Exhibit 99.3
(Unaudited Pro Forma Financial Statements)
Unaudited Pro Forma Financial Statements
Effective May 31, 2007, Natural Nutrition, Inc., a Nevada corporation (the “Company”) closed on a purchase agreement (the “Purchase Agreement”) with Nesracorp. Inc., a company organized under the laws of Canada (the “Vendor”) pursuant to which the Company purchased from the Vendor, and the Vendor sold, assigned transferred and conveyed to the Company, all of Vendor’s right, title, benefit and interest in (a) all of the then outstanding principal and interest accrued thereon (the “Indebtedness”) owed to the Vendor by Interactive Nutrition International, Inc. (“INII”), a company organized under the laws of Canada and a wholly-owned subsidiary of the Company, under a promissory note in the original principal amount of Fifteen Million Canadian Dollars (Cdn$15,000,000) issued (in part) by INII to the Vendor on March 31, 2004 (the “Subsidiary Note”) and (b) a general security agreement, of even date with the Subsidiary Note, and a share pledge agreement, of even date with the Subsidiary Note, both granted concurrently by INII and its shareholder, the Company (as successor in interest to the now defunct Bio One Corporation) in connection with the Indebtedness (together, both instruments are hereinafter referred to as the “Security”) for a purchase price equal to (i) Seven Million Six Hundred Fifty Thousand Canadian Dollars (Cdn$7,650,000) and (ii) the execution by the Company of that certain Mutual Release. The Company and the Vendor entered into an Assignment and Conveyance (“Assignment”), of even date with the Purchase Agreement, in order to properly effectuate the assignment by the Vendor to the Company of all of the right, title, benefit and interest in and to the Purchased Assets, which such Purchased Assets include, without limitation, the Indebtedness, the Security and all loan, security and other documentation relating to the Indebtedness and the Security purchased under the Purchase Agreement. The Company and the Vendor executed the Purchase Agreement, the Mutual Release and the Assignment on May 25, 2007, however they closed the transactions upon the execution of the SPA on May 31, 2007.
The unaudited pro forma consolidated balance sheet combines the historical balance sheets of the Company and INII as if the transaction had taken place on March 31, 2007. The unaudited pro forma consolidated statements of operations for the year ended December 31, 2006 and for the three month period ended March 31, 2007 combine the historical statements of operations of the Company and INII as if the transaction had taken place at the beginning of each reporting period. The historical financial information has been adjusted to give effect to pro forma events that are (i) directly attributable to the transaction and (ii) factually supportable. In addition, with respect to the statements of operations, the pro forma events must be expected to have a continuing impact on the combined results.
This information should be read in conjunction with (i) the accompanying notes to the unaudited pro forma consolidated financial statements, (ii) the Company’s separate historical audited financial statements as of and for the year ended December 31, 2006, included in its Annual Report on Form 10-KSB previously filed with the U.S. Securities and Exchange Commission ("SEC"), and (iii) the Company’s separate historical financial information as of and for the three month period ended March 31, 2007, included in its Quarterly Report on Form 10-QSB previously filed with the SEC.
The unaudited pro forma consolidated financial information is presented for informational purposes only. The pro forma information is not necessarily indicative of what the financial position or results of operations actually would have been had the transaction been completed as of the date indicated. In addition, the unaudited pro forma consolidated financial information does not purport to project the future financial position or operating results of the Company after the transaction.
The pro forma adjustments are based on preliminary estimates, available information, and certain assumptions, all as more fully described in the notes to the unaudited pro forma financial statements, and may be revised as additional information becomes available.
