Edgar Filing: LIFEN INC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

[ ] Annual Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934

[X] Transition Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934

For the transition period from September 1, 2002 to December 31, 2002.

Commission File Number: 0-31152

LIFEN, INC.
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(Name of Small Business Issuer in Its Charter)

Delaware 76-0585701
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)

455 Market Street, Suite 1220, San Francisco, California 94105
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(Address of Principal Executive Offices) (Zip Code)

(415) 543-1535
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(Issuer's Telephone Number)

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act:
Title of class: Name of each exchange on which registered:
Common Stock, $.0001 par value None

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation B is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB [X]

Registrant had no revenues during its most current fiscal year.

Indicate the number of shares outstanding of each of issuer's classes of
Common Stock, as of the latest practicable date. At February 28, 2003,
10,998,166 shares of Common Stock, $.0001 par value, were outstanding.

The aggregate market value of the voting stock held by non-affiliates of
Registrant on February 28, 2003 was $29,628,343.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

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FORM 10-KSB
December 31,2002
LIFEN, INC.

TABLE OF CONTENTS

FORWARD LOOKING STATEMENTS 1

PART I

ITEM 1. Description of Business 1
ITEM 2. Description of Property 10
ITEM 3. Legal Proceedings 10
ITEM 4. Submission of Matters to a Vote of Security Holders 11

PART II

ITEM 5. Market for Registrant's Common Equity and
Related Stockholder Matters 11
ITEM 6. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
ITEM 7. Financial Statements 15
ITEM 8. Changes in and Disagreements with Accountants 15

PART III

ITEM 9. Directors, Executive Officers, Promoters and
Control Persons 15
ITEM 10. Executive Compensation 20
ITEM 11. Security Ownership of Certain Beneficial
Owners and Management 21
ITEM 12. Certain Relationships and Related Transactions 23
ITEM 13. Controls and Procedures 24
ITEM 14. Exhibits and Reports on Form 8-K 26

PART F/S

Financial Statements F-1 to F-15
Signatures 27
Certifications 28
Exhibits

FORWARD LOOKING STATEMENTS

Some of the information contained in this Report may constitute
forward-looking statements or statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
are based on current expectations and projections about future events. The
words "estimate", "plan", "intend", "expect", "anticipate" and similar
expressions are intended to identify forward-looking statements which
involve, and are subject to, known and unknown risks, uncertainties and
other factors which could cause the Company's actual results, financial or
operating performance, or achievements to differ from future results,
financial or operating performance, or achievements expressed or implied by
such forward-looking statements. Projections and assumptions contained and
expressed herein were reasonably based upon information available to the
Company at the time so furnished and as of the date of this filing. All such
projections and assumptions are subject to significant uncertainties and
contingencies, many of which are beyond the Company's control, and no
assurance can be given that the projections will be realized. Potential
investors are cautioned not to place undue reliance on any such forward-
looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release any revisions to these forward-
looking statements to reflect events or circumstances after the date hereof
or to reflect the occurrence of unanticipated events.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

(A) Corporate History

The Company was incorporated under the laws of the state of Delaware on
November 10, 1997. The Company continues to be a development stage company
with no present commercial operations. In early 1999, the Company began
development of a conceptual plan for a health and wellness related business,
which has been further defined and expanded as discussed below. In 2002,
the Company's business plan was extended to include the acquisition of
specialized private companies in the healthcare services field that provide
temporary healthcare professionals. These private companies, because of
their smaller size, find it difficult to compete for limited funding, public
exposure, and technology that can only be provided by critical mass.

During the period covered by this Report, the Company began
implementation of its new strategic direction by opening initial discussions
with several companies that meet the Company's desired acquisition criteria.
Although there can be no assurances that these discussions will result in
the consummation of one or more acquisitions, the Company remains confident
that the strategic direction chosen remains sound. Toward this end, during
the current reporting period, the Company entered into two consulting
agreements regarding the identification of potential acquisitions. The
Company entered into two additional consulting agreements on January 2 and
January 22, 2003 for further identification of potential acquisitions.
Refer to Financial Statements, Note 6, "Commitments and Contingencies."

(B) Business of Registrant

I. Overview of Acquisition of Temporary Healthcare Professional
Staffing Companies

The Company's objective is to capitalize on an opportunity that
currently exists in the healthcare industry by targeting the critical
nursing shortage issue. There are many small companies that are addressing
the rapidly expanding needs of the healthcare industry. Unfortunately, due
to their relatively small capitalization, they are unable to maximize their
potential, obtain outside capital or expand. By consolidating well-run
small private companies into a larger public entity, the Company intends to
facilitate access to capital, the acquisition of technology, and expanded
distribution that, in turn, drive internal growth. There are a number of
reasons why the Company has selected this focus:

. GROWTH - The $1.5 trillion healthcare industry shows no sign of
slowing its growth, and the aging baby boomers will likely provide
further fuel to escalating costs. The Centers for Medicare and
Medicaid Services project that healthcare expenditures will grow
at an annual rate of 7.1% for the next eight years.

. NEED - This significant industry-wide expansion provides an
increased need for cost-efficient, quality solutions that improve
the delivery capabilities of the current health care system. This
need includes the availability of skilled healthcare workers for
hospitals, physician offices, and assisted living centers.

. LIQUIDITY - While this environment is ideal for corporate
opportunity, all of this is occurring in a very difficult market
for private capital formation for small companies. Venture capital
and other forms of private equity financing are difficult to
attract, especially for service companies.

However, in spite of its size, the healthcare industry is predominantly
served by small companies. The overwhelming majority of these companies
have the following characteristics:

. Revenues ranging between $1 million and $10 million with modest
profits
. Limited geographic focus
. Little, if any, utilization of technology
. Inability to invest in continuing education and other professional
requirements to create employee loyalty and company
differentiation
. Limited ability to attract professional management or investment
capital
. Few avenues for liquidity

The Company intends to provide a platform for select companies in this
environment to consolidate and create sufficient critical mass to provide
access to capital and professional management, build a common technology
backbone, open new markets, and reinvest in the professional staff to create
a larger revenue opportunity. It will do so initially through acquisitions
and then integration using technology for expense and operating synergy.

II. Temporary Healthcare Professional Staffing Division

A report published in July, 2002 by the U. S. Department of Health and
Human Services indicates that by year 2020, the nation's registered nurse
workforce will be 29% below projected requirements if current trends
continue. This projected shortage results from a projected 40% increase in
demand between 2000 and 2020 compared to a projected 6% growth in supply.
Factors driving the growth in demand include an 18% increase in population,
a larger proportion of elderly persons, and medical advances that increase
the need for nurses. In contrast, the projected growth in supply is expected
to reach a peak of only 10% by 2011 and then begin to decline as the number
of nurses leaving the profession exceeds the number that enter. The factors
causing the projected decline include an aging workforce, nurses leaving the
profession for less stressful occupations, and decreasing number of nursing
school enrollments.

Approximately 70% of the temporary healthcare staffing industry
consists of nurse staffing and approximately 30% consists of related health,
physician and other healthcare professionals. By 2010, this industry is
projected to be a $46 billion market, a projected 20% annual growth rate.

The Company has identified opportunities to expand services in areas
that are currently under-served by the temporary medical staffing industry.
These areas include medical professionals for the health insurance industry,
as well as specialty healthcare support workers such as tumor registrars.

The Company, which plans to operate this division under the trade name
"Crdentia", believes that temporary staffing companies must consolidate in
order to survive. The success of the large industry leaders is indicative of
the efficiency, both in operations as well as capital formation, of this
strategy. Small companies in this sector will increasingly be at a
competitive disadvantage in the marketplace because technology and
operating efficiency will soon be the key to survival.

Crdentia's Website

The Crdentia website is being designed to provide an overview of the
business concept, the market opportunity with regard to the acquisition of
temporary healthcare staffing companies, the conditions driving this special
market and information regarding the nursing shortage.

The Crdentia website is currently under development, but may be
viewed at www.crdentia.com.

Competition

The temporary healthcare industry is highly competitive and the Company
will compete with national, regional and local companies for acquisitions,
virtually all of whom have greater financial resources and market
recognition than the Company. In addition, the Company will be competing
with established venture capital companies who seek to acquire similar
temporary healthcare companies. Consequently, the Company will be competing
with many other companies for both acquisition candidates and a share of the
available market for each such acquired company and no assurance can be
given that in the future the Company will be able to achieve an adequate
position to achieve commercial success.

III. Wellness Division

The wellness industry is fragmented and encompasses a broad range of
businesses that are focused on areas such as health, fitness, nutrition, and
beauty. The industry includes medical practitioners and facilities, wellness
centers, health and fitness clubs, spas, and manufacturers of traditional
and alternative medical, nutritional and beauty related products.

The purpose of the Company's Wellness Division is to provide
information on a subscription basis regarding professional services to
improve the health, fitness, nutrition, and physical appearance of its
clients through an integrated approach involving many potential therapies
available. The Company intends to provide only services that do not require
it to obtain medical licenses. The Company is not authorized or qualified
to engage in any activity which may be construed or be deemed to constitute
the practice of medicine and intends to be an independent supplier of non-
medical services only.

If successful, the Company intends to expand this website to include
other health problems that can be reduced by preventive measures, such as
cardiac disease or arteriosclerosis.

The beginning phase of the business will include activities such as
fund raising, establishing relationships with medical professionals and
beauty experts, development of the website and a marketing program for
wellness service provided to individual and corporate clients.

Wellness Website

The Wellness Division's website is being designed to provide consumers
with a variety of healthcare content, including information on acute
ailments, chronic illnesses, nutrition, fitness, and wellness, and access to
medical databases, publications, and real-time medical news. In addition,
the Company intends to offer various interactive communities consisting of
chat support groups. The planned content to be provided on a website and the
chat support groups will not require medical licensing on the part of the
Company. The support groups will enable users to share experiences with
others who face, or have faced, similar health conditions, making the entire
group's experience available to each member.

The Wellness Division website is currently under development, but may
be viewed at www.lifen.com.

The Company intends to develop relationships with established wellness
providers who will provide their users easy access to the information and
services offered on the Company's website. These relationships will provide
the opportunity for broad exposure of the Company's brand, direct traffic to
the Company's website, and permit the company to acquire and distribute
related local content.

Competition

In regard to the Company's Wellness Division, a large number of
companies compete for users, advertisers and other sources of on-line
revenue. In addition, traditional media and healthcare companies compete for
consumers both through traditional methods as well as through new internet
initiatives. The competition for healthcare consumers will continue to
increase as the internet grows as a commercial medium. The Company will be
competing directly for advertisers and affiliates with numerous internet and
non-internet businesses. The Company believes that competition in this
marketplace will be based primarily on the quality and market acceptance of
healthcare content, brand recognition, and the quality and market acceptance
of new enhancements, features and tools. The Company's operations will
compete with other health resource businesses that have a wellness-focused
environment and provide consumers with access to traditional and alternative
health information. Most of these competitors will have significantly
greater financial and other resources, larger facilities, multiple
locations, provide a wider array of services, more experience providing
services, and have longer established relationships with buyers of such
services than the Company.

