UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549


_______________________





FORM
10-K


_______________________





(MARK
ONE)





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


For the
fiscal year ended June 30, 2008





[_]           Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934





For the
transition period from ________ to ________





Commission
file number: 0-50993





LIFE
EXCHANGE, INC.


(Exact
name of registrant as specified in its charter)





Nevada
            20-2602277(State
      or other jurisdiction of incorporation or organization)
            (IRS
      Employee Identification No.)





2001
      Biscayne Boulevard, Suite 2102, Miami, FL
            33137(Address
      of principal executive offices)
            (Zip
      Code)


Registrant's
telephone number, including area code: (866) 907-9766





Securities
Registered pursuant to Section 12(b) of the Exchange Act:





Title
      of each class
            Name
      of each exchange on which registeredNone
            None





Securities
Registered pursuant to Section 12(g) of the Exchange Act:





Common
Stock, $0.001 Par Value


(Title
of class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.Yes  [_] No  [X]





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes  [_]
No  [X]





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 S-K (§ 229.405 of this chapter) 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-K
or any amendment to this Form 10-K.  [X]





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer [_]
            Accelerated
      filer [_]Non-accelerated
      filer [_]
            Smaller
      reporting company [X]


(Do not
check if a smaller reporting company)










Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act)  Yes [_]  No [x]





The
aggregate market value of the voting stock held by non-affiliates of the
registrant as of September 15, 2008 was $25,944,000.   This
valuation is based on the closing sale price of common stock as quoted on the
OTCBB on September 15, 2008 ($1.60). This calculation does not reflect a
determination that persons are affiliates for any other purposes.





APPLICABLE
ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:





Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes  [_] No  [_]





(APPLICABLE
ONLY TO CORPORATE REGISTRANTS)





Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.  The number of shares
outstanding of the registrant's common stock as of September 15, 2008 was
176,715,000.








(DOCUMENTS
INCORPORATED BY REFERENCE)


None








LIFE
EXCHANGE, INC.


FORM
10-K


INDEX




PagePART
      IItem
      1.
              Business
              1Item
      1A.
              Risk
      Factors
              9Item
      1B.
              Unresolved
      Staff Comments
              N/AItem
      2.
              Properties
              12Item
      3.
              Legal
      Proceedings
              12Item
      4.
              Submission
      of Matters to a Vote of Security Holders
              12PART
      IIItem
      5.
              Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
              12Item
      6.
              Selected
      Financial Data
              12Item
      7.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              13Item
      7A.
              Quantitative
      and Qualitative Disclosures About Market Risk
              16Item
      8.
              Financial
      Statements and Supplementary Data
              16Item
      9.
              Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
              18Item
      9A.
              Controls
      and Procedures
              18Item
      9B.
              Other
      Information
              19PART
      IIIItem
      10.
              Directors,
      Executive Officers and Corporate Governance
              19Item
      11.
              Executive
      Compensation
              20Item
      12.
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
              21Item
      13.
              Certain
      Relationships and Related Transactions, and Director
      Independence
              21Item
      14.
              Principal
      Accounting Fees and Services
              2222PART
      IVItem
      15.
              Exhibits
      and Financial Statement Schedules
              22Signatures
              
              24





PART
I





This annual report on Form 10-K
contains forward-looking statements that are based on current expectations,
estimates, forecasts and projections about the Company, us, our future
performance, our beliefs and our Management's assumptions. In addition, other
written or oral statements that constitute forward-looking statements may be
made by us or on our behalf. Words such as "expects," "anticipates," "targets,"
"goals," "projects," "intends," "plans," "believes," "seeks," "estimates,"
variations of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions that are
difficult to predict or assess. Therefore, actual outcomes and results may
differ materially from what is expressed or forecast in such forward-looking
statements. Except as required under the federal securities laws and the rules
and regulations of the SEC, we do not have any intention or obligation to update
publicly any forward-looking statements after the filing of this Form 10-K,
whether as a result of new information, future events, changes in assumptions or
otherwise.


Unless the context otherwise requires,
throughout this Annual Report on Form 10-K the words “Life-Exchange”, “Company,”
“we,” “us” and “our” refer to Life Exchange, Inc. and its consolidated
subsidiaries.




ITEM
1.  BUSINESS




Overview




On
January 19, 2005 (“date of inception”), Life-Exchange, Inc. (“the Company”) was
organized under the laws of the State of Delaware as a
corporation.  Life-Exchange, Inc. was established for the purposes of
servicing the life settlement industry by creating an on-line
business-to-business exchange platform, which will facilitate the brokering of
life insurance policies in the secondary market.  On January 29, 2006,
the Company began to trade publicly under the name Life Exchange, Inc. (OTC pink
sheets: LFXG.PK).





Our Products and
Services




We are an
Internet-based, business-to-business exchange for the life settlement industry.
By providing a secure, efficient, and neutral electronic trading platform
specifically designed for life settlements, we address many of the
inefficiencies and difficulties currently facing the industry.




On the sell side of the transaction
process, licensed life settlement brokers, on behalf of the policyholders,
register and submit to us information and documentation on life insurance
policies which they are seeking to sell. We provide brokers a means by which to
shop their client's policies to the entire community of buyers and sell them to
the highest bidder. Our automated listing and auction processes encourage
bidding on policies as it allows more buyers into the marketplace, and thus, we
help to create greater value for policy owners.




By selling the policy, the
policyholder/insured receives an immediate cash payment to use as he or she
wishes. The buyer takes an ownership interest in the policy at a discount to its
face value and receives the death benefit under the policy when the insured
dies.




On the buy side of the transaction
process, licensed life settlement providers register and list the criteria that
they use in evaluating the feasibility of purchasing life insurance policies. To
that end, we provide a cost effective means to sort and filter through thousands
of policies in minutes - not months; thereby allowing providers to focus on just
those policies most appropriate to their needs.




After a policy has been registered and
submitted to auction, the policy enters a preview period which allows all
potential buyers the opportunity to underwrite the policy. After this preview
period, the policy enters a live auction period where providers are able to bid
against each other for the right to purchase the life insurance policy in a
real-time, online auction.




At such time that a provider locates
and successfully bids on a life insurance policy, the provider then negotiates
and enters into a contract with the broker. We do not participate in that
negotiation.  We generate revenue based primarily on transaction
fees.  Our fee structure is designed to provide both brokers (sellers)
and providers (buyers) with a compelling cost justification to use Life-Exchange
as their primary means to execute life settlement transactions.




Fee
Structure




Our
business model is based primarily on revenue streams generated via various
transaction fees associated with successful policy auctions.  Our fee
structure is designed to provide both sellers and buyers with a compelling cost
justification to use Life-Exchange as their primary means to execute life
settlement transactions.  Transactions fees are based on a percentage of
the face amount of the life insurance policy. This fee arrangement is
non-commission based and therefore it allows us to remain neutral in a life
settlement transaction as we are not incentivized by either a high or a low
sales price. Furthermore, because of our role in the life settlement transaction
and as validated by the neutrality of our fee structure, we do not represent or
negotiate on behalf of the policy owners and accordingly do not have a fiduciary
responsibility to the policy owner as a life settlement broker
would.




1




In addition to the Transaction Fees
described above, Life-Exchange also generates News Distribution Fees. The
secondary life insurance market is a niche marketplace with a unique blend of
participants. And while this marketplace is experiencing tremendous growth, it
is still difficult to target the most active firms and individuals. To address
this need, we maintain a large database of influential readers focused on life
settlements. In order to monetize this subscriber base, we provide a news
distribution service. For a fee, we will distribute press releases to our
subscriber base. The news distribution fee ranges from $500 to $2,000 per press
release depending on the specific nature of the press release.




The Life-Exchange
Automation




While the majority of the life
settlement industry is backed by technologically sophisticated, Fortune 500
financial institutions, the technological sophistication of the life settlement
industry itself is antiquated and highly inefficient. The majority of policy
transactions are labor-intensive, cumbersome and disorganized undertakings.
There is significant duplication of work, inappropriate policy transactions,
miscommunication and poor follow through. All of these factors contribute to an
unproductive and inequitable marketplace.




We have automated and modernized the
life settlement industry by introducing buyers to sellers (and vice versa) in a
virtual, online marketplace. Our features and functionality are specifically
designed to improve regulatory compliance, increase customer value, reduce
transaction costs, create new revenue models, and add efficiency to an
inefficient market.




With our web-based document management
features and scalable database, we greatly assist clients by removing the
confusion caused by different employees making changes to the same documents and
not communicating the changes explicitly. Brokers and providers have access to
the correct documents, and the ability to make and communicate changes, 24/7
from anywhere via secure internet connection. Each client's employee's
responsibilities and completed work can be tracked using the audit feature built
into our products, ensuring accountability.




Of particular importance to our
industry, is the fact that the transfer of medical information requires
adherence to the compliance procedures of the Health Insurance Portability &
Accountability Act ("HIPAA"). In order to ensure compliance with the laws
regulating the transmission of medical information, especially in electronic
format, we offer all members a secure hosting center to store, retrieve, and
exchange medical data in a manner that maintains compliance with HIPAA and state
regulations.




In addition to the above factors, there
is a significant influx of institutional capital entering the life settlement
industry and the pressure to place this capital continues to increase.
Automating the Life-Settlement transaction process and allowing more buyers and
sellers to transact business through a single, highly efficient electronic
exchange will greatly improve value for both buyer and seller by bringing
greater liquidity to the life settlement marketplace. Life settlement brokers
benefit by having equal and greater access to potential buyers, ensuring their
clients receive the highest bids for their policies while maintaining compliance
with stringent state-by-state regulations. Providers benefit by having access to
more suitable investment opportunities, and are thus able to place their capital
more rapidly and with greater efficiently, thus increasing their internal rate
of return.




Intellectual Property and
Patents




On March 31, 2006, David C. Dorr, our
president, assigned his rights in a Patent pending application for Letters
Patent of the United States filed July 21, 2004, U.S. Patent Application No.
10/895112. Said patent relates to our processes described herein.




Company
History




On July 7, 2006, the Company entered
into a note agreement with Vantage Group Ltd. to provide $300,000 of additional
financing (“Note 1”).  The terms of Note 1, as modified by subsequent
amendments, provide for 7% interest payable at maturity.  Note 1 is
unsecured and matures on April 15, 2010 with quarterly interest installments due
through April 15, 2010.  Note 1 also provides Vantage with conversion
rights based on us attaining certain performance criteria as follows. The Holder
of this Note 1 is entitled, at its option, to convert the principal amount of
Note 1 or any portion thereof, together with accrued but unpaid interest, into
shares of our common stock based on attaining certain performance criteria
measured during December, 2006.  We did not meet the performance
criteria and accordingly, no shares were converted.




On April 2, 2007, we entered into a
note agreement with Vantage Group Ltd. to provide $150,000 of additional
financing (“Note 2”).  The terms of Note 2, as modified by subsequent
amendments, provide for 7% interest payable at maturity.  Note 2 is
unsecured and matures on April 15, 2010.  Note 2 also provides Vantage
with conversion rights based on us attaining certain performance criteria as
follows.  Note 2 may be converted into shares of our common stock at
(i) $0.10 or (ii) fifty percent (50%) of the three lowest closing prices of the
Stock on the Pink Sheets (or such other principal market or exchange where the
Common Stock is listed or traded at the time of conversion) immediately
preceding the date of conversion.




On August
2, 2007, the Company was advanced an additional $5,000 under the same terms as
Note 2.




2




On
September 27, 2007, the Company formed LFX Insurance Services, LLC (“LFXIS”) a
Nevada limited liability corporation as a wholly-owned
subsidiary.  LFXIS was formed to process “structured finance”
transactions related to the Company’s core life settlement
business.  Structured finance transactions involve an extension of the
services provided to customer base for customer driven transactions executed
through the Company’s exchange platform.  Structured finance
transactions involve utilizing the skill sets of the Company’s personnel to both
advise and structure an appropriate transaction that accommodates the goals of
the parties involved.  The Company incurred minimal expenses in
establishing the subsidiary.





In July
2008, the Company formed four additional subsidiaries to facilitate its plans to
further expand its service offerings.  Filings with the State of
Nevada began on June 3, 2008, however the organization activities were not
completed until July 2008.  None of these subsidiaries were complete
and operational or record any transactions as of June 30, 2008.  The
newly formed subsidiaries are as follows:





LFX
Brokerage LLC was formed to facilitate deeper market penetration into life
settlement sell-side participants.  This entity will hold life settlement
brokerage licenses and life insurance general agency licenses allowing us to
offer expanded services as they relate to our core business of operating a life
settlement exchange.  These licenses also give us the flexibility to
interact directly with policy owners and more efficiently address their market
needs.





LFX
Acquisitions LLC was formed to facilitate deeper market penetration into life
settlement buy-side participants.  This entity will hold life settlement
provider licenses and provide better market access to financial institutions
like banks and pension funds to our life settlement exchange.  This entity
will also allow us the ability to provide ongoing asset servicing to clients
that require these services.





LFX
Capital Markets LLC was formed in anticipation of further regulatory
developments that could bring greater oversight by FINRA to the life settlement
market place.  This entity will be licensed as a broker/dealer and will
also be designed for providing trades in more advanced structured life
settlement products that will be classified as securities.  Having a
broker/dealer license will also allow us to accept variable life insurance
contracts, a sector of the market that we have not yet tapped.





LFX
Trading, LLC was formed to hold all the technology related to our life
settlement auction platform as well as the intellectual property we will be
developing related to our electronic trading platform.  This new entity
will ultimately be responsible for receiving all transaction fees as they relate
to auctions or trades through our systems.





We
operate two websites: www.life-exchange.com and
www.life-exchange.net.




The Viatical and Life
Settlement Industry




A Viatical and/or Life Settlement
(herein referred to as a "Life Settlement") is the sale to a third party of an
existing life insurance policy for more than its cash surrender value but less
than its net death benefit. The insurance industry generally uses the term
Viatical Settlement to refer to a transaction involving the terminally or
chronically ill insured and the term Life Settlement to refer to a transaction
involving an insured who is not terminally or chronically ill, but generally
over the age of sixty five (65).




The U.S. secondary market for life
insurance policies has experienced phenomenal growth over the past several
years. Life settlement buyers, also known as “providers”, purchase policies from
policyholders for immediate cash settlement. Providers will purchase life
settlement policies on their own behalf as well as on the behalf of various
investors including both domestic and international banks, hedge funds, and
private equity firms.




Once a
provider acquires a policy, the provider continues to pay the policy premiums
until the death of the insured, at which time they collect the policy's
proceeds. Some life settlement providers negotiate directly with policyholders,
but the majority of Life Settlement transactions are conducted through a life
settlement broker. Most states require providers to be licensed in the states in
which they purchase policies. Many providers are well-financed by large
institutional investors. Not only does this institutional backing provide a
secure funding source for secondary market transactions, but it also provides
the highest degree of consumer protection with regard to privacy and
confidentiality.