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NATURAL NUTRITION, INC. AND SUBSIDIARIES |
(Formerly CSI Business Finance, Inc.) |
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS |
FOR THE YEAR ENDING DECEMBER 31, 2006 |
Natural Nutrition, | Pro Forma Adjustments | Pro Forma | ||||||||||||||
Inc. | INII, Inc. | Debit | Credit | Combined | ||||||||||||
REVENUE | ||||||||||||||||
Sales revenue | $ | - | $ | 13,576,635 | $ | 13,576,635 | ||||||||||
Lease and fee income | 132,755 | - | 132,755 | |||||||||||||
Trading gains (losses) | (168,398 | ) | - | (168,398 | ) | |||||||||||
Dividends and interest income | 644,675 | - | 644,675 | |||||||||||||
Total revenue | 609,032 | 13,576,635 | 14,185,667 | |||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Cost of sales revenue | - | 9,904,147 | 1 | 88,150 | 9,992,297 | |||||||||||
Selling, general and administrative expenses | 1,441,989 | 1,549,058 | 1 | 548,350 | 3,539,397 | |||||||||||
Interest expense | 1,219,718 | - | 1,219,718 | |||||||||||||
Total operating expenses | 2,661,707 | 11,453,205 | 14,751,412 | |||||||||||||
OPERATING INCOME(LOSS) | (2,052,675 | ) | 2,123,430 | (565,745 | ) | |||||||||||
OTHER (INCOME) EXPENSE | ||||||||||||||||
Net change in fair value of derivatives | (27,874 | ) | - | (27,874 | ) | |||||||||||
Interest expense | - | 864,633 | 3 | 1,115,147 | 2 | 716,540 | 1,263,240 | |||||||||
Minority interest | 4 | 73,375 | 73,375 | |||||||||||||
Loss on extinguishment of debenture receivable | 639 | - | 639 | |||||||||||||
Interest, other income and expense | (46,972 | ) | - | (46,972 | ) | |||||||||||
Receivership items | - | 124,363 | 5 | 124,363 | - | |||||||||||
Total other (income) expense | (74,207 | ) | 988,996 | 1,262,408 | ||||||||||||
Income (loss) before provision for income taxes | (1,978,468 | ) | 1,134,434 | (1,828,153 | ) | |||||||||||
Income taxes | - | 471,367 | 6 | 27,144 | 498,511 | |||||||||||
Foreign exchange translation | - | 26,532 | 26,532 | |||||||||||||
NET INCOME(LOSS) APPLICABLE TO COMMON SHARES | $ | (1,978,468 | ) | $ | 636,535 | $ | (2,353,196 | ) | ||||||||
Basic and diluted loss per share | $ | (0.25 | ) | $ | (0.30 | ) | ||||||||||
Weighted shares outstanding - basic and diluted | 7,798,198 | 7,798,198 |
Notes to the Unaudited Pro Forma Consolidated Statement of Operations for the Year Ending December 31, 2006
1 - Depreciation effect of basis step up of assets to FMV based on appraisal.
2 - Elimination of interest expense on the Nesracorp note.
3 - Recording of interest expense on the new borrowing for acquisition.
4 - Recording of 10% minority interest.
5 - Elimination of receivership expenses.
6 - Adjustment of tax effect for the elimination of receivership expenses.