IV. Government Regulation

Various federal, state and local laws regulate companies in the health
care industry. The Company does not plan to offer healthcare services which
are subject to such laws. Although management does not believe that any of
the Company's current or planned operations are subject to existing federal
or state regulations, it is possible that in the future new laws may be
enacted that would have a material adverse impact upon the Company's then
operations. In addition, it is possible that some of the companies that may
be acquired by the Company will be subject to federal or state regulations
with respect to their operations.

V. Risk Factors

Lack of Operating History and Earnings. The Company was formed in
November, 1997, and has no operating history or revenues. Most recently,
the Company has been engaged in the development of a new business plan and
the search for funding in order to commence commercial operations.
Therefore, the Company must be considered to be a "start-up" operation and
subject to all the risks inherent in a new business venture, many of which
are beyond the control of the Company, including the inability to implement
successful operations, lack of capital to finance acquisitions and failure
to achieve market acceptance.

Reliance Upon Management. Presently, the Company is totally dependent
upon the personal efforts of its management team. The loss of any officer
or director of the Company could have a material adverse effect upon the
business and future prospects of the Company. The Company does not
presently have key-man life insurance upon the life of any of its officers
or directors. Further, all decisions with respect to management of Company
affairs will be made exclusively by current management. The Company will
also employ independent consultants to provide business and marketing
advice. Such consultants have no fiduciary duty to the Company or its
shareholders, and may not perform as expected. The success of the Company
will, in significant part, depend upon the efforts and abilities of
management, including such consultants as may be engaged in the future.
Additionally, as the Company implements its planned expansion of commercial
operations it will require the services of additional skilled personnel.
There can be no assurance that the Company can attract persons with the
requisite skills and training to meet their future needs or, even if such
persons are available, that they can be hired on terms favorable to the
Company. See "PART III, ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS".

Members of Management are Working with Other Companies. As discussed
herein, all members of the Company's senior management team have other
business interests that will require a portion of their time and efforts.
Although management believes that it will be able to devote such time as is
necessary for the proper management of the Company's business, it is
possible that their obligations to these other business interests may
interfere with or distract from the full performance of their duties as
management of the Company. Management is committed to devoting
substantially all of their time to the Company's business at such time, if
any, that the Company consummates its first acquisition, at which time they
anticipate hiring other members of the management team. There can be no
assurance that these assumptions will prove accurate or that suitable
personnel will be available to the Company on acceptable terms.

Another Company with which certain Members of Management Are Involved
Also Seeks to make Acquisitions of Companies. The Company's CEO and CFO/
Secretary also hold similar positions in First Medical Resources Corp
("FMRC"). The current plans of FMRC involve the search for companies in
distinct healthcare markets that are not competitive with the acquisitions
planned by the Company. The Company is focused on making acquisitions on
the provider side of the healthcare market while FMRC seeks to make
acquisitions of companies on the payor side. As such, management does not
believe that any conflict will arise in the foreseeable future. However, it
is possible that the business direction of either the Company or FRMC could
change in the future and that certain opportunities may be found by officers
of the Company that would be appropriate for both companies. In such event,
a potential conflict could arise with respect to which company the
opportunity is presented first. Because of the potential for conflict, the
Company's management believes it is unlikely that the Company will ever
pursue opportunities to acquire payor side companies.

Company Growth is Dependent on the Successful Implementation of the
Company's Business Plan. It is currently anticipated that the Company's
future growth will result from the development of its planned operations,
the completion of acquisitions and their subsequent integration into the
Company's business, the development of brand awareness, the ability to
develop strategic relationships, the ability to respond effectively to

competition, the development and upgrading of its future technology, the
ability to attract and retain qualified personnel and the ability to obtain
necessary financing on acceptable terms. Additionally, as the Company
implements its business plan, there can be no assurance that there will
not be substantial unanticipated costs and expenses associated with the
start-up and implementation of such plan.

The Company's Financial Statements Contain a "Going Concern
Qualification". The Company may not be able to operate as a going concern.
The independent auditor's report accompanying the Company's financial
statements contains an explanation that the Company's financial statements
have been prepared assuming that the Company will continue as a going
concern. Note 6 to these financial statements indicates that the Company is
in the development stage and needs additional funds to implement its plan of
operations. This condition raises substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty. The Company's audit report and financial statements are
included herein as "PART F/S".

Ability to Fund Business and Acquisition Strategy. The Company's
business strategy will require that substantial capital investment and
adequate financing be available to the Company for the completion of
acquisitions, development and integration of operations and technology as
needed. Should the Company be unable to obtain the amount of capital
presently anticipated, the Company may be required to obtain financing
through borrowings or the issuance of additional equity or debt securities,
which could have an adverse effect on the value of the existing Common
Stock to the current shareholders.

Growth of the Temporary Healthcare Professional Staffing Business is
Dependent on the Successful Completion of Acquisitions. It is currently
anticipated that growth of the temporary healthcare professional staffing
business will result from acquisitions. The Company's acquisition plan
depends on its ability to identify suitable candidates, effectively
integrate acquired companies into its organization, retain personnel and
customers in the acquired companies, and obtain necessary financing on
acceptable terms. While the Company is in discussions with acquisition
candidates, there can be no assurance that any acquisition will be
consummated, that the operations, personnel or customers of any acquired
company will be successfully integrated with those of the Company or that
any organization will be profitable for the Company.

Risk Associated with Acquisitions. Any acquisition is accompanied by
risks which include difficulty assimilating the operations and personnel of
acquired businesses, maximizing the financial and strategic position of the
Company through the successful incorporation and integration of acquired
personnel and customers, maintaining uniform standards and preventing the
impairment of relationships with employees and customers. Additionally, as
the Company implements its business plan, there can be no assurance that
there will not be substantial unanticipated costs and expenses associated
with the start-up and implementation of such acquisition plan.

Uncertainty As To Management's Ability To Control Costs And Expenses.
With respect to the planned business operations of the Company, management
cannot accurately project or give any assurance, with respect to its
ability to control development and operating costs and/or expenses in the

future. Consequently, even if the Company is successful in implementing its
planned commercial operations (of which there can be no assurance),
management still may not be able to control costs and expenses adequately,
and such operations may generate losses.

Possible Adverse Effect of Government Regulations and Future
Regulatory Changes Regarding Healthcare. Although the Company's planned
operations are currently not subject to any regulations governing the
acquisition of healthcare companies, it is possible that, in the future,
such regulations may be legislated. Although it is difficult to predict the
extent of any such future regulations, it is possible that future or
unforeseen changes may have an adverse impact upon the Company's ability to
continue or expand its operations as presently planned.

No Dividends. The Company has not paid any dividends to date nor, by
reason of its present financial status and contemplated financial
requirements, does it anticipate paying any dividends in the foreseeable
future.

Competition. The Company is a start-up venture with no established
commercial operations and no market recognition in either area of its
business. As such, in all aspects of its planned operations, the Company
will face significant competition from many companies virtually all of which
are larger, better financed and have a significantly greater market
recognition than the Company. See the discussion of competition contained
in Item 1, "DESCRIPTION OF BUSINESS" above, for each of the Company's two
divisions.

Liability For Information Services. Because content made available by
third parties for the Company's Wellness Division website may be
subsequently distributed to others, there is a potential that claims will
arise against the Company for defamation, negligence or personal injury, or
based on other theories due to the nature of such content. In addition, the
Company could be exposed to liability with respect to the content and
materials that may be posted by users in services offered by the Company.
Although the Company intends to carry general liability insurance, the
Company's insurance may not cover potential claims of this type or may not
be adequate to fully indemnify the Company. Any successful imposition of
liability could have a material adverse effect on the Company's business,
results of operations and financial condition.

Limited Public Market For Common Stock. The Company has received
approval to list its common stock on the OTC Bulletin Board and trading of
shares began on February 24, 2003. There currently is a very limited public
market for the Company's common stock and no assurance can be given that a
large public market will develop in the future. The Company's common stock
may be thinly traded, if at all, even if the Company achieves full operation
and has significant revenues.

Risks of Low-Priced Stocks And Possible Effect of "Penny Stock" Rules
on Liquidity. The Company's stock is defined as a "penny stock" under Rule
3a51-1 adopted by the Securities and Exchange Commission under the
Securities Exchange Act of 1934. In general, a "penny stock" includes
securities of companies which are not listed on the principal stock
exchanges or the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") or National Market System ("NASDAQ NMS") and

have a bid price in the market of less than $5.00; and companies with net
tangible assets of less than $2,000,000 ($5,000,000 if the issuer has been
in continuous operation for less than three years), or which have recorded
revenues of less than $6,000,000 in the last three years. "Penny stocks"
are subject to rule 15g-9, which imposes additional sales practice
requirements on broker-dealers that sell such securities to persons other
than established customers and "accredited investors" (generally,
individuals with net worth in excess of $1,000,000 or annual incomes
exceeding $200,000, or $300,000 together with their spouses, or individuals
who are officers or directors of the issuer of the securities). For
transactions covered by Rule 15g-9, a broker-dealer must make a special
suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. Consequently,
this rule may adversely affect the ability of broker-dealers to sell the
Company's common stock, and therefore, may adversely affect the ability of
the Company's stockholders to sell common stock in the public market.

Shares Eligible for Future Sale. A total of 10,998,166 shares of
common stock are issued and outstanding as of the date of this Report, of
which in excess of 7,724,766 shares thereof are "restricted securities" as
that term is defined under the Securities Act. Therefore, all such
restricted shares must be held indefinitely unless subsequently registered
under the Securities Act or an exemption from registration becomes
available. One exemption which may be available in the future is Rule 144
adopted under the Securities Act. Generally, under Rule 144 any person
holding restricted securities for at least one year may publicly sell in
ordinary brokerage transactions, within a 3 month period, the greater of one
(1%) percent of the total number of the Company's shares outstanding or the
average weekly reported volume during the four weeks preceding the sale, if
certain conditions of Rule 144 are satisfied by the Company and the seller.
Furthermore, with respect to sellers who are "non-affiliates" of the Company,
as that term is defined in Rule 144, the volume sale limitation does not
apply and an unlimited number of shares may be sold, provided the seller
meets a holding period of 2 years. Sales under Rule 144 may have a
depressive effect on the market price of the Company's common stock, should
a public market develop or continue for the Company's common stock.

