Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - AtheroNova Inc. | atheronova_8k-051310.htm |
| EX-3.1 - AtheroNova Inc. | ex3-1.htm |
| EX-10.2 - AtheroNova Inc. | ex10-2.htm |
| EX-10.1 - AtheroNova Inc. | ex10-1.htm |
| EX-10.4 - AtheroNova Inc. | ex10-4.htm |
| EX-10.5 - AtheroNova Inc. | ex10-5.htm |
| EX-21.1 - AtheroNova Inc. | ex21-1.htm |
| EX-10.8 - AtheroNova Inc. | ex10-8.htm |
| EX-10.7 - AtheroNova Inc. | ex10-7.htm |
| EX-99.3 - AtheroNova Inc. | ex99-3.htm |
| EX-99.1 - AtheroNova Inc. | ex99-1.htm |
| EX-10.6 - AtheroNova Inc. | ex10-6.htm |
| EX-10.3 - AtheroNova Inc. | ex10-3.htm |
Exhibit
99.2
(A
Developmental Stage Company)
Index
to Financial Statements
|
Balance
Sheets as of March 31, 2010 and December 31,
2009
|
|
|
Statements
of Operations for the three Months ended March 31, 2010 and 2009, and for
the period December 13, 2006 (Inception) through
March 31, 2010
|
|
|
Statements
of Cash Flows for the three months ended March 31, 3010 and 2009, and for
the period December 13, 2006 (Inception) through March 31,
2010
|
|
|
Notes
to Financial Statements
|
Z&Z
Medical Holdings, Inc.
(A
Development Stage Company)
Balance
Sheets
|
ASSETS
|
||||||||
| March 31, | December 31, | |||||||
|
2009
|
2009
|
|||||||
|
Current
Assets:
|
(Unaudited)
|
|||||||
|
Cash
|
$ | 123,734 | $ | 28,047 | ||||
|
Total
current assets
|
123,734 | 28,047 | ||||||
|
Equipment,
net
|
955 | - | ||||||
|
Intellectual
property rights
|
572,867
|
572,867
|
||||||
|
Total
Assets
|
$697,557
|
$600,914
|
||||||
|
Current
Liabilities:
|
||||||||
|
Accounts
payable and accrued expenses
|
$ | 214,589 | $ | 211,859 | ||||
|
Total
current liabilities
|
214,589 | 211,859 | ||||||
|
Commitments and
Contingencies
|
||||||||
|
Stockholders'
Equity:
|
||||||||
|
Common
stock, par value $0.001 per share, 20,000,000 shares
authorized;
9,873,050 and 9,218,050 shares issued and outstanding at March 31, 2010
and December 31, 2009, respectively
|
9,873 | 9,218 | ||||||
|
Additional
paid-in capital
|
892,626 | 565,782 | ||||||
|
Deficit
accumulated during the development stage
|
(419,531 | ) | (385,945 | ) | ||||
|
Total
stockholders' equity
|
482,968 | 189,055 | ||||||
|
Total
Liabilities and Stockholders' Equity
|
$ | 697,557 | $ | 600,914 | ||||
See
accompanying notes, which are an integral part of the financial
statements.
Z&Z
Medical Holdings, Inc.
(A
Development Stage Company)
Statements
of Operations
For
the three Months Ended March 31, 2010 and 2009
And
for the period from December 13, 2006 (Inception) through March 31,
2010
|
Three
Months ended
|
Three
Months ended
|
December
13, 2006
|
||||||||||
|
March
31,
|
March
31,
|
(Inception) through March | ||||||||||
|
2010
|
2009
|
31,
2010
|
||||||||||
|
Revenues:
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
|
Expenses:
|
||||||||||||
|
General
and administrative
|
32,633
|
3,163
|
420,268
|
|||||||||
|
Loss
from operations:
|
(32,633)
|
(3,163)
|
(420,268)
|
|||||||||
|
Interest
income
|
6
|
108
|
1,696
|
|||||||||
|
Provision
for income taxes:
|
959
|
-
|
959
|
|||||||||
|
Net
loss:
|
$
|
(33,586)
|
$
|
(3,055)
|
$
|
(419,531)
|
||||||
|
Net
loss per share attributable to commons shares – Basic and
Diluted:
|
$
|
(0.00)
|
$
|
(0.00)
|
-
|
|||||||
|
Weighted
average number of shares outstanding:
|
9,583,050
|
8,918,050
|
-
|
|||||||||
See
accompanying notes, which are an integral part of the financial
statements.