See Notes to the Unaudited Pro Forma Financial Statements |
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NATURAL NUTRITION, INC. AND SUBSIDIARIES |
(Formerly CSI Business Finance, Inc.) |
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET |
MARCH 31, 2007 |
Natural Nutrition, | Pro Forma Adjustments | Pro Forma | ||||||||||||||
Inc. | INII, Inc. | Debit | Credit | Combined | ||||||||||||
ASSETS | ||||||||||||||||
CURRENT ASSETS | ||||||||||||||||
Cash and cash equivalents | $ | 89,540 | $ | 701,754 | 4 | 1,070,910 | $ | 1,862,204 | ||||||||
Accounts receivable | - | 1,875,791 | 7 | 539,918 | 2,415,709 | |||||||||||
Inventory | - | 2,487,328 | 2,487,328 | |||||||||||||
Notes receivable | 1,978,142 | - | 1,978,142 | |||||||||||||
Investment in marketable securities | 702,782 | - | 702,782 | |||||||||||||
Due from affiliate | 113,244 | - | 113,244 | |||||||||||||
Prepaid expenses, deferred financing costs and other current assets | 112,737 | 268,879 | 381,616 | |||||||||||||
Total current assets | 2,996,445 | 5,333,751 | 9,941,024 | |||||||||||||
NONCURRENT ASSETS | ||||||||||||||||
Note receivable - INII | 4 | 7,064,695 | 9 | 7,064,695 | - | |||||||||||
Investments | 9,462,958 | - | 6 | 8,008,237 | 25,000 | |||||||||||
7 | 539,918 | |||||||||||||||
8 | 889,804 | |||||||||||||||
Fixed assets, net | 4,292 | 848,859 | 3 | 1,289,610 | 2 | 848,859 | 1,293,902 | |||||||||
Deferred financing costs | - | - | 4 | 153,000 | 153,000 | |||||||||||
Goodwill | 5 | 9,638,931 | 9,638,931 | |||||||||||||
Intellectual property | - | 12,954,000 | 5 | 8,633,569 | 4,320,431 | |||||||||||
TOTAL ASSETS | 12,463,695 | $ | 19,136,611 | $ | 25,372,289 | |||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | ||||||||||||||||
CURRENT LIABILITIES | ||||||||||||||||
Accounts payable and accrued liabilities and other current liabilities | $ | 260,273 | $ | 1,772,681 | $ | 2,032,955 | ||||||||||
Income taxes payable - current | - | 2,193,662 | 2,193,662 | |||||||||||||
Total current liabilities | 260,273 | 3,966,343 | 4,226,617 | |||||||||||||
Debenture payable - net of discount of $331,094 | 15,297,105 | - | 15,297,105 | |||||||||||||
Secured convertible note payable (net of discount of $2,185,159) | - | - | 4 | 7,107,735 | 7,107,735 | |||||||||||
Deferred income taxes payable | - | 831,505 | 831,505 | |||||||||||||
Note payable | - | 9,603,750 | 5 | 2,539,055 | - | |||||||||||
9 | 7,064,695 | |||||||||||||||
Capital lease payable and other long-term liabilities | - | 160,349 | 160,349 | |||||||||||||
Derivative liability | 210,622 | - | 4 | 1,180,870 | 1,391,492 | |||||||||||
Accrued interest payable | 896,934 | - | 896,934 | |||||||||||||
Total liabilities | 16,664,934 | 14,561,947 | 29,911,738 | |||||||||||||
Minority interest | 1 | 551,594 | 551,594 | |||||||||||||
COMMITMENTS AND CONTINGENCIES | - | - | - | |||||||||||||
SHAREHOLDERS' EQUITY (DEFICIT) | ||||||||||||||||
Preferred stock, $.01 par value; 10,000,000 shares authorized | ||||||||||||||||
Preferred stock Series A Convertible $0.01 par value; 100,000 shares authorized, 94,443 shares issued and outstanding and no liquidation or redemption value | 944 | - | 944 | |||||||||||||
Common stock, par value $0.001; 10,000,000,000 shares authorized; 12,737,983 issued and outstanding | 12,738 | - | 12,738 | |||||||||||||
Share capital | - | 87 | 1 | 87 | - | |||||||||||
Additional paid-in capital | 202,697 | - | 2 | 848,859 | 1 | 4,574,663 | 202,697 | |||||||||
3 | 1,289,610 | |||||||||||||||
5 | 3,544,417 | |||||||||||||||
6 | 8,008,237 | |||||||||||||||
1 | 551,594 | |||||||||||||||
Retained earning (deficit) | (4,417,618 | ) | 3,941,189 | 1 | 3,941,189 | (5,307,422 | ) | |||||||||
8 | 889,804 | |||||||||||||||
Other comprehensive income | - | 633,387 | 1 | 633,387 | - | |||||||||||
Total shareholders' deficit equity (deficit) | (4,201,239 | ) | 4,574,663 | (5,091,043 | ) | |||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) | $ | 12,463,695 | $ | 19,136,611 | 44,233,971 | 44,233,971 | $ | 25,372,289 |
Notes to the Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2007
1 - Reclass INII equity to Additional paid-in capital and set up minority interest
2 - Reclass net book value of fixed assets to Additional paid-in capital.
