##### 



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-KSB
 (Mark One)
 þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
 For the fiscal year ended June 30, 2007
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
 For the transition period from     to
 Commission file number: 000-30489
 LIFEVANTAGE CORPORATION
  Colorado
(State or other jurisdiction of 
incorporation or organization)6400 S. Fiddlers Green Circle, #1970
Greenwood Village, Colorado
(Address of principal executive offices)
    
    90-0224471
(IRS Employer
Identification No.)80111
(Zip Code)
 (720) 488-1711
 None
 
 o
 þ o
 þ
 o þ
    o þ




---



##### 



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
    
    
    Our limited operating history and lack of sufficient revenues from operations;
    
    Our ability to successfully expand our operations and manage our future growth;
    
    The effect of current and future government regulations and regulators on our business;
    
    The effect of unfavorable publicity on our business;
    
    Competition in the dietary supplement market;
    
    The potential for product liability claims against the Company;
    
    Our dependence on third party manufacturers to manufacture our product;
    
    The ability to obtain raw material for our product;
    
    Our dependence on a limited number of significant customers and a single product for our
revenue;
    
    Our ability to protect our intellectual property rights and the value of our product;
    
    Our ability to continue to innovate and provide products that are useful to consumers;
    
    The significant control that our management and significant shareholders exercise over
us;
    
    The illiquidity of our common stock; and
    
    Other factors not specifically described above, including the other risks,
uncertainties, and contingencies described under Description of Business, Risk Factors,
Managements Discussion and Analysis of Financial Condition and Results of Operations,
and other sections of this Report on Form 10-KSB.
  2




---



##### 



TABLE OF CONTENTS
 PagePART IItem 1. Description of Business
    
    
    4Item 2. Description of Properties
    
    
    14Item 3. Legal Proceedings
    
    
    14Item 4. Submission of Matters to a Vote of Security Holders
    
    
    14PART IIItem 5. Market for Common Equity, Related Stockholder Matters and Small
Business Issuer Purchase of Equity Securities
    
    
    15Item 6. Managements Discussion of Financial Condition and Results of Operations
    
    
    17Item 7. Financial Statements
    
    
    32Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    32Item 8A. Controls and Procedures
    
    
    32Item 8B. Other Information
    
    
    32PART IIIItem 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
    
    
    33Item 10. Executive Compensation
    
    
    33Item 11. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    33Item 12. Certain Relationships and Related Transactions
    
    
    33Item 13. Exhibits
    
    
    33Item 14. Principal Accountant Fees and Services
    
    
    33
 3




---



##### 



PART I
 ITEM 1  DESCRIPTION OF BUSINESS
 Overview
 ®
 History
   
    
    We issued 15,385,110 shares of our common stock (representing about 94% of our
outstanding common stock after the Reorganization) to eleven persons in exchange for
their ownership interest in Lifeline Nutraceuticals.
    
    We agreed to exchange $240,000 in new promissory notes for a like amount of
convertible debt obligations of Lifeline Nutraceuticals.
    
    We agreed to exchange $559,000 in new promissory notes for a like amount of bridge
loan note obligations of Lifeline Nutraceuticals.
  Our Product
  4




---



##### 



Mini-Reviews in Medicinal Chemistry
   5




---



##### 



® ® www.protandim.com
 Our Business Model
  Manufacturing
 ®
 ®
  Marketing ® ®
 6




---



##### 



Sales
 ®
 ® ®
     7




---



##### 



Research and Development
  The U.S. Dietary Supplement Market
 Nutrition Business Journal
 U.S. Nutrition Industry Sales,
1997  2006 ($85 Bil in 2006)
 
 8




---



##### 



Nutrition Industry:
Major Product Segment
 2005 ($Mil)
    
    
    
    2006 ($Mil)
    
    
    
    06 growthSupplements
    
    
    
    21,316
    
    
    
    
    22,460
    
    
    
    
    5.4
    %Natural & Organic Food
    
    
    
    20,840
    
    
    
    
    23,602
    
    
    
    
    13.3
    %Functional Foods
    
    
    
    28,500
    
    
    
    
    31,400
    
    
    
    
    10.2
    %Natural & Organic Personal Care, Household Goods
    
    
    
    6,556
    
    
    
    
    7,490
    
    
    
    
    14.2
    %Nutrition Industry
    
    
    
    77,212
    
    
    
    
    84,952
    
    
    
    
    10.0
    %
 Nutrition Business Journal
 We believe that the growth in the supplement market is driven by a number of factors, including:
 o
    
    increased awareness of the health benefits of dietary supplements;o
    
    a trend toward preventive health care;o
    
    an increase in the number of older Americans; ando
    
    health care consumers interest in managing their own health needs.
 Target Market
     9




---



##### 



Pricing
  Competition
 ® ®
 ® ®
 ®
  Product Liability and Other Insurance
 ®
 Intellectual Property, Patents, and Royalty Agreements
  ®
  10




---



##### 



® ® ®
  Governmental Approval and Regulations
 ® ® ,
 ®
 FDA Regulations Applicable to the Formulation, Manufacturing, Packaging, and Labeling of
Protandim®
  11




---



##### 



® ®
  FTC Regulations Applicable to the Advertising and Marketing of Protandim®
  12




---



##### 



The Bioterrorism Act
  1.
    
    Mandatory registration with the FDA of all food manufacturers.2.
    