Shares Eligible for Purchase. Subject to the terms and conditions of a
Common Stock Purchase Agreement dated May 15, 2002 with James Durham and
Malahide Investments, two of the Company's current stockholders, during the
one year period beginning on the closing date of the Company's first
acquisition, each party to the Agreement has the right to purchase at a
purchase price of $0.0001 per share, up to a number of additional shares of
common stock equal to twenty-five (25%) of the aggregate number of
additional shares of common stock and other securities convertible into
common stock issued in connection with any Acquisition (as defined in the
agreement). In the event that the Company consummates an Acquisition, and
the company issues additional shares of common stock, pursuant to the
Agreement, such issuances may cause substantial dilution to the Company's
stockholders and may have a depressive effect on the market price of the
Company's securities, should a public market develop or continue for the
company's shares of common stock.

Forward-Looking Statements. This document contains forward-looking
statements. Readers are cautioned that all forward-looking statements
involve risk and uncertainty. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there

can be no assurance that the forward-looking statements included in this
document will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein,
the inclusion of such information should not be regarded as a representation
by the Company or any other person that the objectives and plans of the
Company will be achieved. (See "Forward Looking Statements", PART I).

The public may read and copy any materials filed with the SEC at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
internet site that contains reports, proxy and information statements, and
other information regarding issuers that file electronically with the SEC.
The address of that SEC internet site is www.sec.gov. The Company's
websites are currently under development, but may be viewed as discussed in
ITEM 1, Section II and Section III.

ITEM 2. DESCRIPTION OF PROPERTY

The Company is located at 455 Market Street, Suite 1220, San Francisco,
California 94105, which office was acquired in September, 2002. Its
telephone number is (415) 543-1535. The Company's offices consist of a
sublease dated September 26, 2002, for 2,487 square feet of office space
from City National Bank. The term of the sublease is from October 30, 2002
until July 31, 2004. The monthly rent is $4,559.50 and the Company paid
the sum of $45,595 as the advance rent payment for ten prepaid months and
the additional sum of $9,119 as a security deposit.

The Company currently has no material assets, and the Company does not
own any real property.

ITEM 3. LEGAL PROCEEDINGS

Neither the Company, nor any of its officers or directors, is a
defendant in any litigation except as noted in the next paragraph. To the
knowledge of management, there is no litigation currently pending or
contemplated against the Company or any of its officers or directors in
their capacity as such.

Mr. James D. Durham, Chairman and CEO of the Company, previously
served as Chairman and Chief Executive Officer of QuadraMed Corporation
until June 12, 2000 and continued as a Director of QuadraMed until July 31,
2001. Following a restatement of its financial statements by QuadraMed in
October 2002, several holders of the common stock of QuadraMed purporting to
represent a class of similarly aggrieved stockholders filed lawsuits against
QuadraMed and certain directors and senior officers. These suits allege that
during the period from April 19, 1999 to October 16, 2002 QuadraMed and
certain officers and directors violated Section 10(b) and 20(a) of the
Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder by the Securities and Exchange Commission including Rule 10b-5.
Of four such complaints filed, one names Mr. James D. Durham as a defendant.
These actions are only at a preliminary stage and no answers have been
interposed by any party thereto.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There have been no matters submitted to a vote of security holders
during the period from September 1, 2002 to December 31, 2002 through the
solicitation of proxies or otherwise.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS

The Company has received approval to list its common stock on the OTC
Bulletin Board, and trading of such shares began on February 24, 2003.
There currently is a very limited public market for the Company's common
stock and no assurance can be given that a large public market will develop
in the future. The Company's common stock may be thinly traded, if traded
at all, even if the Company achieves full operation and has significant
revenue.

As of the date of this report, there were 72 record holders of the
Company's common stock

The Company has no outstanding options or warrants to purchase, or
securities convertible into, shares of the Company's common stock. On
December 31, 2002, there were 10,998,166 shares issued and outstanding, and
as of the date of this Report, 7,724,766 shares of the Company's common
stock that may be eligible for future sale by shareholders pursuant to Rule
144 under the Securities Act (See "RISK FACTORS, Shares Eligible for Future
Sale"). There are no shares of the Company's common stock that are currently
being publicly offered, or proposed to be publicly offered.

Subject to the terms and conditions of a Common Stock Purchase
Agreement, executed effective May 15, 2002, two of the Company's
stockholders, James Durham and Malahide Investments, during the one year
period beginning on the closing date of the Company's first acquisition,
have the right to purchase at a purchase price of $0.0001 per share, a
number of additional shares of common stock equal to twenty-five percent
(25%) of the aggregate number of additional shares of common stock and other
securities convertible into common stock issued in connection with any
Acquisition (as defined in the Agreement). Refer to Form 8-K dated August
21, 2002, which is incorporated herein by reference.

Subsequent to the period covered by this Report, on March 5, 2003 the
Company executed a Promissory Note in favor of one of its shareholders,
Gable International Holdings, Ltd., in the principal amount of $100,000 in
exchange for cash in the same amount. This Promissory Note accrues interest
at 12% per annum, and matures on June 13, 2003, at which time the principal
plus accrued interest are payable in full. If the Company should default on
this Note, interest will accrue at 18% per annum as of the date of default.
The Company paid another shareholder, Atlantic International Capital
Holdings, $5,000 as a transaction fee for securing this loan.

The Company has not paid any cash dividends since its inception and
does not anticipate paying dividends in the foreseeable future. It is
anticipated that earnings, if any, will be retained for the operation of the
Company's business.

The following transactions describe the sale of unregistered securities
by the Company during the four-month transition period ended December 31,
2002. All of the shares were sold privately by the Company and not offered
to the public, and were not registered under the Securities Act of 1933 (the
"Act"), as amended, in reliance on the exemption provided by Section 4(2) of
the Act. All shares listed below were sold as restricted shares.

At the Company's Board Meeting on October 22, 2002, the Board approved
the issuance of 100,000 shares of the Company's common stock to each of the
directors of the Company: Robert Kenneth, Joseph M. De Luca and Robert P.
Oliver. Said shares were valued at $.007 per share, vest over a three year
period with a vesting start date of October 22, 2002, and were issued in
exchange for services previously provided to the Company. All of the
300,000 shares were issued as restricted securities, and the certificates
bear the customary restrictive legend under Rule 144 of the Act. The
issuance of such shares of common stock was not approved by the Company's
stockholders.

Also, at the Board Meeting on October 22, 2002, the Board approved the
issuance of 399,931 and 299,949 shares of common stock to Pamela Atherton,
President, and Lawrence M. Davis, Chief Financial Officer and Secretary,
respectively. Said shares were valued $0.0067 per share, vest over a four
year period with a vesting start date of November 1, 2002 and were issued in
exchange for services previously provided to the Company. The total of
these 699,880 shares were issued as restricted, and the certificates will
bear the customary restrictive legend under Rule 144 of the Act.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction
with the audited financial statements and notes thereto included in this
report, and Management's Discussion and Analysis of Financial Condition and
Results of Operations and Risk Factors contained in the Company's Annual
Report on Form 10-KSB for the Company's former fiscal year ended August 31,
2002 as filed with the Securities and Exchange Commission on November 27,
2002.

Change of Fiscal Year End

On October 22, 2002, the Company's Board of Directors approved a
change in the Company's fiscal year end from August 31st to December 31st,
as reported in Form 8-K filed on November 6, 2002. This change became
effective on December 31, 2002 and this Form 10-KSB for the four-month
period, from September 1, 2002 to December 31, 2002, is being filed to
comply with transition reporting requirements.

Results of Operations

The Company did not have any revenue during the four-month period
ended December 31, 2002, or during the comparable period for the prior year,
and has not had any revenue since its inception in November 1997.

For the four-month period ended December 31, 2002 and 2001, the total
loss for the Company was $207,178 and $21,580, respectively. From inception,
November 10, 1997, through December 31, 2002, the total loss was $662,347.
These losses resulted from the Company's start-up expenses, business plan
development, initial market research activities, and initial website
development, and were funded by the private placement sale of shares of
Common Stock. No assurance can be made that the Company will be able to
raise additional funds through the private placement sale of its securities.

The audit report accompanying the Company's financial statements for
the four-month period ended December 31, 2002 and 2001 contains a going
concern qualification because the Company is in the development stage and
needs additional capital to begin commercial operations. Refer to "RISK
FACTORS" and the audit report and financial statements contained in "PART
F/S".

For the four-month period ended December 31, 2002, the total loss for
the Company was $207,178 compared to a loss of $21,580 for the comparable
prior fiscal year period ended December 31, 2001, an increased loss of
$185,598. This increased loss resulted from increased consulting expenses of
$124,420, which are primarily attributable to the cost of hiring a Chief
Executive Officer and Chief Financial Officer. Professional fees increased
by $29,715 in the four-month period ended December 31, 2002, primarily as a
result of increased legal fees incurred for enhanced corporate governance
commensurate with more stringent external reporting requirements for public
companies. Administrative expenses increased by $9,703 as the Company
relocated to new offices and incurred the expense of computers, telephone
systems, and other related expenses. Market research expense increased
$17,852 as the Company engaged the services of several consulting firms to
identify the names of businesses that met the Company's target acquisition
criteria.

In regard to its capital requirements for the next twelve months,
additional funding will be required and the Company plans to meet its
immediate capital needs through private equity or debt financing. Issuing
additional equity will result in dilution to the existing shareholders.

The Company is considered to be a development stage enterprise because
it has not yet generated revenue from the sale of products or services.
There have been no business operations since the date of incorporation.
Since its inception, the Company has devoted all of its efforts to business
research and development, the preparation of a business plan, discussions
with potential acquisition candidates, the discussion of specific services
to be offered, marketing considerations, planning development of a website,
discussions regarding strategic alliances and the search for sources of
capital to fund its efforts.

In addition to the Company's projected expenses and cash flow,
financing requirements will depend on other factors, such as the progress of
its market research and development, acquisition costs, any changes
resulting from continuing research, development of new technology, and the
economic impact of competition. The Company's future long-term capital
requirements will depend significantly on the rate of its business growth,
the introduction of services, and the success of such services after they
are introduced. Projections of future long-term cash needs are subject to
substantial uncertainty.

Liquidity and Capital Resources

At December 31, 2002, the Company had cash totaling $125,462. The
Company's management is engaged in raising additional capital to execute its
business plan. There can be no assurance that the Company will be able to
raise the amount of capital required to meet its objectives.

Plan of Operations

The Company's success in achieving profitability will depend on its
ability to consummate acquisitions of healthcare companies, to implement its
marketing strategy and to achieve a revenue stream from the sale of products
and services, while not exceeding budgeted expenses. During the
implementation of its business plan, the Company will be subject to all of
the risks inherent in an emerging business, including the need to provide
reliable and effective products and services, to develop marketing
expertise, and to generate sales. In the event that the Company's projected
market does not develop as anticipated, the Company's business, financial
condition and results of operations could be materially adversely affected.