(A
Development Stage Company)
Statements
of Cash Flows
For
the Three Months Ended March 31, 2010 and 2009
and
for the period December 13, 2006 from (Inception) through March 31,
2010
|
Three
Months ended
|
December
13, 2006
|
|||||||
|
March
31,
|
(Inception) through March | |||||||
| 2010 |
2009
|
31,
2010
|
||||||
|
Operating
Activities:
|
||||||||
| Net Loss | $ | (33,586) | $ | (3,055) | $ | (419,531) | ||
| Adjustments to reconcile net income | - | |||||||
| to net cash (used) provided by operating activities | ||||||||
| Depreciation and amortization | 87 | 87 | ||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts payable and accrued expenses | (197,271) | 17,323 | 14,589 | |||||
| Net Cash (Used) Provided by Operating Activities | (230,770) | 14,268 | (404,855) | |||||
| Investing Activities: | ||||||||
| Equipment | (1,042) | - | (1,042) | |||||
| Acquisition of intellectual property | - | (52,323) | (372,868) | |||||
| Net Cash Used in Investing Activities | (1,042) | (52,323) | (373,910) | |||||
| Financing Activities: | ||||||||
| Proceeds from issuance of common stock | 327,500 | - | 902,500 | |||||
| Net Cash Provided by Financing Activites | 327,500 | - | 902,500 | |||||
| Net Increase in Cash | 95,688 | 38,056 | 123,734 | |||||
| Cash - Beginning of Period | 28,047 | 91,370 | - | |||||
| Cash - End of Period | $ | 123,734 | $ | 52,314 | $ | 123,734 | ||
| Supplemental Cash Flow Disclosures: | ||||||||
| Cash paid during the period for income taxes | $ | 959 | $ | - | $ | 959 | ||
| Supplemental Disclosures of Non Cash Investing | ||||||||
| and Financing Transactions: | ||||||||
| Common stock issued in lieu of | $ | 102,500 | $ | - | $ | 102,500 | ||
| compensation | ||||||||
| Common stock issued to founders | $ | - | $ | - | $ | 200,000 | ||
| Notes payable related parties issued in | $ | (200,000) | $ | - | $ | - | ||
| exchange for intellectual property | ||||||||
| Notes payable related parties issued in lieu of | $ | - | $ | - | $ | 100,000 | ||
| expense reports | ||||||||
See
accompanying notes, which are an integral part of the financial
statements.
Z&Z
Medical Holdings, Inc.
(A
Development Stage Company)
Notes
to Financial Statements
|
(1)
|
Description
of Business
|
Z&Z
Medical Holdings, Inc. (the “Company” and / or “Z&Z”) was
incorporated in the State of Nevada on December 13, 2006. On March 3,
2010, the Company reincorporated in Delaware.
The
Company owns certain intellectual property (“IP”) consisting of pharmacological
compounds and delivery systems for the treatment of cardiovascular disease. The
Company plans to develop commercial relationships with third parties for the
development, marketing and sale of products based on the IP and to derive
revenue through the licensing of the IP to such third parties. The Company plans
to further establish the curative aspects of and the licensing value of the
Company’s IP reflective of the global market size and impact that its
patents-pending pharmacological compounds and delivery systems will have on the
world’s largest healthcare market, the cardiovascular diseases
market.
On March
26, 2010, we signed an agreement of merger with Trist Holding, Inc. an OTCBB
“shell” company traded under the symbol TRHI. Under the terms of the
agreement, a reverse merger will take place whereby the operations of our
Company will become the operations of the merged company. The
stockholders of Z & Z will receive approximately 98% of the total
outstanding shares of the merger company. The officers of Z & Z
will become the officers of the merged company and three members of our Board of
Directors will become directors of the merged company. Once merged,
Trist will change its name to AtheroNova, Inc. to more accurately reflect the
healthcare emphasis of the Company.
Concurrent
with the merger, a senior convertible debt placement of $1.5 million will be
closed with KOM Capital Management. The debt carries an interest rate
of 2.5% per annum and is not due and payable until maturity or upon conversion
of the underlying debt, and is payable in cash or common stock. The
debt matures 4 years from the date of issuance if not converted into common
stock prior to that date. The debt is convertible at $0.38 per share,
with the total debt representing 3,947,368 shares of the company’s common stock.
