,575 $ 20,505
=========== ===========
21
Galea Life Sciences, Inc.
(A Development Stage Company)
Condensed Statements of Operations
For the Three Months Ended January 31, 2010 and 2009, and for the Period
From November 1, 2001 (Inception) to January 31, 2010
From
November 1,
2001
(Inception) For the Three Months
to Ended January 31,
January 31, ----------------------------
2010 2010 2009
------------ ------------ ------------
Revenue $ 98,918 $ 7,500 $ 26,618
Cost of goods sold 17,181 -- --
------------ ------------ ------------
Gross income 81,737 7,500 26,618
------------ ------------ ------------
Expenses:
General and administrative expenses 1,753,835 29,045 12,842
------------ ------------ ------------
1,753,835 29,045 12,842
------------ ------------ ------------
Net (loss) before other income and expenses (1,672,098) (21,545) 13,776
Other income and expenses
Interest expense (392,354) (18,489) (26,214)
Provision for income taxes -- -- --
------------ ------------ ------------
(392,354) (18,489) (26,214)
------------ ------------ ------------
Net Loss (2,064,452) (40,034) (12,438)
Dividends - Preferred (187,500) (18,750) (18,750)
------------ ------------ ------------
Net Loss Available to Common Shareholders $ (2,251,952) $ (58,784) $ (31,188)
============ ============ ============
Loss per common share - Basic and fully
diluted $ (0.00) $ (0.00)
============ ============
Weighted average number of shares
outstanding - Basic and fully diluted 33,697,402 34,822,402
============ ============
22
Galea Life Sciences, Inc.
(A Development Stage Company)
Condensed Statement of Stockholders' (Deficit)
For the Period from November 1, 2001 (Inception) to January 31, 2010
Accumulated Deficit
--------------------------
Prior to
Common Stock Preferred Stock Additional the During the
------------------------- ------------------------- Paid-in Development Development
Shares Amount Shares Amount Capital Stage Stage Total
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
November 1, 2001 9,608,172 $ 961 -- -- $ 1,393,126 $(1,958,787) $ -- $ (564,700)
Common stock
issued for
services at
$0.10 per share 100,000 10 -- -- 9,990 -- -- 10,000
Net loss -
October 31, 2002 -- -- -- -- -- -- (202,477) (202,477)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at 9,708,172 971 -- -- 1,403,116 (1,958,787) (202,477) (757,177)
October 31, 2002
Common stock
issued to
Acquire
BioSource
Therapeutics
at $0.10 per
share 2,912,452 291 -- -- 290,954 -- -- 291,245
Merger of
Bio-Source
subsidiary into
Galea -- -- -- -- (22,158) -- -- (22,158)
Net loss -
October 31, 2003 -- -- -- -- -- -- (461,194) (461,194)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
October 31, 2003 12,620,624 1,262 -- -- 1,671,912 (1,958,787) (663,671) (949,284)
Common stock
issued for
services at
$0.10 per share 100,000 10 -- -- 9,990 -- -- 10,000
Net loss -
October 31, 2004 -- -- -- -- -- -- (32,692) (32,692)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
October 31, 2004 12,720,624 1,272 -- -- 1,681,902 (1,958,787) (696,363) (971,976)
Common stock
issued for
services at
$0.10 per share 1,105,000 111 -- -- 110,389 -- -- 110,500
Common stock
issued for cash
at $0.10 per
share 182,000 18 -- -- 18,182 -- -- 18,200
23
Accumulated Deficit
--------------------------
Prior to
Common Stock Preferred Stock Additional the During the
------------------------- ------------------------- Paid-in Development Development
Shares Amount Shares Amount Capital Stage Stage Total
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Net loss -
October 31, 2005 -- -- -- -- -- -- (178,727) (178,727)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
October 31, 2005 14,007,624 1,401 -- -- 1,810,473 (1,958,787) (875,090) (1,022,003)
Common stock
issued for cash
at $0.10 per
share 2,960,000 296 -- -- 295,704 -- -- 296,000
Common stock
issued for
services at
$0.10 per share 6,600,000 660 -- -- 659,340 -- -- 660,000
Net loss -
October 31, 2006 -- -- -- -- 124,250 -- (250,814) (126,564)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
October 31, 2006 23,567,624 2,357 -- -- 2,889,767 (1,958,787) (1,125,904) (192,567)
Common stock
issued for
recapitalization 7,504,778 750 -- -- (5,025,272) -- -- (5,024,522)
Preferred stock
issued for
recapitalization -- -- 750,000 750,000 -- -- -- 750,000
Recapitalization
of Notes Payable -- -- -- -- 430,568 -- -- 430,568
Dividends -- -- -- -- -- -- (18,750) (18,750)
Net loss -- -- -- -- -- -- (428,129) (428,129)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
October 31, 2007 31,072,402 3,107 750,000 750,000 (1,704,937) (1,958,787) (1,572,783) (4,483,400)
Dividends -- -- -- -- -- -- (75,000) (75,000)
Net loss -- -- -- -- -- -- (385,538) (385,538)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
October 31, 2008 31,072,402 3,107 750,000 750,000 (1,704,937) (1,958,787) (2,033,321) (4,943,938)
Dividends -- -- -- -- -- -- (75,000) (75,000)
Common stock
issued for
services at
$0.0001 per share 2,500,000 250 -- -- -- -- -- 250
Net loss -- -- -- -- -- -- (84,847) (84,847)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
October 31, 2009 33,572,402 3,357 750,000 750,000 (1,704,937) (1,958,787) (2,193,168) (5,103,535)
Dividends -- -- -- -- -- -- (18,750) (18,750)
Common stock
issued for
services at
$0.0001 per share 125,000 13 -- -- -- -- -- 13
Net loss -- -- -- -- -- -- (40,034) (40,034)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
January 31, 2010 33,697,402 3,370 750,000 750,000 (1,704,937) (1,958,787) (2,251,952) (5,162,306)
24
Galea Life Sciences, Inc.