During the next twelve months, the Company intends to perform the
activities required to establish its business operations, as described in
"ITEM 1 (B) Business of Issuer". In executing its current plans, the
Company's objectives will include the following:

. Find healthcare companies to acquire and consummate acquisitions

. Develop brand awareness

. Build an operations structure to support the business

. Develop management information systems and technology to support
operations

. Attract and retain qualified personnel

According to the Company's estimates, between $1,000,000 and $3,000,000
will be needed through the twelve months ending December 31, 2003 to
establish these business operations, not including revenues from operations,
which are not expected to materialize in significant amounts until the
second or third calendar quarters of 2003 at the earliest. As a result, the
Company's ability to remain solvent in the coming year will primarily depend
on its ability to raise additional equity capital.

Capital commitments for the next twelve months are minimal, and the
Company believes that additional funds raised through various equity
offerings should be sufficient to meet the Company's obligations for that
period and until the various planned activities described herein are able to
create significant cash flow. The Company has received an audit opinion
which includes a "going concern" risk. The Company is aware of this risk and
plans to raise any necessary capital through the sale of additional equity.
If additional capital is not readily available, the Company will be forced
to scale back its development activities until its income will exceed its
expenses. Although this will slow the Company's development, it will allow
for the Company's survival. Notwithstanding the foregoing, there is
substantial doubt regarding the Company's ability to continue as a going
concern, and as such, the Company is substantially dependent upon its
ability to raise sufficient capital to cover its development costs.

The Company plans to perform market research and development during the
next twelve months regarding such considerations as additional definition of
services to be offered, and pricing of services. The Company's planned
business does not require the purchase of plants, factories, extensive
capital equipment, or inventory.

The Company has no employees as of the date of this Report. The
Company intends to hire employees during the next twelve months as its
business plan is executed, which will be dependent on the Company's ability
to raise the required funds. In the interim, the Company will rely on its
management to perform the activities required for preliminary business
development. The failure to attract and retain the required personnel would
have a material adverse effect on the Company's business and results of
operations.

ITEM 7. FINANCIAL STATEMENTS

Audited financial statements for the four-month transition period ended
December 31, 2002 and 2001 are submitted herein as PART F/S on Pages F-1 to
F-15.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

None.

PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

Name Age Position

James D. Durham 55 Chief Executive Officer and Chairman of the Board
Pamela G. Atherton 53 President
Lawrence M. Davis 54 Chief Financial Officer and Secretary
Robert J. Kenneth 66 Director
Robert P. Oliver 75 Director
Joseph M. De Luca 46 Director

The Company's previous Officers and Directors resigned effective August
16, 2002.

The Company's Restated Certificate of Incorporation adopted on August
15, 2002 changed the election of Directors, such that; the Directors are
classified into three classes, with the first such class holding office
until the first annual meeting of stockholders; the second class holding
office until the second annual meeting of stockholders; and the third class
holding office until the third annual meeting of stockholders. Each class
of Directors will be elected for a three year term.

The initial Class I Directors are vacant. The initial Class II
Directors are Joseph M. De Luca and Robert P. Oliver. The initial Class
III Directors are James D. Durham and Robert J. Kenneth.

The Officers are appointed by, and serve at the will of, the Board of
Directors. There are no family relationships among the Directors and
Officers of the Company. On October 22, 2002, an Audit Committee was formed
consisting of three Directors: Joseph M. De Luca, Robert J. Kenneth and
Robert P. Oliver. There are at present no other committees of the Board of
Directors.

Officers and Directors

James D. Durham, Chief Executive Officer and Chairman of the Board

Mr. James D. Durham has been Chief Executive Officer and the Chairman
of the Board of the Company since August, 2002. Mr. Durham has also been
Chief Executive Officer and a Director of First Medical Resources
Corporation, a publicly held company, since March, 2002.

In 1999, Mr. Durham co-founded Market Insite Group, Inc., which offers
an exclusive web-based scoring and correlation algorithm to match business
with their customers. Mr. Durham also founded ChartOne, Inc. to offer web-
based storage and retrieval capabilities for medical records, which has over
1,000 hospital customers. In 1993, Mr. Durham founded QuadraMed
Corporation, a public company, which offers a suite of software products and
services focused on the financial and clinical needs of hospitals. In 1986,
in a turn-around situation, Mr. Durham became CEO of Knowledge Data Systems,
which was then in bankruptcy, and restructured the company, which returned
to profitability and later was sold to Ameritech.

From 1971 to 1979, Mr. Durham served in a variety of positions at
Medicus Corporation, and became President and Chief Financial Officer of a
subsidiary of the company. During this period, Mr. Durham founded the first
company in the healthcare industry to use personal computers, which later
became a public company as Medicus Systems Corporation.

Mr. Durham has a Bachelors Degree in Industrial Engineering from the
University of Florida, graduating with high honors, and has a Masters Degree
in Business Administration from UCLA. He is a Certified Public Accountant,
licensed in the State of Illinois.

Pamela G. Atherton, President

Ms. Atherton was appointed President of the Company in August, 2002 by
the Company's CEO and her appointment was ratified by the Board of Directors
in October, 2002.

Ms. Atherton has over 25 years experience in the healthcare industry.
Her career includes time as a corporate executive with a large national HMO,
as well as ten years as Chairman and CEO of two healthcare services
organizations. Ms. Atherton began her career at Humana, Inc., where she
served from 1982 to 1992. She held numerous field and corporate positions
and was the corporate director of Nursing/Allied Heath Recruitment and
Retention from 1988 to 1992. In that role, she led the nursing and allied
health recruitment for hospitals nationwide. Her creative solutions to
recruitment and retention were featured in Modern Healthcare and numerous
other trade publications. From 1992 to 1997, Ms. Atherton served as Chief
Executive Officer of Resource Factor, a privately held female business
enterprise that she founded, which specialized in per diem and mobile nurse/
allied health staffing. After securing venture capital, the company
expanded into two additional satellite offices. Ms. Atherton led the sale
of those businesses in 1997. From 1996 to 2000, Ms. Atherton served as
Chairman and Chief Executive Officer of Aperture Credentialing, Inc., a
company she founded which provides data management of physician information
for provider credentialing. The company also provided nurses nationwide,
to perform physician office site visits and HEDIS data collection. Since
2000, Ms. Atherton has continued to serve as Vice Chairman of Aperture's
Board of Directors. Since 2001, Ms. Atherton has led the commercial
division of Appriss, Inc., a pioneering voice application service provider.
Her division specializes in providing innovative voice solutions for the
healthcare industry. These applications assist the industry in enabling
access to mission critical information over the telephone using human
speech. Ms. Atherton formed Crois, Inc., in 2000 as a consulting company
specializing in healthcare services and staffing. She has served as a
consultant to the company.

Ms. Atherton graduated, magna cum laude, from Kentucky Southern
College and holds a Masters Degree from the University of Louisville. Ms.
Atherton is a Woodrow Wilson Fellow and has been honored as a female
business owner as well as an innovative entrepreneur and community leader.

Lawrence M. Davis, Chief Financial Officer and Secretary

Mr. Lawrence M. Davis was appointed Chief Financial Officer of the
Company in August, 2002 by the Company's CEO and his appointment was
ratified by the Board of Directors in October, 2002. Mr. Davis has
performed CFO level services for First Medical Resources Corporation, a
publicly held company, since July, 2002. He also serves as a director and
treasurer of Sawhorse Enterprises, Inc., a privately held ecommerce company,
and serves on the Board of two non-profit organizations.

Mr. Davis has more than 25 years experience as a financial executive.
From January 1999 to present, Mr. Davis has served as an independent
financial consultant, providing consulting services to numerous software and
technology companies in preparing for financing events including initial
public offerings and venture financings. Such consulting services included

creating financial reporting systems, designing and implementing long-range
financial forecasts, and providing advice regarding cash management and all
aspects of corporate administration. From March 1997 to August 1998, Mr.
Davis was the corporate controller and interim CFO of FirstAmerica
Automotive, Inc., a publicly held consolidator of automotive dealerships.
This company was formed as the result of a reverse merger into a "shell"
while simultaneously raising $250 million in debt financing from GE Capital
for the purpose of financing seven acquisitions. In 1998, this company was
sold to Sonic Automotive. Previously, Mr. Davis served as the CFO of The
Nalley Companies, another consolidator of automotive dealerships, where he
arranged for its sale to Asbury Automotive. Other professional experience
has included serving as a senior credit officer and commercial lender with
Citicorp, controllership of the U.S. subsidiary of LeasePlan Holland N.V.,
Europe's largest automotive leasing company, and as a member of the audit
staff of Arthur Andersen. He also served as a Regular Army officer in tank
battalions in the former Federal Republic of Germany and stateside.

Mr. Davis earned his MBA and BS (accounting) from Auburn University,
and a BS (mechanical engineering and Russian language) from the U.S.
Military Academy at West Point, New York. He is licensed as a Certified
Public Accountant by the State of Georgia.

Robert J. Kenneth, Director

Mr. Kenneth has been active in the healthcare industry for 34 years.
He is the founder of Kenneth Associates, a leading provider of staffing and
professional services to hospitals and physicians in California, focused on
on-site billing staff and management as well as off-site billing services
with a goal of reducing accounts receivable. Mr. Kenneth has also served
on the Board of Trustees of St. Francis Memorial Hospital where he was a
member of the Investment Committee, Chairman of the Budget and Finance
Committee and Chairman of the Retirement and Personnel Committee. Mr.
Kenneth also serves on the Board of Overseers for the University of
California School of Nursing. Mr. Kenneth is also a Director of Nurses
Network Inc., a San Francisco based nurse staffing agency. Mr. Kenneth
is also a member of the Healthcare Financial Management Association, the
American Guild of Patient Accounts Managers, and is the author of numerous
articles and publications. He is a regular speaker for healthcare
professional organizations and has served as an expert witness before the
U.S. House of Representatives Ways and Means Committee.

Mr. Kenneth earned his Bachelors Degree in Business Administration
from Roosevelt University in Chicago and a Masters Degree in Business
Administration from Golden Gate University.

Robert P. Oliver, Director

Mr. Oliver is presently the Chief Executive Officer of CorDev
Financial, Inc., a privately held company specializing in growth-oriented
CEO consulting and mergers and acquisitions. While in this position he has
served as the principal negotiator for over 25 acquisitions or divestitures.
Mr. Oliver's management experience has encompassed a wide variety of
manufacturing, retail, service, and distribution companies. Mr. Oliver
previously served as head of the Culligan International development group
where he led an innovative and active plan of acquiring Culligan dealers.

Subsequently, he served as co-managing partner for Anne Klein & Co. where
he launched the Anne Klein retail operation. Mr. Oliver has also served in
a variety of management positions in computer service and software,
automotive manufacturing and distribution, publishing, international
pipeline construction, and real estate development. Mr. Oliver has served
as a member of the Board of Directors of a number of manufacturing, software
and service companies and presently is a board member of AMCAL, Inc.,
Calpine Containers, Inc., North American Imports, Inc., and, ex officio,
Willitts Designs International, Inc.