    Prior notice to regulators of inbound food shipments.3.
    
    Recordkeeping requirements, and grant of access to the FDA of applicable
records.4.
    
    Grant of detention authority to the FDA of food products in certain
circumstances.
 ®
 Potential FDA and Other Regulation
   13




---



##### 



Employees
  ITEM 2  DESCRIPTION OF PROPERTIES
 Corporate Office
  Warehouse Facility
  ITEM 3  LEGAL PROCEEDINGS
  ITEM 4  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  14




---



##### 



PART II
 ITEM 5  MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES
OF EQUITY SECURITIES
 Market Information and Holders
   2007
    
    2006High
    
    Low
    
    High
    
    LowFirst Quarter
    
    $
    1.40
    
    
    $
    0.69
    
    
    $
    11.75
    
    
    $
    4.30Second Quarter
    
    $
    0.87
    
    
    $
    0.44
    
    
    $
    5.75
    
    
    $
    1.72Third Quarter
    
    $
    0.61
    
    
    $
    0.19
    
    
    $
    5.95
    
    
    $
    1.80Fourth Quarter
    
    $
    0.36
    
    
    $
    0.16
    
    
    $
    2.71
    
    
    $
    0.46
  Dividends
  Securities Authorized for Issuance under Equity Compensation Plans
 (c) Number of securities(b) Weighted-
    
    
    remaining available for(a) Number of
    
    
    average exercise
    
    
    future issuance undersecurities to be issued
    
    
    price of
    
    
    equity compensationupon exercise of
    
    
    outstanding
    
    
    plans (excludingoutstanding options,
    
    
    options, warrants
    
    
    securities reflected inPlan Category
    
    warrants and rights
    
    
    and rights
    
    
    column (a))Equity compensation
plans approved by
security holders
    
    
    6,000,000
    
    
    $
    1.66
    
    
    
    1,765,679Equity compensation
plans not approved
by security holders
    
    
    1,679,516
    
    
    $
    2.01
    
    
    
    0Total
    
    
    7,679,516
    
    
    $
    1.89
    
    
    
    1,765,679
 15




---



##### 



Consultant Warrants.
 16




---



##### 



ITEM 6  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 You should read the following discussion and analysis in connection with our financial statements
and related notes beginning on page F-1 following Part III of this annual report.
 Overview
  ® ®
 ® ® ® ® ®
 ®
  ®
  17




---



##### 



Recent Developments
 2007 Private Placement
   Offer to Re-Price 2005 Private Placement Warrants
  18




---



##### 



Departure of Chief Executive Officer
  Resignation of Chief Financial Officer
  Restatement
  Registration Statement
  The Chemins Company
  Year ended June 30, 2007 Compared to the Year ended June 30, 2006
 Sales. ®
 ®
 19




---



##### 



Gross Margin.
 Operating Expenses.
 Marketing and Customer Service Expenses.
 General and Administrative Expenses.
 Research and Development. ®
 Depreciation and Amortization Expense.
 Net Other Income and Expense.
 Net Loss.
 Liquidity and Capital Resources
 ®
  20




---



##### 



® ®
  Critical Accounting Policies
  21




---



##### 



Allowances for Product Returns
    Inventory Valuation
  Revenue Recognition
  ®
 22




---



##### 



® ®
 ®
  Deferred
    
    DeferredRevenue
    
    ExpenseDeferred revenue and expense as of June 30, 2006
    
    $
    1,144,950
    
    
    $
    152,677Recognition of revenue from FY2006 deferred sales
    
    
    (748,230
    )
    
    
    (98,268
    )Additions to deferred revenue / expense for the three
months ended September 30, 2006
    
    
    678,960
    
    
    
    101,627Recognition of revenue due to retail sell-through in the
three months ended September 30, 2006
    
    
    (199,020
    )
    
    
    (30,118
    )Deferred revenue and expense as of September 30, 2006
    
    $
    876,660
    
    
    $
    25,918Additions to deferred revenue / expense for the three
months ended December 31, 2006
    
    
    126,653
    
    
    
    19,381Recognition of revenue due to retail sell-through in the
three months ended December 31, 2006
    
    
    (221,910
    )
    
    
    (33,529
    )Deferred revenue / expenses as of December 31, 2006
    
    $
    781,403
    
    
    $
    111,770Additions to deferred revenue / expense for the three
months ended March 31, 2007
    
    
    208,395
    
    
    
    31,564Recognition of revenue due to retail sell-through in the
three months ended March 31, 2007
    
    
    (186,840
    )
    
    
    (28,523
    )Deferred revenue / expenses as of March 31, 2007
    
    $
    802,958
    
    
    $
    114,811Additions to deferred revenue / expense for the three
months ended June 30, 2007
    
    
    156,352
    
    
    
    24,978Recognition of revenue due to retail sell-through in
the three months ended June 30, 2007
    
    
    (141,060
    )
    
    
    (21,982
    )Deferred revenue / expenses as of June 30, 2007
    
    $
    818,250
    
    
    $
    117,807
 23




---



##### 



Intangible Assets  Patent Costs
  Stock-Based Compensation
  Research and Development Costs
  Recently Issued Accounting Standards
     Risk Factors
 An investment in our common stock involves a high degree of risk, and should be considered
only by persons who can afford the loss of their entire investment. You should carefully consider
each of the following risk factors and all of the other information provided in this Annual Report,
including our financial statements and the related notes, before purchasing our common stock. The
risks described below are those we currently believe may materially affect us. The future
development of LifeVantage and Protandim ® is and will continue to be dependent upon a
number of factors, many of which we cannot predict or anticipate. Accordingly, the following risk
factors are not necessarily all of the important factors that could cause actual results of
operations to differ materially from those expressed in the forward-looking statements in this
Annual Report. Other unknown or unpredictable factors also could have material adverse effects on
our business, future
 24




