Treasure Mountain Holdings, Inc. 8-K Amendment

Vyteris, Inc.

(A Development Stage Enterprise)

Balance Sheets

	June 30, 2004			December 31, 2003
	June 30, 2004			December 31, 2003
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	2,989,979		$	2,286,167
Accounts receivable		32,500			—
Prepaid expenses		354,388			92,817
Accrued interest receivable		1,704			421
Total current assets		3,378,571			2,379,405

Equipment, net		2,871,712			2,934,902
Deferred debt financing costs, net		1,757,692			—
Deferred offering costs		258,610			—
Total assets	$	8,266,585		$	5,314,307

Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	911,302		$	887,858
Accrued expenses		640,816			627,523
Interest payable		134,331			—
Interest payable to related parties		60,000			2,056,495
Deferred revenue		300,000			300,000
Due to related party		71,587			71,577
Convertible, secured promissory notes payable to related parties		115,122			—
Convertible, secured promissory notes payable		5,315,175			—
Convertible, secured promissory notes payable to related parties		500,000			20,350,000
Convertible promissory note payable to related party		500,000			500,000
Secured promissory notes payable to related parties		—			2,900,000
Current portion of capital lease obligation		19,824			22,620
Total current liabilities		8,568,157			27,716,073

Capital lease obligation, less current portion		19,429			29,546

Preferred stock, par value $0.0001 per share; 50,000,000 shares authorized:
Series A convertible, redeemable preferred stock; 333,333 shares issued and outstanding on June 30, 2004 and December 31, 2003; liquidation preference $9,999,990		333,333			333,333
Series B convertible, redeemable preferred stock; 3,000,000 shares issued and outstanding December 31, 2003; liquidation preference $9,000,000; no shares issued and outstanding on June 30, 2004		—			2,917,640
Series C convertible, redeemable preferred stock; 7,500,000 shares issued and outstanding on June 30, 2004; liquidation preference $7,500,000; no shares issued and outstanding on December 31, 2003		7,500,000			—

Stockholders’ deficit:
Common stock, par value $0.0001 per share; 75,000,000 shares authorized, 24,849,979 and 1,812,479 shares issued and outstanding on June 30, 2004 and December 31, 2003; respectively		2,485			181
Additional paid-in capital		34,709,950			7,836,638
Deferred compensation		(87,394	)		(43,347	)
Deficit accumulated in development stage		(42,779,375	)		(33,475,757	)
Total stockholders’ deficit		(8,154,334	)		(25,682,285	)
Total liabilities and stockholders’ deficit	$	8,266,585		$	5,314,307

See accompanying notes.


	-31-

Vyteris, Inc.

(A Development Stage Enterprise)

Statements of Operations

(Unaudited)

November

Six months ended

Three months ended

10, 2000

June 30,

June 30,

(inception) to

2004

2003

2004

2003

June 30, 2004

Revenue:

Contract research revenue

$

60,000

$

145,000

$

60,000

$

40,000

$

688,000

Operating expenses:

Research and development

5,233,696

4,185,379

2,841,571

2,345,305

28,551,455

General and administrative

1,487,535

1,178,809

714,168

577,059

10,198,488

Total operating expenses

6,721,231

5,364,188

3,555,739

2,922,364

38,749,943

Interest income

(5,763

)

(3,327

)

(4,667

)

(1,636

)

(324,141

)

Interest expense to related parties

676,192

771,923

75,958

407,860

3,298,908

Interest expense

1,971,958

2,763

1,970,705

1,630

1,981,249

Net loss before state income taxes

(9,303,618

)

(5,990,547

)

(5,537,735

)

(3,290,218

)

(43,017,959

)

Benefit from state income taxes

—

—

—

—

(238,584

)

Net loss

$

(9,303,618

)

$

(5,990,547

)

$

(5,537,735

)

$

(3,290,218

)

$

(42,779,375

)

Basic and diluted net loss per share

$

(0.69

)

$

(3.31

)

$

(0.22

)

$

(1.82

)

Basic and diluted weighted
average number of common
shares outstanding

13,445,240

1,812,479

24,825,254

1,812,479

See accompanying notes.


	-32-

Vyteris, Inc.

(A Development Stage Enterprise)

Statements of Changes in Stockholders’ Equity (Deficit)

(Unaudited)

					Additional						Deficit Accumulated			Total
	Common Stock				Paid-in			Deferred			in Development			Stockholders’
	Shares		Amount		Capital			Compensation			Stage			Equity / (Deficit)
Balance at November 10, 2000 (inception)		—	$	—	$	—		$	—		$	—		$	—
Issuance of common stock		1,666,667		167		6,501,860			—			—			6,502,027
Net Loss		—		—		—			—			(716,621	)		(716,621	)
Balance at December 31, 2000		1,666,667		167		6,501,860			—			(716,621	)		5,785,406
Compensation associated with stock option grants		—		—		260,810			(260,810	)		—			—
Amortization of deferred compensation		—		—		—			48,177			—			48,177
Exercise of stock options		20,625		2		12,372			—			—			12,374
Issuance of warrants		—		—		64,000			—			—			64,000
Consultant compensation associated with stock option grants		—		—		8,799			—			—			8,799
Net Loss		—		—		—			—			(9,458,865	)		(9,458,865	)
Balance at December 31, 2001		1,687,292		169		6,847,841			(212,633	)		(10,175,486	)		(3,540,109	)
Issuance of common stock		125,000		12		499,988			—			—			500,000
Forfeited stock options		—		—		(25,161	)		25,161			—			—
Amortization of deferred compensation		—		—		—			80,669			—			80,669
Exercise of stock options		187		—		112			—			—			112
Issuance of warrants		—		—		502,220			—			—			502,220
Net Loss		—		—		—			—			(10,767,694	)		(10,767,694	)
Balance at December 31, 2002		1,812,479		181		7,825,000			(106,803	)		(20,943,180	)		(13,224,802	)
Adjustment for cancelled-unamortized, stock option grants		—		—		(272	)		272			—			—
Compensation associated with stock option grants		—		—		9,480			(9,480	)		—			—
Amortization of deferred compensation		—		—		—			72,664			—			72,664
Consultant compensation associated with stock option grants		—		—		2,430			—			—			2,430
Net Loss		—		—		—			—			(12,532,577	)		(12,532,577	)
Balance at December 31, 2003		1,812,479		181		7,836,638			(43,347	)		(33,475,757	)		(25,682,285	)
Adjustment for cancelled-unamortized, stock option grants		—		—		(553	)		553			—			—
Compensation associated with stock option grants		—		—		131,246			(131,246	)		—			—
Amortization of deferred compensation		—		—		—			86,646			—			86,646
Exercise of stock options		37,500		4		22,496			—			—			22,500
Issuance of warrants to convertible note holders		—		—		1,856,104			—			—			1,856,104
Beneficial conversion of convertible debt		—		—		2,401,057			—			—			2,401,057
Issuance of common stock on conversion of debt and preferred stock		23,000,000		2,300		21,280,698			—			—			21,282,998
Issuance of warrants associated with fund raising		—		—		1,182,264			—			—			1,182,264
Net Loss		—		—		—			—			(9,303,618	)		(9,303,618	)
Balance at June 30, 2004		24,849,979	$	2,485	$	34,709,950		$	(87,394	)	$	(42,779,375	)	$	(8,154,334	)

See accompanying notes.


	-33-

Vyteris, Inc.