Mr. Oliver is a graduate of the U.S. Naval Academy and served five
years as a surface and submarine naval officer. He has been a long-time
member of the Young Presidents Organization and its graduate group, World
Presidents Organization, and has been a guest lecturer to several graduate
schools of business.

Joseph M. De Luca, Director

Mr. De Luca has provided consulting services in addition to serving in
line, interim or turnaround management positions in the healthcare industry
for over 22 years. His experience includes healthcare information
technology suppliers, healthcare delivery systems, academic medical centers,
payor and physician organizations. His clients include the nation's largest
investor owned financially integrated delivery system, the nation's largest
non-profit financially integrated delivery system, and the nation's largest
delegated risk physician organization. His professional continuum also
includes futurist, research and publication activities. In 1996, Mr. De
Luca co-founded Healthcare Investment Visions LLC, a research, business
development and management consultancy located in the San Francisco Bay
Area. The firm is committed to providing objective, visionary services
within the context of current healthcare information and medical technology
trends, adoption and market conditions. Between 1985 and 1995, Mr. De Luca
was the founder and President of JDA, a consulting firm providing
information systems strategy, vendor selection, development, implementation
and management services to healthcare provider organizations. In 1995, JDA
was acquired by Science Applications International Corporation. Between 1984
and 1985, Mr. De Luca served as a senior manager with Computer Synergy Inc.,
a public company who developed hospital information systems. His duties
included corporate strategy development, sales and marketing support,
financial systems product management, and operational finance. Between
1980 and 1984, Mr. De Luca was a manager with the Management Information
Consulting Division of Arthur Andersen (now Accenture), responsible for
healthcare information systems consulting services to provider and payor
organizations. Mr. De Luca is a fellow of the American College of
Healthcare Executives ("ACHE"), and was recently awarded the ACHE
Regent's Senior Leadership Award for service to the community. Mr. DeLuca
is a frequent speaker at high-profile regional and national conferences, a
lecturer for university programs, and is the author of numerous manuscripts
and books.

Mr. De Luca holds a Master Degree of Arts-Health Services
Administration from the University of Wisconsin, Madison, and graduated from
Lawrence University, Appleton, Wisconsin with a Bachelors Degree in Biology,
with high honors.

Under Section 16(a) of the Securities Exchange Act of 1934, as amended,
the directors and officers of the Company and any person who owns ten
percent or more of the Company's common stock are required to report their
initial ownership of the Company's common stock and any subsequent changes
in that ownership to the SEC on Forms 3, 4, and 5. Such reporting persons
are also required by SEC regulations to furnish the Company wih copies of
all such reports that they file in accordance with Section 16(a).

To the Company's knowledge, based solely upon a review of the copies of
such reports furnished to the Company and representations made to the
Company, no other reports were required, during and with respect to the
transitional period ended December 31, 2002 and all reporting persons have
timely complied with all filing requirements applicable to such persons.

Conflict of Interest

As discussed herein, all members of the Company's senior management
team have other business interests that will require a portion of their time
and efforts. Although management believes that it will be able to devote
such time as is necessary for the proper management of the Company's
business, it is possible that their obligations to these other business
interests may interfere with or distract from the full performance of their
duties as management of the Company. Management is committed to devoting
substantially all of their time to the Company's business at such time, if
any, that the Company consummates its first acquisition, at which time they
anticipate hiring other members of the management team. There can be no
assurance that these assumptions will prove accurate or that suitable
personnel will be available to the Company on acceptable terms.

The Company's CEO and CFO/Secretary also hold similar positions in
First Medical Resources Corp ("FMRC"). The current plans of FMRC involve
the search for companies in distinct healthcare markets that are not
competitive with the acquisitions planned by the Company. The Company is
focused on making acquisitions on the provider side of the healthcare market
while FMRC seeks to make acquisitions of companies on the payor side. As
such, management does not believe that any conflict will arise in the
foreseeable future. However, it is possible that the business direction of
either the Company or FRMC could change in the future and that certain
opportunities may be found by officers of the Company that would be
appropriate for both companies. In such event, a potential conflict could
arise with respect to which company the opportunity is presented first.
Because of the potential for conflict, the Company's management believes it
is unlikely that the Company will ever pursue opportunities to acquire
payor side companies.

ITEM 10. EXECUTIVE COMPENSATION

The Company paid consulting fees of $66,667 to its Chairman of the
Board/CEO and $18,350 to its CFO/Secretary during the four-month period
ended December 31, 2002. The Company's President has not received any
compensation as of the date of this Report, and will not receive any
compensation until an acquisition has been consummated by the Company.

On August 14, 2002, the Company entered into an Employment Agreement
for period of two years with its Chairman and CEO, which provides
for a base salary of $200,000 per year. From this date until such date as
additional funding may be obtained, the Chairman/CEO will be compensated as
an independent consultant at a rate of $8,333.33 payable semi-monthly.

At the Company's Board Meeting on October 22, 2002, the Board approved
the issuance of 100,000 restricted shares of common stock to each of the
Company's three Directors in consideration for services previously provided
and 399,931 and 299,949 restricted shares of common stock to the Company's
President and CFO/Secretary, respectively, in consideration for services
previously provided. The issuance of such shares of Common Stock was not
approved by the Company's Stockholders. Refer to "Part II, Item 5, Market
for Registrant's Common Equity and Related Stockholder Matters."

There are no other written agreements between the Company and any other
of its Officers and Directors, and there are no agreements with Directors
for the payment of Directors fees. The Company does not have any pension
plan, profit sharing plan, or similar plans for the benefit of its
Directors, Officers or employees.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

At the Company's Board Meeting on October 22, 2002, the Board approved
the issuance of 100,000 restricted shares of common stock to each of the
Company's three Directors in consideration for services previously provided
and 399,931 and 299,949 restricted shares of Common Stock to the Company's
President and CFO/Secretary, respectively, in consideration for services
previously provided. The issuance of such shares of common stock was not
approved by the Company's stockholders. Refer to "Part II, Item 5, Market
for Registrant's Common Equity and Related Stockholder Matters."

The following table sets forth, as of December 31, 2002, the end of the
Company's fiscal year, information with respect to; (1) any person known by
the Company to own beneficially more than five (5%) percent of the Company's
common stock, based on 10,998,166 shares issued and outstanding as of the
end of December 31, 2002, (2) common stock owned beneficially by each
Officer or Director of the Company, and (3) the total of the Company's
common stock owned beneficially, directly or indirectly, by the Company's
Officers and Directors.

Number of Percent of
Name and Address of Beneficial Owner (1) Shares Owned (2) Class
------------------------------------------- ---------------- ----------

James D. Durham and
Sandra J. Durham, JTWROS (2)(4)* 980,000 9.81 %
455 Market Street, Suite 1220
San Francisco, CA 94105

Paine Weber,
Custodian for the IRA FBO James Durham (2)(5)* 40,000 0.36 %
455 Market Street, Suite 1220
San Francisco, CA 94105

Malahide Investments (6) 980,000 8.91 %
P.O. Box 170, Churchill Building
Grand Turk
Turks & Caicos Islands

Robert Gordon 760,000 6.91 %
444 Madison Avenue, Ste. 2904
New York, NY 10022

Parthian Securities 704,286 6.40 %
36 Boulevard Helvetique
1207 Geneva, Switzerland

John Messina (7) 616,000 5.60 %
11 Wyman Street
Rye Brook, NY 10573

Pamela Atherton (2)(8)* 399,931 3.64 %
455 Market Street, Suite 1220
San Francisco, CA 94105

Lawrence M. Davis (2)(8)* 299,949 2.73 %
455 Market Street, Suite 1220
San Francisco, CA 94105

Robert J. Kenneth (2)(9)* 100,000 0.91 %
455 Market Street, Suite 1220
San Francisco, CA 94105

Robert P. Oliver (2)(9)* 100,000 0.91 %
455 Market Street, Suite 1220
San Francisco, CA 94105

Joseph M. DeLuca (2)(9)* 100,000 0.91 %
455 Market Street, Suite 1220
San Francisco, CA 94105

Officers and Directors as a group (6 persons)(3) 2,019,880 18.37 %

* Officer and/or Director
________________________________________

(1) Persons known by the Company to own beneficially more than five
percent (5%) of the Company's Common Stock.
(2) Common Stock owned beneficially by each Officer and Director of the
Company.
(3) The total number of shares of the Company's Common Stock owned
beneficially, directly or indirectly, by the Officers and Directors
of the Company as a group.
(4) Shares owned by James D. Durham, CEO and Chairman of the Board of the
Company, and his wife, Sandra J. Durham, as Joint Tenants with Rights
of Survivorship.
(5) James D. Durham, CEO and Chairman of the Board of the Company is the
beneficiary of Paine Webber as custodian of these shares.
(6) James D. Durham is an advisor to Malahide Investments but has no
beneficial interest in the shares of the Company owned by Malahide
Investments.

(7) John Messina is the brother of Joseph J. Messina, sole Officer and
Director of Wilmont Holdings Corp., a corporate shareholder of the
Company. John Messina does not have voting or dispositive control
over the shares held by Wilmont Holdings Corp.
(8) Shares vest over a four year period, with a vesting start date of
November 1, 2002. Refer to PART II, Item 5, "MARKET FOR REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS."
(9) Shares vest over a three year period, with a vesting start date of
October 22, 2002. Refer to PART II, Item 5, "MARKET FOR REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS."

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company's Chief Executive Officer and Chief Financial Officer also
hold similar positions with First Medical Resources Corporation ("FMRC").
The Company advanced certain moving and equipment installation costs for the
benefit of itself and FMRC. That portion advanced for the benefit of FMRC
was repaid in full to the Company in December, 2002. (See Note 5 to
Financial Statements, Related Party Transactions.)

During the four-month period ended December 31, 2002, the Company paid
consulting fees totaling $20,000 to Ameristar Group Incorporated
("Ameristar"). Ameristar is an affiliate of Remsen Group, Ltd. and Wilmont
Holdings Corp., two corporate shareholders of the Company. (See Note 5 to
Financial Statements, Related Party Transactions.)

On October 30, 2002 the Company entered into an agreement with a
consulting firm to generate a list of businesses that met the Company's
acquisition criteria. The Company agreed to pay the consulting firm $14,250
for these services plus an additional $42,750 for each business identified
by the consulting firm that was acquired by the Company. To date, no
businesses identified by the consulting firm have resulted in a consummated
acquisition. The Company paid $5,000 of the $14,250 liability to the
consulting firm during the fiscal quarter ended November 30, 2002.