Life settlement sellers, also known as
“brokers”, act on behalf of the policyholders in order to secure the highest
price from the sale of the policyholder's life insurance policy. Life settlement
brokers work with the insured, the policy owner, general agencies, life
insurance agents, attorneys, and/or financial planners.




In an
attempt to secure the highest price for a policyholder, brokers will typically
present a life insurance policy to multiple providers. Brokers are required to
collect and prepare critical policy information and medical records on the
insured for use in evaluating the value a policyholder's life insurance
policy.




An important industry group is the Life
Insurance Settlement Association (LISA). This industry association promotes
self-regulation of the industry, and advises and recommends regulations to
governing bodies. They also lobby for new laws and regulations to help protect
the consumer and keep fraud out of the industry.




3




The Life Settlement Market
and Competition




The life settlement industry developed
out of the viatical industry which began in the late 1980s as large numbers of
AIDS patients found themselves coping with the catastrophic costs of a terminal
illness. Many had life insurance policies that seemed to be limited or
inaccessible prior to the death of the insured. A creative solution was to offer
AIDS patients; a lump sum payment of cash greater than their cash surrender
value, in exchange for transferring the ownership and beneficiary of a policy.
Viewing a life insurance policy as a financial asset which could be transferred
for value had begun and unfortunately, as with many new financial concepts, lack
of regulation lead to several incidences of fraud and other
improprieties.




Over the past several years the market
has evolved into a multi-billion dollar industry, which is heavily regulated and
institutionally backed. The demand driving the growth of this product has been
the rapid increase in the senior population, constantly changing estate planning
needs and most profoundly the awareness that these insurance policies can be
sold on a secondary market as financial instruments to institutionally-backed
buyers.




We are
aware of one direct competitor, -- LexNet (www.lexnet.com) -- that provide
consumers with the ability to auction their life insurance policies. 
LexNet was launched in May, 2007 by Cantor LifeMarkets, a division of Cantor
Fitzgerald.  A primary difference between LexNet and Life-Exchange is that
LexNet will not accept policy submissions directly from producers.  Rather,
access to LexNet is exclusively controlled through a select group of Master
Agencies.  Regardless of whether or not an insurance agent is part of the
select Master Agency’s network, they must still work through a Master Agency,
which is likely to be seen as an extra fee layer by agents, further diluting the
agent’s commission and potentially disinter mediating the relationship between
the agent and his end clients.   Life-Exchange on the other hand, is
open to any life settlement broker, general agency, agent, or master general
agency which is capable of meeting our membership requirements.




As another form of indirect competition
to life settlements, the life insurance industry has responded with policy
features offering various pre-death, cash benefits (sometimes called accelerated
death benefits). While in some cases accelerated death benefits may compete with
life settlements, we do not expect the availability of accelerated death
benefits to affect the life settlement market significantly at this time. The
availability of accelerated death benefits is generally more restricted than
life settlements. For example, policies often limit such benefits to persons who
have a life expectancy of less than one year, in contrast to life settlements
that are usually available to persons with life expectancies of two to 15 years.
Life settlements generally offer sellers a greater dollar amount than they would
receive under accelerated death benefit provisions.




Finally, access to capital, the
insurance industry's addition of pre-death cash benefits, law enforcement
pressure on companies operating illegally, and increasing government regulation
have all contributed to a stabilization in the number and sophistication of life
settlement companies, both those purchasing for their own accounts and those who
act as agents for purchasers.




Sales &
Marketing




Since our
public launch on April 20, 2006, we have aggressively focused on acquiring as
clients the top life settlement sellers and buyers in our industry.  As of
June 30, 2008, we have agreements with over 30 suppliers of life settlement
policies, including life settlement brokers, general agencies, and master
general agencies.  On the buy side, we have agreements in place with over
40 buyers of life settlement policies, including domestic life settlement
providers, as well as both domestic and international banks, hedge funds, and
private equity firms.




A primary
theme of our user agreements is that we are an online venue for indications of
interests to buy and sell, and that the site is only an online communications
medium to facilitate registered buyers and registered sellers to exchange
information relating to proposed Life Settlement Transactions; such life
insurance policies transactions are completed off-line, outside of the
site.




Life-Exchange auction participants,
both on the buy-side and sell-side, pay a transaction fee that ranges from 0.25%
to 0.50% of the face value of a policy.




All
buy-side and sell-side member contracts are identical with regards to the
material rights and obligations of both parties and include:




·
            Contracts
      have no fixed contract length and parties are not obligated to use the
      exchange, post policies, or provide a minimum level of business to the
      exchange.




·
            Life-Exchange
      members may terminate this Agreement at any time upon thirty (30) days
      advance written notice of termination provided to the other
      party.




·
            Life-Exchange
      members must comply with stringent confidentiality and privacy
      obligations, including those related to the
  HIPAA,




·
            Life-Exchange
      members  are responsible for paying for any life expectancy
      reports that they order through
Life-Exchange.






4




·
            Life-Exchange
      members must at all times




§
            comply
      with all applicable laws and regulations applicable to its offer to
      purchase, solicitation to sell, or purchase of, Policies in Life
      Settlement Transactions,




§
            obtain
      and maintain in good standing all licenses and permits that
      Broker/Provider may be required to hold under applicable laws and
      regulations.




·
            Life-Exchange
      members  agree to a non-circumvent period where neither party
      shall, directly or indirectly, purchase or sell a Policy listed on the
      exchange or make any offer to purchase or sell any such policy for a
      period of 1 year




Over the next twelve months,
management's strategy is to continue with its sales and marketing strategy of
focusing efforts on establishing a “footprint” nationally with the industries
top tier firms.




Our primary marketing efforts will
continue to include:




·
            Taking
      advantage of our favorable position within the Life Settlement industry to
      secure exclusive industry alliances thereby ensuring long term deal flow
      in the form of long term use of our web-based exchange
      platform.




·
            Use
      our strong industry contacts within the life settlement community to
      promote the usage of Life-Exchange as an industry
  standard.




·
            Implement
      website features and functionality that create user
    retention.




·
            Continual
      development of products and services that anticipate the market's
      evolution particularly in regards to the regulatory
    landscape.




·
            Enhancements
      and modifications to our website that differentiates our product and
      services by offering industry specific tools and functionality that will
      become and remain the industry
standard




Research &
Development




Product
and development costs consist of the costs to develop and operate the online
exchange platform's web based application and transaction database and are
expensed as incurred.




We have
outsourced the development of our web application to Epiq Technologies of San
Diego, California. Epiq Technologies was chosen after an exhaustive search for
the most appropriate business-to-business exchange platform and software
developer. Our web based application is based upon industry leading technology
which has provided us with a common, secure, and scalable infrastructure for
which to base future development. Our web application was publicly launched on
April 20, 2006 and to date, our developer has delivered all milestones ahead of
schedule.




Data
transmitted between our clients and our Web servers is via the industry standard
Secure Sockets Layer (SSL), which is a mechanism to secure Internet traffic so
that it cannot be intercepted. Life-Exchange will continue to use and update its
platform with the most advanced security measures available.




Our
ongoing research and development will focus on modifications and enhancements to
meet the changing needs of our users, as well as addressing regulatory issues
encountered by the industry. This proactive approach towards customer
satisfaction will include making certain that www.Life-Exchange.com continues to
foster:




·
            A
      customer-first approach




·
            Superior
      and efficient execution of all web site functionality, processes, and
      procedures.




·
            Excellent,
      easy to access customer support
services.




·
            Resources
      to serve both brokers and
providers.




·
            A
      comprehensive range of products and services to ensure competitive
      advantage and to serve current and future customer
  needs.




·
            Fast,
      reliable, and accurate
functionality.




·
            A
      highly credible site which offers private and secure
      transactions






5




Equipment




With
respect to equipment requirements, we employ a strategy of leasing all of its
technological hardware and software requirements through industry leading
vendors. As such, we expect no significant equipment purchases over the next 12
months.




Staffing




We operate around a core group of
highly skilled individuals with an extensive knowledge and understanding of the
life settlement industry. Besides a nominal administrative staff to support this
core group, we plan to outsource all staffing activities not directly related to
our core capabilities in the life settlement industry, including such activities
as software development, marketing, investor relations, and compliance. Based on
this outsourcing strategy, we anticipate no significant staffing level increases
within the next twelve months.  As of June 30, 2008, we have 8
employees, consisting of 6 full time employees, and 2 part time employee, none
of whom are represented by a labor union. We consider our employee relations to
be satisfactory.




Government
Regulation




Although our services do not require us
to be licensed under federal or state law as a provider, broker or otherwise, we
believe these laws and regulations have generally had a positive effect on the
industry and on our ability to compete in the life settlement
marketplace.




Currently the life settlement industry
is regulated on a state-by-state basis, and at this time almost all states
regulate life settlement transactions. Depending on the state, different
licenses may be required for viatical and life settlements transactions, as well
as for life settlement brokers and life settlement providers. Of those states
that regulate the life settlement transactions, most require both the
Viatical/Life Settlement Broker and the Viatical/Life Settlement Provider to be
licensed.




The foundation for these regulations is
based largely from the NAIC Viatical Settlements Model Act (the "Model Act"),
which act encompasses a model law and regulations promulgated by the National
Association of Insurance Commissioners (the "NAIC"). Most states have now
adopted some version of this model law or another form of regulation governing
in some way viatical or life settlement companies or both. These laws generally
require the licensing of providers and brokers, require the filing and approval
of settlement agreements and disclosure statements, describe the content of
disclosures that must be made to potential viators and/or life settlors,
describe various periodic reporting requirements for settlement companies and
prohibit certain business practices deemed to be abusive.




In 1996, Congress passed the Health
Insurance Portability & Accountability Act ("HIPAA"). The purpose of HIPAA
is to prevent fraud in the health care industry and to protect confidential
patient information. HIPPA standardizes and provides enforcement mechanisms for
ROI rules and guidelines to protect personal healthcare information. HIPAA
effects entities involved with electronic health care information - including
health care providers, health plans, employers, public health authorities, life
insurers, clearinghouses, billing agencies, information systems vendors, service
organizations, universities, and even single-physician offices. The final
version of the HIPAA Privacy regulations was issued in December 2000, and went
into effect on April 14, 2001. A two-year "grace" period was included;
enforcement of the HIPAA Privacy Rules began on April 14, 2003.




Licensing in
Florida




Florida regulates both viatical and
life settlements pursuant to the Florida Viatical Settlement Act set forth in
Florida Statutes Sections 626.991--626.99295 (the "Florida Act"). The Florida
Act makes no distinction between viatical and life settlements and refers to all
settlements as viatical settlements.




The settlement process begins when the
policy owner executes a viatical settlement application and provides
authorization to the insured's attending physician and the issuing insurance
company to disclose confidential information pertaining to the insured's health
and insurance coverage. This information is necessary for a buyer to evaluate
the policy for potential purchase. If the policy owner is not also the insured,
both the viator and the insured typically will be required to review and sign
the application. In addition to the policy owner's execution of the application
documents, he or she is also required to provide some form of photo
identification, a copy of the life insurance policy to be sold, and a copy of
the application for the policy. As a general rule, policy owners are not
required to submit to a medical examination as part of the application
process.




A viator is the owner of a life
insurance policy, who seeks to sell a policy. The insured may or may not have a
catastrophic or life threatening condition.




A viatical settlement provider is a
person or company who purchases a life insurance policy from a viator A viatical
settlement provider must be licensed by the Florida Department of Financial
Services (the “Department”).




A viatical settlement broker is a
person who negotiates an agreement between a viator and a viatical settlement
provider. The broker has a fiduciary responsibility to act according to the
viator’s instructions and in the viator’s best interests and must be licensed by
the Department. Brokers typically work closely with policy owners and collect
their commissions from providers after the contract has been executed. After
October 1, 2006, a person must be licensed with the Department as a life agent
in order to act as a viatical broker.




6


An escrow agent or trustee is the party
who holds the documents and the money until ownership rights of the policy have
been transferred from the viator to the viatical settlement
provider.  In some cases they retain investor’s funds until they have
been placed on a life insurance policy and could be the party responsible for
insuring payment to the investor.  Escrow agents or trustees are not
licensed by the Department.




A viatical settlement investment, as of
July 1, 2005, is subject to the Florida Securities and Investor Protection
Act.  For an investor, this means full disclosure and access to
company information.  In addition, a determination of the investment’s
suitability for the investor would have to be made after considering the
investor’s financial and tax status, and the investor’s investment
objectives.  It also means that the viatical settlement investment
must either be registered with the Department or exempt from
registration.  In addition, the person offering or selling the
viatical settlement investment must be licensed with the Department to sell
these securities.




In order to make their medical records
available to third parties in the viatical settlement process, insured's must
authorize their physicians and other health care givers, in writing, to release
their private medical records.




The medical release allows the viatical
settlement broker to obtain current medical records from the insured's
physician. At a minimum, two years of records are required. These records are
then provided to a review company that specializes in viatical and life
settlement mortality profiles for a determination of an estimated life
expectancy. Once a medical underwriter has obtained all of the policy owner's
medical records, it can generate a preliminary estimate of the insured's life
expectancy and thereafter issue a final report. The report is then used by the
viatical settlement provider to determine if the offered policy comes within its
underwriting guidelines for purchase.




The evaluation of a viatical settlement
focuses on the specific terminal illness with which the insured has been
diagnosed. In the case of a life settlement, however, where there is no terminal
illness, other factors must be examined in order to determine estimated life
expectancy.




Once the parties agree on a price, they
will enter into a viatical settlement contract and other related agreements
necessary to close the transaction. The viatical settlement contract contains
the price to be paid to the policy owner for the policy and other important
terms and conditions of the sale, including those dealing with mandatory
disclosures, the policy owner's right to rescind the contract, and post-closing
contact with the insured for health status updates. Other related forms
typically include an escrow agreement with the entity that will hold the funds
payable to the policy owner, the forms from the issuing insurance company
necessary to record the change in the policy ownership and beneficiary(ies),
releases for execution by the existing policy beneficiary(ies), a power of
attorney and funding instructions.




The Florida Act defines a viatical
settlement contract as one in which the provider pays compensation or value to
the policy owner in an amount less than the expected death benefit of the
subject insurance policy, and the policy owner in return assigns, transfers,
sells, devises, or bequeaths ownership of all or a portion of the subject
insurance policy to the provider. The contract can also include a loan secured
primarily by a life insurance policy, or a loan secured by the cash value of the
policy, excepting loans made by life insurers to insured under the guidelines of
the subject policy.