(A Development Stage Enterprise)

Statements of Cash Flows

(Unaudited)

							Period from
							November 10,
	Six months ended						2000
	June 30,						(inception) to
	2004			2003			June 30, 2004
Operating activities
Net loss	$	(9,303,618	)	$	(5,990,547	)	$	(42,779,375	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		182,664			137,211			822,162
Amortization of notes payable discount		1,189,958			169,110			1,756,178
Amortization of deferred compensation		86,646			37,090			288,156
Amortization of deferred financing costs		689,342			—			689,342
Noncash compensation		—			—			11,229
Changes in operating assets and liabilities:
Accounts receivable		(32,500	)		—			(32,500	)
Due from the U.S. Food and Drug Administration		—			313,320			—
Prepaid expenses		(261,571	)		(52,447	)		(354,389	)
Deferred offering costs		—			(39,242	)		—
Accrued interest receivable		(1,283	)		(537	)		(1,703	)
Accounts payable		23,444			148,681			911,302
Accrued expenses		13,293			(21,740	)		640,816
Interest payable to related parties		618,873			603,718			2,675,368
Interest payable		134,331			—			134,331
Deferred revenue		—			7,500			300,000
Due to related party		—			—			71,577
Net cash used in operating activities		(6,660,421	)		(4,687,883	)		(34,867,506	)

Investing activities
Purchases of equipment		(119,474	)		(730,352	)		(2,612,440	)
Net cash used in investing activities		(119,474	)		(730,352	)		(2,612,440	)

Financing activities
Net proceeds from issuance of common stock		—			—			6,335,360
Net proceeds from issuance of convertible redeemable preferred stock		—			—			2,917,640
Proceeds from exercise of options		22,500			—			34,986
Proceeds from issuance of convertible secured promissory notes payable to related parties		—			5,065,000			20,350,000
Proceeds from issuance of secured promissory notes payable to related parties		—			—			2,900,000
Proceeds from issuance of convertible secured promissory notes payable to related parties		500,000			—			500,000
Proceeds from issuance of convertible secured promissory note payable to related party		500,000			—			500,000
Repayment of convertible secured promissory note payable to related party		(500,000	)		—			(500,000	)
Proceeds from issuance of convertible promissory note payable to a related party		—			—			500,000
Net proceeds from issuance of convertible secured promissory notes payable		7,232,730			—			7,232,730
Deferred offering costs		(258,610	)		—			(258,610	)
Repayment of capital lease obligations		(12,913	)		(8,698	)		(42,181	)
Net cash provided by financing activities		7,483,707			5, 056,302			40,469,925
Net increase (decrease) in cash and cash equivalents		703,812			(361,933	)		2,989,979
Cash and cash equivalents, beginning of period		2,286,167			765,123			—
Cash and cash equivalents, end of period	$	2,989,979		$	403,190		$	2,989,979


	-34-

Vyteris, Inc.

(A Development Stage Enterprise)

Statements of Cash Flows (continued)

(Unaudited)

						Period from
						November 10,
	Six months ended					2000
	June 30,					(inception) to
	2004			2003		June 30, 2004
Supplemental disclosure of cash flow information
Issuance of capital stock in exchange for equipment	$	—		$	—	$	1,000,000
Equipment acquired under capital lease	$	—		$	—	$	81,434
Cancellation of warrants	$	(566,220	)	$	—	$	—
Issuance of warrants in connection with issuance of convertible secured promissory notes payable	$	1,856,104		$	—	$	1,856,104
Issuance of warrants to placement agents	$	1,182,264		$	—	$	1,182,264
Beneficial conversion of convertible notes	$	2,401,057				$	2,401,057
Conversion of convertible secured promissory notes payable to related parties into convertible secured promissory notes payable	$	500,000		$	—	$	500,000
Interest paid	$	15,597		$	1,858	$	22,798
Recapitalization transaction:
Exchanged:
Interest payable to related parties	$	(2,615,368	)		—	$	(2,615,368	)
Convertible secured promissory notes payable to related parties	$	(20,350,000	)		—	$	(20,350,000	)
Warrants which were issued with convertible, secured promissory notes payable to related parties	$	(566,220	)		—	$	(566,220	)
Secured promissory notes payable to related parties	$	(2,900,000	)		—	$	(2,900,000	)
Convertible redeemable preferred stock	$	(2,917,640	)		—	$	(2,917,640	)
For:
Due to Spencer Trask Specialty Group, LLC	$	10			—	$	10
Proceeds from issuance of convertible redeemable preferred stock	$	7,500,000			—	$	7,500,000
Common stock		2,300			—		2,300
Paid in capital	$	21,846,918			—	$	21,846,918
	$	—		$	—	$	—

See accompanying notes


	-35-

Vyteris, Inc.

(A Development Stage Enterprise)

Notes to Financial Statements

(Unaudited)

1. Organization and Basis of Presentation

Organization

Vyteris, Inc. (“Vyteris”), formerly Drug Delivery Technologies, Inc., was incorporated on July 19, 2000 in the State of Delaware. Vyteris had no operating activity prior to November 10, 2000.

Effective November 10, 2000, Vyteris, Becton Dickinson and Co. (“Becton”) and Spencer Trask Specialty Group, LLC (“Spencer Trask”) entered into a stockholders’ agreement (“Stockholders’ Agreement”), in conjunction with a transaction agreement (“Transaction Agreement”), also effective on November 10, 2000, whereby Becton agreed to transfer to Vyteris certain assets in exchange for common stock and Series A convertible redeemable preferred stock and Spencer Trask agreed to contribute $9,000,000 in cash in exchange for common stock and Series B convertible redeemable preferred stock.

Vyteris paid certain Transaction Agreement expenses on behalf of Spencer Trask approximating $250,000. The reimbursement was recorded as a reduction in paid-in capital associated with the common stock and Series B convertible, redeemable preferred stock issued to Spencer Trask.

Vyteris is engaged in the development of noninvasive, transdermal drug delivery systems. Vyteris holds over 60 U.S. patents relating to the delivery of drugs across the skin using a mild electric current. The Company operates in one business segment.

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six-month period ended June 30, 2004 are not necessarily indicative of the results that may be expected for the year ended December 31, 2004.


	-36-

Vyteris, Inc.

(A Development Stage Enterprise)

Notes to Financial Statements

(Unaudited)

1. Organization and Basis of Presentation (continued)

The condensed balance sheet at December 31, 2003 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. For further information, refer to the financial statements and footnotes thereto, included in Vyteris, Inc.’s audited financial statements for the year ended December 31, 2003.

The accompanying financial statements have been prepared assuming that Vyteris will continue as a going concern; however, at its current and planned rate of spending, Vyteris' cash and cash equivalents as of June 30, 2004 are not sufficient to allow it to continue operations through June 30, 2005. As of June 30, 2004, Vyteris requires additional sources of capital to meet budgeted expenditures in order to continue its operations through that date.

On September 29, 2004 Vyteris consummated a $15 million private placement transaction (the “Private Placement”) (refer to note 13). Immediately prior to the closing of the Private Placement, certain related parties agreed to provide Vyteris with up to $5 million in working capital loans (the “Working Capital Facility”) (refer to note 13). We expect that the net proceeds from the Private Placement, together with the funds to be made available to us under the Working Capital Facility, will be sufficient to finance the operations of Vyteris for at least 12 months.

2. Significant Accounting Policies

Cash Equivalents

Vyteris considers all highly liquid instruments with maturities of three months or less at the date of purchase to be cash equivalents.

Deferred Revenue

Non-refundable upfront fees received from B. Braun Medical, Inc. (“Braun”) are deferred and recognized as revenue on a straight-line basis commencing on the commercial start date (as defined in the agreement) over the 10-year life of the agreement.


	-37-

Vyteris, Inc.

(A Development Stage Enterprise)

Notes to Financial Statements

(Unaudited)

2. Significant Accounting Policies (continued)

Reverse Common Stock Split

On March 31, 2004 Vyteris completed a 1:4 reverse split of its common stock. All share information with respect to Vyteris’ common stock, options, warrants, and basic and diluted loss per share have been adjusted to give retroactive effect to the reverse common stock split for all periods presented.