If the full debt is outstanding for the full term and is paid in common stock,
there will be an additional 394,737 shares issued. As part of
the debt placement, warrants to purchase common stock are also issued to the
debt holders. The warrants are exercisable at $0.38 per share and
allow for purchase of 1,973,684 shares of our common stock and have an automatic
cashless conversion feature if not exercised prior to expiration, which is 4
years after closure of the debt placement.
Both
transactions closed on May 14, 2010, please see Subsequent Events Footnote
9.
|
(2)
|
Summary
of Significant Accounting Policies
|
Basis
of Presentation
The
accompanying financial statements have been prepared in accordance with
generally accepted accounting principles (“GAAP”) as promulgated in the United
States of America.
Use
of Estimates
Financial
statements prepared in accordance with accounting principles generally accepted
in the United States require management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Among other things, management has estimated
the useful lives of equipment and patents, along with the variables used to
calculate the valuation of stock options and warrants using the Black-Scholes
option valuation model. Actual results could differ from those
estimates.
Z&Z
Medical Holdings, Inc.
(A
Development Stage Company)
Notes
to Financial Statements
|
(2)
|
Summary
of Significant Accounting Policies
(continued)
|
Cash
and Cash Equivalents
The
Company considers all highly liquid temporary cash investments with an original
maturity of three months or less to be cash equivalents. At March 31,
2010 and 2009, respectively, the Company had no cash equivalents.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit
risk consist principally of cash deposits. Accounts at each institution are
insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. At
March 31, 2010, the Company had no amounts in excess of FDIC insured limit.
While the Company periodically evaluates the credit quality of the financial
institutions in which it holds deposits, it cannot reasonably alleviate the risk
associated with the sudden possible failures of such institutions.
Revenue
Recognition
The
Company is in the development stage and has yet to realize revenues from planned
operations. The Company will recognize revenue on arrangements in
accordance with FASB ASC No. 605, “Revenue Recognition”. The Company
plans to expand the application and development of clinical modalities for the
Company’s IP through licensing agreements with select licensing partners to
administer therapeutics. The Company will generate revenues primarily
from IP licensing royalties. For licensing
activities, revenue from such agreements will be realized over the term and
under the conditions of each specific license once all contract conditions have
been met. Payments for licensing fees are generally received at the time
the license agreements are executed, unless other terms for delayed payment are
documented and agreed to between the parties.
Research
and Development Costs
Research
and development costs consist of expenditures for the research and development
of new products and technology. Research and development costs are expensed as
incurred.
Intellectual
Property
The
Company obtained certain intellectual property from two Directors who are also
stockholders. The intellectual property obtained was by assignment
effective on December 1, 2006, the date of the initial meeting of the Board of
Directors. Under Staff Accounting Bulletin Topic 5G, “ Transfers of Nonmonetary Assets by
Promoters and Shareholders ,” the Company recorded the transaction as an
obligation payable to the Directors and stockholders’ at the historical cost
basis in the amount of $200,000. The Company accounts for its
intellectual property and patent applications in accordance with ASC 350-30 and
ASC 360 (formerly SFAS No. 142, Goodwill and Other Intangible
Assets). The Company amortizes the capitalized intellectual property and
patent costs on a straight line basis over a period of 19.5 years, management’s
estimated legal life of the patents, which approximates their estimated useful
life. No amortization expense relating to these assets was recognized for the
three months ended March 31, 2010 and 2009, respectively, as the Company is
still in the development stage.
Intangible
and Long-Lived Assets
In
accordance with ASC 350-30 (formerly SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets), the Company evaluates long-lived assets
for impairment whenever events or changes in circumstances indicate that their
net book value may not be recoverable. When such factors and circumstances
exist, the Company compares the projected undiscounted future cash flows
associated with the related asset or group of assets over their estimated useful
lives against their respective carrying amount.
Z&Z
Medical Holdings, Inc.
(A
Development Stage Company)
Notes
to Financial Statements
|
(2)
|
Summary
of Significant Accounting Policies
(continued)
|
Intangible
and Long-Lived Assets (Continued)
Impairment,
if any, is based on the excess of the carrying amount over the fair value, based
on market value when available, or discounted expected cash flows, of those
assets and is recorded in the period in which the determination is made. The
Company’s management currently believes there is no impairment of its long-lived
assets. There can be no assurance, however, that market conditions will not
change or demand for the Company’s products under development will continue.