---



##### 



results of operations or financial condition. We have no obligation and do not undertake to
update or revise the following risk factors to reflect events or circumstances after the date of
this Report.
 Risk Factors Relating to the Company, our Limited Operating History, our Management, and our
Financial Condition
 We have a limited operating history and lack of sufficient revenues from operations.
 ® ®
 There is no assurance that we will be successful in expanding our operations and, if successful,
managing our future growth.
  Government regulators and regulations could adversely affect our business.
  
    
    Initiating investigations;
    
    Issuing warning letters and cease and desist orders;
    
    Demanding recalls;
    
    Initiating adverse publicity;
    
    Requiring corrective labeling or advertising;
    
    Requiring consumer redress and/or disgorgement;
    
    Seeking injunctive relief or product seizures;
    
    Initiating judicial actions; and
    
    Imposing civil penalties or commencing criminal prosecution.
 25




---



##### 



Future laws or regulations may hinder or prohibit the production or sale of our existing product
and any future products.
  
    
    The reformulation of products to meet new standards;
    
    Additional ingredient restrictions;
    
    Additional claim restrictions;
    
    The recall or discontinuance of products unable to be reformulated;
    
    Imposition of additional good manufacturing practices and/or record keeping
requirements;
    
    Expanded documentation of the properties of products; and
    
    Expanded or different labeling or scientific substantiation.
  Unfavorable publicity could materially hurt our business and the value of your investment.
  26




---



##### 



We are and will continue to be subject to the risk of investigatory and enforcement action by the
FTC, which could have a negative impact upon the price of our stock.
  The dietary supplement market is highly competitive.
  Our business is susceptible to product liability claims, which could adversely affect our results
of operations and financial condition.
  Consumers of our products may not feel noticeable physiological differences after taking
Protandim ® .
 ® ®
 27




---



##### 



We have no manufacturing capabilities and we are dependent upon a third party to manufacture our
product.
  Raw material for our product may be difficult to obtain or expensive.
 ®
 We depend on a limited number of significant customers and the loss of any of them could negatively
affect our business.
   28




---



##### 



Product returns may adversely affect our business.
    We currently depend on a single product for our revenue.
 ® ® ®
 Worsening economic conditions may adversely affect our business.
  We may face limited availability of additional capital.
  We could be exposed to certain environmental liabilities due to our past operations and property
ownership.
   29




---



##### 



Risks Related to Our Intellectual Property and Obsolescence
 Our intellectual property rights are valuable, and any inability to protect them could reduce the
value of our products and brand.
 ® ® ®
 If we do not continue to innovate and provide products that are useful to consumers, we may not
remain competitive, and our revenues and operating results could suffer.
 ®
 If we are unable to protect our proprietary information against unauthorized use by others, our
competitive position could be harmed.
  30




---



##### 



Other parties might claim that we infringe on their intellectual property rights.
  Risk Factors Relating to our Common Stock
 Our management and large shareholders exercise significant control over our Company and may approve
or take actions that may be adverse to your interests.
  
    
    Control the composition of our board of directors;
    
    Control our management and policies;
    
    Determine the outcome of significant corporate transactions, including changes
in control that may be beneficial to shareholders; and
    
    Act in each of their own interests, which may conflict with, or be different
from, the interests of each other or the interests of the other shareholders.
 Our common stock could be classified as penny stock and is extremely illiquid, so investors may not
be able to sell as much stock as they want at prevailing market prices.
   Our stock price may experience future volatility.
  31




---



##### 



ITEM 7  FINANCIAL STATEMENTS
  ITEM 8  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  ITEM 8A  CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control Over Financial Reporting
    ITEM 8B  OTHER INFORMATION
  32




---



##### 



PART III
  ITEM 9  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION
16(a) OF THE EXCHANGE ACT
  ITEM 10  EXECUTIVE COMPENSATION
  ITEM 11  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS.
  ITEM 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  ITEM 13  EXHIBITS
  ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES
  33




---



##### 



SIGNATURES
  
 /s/ James D.
Crapo
 
  Signature
    
    Date
    
    Title/s/
James D. Crapo

James D. Crapo
    
    October 12, 2007
    
    Chairman of the Board of
Directors(Interim Principal Executive Officer)/s/ Bradford K. Amman

Bradford K. Amman
    
    October 12, 2007
    
    Director of Finance, Secretary and
Treasurer (Principal Financial Officer)/s/ Jack R. Thompson

Jack R. Thompson
    
    October 12, 2007
    
    Director and Chairman of the Audit Committee/s/ Joe M. McCord

Joe M. McCord
    
    October 12, 2007
    
    Director




---



##### 



EXHIBIT INDEX
 ExhibitNumber
    
    Title2.1
    
    Agreement and Plan of Reorganization between Lifeline Nutraceuticals Corporation and Yaak River Resources, Inc. dated September 21,
2004(1)2.2
    