On November 15, 2002, the Company entered into an agreement with a
consultant to identify businesses that met the Company's acquisition
criteria. The Company agreed to pay the consultant five per cent of the
first $1,000,000 in the aggregate purchase price paid by the Company to the
seller. This percentage declines by one per cent for each additional
$1,000,000 in aggregate purchase price paid by the Company to the seller at
which time the consultant is paid one per cent of the excess of $5,000,000
in aggregate purchase price. To date, no businesses identified by the
consultant have resulted in a consummated acquisition, and this agreement
was terminated effective February 25, 2003. Should such a transaction occur
with a company identified by the consultant during the period of time that
this agreement was in effect, the consultant's fee will be paid 75% in cash
less the $14,250 paid to the consulting firm previously referenced and 25%
in the Company's common stock based upon the average closing price of the
stock over the previous 20 days prior to the date of consummation.

Subsequent to the period covered by this Report, on January 2, 2003,
the Company entered into an Agreement with Health Care Investment Visions,
LLC ("HCIV"). Under the terms of this Agreement, HCIV will provide non-
exclusive advisory services to the Company related to identifying and
evaluating potential acquisition candidates. The Company agreed to pay HCIV

seven (7%) percent of the first $1,000,000 of the aggregate purchase price
paid by the Company to the seller. This percentage declines by one percent
for each additional $1,000,000 in aggregate purchase price paid by the
Company to the seller at which time HCIV is paid one (1%) percent of any
amount in excess of $5,000,000 in aggregate purchase price. Should such a
transaction occur, HCIV's fee will be paid with the Company's common stock
based upon the average closing price of the stock over the previous 20 days.
To date, no business identified by HCIV has resulted in a consummated
acquisition. Mr. Joseph M. DeLuca, Chief Executive Officer of HCIV, is also
a Director of the Company and a member of its audit committee.

Also, subsequent to the period covered by this Report, on January 22,
2003 the Company entered into an agreement with a consulting firm to
generate a list of businesses headquartered in Florida that met the
Company's acquisition criteria. The Company agreed to pay the consulting
firm $7,500 for these services plus an additional $22,500 for each business
identified by the consulting firm that was acquired by the Company. To date,
no businesses identified by the consulting firm have resulted in a
consummated acquisition, and no portion of the fee has been paid.

ITEM 13. EXHIBITS, LISTS, SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1. The following documents are filed in PART F/S, as a part of this
report on pages F-1 to F-13:

Auditors Report of Sanford Feibusch, C.P.A., P.C. Dated February 5,
2003;

Balance Sheet as of December 31, 2002;

Statement of Operations and Consolidated Statement of Operations for
the Four-Month Transition Period Ended December 31, 2002 and 2001,
and from Inception, November 10, 1997 to December 31, 2002;

Statement of Stockholders' Equity and Consolidated Statement of
Stockholders' Equity for the Four-Month Transition Period Ended
December 31, 2002 and 2001, and from Inception, November 10, 1997 to
December 31, 2002;

Statement of Cash Flow and Consolidated Statement of Cash Flows for
the Four-Month Transition Period Ended December 31, 2002 and 2001,
and from Inception, November 10, 1997 to December 31, 2002;

Notes to Financial Statements.

2. Financial Statement Schedules - None.

All applicable information is contained in the financial statements
or notes thereto.

3. Exhibits and Material Contracts.

Exhibits required to be filed are listed below and except where
incorporated by reference, immediately follow the Financial
Statements.

Exhibit
Number Description

3.1 Restated Certificate of Incorporation is incorporated
herein by reference from the exhibit with the same
number to our current report on Form 8-K filed with
the Commission on August 21, 2002.
3.2 Restated Bylaws are incorporated herein by
reference from the exhibit with the same number to
our current report on Form 8-K filed with the
Commission on August 21, 2002.
10.1 Restricted Stock Issuance Agreement with Pamela
Atherton, President, dated November 1, 2002.
10.2 Restricted Stock Issuance Agreement with
Lawrence M. Davis, Chief Financial Officer and
Secretary, dated November 1, 2002.
10.3 Restricted Stock Issuance Agreement with Robert J.
Kenneth, Director, dated October 22, 2002.
10.4 Restricted Stock Issuance Agreement with Robert
P. Oliver, Director, dated October 22, 2002.
10.5 Restricted Stock Issuance Agreement with Joseph
M. DeLuca, Director, dated October 22, 2002.
10.6 Common Stock Purchase Agreement dated May 15,
2002 is incorporated herein by reference from
Exhibit Number 10.1 to our current report on Form
8-K filed with the Commission on August 21, 2002.
10.7 Agreement with L.E.K. Consulting LLC dated
October 30, 2002 for consulting services regarding
identification of acquisition candidates.
10.8 Agreement with Jeffrey W. Rose dated November
15, 2002 for consulting services regarding
identification of acquisition candidates.
10.9 Agreement with Health Care Investment Visions, LLC
dated January 2, 2003 for consulting services
regarding identification of acquisition candidates.
10.10 Agreement with L.E.K. Consulting, LLC dated
January 22, 2003 for consulting services regarding
identification of acquisition candidates in Florida.

10.11 Promissory Note with Gable International Holdings, Ltd.
dated March 5, 2003.

(b) Reports on Form 8

Form 8-K filed on November 6, 2002 Re: change of Registrant's fiscal
year end from August 31st to December 31st, such change to take
effect on December 31, 2002. This change was approved by the Board
of Directors on October 22, 2002 and registrant is filing herein on
Form 10-KSB the report covering the transition period from September
1, 2002 to December 31, 2002.

ITEM 14. CONTROLS AND PROCEDURES

Subsequent to December 31, 2002 and prior to the filing of this Report,
the Company conducted an evaluation of the effectiveness of the design and
operation of its disclosure controls and procedures under the supervision
of, and with the participation of, its management, including the Chief
Executive Officer and Chief Financial Officer. Based on that evaluation,
the Company's management, including the Chief Executive Officer and Chief
Financial Officer, concluded that its disclosure controls and procedures
were effective at December 31, 2002, and during the period prior to the
execution of this Report. There have been no significant changes in the
Company's internal controls or in other factors that could significantly
affect internal controls subsequent to December 31, 2002.

PART F/S

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Lifen, Inc.

I have audited the accompanying balance sheet of Lifen, Inc. (A Development
Stage Company) as of December 31, 2002 and the related statement of operations,
stockholders' equity and cash flow for the four months then ended and for the
period from November 10, 1997 (inception) to December 31, 2002. These Financial
Statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the Financial Statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly in
all material respects, the financial position of Lifen, Inc. as of December
31, 2002 and results of operations, changes in stockholders' equity and
cash flows for the four months then ended and from November 10, 1997
(inception) to December 31, 2002, in conformity with generally accepted
accounting principles.

The accompanying Financial Statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 8 to the Financial
Statements, the Company is in the development stage and needs additional funds
for them to implement their plan of operations. This condition raises
substantial doubt about its ability to continue as a going concern. Management's
plans regarding this matter are also described in Note 8. The Financial
Statements do not include any adjustments that might result from the outcome of
this uncertainty.

/s/ Sanford H. Feibusch
-------------------------------
Certified Public Accountant

Monsey, New York
February 5, 2003

F-1

LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS
--------------

ASSETS
December 31, December 31,
Current Assets: 2002 2001
------------ ------------
Cash $ 125,463 $ 206
Prepaid Expenses 33,126 143,201
------------ ------------
Total Current Assets: 158,589 143,407
------------ ------------
Long Term Assets:

Fixed assets, net of accumulated
depreciation of $377 and $156 6,418 864
Prepaid rent 36,476 -
Website development, net of amortization of $292 3,208 -
Security deposit 9,119 -
------------ ------------
Total Long Term Assets: 55,221 864
------------ ------------
TOTAL ASSETS $ 213,810 $ 144,271
------------ ------------
------------ ------------

LIABILITIES & STOCKHOLDERS' EQUITY

Liabilities:
Accounts Payable $ 49,569 $ -
Accrued Liabilities 4,144 4,865
------------ ------------
Total Liabilities: 53,713 4,865
------------ ------------
Stockholders' Equity:
Preferred Stock, par value $.0001
Authorized 10,000,000 shares,
No shares issued and outstanding - -
Common Stock, par value $.0001
Authorized 50,000,000 shares
Issued and outstanding 10,998,166 shares
and 7,424,000 shares 1,100 743
Additional paid in Capital,
net of costs incurred in obtaining financing 821,344 367,239
Accumulated deficit during development stage (662,347) (228,576)
------------ ------------
Total Stockholder's Equity: 160,097 139,406
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 213,810 $ 144,271
------------ ------------
------------ ------------

The accompanying notes are an integral part of these financial statements.

F-2

LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF OPERATIONS
FOR THE FOUR MONTHS ENDED DECEMBER 31
AND FROM INCEPTION NOVEMBER 10, 1997 TO DECEMBER 31, 2002
---------------------------------------------------------

From Inception
Four Months Ended Four Months Ended Nov. 10, 1997 to
December 31, 2002 December 31, 2001 December 31, 2002
----------------- ----------------- -----------------

Revenue: $ - $ - $ -
----------------- ----------------- -----------------
Expenses:
Market Research 17,852 - 42,852
Consulting 131,757 7,337 283,123
Write Off of Offering Costs - - 15,546
Professional Fees 29,715 - 77,770
Rent and Occupancy 9,236 6,100 41,236
Administrative 17,703 8,000 87,703
Cancellation of Management
Service Agreement - - 94,165
Other Operating Expenses 915 143 19,952
----------------- ----------------- -----------------
Total Expenses 207,178 21,580 662,347
----------------- ----------------- -----------------
Net Loss before Provision
For Income Taxes (207,178) (21,580) (662,347)

Provision for Income Taxes - - -
----------------- ----------------- -----------------
Net Loss (207,178) (21,580) (662,347)
----------------- ----------------- -----------------
----------------- ----------------- -----------------
Basic Loss per Share $ (0.02) $ (0.00)
----------------- -----------------
----------------- -----------------
Weighted Average Number
Shares Outstanding 10,514,620 7,198,000
----------------- -----------------
----------------- -----------------

The Accompanying Notes are an integral part of these Financial Statements.

F-3

LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FROM INCEPTION NOVEMBER 10, 1997 TO DECEMBER 31, 2002
-----------------------------------------------------

Common Stock
Par Value $.0001 Additional
------------------- Paid-In Retained
Shares Amount Capital (Deficit)
----------- ------ ---------- ----------
January 1998 - Shares Issued
For Services @ $.0001 Per Share 2,250,000 $ 225 $ - $ -

Loss for Year Ended August 31, 1998 - - - (511)
----------- ------ ---------- ----------
Balance - August 31, 1998 2,250,000 225 - (511)

October 1998 Shares Issued
For Services @ $.0001 Per Share 2,750,000 275 - -

Cancellation of Shares Issued
October 1998 @ $.0001 Per Share (2,750,000) (275) - -

November 1998 Shares Issued
For Services Net of Expenses
@ $.05 Per Share 500,000 50 23,250 -

March 1999 Shares Issued
For Services @ $.0001 Per Share 2,325,200 232 - -

Loss for the Year Ended
August 31, 1999 - - - (41,133)
----------- ------ ---------- ----------
Balance - August 31, 1999 5,075,200 507 23,250 (41,644)

March 2000 Shares Issued
For Services @ $.0001 Per Share 1,219,800 122 - -

April 2000 Shares Issued Private
Placement @ $1.00 Per Share 45,000 5 44,995 -

Loss for Year Ended August 31, 2000 - - - (43,733)
----------- ------ ---------- ----------
Balance - August 31, 2000 6,340,000 $ 634 $ 68,245 $ (85,377)
----------- ------ ---------- ----------
----------- ------ ---------- ----------

The accompanying notes are an integral part of these financial statements.