Either of these could result in future impairment of the Company’s long-lived
assets.
Income
Taxes
The
Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC
740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under ASC 740-
10-25,
the effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date.
The
Company maintains a valuation allowance with respect to deferred tax
assets. The Company establishes a valuation allowance based upon the
potential likelihood of realizing the deferred tax asset and taking into
consideration the Company’s financial position and results of operations for the
current period. Future realization of the deferred tax benefit
depends on the existence of sufficient taxable income within the carryforward
period under the Federal tax laws.
Changes
in circumstances, such as the Company generating taxable income, could cause a
change in judgment about the realizability of the related deferred tax
asset. Any change in the valuation allowance will be included in
income in the year of the change in estimate.
Stock Based Compensation
The
Company uses the fair value recognition provision of ASC 718, “Stock
Compensation,” which requires the Company to expense the cost of employee
services received in exchange for an award of equity instruments based on the
grant date fair value of such instruments. The Company uses the Black-Scholes
option pricing model to calculate the fair value of any equity instruments on
the grant date. The Company also uses the provisions of ASC 505-50, “Equity Based Payments to
Non-Employees,” to account for stock-based compensation awards issued to
non-employees for services. Such awards for services are recorded at either the
fair value of the services rendered or the instruments issued in exchange for
such services, whichever is more readily determinable, using the measurement
date guidelines enumerated in ASC 505-50.
Fair
Value of Financial Instruments
The
Company adopted ASC topic 820, “Fair Value Measurements and Disclosures” (ASC
820), formerly SFAS No. 157 “Fair Value Measurements,” effective January 1,
2009. ASC 820 defines “fair value” as the price that would be received for an
asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date.
Z&Z
Medical Holdings, Inc.
(A
Development Stage Company)
Notes
to Financial Statements
|
(2)
|
Summary
of Significant Accounting Policies
(continued)
|
There was
no impact relating to the adoption of ASC 820 to the Company’s financial
statements. The carrying amounts of such financial instruments in the
accompanying balance sheets approximate their fair values due to their
relatively short-term nature. It is management’s opinion that the Company is not
exposed to any significant currency or credit risks arising from these financial
instruments.
Loss
Per Share
Basic
loss per share is calculated using the weighted-average number of common shares
outstanding during each reporting period. Diluted loss per share includes
potentially dilutive securities such as outstanding options and warrants, using
various methods such as the treasury stock or modified treasury stock method in
the determination of dilutive shares outstanding during each reporting
period.
For the
three months ended March 31, 2010 and 2009, we excluded any effect of the
1,845,000 and 450,000 outstanding options and warrants, respectively, as their
effect would be anti-dilutive.
Recent
Accounting Pronouncements
In June
2009, the FASB issued changes to the consolidation guidance applicable to a
variable interest entity (VIE). FASB ASC Topic 810, "Consolidation," amends the
guidance governing the determination of whether an enterprise is the primary
beneficiary of a VIE, and is, therefore, required to consolidate an entity, by
requiring a qualitative analysis rather than a quantitative analysis. The
qualitative analysis will include, among other things, consideration of who has
the power to direct the activities of the entity that most significantly impact
the entity's economic performance and who has the obligation to absorb losses or
the right to receive benefits of the VIE that could potentially be significant
to the VIE. This standard also requires continuous reassessments of whether an
enterprise is the primary beneficiary of a VIE. FASB ASC 810 also requires
enhanced disclosures about an enterprise's involvement with a VIE. Topic 810 is
effective as of the beginning of interim and annual reporting periods that begin
after November 15, 2009. This will not have an impact on the Company’s financial
position, results of operations or cash flows.
FASB ASC
No. 860 is effective as of the beginning of each reporting entity's first annual
reporting period that begins after November 15, 2009, for interim periods within
that first annual reporting period and for interim and annual reporting periods
thereafter. This will not have an impact on the Company’s financial position,
results of operations or cash flows.
|
(3)
|
Development
Stage Activities and Going Concern
|
The
Company is currently in the development stage, and its business plan is to
develop commercial relationships with third parties for the development,
marketing and sale of products based on the IP and to derive revenue through the
licensing of the IP to such third parties.