Stock-Based Compensation

As permitted by Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“SFAS No. 123”), Vyteris has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB No. 25”) and related interpretations in accounting for its employee stock-based compensation because the alternative fair value method of accounting provided for under SFAS No. 123 requires the use of option valuation models that were not developed for use in valuing employee stock options. Under APB No. 25, no compensation expense is recognized at the time of option grant if the exercise price of the employee stock option is fixed and equals or exceeds the fair value of the underlying common stock on the date of grant and the number of shares to be issued pursuant to the exercise of such option are known and fixed at the date of grant. The Board of Directors determines the fair value of common stock.

Vyteris accounts for options issued to non-employees under SFAS No. 123 and Emerging Issues Task Force Issue No. 96-18, Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services. Therefore, the fair value of options issued to non-employees is recorded as an expense and periodically re-measured over the vesting terms.

Vyteris has adopted the disclosure-only provisions of SFAS No. 123. Pro forma information regarding net loss is required by SFAS No. 123, which requires that the information is to be determined as if Vyteris had accounted for its employee stock options granted under the fair value provisions of SFAS No. 123. For purposes of SFAS No. 123 pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting periods.


	-38-

Vyteris, Inc.

(A Development Stage Enterprise)

Notes to Financial Statements

(Unaudited)

2. Significant Accounting Policies (continued)

The fair value of each option granted was estimated at the date of grant using the minimum value option pricing model with the following assumptions:

Grant period	Weighted- average risk- free interest rate	Dividend yield	Weighted- average expected option life
Six months ended June 30, 2004	4.09%	0%	six years
Six months ended June 30, 2003	2.78%	0%	six years
Three months ended June 30, 2004	4.10%	0%	six years
Three months ended June 30, 2003	2.78%	0%	six years

In addition, the option valuation models require input of highly subjective assumptions. Because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of employee stock options.

The pro forma net loss may not be representative of future disclosure since the estimated fair value of stock options is amortized to expense over the vesting period and additional options may be granted in future years.


	-39-

Vyteris, Inc.

(A Development Stage Enterprise)

Notes to Financial Statements

(Unaudited)

2. Significant Accounting Policies (continued)

For purposes of pro forma disclosures, the estimated fair value of the employee options is amortized to expense over the options’ vesting period. Vyteris’ pro forma information is as follows:

													Period from
													November 10,
	Six months ended June 30,						Three months ended June 30,						2000 (inception)
	2004			2003			2004			2003			to June 30, 2004
Net loss as reported:	$	(9,303,618	)	$	(5,990,547	)	$	(5,537,735	)	$	(3,290,218	)	$	(42,779,375	)
Add stock-based employee compensation expense included in reported net loss	$	86,646		$	37,090		$	69,946		$	18,253		$	288,156
Deduct total stock-based employee compensation expense determined under the fair value based method for all awards	$	(187,097	)	$	(68,383	)	$	(147,384	)	$	(34,531	)	$	(518,701	)
Pro forma net loss	$	(9,404,069	)	$	(6,021,840	)	$	(5,615,173	)	$	(3,306,496	)	$	(43,009,920	)
Basic and diluted net loss per share	$	(0.70	)	$	(3.32	)	$	(0.23	)	$	(1.82	)


	-40-

Vyteris, Inc.

(A Development Stage Enterprise)

Notes to Financial Statements

(Unaudited)

2. Significant Accounting Policies (continued)

Income Taxes

Vyteris records deferred tax assets and liabilities based on the differences between the financial statement and tax bases of assets and liabilities and on operating loss carryforwards using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Contract Research Revenue

During the three and six-month periods ended June 30, 2004 and 2003, Vyteris had research arrangements with pharmaceutical companies to develop iontophoretic transdermal patch systems for the administration of drugs for use in pre-clinical and clinical development. Contract research revenue is recognized utilizing the percentage of completion method. The cost of contract research revenue was approximately $99,000 and $33,000 for the three month periods ended June 30, 2004 and 2003, respectively, $102,000 and $145,000 for the six month periods ended June 30, 2004 and 2003, respectively, and $623,000 for the period from November 10, 2000 (inception) to June 30, 2004, and is included in research and development expense in the accompanying financial statements.

Research and Development

Research and development costs are charged to expense as incurred.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure 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.

Net Loss Per Share

The Company computes net loss per share in accordance with SFAS No. 128, “Earnings per Share” (“SFAS No. 128”). Under the provisions of SFAS No. 128, basic net loss per common share (“Basic EPS”) is computed by dividing net loss by the weighted-average number of common shares outstanding. Diluted net loss per common share (“Diluted EPS”) is computing by dividing net loss by the weighted average number of shares and


	-41-

Vyteris, Inc.

(A Development Stage Enterprise)

Notes to Financial Statements

(Unaudited)

2. Significant Accounting Policies (continued)

dilutive common share equivalents then outstanding. Common equivalent shares consist of the incremental common shares issuable upon the exercise of stock options and warrants and the conversion of preferred stock. Diluted EPS is identical to Basic EPS since common equivalent shares are excluded from the calculation, as their effect is anti-dilutive.

3. Convertible Secured Promissory Notes Payable

During the six months ended June 30, 2004, Vyteris issued $8,497,500 of 8% convertible secured promissory notes payable, maturing December 31, 2004 (the “December Notes”), in a private placement transaction. The December Notes are convertible at any time prior to maturity into Vyteris common stock at a conversion price of the lower of $1.00 per share or the per share price of common stock sold prior to the conversion, as described in the agreements. The December Notes are subject to automatic conversion if Vyteris consummates, before December 31, 2004, a private equity financing or series of related financings of at least $8,000,000, in which case the principal amount of the December Notes will automatically convert into shares of Vyteris common stock at a conversion price equal to the lower of $1.00 or eighty-five percent (85%) of the offering price of the securities sold in the financing.

In connection with the issuance of the December Notes, Vyteris issued warrants ("Warrants") to purchase 4,248,750 shares of Vyteris' common stock at an exercise price of $1.00 per share. The Warrants have an expiration date of five years from the date of issuance. Management estimated that the Warrants had an aggregate fair value of approximately $1,856,000 based on an estimate of the value by Vyteris. In addition Vyteris estimates that the December Notes contained a beneficial conversion feature valued at approximately $2,401,000. Therefore, Vyteris has recorded a discount on the December Notes and increased paid-in capital by approximately $4,257,000. The discount is being amortized over the life of the December Notes. Amortization of the discount included in interest expense in the accompanying financial statements was approximately $1,190,000 for the three and six month periods ended June 30, 2004 and for the period from November 10, 2000 (inception) to June 30, 2004. Accumulated amortization of the discount was $1,190,000 at June 30, 2004.


	-42-

Vyteris, Inc.

(A Development Stage Enterprise)

Notes to Financial Statements

(Unaudited)

3. Convertible Secured Promissory Notes Payable (continued)

Included in the aforementioned offering are convertible secured promissory notes payable with principal of $185,000 and 92,500 warrants issued to members of Vyteris Board of Directors and senior management, who purchased the December Notes on the same terms and conditions as all other purchasers of the December Notes.

Spencer Trask Ventures, Inc., a related party to Vyteris’ principal stockholder acted as placement agent in this transaction. Spencer Trask Ventures, Inc. received a 10% placement fee, a 3% non-accountable expense allowance and warrants to purchase 2,549,250 shares of common stock at an exercise price of $1.00 as compensation for acting as placement agent. In addition, Vyteris granted Spencer Trask Ventures, Inc. an irrevocable right of first refusal for a period of two years following the closing of the aforementioned offering to either purchase for its own account or act as agent for any proposed private offering of our securities by us, other than notes or convertible notes to be issued to STSG.