    Settlement and Release Agreement and Plan of Reorganization dated March 10, 2005, among Lifeline Therapeutics, Inc., Lifeline
Nutraceuticals Corporation and Michael Barber (2)3.1
    
    Articles of Incorporation of the Registrant, as amended(9)3.2
    
    Amended and Restated Bylaws of the Registrant(9)10.1
    
    Form of Unit Warrant Certificate (3)10.2
    
    Form of Bridge Warrant Certificate (3)10.3
    
    Form of Placement Agent Warrant Certificate (3)10.4
    
    Secured Indemnification Agreement dated February 21, 2005 between Lifeline Therapeutics, Inc. and William J. Driscoll and Rosemary
Driscoll (3)10.5
    
    Interim Executive Services Agreement between Lifeline Therapeutics, Inc. and Tatum CFO Partners, LLP dated August 1, 2005 (4)10.6
    
    Agreement between Lifeline Therapeutics, Inc. and William Driscoll dated July 1, 2005 (4)10.7
    
    Form of Placement Agent Warrant Certificate (5)10.8
    
    Selling Agreement dated January 14, 2005 between Lifeline Therapeutics, Inc. and Keating Securities, LLC (5)10.9
    
    Memorandum Agreement dated November 16, 2004 between Lifeline Nutraceuticals Corporation and The Scott Group (5)10.10
    
    Lifeline Therapeutics, Inc. 2006 Stock Option Plan (5)10.11
    
    Independent Contractors Agreement dated September 1, 2005 between Lifeline Therapeutics, Inc. and Robert Sgarlata Associates, Inc.
(6)10.12
    
    Statement regarding Javier Baz Employment Agreement (6)10.13
    
    Employment Agreement dated November 28, 2005 by and between Lifeline Therapeutics, Inc. and Stephen K. Onody (7)10.14
    
    Employment Agreement dated January 4, 2006 by and between Lifeline Therapeutics, Inc. and Gerald J. Houston (8)10.15
    
    Voting Agreement and Irrevocable Proxy dated July 1, 2005 between Lifeline Therapeutics, Inc. and William Driscoll (9)10.16
    
    Voting Agreement and Irrevocable Proxy dated February 9, 2006 among Lifeline Therapeutics, Inc. Paul Myhill and Lisa Gail Myhill
(9)10.17
    
    Manufacturing Agreement dated February 26, 2004 and amended on February 26, 2004 between Lifeline Therapeutics, Inc. and The Chemins
Company (9)10.18
    
    Lease dated as of August, 2005 between Property Colorado OBJLW One Corporation and Lifeline Therapeutics, Inc.(9)10.19
    
    Confidential Termination Agreement and General Release of Claims dated February 14, 2007 between Gerald J. Houston and the Company




---



##### 



ExhibitNumber
    
    Title21.1
    
    List of subsidiaries (4)31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *32.1
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *32.2
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
 
 (1)
    
    
    Filed as an exhibit to Yaak River Resources, Inc.s Current Report of Form 8-K (File
No. 000-30489), filed on September 28, 2004, and incorporated herein by reference.(2)
    
    
    Filed as an exhibit to LifeVantage Corporations Current Report of Form 8-K (File No. 000-30489), filed on March 14, 2005, and incorporated herein by reference.(3)
    
    
    Filed as an exhibit to LifeVantage Corporations Registration Statement on Form SB-2
(File No. 333-126288), filed on June 30, 2005, and incorporated herein by reference.(4)
    
    
    Filed as an exhibit to LifeVantage Corporations Annual Report on Form 10-KSB (File No.
000-30489), filed on October 13, 2005, and incorporated herein by reference.(5)
    
    
    Filed as an exhibit to LifeVantage Corporations Registration Statement on Form SB-2/A
(File No. 333-126288), filed on February 6, 2006, and incorporated herein by reference.(6)
    
    
    Filed as an exhibit to LifeVantage Corporations Registration Statement on Form SB-2/A
(File No. 333-126288), filed on May 26, 2006, and incorporated herein by reference.(7)
    
    
    Filed as an exhibit to LifeVantage Corporations Current Report on Form 8-K (File No.
000-30489), filed on November 29, 2005, and incorporated herein by reference.(8)
    
    
    Filed as an exhibit to LifeVantage Corporations Current Report on Form 8-K (File No.
000-30489), filed on January 4, 2006, and incorporated herein by reference.(9)
    
    
    Filed as an exhibit to LifeVantage Corporations Annual Report on Form 10-KSB (file No.
000-30489), filed on September 28, 2006, and incorporated herein by reference.(10)
    
    
    Filed as an exhibit to Lifevantage Corporations Quarterly Report on Form 10-QSB (file
No. 000-30489), filed on May 14, 2007, and incorporated herein by reference.
 *
    
    Filed herewith.