While
management of the Company believes that the Company will be successful in its
planned operating activities, there can be no assurance that the Company will be
successful in the development of its intellectual property, or services that
will generate sufficient revenues to sustain the operations of the
Company. The Company also intends to conduct additional capital
formation activities through the issuance of its common stock and to commence
operations.
Z&Z
Medical Holdings, Inc.
(A
Development Stage Company)
Notes
to Financial Statements
The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. The
Company has incurred an operating loss since inception, had negative working
capital as of March 31, 2010, and 2009, and the cash resources of the Company
were insufficient to meet its planned business objectives. These and
other factors raise substantial doubt about the Company’s ability to continue as
a going concern. The accompanying financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the possible inability of the Company to continue as a going
concern.
|
(4)
|
Common
Stock and Common Stock Warrants
|
On
December 1, 2007, the Company issued 8,468,050 shares of common stock to its
founders at approximately $0.02 per share based on the fair value of the shares
on the grant date. During the three months ended March 31, 2010 and
2009, the Company issued 450,000 and 0 shares, respectively, of common
stock. These subsequent issuances of common stock were issued for
cash at a per share amount of $0.50. The Company recognized proceeds
from these issuances during the three months ended March 31, 2010 and 2009 of
$225,000 and $0, respectively.
The
Company also issued warrants exercisable into common stock of the
Company. Certain common stock subscribers also received a warrant to
purchase one share of common stock for every subscription share
purchased. The exercise price of these warrants are equal to the
price of shares of securities of the Company issued in a subsequent equity
financing with an aggregate gross proceeds to the Company of at least
$2,500,000. However, in the event the Company’s valuation immediately prior to
the financing is less than $20,000,000, the exercise price of the warrant shall
be 50% of the purchase price per share of the Equity Securities
offered. Warrants issued in connection with the subscription
agreements were 450,000 and 0 in the three months ended March 31, 2010 and 2009,
respectively.
The
Company has also issued warrants to purchase 500,000 shares of common stock at
$0.50 per share to a director of the Company as compensation for services
rendered in connection with the reverse merger and financing consented to by a
majority of the stockholders of the Company.
As of
March 31, 2010, there are warrants to purchase 1,600,000 shares of the Company’s
common stock outstanding with expiration dates ranging from February 2013
through March 2015.
| March 31, | March 31, | ||||
|
Shares
underlying warrants issued:
|
2010
|
2009
|
|||
|
Beginning
balance
|
650,000
|
450,000
|
|||
|
Shares
granted
|
950,000
|
-
|
|||
|
Ending
balance
|
1,600,000
|
450,000
|
|||
|
(5)
|
Stock-Based
Compensation
|
The
Company’s 2010 Equity Incentive Plan (the “Plan”), which is not yet received
shareholder-approval, permits the grant of share options and shares to its
employees and affiliates for up to 2,000,000 shares of common stock. The Company
believes that such awards better align the interests of its employees and
affiliates with those of its stockholders. Option awards are generally granted
with an exercise price that approximates the market price of the Company’s stock
at the date of grant.
Z&Z
Medical Holdings, Inc.
(A
Development Stage Company)
Notes
to Financial Statements
|
(5)
|
Stock-Based
Compensation (Continued)
|
The
Company has granted and issued the stock options in the financial statements as
shareholder approval is nothing more than an administrative matter, consistent
with ASC 718, “Stock Compensation,”
On
January 7, 2010, the Company issued options to purchase 245,000 shares of common
stock of the Company at $0.50 per share as part of an employment agreement with
our Chief Financial Officer. The option vests at 2.78% per month over
a 36 month period. The option expires 7 years from the date of
grant.
The fair
value of each option award is estimated on the date of grant using the
Black-Scholes option valuation model that uses the assumptions noted in the
following table. Because the Black-Scholes option valuation model incorporate
ranges of assumptions for inputs, those ranges are disclosed. Expected
volatilities are based on implied volatilities from traded options on the
companies in the industry that are very similar to Z&Z, and other factors.