Costs relating to the private placement transaction are capitalized and amortized over the term of the December Notes. At June 30, 2004 total deferred financing costs of approximately $2,447,000 included placement agent fees and non-accountable expenses of approximately $1,105,000, legal and other expenses of $160,000 and warrants issued to the placement agent valued at approximately $1,182,000. Amortization expense, included in interest expense in the accompanying financial statements, was approximately $689,000 in the three and six months ended June 30, 2004 and for the period from November 10, 2000 (inception) to June 30, 2004. Accumulated amortization of deferred financing costs at June 30, 2004 was approximately $689,000.

At June 30, 2004 accrued and unpaid interest on the December Notes was $134,331, including $2,127 due to related parties, and is recorded in the accompanying balance sheet as interest payable.


	-43-

Vyteris, Inc.

(A Development Stage Enterprise)

Notes to Financial Statements

(Unaudited)

4. Convertible Secured Promissory Notes Payable to Related Parties

During February 2004, Vyteris issued secured promissory notes with principal of $1,000,000 to Spencer Trask and related parties. Each of the Notes matures 120 days from its respective date of issuance and bears an annual interest rate of 12%, which is payable on maturity, and are convertible into common stock, at the option of the holders under certain circumstances at $1 per share.

During May 2004, the holders of $500,000 principal amount of the secured promissory notes issued to related parties converted their notes into convertible secured promissory notes and warrants in a private placement transaction in accordance with their original terms (refer to Note 3).

The remaining $500,000 principal amount of the secured promissory note issued to related parties elected not to convert. This note and interest thereon were repaid in full subsequent to June 30, 2004 (refer to Note 13).

At June 30, 2004 accrued and unpaid interest on the remaining $500,000 secured promissory note issued to related parties was $20,000 and is included in interest payable to related parties in the accompanying balance sheet.

5. Convertible Promissory Note Payable to a Related Party

At June 30, 2004 and December 31, 2003 $500,000 of convertible promissory notes payable to Becton Dickinson and Co. (the "BD Convertible Note") were recorded in the accompanying balance sheet. At June 30, 2004 and December 31, 2003, accrued and unpaid interest on the BD Convertible Note was $40,000 and $20,000, respectively, and is reflected in the accompanying balance sheets as interest payable to related parties.

6. Recapitalization Transaction

On March 31, 2004 Spencer Trask and a related entity (“Spencer Trask and Related Party”) consummated a transaction with Vyteris wherein Vyteris issued to Spencer Trask and Related Party 23 million shares of common stock, 7.5 million shares of Series C Convertible Redeemable Preferred Stock (the “Series C Preferred Stock”) with a par value of $0.0001 per share, and other nominal consideration in exchange for $20,350,000 principal amount of the convertible, secured promissory notes payable to related parties, $2,900,000 of the secured promissory notes payable to related parties (collectively the “Spencer Trask Notes”), $2,615,000 of accrued and unpaid interest on the Spencer Trask Notes, 3,000,000 shares of Series B convertible preferred stock and the cancellation of warrants to purchase 2,035,000 shares of common stock with a paid-in capital value of $566,000 (the “Recapitalization Transaction”).


	-44-

Vyteris, Inc.

(A Development Stage Enterprise)

Notes to Financial Statements

(Unaudited)

6. Recapitalization Transaction (continued)

Each shareholder of Series C Preferred Stock is entitled to receive dividends when, as and if declared by the Board of Directors as long as any shares of the Series A Preferred Stock shall remain outstanding. Effective upon cancellation of all outstanding shares of Series A Convertible Preferred Stock, the holders of Series C Redeemable Convertible Preferred Stock are entitled to receive, ratably, an annual cash dividend of 8% of the then applicable redemption price, as defined, out of funds legally available, payable quarterly. Subject to the prior rights of the Series A Preferred Stock, the dividends on the Series C Preferred Stock shall be cumulative, whether or not earned or declared and shall be paid quarterly in arrears. Additionally, the holders of Series A Convertible Preferred Stock are entitled to receive ratably, dividends if declared by the Board of Directors out of funds legally available, before any dividends are received by holders of common stock. In the event of liquidation, holders of Series C Redeemable Convertible Preferred Stock are entitled to receive a liquidation preference of $1.00 per share (adjusted for stock splits or combinations of such stock, recapitalizations, or other similar transactions that have the effect of increasing or decreasing the number of shares represented by each outstanding share of such stock), plus an amount equal to all declared but unpaid dividends on the Series C Redeemable Convertible Preferred Stock.

With respect to the distribution of assets, Series C Redeemable Convertible Preferred Stock ranks senior to our common stock, but junior to Series A Convertible Preferred Stock. Each share of the Series C Redeemable Convertible Preferred Stock is convertible at any time, at the option of the holder, into common stock at a price per share if converted within 18 months from March 31, 2004, of $4.00; if converted within the next 18 months, $3.00; or if converted any time thereafter, $1.50. The holders of Series C Preferred Stock (and the holders of any other series of preferred stock with similar voting rights as the Series C Preferred Stock) vote together with the holders of shares of common stock and Series A Convertible Preferred Stock as a single class in all matters to be voted on by shareholders of Vyteris, except that the vote or consent of the holders of a majority of the shares of Series C Redeemable Convertible Preferred Stock is necessary to authorize or issue an equity security having any preference over or being on a parity with the Series C Redeemable Preferred Stock with respect to dividend or liquidation preference; increase the number of authorized shares of Series C Redeemable Convertible Preferred Stock; or amend, alter or repeal any provision of Vyteris Certificate of Incorporation, Certificate of Designations or By-laws, if such action would alter, in any material respect, the rights of the Series C Redeemable Preferred Stock. Commencing on of the first anniversary date of the first commercial sale of LidoSite, and continuing for one year thereafter, Vyteris will be required to redeem (on a quarterly basis) an amount of Series C Preferred Stock equal to 5% of the gross profits derived from the sale of LidoSite. During the following years, Vyteris will be required to redeem (on a quarterly basis) an amount of Series C Preferred Stock equal to 10% of the gross profits derived from the sale of LidoSite. The redemption price of the Series C Preferred Stock is $1.00 per share (adjusted for splits, etc.) plus any accrued but unpaid dividends.


	-45-

Vyteris, Inc.

(A Development Stage Enterprise)

Notes to Financial Statements

(Unaudited)

6. Recapitalization Transaction (continued)

Since these transactions were between Vyteris and its majority shareholder, the transactions were treated as capital transactions and no gain or loss has been reflected in the accompanying financial statements.

7. Stock Compensation Plan

A summary of Vyteris’ stock option activity under the Vyteris, Inc. 2001 Stock Option Plan, and related information for the six months ended June 30, 2004, is as follows:

	Six months ended June 30, 2004					Year ended December 31, 2003
	Options			Weighted-Average Exercise Price		Options			Weighted-Average Exercise Price

Outstanding at beginning of year		448,709		$	1.70		192,959		$	2.92
Granted		1,093,724			.80		262,375			0.80
Exercised		(37,500	)		.60		—			—
Forfeited and canceled		(135,916	)		3.85		(6,625	)		1.33
Outstanding and exercisable to acquire restricted stock at end of the period		1,369,017		$	0.80		448,709		$	1.70

Weighted-average grant date fair value of options granted during the period for options with an exercise price less than the fair value of a common share on the date of grant	$	0.29				$	0.76


	-46-

Vyteris, Inc.

(A Development Stage Enterprise)

Notes to Financial Statements

(Unaudited)

7. Stock Compensation Plan (continued)

A summary of Vyteris' options outstanding under the Option Plan at June 30, 2004 and related exercise prices and weighted-average remaining lives is as follows:

Exercise Price	Outstanding	Weighted- Average Remaining Life (Years)

$0.60	24,418	6.8
$0.80	1,344,599	9.8
	1,369,017	9.7

During the six months ended June 30, 2004, 37,500 stock options were exercised, 6,500 stock options were forfeited, and 129,416 stock options were cancelled. 91,917 of the cancelled stock options were reissued with an exercise price of $0.80. In accordance with APB No. 25 and FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation, an Interpretation of APB Opinion No. 25, the reissued options are accounted for as a direct re-pricing, which requires the options to be re-measured at intrinsic value over the vesting period. Additionally, 1,001,807 stock options were granted with an exercise price of $0.80.