A viatical settlement contract and the
related forms must be pre-approved by the State of Florida Office of Insurance
Regulation. By statute, the department must reject any viatical settlement
contract or related form that is unreasonable, contrary to the public interest,
discriminatory, or misleading or unfair to the policy owner. As part of the form
approval process, the department requires that each form have a unique number in
the lower left hand corner. This approval requirement provides policy owners
with a measure of protection in that the department has reviewed the provisions
of the viatical settlement contract and related forms and has required the
removal of any unfair provisions prior to use of the form.




A viatical settlement purchase
agreement is defined as a contract between a purchaser and a party other than
the policy owner to purchase an interest in a life insurance policy. This is
usually the investment contract between the purchaser and the
provider.




As a further condition to a sale,
Florida law requires the policy owner to confirm or agree in writing the
following:




1.
            Consent
      to the viatical settlement
contract;


2.
            Represent
      that he or she has a full and complete understanding of the viatical
      settlement contract and the benefits of the life insurance
      policy;


3.
            Release
      his or her medical records; and


4.
            Acknowledge
      that he or she has entered into the viatical settlement contract freely
      and voluntarily.




Finally,
in Florida, all viatical settlement contracts must close in escrow in order to
assure that the policy owner is paid. The independent escrow agent's role in a
viatical settlement transaction is to receive and hold the executed viatical
settlement contract and related documents, including the insurance company forms
executed by the policy owner to transfer the ownership of the policy, and to
receive and hold the funds transferred from the viatical settlement provider in
the amount of the agreed-upon purchase price for the policy. After expiration of
the policy owner's fifteen day right of rescission, the viatical settlement
provider or its agent begins tracking or monitoring the policy owner's health
status.




7




Florida law requires viatical
settlement providers or brokers to provide specific information to policy owners
before entering into a viatical settlement contract. Nearly all jurisdictions
that regulate viatical settlements require substantially similar disclosures,
the purpose of which is to give a person who is contemplating the sale of a life
insurance policy basic information that may be material to that decision.
Florida requires the following information to be disclosed:




1.
            That
      there are possible alternatives to viatical settlement contracts
      including, but not limited to, accelerated benefits available from the
      insurer that issued the policy.


2.
            That
      proceeds of the viatical settlement could be
  taxable.


3.
            That
      viatical settlement proceeds could be subject to the claims of
      creditors.


4.
            That
      receipt of the viatical settlement proceeds could adversely affect the
      recipient's eligibility for Medicaid or other government benefits or
      entitlements.


5.
            That
      all viatical settlement contracts must contain an unconditional rescission
      provision; and


6.
            The
      name, business address, and telephone number of the independent third
      party escrow agent.




The basic regulatory mechanism of the
Florida Act is licensure. Brokers, providers, and sales agents are expressly
subject to specific licensure requirements. Brokers must submit fingerprints,
organizational documents, and sworn biographical statements, and must undergo a
background check before receiving a license. Providers also must submit
fingerprints and organizational documents and must undergo a background check as
a prerequisite to licensure. Additionally, providers must meet a minimum trust
deposit requirement of $100,000 with the Department of Insurance. Sales agents
must hold valid life insurance agent licenses as defined in §626.051 of the
Florida Insurance Code.




The Florida Act provides safeguards for
the policy owners and purchasers who deal with brokers, providers, and sales
agents. For example, brokers must disclose to policy owners the amount of the
broker's compensation and the method used in determining compensation. In
addition, providers may not enter into contracts with policy owners whose
policies provide accelerated death benefits in amounts and with prerequisites
equal to those offered by the provider, unless the policy owner's insurer denies
a request to release the accelerated death benefit in writing, or does not
respond to such a request within 30 days of receipt. Policy owners may also
rescind a viatical settlement contract within 15 days after receipt of the
settlement proceeds, contingent upon return of the proceeds.




The provider must inform the policy
owner of the following: that there are alternatives to viatical settlements,
including accelerated death benefits offered by the policy owner's insurer; that
proceeds of the settlement may be taxable; that proceeds of the settlement could
be subject to the claims of creditors; and that the policy owner's receipt of
the settlement sum could adversely affect the policy owner's eligibility for
Medicaid or other government benefits.




Moreover, the Florida Act provides for
the use of independent escrow agents for the simultaneous delivery of contract
documents and settlement funds. This last protection reduces much of the policy
owner's transaction risk and results in orderly, real estate style settlement
closings.




For purchasers, the Florida Act
provides for the following mandatory disclosures to be made by providers, among
others: that the represented return of the investment is directly tied to the
lifespan of one or more insured; that the projected life span of the insured is
tied to the return, if a return is represented; that the investor shall be
responsible for the payment of insurance premiums on the policy, late fees,
surrender fees, and other costs, if required by the terms of the viatical
contract; that the life expectancy and rate of return are only estimates and
cannot be guaranteed; and that the viatical investment should not be considered
a liquid purchase, since it is impossible to predict the exact timing of its
maturity and the funds may not be available until the death of the insured.
Furthermore, providers and sales agents are expressly prohibited from
misrepresenting the nature of the viatical transaction, the expected return, or
that the return is guaranteed by any government authority, which it is
not.




In May 2006 we requested an opinion
from the Florida Office of Insurance Regulation, that we would not be required
to be licensed as a life settlement provider as a result of our business
operations. In June 2006, the Florida Office of Insurance Regulation concurred
with our conclusions.




In August 2006, we requested an opinion
from the Florida Department of Financial Services, that we would not be required
to be licensed as a Life Settlement Provider as a result of our business
operations. In September 2006, the Florida Department of Financial Services
concurred with our conclusions.







8




ITEM
1A.      RISK FACTORS




An
investment in our Common Stock is highly speculative, involves a high degree of
risk and should be considered only by those persons who are able to afford a
loss of their entire investment. In evaluating the Company and our business,
prospective investors should carefully consider the following risk factors in
addition to the other information included in this Annual Report.





There
is substantial doubt as to our ability to continue as a going concern based on
our past operating losses.




Although
we have realized our fourth profitable quarter since inception, it is still
uncertain whether we can consistently generate sufficient revenues to fund our
operational costs.  As shown in the accompanying financial statements,
we realized net income from operations of $376,469 for the year ended June 30,
2008 and a shareholders’ deficit of $320,406, which is an improvement from a
shareholders’ deficit of $696,875 as of June 30, 2007.  It will take
several quarters of revenues at volumes consistent with 2008 average quarterly
revenue to offset the accumulated deficit.  These factors raise
substantial doubt about our ability to continue as a going concern, which may
limit our ability to access certain types of financing or may prevent us from
obtaining financing on acceptable terms.  There are no assurances that
we will be successful in raising additional capital or generating sufficient
revenues to support our operations.  If we are unable to continue as a
going concern, you could lose your entire investment in us.





Questions
Concerning Our Status as a Going Concern May Cause Customers and Current and
Potential Partners to Reduce or Not Conduct Business with Us




Due to
concerns regarding our ability to continue operations, customers and current and
potential partners may decide not to conduct business with us, may reduce
business they conduct with us, or may conduct business with us on terms that are
less favorable than those customarily offered by them. In that event, our sales
would likely decrease, our product development efforts would suffer and our
business will be significantly harmed.





We
Are Operating in Markets that May Change Dramatically




We are operating in the viatical and
life settlement markets. The viatical settlement market is approximately 16
years old. While the market saw tremendous growth in its initial years, the
market growth in recent years has moderated somewhat. The life settlement market
is less than a decade old. How and to what extent it will develop is uncertain.
As more insured become aware of life settlements as a financial planning option,
we expect the size of the market to grow substantially. Any dramatic growth,
however, will depend heavily upon the entry of institutional purchasers. Until a
sufficient number of institutional purchasers commit to this industry and create
a relatively stable demand, our financial performance during any period may be
dramatically affected by the entry or departure from the market of one or more
institutional providers.




Our prospects must be considered in
light of the risks, expenses and difficulties encountered by those attempting to
operate in rapidly evolving markets. We cannot assure you that we will be
successful in addressing the risks we face. The failure to do so could have a
material adverse effect on our business, financial condition, and results of
future operations.




Because
we have a short operating history under our current management, there is limited
information upon which you can evaluate our business.




We were formed in January 2005. As
such, we have not engaged in a sufficient amount of consistent activity over a
sustained period of time to establish an operating history in our current line
of business. Since beginning operations in our current line of business through
June 2007, we have not been profitable.  Commencing this fiscal year
we have generated profitable operations in each fiscal quarter, however we have
limited financial results upon which you may judge our potential. As of June 30,
2008, our accumulated losses total $682,884.




You should consider our prospects in
light of the risks, uncertainties and difficulties frequently encountered by
companies that are, like us, in their early stages of earning revenues and
growing their businesses particularly companies in the rapidly evolving market
of viatical and life settlements. Similarly, we may require additional capital
in order to execute our current business plan. Further, we may in the future
experience under-capitalization, shortages, setbacks and many of the problems,
delays and expenses encountered by any early stage business. As a result of
these factors, other factors described herein and unforeseen factors, we may not
be able to successfully implement our business model.




Our
Success Depends on Maintaining Relationships within our Referral
Networks




In the viatical market, we rely
primarily upon brokers to refer potential viators and life settlors to us and
upon financial planners, known as licensees, to refer viatical and life
settlement purchasers to us. These relationships are essential to our operations
and we must maintain these relationships to be successful. We do not have fixed
contractual arrangements with the brokers or financial planners and they are
free to do business with our competitors. In addition, the pool of viatical
brokers and referring financial planners is relatively small, which can increase
our reliance on our existing relationships.




As
we develop our own network of insurance and financial planning professionals,
known as producers, to refer potential sellers to us, we expect referrals from
this source to grow. As with brokers, our ability to build and maintain these
relationships will depend upon our closing rates and the level of compensation
we pay to the referring professional. The compensation paid to the referring
professional will affect the offer price to the seller and the compensation we
receive. We must balance these interests successfully to build our referring
network and attain greater profitability.




9




We
must Develop our Life Settlement Referral Network




An impediment to our expansion in the
life settlement market could be the difficulty in identifying a large volume of
potential sellers. These sellers are typically affluent persons over the age of
70 and not terminally or chronically ill. The target market is relatively narrow
and advertising methods such as direct mailings or print media advertising are
not likely to be cost effective. We believe the best way to reach this market is
generally through life insurance professionals and, to a lesser extent, through
professionals engaged in estate planning, such as attorneys, accountants, and
financial planners. Settlement brokers will also reach this market. Our business
plan utilizes both insurance professionals and brokers as sources of policies,
as well as the development of a life settlement referral network.




We
intend to rapidly expand our referring network of insurance professionals to
educate potential life settlors on the options presented by life settlements. We
are actively working to expand our network through direct solicitation, calls to
managing general insurance agents, and by word-of-mouth contacts. To a lesser
extent, we will also use advertising in financial planning trade publications
and our Internet website. This is a new market and building our referral network
will depend on our ability to educate insurance professionals about the benefits
of senior life settlements to potential sellers and to the professionals
themselves. While we believe we have been successful in publicizing the benefits
of viatical settlements, we cannot assure you that our past successes will carry
over into this new market. Our business, financial condition and results of
operations could be materially adversely affected to the extent we fail to
expand the referral network.




We
Depend on Growth in both the Viatical and Life Settlement Market




While the existing markets for viatical
and life settlements provide opportunity for growth, greater opportunity lies in
the growth in the life settlement market. Growth of the life market and our
expansion within the market may be affected by a variety of factors,
including:




•
            the
      inability to locate sufficient numbers of life
  settlors;




•
            the
      inability to convince potential sellers of the benefits of life
      settlements;




•
            the
      inability to attract institutional
purchasers;




•
            competition
      from other life settlement
companies;




•
            the
      occurrence of illegal or abusive business practices resulting in negative
      publicity about the market; and




•
            the
      adoption of overly burdensome governmental
  regulation.




In
addition, the life settlement market may evolve in ways we have not anticipated
and we may be unable to respond in a timely or cost-effective manner. If the
life settlement market fails to grow as quickly as or in the directions we have
anticipated, our business, financial condition and results of operations would
be materially adversely affected as it relates to our large-scale
growth.




Government
Regulation Could Negatively Impact Our Business




At least 36 states have now adopted
some version of the model law promulgated by the National Association of
Insurance Commissioners or another form of regulation governing viatical
settlement companies in some way. These laws generally require the licensing of
viatical providers and brokers, require the filing and approval of viatical
settlement agreements and disclosure statements, and describe the content of
disclosures that must be made to potential viators, describe various periodic
reporting requirements for viatical settlement companies and prohibit certain
business practices deemed abusive.




In
addition, some states and the Securities and Exchange Commission treat viatical
and life settlements as securities under state and federal securities laws.
Because of legal precedent relating to the structure of our transactions, we do
not believe that the application of securities laws will have a material adverse
effect on our operations, but cannot assure you that state regulators or private
individuals will not file these types of actions in the future or that such
actions would not have a material adverse effect on our business.




While
we welcome reasonable regulation of the viatical and senior life markets and
believe that such regulation will benefit these markets, attempts to regulate
these markets through application of their securities laws - either through
actions by state agencies or private individuals may adversely affect the
markets. We cannot assure you that we will not encounter regulatory difficulties
in the future, some of which could have a material adverse effect on our
business. In addition, government regulation could affect our referral networks
or settlement purchasers, which could in turn have a material adverse effect on
our business.




10




Our
Founder Beneficially Owns 43% of Our Common Stock and, as a Result, Can Exercise
Significant Influence over Our Company




Mr. David Dorr, our founder, is the
beneficial owner of 42.826% of our common stock. In addition, Brian Dorr, our
secretary and treasurer, owns 12.348% of our common stock. He will be able to
influence most matters requiring approval by our shareholders, including the
election of directors and approval of significant corporate transactions. This
concentration of ownership may also have the effect of delaying or preventing a
change in control, which in turn could have a material adverse effect on the
market price of our common stock or prevent our shareholders from realizing a
premium over the market price for their shares of common stock.




Our
Stock Is Thinly Traded and the Stock Price May Be Volatile




Shares of our common stock are quoted
on the “pink sheets,” and we cannot assure you that any other trading market for
our securities will develop and you should anticipate bearing the economic risk
of your investment for an indefinite period of time. The average volume on the
stock is very low and the sale of even small blocks of shares could cause a
significant decrease in the per share price.




If
the Company were to seek to have shares of its common stock quoted on the OTC
Bulletin Board or other trading medium, it may be subject to lengthy delays in
doing so, and there can be no assurance that the Company's efforts will be
successful. Moreover, in the event that the Company's shares become quoted on
any such trading medium, we will be a penny stock and subject to the penny stock
rules by the Securities and Exchange Commission that require brokers to provide
extensive disclosure to their customers prior to executing trades in penny
stocks, and as such there may be a reduction in the trading activity of our
common stock.