The Company uses historical data of reference companies to estimate option
exercise and employee termination within the valuation model. The expected term
of options granted is derived from estimates and represents the period of time
that options granted are expected to be outstanding. The risk-free rate for
periods within the contractual life of the option is based on the U.S. Treasury
yield curve in effect at the time of grant. Assumptions used to calculate the
fair value of the options issued was as follows:
|
Three months
ended
March 31,
2010
|
||
| Expected life in years | 3-7 | |
| Stock price volatility | 100% to 263% | |
| Risk free interest rate | 1.62 | |
| Expected dividends | None | |
| Forfeiture rate | 0% | |
A summary
of option activity as of March 31, 2010 and changes during the three months
ended presented below:
|
Shares
|
Weighted
Exercise Price
|
Remaining
Contractual Term
|
|||||||||||
|
|
|||||||||||||
|
Outstanding
- January 1, 2010
|
- | $ | - | - | |||||||||
|
Shares
granted
|
245,000 | 0.50 | 7 | ||||||||||
|
Exercised
|
- | - | - | ||||||||||
|
Forfeited
|
- | - | - | ||||||||||
|
Outstanding
– March 31, 2010
|
245,000 | 0.50 | 6.75 | ||||||||||
|
Exercisable
– March 31, 2010
|
20,433 | $ | 0.50 | 6.75 | |||||||||
There
were no options exercised during the three months ended March 31, 2010 and 2009.
There is approximately $1,880 of unvested compensation at March 31,
2010.
Z&Z
Medical Holdings, Inc.
(A
Development Stage Company)
Notes
to Financial Statements
(6)
Income Taxes
The
provision for income taxes for the periods ended March 31, 2010, and 2009, was
as follows (using a 42.8 percent effective Federal and state income tax
rate):
|
2010
|
2009
|
|||||||
|
Current
Tax Provision:
|
||||||||
|
Federal
and state-
|
||||||||
|
Taxable
income
|
$
|
-
|
$
|
-
|
||||
|
Total
current tax provision
|
$
|
-
|
$
|
-
|
||||
|
Deferred
Tax Provision:
|
||||||||
|
Federal
and state-
|
||||||||
|
Loss
carryforwards
|
$
|
(14,375
|
)
|
$
|
(1,308
|
)
|
||
|
Valuation
allowance
|
14,375
|
1,308
|
||||||
|
Total
deferred tax provision
|
$
|
-
|
$
|
-
|
||||
The
Company had deferred income tax assets as of March 31, 2010, and 2009, as
follows:
|
2010
|
2009
|
|||||||
|
Loss
carryforwards
|
$
|
(82,143
|
)
|
$
|
(42,456
|
)
|
||
|
Less
- valuation allowance
|
82,143
|
42,456
|
||||||
|
Total
net deferred tax assets
|
$
|
-
|
$
|
-
|
||||
As of
March 31, 2010 and 2009, respectively, the Company had net operating loss
carryforwards for income tax reporting purposes of approximately $82,143 and
$42,456 that may be offset against future taxable income. Current
tax laws limit the amount of loss available to be offset against future taxable
income when a substantial change in ownership occurs or a change in the nature
of the business. Therefore, the amount available to offset future
taxable income may be limited.
No tax
benefit has been reported in the financial statements for the realization of
loss carryforwards, as the Company believes there is high probability that the
carryforwards will not be utilized in the foreseeable
future. Accordingly, the potential tax benefits of the loss
carryforwards are offset by a valuation allowance of the same
amount.
The
Company is primarily subject to U.S. federal and state income tax. As
a result of the implementation of certain provisions of ASC 740, Income Taxes, (formerly FIN
48, Accounting for Uncertainty
in Income Taxes – An Interpretation of FASB Statement No. 109), the
Company performed an analysis of its previous tax filings and determined that
there were no positions taken that it considered uncertain. Therefore, there
were no unrecognized tax benefits as of March 31, 2010 and 2009.
Future
changes in the unrecognized tax benefit are not expected to have an impact on
the effective tax rate due to the existence of the valuation allowance. The
Company estimates that the unrecognized tax benefit will not change within the
next twelve months. The Company will continue to classify income tax penalties
and interest, if any, as part of interest and other expenses in its statements
of operations. The Company has incurred no interest or penalties as of March 31,
2010.
(A
Development Stage Company)
Notes
to Financial Statements
|
(7)
|
Commitments
and Contingencies
|
The
Company has executed three year employment contracts with Thomas Gardener,
Filiberto Zadini, Giorgio Zadini and Aaron Sandoval, each with a salary and
salary increases at the discretion of the Board of Directors not to exceed 10%
per annum or the previous calendar year's percentage increase in the Consumer
Price Index, whichever is greater. The contracts are not in effect until the
Company raises the equity financing with an aggregate gross proceeds to the
Company of at least $2,500,000. Effective March 22, 2010, Mr.