8. Loss Per Share

The following table shows dilutive common share equivalents outstanding, which are not included in the above historical calculations, as the effect of their inclusion is anti-dilutive during each period.

	June 30,
	2004		2003
Convertible preferred stock		1,958,333		833,333
Convertible debt		8,622,500		4,061,250
Warrants		6,848,000		1,624,500
Options		1,369,017		328,210
B. Braun purchase right		92,593		92,593
Total		18,890,443		6,939,886


	-47-

Vyteris, Inc.

(A Development Stage Enterprise)

Notes to Financial Statements

(Unaudited)

9. Related Party Transactions

Spencer Trask

In addition to the convertible secured promissory notes payable to related parties described in Note 4, the Recapitalization Transaction described in Note 6, and the Private Placement described in Note 3, Vyteris had the following transactions with Spencer Trask:

At June 30, 2004 and December 31, 2003, approximately $62,000 is included in due related party in the accompanying balance sheets for amounts owed to Spencer Trask and Spencer Trask Ventures, Inc. for certain expenses paid on behalf of Vyteris.

During December 2001, $10,000 of Spencer Trask’s funds were deposited in Vyteris’ bank account in error by Vyteris’ bank. Therefore, at June 30, 2004 and December 31, 2003, $10,000 is included in due to related party in the accompanying balance sheets.

10. Income Taxes

At December 31, 2003, Vyteris has available for federal income tax purposes net operating loss carryforwards, subject to review by the Internal Revenue Service, aggregating approximately $34 million and expiring from 2020 to 2023.

11. FDA Approval

On May 6, 2004, the Food and Drug Administration approved Vyteris’ New Drug Application (NDA 215-04) for its LidoSite™ Patch.

12. Employment Contract

In June 2004 the Company entered into a two year employment contract with a key executive. The contract calls for the issuance of options to purchase 425,000 shares of the Company’s common stock at a price of $.80 per share upon execution of the contract. Such options were issued in September 2004. The contract also calls for the issuance of additional options to this key executive upon the closing of a financing or series of financings aggregating up to $27 million, such that that executive’s total potential ownership of the Company is equal to 4% of the shares outstanding after such financing or series of financing.


	-48-

Vyteris, Inc.

(A Development Stage Enterprise)

Notes to Financial Statements

(Unaudited)

13. Subsequent Events

Increase in shares authorized for issuance under the employee stock option plan

In July the Company’s Board of directors and stockholders approved increasing the number of shares of common stock available for issuance under the 2001 stock option plan from 1,500,000 to 7,000,000.

Increase in authorized capital

In July the Company’s Board of directors and stockholders approved an increase in the Company’s authorized common stock from 75,000,000 shares to 100,000,000 shares.

Secured Promissory Notes

On July 7, 2004, $500,000 of the secured promissory notes issued to related parties (refer to Note 4) was repaid together with interest of $20,000.

Convertible Promissory Notes

The terms of the $500,000 BD Convertible Note were changed subsequent to June 30, 2004. The BD Note was originally due to be repaid on July 1, 2004. BD and Vyteris have agreed to change the repayment date to the earlier of September 30, 2004 or the closing of the sale of units and merger with Treasure Mountain Holdings, Inc. The Note will continue to accrue interest at a rate of 8% (refer to Note 5). In September 2004, BD agreed to the redemption of $250,000 of the principal amount of the BD Note in exchange for 166,667 shares of common stock and warrants to purchase 41,667 shares of common stock at $1.875 per share. The remaining $250,000 in principal amount and all interest accrued to date on the BD Convertible Note was paid on October 1, 2004.

Redemption of Series A Convertible Redeemable Preferred Shares

In September 2004, BD redeemed all 333,333 of its Series A Convertible Redeemable Preferred Shares (the “Series A Shares”). In lieu of cash, BD elected to redeem its Series A Shares for 666,667 shares of common stock and warrants to purchase a total of 166,667 shares of common stock at $1.875 per share.


	-49-

Vyteris, Inc.

(A Development Stage Enterprise)

Notes to Financial Statements

(Unaudited)

13. Subsequent Events (continued)

Sale of Units, Conversion of December Notes and Merger with Treasure Mountain Holdings, Inc.

On September 29, 2004 Vyteris consummated a $15,060,114 private placement transaction ( the “Private Placement”) of 2,510,019 units (the “Units”). Each Unit consisted of 4 shares of common stock and a warrant to purchase one share of common stock at an exercise price of $1.875 per share. The common stock issued in the Private Placement has registration rights, the Company will cause a registration statement to be filed within 45 days after the closing of the Private Placement. The Private Placement included the conversion of $1.6 million of loans made to Vyteris during the month of September 2004 by Spencer Trask and certain of its related parties (the “September Notes”). Net proceeds to Vyteris from the Private Placement were approximately $12 million.

Simultaneously with the closing of the Private Placement the $8,497,500 principal amount of the December Notes (refer to Note 3) converted into 8,497,500 shares of Vyteris common stock and immediately thereafter Vyteris merged with a subsidiary of Treasure Mountain Holdings, Inc. (“TMHI”) (the “Merger”). Each outstanding share of Vyteris’ common stock automatically converted into the right to receive 4.19 shares of TMHI. Immediately after the Merger Vyteris stockholders owned 98.2% of the outstanding common stock and rights to receive common stock of TMHI.

The directors of TMHI resigned immediately prior to the Merger and the directors of Vyteris immediately prior to the Merger became the sole directors of TMHI, and the officers of TMHI resigned immediately prior to the Merger and the executive officers of Vyteris immediately prior to the Merger became the sole officers of TMHI.

The Credit Facility

Immediately prior to the closing of the Private Placement, Spencer Trask and certain of its related parties agreed to provide Vyteris with up to $5,000,000 in working capital loans in the form of 11.5% secured demand promissory notes (“Working Capital Facility”). As consideration for the commitment of the Working Capital Facility Vyteris issued 1,000,000 shares of its common stock to Spencer Trask and certain of its related parties. Each time funds are loaned to Vyteris under the Working Capital Facility Vyteris shall issue to the lender a common stock purchase warrant to purchase such number of shares equal to the quotient obtained by dividing (i) 40% of the amount loaned by (ii) 1.50. The warrants are exercisable for five years from the date of issuance and have an initial exercise price of $1.50 per share. As of October 31, 2004 no amounts have been loaned to Vyteris under the Working Capital Facility.


	-50-

Vyteris, Inc.

(A Development Stage Enterprise)

Notes to Financial Statements

(Unaudited)

13. Subsequent Events (continued)

License and Development Agreement

In September 2004, Vyteris entered into an agreement with a major, European, pharmaceutical company for the licensing and development of an iontophoretic product for the treatment of female infertility. In July 2004 a non-refundable payment of $150,000 was made to Vyteris by this European pharmaceutical company.


	-51-

Unaudited Pro Forma Condensed Consolidated Financial Statements

Introduction

The unaudited pro forma consolidated balance sheet as of June 30, 2004 and the unaudited pro forma consolidated statements of income for the year ended December 31, 2003 and the six months ended June 30, 2004, combine the historical financial statements of Treasure Mountain with Vyteris after giving effect to the Merger by recording the transaction as the issuance of Vyteris stock for the net monetary assets of Treasure Mountain, accompanied by a recapitalization with no goodwill or other intangibles recorded. Pro forma adjustments to the balance sheet are computed as if the transaction occurred at June 30, 2004, while the pro forma adjustments to the statements of operations are computed as if the transaction occurred on January 1 of each period presented.