---



##### 



LIFEVANTAGE CORPORATION
 Index to Consolidated Financial Statements
 Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Financial Statements:Consolidated Balance Sheets as of June 30, 2007 and
2006 (Restated)
    
    F-3Consolidated Statements of Operations for the years
ended June 30, 2007 and 2006
    
    F-4Consolidated Statements of Stockholders Equity and
Comprehensive Income for the years ended June 30, 2007
and 2006 (Restated)
    
    F-5  F-6Consolidated Statements of Cash Flows for the years
ended June 30, 2007 and 2006 (Restated)
    
    F-7  F-8Notes to Consolidated Financial Statements
    
    F-9  F-21
 F-1




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     /s/ Gordon,

Hughes
&

Banks,
LLP
 
 F-2




---



##### 



June 30, 2007
    
    June 30, 2006(Restated*)ASSETSCurrent assetsCash and cash equivalents
    
    $
    160,760
    
    
    $
    228,112Marketable securities, available for sale
    
    
    
    
    
    
    3,008,573Accounts receivable, net
    
    
    398,463
    
    
    
    107,892Inventory
    
    
    27,834
    
    
    
    45,001Deferred expenses
    
    
    117,807
    
    
    
    152,677Deposit with manufacturer
    
    
    388,791
    
    
    
    555,301Prepaid expenses
    
    
    60,175
    
    
    
    316,659Total current assets
    
    
    1,153,830
    
    
    
    4,414,215Property and equipment, net
    
    
    108,915
    
    
    
    245,000Intangible assets, net
    
    
    2,311,110
    
    
    
    2,162,042Deposits
    
    
    340,440
    
    
    
    316,621TOTAL ASSETS
    
    $
    3,914,295
    
    
    $
    7,137,878LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    148,699
    
    
    $
    613,833Accrued expenses
    
    
    230,811
    
    
    
    399,305Deferred revenue
    
    
    818,250
    
    
    
    1,144,950Capital lease obligations, current portion
    
    
    2,301
    
    
    
    1,985Total current liabilities
    
    
    1,200,061
    
    
    
    2,160,073Long-term liabilitiesCapital lease obligations, net of current portion
    
    
    846
    
    
    
    3,146Total liabilities
    
    
    1,200,907
    
    
    
    2,163,219Stockholders equityPreferred stock  par value $.001, 50,000,000 shares
authorized, no shares issued or outstanding
    
    
    
    
    
    
    Common stock,  par value $.001,
250,000,000 shares authorized
and 22,268,034 and 22,117,992 issued and
outstanding as of June 30, 2007 and
2006 respectively
    
    
22,268
    
    
    
    22,118Additional paid-in capital
    
    
    15,395,037
    
    
    
    14,018,487Accumulated (deficit)
    
    
    (12,703,917
    )
    
    
    (9,010,339
    )Unrealized (loss) on securities available for sale
    
    
    
    
    
    
    (55,607
    )Total stockholders equity
    
    
    2,713,388
    
    
    
    4,974,659TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    3,914,295
    
    
    $
    7,137,878
 
 F-3




---



##### 



2007



    2006Sales, net
    
    $
    5,050,988
    
    
    
    $
    7,165,819Cost of sales
    
    
    1,022,792
    
    
    
    
    1,491,332Gross profit
    
    
    4,028,196
    
    
    
    
    5,674,487Operating expenses:Marketing and customer service
    
    
    2,991,302
    
    
    
    
    4,259,711General and administrative
    
    
    4,355,803
    
    
    
    
    3,904,368Research and development
    
    
    245,561
    
    
    
    
    114,163Depreciation and amortization
    
    
    92,433
    
    
    
    
    265,279Total operating expenses
    
    
    7,685,099
    
    
    
    
    8,543,521Operating (loss)
    
    
    (3,656,903
    )
    
    
    
    (2,869,034
    )Other income and (expense):Interest income (expense)
    
    
    71,105
    
    
    
    
    134,533Loss on disposal of assets
    
    
    (105,621
    )
    
    
    
    Other (expense)
    
    
    (2,159
    )
    
    
    
    Total operating expenses
    
    
    (36,675
    )
    
    
    
    134,533Net (loss)
    
    $
    (3,693,578
    )
    
    
    $
    (2,734,501
    )Net (loss) per share, basic and diluted
    
    $
    (0.17
    )
    
    
    $
    (0.12
    )Weighted average shares outstanding, basic and diluted
    
    
    22,268,034
    
    
    
    
    22,117,992
  F-4




---



##### 



Additional
    
    
    AccumulatedCommon Stock
    
    
    Paid In Capital
    
    
    Other Comprehensive
    
    
    Accumulated
    
    
    Total
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    (Restated*)
    
    
    Income/(loss)
    
    
    Deficit
    
    
    (Restated*)
    
    
    IncomeBalances,
July 1, 2005
    
    
    22,117,992
    
    
    $
    22,118
    
    
    $
    13,921,832
    
    
    $
    
    
    
    $
    (6,275,838
    )
    
    $
    7,668,112
    
    
    $
    (5,822,397
    )Unrealized (loss) on
securities available for
sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (55,607
    )
    
    
    
    
    
    
    (55,607
    )
    
    
    (55,607
    )Warrants issued for services
    
    
    
    
    
    
    
    
    
    
    96,655
    
    
    
    
    
    
    
    
    
    
    
    96,655Net (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,734,501
    )
    
    
    (2,734,501
    )
    
    
    (2,734,501
    )Balances, June 30, 2006
    
    
    22,117,992
    
    
    $
    22,118
    
    
    $
    14,018,487
    
    
    $
    (55,607
    )
    
    $
    (9,010,339
    )
    
    $
    4,974,659
    
    
    $
    (2,790,108
    )
 
 F-5




---



##### 



Additional
    
    
    AccumulatedCommon Stock
    
    
    Paid In Capital
    
    
    Other Comprehensive
    
    
    Accumulated
    
    
    
    
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    (Restated*)
    
    
    Income/(loss)
    
