- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to section 13 or 15 (d) of the Securities Exchange Act
-------------------------------------
December 14, 2001
Date of Report
(Date of Earliest Event Reported)
NUTRASTAR INCORPORATED (formerly
known as Alliance Consumer International, Inc.)
(Exact Name as Specified in its Charter)
-------------------------------------
California 000-27728 87-0673375
---------------------- ----------------- ---------------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
1261 Hawk's Flight Court, El Dorado Hills, CA 95762
(Address of principal executive offices)
(916) 933-7000
Registrant's telephone number
- --------------------------------------------------------------------------------
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
This Form 8-K/A is filed to submit the financial statements and pro forma
financial information for the business acquired pursuant to the acquisition
reported on the Form 8-K previously filed on December 18, 2001.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of business acquired.
The audited financial statements of NutraStar Technologies
Incorporated (formerly NutraStar Incorporated, a Nevada corporation)
are filed herewith.
(b) Pro Forma Financial Information
The NutraStar Incorporated/Alliance Consumer International, Inc.
Proforma statements are filed herewith.
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.
NUTRASTAR INCORPORATED
Dated: February 27, 2002 s/James W. Kluber
----------------------------------------------------
James W. Kluber, Chief Financial Officer
(Authorized Officer and Principal Financial Officer)
NUTRASTAR INCORPORATED
DECEMBER 31, 2000
------------------------------------------------------------------
FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS' REPORT
EXHIBIT (a)
NutraStar, Incorporated
Financial Statements and
Independent Auditors' Report
- --------------------------------------------------------------------------------
Independent Auditors' Report 1
Financial Statements
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' Deficit 4
Statement of Cash Flows 5
Notes to Financial Statements 6 - 15
HOOD &
STRONG LLP
CERTIFIED PUBLIC ACCOUNTANTS
Consultants and
Business Advisors
101 California
Suite 1500
San Francisco
CA 94111
415.781.0793
fax 415.421.2976
Independent Auditors' Report
Board of Directors
Nutrastar, Incorporated
El Dorado Hills, California
We have audited the accompanying balance sheet of NUTRASTAR, INCORPORATED (the
Company) as of December 31, 2000 and the related statements of operations,
stockholders' deficit and cash flows for the period from February 4, 2000
(inception) through December 31, 2000. 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 audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. 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 audit provides 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 NutraStar, Incorporated as of
December 31, 2000 and the results of its operations and its cash flows for the
period then ended in conformity with accounting principles generally accepted in
the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has incurred losses since inception,
anticipates continuing losses for the foreseeable future and will require
substantial additional capital in order to complete its operational objectives.
This raises substantial doubt about the Company's ability to continue as a going
concern. Management plans in regard to these matters are also described in Note
2. The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
[Hood & Strong LLP]
December 19, 2001
San Francisco
Menlo Park
NutraStar, Incorporated
Balance Sheet
- --------------------------------------------------------------------------------
December 31, 2000
- --------------------------------------------------------------------------------
Assets
Current Assets:
Cash and cash equivalents $ 5,865
Accounts receivable 115,636
Inventories 515,772
Prepaid expenses and other 15,385
- --------------------------------------------------------------------------------
Total current assets 652,658
Property and Equipment, net 65,633
Intangible Assets, net 63,268
Deposits 100,525
- --------------------------------------------------------------------------------
Total assets $ 882,084
- --------------------------------------------------------------------------------
Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts payable $ 845,890
Deposits payable 896,500
Accrued expenses 58,517
Notes payable 255,000
- --------------------------------------------------------------------------------
Total current liabilities 2,055,907
- --------------------------------------------------------------------------------
Stockholders' Deficit:
Series A preferred stock - $.001 par value; 50,000 shares
authorized; 0 shares issued and outstanding
Common stock - $.001 par value; 100,000,000 shares
authorized; 11,170,710 shares issued and outstanding 419
Additional paid-in capital 382,458
Accumulated deficit 1,556,700)
- --------------------------------------------------------------------------------
Total stockholders' deficit 1,173,823)
- --------------------------------------------------------------------------------
Total liabilities and stockholders' deficit $ 882,084
- --------------------------------------------------------------------------------
See accompanying summary of accounting policies and notes to the financial
statements.