The following unaudited pro forma condensed consolidated financial information gives effect to the $15,000,000 private placement of units completed by Vyteris on September 29, 2004, the conversion of the $8,497,500 principal amount of convertible secured promissory notes payable into 8,497,500 shares of Vyteris common stock, the exchange of Vyteris' Series A convertible, redeemable preferred stock for 666,667 shares of Vyteris common stock and common stock purchase warrants, the exchange of the Becton Dickinson note for 166,667 shares of Vyteris common stock, common stock warrants and cash,, the issuance of 1,000,000 shares of Vyteris common stock as consideration for the commitment to provide up to $5,000,000 in working capital loans and the Merger including the 4.19 to 1 conversion of 45,220,888 Vyteris shares into 189,475,520 TMHI shares. These pro forma statements are presented for illustrative purposes only. The pro forma adjustments are based upon available information and assumptions that we believe are reasonable. The unaudited pro forma condensed consolidated financial statements do not purport to represent what the consolidated results of operations or financial position of Treasure Mountain would actually have been if the Merger had in fact occurred on the dates that we refer to below, nor do they purport to project the results of operations or financial position of Treasure Mountain for any future period or as of any date.

The unaudited pro forma condensed consolidated balance sheet as of June 30, 2004, was prepared by combining the balance sheet as of June 30, 2004 of Treasure Mountain with the balance sheet of Vyteris, Inc. as of June 30, 2004, giving effect to the Merger as if it occurred on June 30, 2004.

The unaudited condensed consolidated statements of operations for the periods presented were prepared by combining Treasure Mountain’s statements of operations for the six months ended June 30, 2004 and the year ended December 31, 2003 with Vyteris’ statements of operations for the same periods, giving effect to the Merger as if it occurred on January 1 of each period.


	-52-

The historical financial information regarding Treasure Mountain for the year ended December 31, 2003 has been derived from the audited financial statements of Treasure Mountain filed previously with the SEC as part of Treasure Mountain’s Annual Report on Form 10-KSB for the year ended December 31, 2003. The historical financial information regarding Treasure Mountain for the six months ended June 30, 2004 has been derived from the unaudited financial statements of Treasure Mountain filed previously with the SEC as part of Treasure Mountain’s Quarterly Report on Form 10-QSB for the six months ended June 30, 2004. The historical financial information regarding Vyteris, Inc. for the year ended December 31, 2003 has been derived from the audited financial statements of Vyteris, Inc. for the year ended December 31, 2003, included elsewhere in this Form 8-K/A. The historical financial information regarding Vyteris, Inc. for the six months ended June 30, 2004 has been derived from the unaudited financial statements of Vyteris, Inc. for the six months ended June 30, 2004, included elsewhere in this Form 8-K/A.


	-53-

Treasure Mountain Holdings, Inc.

Pro Forma Condensed Consolidated Balance Sheet - Unaudited

As of June 30, 2004

	Treasure Mountain			Vyteris, Inc.			Adjustment Reference		Adjustments			Combined
Assets
Current assets:
Cash and cash equivalents	$	1,454		$	2,989,979			(1)	$	12,793,724		$	15,535,157
								(2)		(250,000	)
Accounts receivable		—			32,500								32,500
Prepaid expenses		—			354,388					—			354,388
Accrued interest receivable		—			1,704					—			1,704
Total current assets		1,454			3,378,571					12,543,724			15,923,749

Equipment, net		—			2,871,712					—			2,871,712
Deferred financing costs		—			1,757,692			(3)		1,275,000			1,275,000
								(4)		(1,757,692	)
Deferred offering costs		—			258,610			(1)		(258,610	)		—
Total assets	$	1,454		$	8,266,585				$	11,802,422		$	20,070,461
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	3,570		$	911,302							$	914,872
Accrued expenses		—			640,816								640,816
Interest payable		—			194,331								194,331

Deferred revenue		—			300,000								300,000
Due to related party		—			71,587								71,587
Short-term debt		12,167			6,430,297			(2)		(500,000	)		512,167
								(4)		(5,430,297	)
Current portion of capital lease obligation					19,824								19,824
Total current liabilities		15,737			8,568,157					(5,930,297	)		2,653,597

Capital lease obligation, less current portion					19,429								19,429
		—
Preferred stock:
Series A convertible		—			333,333			(2)		(333,333	)		—

Series C convertible		—			7,500,000								7,500,000
Stockholders’ deficit:
Common stock		3,392			2,485			(1)		1,004			19,289
								(2)		83
								(3)		100
								(4)		850
								(5)		(3,392	)
								(6)		14,767

Additional paid-in capital		742,379			34,709,950			(1)		12,534,110			52,744,915
								(2)		583,250
								(3)		1,274,900
								(4)		3,671,755
								(5)		(756,662	)
								(6)		(14,767	)

Deferred compensation					(87,394	)							(87,394	)
Accumulated deficit		(760,054	)		(42,779,375	)		(5)		760,054			(42,779,375	)



Total stockholders’ (deficit) equity		(14,283	)		(8,154,334	)				18,066,052			9,897,435
Total liabilities and stockholders’ deficit	$	1,454		$	8,266,585				$	11,802,422		$	20,070,461


	-54-

NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

Vyteris pre-merger transactions which were pre-conditions to completion of the merger

Note 1. To record issuance of 2,510,019 units, each unit consisting of four shares of Vyteris common stock and a warrant to purchase one share of Vyteris common stock, for approximately $12.8 million in cash ($15.1 million net of $1.9 million of placement agent fees and non-accountable expenses and $.525 million of other expenses related to the transaction) based upon the assumption the transaction occurred as of June 30, 2004.

Note 2. To record the redemption of 333,333 outstanding shares of Series A convertible, redeemable preferred stock and the $500,000 principal amount of Becton Dickinson convertible note for 833,333 shares of Vyteris common stock, common stock warrants and cash based upon the assumption the transaction occurred as of June 30, 2004.

Note 3. To record the issuance of 1,000,000 shares Vyteris common stock as a cost to establish a $5 million working capital facility based upon the assumption the transaction occurred as of June 30, 2004.

Note 4. To record the conversion of $8,497,500 aggregate principal amount of convertible secured promissory notes to 8,497,500 shares of Vyteris common stock.

Merger transaction

Note 5. To record the elimination of Treasure Mountain equity as a result of the combination.

Note 6. To record the 4.19 to 1 conversion of Vyteris common shares to Treasure Mountain common shares and the related adjusted par value.


	-55-

Treasure Mountain Holdings, Inc.

Pro Forma Condensed Consolidated Statement of Operations - Unaudited

Six Months Ended June 30, 2004

	Treasure Mountain			Vyteris, Inc.			Adjustment Reference		Adjustments			Combined

Revenues	$	—		$	60,000							$	60,000

Operating expenses:
Research and development		—			5,233,696								5,233,696
General and administrative		64,454			1,487,535								1,551,989
Total operating expenses		64,454			6,721,231								6,785,685

Interest income		—			(5,763	)							(5,763	)
Interest expense		209			2,648,150			(1)		(2,013,631	)		4,534,068
								(2)		(19,945	)
								(3)		3,919,285
Net loss	$	(64,663	)	$	(9,303,618	)			$	1,885,709		$	(11,253,990	)

Basic and diluted net loss per share												$	(0.08	)
Basic and diluted shares outstanding													145,101,785

NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Vyteris pre-merger transactions which were pre-conditions to completion of the merger

Note 1. To record the effect on interest expense of the conversion of $8,497,500 aggregate principal amount of convertible secured promissory notes to 8,497,500 shares of Vyteris common stock based upon the assumption the debt was converted to capital at the date of the initial transaction.