(A Development Stage Company)
Condensed Statements of Cash Flows
For the Three Months Ended January 31, 2010 and 2009, and for the Period
From November 1, 2001 (Inception) to January 31, 2010
From
November 1,
2001
(Inception) For the Three Months
to Ended January 31,
January 31, --------------------------
2010 2010 2009
----------- ----------- -----------
Cash flows from operating activities:
Net loss $(2,064,452) $ (40,034) $ (12,438)
Adjustments to reconcile net loss to
net cash used in operating activities:
Stock issued for services 790,764 13 --
Recapitalization 475,500 -- --
Changes in Assets and Liabilities:
(Decrease) Increase in security deposits (2,450) -- --
Increase in accounts payable and accrued expenses 436,757 43,941 55,535
Stock issued to repay debenture -- -- --
----------- ----------- -----------
Net cash used in operating activities (457,631) 3,920 43,097
----------- ----------- -----------
Cash flows from financing activities:
Due to stockholders -- (100) --
Debentures payable 238,661 -- (24,506)
Increase in loan payable - other 1,645 -- --
Proceeds from sales of common stock 314,200 -- --
Dividends (93,750) (18,750) (18,750)
----------- ----------- -----------
Net cash provided by financing activities 460,756 (18,850) (43,256)
----------- ----------- -----------
Net (decrease) increase in cash 3,125 (14,930) (159)
Cash - November 1 -- 18,055 159
----------- ----------- -----------
Cash - January 31 $ 3,125 $ 3,125 $ --
=========== =========== ===========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 63,061 $ -- $ 7,724
=========== =========== ===========
Income taxes $ -- $ -- $ --
=========== =========== ===========
Non cash investing and financing activities
Common shares issued for acquisition $ 291,245 $ -- $ --
=========== =========== ===========
25
Galea Life Sciences, Inc.
(A Development Stage Company)
Notes to Condensed Financial Statements
January 31, 2010 and October 31, 2009
1. Presentation of Interim Information
These condensed financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America (GAAP)
for interim financial statements and Item 310(b) of Regulation S-K. Accordingly,
they do not include all of the information and footnotes required by GAAP for
complete financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation have been reflected in these condensed financial statements.
Operating results for the three months ended January 31, 2010 are not
necessarily indicative of the results that may be expected for the year ending
October 31, 2010.
These financial statements should be read in conjunction with the financial
statements of Galea Life Sciences, Inc. (the "Company") as of and for the year
ended October 31, 2009, and for the period from inception (November 1, 2001) to
October 31, 2009.
2. Revenue Recognition
In general, the Company records revenue when persuasive evidence of an
arrangement exists, services have been rendered or product delivery has
occurred, the sales price to the customer is fixed or determinable, and
collectability is reasonably assured. The following policies reflect specific
criteria for the various revenues streams of the Company:
Revenue will be recognized at the time the product is delivered or services are
performed. Provision for sales returns will be estimated based on the Company's
historical return experience. Revenue will be presented net of returns.
3. Earnings Per Share
The Company calculates net income (loss) per share as required by Statement of
Financial Accounting Standards (SFAS) 128, "Earnings per Share". Basic earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares outstanding for the period. Diluted earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares and dilutive common stock equivalents
outstanding. During periods when common stock equivalents are anti-dilutive they
are not considered in the computation.
26
Galea Life Sciences, Inc.