F-4

LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (Continued)
FROM INCEPTION NOVEMBER 10, 1997 TO DECEMBER 31, 2002
-------------------------------------------------------

Common Stock
Par Value $.0001 Additional
------------------- Paid-In Retained
Shares Amount Capital (Deficit)
----------- ------ ---------- ----------
Balance August 31, 2000 6,340,000 $ 634 $ 68,245 $ (85,377)

October 2000 Shares Issued
For Services @ $.0001 Per Share 660,000 66 - -

October 2000 Shares Issued
Private Placement @ $1.00 Per Share 10,000 1 9,999 -

November 2000 Shares Issued
Private Placement @ $.50 per Share 10,000 1 4,999 -

November 2000 Shares Issued
Private Placement @ $.50 per Share 20,000 2 9,998 -

January 2001 Shares Issued
Private Placement @ $.50 per Share 48,000 5 23,995 -

May 2001 Shares Issued
Private Placement @ $.50 per Share 500,000 50 249,950 -

Less Shares Returned
July 2001 @$.0001 per Share (530,000) (53) 53 -

Loss for the Twelve Months
Ended August 31, 2001 - - - (121,619)
----------- ------ ---------- ----------
Balance - August 31, 2001 7,058,000 $ 706 $ 367,239 $(206,996)
----------- ------ ---------- ----------
----------- ------ ---------- ----------

The accompanying notes are an integral part of these financial statements.

F-5

LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (Continued)
FROM INCEPTION NOVEMBER 10, 1997 TO DECEMBER 31, 2002
-------------------------------------------------------

November 2001 Shares Issued
For Services @ $.0001 per Share 366,000 37 - -

August 2002 Shares Issued
Private Placement @ $.70 per Share 574,286 57 402,093 -

August 2002 Shares Issued
Private Placement @ $.05 per Share 2,000,000 200 99,800 -

Costs of Private Placement - - (54,455) -

Loss for the Twelve Months
Ended August 31, 2002 - - - (248,173)
----------- ------ ---------- ----------
Balance - August 31, 2002 9,998,286 $1,000 $ 814,677 $(455,169)
----------- ------ ---------- ----------
----------- ------ ---------- ----------
October 2002 Shares Issued
For Services @ $.07 per Share 300,000 30 2,070 -

November 2002 Shares Issued
For Services @ $.067 per Share 699,880 70 4,597 -

Loss For The Four Months Ended
December 31, 2002 - - - (207,178)
----------- ------ ---------- ----------
Balance - December 31, 2002 10,998,166 $1,100 $ 821,344 $(662,347)
----------- ------ ---------- ----------
----------- ------ ---------- ----------

The accompanying notes are an integral part of these financial statements.

F-6

LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)

STATEMENT OF CASH FLOWS
FOR THE FOUR MONTHS ENDED DECEMBER 31
AND FROM INCEPTION NOVEMBER 10, 1997 TO DECEMBER 31, 2002
---------------------------------------------------------

From Inception
Four Months Ended Four Months Ended Nov. 10, 1997 to
December 31, 2002 December 31, 2001 December 31, 2002
----------------- ----------------- -----------------

Operating Activities:
Net (Loss) $ (207,178) $ (21,580) $ (662,347)
----------------- ----------------- -----------------
Adjustments to reconcile net (loss) to
Net cash used in operating activities:
Market Research - - 25,000
Consulting 6,767 - 12,449
Depreciation and amortization 669 80 1,081

Changes in operating assets & liabilities:
Accounts payable & accrued expenses (28,996) - 53,713
Prepaid expenses & other current assets (30,426) (8,680) (33,126)
----------------- ----------------- -----------------
Net Cash Flows from
Operating Activities: (259,165) (30,360) (603,230)
----------------- ----------------- -----------------
Investing Activities:
Purchase of fixed assets (6,795) - (7,975)
Long term prepaid expenses (45,595) - (45,595)
Acquisition of intangible assets (3,500) - (3,500)
Disposal of Equipment - - 767
----------------- ----------------- -----------------
Net Cash Flows from
Investing Activities: (55,890) - (56,303)
----------------- ----------------- -----------------
Financing Activities:
Common Stock Issued - 37 841,150
Offering Expenses - - (56,155)
----------------- ----------------- -----------------
Net Cash Flow from
Financing Activities - 37 784,995
----------------- ----------------- -----------------
Net cash (decrease)/increase for period (315,055) (30,323) 125,462

Cash at beginning of period 440,517 30,529 -
----------------- ----------------- -----------------
Cash at end of period $ 125,462 $ 206 $ 125,462
----------------- ----------------- -----------------
----------------- ----------------- -----------------

The accompanying notes are an integral part of these financial statements.

F-7

LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002

Note 1. Organization
---------------------

Lifen, Inc. (the "Company") was incorporated under the laws of the State of
Delaware on November 10, 1997 under the name Digivision International, Ltd.
The Company's name was changed to Lifen, Inc. on June 22, 2000. To date, the
Company has had no commercial operations and has been engaged in the development
of its business plan, market research, initial website development, and seeking
initial financing in order to commence commercial operations.

Note 2. Summary of Significant Accounting Policies
---------------------------------------------------

Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amount of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. The most
significant estimate relates to the valuation allowance in connection with
deferred tax assets. Actual results could differ from those estimates.

Fixed Assets
------------
Fixed assets are stated at cost. Depreciation is provided for utilizing the
straight-line method over the estimated useful life of the asset. The cost of
maintenance and repairs is charged to operations as incurred.

Accounting for Impairment of Long-Lived Assets
----------------------------------------------
In accordance with SFAS 121, the Company has adopted a policy of recording an
impairment loss on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. Adoption of this
statement will not have an impact on these financial statements.

Organization Costs
------------------
The Company has adopted SOP 98-5, "Reporting on the Costs of Start-up
Activities", which requires that all costs of start-up activities and
organization costs be expensed as incurred. The Company expects that the
adoption of SOP 98-5, which is effective for fiscal years beginning after
December 15, 1998, will not have a material effect on its financial statements.

F-8

LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002

Website Development
-------------------
In March 2000, the Emerging Issues Task Force issued No. 00-02 ("EITF 00-02"),
"Accounting for Website Development Costs." EITF 00-02 states that all costs
relating to software used to operate a website and relating to development of
initial graphics and web page design should be accounted for using Statement of
Position ("SOP") 98-1. Under this SOP, costs incurred in the preliminary project
stage should be expensed as incurred, as should most training and data
conversion costs. External direct costs of materials and services and internal
direct payroll-related costs should be capitalized once certain criteria are
met. EITF 00-02 is effective for all fiscal quarters beginning after June 30,
2000. The Company's accounting policy for internal-use software, as required by
SOP 98-1, incorporated the requirements of EITF 00-02. To date, no significant
costs have been incurred.

Income Taxes
------------
The Company records deferred income taxes using the liability method. Under the
liability method, deferred tax assets and liabilities are recognized for the
expected future tax consequences of temporary differences between the financial
statement and income tax basis of the Company's assets and liabilities. An
allowance is recorded, based on currently available information, when it is
more likely than not that any or all of a deferred tax asset will not be
realized. The provision for income taxes includes taxes currently payable, if
any, plus the net change during the period presented in deferred tax assets and
liabilities recorded by the Company.

Per Share Data
--------------
The Company has adopted the standards set by the Financial Accounting Standards
Board and computes earnings per share data in accordance with SFAS No. 128
"Earning per Share." The basis per share data has been computed on the loss for
the period divided by the historic weighted average number of shares of common
stock outstanding. There are no potentially dilutive securities which would be
included in computation of fully diluted earnings per share.

Note 3. Income Taxes
---------------------
There is no provision for Federal or State Income Taxes for the four-month
period ended December 31, 2002 and 2001, since the Company has incurred losses
from inception. Additionally, the Company has reserved fully for any potential
tax benefits resulting from its carryforward operating losses. Deferred tax
assets at December 31, 2002 and 2001 consist of the following:

F-9

LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002

2002 2001
----------- -----------
Net operating loss carryforward $ 249,700 $ 111,000
Valuation allowance (249,700) (111,000)
----------- -----------
-0- -0-

As of December 31, 2002, the Company has net operating loss carryfoward of
approximately $662,000 which expire in various years from 2012 through 2017.

Note 4. Common Stock
---------------------

During January, 1998, the Company issued 2,250,000 shares of its common stock to
two founders of the Company for services valued at $225.

During October, 1998, the Company issued 2,750,000 shares of its common stock to
four individuals for services to be performed. The agreement was canceled and
the shares of common stock were returned and canceled.

During November, 1998, the Company completed a private placement offering of its
common stock, Pursuant to Rule 504 under Regulation D, the Company issued
500,000 shares of its common stock in satisfaction of $25,000 owed to four
parties who had performed services on behalf of the Company.

During March, 1999, the Company issued 2,325,200 shares of its common stock to
eight parties for services performed on behalf of the Company, valued at $232.

During March, 2000, the Company issued 1,219,800 to ten parties for services
performed on behalf of the Company, valued at $122.

During April 2000, the Company sold 45,000 shares of its common stock at $1.00
per share to three investors in a private placement, pursuant to Rule 504 under
Regulation D, and received total proceeds of $45,000.

During October, 2000, the Company issued 660,000 shares of its common stock to
six individuals for consulting services performed, valued at $.0001 per share,
or $66. Also during October, 2000, the Company sold 10,000 shares of its
Company stock to one investor at $1.00 per share. The Company received $5,000
in cash and services totaling $5,000.

F-10

LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002

In November 2000, the Company sold 30,000 shares of its common stock to two
individual investors at a price of $.50 per share and received total proceeds
of $15,000.

In January 2001, the Company sold 48,000 shares of its common stock to five
individual investors at a price of $.50 per share and received total proceeds
of $24,000.

In May 2001, the Company sold 500,000 shares of its common stock to one
individual investor at a price of $.50 per share. The Company received proceeds
in the amount of $100,000 in May, 2001, $50,000 in June, $50,000 in July, and
$50,000 in August, 2001, for a total of $250,000. These shares were sold in
reliance on the exemption provided by Section 4(2) of the Act.

In July 2001, 530,000 shares of the Company's common stock were returned to the
Company for no consideration and were cancelled.