Our
common stock is subject to the “penny stock” rules of the SEC, which will make
transactions in our common stock cumbersome and may depress the trading price of
our common stock.




Our common stock is a "penny stock," as
defined in Rule 3a51-1 under the Exchange Act. The penny stock rules apply
generally to companies whose common stock trades at less than $5.00 per share,
subject to certain limited exemptions. Such rules require, among other things,
that brokers who trade “penny stocks” to persons other than “established
customers” complete certain documentation, make suitability inquiries of
investors and provide investors with certain information concerning trading in
the security, including a risk disclosure document and quote information under
certain circumstances Many brokers have decided not to trade “penny stocks”
because of the requirements of these rules and, as a result, the number of
broker-dealers willing to act as market makers in such securities is limited. In
the event that we remain subject to the penny stock rules for any significant
period, there may develop an adverse impact on the market, if any, for our
securities.




We will incur
significant additional expense related to compliance with the internal control
over financial reporting requirements and other requirements of the Sarbanes
Oxley Act of 2002 (“Sarbanes-Oxley”), and any inability to comply with these
requirements may harm our business and the price of our common
stock.




As directed by Section 404 of
Sarbanes-Oxley, the SEC has adopted rules requiring public companies to conduct
a comprehensive review and assessment of the effectiveness of their internal
control over financial reporting, and to include a report of management on
internal control over financial reporting in their annual reports, including
Annual Reports on Form 10-K, which we will be required to file after the
effectiveness of this registration statement. In addition, the independent
registered public accounting firm that audits a public company's financial
statements must attest to and report on management's assessment of the
effectiveness of the company's internal control over financial reporting as well
as the operating effectiveness of the company's internal control over financial
reporting. These requirements may first apply to our annual report on Form 10-K
for the fiscal year ending June 30, 2008 and the auditor attestation with
not be required until fiscal year ending June 30, 2010.




We
have engaged an outside Sarbanes-Oxley consulting firm who is assisting our
management in  evaluating our internal control over financial
reporting in order to allow our management to report on, and preparing for our
independent registered public accounting firm to attest to, our internal
controls, and to identify weaknesses and deficiencies in or internal controls
that require remediation.  Currently, we do not have an independent audit
committee and due to our small staff, we are only able to provide limited
segregation of duties. Until our board of directors has established a qualified,
independent audit committee and were are able to provide for more robust
segregation of duties, it is highly unlikely that our management will be
able to conclude that our internal control over financial reporting is effective
without being subject to these qualifications. We have already expended
significant resources during our 2008 fiscal year and expect to expend
additional significant resources during our 2009 and 2010 fiscal years
developing the necessary internal controls, documentation and testing procedures
required by Section 404 of the Sarbanes-Oxley Act related to our internal
controls. We also expect to continue expending significant resources in audit
fees and related expenses related to Section 404. Despite these efforts, a
review of our financial systems and controls may uncover additional deficiencies
in existing systems and controls, and our efforts to correct any such
deficiencies may be costly and may strain our management resources and
negatively impact earnings. In the event we identify significant deficiencies or
material weaknesses in our internal controls over financial reporting that we
cannot remediate in a timely manner or we receive an adverse report from our
independent registered public accounting firm with respect to our internal
controls over financial reporting, investors and others may lose confidence in
the reliability of our financial statements and our ability to obtain equity or
debt financing could be adversely affected. In addition to the above, in the
event that our independent registered public accounting firm is unable to rely
on our internal controls over financial reporting in connection with their audit
of our financial statements, and in the further event that they are unable to
devise alternative procedures in order to satisfy themselves as to the material
accuracy of our financial statements and related disclosures, it is possible
that we could receive a qualified or adverse audit opinion on those financial
statements. In that event, the market for our common stock could be adversely
affected. In addition, investors and others may lose confidence in the
reliability of our financial statements and our ability to obtain equity or debt
financing could be adversely affected.




11




Stockholders
are subject to potential dilution as a result of future issuances of
securities.




In the event we need additional
capital, we may offer to sell additional stock with rights, preferences and
privileges senior to our common stock. Any such issuance would dilute the
outstanding stockholders' equity interests in the Company and might adversely
affect the value of the outstanding shares. Although we are generating revenue
and believe such revenues are sufficient to support operations, we have an
accumulated deficit and therefore may be required to raise additional
funds.




ITEM
2.      PROPERTIES




Our
executive offices are located at 2001 Biscayne Blvd., Suite 2102 Miami, FL
33137. This office consists of 1,400 square feet and is leased under a one-year,
non-cancelable real estate operating lease with a minimum rental commitment of
$31,250 through June 15, 2009, the renewal date. We have occupied the current
location since 2006 and expect that we will have no difficulty in obtaining
additional annual renewals, if desired.  There is currently a surplus
of vacant office space available in the South Florida market and we do not
anticipate any difficulty in obtaining a suitable replacement location should it
become necessary.  We do not own any properties nor do we lease any
other properties.




ITEM
3.      LEGAL PROCEEDINGS




We are not a party to any pending legal
proceedings nor are any of our property the subject of any pending legal
proceedings.




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




We did not submit any matters to a vote
of our stockholders, through the solicitation of proxies or otherwise, during
the fourth quarter of fiscal 2008.




PART
II




ITEM
5.      MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES




Our common stock trades on the
Over-the-Counter Bulletin Board under the symbol "LFXG.OB".  Prices
reported represent prices between dealers, do not include markups, markdowns or
commissions and do not necessarily represent actual transactions. The following
table sets forth high and low bid quotations of our common stock (broken-down
into fiscal quarters) for the periods indicated as reported on the OTC Bulletin
Board:







Quarter
      Ended
            Bid
      High
            Bid
      LowFiscal
      Year 2008June
      30, 2008
            $1.34
            $0.13March
      31, 2008
            $0.18
            $0.08December
      31, 2007
            $0.35
            $0.08September
      30, 2007
            $0.23
            $0.08Fiscal
      Year 2007June
      30, 2007
            $0.25
            $0.125March
      31, 2007
            $0.24
            $0.10December
      31, 2006
            $1.39
            $0.125September
      30, 2006
            $0.60
            $0.305





As of June 30, 2008, there were 20
holders of record of our common stock.




We have never declared or paid cash
dividends on our capital stock. We currently intend to retain all available
funds and any future earnings for use in the operation and expansion of our
business and do not anticipate paying any cash dividends in the foreseeable
future.




Recent
Sales of Unregistered Securities.





None




ITEM
6.      SELECTED FINANCIAL DATA




We are a
smaller reporting company as defined by Rule 12b-2 of the Securities Exchange
Act of 1934 and are not required to provide information under this
item.




12




ITEM
7.      MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.




The following presentation of
management's discussion and analysis of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements, the accompanying notes thereto and other financial information
appearing elsewhere in this report. This section and other parts of this report
contain forward-looking statements that involve risks and
uncertainties.  Please refer to the discussion of Forward-looking
statements included at the start of this annual report.  Our actual
results may differ significantly from the results discussed in the
forward-looking statements.




Overview
and Plan of Operations




We are an Internet-based,
business-to-business exchange for the life settlement industry.  We
offer a broad range of services, resources and information specific to the life
settlement industry, including news alerts, forums, industry-specific search
capabilities, headlines and industry events.




Recent market events surrounding the
AIG bankruptcy have been analyzed and evaluated by management and concur with
the following observations. “The meltdown is happening at the holding company
level," Connecticut Insurance Commissioner Thomas R. Sullivan said Tuesday. The
insurance companies that are part of AIG "are still very solid, heavily
capitalized, and are in good shape," he said.   It's not the
insurance side of the business but rather how insurers chose to invest money
that's a problem now, the experts said. And state guaranty funds protect
residents from the total loss of their policy benefits.




Although we currently have several
pending contracts involving AIG policies, we fully expect the current market
situation to have little impact on the underlying insurance policies we
exchange, or the volume related thereto.




Results
of Operations





Year
Ended June 30, 2008 (FISCAL 2008) Compared to Year Ended June 30, 2007 (FISCAL
2007)





Revenuesincreased $1,122,390
(652%) to $1,294,596 (FISCAL 2008) from $172,206 (FISCAL 2007).  The
Company currently operates two service lines, its original exchange transaction
platform service line, which commenced commercial operations during the second
quarter of fiscal 2007 and a new service line of structured finance fees, which
commenced operations during the first quarter of fiscal
2008.  Approximately 81% of FISCAL 2008 revenue or $1,053,967 was from
structured finance fees.





Costs of Revenue decreased
$14,232 (28%) to $36,849 (FISCAL 2008) from $51,081 (FISCAL
2007).  Cost of revenues consists of product development expenses,
internet hosting services and related expenses.  The decrease was
primarily due to an $8,213 reduction in product development costs as a result of
commercializing the exchange platform during the second quarter of fiscal 2007
along with overall reductions in administration and other costs and $11,204,
which were partially offset by a $5,185 increase in product development
costs.





Sales and Marketing Costs
increased $161,940 (276%) to $220,666 (FISCAL 2008) from $58,726 (FISCAL
2007).  Sales and marketing costs consist of travel, communications,
subscriptions and memberships.  The increase was primarily due to
increased commissions associated with the new structured finance fee line;
increased expenditures for organization memberships and other marketing costs
design to promote the business; and increased travel and entertainment expenses
incurred to promote growth.





Administration Costs decreased
$138,844 (18%) to $626,328 (FISCAL 2008) from $765,172 (FISCAL
2007).  Administration costs consist of payroll expenses, professional
fees, office expenses and other general and administrative costs.  The
decrease was primarily due to $120,378 decrease in legal and professional fees
related to intellectual property acquisition costs  a $54,013 decrease
in insurance and a $65,901 decrease in other administration cost.  The
decreases were partially offset by a $110,952 increase in payroll costs caused
by the hiring of additional staff needed due to company’s growth.





Other Income (Expense)
reported an increased expense of $26,012 (314%) to $34,284 expense (FISCAL 2008)
from $8,272 expense (FISCAL 2007). Other income (expense) consists of refunds
received, interest income and interest expense.  The increased expense
is primarily interest expense.





Net Income (Loss) increased
$1,087,512 (153%) to $376,469 net income (FISCAL 2008) from $711,043 net loss
(FISCAL 2007).  The increase is primarily due to the new service line
of structured fees.




13





Liquidity
and Capital Resources and Plan of Operations





Overview The Company’s net
working capital increased $377,338 (139%) to a $105,870 surplus at June 30, 2008
from a $271,468 deficit at June 30, 2007.  The Company reported
$263,263 in cash at June 30, 2008, which represents collections of earned
revenue primarily from structured finance fees, our additional service line
which commenced operations during the first quarter of fiscal 2008.





Although
the Company has realized its fourth profitable quarter since inception, it is
still uncertain whether the Company can consistently generate sufficient
revenues to fund its operational costs.  As shown in the accompanying
financial statements, the Company realized net income from operations of
$376,469 for the year ended June 30, 2008 and a shareholders’ deficit of
$320,406, which is an improvement from a shareholders’ deficit of $696,875 as of
June 30, 2007.  It will take several quarters of revenues at volumes
consistent with 2008 average quarterly revenue to offset the accumulated
deficit. These factors continue to raise substantial doubt about the Company’s
ability to continue as a going concern. Our financial statements were prepared
on the assumption that we will continue as a going concern and do not include
any adjustments that might result should we be unable to continue as a going
concern





Management’s
plans in regard to this matter are to continue to raise equity capital and seek
strategic relationships and alliances in order to further enhance the
commercialization of its exchange platform in an effort to generate positive
cash flow.  Until its technologies become fully commercially viable
and marketing efforts generate sufficient transaction volume, the Company may
need to seek additional equity infusions in order to provide adequate liquidity
to sustain its operations.





Cash
Flows for FISCAL 2008





Cash Flows From Operating
Activities  Net cash provided by operating activities was
$254,903 (FISCAL 2008).  Net cash provided from Net income, adjusted
for non-cash reconciling items, was $386,907, which was partially offset by net
cash used for working capital requirements of $132,004.  Working
capital was used to support increased revenues in the form of increased accounts
receivables ($107,440) and a decrease in accrued expenses ($27,597), which was
partially reduced by working capital provided by increased accounts payables
($3,033).





Cash Flows From Investing ActivitiesNet cash used by investing activities was $9,837 (FISCAL 2008), which was
entirely for capital spending for equipment related to expanding our
operations.





Cash Flows From Financing
Activities  Net cash provided by financing activities was
$5,000 (FISCAL 2008) and was the result of an extension to our existing
financing.





FinancingThe Company has
obtained its financing from Vantage Group Ltd., a significant shareholder,
through two note agreements, one for $300,000 dated July 7, 2006 and one for
$150,000 dated April 2, 2007 and a $5,000 advance made under the same terms as
the second note.  Vantage Group Ltd. has provided $455,000 of
financing in aggregate.  The terms of the notes provide for 7%
interest payable at maturity.  The notes are unsecured and mature on
April 15, 2010.





The
$300,000 note provides that the Holder, at its option, may convert the principal
amount of this Note or any portion thereof, together with accrued but unpaid
interest, into shares of Common Stock of the Company (“Conversion Shares”) based
on the Company attaining certain performance criteria as follows measured during
December 2006. Company did not meet the performance criteria and accordingly, no
shares were converted.





The
$150,000 note also provides the Holder with conversion rights based on the
Company attaining certain performance criteria.


Recent Accounting
Pronouncements
  The Company continues to assess the
effects of recently issued accounting standards. The impact of all recently
adopted and issued accounting standards has been disclosed in the Notes to the
audited Consolidated Financial Statements.




14




Critical Accounting
Estimates




The
Company prepares its financial statements in conformity with accounting
principles generally accepted in the United States. The preparation of financial
statements in conformity with U.S. generally accepted accounting principles
(GAAP) requires the use of estimates and assumptions the affect the reported
amounts of revenue and expenses during the reporting period. The Company's
critical accounting policies are those that are both most important to the
Company's financial condition and results of operations and requires the most
difficult, subjective or complex judgments or complex judgments on the part of
management in their application, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain. Because of the
uncertainty of factors surrounding the estimates or judgments used in the
preparation of the financial statements, actual results could vary from these
estimates.





Although
we believe we will have sufficient cash flow for operations, we would like to
continue to grow and expand our business. During the next 12 months, we intend
to spend between $250,000 and $500,000 to fund the establishment and expansion
of our operations, although our ability to do so may depend on our ability to
raise additional funds through debt and/or equity financing. The expansion of
our operations will be primarily through further product development and
intellectual property development and purchases. In the event we do not or
cannot raise additional funds, we may be required to limit or curtail our
expansion and growth plans.