(A Development Stage Company)
Notes to Condensed Financial Statements
January 31, 2010 and October 31, 2009
4. Going Concern
The accompanying condensed financial statements have been prepared assuming that
the Company will continue as a going concern. Going concern contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business over a reasonable length of time. These condensed financial
statements show that there are minimal revenues and current liabilities exceed
current assets by approximately $5,165,000 at January 31, 2010. The future of
the Company is dependent upon its ability to raise the necessary working capital
to permit its continued purchasing of inventory. The condensed financial
statements do not include any adjustments relating to the recoverability and
classifications of recorded assets, or the amounts and classification of
liabilities that might be necessary in the event the Company cannot continue in
existence.
5. Loan Payable - Stockholders
The loan, which is due on demand, was incurred by ITAQ in connection with the
acquisition of a distribution license from a corporate stockholder in August
1996 had an original due date of August 28, 1998. The loan bears interest at
prime plus 1% (or 8.75%). There are no installment payments due under the terms
of the agreement. Principal of $430,568 plus all accrued interest is due on
demand. 6. Dividends During the three months ended January 31, 2010 the Company
declared and accrued dividends in the amount of $18,750 on its preferred stock.
27
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Stockholders and Board of Directors
Galea Life Sciences, Inc.
We have audited the accompanying balance sheet of Galea Life Sciences, Inc., (A
Development Stage Company) as of October 31, 2009 and 2008, and the related
statements of operations, stockholders' (deficit) and cash flows for the years
ended October 31, 2009 and 2008, and the period from inception (November 1,
2001) to October 31, 2009. 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 audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits 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 by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide
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 Galea Life Sciences, Inc., (A
Development Stage Company) as of October 31, 2009 and 2008, and results of its
operations and its cash flows for the years then ended, and for the period from
inception (November 1, 2001) to October 31, 2009, 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 8 to the
financial statements, the Company has suffered a loss from operations and is in
the development stage. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to this
matter are also discussed in Note 8. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ David A. Aronson, CPA, P.A.
- ---------------------------------------------
David A. Aronson, CPA. P.A.
North Miami Beach, Florida
March 17, 2010
28
Galea Life Sciences, Inc.
(A Development Stage Company)
Condensed Balance Sheets
October 31, 2009 and 2008
ASSETS
2009 2008
----------- -----------
Current Assets
Cash $ 18,055 $ 159
----------- -----------
Total current assets 18,055 159
Security deposits 2,450 --
----------- -----------
Total Assets $ 20,505 $ 159
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued expenses $ 146,905 $ 91,514
Loans payable - stockholders 100 --
Loans payable - other 5,205 5,205
Loans payable - affiliates 495,928 495,928
Accrued interest and dividends 1,812,241 1,663,283
Debentures payable 2,663,661 2,688,167
----------- -----------
Total Liabilities 5,124,040 4,944,097
----------- -----------
Stockholders' Deficit
Preferred stock, $0.0001 par value;
20,000,000,000 shares authorized,
750,000 issued and outstanding at
liquidation value 750,000 750,000
Common stock, $0.0001 par value;
100,000,000 shares authorized;
33,572,402 and 31,072,402 shares
issued and outstanding, respectively 3,357 3,107
Additional paid in capital (1,704,937) (1,704,937)
Accumulated deficit prior to development stage (1,958,787) (1,958,787)
Accumulated deficit during development stage (2,193,168) (2,033,321)
----------- -----------
Total Stockholders' Deficit (5,103,535) (4,943,938)
----------- -----------
Total Liabilities and Stockholders' Deficit $ 20,505 $ 159
=========== ===========
29
Galea Life Sciences, Inc.
(A Development Stage Company)
Condensed Statements of Operations
For the Years Ended October 31, 2009 and 2008, and for the Period
From November 1, 2001 (Inception) to October 31, 2009
From
November 1,
2001
(Inception) For the Year Ended
to October 31,
October 31, ----------------------------
2009 2009 2008
------------ ------------ ------------
Revenue $ 91,418 $ 91,418 $ --
Cost of goods sold 17,181 17,181 --
------------ ------------ ------------
Gross income 74,237 74,237 --
------------ ------------ ------------
Expenses:
General and administrative expenses 1,724,791 77,402 256,869
------------ ------------ ------------
1,724,791 77,402 256,869
------------ ------------ ------------
Net loss before other income and expenses (1,650,554) (3,165) (256,869)
Other income and expenses
Interest expense (373,864) (81,682) (128,669)
------------ ------------ ------------
(373,864) (81,682) (128,669)
------------ ------------ ------------
Net Loss (2,024,418) (84,847) (385,538)
Dividends - Preferred (168,750) (75,000) (75,000)
------------ ------------ ------------
Net Loss Available to Common Shareholders $ (2,193,168) $ (159,847) $ (460,538)
============ ============ ============
Loss per common share - Basic and fully
diluted $ (0.00) $ (0.01)
============ ============
Weighted average number of shares
outstanding - Basic and fully diluted 33,572,402 31,072,402
============ ============
30
Galea Life Sciences, Inc.