Note 2. To eliminate the interest expense for the period January 1, 2004 to June 30, 2004 assuming that the exchange of the $500,000 principal amount of Becton Dickinson convertible note for 166,667 shares of Vyteris common stock, common stock warrants and $250,000 in cash based upon the assumption the transaction occurred as of January 1, 2004.

Note 3. To record the unamortized beneficial conversion feature and discount as interest expense upon the conversion of the $8,497,500 convertible secured promissory notes.


	-56-

Treasure Mountain Holdings, Inc.

Pro Forma Condensed Consolidated Statement of Operations - Unaudited

For the year ended December 31, 2003

	Treasure Mountain			Vyteris, Inc.			Adjustment Reference		Adjustments			Combined

Revenues	$	2,297		$	200,000							$	202,297

Operating expenses:
Research and development		—			8,734,871								8,734,871
General and administrative		30,247			2,454,922			(1)		425,000			2,910,169
Total operating expenses		30,247			11,189,793					425,000			11,645,040

Interest income		—			(5,775	)							(5,775	)
Interest expense		144			1,787,143			(2)		(20,055	)		1,767,232
Net loss before state income taxes		(28,094	)		(12,771,161	)				(20,055	)		(13,204,200	)
Benefit from state income taxes		—			238,584								238,584
Net loss	$	(28,094	)	$	(12,532,577	)			$	(404,945	)	$	(12,965,616	)

Basic and diluted net loss per share												$	(0.13	)
Basic and diluted shares outstanding													96,360,517

NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

Merger transaction

Note 1 . To record $.425 million of expenses related to the reverse merger transaction based upon the assumption the transaction occurred as of January 1, 2003.

Vyteris pre-merger transactions which were pre-conditions to completion of the merger

Note 2. To eliminate the interest expense for the period July 1, 2003 to December 31, 2003 assuming that the exchange of $500,000 principal amount of Becton Dickinson convertible note for 166,667 shares of common stock, common stock warrants and $250,000 in cash based on the assumption the transaction occurred on the issue date, July 1, 2003.


	-57-

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


	TREASURE MOUNTAIN HOLDINGS, INC.

	By:	/s/ Vincent De Caprio
		Name: Vincent De Caprio Title: President and Chief Executive Officer

Dated: November 5, 2004


	-58-

Nevada	000-32741	84-394211
(State or Other Jurisdiction	(Commission File Number)	(IRS Employer
of Incorporation)		Identification No.)

13-01 Pollitt Drive, Fair Lawn, NJ	07410
(Address of principal executive offices)	(Zip Code)

							Period from
							November
							10, 2000
							(inception) to
	Year ended December 31,						December 31,
	2003			2002			2003
Revenue:
Contract research revenue	$	200,000		$	151,452		$	628,000

Operating expenses:
Research and development		8,734,871			7,209,796			23,317,759
General and administrative		2,454,922			2,890,568			8,710,953
Total operating expenses		11,189,793			10,100,364			32,028,712

Interest income		(5,775	)		(10,834	)		(318,378	)
Interest expense		1,787,143			829,616			2,632,007
Loss before benefit from state income taxes		(12,771,161	)		(10,767,694	)		(33,714,341	)

Benefit from state income taxes		(238,584	)		—			(238,584	)

Net loss	$	(12,532,577	)	$	(10,767,694	)	$	(33,475,757	)

Basic and diluted loss applicable to common shareholders per share	$	(6.91	)	$	(6.25	)

Weighted-average number of shares of common stock outstanding		1,812,479			1,722,744

							Period from November 10, 2000 (inception) to
	Year ended December 31						December 31,
	2003			2002			2003

Net loss as reported:	$	(12,532,577	)	$	(10,767,694	)	$	(33,475,757	)
Add stock-based employee compensation expense included in reported net loss		72,664			80,669			201,510
Deduct total stock-based employee compensation expense determined under the fair value based method for all awards		(140,829	)		(130,133	)		(331,604	)
Pro forma net loss	$	(12,600,742	)	$	(10,817,158	)	$	(33,605,851	)
Basic and diluted pro forma net loss per share applicable to common stockholders per share	$	(6.95	)	$	(6.28	)

	December 31,
	2003		2002

Manufacturing and laboratory equipment	$	1,235,815	$	1,116,626
Furniture and fixtures		32,743		7,899
Office equipment		104,516		50,008
Software		82,200		43,840
		1,455,274		1,218,373
Less accumulated depreciation and amortization		639,498		351,457
		815,776		866,916
In-process equipment		1,888,396		1,105,180
Construction in progress		230,730		—
	$	2,934,902	$	1,972,096

Item 4.01 Change in Registrant’s Certifying Accountant Reference is made to the Current Report on Form 8-K dated September 29, 2004 filed by Treasure Mountain on October 5, 2004 for information regarding Treasure Mountain's auditors. In addition, during the two most recent fiscal years and through the date hereof, there have been no reportable events as defined in Regulation S-K, Item 304(a)(1)(v). Ernst & Young LLP is the independent auditor for Vyteris, and has been such since Vyteris was incorporated in 2000. By virtue of the Merger, there is deemed to have been a change in Treasure Mountain's certifying accountant. Formal appointment of Ernst & Young LLP will be considered by Treasure Mountain's newly constituted audit committee. Ernst & Young LLP was appointed by the Vyteris audit committee and it is anticipated that Ernst & Young will be approved by the newly constituted audit committee. Upon such appointment, the registrant will amend this disclosure to provide additional information regarding the appointment of Ernst & Young LLP and the dismissal of the registrant's former certifying accountants. Madsen & Associates served as Treasure Mountain's accountants with respect to its financial statements for the year ended December 31, 2003. As noted in Treasure Mountain's annual report on Form 10-KSB for the year ended December 31, 2003, the firm of Sellers & Andersen, LLC served as Treasure Mountain's independent certifying accountants for the prior year. As reported in Treasure Mountain's annual report on Form 10-KSB for the year ended December 31, 2003, there were no disagreements with Sellers & Anderson on any matters of accounting principles and practices, financial statement disclosure, or auditing scope or procedures which, if not resolved to the satisfaction of Sellers & Andersen, would have caused them to make reference thereto on the financial statements. Further, during 2004 there have been no disagreements with Madsen & Associates on any matters of accounting principles and practices, financial statement disclosure, or auditing scope or procedures which, if not resolved to the satisfaction of Madsen & Associates, would have caused them to make reference thereto on the financial statements. Further, for 2002 and 2003, there were no reportable events as set forth in Regulation S-B, Item 304 (a)(1)(iv). Audit reports of each of the above firms for Treasure Mountain's 2002 and 2003 year-end financial statements contained a modification expressing substantial doubt as to Treasure Mountain's ability to continue as a going concern. The Company has provided Madsen & Associates with a copy of this Current Report on Form 8-K/A, along with the Current Report on Form 8-K dated September 29, 2004 filed by Treasure Mountain on October 5, 2004, and requested that they furnish it with a letter addressed to the Securities and Exchange Commission stating whether or not it agrees with the above statements. A copy of this letter is attached hereto as Exhibit 16.1 in accordance with Regulation S-K, Item 304(a)(3).
	-2-

					Additional						Deficit Accumulated			Total Stockholders’
	Common Stock				Paid-in			Deferred			in Development			Equity
	Shares		Amount		Capital			Compensation			Stage			(Deficit)