    
    Deficit
    
    
    Total
    
    
    IncomeBalances,
July 1, 2006
    
    
    22,117,992
    
    
    $
    22,118
    
    
    $
    14,018,487
    
    
    $
    (55,067
    )
    
    $
    (9,010,339
    )
    
    $
    4,974,659
    
    
    $
    (2,790,108
    )Unrealized (loss) on
securities available for
sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,607
    
    
    
    
    
    
    
    55,607
    
    
    
    55,607Options/Warrants issued for services
    
    
    
    
    
    
    
    
    
    
    1,345,200
    
    
    
    
    
    
    
    
    
    
    
    1,345,200Stock issued for services
    
    
    150,042
    
    
    
    150
    
    
    
    31,350
    
    
    
    
    
    
    
    
    
    
    
    31,500Net (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,693,578
    )
    
    
    (3,693,578
    )
    
    
    (3,693,578
    )Balances, June 30, 2007
    
    
    22,268,034
    
    
    $
    22,268
    
    
    $
    15,395,037
    
    
    $
    0
    
    
    $
    (12,703,917
    )
    
    $
    2,713,388
    
    
    $
    (3,637,971
    )
  F-6




---



##### 



2007
    2006Cash Flows from Operating Activities:Net (loss)
    
    $
    (3,693,578
    )
    
    
    $
    2,734,501
    )Adjustments to reconcile net (loss) to net cash
(used) by operating activities:Depreciation and amortization
    
    
    92,432
    
    
    
    
    265,279Loss on disposition of assets
    
    
    (103,807
    )
    
    
    
    Stock based compensation to employees
    
    
    1,199,440
    
    
    
    
    Stock based compensation to non-employees
    
    
    177,110
    
    
    
    
    96,655Changes in operating assets and liabilities:(Increase) in accounts receivable
    
    
    (290,571
    )
    
    
    
    (107,892
    )Decrease in inventory
    
    
    17,167
    
    
    
    
    174,643Decrease in deposits to manufacturer
    
    
    166,510
    
    
    
    
    436,259Decrease in prepaid expenses
    
    
    256,484
    
    
    
    
    99,147(Increase) in other assets
    
    
    (23,819
    )
    
    
    
    (285,429
    )(Decrease) in accounts payable
    
    
    (465,134
    )
    
    
    
    (43,695
    )(Decrease)/Increase in accrued expenses
    
    
    (168,494
    )
    
    
    
    191,632(Decrease)/Increase in deferred revenue
    
    
    (326,700
    )
    
    
    
    1,144,950Decrease/(Increase) in deferred expenses
    
    
    34,870
    
    
    
    
    (152,677
    )Net Cash (Used) by Operating Activities
    
    
    (3,128,090
    )
    
    
    
    (915,629
    )Cash Flows from Investing Activities:Redemption/(Purchase) of marketable securities
    
    
    3,064,180
    
    
    
    
    (3,064,180
    )(Purchase) of equipment
    
    
    (60,166
    )
    
    
    
    (136,367
    )Disposal of equipment
    
    
    207,626
    
    
    
    
    (Purchase) of Intangible Assets
    
    
    (149,068
    )
    
    
    
    (59,879
    )Net Cash (Used) by Investing Activities
    
    
    3,062,572
    
    
    
    
    (3,260,426
    )Cash Flows from Financing Activities:Principal payments under capital lease obligation
    
    
    (1,984
    )
    
    
    
    (1,169
    )Proceeds from margin debt
    
    
    2,093,101
    
    
    
    
    Repayment from margin debt
    
    
    (2,093,101
    )
    
    
    
    Issuance of Common Stock
    
    
    150
    
    
    
    
    Net Cash (Used) by Financing Activities
    
    
    (1,834
    )
    
    
    
    (1,169
    )(Decrease) in cash
    
    
    (67,352
    )
    
    
    
    (4,177,224
    )Cash and Cash Equivalents  beginning of period
    
    
    228,112
    
    
    
    
    4,405,336Cash and Cash Equivalents  end of period
    
    $
    160,760
    
    
    
    $
    228,112
  F-7




---



##### 



2007
    2006Non Cash Investing and Financing Activities:Acquisition of asset through capital lease
    
    $
    
    
    
    
    $
    6,300SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash paid for interest expense
    
    $
    
    
    
    
    $
    Cash paid for income taxes
    
    $
    
    
    
    
    $
    
  F-8




---



##### 



LIFEVANTAGE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Note 1  Organization and Basis of Presentation:
 ®
   Liquidity and managements plans for operations
   
    
    The Company re-evaluated its marketing programs and has either cancelled or allowed
to expire various marketing and positioning contracts, replacing them with a more
targeted advertising plan. The new marketing plan includes direct to consumer
interview style marketing that can be expanded or contracted according to available
cash flows. Cash flow savings from changing from the Companys previous national
marketing programs to the Companys targeted marketing approach are expected to be
approximately $1,600,000.
    
    During fiscal 2007, in effort to cut expenses, several employees were terminated
and consultant contracts were allowed to expire without renewal and management has
balanced corporate responsibilities among remaining personnel. Cash flow savings from
changes to the Companys current personnel are expected to be approximately
$1,100,000.
    
    The Company re-evaluated its consultant contracts including web hosting and call
center operations and has either cancelled various contracts or allowed them to expire
and replaced them with more cost-efficient contracts. Cash flow savings from the
expiration or termination of the Companys consultant contracts are expected to be
approximately $400,000.
    