(A Development Stage Company)
Condensed Statement of Stockholders' (Deficit)
For the Period from November 1, 2001 (Inception) to October 31, 2009
Accumulated Deficit
--------------------------
Prior to
Common Stock Preferred Stock Additional the During the
------------------------- ------------------------- Paid-in Development Development
Shares Amount Shares Amount Capital Stage Stage Total
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at 9,608,172 $ 961 -- -- $ 1,393,126 $(1,958,787) $ -- $ (564,700)
November 1, 2001
Common stock
issued for
services at
$0.10 per share 100,000 10 -- -- 9,990 -- -- 10,000
Net loss -
October 31, 2002 -- -- -- -- -- -- (202,477) (202,477)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at 9,708,172 971 -- -- 1,403,116 (1,958,787) (202,477) (757,177)
October 31, 2002
Common stock
issued to
Acquire
BioSource
Therapeutics
at $0.10 per
share 2,912,452 291 -- -- 290,954 -- -- 291,245
Merger of
Bio-Source
subsidiary into
Galea -- -- -- -- (22,158) -- -- (22,158)
Net loss -
October 31, 2003 -- -- -- -- -- -- (461,194) (461,194)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
October 31, 2003 12,620,624 1,262 -- -- 1,671,912 (1,958,787) (663,671) (949,284)
Common stock
issued for
services at
$0.10 per share 100,000 10 -- -- 9,990 -- -- 10,000
Net loss -
October 31, 2004 -- -- -- -- -- -- (32,692) (32,692)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
October 31, 2004 12,720,624 1,272 -- -- 1,681,902 (1,958,787) (696,363) (971,976)
Common stock
issued for
services at
$0.10 per share 1,105,000 111 -- -- 110,389 -- -- 110,500
Common stock
issued for cash
at $0.10 per
share 182,000 18 -- -- 18,182 -- -- 18,200
Net loss -
October 31, 2005 -- -- -- -- -- -- (178,727) (178,727)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
October 31, 2005 14,007,624 1,401 -- -- 1,810,473 (1,958,787) (875,090) (1,022,003)
31
Accumulated Deficit
--------------------------
Prior to
Common Stock Preferred Stock Additional the During the
------------------------- ------------------------- Paid-in Development Development
Shares Amount Shares Amount Capital Stage Stage Total
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Common stock
issued for cash
at $0.10 per
share 2,960,000 296 -- -- 295,704 -- -- 296,000
Common stock
issued for
services at
$0.10 per share 6,600,000 660 -- -- 659,340 -- -- 660,000
Net loss -
October 31, 2006 -- -- -- -- 124,250 -- (250,814) (126,564)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
October 31, 2006 23,567,624 2,357 -- -- 2,889,767 (1,958,787) (1,125,904) (192,567)
Common stock
issued for
recapitalization 7,504,778 750 -- -- (5,025,272) -- -- (5,024,522)
Preferred stock
issued for
recapitalization -- -- 750,000 750,000 -- -- -- 750,000
Contribution
of Notes Payable -- -- -- -- 430,568 -- -- 430,568
Dividends -- -- -- -- -- -- (18,750) (18,750)
Net loss -- -- -- -- -- -- (428,129) (428,129)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
October 31, 2007 31,072,402 3,107 750,000 750,000 (1,704,937) (1,958,787) (1,572,783) (4,483,400)
Dividends -- -- -- -- -- -- (75,000) (75,000)
Net loss -- -- -- -- -- -- (385,538) (385,538)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
October 31, 2008 31,072,402 3,107 750,000 750,000 (1,704,937) (1,958,787) (2,033,321) (4,943,938)
Dividends -- -- -- -- -- -- (75,000) (75,000)
Common stock
issued for
services at
$0.0001 per
share 2,500,000 250 -- -- -- -- -- 250
Net loss -- -- -- -- -- -- (84,847) (84,847)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at
October 31, 2009 33,572,402 $ 3,357 750,000 $ 750,000 $(1,704,937) $(1,958,787) $(2,193,168) $(5,103,535)
=========== =========== =========== =========== =========== =========== =========== ===========
32
Galea Life Sciences, Inc.