Our plan
of operation over the next twelve months is to focus on the following key
objectives:




·
            Continue
      with our successful acquisition of new member
  clients.




·
            Continue
      to generate positive operating cash flows and develop cash
      reserves.




·
            Continue
      with the aggressive expansion of our intellectual property
      portfolio.




·
            Launch
      additional services which will increase our revenue
    streams.




Critical Accounting/Use of
Estimates




The
Company prepares its financial statements in conformity with accounting
principles generally accepted in the United States. The preparation of financial
statements in conformity with U.S. generally accepted accounting principles
(GAAP) requires the use of estimates and assumptions the affect the reported
amounts of revenue and expenses during the reporting period. The Company's
critical accounting policies are those that are both most important to the
Company's financial condition and results of operations and requires the most
difficult, subjective or complex judgments or complex judgments on the part of
management in their application, often as a result of the need to make estimates
about the effect of matters that are inherently uncertain. Because of the
uncertainty of factors surrounding the estimates or judgments used in the
preparation of the financial statements, actual results could vary from these
estimates.




Income
taxes




Income
taxes will be computed using the liability method and will be provided on all
temporary (timing) differences between the financial reporting basis and the tax
basis of the Company's assets and liabilities. Allowable tax credits and carry-
forward losses will be applied as reductions to future provision for income
taxes if and when the Company becomes profitable, as reductions of the provision
for income taxes.




15




Revenue
Recognition/Accounting Pronouncement(s)




The
Company will recognize revenues in accordance with SAB No. 101, Revenue
Recognition in Financial Statements, as amended by SAB No. 104, Revenue
Recognition . The Company's accounting policy for revenue recognition will have
a substantial impact on its reported results and relies on certain estimates
that require difficult, subjective and complex judgments on the part of
management The Company will recognize revenue when substantially all the risks
and rewards of life settlement transactions have transferred from the seller to
the buyer. A life settlement transaction is defined by the Company as “the sale
of an in-force life insurance policy that is issued on the life of a person that
is not considered terminally ill, for a lump sum amount; the amount is more than
the cash surrender value of the policy but less than the face value of the
policy”. Revenue associated with life settlement transactions will be recognized
when title (ownership) passes to the customer (purchaser), either immediately or
within a fixed time schedule that is reasonable and customary in the
industry.





OFF-BALANCE
SHEET ARRANGEMENTS





As of June 30, 2008, we did not
have any relationships with unconsolidated entities or financial partners, such
as entities often referred to as structured finance or special purpose entities,
that had been established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes. As such, we are
not materially exposed to any financing, liquidity, market or credit risk that
could arise if we were engaged in such relationships.




ITEM
7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.




We are a smaller reporting company as
defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not
required to provide information under this item.




ITEM 8.     
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.








16




Life
Exchange, Inc. and Subsidiary
 
 FINANCIAL
STATEMENTS
 
 June 30,
2008
 
 Table of
Contents
 
 
 Report
      of Independent Registered Public Accounting Firm
              F –
      2Consolidated
      Balance
      Sheets
              F –
      3Consolidated
      Statements of Revenue and Expense
              F –
      4Consolidated
      Statements of Changes in Shareholders' Deficit
              F –
      5Consolidated
      Statements of Cash Flow
              F –
      6Consolidated
      Notes to Financial Statements
              F –
      7 -19







F-1


Report
of Independent Registered Public Accounting Firm
 
 
 
 To The
Shareholders and Board of Directors of
 Life Exchange, Inc.
 
 We have
audited the accompanying balance sheets of Life Exchange, Inc. and the related
statements of operations, changes in shareholders’ deficiency and cash flows for
the year ended June 30, 2008 and 2007.  These financial statements are
the responsibility of the Company’s management.  Our responsibility is
to express an opinion on these financial statements based on our
audits.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we 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 financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provided a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Life Exchange, Inc. as of June 30,
2008 and 2007 and the results of its operations and its cash flows in conformity
with accounting principles generally accepted in the United States.
 
 The
accompanying financial statements have been prepared assuming that Life
Exchange, Inc. will continue as a going concern.  As discussed in Note
A to the financial statements, it is still uncertain whether the Company can
consistently generate sufficient revenues to fund its operational costs, which
raises substantial doubt about its ability to continue as a going
concern.  Management’s plans regarding those matters also are
described in Note A.  The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
 
 
 
 
 /s/Jewett, Schwartz, Wolfe
& Associates
 
 Hollywood,
Florida
 September
26, 2008
  
 F-2
 LIFE
      EXCHANGE, INC. AND SUBSIDIARYCONSOLIDATED
      BALANCE SHEETSJune 30,2008
              
              
              2007ASSETSCURRENT
      ASSETSCash
              
              $
              263,263
              
              
              $
              13,197Accounts
      receivables
              
              
              106,752
              
              
              
              4,043Prepaid
      expenses
              
              
              2,750
              
              
              
              2,750TOTAL
      CURRENT ASSETS
              
              
              372,765
              
              
              
              19,990PROPERTY,
      EQUIPMENT AND IMPROVEMENTS, NET
              
              
              15,964
              
              
              
              11,166OTHER
      ASSETS, NET
              
              
              12,760
              
              
              
              13,427TOTAL
      ASSETS
              
              $
              401,489
              
              
              $
              44,583LIABILITIES AND SHAREHOLDERS'
      DEFICITCURRENT
      LIABILITIESTrade
      accounts payable
              
              $
              27,899
              
              
              $
              24,865Accrued
      expenses, payroll, related taxes and interest
              
              
              238,996
              
              
              
              266,593TOTAL
      CURRENT LIABILITIES
              
              
              266,895
              
              
              
              291,458NOTE
      PAYABLE RELATED PARTY
              
              
              455,000
              
              
              
              450,000TOTAL
      LIABILITIES
              
              
              721,895
              
              
              
              741,458COMMITMENTS
      AND CONTINGENCIESSHAREHOLDERS'
      DEFICITPreferred
      stock $.001 par valueAuthorized
      20,000,00 shares.  No shares issued and
    outstanding
              
              
              -
              
              
              
              -Common
      stock $.001 par valueAuthorized
      250,000,00 shares.176,715,000
      shares issued and outstanding
              
              
              176,715
              
              
              
              176,715Additional
      paid-in capital
              
              
              185,764
              
              
              
              185,764Accumulated
      deficit
              
              
              (682,885
              )
              
              
              (1,059,354
              )TOTAL
      SHAREHOLDERS' DEFICIT
              
              
              (320,406
              )
              
              
              (696,875
              )TOTAL
      LIABILITIES AND SHAREHOLDERS' DEFICIT
              
              $
              401,489
              
              
              $
              44,583
   The
accompanying notes are an integral part of these financial
statements
 
 F-3
  LIFE
      EXCHANGE, INC. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF REVENUE AND EXPENSEYear Ended June 30,2008
              
              
              2007NET
      REVENUE
              
              $
              1,294,596
              
              
              $
              172,206COSTS
      AND EXPENSESCost
      of net revenueProduct
      development
              
              
              5,000
              
              
              
              13,213Internet
      hosting
              
              
              28,847
              
              
              
              23,662Other
      costs of net revenue
              
              
              3,002
              
              
              
              14,20636,849
              
              
              
              51,081Costs
      of sales and marketingTravel
      and entertainment
              
              
              50,168
              
              
              
              23,653Telephone
      and communication
              
              
              13,184
              
              
              
              9,369Dues,
      subscriptions and memberships
              
              
              18,768
              
              
              
              14,690Other
      costs of sales and marketing
              
              
              138,546
              
              
              
              11,014220,666
              
              
              
              58,726Costs
      of administrationLegal
      and professional fees
              
              
              122,656
              
              
              
              243,034Payroll
      expenses
              
              
              405,731
              
              
              
              294,779Office
      expenses
              
              
              54,164
              
              
              
              63,667Insurance
              
              
              5,110
              
              
              
              59,122Other
      cost of administration
              
              
              38,667
              
              
              
              104,568626,328
              
              
              
              765,170TOTAL
      COSTS AND EXPENSES
              
              
              883,843
              
              
              
              874,977OPERATING
      INCOME (LOSS)
              
              
              410,753
              
              
              
              (702,771
              )OTHER
      INCOME (EXPENSE)Refunds
      received and other fees
              
              
              -
              
              
              
              14,850Interest
      income
              
              
              422
              
              
              
              750Interest
      expense
              
              
              (34,706
              )
              
              
              (23,872
              )(34,284
              )
              
              
              (8,272
              )NET
      INCOME (LOSS)
              
              $
              376,469
              
              
              $
              (711,043
              )Net
      Earnings (Loss) Per ShareBasic
              
              $
              0.002
              
              
              $
              (0.004
              )Fully
      Diluted
              
              $
              0.002
              
              
              $
              (0.004
              )Weighted
      Average Shares OutstandingBasic
              
              
              176,715,000
              
              
              
              176,715,000Fully
      Diluted
              
              
              178,391,210
              
              
              
              176,715,000
   The
accompanying notes are an integral part of these financial
statements
   F-4
   LIFE
      EXCHANGE, INC.CONSOLIDATED
      STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICITFor
      the Year Ended June 30, 2007 and 2008Common
      Stock
                
                
                Additional
                
                
                Accumulated
                
                
                Shareholder'sShares
                
                
                $
                
                
                Paid
      In Capital
                
                
                Deficit
                
                
                DeficitBALANCE
      AT JUNE 30, 2006
                
                
                176,715,000
                
                
                $
                176,715
                
                
                $
                185,764
                
                
                $
                (348,311
                )
                
                $
                14,168Net
      Loss for the year ended June 30, 2007
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (711,043
                )
                
                
                (711,043
                )BALANCE
      AT JUNE 30, 2007
                
                
                176,715,000
                
                
                
                176,715
                
                
                
                185,764
                
                
                
                (1,059,354
                )
                
                
                (696,875
                )Net
      Income for the period ended June 30, 2008
                
                
                -
                
                
                
                
                
                
                
                -
                
                
                
                376,469
                
                
                
                376,469BALANCE
      AT JUNE 30, 2008
                
                
                176,715,000
                
                
                $
                176,715
                
                
                $
                185,764
                
                
                $
                (682,885
                )
                
                $
                (320,406
                )
   The
accompanying notes are an integral part of these financial
statements
  F-5
   LIFE
      EXCHANGE, INC. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF CASH FLOWYear Ended June 30,2008
                
                
                2007Cash
      Flows From Operating Activities:NET
      INCOME (LOSS)
                
                $
                376,469
                
                
                $
                (711,043
                )Adjustments
      to reconcile net loss to netcash
      used in operating activities:Depreciation
                
                
                5,040
                
                
                
                8,918Amortization
      of intangible assets
                
                
                667
                
                
                
                667Allowance
      for bad debts
                
                
                4,731
                
                
                
                86,200Changes
      in operating assets and liabilities:Trade
      accounts receivable
                
                
                (107,440
                )
                
                
                (90,243
                )Prepaid
      expenses
                
                
                -
                
                
                
                2,180Trade
      accounts payable
                
                
                3,033
                
                
                
                13,566Accrued
      expenses, payroll,related taxes and interest
                
                
                (27,597
                )
                
                
                258,672Net
      cash provided by (used in) operating activities
                
                
                254,903
                
                
                
                (431,083
                )Cash
      Flow From Investing Activities:Purchases
      of property, equipment and improvements
                
                
                (9,837
                )
                
                
                (4,197
                )Net
      cash used in investing activities
                
                
                (9,837
                )
                
                
                (4,197
                )Cash
      Flow From Financing Activities:Net
      proceeds related party
                
                
                5,000
                
                
                
                450,000Net
      cash provided by financing activities
                
                
                5,000
                
                
                
                450,000NET
      INCREASE IN CASH AND EQUIVILANTS
                
                
                250,066
                
                
                
                14,720Cash
      and cash equiviliants at beginning of the period
                
                
                13,197
                
                
                
                (1,523
                )CASH
      AND CASH EQUIVILANTS AT END OF PERIOD
                
                $
                263,263
                
                
                $
                13,197SUPPLEMENTARY INFORMATIONInterest
      paid
                
                $
                -
                
                
                $
                -Income
      taxes paid
                
                $
                -
                
                
                $
                -NONCASH INVESTING AND FINANCING
      ACTIVITIESNone
                
                $
                -
                
                
                $
                -
   The
accompanying notes are an integral part of these financial
statements
 F-6
 LIFE-EXCHANGE,
INC. and SUBSIDIARY
 Notes
to Consolidated Financial Statements
 For
the Year Ended June 30, 2008
  NOTE A - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
 
 Terms and
Definitions
 
 Company
                Life-Exchange,
      Inc. and subsidiaryAPB
                Accounting
      Principles BoardARB
                Accounting
      Review BoardEITF
                Emerging
      Issues Task ForceFASB
                Financial
      Accounting Standards BoardFSP
                FASB
      Staff PositionFIFO
                First-in,
      First-outSAB
                Staff
      Accounting BulletinSEC
                Securities
      Exchange CommissionSFAS
      or FAS
                Statement
      of Financial Accounting StandardsYTD
      2008
                the
      year ended June 30, 2008
 
 Company
Background
 
 On
January 19, 2005 (“date of inception”), Life-Exchange, Inc. (“the Company”) was
organized under the laws of the State of Delaware as a
corporation.  Life-Exchange, Inc. was established for the purposes of
servicing the life settlement industry by creating an on-line
business-to-business exchange platform, which will facilitate the brokering of
secondary life insurance.
 
 On
January 29, 2006, the Company began to trade publicly under the name Life
Exchange, Inc. (OTC pink sheets: LFXG.PK).
 
 On
September 27, 2007, the Company formed LFX Insurance Services, LLC (“LFXIS”) a
Nevada limited liability corporation as a wholly-owned
subsidiary.  LFXIS was formed to process “structured finance”
transactions related to the Company’s core life settlement
business.  Structured finance transactions involve an extension of the
services provided to customer base for customer driven transactions executed
through the Company’s exchange platform.  Structured finance
transactions involve utilizing the skill sets of the Company’s personnel to both
advise and structure an appropriate transaction that accommodates the goals of
the parties involved.  The Company incurred minimal expenses in
establishing the subsidiary.
 