3 - Record fixed assets at appraised value.
4 - Record debt incurred for the acquisition of INII.
5 - Reclass to Additional paid-in capital the reduction in the note payable to Nesracorp for the amount paid to acquire the note by Natural Nutrition, Inc. and to reduce Intellicual property to appraised value.
6 - Eliminate the investment in INII on the books of Natural Nutrition, Inc.
7 - Reduce the investment in INII for proceeds received from sale.
8 - To expense 10% equity interest in INII received by an affiliated company for services rendered.
9 - Eliminate intercompany notes receivable / payable.
See Notes to the Unaudited Pro Forma Financial Statements
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NATURAL NUTRITION, INC. AND SUBSIDIARIES |
(Formerly CSI Business Finance, Inc.) |
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED |
MARCH 31, 2007 |
Natural Nutrition, | Pro Forma Adjustments | Pro Forma | ||||||||||||||
Inc. | INII | Debit | Credit | Combined | ||||||||||||
REVENUE | ||||||||||||||||
Sales revenue | $ | - | $ | 3,902,154 | $ | 3,902,154 | ||||||||||
Fee income | 2,965 | - | 2,965 | |||||||||||||
Trading gains (losses) | 3,285 | - | 3,285 | |||||||||||||
Dividends and interest income | 81,217 | - | 81,217 | |||||||||||||
Total revenue | 87,467 | 3,902,154 | 3,989,621 | |||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Cost of sales revenue | - | 3,008,336 | 1 | 22,038 | 3,030,374 | |||||||||||
Selling, general and administrative expenses | 374,113 | 338,962 | 1 | 137,088 | 850,163 | |||||||||||
Interest expense | 249,910 | - | 249,910 | |||||||||||||
Total operating expenses | 624,023 | 3,347,298 | 4,130,447 | |||||||||||||
OPERATING INCOME(LOSS) | (536,556 | ) | 554,856 | (140,826 | ) | |||||||||||
OTHER (INCOME) EXPENSE | ||||||||||||||||
Net change in fair value of derivative | 40,368 | - | 40,368 | |||||||||||||
Interest and other income | (9,519 | ) | - | (9,519 | ) | |||||||||||
Interest expense | 302,754 | 3 | 278,787 | 2 | 179,135 | 402,406 | ||||||||||
Receiver items | - | 36,000 | 5 | 36,000 | - | |||||||||||
Minority interest | - | - | 4 | 14,536 | 14,536 | |||||||||||
Total other expense | 30,849 | 338,754 | 447,791 | |||||||||||||
- | ||||||||||||||||
Income (loss) before provision for income taxes | (567,405 | ) | 216,102 | (588,617 | ) | |||||||||||
- | ||||||||||||||||
INCOMETAX PROVISION | - | 98,888 | 6 | 7,858 | 106,746 | |||||||||||
NET INCOME(LOSS) APPLICABLE TO COMMON SHARES | $ | (567,405 | ) | $ | 117,214 | $ | (695,363 | ) | ||||||||
Net loss per share for basic and diluted | $ | (0.04 | ) | $ | (0.05 | ) | ||||||||||
Weighted shares outstanding for basic and diluted | 12,759,712 | 12,759,712 |
Notes to the Unaudited Pro Forma Consolidated Statements of Operations for the Three Months Ended March 31, 2007
1 - Depreciation effect of basis step up of assets to FMV based on appraisal.
2 - Elimination of interest expense on note from the settlement of the Nesracorp note.
3 - Recording of interest expense on the new borrowing for acquisition.
4 - Recording of 10% minority interest.
5 - Elimination of receivership expenses.
6 - Adjustment of tax effect for the elimination of receivership expenses.
See Notes to the Unaudited Pro Forma Financial Statements
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