(A Development Stage Company)
Condensed Statements of Cash Flows
For the Years Ended October 31, 2009 and 2008, and for the Period
From November 1, 2001 (Inception) to October 31, 2009
From
November 1,
2001
(Inception) For the Year Ended
to October 31,
October 31, --------------------------
2009 2009 2008
----------- ----------- -----------
Cash flows from operating activities:
Net loss $(2,024,418) $ (84,847) $ (385,538)
Adjustments to reconcile net loss to
net cash used in operating activities:
Stock issued for services 790,751 250 --
Recapitalization 475,500 -- --
Changes in Assets and Liabilities:
(Decrease) Increase in security deposits (2,450) (2,450)
Increase in accounts payable and accrued expenses 486,566 204,349 195,635
----------- ----------- -----------
Net cash used in operating activities (367,801) 117,302 (189,903)
----------- ----------- -----------
Cash flows from financing activities:
Due to stockholders 100 100 --
Debentures payable 238,661 (24,506) 263,167
Increase in loan payable - other 1,645 -- 1,645
Proceeds from sales of common stock 314,200
Dividends (168,750) (75,000) (75,000)
----------- ----------- -----------
Net cash provided by financing activities 385,856 (99,406) 189,812
----------- ----------- -----------
Net increase (decrease) in cash 18,055 17,896 (91)
Cash - beginning of period -- 159 250
----------- ----------- -----------
Cash - end of period $ 18,055 $ 18,055 $ 159
=========== =========== ===========
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 63,061 $ 7,724 $ 46,212
=========== =========== ===========
Income taxes $ -- $ -- $ --
=========== =========== ===========
Non cash investing and financing activities:
Common shares issued for acquisition $ 291,245 $ -- $ --
=========== =========== ===========
Contribution of Loan $ 430,568 $ -- $ --
=========== =========== ===========
33
"GALEA LIFE SCIENCES, INC."
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2009 AND 2008
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business Activity
"Galea Life Sciences, Inc., formerly known as Value Holdings, Inc.(the Company)
was incorporated in the state of Florida in December 1992. On June 6, 2007 its
name was changed to Galea Life Sciences, Inc. On August 10, 2007 the Company
merged with Innovative Technologies Acquisition Corporation (""ITAQ"") (Note
2)."
"The Company is considered to be in the development stage, and the accompanying
financial statements, represent those of a development stage enterprise."
Principles of Consolidation
"The consolidated financial statements include the accounts of Galea Life
Sciences, Inc. and its wholly owned subsidiary, BioSource Therapeutics, Inc. All
material intercompany transactions have been eliminated."
Revenue Recognition
"In general, the Company records revenue when persuasive evidence of an
arrangement exists, services have been rendered or product delivery has
occurred, the sales price to the customer is fixed or determinable, and
collectability is reasonably assured. The following policies reflect specific
criteria for the various revenues streams of the Company:"
Revenue will be recognized at the time the product is delivered or services are
performed. Provision for sales returns will be estimated based on the Company's
historical return experience. Revenue will be presented net of returns.
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 reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
34
"GALEA LIFE SCIENCES, INC."
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2009 AND 2008
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial Instruments
The carrying value of the Company's financial instruments, including cash and
cash equivalents, accounts receivable, accounts payable and accrued liabilities
approximate fair value because of the short maturities of those instruments.
Based on borrowing rates currently available to the Company for loans with
similar terms, the carrying value of term notes convertible notes and notes
payable are also approximate fair value.
We review the terms of convertible debt and equity instruments we issue to
determine whether there are embedded derivative instruments, including the
embedded conversion option, that are required to be bifurcated and accounted for
separately as a derivative financial instrument. Generally, where the ability to
physical or net-share settle the conversion option is deemed to be not within
the control of the company, the embedded conversion option is required to be
bifurcated and accounted for as a derivative financial instrument liability.
In connection with the sale of convertible debt and equity instruments, we may
also issue freestanding options or warrants. Additionally, we may issue options
or warrants to non-employees in connection with consulting or other services
they provide. Although the terms of the options and warrants may not provide for
net-cash settlement, in certain circumstances, physical or net-share settlement
is deemed to not be within the control of the company and, accordingly, we are
required to account for these freestanding options and warrants as derivative
financial instrument liabilities, rather than as equity.
Derivative financial instruments are initially measured at their fair value. For
derivative financial instruments that are accounted for as liabilities, the
derivative instrument is initially recorded at its fair value and is then
re-valued at each reporting date, with changes in the fair value reported as
charges or credits to income. For option-based derivative financial instruments,
we use the Black-Scholes option pricing model to value the derivative
instruments.
Any discount from the face value of the convertible debt instrument resulting
from the allocation of part of the proceeds to embedded derivative instruments
and/or freestanding options or warrants is amortized over the life of the
instrument through periodic charges to income, using the effective interest
method.