 Going
Concern
 
 Although
the Company has realized its fourth consecutive profitable quarter, it is still
uncertain whether the Company can consistently generate sufficient revenues to
fund its operational costs.   As shown in the accompanying
financial statements, the Company realized net income from operations of
$376,469 for the year ended June 30, 2008 and a shareholders’ deficit of
$320,406, which is an improvement from a shareholders’ deficit of $696,875 as of
June 30, 2007.  It will take several quarters of revenues at volumes
consistent with 2008 average quarterly revenue to offset the accumulated
deficit.  These factors raise substantial doubt about the Company’s
ability to continue as a going concern.
 
 Management’s
plans in regard to this matter are to continue to pursue structured finance
transactions and if necessary to raise equity capital, seek debt financing and
to form strategic relationships and alliances in order to continue the
commercialization of its online exchange platform in an effort to generate
sustainable positive cash flow.  Until its online exchange platform
becomes commercially viable or the newly formed structured finance transactions
prove sustainable and continue to generate sufficient revenues, the Company must
continue to rely upon debt and/or equity infusions in order to provide adequate
liquidity to sustain its operations.  However, there can be no
assurance that management’s plans will be successful.
 
 The
financial statements have been prepared on a “going concern” basis and
accordingly do not include any adjustments that might result from the outcome of
this uncertainty.
  F-7
 LIFE-EXCHANGE,
INC. and SUBSIDIARY
 Notes
to Consolidated Financial Statements
 For
the Year Ended June 30, 2008
  
 NOTE A - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
 
 Principles of Consolidation
and Basis of Presentation
 
 The
consolidated financial statements include the accounts of Life-Exchange, Inc.
and its wholly owned subsidiary LFX Insurance Services, LLC.  All
significant intercompany balances and transactions have been eliminated in
consolidation.  Certain reclassifications have been made in the 2007
results to conform to the presentation used in 2008.
 
 Basis of
Accounting
 
 The
consolidated financial statements are prepared using the accrual basis of
accounting where revenues and expenses are recognized in the period in which
they were incurred.  The basis of accounting conforms to accounting
principles generally accepted in the United States of America.
 
 Management’s Use of
Estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period.  Actual results could differ from those
estimates.
 
 Revenue
Recognition
 
 The
Company recognizes revenue in accordance with the provisions of SAB No.101,
Revenue Recognition in
Financial Statements, as amended by SAB No.104, Revenue Recognition, which
states that revenue is realized and earned when all of the following criteria
are met:
  (a)
                persuasive
      evidence of the arrangement exists,
 (b)
                delivery
      has occurred or services have been
rendered,
 (c)
                the
      seller’s price to the buyer is fixed and determinable
  and
 (d)
                collectability
      is reasonably assured.
 
 The
Company’s accounting policy for revenue recognition will have a substantial
impact on its reported results and relies on certain estimates that require
difficult, subjective and complex judgments on the part of
management.  The Company will recognize revenue when substantially all
the risks and rewards of life settlement transactions have transferred (will
transfer) from the seller to the buyer.  A life settlement transaction
is defined by the Company as “the sale of an in-force life insurance policy that
is issued on the life of a person that is not considered terminally ill, for a
lump sum amount; the amount is more than the cash surrender value of the policy
but less than the face value of the policy”.  Revenue associated with
life settlement transactions will be recognized when title (ownership) passes to
the customer (purchaser), either immediately or within a fixed time schedule
that is reasonable and customary in the industry.
 
 In
addition to settlement transactions, the Company also recognizes revenue from
distributing industry related news and information; annual license fees and
setup fees.  All these fees are non-refundable and earned upon
delivery of the related service.
 
 Cash and Cash
Equivalents
 
 The
Company considers liquid investments with an original maturity of three months
or less to be cash equivalents.
 
  F-8
 LIFE-EXCHANGE,
INC. and SUBSIDIARY
 Notes
to Consolidated Financial Statements
 For
the Year Ended June 30, 2008
  NOTE A - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
 
 Concentration of Credit
Risk
 
 Financial
instruments that potentially subject the Company to concentrations of credit
risk consist principally of cash and accounts receivable.
 
 At June
30, 2008, the Company had cash deposits that exceeded federally insured limits,
which potentially subjects the Company to a concentration
risk.  Although the Company believes that it maintains its cash
deposits at high quality financial institutions, the Company will periodically
evaluate the quality of its financial depository’s and if appropriate,
distribute its deposits across several financial institutions, to mitigate this
concentration risk.
 
 The
Company performs ongoing credit evaluations of its customers’ financial
condition and maintains an appropriate allowance for uncollectible accounts
receivable based upon the expected collectability of all accounts
receivable.
 
 Accounts
Receivable
 
 The
Company carries its accounts receivable at net realizable value.  On a
periodic basis, the Company evaluates its accounts receivable and establishes an
allowance for doubtful accounts, based on its history of past write-offs,
collections and current credit conditions.  During YTD 2008, the
Company reflected an allowance for doubtful accounts of $4,730, related to the
amounts due from specific customers that were deemed by management to be
uncollectible.
 
 Property and
Equipment
 
 Property
and equipment are recorded at cost less accumulated depreciation. Depreciation
is calculated using the straight-line method. Maintenance and repair costs are
expensed as incurred. Major replacements and betterments are capitalized and
depreciated over the remaining useful lives of the assets.
 
 Intangible
Assets
 
 Intangible
assets consist of patent costs covering the exchange platform concept and
associated technology.  The patent has a carrying value of $10,000 and
is being amortized on the straight-line basis over 15
years.  Accumulated amortization as of June 30, 2008 was
$2,000.  Amortization expense was $667 for YTD
2008.  Amortization expense is estimated to be $667 per year in each
of the years ended June 30, 2009 through 2013.
  Income Tax
Benefit
 
 The
income tax benefit consists of taxes currently refundable due to net operating
loss carry back provisions for federal and state governments. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or the entire deferred tax asset
will not be realized. Deferred tax assets and liabilities are adjusted for the
effect of changes in tax laws and rates on the date of enactment.
  Product
Development Costs
 
 Product
and development costs consist of the costs to develop and operate the online
exchange platform’s web based application and transaction database and are
expensed as incurred.
  F-9
 LIFE-EXCHANGE,
INC. and SUBSIDIARY
 Notes
to Consolidated Financial Statements
 For
the Year Ended June 30, 2008
  
 NOTE A - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
 
 Fair
Value of Financial Instruments
 
 Cash and
cash equivalents, prepaid expenses and other current assets, accounts payable
and accrued expenses, as reflected in the financial statements, approximate fair
value because of the short-term maturity of these instruments. Fair value
estimates are made at a specific point in time, based on relevant market
information and information about the financial instrument. These estimates arte
subjective in nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
 
 Impairment of Long-lived
Assets
 
 The
Company reviews long-lived assets for impairment whenever circumstances and
situations change such that there is an indication that the carrying amounts may
not be recoverable in accordance with SFAS No.144, “Accounting for the Impairment or
Disposal of Long-Lived Assets.”An asset is considered
impaired if its carrying amount exceeds the undiscounted future net cash flow
the asset is expected to generate. If an asset or asset group is considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the asset exceeds its fair value. We assess the
recoverability of the intangible assets by determining whether the unamortized
balances can be recovered through undiscounted future net cash flows of the
related assets. The amount of impairment, if any, is measured based on projected
discounted future net cash flows using a discount rate reflecting our average
cost of capital, or other appropriated methods of determining fair value. In
2008, the Company believes that there has been no impairment of its long-lived
assets.
 
 Research
and Development Costs
 
 Research
and development costs are expensed as incurred.
 
 Earnings (Loss) Per
Share
 
 The
Company reports earnings (loss) per share in accordance with SFAS
No.128.  This statement requires dual presentation of basic and
diluted earnings (loss) with a reconciliation of the numerator and denominator
of the loss per share computations.  Basic earnings per share amounts
are based on the weighted average shares of common stock
outstanding.  If applicable, diluted earnings per share would assume
the conversion, exercise or issuance of all potential common stock instruments
such as options, warrants and convertible securities, unless the effect is to
reduce a loss or increase earnings per share.
 
 Comprehensive Income
(Loss)
 
 The
Company adopted SFAS No.130, “Reporting Comprehensive
Income”, which establishes standards for the reporting and display of
comprehensive income and its components in the financial statements. There were
no items of comprehensive income (loss) applicable to the Company during the
year covered in the financial statements.
 
 Segment
Reporting
 
 SFAS
No.131, “Disclosures about
Segments of an Enterprise and Related Information”requires companies to
report information about operating segments in interim and annual financial
statements.  It also requires segment disclosures about products and
services, geographic areas and major customers.  The Company
determined that it did not have any separately reportable operating
segments.
 
 
  F-10
 LIFE-EXCHANGE,
INC. and SUBSIDIARY
 Notes
to Consolidated Financial Statements
 For
the Year Ended June 30, 2008
  
 NOTE A - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
 
 Recent
Accounting Pronouncements
 
 Recent
accounting pronouncements that the Company has adopted or that will be required
to adopt in the future are summarized below.
  Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities
  In
June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating
Securities.” The FSP addresses whether instruments granted in share-based
payment transactions are participating securities prior to vesting and,
therefore, need to be included in the earnings allocation in computing earnings
per share under the two-class method. The FSP affects entities that accrue
dividends on share-based payment awards during the awards’ service period when
the dividends do not need to be returned if the employees forfeit the award.
This FSP is effective for fiscal years beginning after December 15, 2008.
The Company is currently assessing the impact of FSP EITF 03-6-1 on its
consolidated financial position and results of operations.
  Determining
Whether an Instrument (or an Embedded Feature) Is Indexed to an entity's Own
Stock
  In June
2008, the FASB ratified EITF 07-5, "Determining Whether an Instrument
(or an Embedded Feature) Is Indexed to an Entity's Own
Stock".  EITF 07-5 provides that an entity should use a two
step approach to evaluate whether an equity-linked financial instrument (or
embedded feature) is indexed to its own stock, including evaluating the
instrument's contingent exercise and settlement provisions.  It also
clarifies on the impact of foreign currency denominated strike prices and
market-based employee stock option valuation instruments on the
evaluation.  EITF 07-5 is effective for fiscal years beginning after
December 15, 2008.  The Company is currently assessing the impact of
EITF 07-5 on its consolidated financial position and results of
operations.
  Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement)
  In
May 2008, the FASB issued FSP APB 14-1, “Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial
Cash Settlement).” The FSP clarifies the accounting for convertible debt
instruments that may be settled in cash (including partial cash settlement) upon
conversion.  The FSP requires issuers to account separately for the
liability and equity components of certain convertible debt instruments in a
manner that reflects the issuer's nonconvertible debt (unsecured debt) borrowing
rate when interest cost is recognized.  The FSP requires bifurcation
of a component of the debt, classification of that component in equity and the
accretion of the resulting discount on the debt to be recognized as part of
interest expense in our consolidated statement of operations.  The FSP
requires retrospective application to the terms of instruments as they existed
for all periods presented.  The FSP is effective for us as of January
1, 2009 and early adoption is not permitted.  The Company is currently
evaluating the potential impact of FSP APB 14-1 upon its consolidated financial
statements.
   F-11
 LIFE-EXCHANGE,
INC. and SUBSIDIARY
 Notes
to Consolidated Financial Statements
 For
the Year Ended June 30, 2008
  NOTE A - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
  The
Hierarchy of Generally Accepted Accounting Principles
  In May
2008, the FASB issued SFAS No.162, "The Hierarchy of Generally Accepted
Accounting Principles".  SFAS No.162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements.  SFAS No.162 is effective 60 days
following the SEC's approval of the Public Company Accounting Oversight Board
amendments to AU Section 411, "The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles".  The
implementation of this standard will not have a material impact on the Company's
consolidated financial position and results of operations.
  Determination
of the Useful Life of Intangible Assets
  In April
2008, the FASB issued FSP FAS 142-3, “Determination of the Useful Life of
Intangible Assets”, which amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
intangible assets under SFAS No.142“Goodwill and Other Intangible
Assets”.  The intent of this FSP is to improve the consistency
between the useful life of a recognized intangible asset under SFAS No.142 and
the period of the expected cash flows used to measure the fair value of the
asset under SFAS No.141 (revised 2007) “Business Combinations” and
other U.S. generally accepted accounting principles.    The
Company is currently evaluating the potential impact of FSP FAS 142-3 on its
consolidated financial statements.
  Disclosure
about Derivative Instruments and Hedging Activities
  In March
2008, the FASB issued SFAS No.161, “Disclosure about Derivative
Instruments and Hedging Activities, an amendment of SFAS No.133”. This
statement requires that objectives for using derivative instruments be disclosed
in terms of underlying risk and accounting designation. The Company is required
to adopt SFAS No.161 on January 1, 2009. The Company is currently evaluating the
potential impact of SFAS No.161 on the Company’s consolidated financial
statements.
  Noncontrolling
Interests in Consolidated Financial Statements
 
 In
December 2007, the FASB issued SFAS No.160, “Noncontrolling Interests in
Consolidated Financial
  Statements”, which amends ARB
51, “Consolidated Financial
Statements”, to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary.  It also clarifies that a noncontrolling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. SFAS No.160 also
changes the way the consolidated income statement is presented by requiring
consolidated net income to be reported at amounts that include the amounts
attributable to both the parent and the noncontrolling interest. It also
requires disclosure, on the face of the consolidated statement of income, of the
amounts of consolidated net income attributable to the parent and to the
noncontrolling interest. SFAS No.160 requires that a parent recognize a gain or
loss in net income when a subsidiary is deconsolidated and requires expanded
disclosures in the consolidated financial statements that clearly identify and
distinguish between the interests of the parent owners and the interests of the
noncontrolling owners of a subsidiary.  SFAS No.160 is effective for
fiscal periods, and interim periods within those fiscal years, beginning on or
after December 15, 2008. The Company does not expect the adoption of SFAS No.160
to have a material impact on its financial statements.
 
  F-12
 LIFE-EXCHANGE,
INC. and SUBSIDIARY
 Notes
to Consolidated Financial Statements
 For
the Year Ended June 30, 2008
  NOTE A - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Cont’d)
 
 Business
Combinations
 
 In
December 2007, the FASB issued SFAS No.141(R) “Business
Combinations”.  This Statement replaces the original SFAS
No.141.  This Statement retains the fundamental requirements in SFAS
No.141 that the acquisition method of accounting (which SFAS No.141 called the
purchase method) be
used for all business combinations and for an acquirer to be identified for each
business combination. The objective of SFAS No.141(R) is to improve the
relevance, and comparability of the information that a reporting entity provides
in its financial reports about a business combination and its effects. To
accomplish that, SFAS No.141(R) establishes principles and requirements for how
the acquirer:
  a.
                Recognizes
      and measures in its financial statements the identifiable assets acquired,
      the liabilities assumed, and any noncontrolling interest in the
      acquiree.
  b.
                Recognizes
      and measures the goodwill acquired in the business combination or a gain
      from a bargain purchase.
  c.
                Determines
      what information to disclose to enable users of the financial statements
      to evaluate the nature and financial effects of the business
      combination.
  This
Statement applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008 and may not be applied before
that date. The Company is unable at this time to determine the effect that its
adoption of SFAS No.141(R) will have on its consolidated results of operations
and financial condition.
 