    The Company has adopted new marketing promotions as well as new customer service
retention and recapture programs. Such programs are not expected to increase sales
immediately, but are expected to reduce direct sales erosion experienced in fiscal
2007. Sales increases are expected to result from the redesign of e-commerce sites and
enhanced direct to consumer marketing, as well as expansion into the natural product
market with contracts with several well-known natural foods retailers and brokers.
  F-9




---



##### 



Note 2  Summary of Significant Accounting Policies and Fiscal Year 2006 Restatement:
 Fiscal Year June 30, 2006 Restatement
      For the year endedJune 30, 2006Intangible AssetsPatent costs as previously reported
    
    $
    97,905Restatement of patent costs related to the acquisition of LNC
    
    
    2,000,000Restated patent costs
    
    $
    2,097,905Goodwill as previously reported
    
    $
    5,310,000Restatement of goodwill related to the acquisition of LNC
    
    
    (5,310,000
    )Restated goodwill
    
    $
    -0-Additional Paid-in-CapitalAdditional paid-in-capital as previously reported
    
    $
    17,328,487Restatement of additional paid-in-capital related to the
acquisition of LNC
    
    
    (3,310,000
    )Restated additional paid-in-capital
    
    $
    14,018,487
 Consolidation
  Use of Estimates
  Revenue Recognition
   F-10




---



##### 



®
 ® ®
 ®
 Accounts Receivable
   Inventory
  F-11




---



##### 



June 30,2007
    
    
    2006Finished goods
    
    $
    10,947
    
    
    $
    25,097Packaging supplies
    
    
    16,887
    
    
    
    19,904Total inventory
    
    $
    27,834
    
    
    $
    45,001
 Earnings per share
  Research and Development Costs
  Advertising Costs
  Cash and Cash Equivalents
  Marketable Securities
 available for sale
   F-12




---



##### 



Unrealized
    
    
    Fair(Loss)
    
    
    ValueAs of June 30, 2007Available for sale securitiesDebt securities (maturing 0 to 2 years)
    
    $
    
    
    
    $
    As of June 30, 2006Available for sale securitiesDebt securities (maturing 0 to 2 years)
    
    $
    (55,607
    )
    
    $
    3,008,573
 Deposit with Manufacturer
  Shipping and Handling
  Property and Equipment
  June 30,2007
    
    
    2006Equipment
    
    $
    148,899
    
    
    $
    139,185Software
    
    
    59,708
    
    
    
    216,881Accumulated Depreciation
    
    
    (99,692
    )
    
    
    (111,066
    )Property and equipment, net
    
    $
    108,915
    
    
    $
    245,000
 Patents
   F-13




---



##### 



Impairment of Long-Lived Assets
   Goodwill and Other Intangible Assets
   June 30,2007
    
    2006Patent costs
    
    $
    2,203,659
    
    
    $
    2,097,905Trademark costs
    
    
    107,451
    
    
    
    64,137Intangible assets, net
    
    $
    2,311,110
    
    
    $
    2,162,042
 Income Taxes
  F-14




---



##### 



Concentration of Credit Risk
  Stock-Based Compensation
     June 30,2007
    
    
    2006Net (loss) as reported:
    
    $
    (3,693,578
    )
    
    $
    (2,734,501
    )Total share
based employee compensation included in net(loss):
    
    
    1,376,550
    
    
    
    Less: total share-based employee
compensation that would have been
included in Net (loss) if the fair value
based method had been applied for all
options granted
    
    
    (1,376,550
    )
    
    
    (1,336,817
    )Pro forma (loss)
    
    $
    (3,693,578
    )
    
    $
    (4,071,318
    )Basic and diluted earnings (loss) per share:As reported
    
    $
    (0.17
    )
    
    $
    (0.12
    )Pro forma
    
    $
    (0.17
    )
    
    $
    (0.18
    )
 F-15




---



##### 



1.
    
    risk-free interest rate of between 4.54 and 4.97 percent in fiscal 2007 and
between 3.84 and 5.16 in fiscal 2006;2.
    
    dividend yield of 0 percent in fiscal 2007 and fiscal 2006;3.
    
    expected life of 5-6 years in fiscal 2007 and 2  3 years in fiscal 2006; and4.
    
    a volatility factor of the expected market price of the Companys common stock of
74 percent in fiscal 2007 and between 187 and 263 percent in fiscal 2006.
 Reclassification
  Segments of an Enterprise and Related Information
  Comprehensive Income
  Organization Costs
  Effect of New Accounting Pronouncements
   F-16




---



##### 



Note 3  Acquisition of Minority Interest in Subsidiary and Accounting for Intellectual Property
   Note 4  Stockholders Equity
 available
for sale
    F-17




---



##### 



Note 5  Stock Option Grants and Warrants
 Stock Option Grants
  Warrants
 F-18




---



##### 



ExerciseOptions
    
    
    Warrants
    
    
    PriceOutstanding and exercisable, June 30, 2005
    
    
    
    
    
    
    
    6,001,866
    
    
    
    $
    2.33Granted
    
    
    1,716,000
    
    
    
    
    167,428
    
    
    
    $
    3.25Cancelled
    
    
    
    
    
    
    
    
    
    
    
    $
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    $
    Expired
    
    
    
    
    
    
    
    
    
    
    
    $
    Outstanding and exercisable, June 30, 2006
    
    
    1,716,000
    
    
    