Net Loss Per Common Share
"The Company applies SFAS No. 128, Earnings Per Share. In accordance with SFAS
No. 128, basic net loss per share has been computed based on the weighted
average of common shares outstanding during the period. Diluted earnings per
share include the effects of any outstanding financial instruments that may be
converted into common stock. SFAS No. 128 provides guidance to calculate the
equivalent number of common shares that would be likely issued in the event the
holder would elect to convert the financial instrument into common shares."
35
"GALEA LIFE SCIENCES, INC."
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2009 AND 2008
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Income Taxes
"The Company accounts for income taxes pursuant to the provisions of FASB No.
109 Accounting for Income Taxes, which requires, among other things, a liability
approach to calculating deferred income taxes. The asset and liability approach
requires the recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between the carrying amounts
and the tax bases of assets and liabilities. The Company has had operating
losses since inception and accordingly has not provided for income taxes.
Realization of the benefits related to the net operating loss carryforward may
be limited in any one year due to IRS Code Section 382, change of ownership
rules."
Recent Accounting Pronouncements
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities, including an amendment of FASB
Statement No. 115 SFAS 159. SFAS 159 permits companies to choose to measure many
financial instruments and certain other items at fair value that are not
currently required to be measured at fair value and establishes presentation and
disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities. The provisions of SFAS 159 will become effective as of the
beginning of the 2009 fiscal year. The adoption of these new Statements is not
expected to have a material effect on the Company's financial position, results
of operations, or cash flows.
In December 2007, the FASB issued SFAS No. 141 (R) Business Combinations SFAS
141R establishes principles and requirements for how the acquirer of a business
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree. SFAS 141R also provides guidance for recognizing and measuring the
goodwill acquired in the business combination and determines what information to
disclose to enable users of the financial statements to evaluate the nature and
financial effects of the business combination. The guidance will become
effective as of the beginning of the Company's fiscal year beginning after
December 15, 2008. Management believes the adoption of this pronouncement will
not have a material impact on the Company's financial statements."
In December 2007, the FASB issued SFAS No. 160 Noncontrolling Interests in
Consolidated Financial Statements,an amendment of ARB No. 51. SFAS 160
establishes accounting and reporting standards for the noncontrolling interest
in a subsidiary and for the deconsolidation of a subsidiary. The guidance will
become effective as of the beginning of the Company's fiscal year beginning
after December 15, 2008. Management believes the adoption of this pronouncement
will not have a material impact on the Company's financial statements.
36
"GALEA LIFE SCIENCES, INC."
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2009 AND 2008
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements (continued)
In February 2008, FASB Staff Position (FSP) No.157-2, Effective Date of FASB
Statement No.157 was issued. FSP No.157-2 defers the effective date of SFAS
No.157 to fiscal years beginning after December15, 2008, and interim periods
within those fiscal years, or all non-financial assets and liabilities, except
those that are recognized or disclosed at fair value in the financial statements
on a recurring basis (at least annually). Examples of items within the scope of
FSP No.157-2 are non-financial assets and non-financial liabilities initially
measured at fair value in a business combination (but not measured at fair value
in subsequent periods), and long-lived assets, such as property, plant and
equipment and intangible assets measured at fair value for an impairment
assessment under SFAS No.144, Accounting for the Impairment or Disposal of
Long-Lived Assets. The partial adoption of SFAS 157 on February 1, 2008, with
respect to financial assets and financial liabilities recognized or disclosed at
fair value in the financial statements on a recurring basis, is not expected to
have a material effect on the Company's consolidated financial statements. The
Company is currently assessing the impact, if any, of SFAS No.157 relating to
its planned February1, 2009, adoption of the remainder of the standard.
In March 2008, the FASB issued SFAS No.161, Disclosures about Derivative
Instruments and Hedging Activities-an Amendment of FASB Statement No. 133, which
became effective on November 15, 2008. This standard changed the disclosure
requirements for derivative instruments and hedging activities. Entities are
required to provide enhanced disclosures about (a)how and why an entity uses
derivative instruments, (b) how derivative instruments and related hedged items
are accounted for under SFAS 133 and its related interpretations, and (c)how
derivative instruments and related hedging items affect an entity's financial
position, financial performance, and cash flows. The adaptation of this standard
had no material impact on the Company's financial statements.
In April 2008, the FASB issued FASB Staff Position (FSP) FSP 142-3,
Determination of the Useful Life of Intangible Assets. This FSP amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible asset under FASB
Statement No.142, Goodwill and Other Intangible Assets. The intent of this FSP
if to improve the consistency between the useful life of a recognized intangible
asset under Statement 142 and the period of expected cash flows to measure the
fair value of the asset under FASB Statement No.141 (Revised 2007), Business
Combinations, and other U.S. generally accepted accounting principles (GAAP).