Balance at November 10, 2000 (inception)		—	$	—	$	—		$	—		$	—		$	—
Issuance of common stock		1,666,667		167		6,501,860			—			—			6,502,027
Net loss		—		—		—			—			(716,621	)		(716,621	)
Balance at December 31, 2000		1,666,667		167		6,501,860			—			(716,621	)		5,785,406
Compensation associated with stock option grants		—		—		260,810			(260,810	)		—			—
Amortization of deferred compensation		—		—		—			48,177			—			48,177
Exercise of stock options		20,625		2		12,372			—			—			12,374
Issuance of warrants		—		—		64,000			—			—			64,000
Consultant compensation associated with stock option grants		—		—		8,799			—			—			8,799
Net loss		—		—		—			—			(9,458,865	)		(9,458,865	)
Balance at December 31, 2001		1,687,292		169		6,847,841			(212,633	)		(10,175,486	)		(3,540,109	)
Issuance of common stock		125,000		12		499,988			—			—			500,000
Forfeited stock options		—		—		(25,161	)		25,161			—			—
Amortization of deferred compensation		—		—		—			80,669			—			80,669
Exercise of stock options		187		—		112			—			—			112
Issuance of warrants		—		—		502,220			—			—			502,220
Net loss		—		—		—			—			(10,767,694	)		(10,767,694	)
Balance at December 31, 2002		1,812,479		181		7,825,000			(106,803	)		(20,943,180	)		(13,224,802	)
Forfeited stock options		—		—		(272	)		272			—			—
Compensation associated with stock option grants		—		—		9,480			(9,480	)		—			—
Amortization of deferred compensation		—		—		—			72,664			—			72,664
Consultant compensation associated with stock option grants		—		—		2,430			—			—			2,430
Net loss		—		—		—			—			(12,532,577	)		(12,532,577	)
Balance at December 31, 2003		1,812,479	$	181	$	7,836,638		$	(43,347	)	$	(33,475,757	)	$	(25,682,285	)

Continuous motion patch machine	$	239,000
Controller manufacturing equipment		29,000
Facility expansion project		101,000
Laboratory equipment		17,000
Total	$	386,000

Payee	Issuance Date		Principal Amount		Balance at December 31, 2003		Balance at December 31, 2002

Spencer Trask Specialty Group, LLC		November 21, 2001	$	750,000	$	750,000	$	750,000
Member of Vyteris Board of Directors		December 3, 2001		250,000		250,000		250,000
Spencer Trask Specialty Group, LLC		January 25, 2002		750,000		750,000		750,000
Spencer Trask Specialty Group, LLC		February 22, 2002		1,500,000		1,500,000		1,500,000
Spencer Trask Specialty Group, LLC		April 10, 2002		1,000,000		1,000,000		1,000,000
Spencer Trask Specialty Group, LLC		May 9, 2002		2,000,000		2,000,000		2,000,000
Spencer Trask Specialty Group, LLC		July 12, 2002		1,000,000		1,000,000		1,000,000
Spencer Trask Specialty Group, LLC		August 20, 2002		625,000		625,000		625,000
Spencer Trask Specialty Group, LLC		October 17, 2002		925,000		925,000		925,000
Spencer Trask Specialty Group, LLC		November 26, 2002		880,000		880,000		880,000
Spencer Trask Specialty Group, LLC		December 23, 2002		1,000,000		1,000,000		1,000,000
Spencer Trask Specialty Group, LLC		January 24, 2003		1,000,000		1,000,000		—
Spencer Trask Specialty Group, LLC		March 7, 2003		1,155,000		1,155,000		—
Spencer Trask Specialty Group, LLC		March 28, 2003		1,150,000		1,150,000		—
Spencer Trask Specialty Group, LLC		April 30, 2003		607,500		607,500		—
Spencer Trask Specialty Group, LLC		May 30, 2003		1,152,500		1,152,500		—
Spencer Trask Specialty Group, LLC		July 8, 2003		1,240,000		1,240,000		—
Spencer Trask Specialty Group, LLC		July 29, 2003		1,200,000		1,200,000		—
Spencer Trask Specialty Group, LLC		August 28, 2003		1,165,000		1,165,000		—
Spencer Trask Specialty Group, LLC		October 3, 2003		1,000,000		1,000,000		—
						20,350,000		10,680,000
Less discount from issuance of warrants						—		217,854
					$	20,350,000	$	10,462,146

Payee	Issuance Date	Principal Amount		Balance at December 31, 2003

Spencer Trask Specialty Group, LLC	November 6, 2003	$	800,000	$	800,000
Spencer Trask Specialty Group, LLC	December 12, 2003		1,000,000		1,000,000
Spencer Trask Specialty Group, LLC	December 30, 2003		1,100,000		1,100,000
				$	2,900,000

Exercise of stock options			1,479,188
Conversion of Series A convertible, redeemable preferred stock			83,333
Conversion of Series B convertible, redeemable preferred stock			750,000
Conversion of convertible promissory notes			5,212,500
Exercise of warrants			2,400,000
B.Braun option to purchase additional shares			92,593
Total			10,017,614

Exercise Price	Outstanding	Weighted- Average Remaining Life (Years)

$0.60	61,917	7.5
$0.80	257,375	9.7
$4.00	129,417	8.0
	448,709	8.9

	Capital Lease Obligations		Operating Lease
Years ended December 31,
2004	$	26,059	$	304,000
2005		20,288		304,000
2006		11,333		228,000
2007		—		—
2008		—		—
Total minimum lease payments		57,680	$	836,000
Less amounts representing interest (interest imputed using rates from 7.4%-13.8%)		5,514
Present value of minimum capital lease payments		52,166
Less current portion of capital lease obligation		22,620
Capital least obligation, less current portion	$	29,546

	December 31
	2003		2002

Convertible preferred stock		833,333		833,333
Convertible debt		5,212,500		2,670,000
Warrants		2,085,000		1,068,000
Options		448,709		192,959
B. Braun purchase right		92,593		92,593
Total		8,672,135		4,856,885

	Quarters Ended
	March 31,			June 30,			September 30,			December 31,
2002
Contract research revenue	$	35,000		$	96,452		$	20,000		$	-
Net loss	$	(2,304,707	)	$	(2,836,718	)	$	(3,055,794	)	$	(2,570,475	)
Basic and diluted net (loss) per common share*	$	(1.36	)	$	(1.68	)	$	(1.79	)	$	(1.42	)

2003
Contract research revenue	$	105,000		$	40,000		$	55,000		$	-
Net loss	$	(2,700,327	)	$	(3,290,218	)	$	(3,310,183	)	$	(3,231,849	)
Basic and diluted net (loss) per common share*	$	(1.49	)	$	(1.82	)	$	(1.83	)	$	(1.78	)


	-3-


	-4-


	-5-


	-6-

													November
	Six months ended						Three months ended						10, 2000
	June 30,						June 30,						(inception) to
	2004			2003			2004			2003			June 30, 2004
Revenue:
Contract research revenue	$	60,000		$	145,000		$	60,000		$	40,000		$	688,000

Operating expenses:
Research and development		5,233,696			4,185,379			2,841,571			2,345,305			28,551,455
General and administrative		1,487,535			1,178,809			714,168			577,059			10,198,488
Total operating expenses		6,721,231			5,364,188			3,555,739			2,922,364			38,749,943
Interest income		(5,763	)		(3,327	)		(4,667	)		(1,636	)		(324,141	)
Interest expense to related parties		676,192			771,923			75,958			407,860			3,298,908
Interest expense		1,971,958			2,763			1,970,705			1,630			1,981,249
Net loss before state income taxes		(9,303,618	)		(5,990,547	)		(5,537,735	)		(3,290,218	)		(43,017,959	)
Benefit from state income taxes		—			—			—			—			(238,584	)
Net loss	$	(9,303,618	)	$	(5,990,547	)	$	(5,537,735	)	$	(3,290,218	)	$	(42,779,375	)
Basic and diluted net loss per share	$	(0.69	)	$	(3.31	)	$	(0.22	)	$	(1.82	)
Basic and diluted weighted average number of common shares outstanding		13,445,240			1,812,479			24,825,254			1,812,479