Sandoval resigned all positions with the company, effective
immediately.
Mr.
Gardner has signed an amended contract that will pay him $144,000 per year
effective upon closure of the Trist merger agreement. Mr. Selawski,
our Chief Financial Officer, has also executed an amended contract that will pay
him $144,000 per year upon closure of the Trist merger agreement.
The
Company has executed a contract in May 2008 with The University of California
(the “University”), on behalf of its Los Angeles Campus under which the
University shall conduct a laboratory study to demonstrate the efficacy of the
Company’s biocompatible emulsifiers on atherosclerotic lesions. The
contract calls for progress payments upon the completion of various stages of
the study and the total obligation to the University for completion of the study
totals $200,600. To date, a total of $190,150 has been paid on the
contract.
|
(8)
|
Related
Party Transactions
|
The
Company had previously executed Notes Payable totaling $200,000 to two directors
of the Company for contribution of certain intellectual property. On
March 21, 2010, the Company and the note holders agreed to cancellation of the
obligation without recourse. The disinterested members of the Board
of Directors ratified this action.
|
(9)
|
Subsequent
Events
|
In
preparing these financial statements, the Company has evaluated events and
transactions for potential recognition or disclosure through May 17, 2010, the
date the financial statements were issued.
On April
23, 2010, the Board approved an amendment to all subscription warrants setting
the pre-merger price at $0.50 per share and making them immediately
exercisable. The respective expiration dates remain
unchanged.
May 14,
2010, the Company completed its reverse merger transactions with Trist Holdings,
Inc. (“Trist”), Immediately after the closing of the merger, Trist closed a
capital raise transaction through the placement of $1.5 million in 2.5% Senior
Secured Convertible Notes which mature 4 years after issuance. Interest on
the Convertible Notes, which will accrue at the rate of 2.5% per year, is not
payable until maturity or conversion, and is payable in cash or common stock.
Also, Trist has changed its name to AtheroNova Inc. to more accurately reflect
the Company's emphasis in the healthcare market and anticipates that the Company
will begin trading under a new symbol on the OTC Bulletin Board in the coming
days.
At the closing, pursuant to the terms of the Merger Agreement dated March 26, 2010, by and among Trist, Z&Z and Z&Z Merger Corp., all of the outstanding shares, warrants and options of Z&Z were exchanged for shares of, and warrants and options to purchase, Trist's Super-Voting Common Stock. Each share of Trist's Super-Voting Common Stock will automatically convert into 50 shares (on a pre-reverse split basis) of Trist's Common Stock upon the consummation of a 200-for-1 reverse split of Trist's Common Stock. As a result of the merger, Z&Z stockholders own 88,575,048 shares of Trist's Super-Voting Common Stock (22,143,763 shares of Trist's Common Stock on a post-reverse split basis), or approximately 97.6% of the total shares outstanding.
Z&Z
Medical Holdings, Inc.
(A
Development Stage Company)
Notes
to Financial Statements
(9) Subsequent
Events (Continued)
The
Convertible Notes are convertible into 3,817,594 shares of common stock (on a
post-reverse split basis), excluding accrued interest, which may also be paid in
stock. If held to maturity and all accrued interest is paid in common stock
an additional 381,759 shares would be issued.
The
purchasers of the Convertible Notes also received Warrants to purchase another
1,908,797 shares of common stock (on a post-reverse split basis) at an exercise
price of $0.39 per share (on a post-reverse split basis). The shares of
Trist's Common Stock issuable upon conversion (excluding the conversion of
accrued interest) and exercise of the Notes and Warrants represent approximately
17.6% of the Company's outstanding capital stock as of the closing of the
capital raise transaction on a fully-diluted basis.
As a
result of the merger and the capital raise transaction, Z&Z stockholders own
80.8% of Trist's fully-diluted Common Stock, Trist stockholders immediately
prior to the merger own 1.6% of Trist's fully-diluted Common Stock and the
holders of Convertible Notes and Warrants issued in the capital raise
transaction own 17.6% of Trist's fully-diluted Common Stock.