This FSP is effective for financial statements issued for fiscal years beginning
after December15, 2008, and interim periods within those fiscal years. Early
adoption is prohibited. The Company does not expect the adoption of FAS 142-3 to
have a material effect on its results of operations and financial condition.
37
"GALEA LIFE SCIENCES, INC."
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
"OCTOBER 31, 2009 AND 2008"
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements (continued)
In May 2008, the FASB issued FASB Staff Position (FSP) No.APB 14-1 Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement) FSP APB 14-1 requires the issuer of certain
convertible debt instruments that may be settled in cash (or other assets) on
conversion to separately account for the liability (debt) and equity (conversion
option) components of the instrument in a manner that reflects the issuer's
non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years
beginning after December 15, 2008, on a retroactive basis and will be adopted by
the Company in the first quarter of fiscal 2009. The Company does not expect the
adoption of FSP APB 14-1 to have a material effect on its results of operations
and financial condition.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles, which becomes effective upon approval by the SEC. The
standard sets forth the sources of accounting principles and provides entities
with a framework for selecting the principles used in the preparation of
financial statements that are presented in conformity with GAAP. It is not
expected to change any of the Company's current accounting principles or
practices and therefore, is not expected to have a material impact on its
financial statements."
NOTE 2 RECAPITALIZATION
On August 10, 2007 ITAQ was acquired by Galea Life Sciences, Inc. (a shell
Company) ("Galea") and to consummate the transaction Galea issued 23,567,624
shares of restricted common stock to the ITAQ stockholders. This transaction was
accounted for as a reverse acquisition, or a recapitalization of Galea, meaning
that the Galea, the legal acquirer, is considered, for accounting purposes, to
be the acquiree and whereby ITAQ issued 7,504,778 shares of common stock and
750,000 shares of preferred stock in exchange for the net liabilities of the
Galea of $4,274,522. Upon completion of the transaction the stockholders of the
ITAQ owned the controlling interest of the combined company and the Company's
financial statements reflect those of ITAQ.
38
"GALEA LIFE SCIENCES, INC."
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2009 AND 2008
NOTE 3 - NOTES PAYABLE - RELATED PARTIES
2009 2008
---------- ----------
Notes payable to affiliate; unsecured and due on demand; interest at 8.25% $ 209,128 $ 209,128
Notes payable to affiliate; unsecured and due on demand; interest at 15.00% 60,000 60,000
Notes payable to affiliate; unsecured and due on demand; interest at 15.00% 126,800 126,800
Notes payable to affiliate; unsecured and due on demand; interest at 8.25% 100,000 100,000
---------- ----------
$ 495,928 $ 495,928
NOTE 4 - CONVERTIBLE DEBENTURES
In August and October 2000 the Company received the proceeds of $2,000,000 by
issuing two convertible debentures in the amount of $1,000,000. The debentures,
with an interest rate of 10% per annum, were payable two years from the date of
issuance or August 10, 2002 and October 11, 2002, respectively. Interest is
payable quarterly. The debentures are convertible into common stock at the lower
of $0.14 per share or 85% of the average closing bid price of the stock for the
five lowest of the twenty two consecutive trading days immediately prior to the
trading day on which written notice of the exercise of the conversion right is
transmitted. The conversion privilege cannot be utilized prior to the date which
is 90 days from when the SEC registration statement becomes effective (which
registers the securities underlying the conversion feature). The registration
has not become effective, therefore the value of the beneficial purchase
interest conversion feature cannot be measured at October 31, 2009.
In addition, warrants were issued to one debenture holder to purchase 5,000,000
shares of common stock at $0.14 per share. This warrant expired two years from
the issue date or October 10, 2002. This debenture holder was also provided with
a warrant to purchase an additional $1,000,000, 10% debenture that includes
warrants to purchase 250,000 shares of common stock at $0.14 per share. This
warrant to purchase an additional debenture expires 30 days after the date the
registration statement becomes effective.
In January 2001, the Company received proceeds of $450,000 from the issuance of
a convertible debenture. The debenture, with an interest rate of 10% per annum,
was payable on February 1, 2003. Interest is payable quarterly. The debenture is
convertible into the Company's common stock at the lower of $0.05 per share or
85% of the average closing bid price of the stock for the five lowest of the
twenty-two consecutive trading days immediately preceding the trading day on
which written notice of the exercise of the conversion right is transmitted. The
conversion privilege cannot be utilized prior to the date on which the
registration statement registering the securities underlying the debentures is
declared effective by the SEC. A registration statement with regard to this
debenture and the securities underlying it has not been filed with the SEC.
39
"GALEA LIFE SCIENCES, INC."