In November, 2001, the Company issued 366,000 shares of its common stock to nine
parties who had performed services on behalf of the Company. The shares were
issued in consideration of debt owed by the Company, at the agreed upon rate of
$.0001 per share, and the shares were sold in reliance on the exemption provided
by Section 4(2) of the Act.

In August, 2002, the Company sold 574,286 shares of its common stock to one
foreign investor at a price of $.70 per share and received total proceeds of
$402,000. The shares were sold pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended.

In August, 2002, the Company sold 2,000,000 shares of its common stock to two
investors at a price of $.05 per share and received total proceeds of $100,000,
pursuant to a Common Stock Purchase Agreement, executed effective May 15, 2002.

In October, 2002, the Company authorized issuance of 300,000 restricted shares
of the Company's common stock, 100,000 shares to each of three directors in
exchange for providing services to the Company as a member of the Board of
Directors, which were valued at $700 ($0.007 per share) for each of the three
directors.

In November, 2002, the Company authorized issuance of 399,931 restricted shares
of the Company's common stock to the Company's President and 299,949 restricted
shares of the Company's common stock to the Company's Chief Financial Officer
and secretary. These shares will be issued in exchange for providing services
as officers of the Company, which were valued at $2,666.66 and 2,000.00,
respectively.

F-11

LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002

Note 5. Related Party Transactions
-----------------------------------

The Company's Chief Executive Officer and Chief Financial Officer also hold
similar positions with First Medical Resources Corporation ("FMRC"). When the
Company was relocated to its new office in October, 2002, certain moving and
equipment installation costs were incurred. These costs were advanced by the
Company for the benefit of itself and FMRC. That portion advanced for the
benefit of FMRC was repaid in full to the Company in December 2002.

Ameristar Group Incorporated ("Ameristar") is a corporation that is an affiliate
of two corporate shareholders of the Company and is considered to be a related
party. During the quarter ended November 30, 2002, the Company paid Ameristar
consulting fees totaling $15,000.

During the first quarter of fiscal 2002, the Company reached agreement with
Ameristar to provide the Company with management services needed for its
continuing development. Accordingly, on November 1, 2001, a Management Services
Agreement was executed with Ameristar to provide consulting services, office
space, and administrative services for a two-year period. The monthly cost of
these services is $5,500, consisting of $2,500 for consulting services, $1,000
for rent, and $2,000 for administrative services. The consulting services
include such activities as business plans; introductions to financial community;
strategic planning; evaluation of potential business relationships, such as
joint ventures, mergers and acquisitions; business projections; review of
marketing plans; and general advisory and management services as required.

Effective August 15, 2002, the Management Services Agreement with Ameristar was
terminated in accordance with a Termination Agreement executed between the
Company and Ameristar on that date. As part of the Termination Agreement, the
debt owed to the Company by Ameristar in the amount of $94,165 was cancelled in
full payment of compensation owed to Ameristar for additional services provided
to the Company.

On March 5, 2003 the Company executed a Promissory Note in favor of one of its
Shareholders in the principal amount of $100,000. This Promissory Note accrues
interest at 12% per annum, and matures on June 13, 2003, at which time the
principal plus accrued interest are payable in full. If the Company should
default on this Note, interest will accrue at 18% per annum as of the date of
default. The Company paid a different Shareholder $5,000 as a transaction fee
for securing this loan.

F-12

LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002

Note 6. Commitments and Contingencies
--------------------------------------

On August 14, 2002, the Company entered into an Employment Agreement for
period of two years with its Chairman and CEO, which provides for a base
salary of $200,000 per year. From this date until such date as additional
funding may be obtained, the Chairman/CEO will be compensated as an
independent consultant at a rate of $8,333.33, payable semi-monthly.

On September 26, 2002, the Company entered into a sublease as successor in
interest to premises at 455 Market Street, San Francisco, California. The
premise includes 2,487 square feet of office space and furniture. The term of
the lease is through July 31, 2004 with a monthly rental through the term of the
lease of $4,559.50. The first, second, and final eight months of the lease were
prepaid as an inducement to the lessee to enter into this sublease.

On October 30, 2002 the Company entered into an agreement with a consulting firm
to generate a list of businesses that met the Company's acquisition criteria.
The Company agreed to pay the consulting firm $14,250 for these services plus an
additional $42,750 for each business identified by the consulting firm that was
acquired by the Company. To date, no businesses identified by the consulting
firm have resulted in a consummated acquisition. The Company paid $5,000 of the
$14,250 liability to the consulting firm during the current reporting period.

On November 15, 2002, the Company entered into an agreement with a consultant to
identify businesses that met the Company's acquisition criteria. The Company
agreed to pay the consultant five per cent of the first $1,000,000 in the
aggregate purchase price paid by the Company to the seller. This percentage
declines by one per cent for each additional $1,000,000 in aggregate purchase
price paid by the Company to the seller at which time the consultant is paid one
per cent of the excess of $5,000,000 in aggregate purchase price. To date, no
businesses identified by the consultant has resulted in a consummated
acquisition, and this agreement was terminated effective February 25, 2003.
Should such a transaction occur with a company identified by the consultant
during the period of time that this agreement was in effect, the consultant's
fee will be paid 75% in cash less the $14,250 paid to the consulting firm
previously referenced and 25% in the Company's common stock based upon the
average closing price of the stock over the previous 20 days prior to the date
of consummation.

Note 7. Concentration of Credit Risk
-------------------------------------

The Company maintains a bank account at one bank as of December 30,
2002 with a balance of $125,463 on deposit, only $100,000 of which is
insured under Federal law.

F-13

LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002

Note 8. Going Concern
----------------------

Lifen, Inc. is considered to be a development stage company. Since inception,
the Company has been engaged in the development of its business plan, market
research, initial website development and seeking financing in order to commence
commercial operations. At December 31, 2002, the Company had incurred losses
during the development stage of $662,347. $37,499 of the cumulative losses have
been non-cash services in exchange for common stock in the Company. The balance
of the losses, $624,848, was funded by the private placements of common stock,
which totaled $784,995, net of placement costs, as of December 31, 2002.

Management recognizes the need to raise additional funds to continue its planned
operations. Primary to the Company's solvency in the coming year is the sale of
additional equity in the Company, continuing the Company's strategy of funding
development through additional equity financing. These funds will be used to
manage working capital requirements and to fund ongoing development costs.
Capital commitments for the next twelve months are minimal, and additional funds
raised through private placements should be sufficient to meet the Company's
obligations for that period and until the various planned activities are able to
create significant cash flow. The Company plans to raise any necessary capital
through the sale of additional equity.

If additional capital is not readily available, the Company will be forced to
scale back its development activities such that its income will exceed its
expenses. Although this will greatly slow the Company's development, it will
allow for the Company's survival. Notwithstanding the foregoing, there is
substantial doubt regarding the Company's ability to continue as a going
concern, and as such, the Company is substantially dependent upon its ability to
raise sufficient capital to cover its development costs.

Note 9. Supplemental Disclosure to Cash Flow Statement
-------------------------------------------------------

For Four For Four From Inception
Months Ended Months Ended Nov. 10, 1997 to
Dec. 31, 2002 Dec. 31, 2001 Dec. 31, 2002
------------- ------------- ----------------
Cash paid during the period for:
Interest - - -
Income Taxes - - -

Non Cash Transactions:
Common stock issued for
consulting services and 6,767 37 37,449
market research

F-14

LIFEN, INC.
(A DEVELOPMENT STAGE COMPANY)

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002

Note 10. Subsequent Events
---------------------------

On January 2, 2003, the Company entered into an Agreement with a consulting firm
to identify and evaluate potential acquisition candidates. Should such a
transaction occur, the fee will be paid with the Company's stock based upon the
average closing price of the stock over the previous 20 days. To date, no
business identified by the consulting firm has resulted in a consummated
acquisition. The Chief Executive Officer of the consulting firm is also a
Director of the Company and a member of its audit committee.

Also, subsequent to the period covered by this Report, on January 22, 2003 the
Company entered into an Agreement with a consulting firm to generate a list of
businesses headquartered in Florida that met the Company's acquisition
criteria. The Company agreed to pay the consulting firm $7,500 for these
services plus an additional $22,500 for each business identified by the
consulting firm that was acquired by the Company. To date, no businesses
identified by the consulting firm have resulted in a consummated acquisition,
and no portion of the fee has been paid.

On February 21, 2003, the Company received approval from the National
Association of Securities Dealers ("NASD") to permit shares of its common stock
to be traded on the Over The Counter Bulletin Board. The first trade occurred
on February 24, 2003.

F-15

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.

LIFEN, INC.

Dated: March 10, 2003 By: /s/ James D. Durham
----------------------------
James D. Durham
Chief Executive Officer and
Chairman of the Board

Dated: March 10, 2003 By: /s/ Pamela G. Atherton
----------------------------
Pamela G. Atherton
President

Dated: March 10, 2003 By: /s/ Lawrence M. Davis
----------------------------
Lawrence M. Davis
Chief Financial Officer and
Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

Dated: March 10, 2003 By: /s/ Robert J. Kenneth
----------------------------
Robert J. Kenneth
Director

Dated: March 10, 2003 By: /s/ Robert P. Oliver
----------------------------
Robert P. Oliver
Director

Dated: March 10, 2003 By: /s/ Joseph M. DeLuca
----------------------------
Joseph M. DeLuca
Director

CERTIFICATE PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Lifen, Inc. (the "Company") on
Form 10-KSB for the transitional four-month period ended December 31, 2002,
as filed with the Securities and Exchange Commission (the "Report"), each of
the undersigned, in the capacities and on the dates indicated below, hereby
certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:

1. the Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

2. the information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of
the Company.

Dated: March 10, 2003 By: /s/ James D. Durham
---------------------------------
James D. Durham
Chief Executive Officer and
Chairman of the Board

Dated: March 10, 2003 By: /s/ Lawrence M. Davis
---------------------------------
Lawrence M. Davis
Chief Financial Officer and
Secretary

CERTIFICATION PURSUANT TO RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, James D. Durham, Chief Executive Officer and Chairman of Board of Lifen,
Inc., certify that:

1. I have reviewed this annual report on Form 10-KSB of Lifen, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;

(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days of the filing date of this
annual report (the "Evaluation Date"); and

(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent function):

(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officer and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Dated: March 10, 2003 By: /s/ James D. Durham
---------------------------------
James D. Durham
Chief Executive Officer and
Chairman of the Board

CERTIFICATION PURSUANT TO RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Lawrence M. Davis, Chief Financial Officer and Secretary of Lifen, Inc.,
certify that:

1. I have reviewed this annual report on Form 10-KSB of Lifen, Inc.;

(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days of the filing date of this
annual report (the "Evaluation Date"); and

(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation of the Evaluation Date;

(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officer and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Dated: March 10, 2003 By: /s/ Lawrence M. Davis
---------------------------------
Lawrence M. Davis
Chief Financial Officer and
Secretary