 Fair
Value Option for Financial Assets and Liabilities
 
 In
February 2007, the FASB issued SFAS No.159, “The Fair Value Option for Financial
Assets and Financial Liabilities”, which provides companies with an
option to report selected financial assets and liabilities at fair value with
the changes in fair value recognized in earnings at each subsequent reporting
date. SFAS No.159 provides an opportunity to mitigate potential volatility in
earnings caused by measuring related assets and liabilities differently, and it
may reduce the need for applying complex hedge accounting provisions. If
elected, SFAS No.159 is effective for fiscal years beginning after November 15,
2007. Management is currently evaluating the impact that this statement may have
on the Company results of operations and financial position, and has yet to make
a decision on the elective adoption of SFAS No.159.
 
 Fair
Value Measurements
 
 In
September 2006, the FASB issued SFAS No.157, “Fair Value Measurements”.
SFAS No.157 provides guidance for using fair value to measure assets and
liabilities. SFAS No.157 addresses the requests from investors for expanded
disclosure about the extent to which Companies measure assets and liabilities at
fair value, the information used to measure fair value and the effect of fair
value measurements on earnings. SFAS No.157 applies whenever other standards
require (or permit) assets or liabilities to be measured at fair value, and does
not expand the use of fair value in any new circumstances. In February 2008, the
FASB issued FSP FAS No. 157-2, “Effective Date of FASB Statement No.
157”.  This FSP delays the effective date of SFAS No. 157 for all
nonfinancial assets and liabilities, except those that are recognized or
disclosed at fair value on a recurring basis (at least annually) to fiscal years
beginning after November 15, 2008, and interim periods within those fiscal
tears.  SFAS No.157 will be adopted by the Company in the first
quarter of fiscal year 2009.  The Company is does not expect the
adoption of SFAS No.157 to have a material impact on its consolidated results of
operations and financial condition.
 
 
  F-13
 LIFE-EXCHANGE,
INC. and SUBSIDIARY
 Notes
to Consolidated Financial Statements
 For
the Year Ended June 30, 2008
  NOTE B – PROPERTY,
EQUIPMENT AND IMPROVEMENTS, NET
 
 June
      30,
                  
                  
                  June
      30,Description
                  Life
                  
                  2008
                  
                  
                  2007Office
      Equipment
                  4
      yrs
                  
                  $
                  20,731
                  
                  
                  $
                  10,894Furniture
      & Fixtures
                  7
      yrs
                  
                  
                  2,085
                  
                  
                  
                  2,085Leasehold
      Improvements
                  1
      yr
                  
                  
                  5,775
                  
                  
                  
                  5,775Vehicles
                  3
      yrs
                  
                  
                  2,123
                  
                  
                  
                  2,12330,714
                  
                  
                  
                  20,877Less:
      Accumulated Depreciation
                  
                  
                  (14,750
                  )
                  
                  
                  (9,711
                  )$
                  15,964
                  
                  
                  $
                  11,166
  Depreciation
expenses for the years ended June 30, 2008 and 2007 were $5,040 and $8,918,
respectively.
 
 
 NOTE C – OTHER
ASSETS
 
 June
      30,
                  
                  
                  June
      30,2008
                  
                  
                  2007Patent
      costs, net of amortization of$2,000
      (2008) and $1,333 (2007)
                  
                  $
                  8,000
                  
                  
                  $
                  8,667Lease
      security deposits
                  
                  
                  4,760
                  
                  
                  
                  4,760$
                  12,760
                  
                  
                  $
                  13,427
  Patent
costs consist of accumulated legal costs associated with a patent application
covering the exchange platform concept and associated technology.  On
March 29, 2006 David Dorr (“Dorr”), the chief executive officer of Life Exchange
and primary developer of the online exchange platform concept, entered into an
Assignment by Inventor agreement whereby the ownership of the patent application
and associated intellectual property rights were transferred to the
Company.  Prior to the transfer, the Company had operated under a
license agreement with Dorr to pursue the development and utilization of the
online exchange platform.  Patent costs amortization expense is $667
annually, for each fiscal year ended June 30, through 2020.
 
 
 NOTE D – NOTE PAYABLE –
RELATED PARTIES
 
 On July
5, 2006, the Company entered into a note agreement with Vantage Group Ltd. to
provide $300,000 of additional financing (“Note 1”).  The terms of
Note 1, as modified by subsequent amendments, provide for 7% interest payable at
maturity.  Note 1 is unsecured and matures on April 15, 2010 with
quarterly interest installments due through April 15, 2010.  Note 1
also provides Vantage with conversion rights based on the Company attaining
certain performance criteria as follows. The Holder of this Note 1 is entitled,
at its option, to convert the principal amount of Note 1 or any portion thereof,
together with accrued but unpaid interest, into shares of Common Stock of the
Company (“Conversion Shares”) based on the Company attaining certain performance
criteria measured during December, 2006.  The Company did not meet the
performance criteria and accordingly, no shares were converted.
 
  F-14
 LIFE-EXCHANGE,
INC. and SUBSIDIARY
 Notes
to Consolidated Financial Statements
 For
the Year Ended June 30, 2008
  NOTE D – NOTE PAYABLE –
RELATED PARTIES (Cont’d)
 
 On April
2, 2007, the Company entered into a note agreement with Vantage Group Ltd. to
provide $150,000 of additional financing (“Note 2”).  The terms of
Note 2, as modified by subsequent amendments, provide for 7% interest payable at
maturity.  Note 2 is unsecured and matures on April 15,
201.  Note 2 also provides Vantage with conversion rights based on the
Company attaining certain performance criteria as follows.  Note 2 may
be converted into shares of the Company’s common stock at (i) $0.10 or (ii)
fifty percent (50%) of the three lowest closing prices of the Company’s Common
Stock on the Pink Sheets (or such other principal market or exchange where the
Common Stock is listed or traded at the time of conversion) immediately
preceding the date of conversion.
 
 On August
2, 2007, the Company was advanced an additional $5,000 under the same terms as
Note 2.
 
 
 NOTE E – INCOME
TAXES
 
 The
benefit from income taxes for the years ended June 30, 2008 and 2007 consist of
the following:
 
 2008
                  
                  
                  2007Current:Federal
                  
                  $
                  128,000
                  
                  
                  $
                  (241,755
                  )State
                  
                  
                  13,666
                  
                  
                  
                  (25,811
                  )Benefit
      from income taxes
                  
                  
                  141,665
                  
                  
                  
                  (267,566
                  )Use
      of NOL/Increase in valuation allowance
                  
                  
                  (141,665
                  )
                  
                  
                  267,566Benefit
      from income taxes, net of allowance
                  
                  $
                  -
                  
                  
                  $
                  -
  The
difference between benefit from income taxes computed by applying the federal
statutory Corporate tax rate and actual income tax expense for the periods ended
June 30, 2008 and 2007 is as follows:
 
 2008
                  
                  
                  2007Statutory
      federal income tax rate
                  
                  
                  34.0
                  %
                  
                  
                  34.0
                  %State
      income taxes, net of federal benefit
                  
                  
                  3.6
                  %
                  
                  
                  3.6
                  %Increase
      in valuation allowance
                  
                  
                  -37.6
                  %
                  
                  
                  -37.6
                  %Effective
      income tax rate
                  
                  
                  0.0
                  %
                  
                  
                  0.0
                  %
  The net
deferred tax assets at June 30, 2008 and June 30, 2007 are comprised of the
following:
  2008
                  
                  
                  2007Deferred
      tax assets - non-current
                  
                  $
                  278,942
                  
                  
                  $
                  420,608Valuation
      allowance
                  
                  
                  (278,942
                  )
                  
                  
                  (420,608
                  )Net
      defered tax asset
                  
                  $
                  -
                  
                  
                  $
                  -
 The
Company currently has a net operating loss (NOL) of $682,885 (2008) and
$1,035,654 (2007) which can be utilized until the year 2026.  The
deductibility of the NOL is subject to the limitations provision of the Federal
tax code (i.e. IRC § 382).
 
  F-15
 LIFE-EXCHANGE,
INC. and SUBSIDIARY
 Notes
to Consolidated Financial Statements
 For
the Year Ended June 30, 2008
  NOTE F – EARNINGS PER
SHARE
 
 Basic
earnings per share are computed by dividing earnings available to common
stockholders by the weighted average number of common shares outstanding during
the period.  Diluted earnings per share reflect per share amounts that
would have resulted if dilutive potential common stock had been converted to
common stock.  The following reconciles amounts reported in the
financial statements for the year ended June 30, 2008:
 
 2008
                
                
                2007Basic earnings per
      share computationNumerator:Income
      (loss) from continuing operations
                
                $
                376,469
                
                
                $
                (711,043
                )Net
      Earnings (Loss)
                
                $
                376,469
                
                
                $
                (711,043
                )Denominator:Basic
      shares outstanding
                
                
                176,715,000
                
                
                
                176,715,000Basic
      net earnings per share
                
                $
                0.002
                
                
                $
                (0.004
                )Diluted earnings per
      share computationNumerator:Income
      from continuing operations
                
                $
                376,469
                
                
                $
                (711,043
                )Plus:
      Preferred share dividends
                
                
                --
                
                
                
                --Net
      Earnings
                
                $
                376,469
                
                
                $
                (711,043
                )Denominator:Basic
      shares outstanding
                
                
                176,715,000
                
                
                
                176,715,000Assumed
      conversion of:Warrants
      related to Note 2
                
                
                1,676,500
                
                
                
                --Diluted
      shares outstanding
                
                
                178,391,210
                
                
                
                176,715,000Diluted
      net earnings per share
                
                $
                0.002
                
                
                $
                (0.004
                )
 
 Effect of dilutive
securities
 
 The
1,676,500 shares of potential common stock associated with Note 2 were not
included in the computation of diluted earnings per share in 2007 because the
effect of conversion would be antidilutive.
 
 
 NOTE G – LEASES and
COMMITTMENTS
 
 The
Company currently leases its primary office facilities under a one-year,
non-cancelable real estate operating lease with a minimum annual rental
commitment of $33,000.  The lease expires on June 1, 2009 and may be
renewed.
 
  F-16
 LIFE-EXCHANGE,
INC. and SUBSIDIARY
 Notes
to Consolidated Financial Statements
 For
the Year Ended June 30, 2008
  NOTE H – SUBSEQUENT
EVENTS
 
 In July
2008, the Company formed four additional subsidiaries to facilitate its plans to
further expand its service offerings.  Filings with the State of
Nevada began on June 3, 2008, however the organization activities were not
completed until July 2008.  None of these subsidiaries were complete
and operational or record any transactions as of June 30, 2008.  The
newly formed subsidiaries are as follows:
 
 LFX
Brokerage LLC
 
 This
company was formed to facilitate deeper market penetration into life settlement
sell-side participants.  This entity will hold life settlement brokerage
licenses and life insurance general agency licenses allowing us to offer
expanded services as they relate to our core business of operating a life
settlement exchange.  These licenses also give us the flexibility to
interact directly with policy owners and more efficiently address their market
needs.
 
 LFX
Acquisitions LLC
 
 This
company was formed to facilitate deeper market penetration into life settlement
buy-side participants.  This entity will hold life settlement provider
licenses and provide better market access to financial institutions like banks
and pension funds to our life settlement exchange.  This entity will also
allow us the ability to provide ongoing asset servicing to clients that require
these services.
 
 LFX
Capital Markets LLC
 
 This
company was formed in anticipation of further regulatory developments that could
bring greater oversight by FINRA to the life settlement market place.  This
entity will be licensed as a broker/dealer and will also be designed for
providing trades in more advanced structured life settlement products that will
be classified as securities.  Having a broker/dealer license will also
allow us to accept variable life insurance contracts, a sector of the market
that we have not yet tapped.
 
 LFX
Trading, LLC
 
 This
company was formed to hold all the technology related to our life settlement
auction platform as well as the intellectual property we will be developing
related to our electronic trading platform.  This new entity will
ultimately be responsible for receiving all transaction fees as they relate to
auctions or trades through our systems.
 
  F-17





ITEM
9.       CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.




NONE




ITEM
9A.    CONTROLS AND PROCEDURES




Management’s Report on
Internal Control over Financial Reporting




Our
management is responsible for establishing and maintaining adequate internal
control over our financial reporting.  Internal control over financial
reporting is a process to provide reasonable assurance regarding the reliability
of our financial reporting for external purposes in accordance with generally
accepted accounting principles. Internal control over financial reporting
includes policies and procedures that: (i) pertain to maintaining records that
in reasonable detail accurately and fairly reflect our transactions; (ii)
provide reasonable assurance that transactions are recorded as necessary for
preparation of our financial statements and that receipts and expenditures of
company assets are made in accordance with management authorization; and (iii)
provide reasonable assurance that unauthorized acquisition, use or disposition
of company assets that could have a material effect on our financial statements
would be prevented or detected on a timely basis. Because of its inherent
limitations, internal control over financial reporting is not intended to
provide absolute assurance that a misstatement of our financial statements would
be prevented or detected.





For the
period ending December 31, 2008, the Company carried out an evaluation of the
effectiveness of the design and operation of its disclosure controls and
procedures. The term “disclosure controls and procedures” is defined in Rules
13(a)-15e and 15(d) - 15(e) of the Securities Exchange Act of 1934, as amended
(the Exchange Act). Our Chief Executive Officer and Chief Financial Officer have
evaluated the effectiveness of our disclosure controls and procedures as of June
30, 2008. They have concluded, as of June 30, 2008 that our disclosures were
effective to ensure that:




(1)
Information required to be disclosed by the Company in reports that it files or
submits under the act is recorded, processed, summarized and reported, within
the time periods specified in the Commissions' rules and forms, and




(2)
Controls and procedures are designed by the Company to ensure that information
required to be disclosed by us in the reports we file or submit under the Act is
accumulated and communicated to the issuer's management including the Chief
Executive Officer and the Chief Financial Officer or persons performing similar
functions, as appropriate to allow timely decisions regarding financial
disclosure.





This term
refers to the controls and procedures of a Company that are designed to ensure
that information required to be disclosed by a Company in the reports that it
files under the Exchange Act is recorded, processed, summarized and reported
within the required time periods. Our Chief Executive Officer and Chief
Financial Officer has evaluated the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this annual report. They have
concluded that, as of June 30, 2008 our disclosure and procedures were effective
in ensuring that required information will be disclosed on a timely basis in our
reports filed under the exchange act.