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2009 AND 2008
NOTE 4 - CONVERTIBLE DEBENTURES (Continued)
In February 2008, the Company received proceeds of $275,000 from the issuance of
a convertible debenture. The debenture is payable on February 2010 and bears
interest at 12% per annum. The debenture requires monthly principal and interest
beginning in the fourth month after issuance. Beginning 60 days after issuance
the debenture is convertible into the Company's common stock at the lower of
100% of the volume weighted average price of the stock as reported by Bloomberg
on the closing date or at a 20% discount to the lowest daily closing bid price
of the common stock during the five trading days prior to the conversion date.
In addition, warrants were issued to one debenture holder to purchase 275,000
shares of common stock at an exercise price equal to the closing price for the
shares on the day prior to the closing and a term of three years which shall be
exercised on a cash basis provided that the Company is not in default and the
shares underlying the warrant are subject to an effective registration statement
"At October 31, 2009 the Company was in default on the debentures that have been
issued."
NOTE 5 - PREFERRED STOCK
The Company has authorized 20,000,000 shares of preferred stock with a par value
of $0.0001 per share. At October 31, 2009, 750,000 shares of preferred stock
were issued and outstanding. Dividends on the preferred stock are cumulative and
are payable quarterly at the rate of $0.10 per annum. Upon liquidation these
shares have a liquidation value of $1.00 per share plus all accrued and unpaid
dividends. The shares may be called by the Company at a redemption price of
$1.00 per share plus all accrued and unpaid dividends. Preferred shares are
convertible at the rate of two and two thirds shares of the Company's common
stock. The conversion price of the preferred shares will be subject to
adjustment for stock dividends, stock splits, or similar events. Preferred
stockholders have the right to vote that number of shares equal to the number of
shares of common stock upon their conversion.
40
"GALEA LIFE SCIENCES, INC."
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2009 AND 2008
NOTE 6 - INCOME TAXES
The Company accounts for income taxes under SFAS 109, which requires use of the
liability method. SFAS 109 provides that deferred tax assets and liabilities are
recorded based on the differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes,
referred to as temporary differences. Deferred tax assets and liabilities at the
end of each period are determined using the currently enacted tax rates applied
to taxable income in the periods in which the deferred tax assets and
liabilities are expected to be settled or realized.
The provision for income taxes differs from the amount computed by applying the
statutory federal income tax rate to income before provision for income taxes
for the years ended October 31, 2009 and 2008. The sources and tax effects of
the differences are as follows:
Income tax provision at the federal statutory rate 34%
Effect of operating losses (34)%
-----
0%
=====
As of October 31, 2009, the Company has a net operating loss carry forward of
approximately $3,983,000. This loss will be available to offset future taxable
income. If not used, this carry forward will expire through 2029. The deferred
tax asset of approximately $1,354,000 relating to the operating loss carry
forward has been fully reserved at October 31, 2009. The increase in the
valuation allowance related to the deferred tax asset was approximately $30,000
during 2009. The principal differences between the accumulated deficit for
income tax purposes and for financial reporting purposes results from stock
based compensation, non-cash finance charges, non-cash losses on settlements,
and the amortization of intangibles. The utilization of the net operating loss
carryforward may be limited because of any change of control of the Company.
NOTE 7 - GOING CONCERN
The Company's financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business." "The Company has experienced significant losses from
operations aggregating approximately $2,024,000 since inception. In addition,
the Company had working capital and stockholders deficits at October 31, 2009,
of approximately $5,104,000 and has no significant revenue generating
operations.
41
"GALEA LIFE SCIENCES, INC."
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
OCTOBER 31, 2009 AND 2008
NOTE 7 - GOING CONCERN (Continued)
"The Company's ability to continue as a going concern is contingent upon its
ability to secure additional financing, increase ownership equity and attain
profitable operations. In addition, the Company's ability to continue as a going
concern must be considered in light of the problems, expenses and complications
frequently encountered in established markets and the competitive environment in
which the Company operates."
"The Company is pursuing financing for its operations and seeking additional
investments. In addition, the Company is seeking to establish a revenue base."
Failure to secure such financing or to raise additional equity capital and to
establish a revenue base may result in the Company depleting its available funds
and not being able pay its obligations.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
42
(b) Exhibits
Exhibit
Number Description
- ------- ----------------------------------------------------------------------
3.1 Articles of Incorporation
3.2 Bylaws
10.1 Agreement with Allion Healthcare
10.2 Secured Promissory Note with Trafalgar Capital Specialized Investment
Fund
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
May 18, 2010
GALEA LIFE SCIENCES INC.
By: /s/ Paul Zuromski
-------------------------
Paul Zuromski
President
43