    
    6,169,294
    
    
    
    $
    2.55Granted
    
    
    2,518,321
    
    
    
    
    1,512,088
    
    
    
    $
    0.59Cancelled
    
    
    
    
    
    
    
    
    
    
    
    $
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    $
    Expired
    
    
    (1,334,290
    )
    
    
    
    
    
    
    
    $
    Outstanding and exercisable, June 30, 2007
    
    
    2,900,031
    
    
    
    
    7,681,382
    
    
    
    $
    2.01Year ended June 30, 2007:Weighted average exercise price
    
    $
    1.66
    
    
    
    $
    1.89Weighted average remaining contractual life (years)
    
    
    8.7
    
    
    
    
    2.4Weighted average fair value of options and
warrants granted during 2007
    
    $
    1.66
    
    
    
    $
    1.89Year ended June 30, 2006:Weighted average exercise price
    
    $
    3.23
    
    
    
    $
    2.36Weighted average remaining contractual life (years)
    
    
    8.0
    
    
    
    
    1.8Weighted average fair value of options and
warrants granted during 2006
    
    $
    3.23
    
    
    
    $
    3.43
 Note 6  Fair Value of Financial Instruments
   Note 7  Income Taxes
  F-19




---



##### 



June 30,2007
    
    2006Deferred tax assets:Net operating loss carry forwards
    
    $
    2,241,000
    
    
    $
    1,284,000Contribution carryover
    
    
    260,000
    
    
    
    260,000Net accrued return liability
    
    
    271,000
    
    
    
    383,000Book/tax depreciation/amortization
    
    
    (2,000
    )
    
    
    (27,000
    )State income taxes
    
    
    (75,000
    )
    
    
    (85,000
    )Total deferred tax assets
    
    
    2,695,000
    
    
    
    1,815,000Deferred tax liabilities
    
    
    
    
    
    
    Net deferred tax assets before
valuation allowance
    
    
    2,695,000
    
    
    
    1,815,000Valuation allowance
    
    
    (2,695,000
    )
    
    
    (1,815,000
    )Net deferred tax asset
    
    $
    
    
    
    $
    
   June 30,2007
    
    
    2006Expected federal income tax benefit
    
    $
    1,427,000
    
    
    
    $
    1,056,000Deferred revenue
    
    
    126,000
    
    
    
    
    (442,000
    )Deferred expense
    
    
    (13,000
    )
    
    
    
    60,000Book/tax depreciation difference
    
    
    (2,000
    )
    
    
    
    (10,000
    )Stock options for services
    
    
    (520,000
    )
    
    
    
    (37,000
    )Meals and entertainment
    
    
    (3,000
    )
    
    
    
    (2,000
    )Disposal of Assets
    
    
    (15,000
    )
    
    
    
    Stock transfer fees
    
    
    (3,000
    )
    
    
    
    (3,000
    )Prior year A/R reserve write-off
    
    
    (21,000
    )
    
    
    
    28,000Sales returns and allowances
    
    
    (30,000
    )
    
    
    
    (13,200
    )Other future differences
    
    
    (65,000
    )
    
    
    
    220,000Change in valuation allowance
    
    
    (881,000
    )
    
    
    
    (856,800
    )Net income tax benefit
    
    $
    
    
    
    
    $
    
 Note 8  Operating Lease Commitments
  F-20




---



##### 



Year ending June 30,2008
    
    
    120,2172009
    
    
    10,038Total future minimum Lease payments
    
    $
    130,255
 Note 9  Interim Financial Results (Unaudited)
 
 YearQuarter
    
    endedYear ended June 30, 2007
    
    First
    
    Second
    
    Third
    
    Fourth
    
    June 30, 2007Sales, net
    
    $
    2,075.5
    
    
    $
    1,136.8
    
    
    $
    995.3
    
    
    $
    843.4
    
    
    $
    5,051.0Gross profit
    
    
    1,699.9
    
    
    
    887.6
    
    
    
    781.7
    
    
    
    659.0
    
    
    
    4,028.2Net income (loss)
    
    $
    (820.2
    )
    
    $
    (1,765.0
    )
    
    $
    (582.3
    )
    
    $
    (526.1
    )
    
    $
    (3,693.6
    )Per common share:Loss per share, basic
and diluted
    
    $
    (0.04
    )
    
    $
    (0.08
    )
    
    $
    (0.03
    )
    
    $
    (0.02
    )
    
    $
    (0.17
    )
 YearQuarter
    
    endedYear ended June 30, 2006
    
    First
    
    Second
    
    Third
    
    Fourth
    
    June 30, 2006Sales, net
    
    $
    2,964.6
    
    
    $
    1,711.7
    
    
    $
    1,390.6
    
    
    $
    1,098.9
    
    
    $
    7,165.8Gross profit
    
    
    2,368.0
    
    
    
    1,348.7
    
    
    
    1,094.5
    
    
    
    863.3
    
    
    
    5,674.5Net income (loss)
    
    $
    80.3
    
    
    $
    (571.0
    )
    
    $
    (670.9
    )
    
    $
    (1,572.9
    )
    
    $
    (2,734.5
    )Per common share:Loss per share, basic
and diluted
    
    $
    0.00
    
    
    $
    (0.02
    )
    
    $
    (0.03
    )
    
    $
    (0.07
    )
    
    $
    (0.12
    )
 Note 10  Subsequent Event
  F-21