This
Annual Report does not include an attestation report of the Company's registered
public accounting firm regarding internal control over financial
reporting.  Management's report was not subject to attestation by the
company's registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permits the company to provide only
management's report in this Annual Report.





Lack of Segregation of
Duties





Management
is aware that there is a lack of segregation of duties at the Company due to the
small number of employees dealing with general administrative and financial
matters. However, at this time management has decided that considering the
abilities of the employees now involved and the control procedures in place, the
risks associated with such lack of segregation are low and the potential
benefits of adding employees to clearly segregate duties do not justify the
substantial expenses associated with such increases. However, Management has
engaged the services to of a consulting firm specializing in Sarbanes-Oxley
compliance to assist us in identifying areas where we may cost-effectively
improve our segregation of duties.  They are also assisting Management
in testing our internal controls to determine if the internal controls currently
in place are functioning as designed.  Management will periodically
reevaluate this situation.





Lack of Independent Board of
Directors and Audit Committee




Management
is aware that there is a lack of an independent board of directors and audit
committee due to the small number of employees dealing with general
administrative and financial matters. However, at this time management has
decided that considering the cost of maintaining independent board members and
the direct involvement of the existing officers and board members in the
company’s daily transactions, the risks associated with such lack of an
independent board of directors are low and the potential benefits of adding
independent directors to enhance corporate governance duties do not justify the
substantial expenses associated with such additions. Management has begun the
interview process for several potential additions to the
board.  Management will periodically reevaluate this
situation.




18





Changes in Internal
Control




There
have been no other changes in our internal controls over financial reporting
that occurred during the period covered by this Report on Form 10-K that have
materially affected, or are reasonably likely to materially affect, our internal
controls over financial reporting.




ITEM 9B.
     OTHER INFORMATION




None.





PART
III





ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.





The following table furnishes the
information concerning our directors and officers as of June 30, 2008. The
directors are elected every year and serve until their successors are elected
and qualify.





Name
            Age
            Position(s)David
      Dorr
            30
            President,
      Chief Executive Officer, Chief Financial Officer,
  DirectorBrian
      Dorr
            25
            Secretary,
      Treasurer, DirectorJean-Marc
      Golden
            41
            Vice
      President, Chief Operating Officer,
Director





David Dorr, (30) is the
President, Chief Executive Officer and founder of Life-Exchange.  Mr.
Dorr has been an officer and director with Life-Exchange since its inception in
January 2005. Over this period, Mr. David Dorr has been responsible for
development and implementation of the company’s direction, strategic ventures
and relationships. Mr. David Dorr has been asked to speak both in the U.S. and
Europe at industry conferences, including the BVZL Conference held in Dortmund,
Germany, the Life Insurance Settlement Association Conference in New York, and
the Emerging Investment Strategies in the Secondary Life Market, Hedge Fund
Conference in New York. For the three years prior to launching Life-Exchange,
Mr. Dorr was Director of Business Development for Life Asset Group in Miami,
Florida; a premier life settlement brokerage firm.  He joined Life
Asset Group when it was a start-up operation and in his position as Director of
Business Development, Mr. Dorr transformed the firm from a start-up operation of
one employee, to a profitable operation of 22 employees within two
years.




Brian Dorr, (25), has been has
been an officer and director with Life-Exchange since March 2005.  As
Vice President of Longevity Trading his primary responsibility is on the
execution of all life settlement policy auctions.  In addition to
these duties, Mr. Dorr is responsible for the development of the Life-Exchange
software application and all customer service and client side activities. For
the three years prior to joining Life-Exchange, Mr. Dorr was employed by Life
Asset Group in Miami, Florida; one of the nation’s largest life settlement
brokerage firms based in Miami, Florida. At Life Asset Group, he was responsible
for the creation and management of the firm's Case Coordination
Department.  In addition to his management duties, Mr. Dorr was
responsible for sourcing, recommending and implementing software applications to
streamline case management. Mr. Dorr was also a member of the firm’s in-house
design committee responsible for design and improvements to the firm’s Customer
Resource Management system.




Jean-Marc Golden, (41), has
been an officer and director with Life-Exchange since March 2005.  As
Vice President and Chief Operating Officer, Mr. Golden has been primarily
responsible for management of the company's day-to-day operations, including
accounting, marketing, software development, technology and personnel. Prior to
joining Life-Exchange, Mr. Golden’s last five years of business experience was a
New York based management consultant specializing in operations, product
commercialization, client development and organizational audits.  His
clients consisted of both Fortune 500 companies and entrepreneurial ventures,
including Deloitte & Touche, Lois Law, American Lawyer Media, Wasserstein
Perella & Co., MTV, and Viacom. During this period, Mr. Golden has also
served as a Board Member for The Sam and Adele Golden Foundation for the Arts,
Inc., an internationally recognized 503(c) organization.





David
Dorr, Brian Dorr, and Cameron Dorr, an investor in the company, are
brothers.





Code of
Ethics





Subsequent to our fiscal year end, in
the quarter ended September 30, 2008, we adopted a code of ethics applicable to
our principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions. Our
three directors, David Dorr, Brian Dorr and Jean-Marc Golden, have chosen to
adopt such a code of ethics because they believe that establishing a code of
ethics is in the best interest of our shareholders.




Section 16(a) Beneficial
Ownership Reporting Compliance




Section 16(a) of the Exchange Act
requires our directors, executive officers and ten percent (10%) beneficial
owners to file reports with the SEC regarding their ownership and changes in
ownership of their equity securities of the Company and to furnish to the
Company copies of such reports. Based solely upon our review of the copies of
such reports, we believe that during the 2008 fiscal year, all directors,
executive officers and ten percent (10%) beneficial owners have complied with
such filing requirements.




19




ITEM
11.      EXECUTIVE COMPENSATION




(a)
Compensation.




The following table sets forth
compensation awarded to, earned by or paid to our Chief Executive Officer and
the four other most highly compensated executive officers with compensation in
excess of $100,000 for the years ended June 30, 2008 and 2007 (collectively, the
"Named Executive Officers").





SUMMARY
      COMPENSATION TABLEName
      and principal position
            Year
            Salary
            Bonus
            Stock
      Awards
            Option
      Awards
            Non-Equity
      Incentive
              Plan
      Compensation
            Nonqualified
      Deferred Compensation Earnings
            All
      Other Compensation
            TotalDavid
      Dorr, CEO
            2008
            73,629
            0
            0
            0
            0
            0
            0
            73,6292007
            84,608
            0
            0
            0
            0
            0
            0
            84,608Brian
      Dorr, secretary
            2008
            73,769
            0
            0
            0
            0
            0
            0
            73,7692007
            83,908
            0
            0
            0
            0
            0
            0
            83,908Jean-Marc
      Golden, vice pres.
            2008
            115,824
            0
            0
            0
            0
            0
            0
            115,8242007
            80,700
            0
            0
            0
            0
            0
            0
            80,700











OUTSTANDING
      EQUITY AWARDS AT JUNE 30, 2008OPTION
      AWARDS
            STOCK
      AWARDSName
            Number
      of Securities Underlying Unexercised Options
              (#)
              Exercisable
            Number
      of Securities Underlying Unexercised Options
              (#)
              Unexercisable
            Equity
      Incentive Plan Awards: Number of Securities Underlying Unexercised
      Unearned Options
              (#)
            Option
      Exercise Price
              ($)
            Option
      Expiration Date
            Number
      of Shares or Units of Stock That Have Not Vested
              (#)
            Market
      Value of Shares or Units of Stock That Have Not Vested
              ($)
            Equity
      Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights
      That Have Not Vested
              (#)
            Equity
      Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or
      Other Rights That Have Not Vested
              (#)David
      Dorr
            None
            None
            None
            None
            None
            None
            None
            None
            NoneBrian
      Dorr
            None
            None
            None
            None
            None
            None
            None
            None
            NoneJean-Marc
      Golden  Ponnath
            None
            None
            None
            None
            None
            None
            None
            None
            None





EMPLOYMENT
CONTRACTS




We do not
have an employment contract with any executive officer.




We have
made no Long Term Compensation payouts (LTIP or other).




20




DIRECTOR
COMPENSATION





DIRECTOR
      COMPENSATIONName
            Fees
              Earned
      or
              Paid
      in
              Cash
            Stock
              Awards
            Option
              Awards
            Non-Equity
              Incentive
              Plan
              Compensation
            Change
      in
              Pension
              Value
      and
              Nonqualified
              Deferred
              Compensation
              Earnings
            All
              Other
              Compensation
            TotalDavid
      Dorr
            None
            None
            None
            None
            None
            None
            NoneBrian
      Dorr
            None
            None
            None
            None
            None
            None
            NoneJean-Marc
      Golden
            None
            None
            None
            None
            None
            None
            None





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




The following table sets forth certain
information regarding the beneficial ownership of Common Stock as of June 30,
2008, for each person, other than directors and executive officers, who is known
by us to own beneficially five percent (5%) or more of its outstanding Common
Stock.





Security
Ownership of five percent (5%) Shareholders





Security
      Ownership of five percent (5%) ShareholdersTitle
      of class
            Name
      and address of
              beneficial
      owner
            Amount
      and nature of beneficial ownership
            Percent
      of classcommon
            Vantage
      Group Ltd.(1)
            45,000,000
            25.465%





(1)Lyle Hauser is the sole shareholder,
officer and director of Vantage Group, Ltd.  Address is c/o Life
Exchange, Inc., 2001 Biscayne Blvd., Suite 2102, Miami, FL
33137.  Vantage Group, Ltd. provided the bulk of the initial funding
necessary to launch the Company.  As of June 30, 2008, the Company
owes Vantage Group, Ltd. $455,000 under 2 unsecured convertible
notes.




Security
Ownership of Management




The following table sets forth certain
information regarding the beneficial ownership of Common Stock as of June 30,
2008, for the following: (1) each of the Company's directors and executive
officers and (2) its directors and executive officers as a group.





Security
      Ownership of ManagementTitle
      of Class
            Name
      of Beneficial Owner
            Amount
      and nature of Beneficial Ownership
            Percent
      of Class(1)Common
            David
      Dorr
            75,680,000
            42.826%Common
            Brian
      Dorr
            21,820,000
            12.348%Common
            Jean-Marc
      Golden
            10,500,000
            5.942%Directors
      and executive officers as a group(3total)
            108,000,000
            61.116%





(1)Based
on an aggregate of 176,715,000 common shares outstanding as of June 30,
2008.





ITEM
13.      CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE




None of our directors or executive
officers or their respective immediate family members or affiliates are indebted
to us. As of the date of this report, there is no material proceeding to which
any of our directors, executive officers or affiliates is a party or has a
material interest adverse to us.




David
Dorr, Brian Dorr, and Cameron Dorr, an investor in the company, are
brothers.




David Dorr is the primary developer of
the online exchange platform concept.  On March 29, 2006 Mr. Dorr
entered into an Assignment by Inventor agreement whereby the ownership of the
Patent Application that had been filed with the U.S. Patent office on July 21,
2004, patent Application No. 10/895112 and associated intellectual property
rights were transferred to the Company. Mr. Dorr assigned the patent rights for
the nominal consideration of $1.00.




21




ITEM
14.      PRINCIPAL ACCOUNTING FEES AND
SERVICES




Audit Fees





We were billed $24,950 for the fiscal
year ended June 30, 2008 and $22,300 for the fiscal year ended June 30, 2007 for
professional services rendered by the principal accountant for the audit of our
annual financial statements, the review of our quarterly financial statements,
and other services performed in connection with our statutory and regulatory
filings.




Audit Related Fees




There were $0 in audit related fees for
the fiscal year ended June 30, 2008 and $0 in audit related fees for the fiscal
year ended June 30, 2007. Audit related fees include fees for assurance and
related services rendered by the principal accountant related to the audit or
review of our financial statements, not included in the foregoing
paragraph.




Tax Fees




Tax fees were $10,000 for the fiscal
year ended June 30, 2008 and $0 for the fiscal year ended June 30,
2007.




All Other Fees




There
were no other professional services rendered by our principal accountant during
the last two fiscal years that were not included in the above
paragraphs.




Preapproval Policy




Our Board of Directors reviews and
approves audit and permissible non-audit services performed by its independent
accountants, as well as the fees charged for such services. In its review of
non-audit service fees and its appointment of Jewett, Schwartz, Wolfe &
Associates as the Company's independent accountants, the Board of Directors
considered whether the provision of such services is compatible with maintaining
independence.









PART
IV




ITEM
15.      EXHIBITS, FINANCIAL STATEMENT
SCHEDULES





(a) Financial Statements and Schedules.
The following financial statements and schedules for the Company as of June 30,
2008 are filed as part of this report.




(1)      Financial
statements of the Company and its subsidiaries.




(2)      Financial
Statement Schedules:




All schedules are omitted because they
are not applicable or the required information is shown in the financial
statements or notes thereto.




(A) EXHIBITS.




22





The following Exhibits are incorporated
herein by reference or are filed with this report as indicated
below.





EXHIBIT
                NUMBER
              DESCRIPTION2.1
              Exchange
      Agreement dated December 22, 2005*2.2
              Agreement
      and Plan of Merger (Short Form Merger) dated March 29,
    2006*3.1
              Articles
      of Incorporation of Life Exchange, Inc. Delaware dated January 20,
      2005*3.2
              Amendment
      to Articles of Life Exchange, Inc. Delaware dated April 6,
      2005*3.3
              Amended
      and Restated Articles of Incorporation of Life Exchange, Inc., Nevada,
      dated November 14, 2005*3.4
              By-Laws*10.1
              Stock
      Purchase Agreement dated March 8, 2006*10.2
              Assignment
      by Inventor dated March 31, 2006*10.3
              Form
      of Broker User Agreement*10.4
              Form
      of Provider User Agreement*23.1
              Consent
      of Auditor*31.1
              Certification
      of Chief Executive Officer pursuant to Exchange Act Rules 13a-14 and
      15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.31.2
              Certification
      of Chief Financial Officer pursuant to Exchange Act Rules 13a-14 and
      15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.32.1
              Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.


_______________


*
Previously filed




23





Signatures





In accordance with 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.





Life
Exchange, Inc.





/s/ David
Dorr





By:  David
Dorr


President,
Chief Executive Officer, Chief Financial Officer


Date:
September 26, 2008




In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated:





/s/ David
Dorr





By:  David
Dorr, Director


Date:  September
26, 2008






/s/ Brian
Dorr





By:  Brian
Dorr, Director


Date:  September
26, 2008






/s/
Jean-Marc Golden





By:  Jean-Marc
Golden, Director


Date:  September
26, 2008