2
NutraStar, Incorporated
Statement of Operations
- --------------------------------------------------------------------------------
From February 4, 2000 (inception) through December 31, 2000
- --------------------------------------------------------------------------------
Net Sales $ 127,954
Cost of Sales 157,170
- --------------------------------------------------------------------------------
Gross profit (loss) (29,216)
- --------------------------------------------------------------------------------
Operating Expenses:
Marketing and selling 53,610
Engineering, research and development 30,985
General and administrative 1,428,426
- --------------------------------------------------------------------------------
Total operating expenses 1,513,021
- --------------------------------------------------------------------------------
Loss from Operations (1,542,237)
- --------------------------------------------------------------------------------
Other Income (Expense):
Interest expense (16,767)
Interest income 2,304
- --------------------------------------------------------------------------------
Total other income (expense) (14,463)
- --------------------------------------------------------------------------------
Loss before Provision for Income Taxes $ (1,556,700)
- --------------------------------------------------------------------------------
Provision for Income Taxes -
- --------------------------------------------------------------------------------
Net Loss $ (1,556,700)
- --------------------------------------------------------------------------------
See accompanying summary of accounting policies and notes to the financial
statements.
3
NutraStar, Incorporated
Statement of Stockholders' Deficit
- -----------------------------------------------------------------------------------------------------------
From February 4, 2000 (inception) through December 31, 2000
- -----------------------------------------------------------------------------------------------------------
Common Stock
---------------------------
Number of Additional Accumulated
Shares Amount Paid-in Capital Deficit Total
Common stock issued
for services
($0.10 per share) 35,960 $ 36 $ 3,560 $ 3,596
Common stock split
(300 to 1) 10,752,040
Common stock sold
($1.00 per share) 378,900 379 378,521 378,900
Common stock issued
for services
($0.10 per share) 3,810 4 377 381
Net loss from
February 4, 2000
(inception) through
December 31, 2000 $ (1,556,700) (1,556,700)
- -----------------------------------------------------------------------------------------------------------
December 31, 2000 11,170,710 $ 419 $ 382,458 $ (1,556,700) $ (1,173,823)
- -----------------------------------------------------------------------------------------------------------
See accompanying summary of accounting policies and notes to the financial
statements.
4
NutraStar, Incorporated
Statement of Cash Flows
- -------------------------------------------------------------------------------
From February 4, 2000 (inception) through December 31, 2000
- -------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net loss $ (1,556,700)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 7,172
Common stock issued for services 3,977
Changes in operating assets and liabilities:
Receivables (115,636)
Inventories (515,772)
Prepaid expenses and other (15,385)
Accounts payable and accrued expenses 904,407
Deposits (100,525)
- -------------------------------------------------------------------------------
Net cash used by operating activities (1,388,462)
- -------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Purchase of property and equipment (70,692)
Patents and trademarks costs (65,381)
- -------------------------------------------------------------------------------
Net cash used by investing activities (136,073)
- -------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock 378,900
Proceeds from notes payable 255,000
Proceeds from deposits payable 896,500
- -------------------------------------------------------------------------------
Net cash provided by financing activities 1,530,400
- -------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents 5,865
Cash and Cash Equivalents, beginning of year -
- -------------------------------------------------------------------------------
Cash and Cash Equivalents, end of year $ 5,865
- -------------------------------------------------------------------------------
See accompanying summary of accounting policies and notes to the financial
statements.
5
Note 1 - Description of Company:
NutraStar, Incorporated (the Company), a Nevada corporation,
markets proprietary whole food dietary supplements derived from
nutrient-dense stabilized rice bran (a nutraceutical) produced by
an affiliated company, The RiceX Company, a current stockholder
and a publicly-traded company. The Company has a license to
distribute certain derivatives of The RiceX Company's stabilized
rice bran, as well as value-added rice bran products in the
United States of America.
Note 2 - Going Concern:
The Company is subject to a number of business risks affecting
companies at a similar stage of development including,
competition from companies with greater resources and alternative
technologies, the ability to obtain financing to fund future
operations, dependence on a key supplier, dependence on a limited
number of customers, dependence on key employees and the ability
to attract and retain additional qualified personnel.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. The Company
incurred a net loss of $1,556,700 for the period from February 4,
2000 through December 31, 2000 and has a working capital deficit
of $1,403,249 and stockholders' deficit of $1,173,823 as of
December 31, 2000. These factors raise substantial doubt about
the Company's ability to continue as a going concern. The Company
has funding plans that include raising additional financing from
third parties and negotiating a line of credit with a bank. Also
effective December 14, 2001, the Company entered into a reverse
merger agreement with Alliance Consumer International, Inc.
(Alliance), a public shell company (see Note 15). Under the terms
of the merger, each issued and outstanding share of the Company's
common stock will be converted to 1.43 shares of Alliance's
common stock. In addition, $1 million in Alliance common stock
was sold to outside investors and $2.1 million in outstanding
Company debt was converted into Alliance's Series A preferred
stock. There is no assurance that the Company will be able to
achieve successful operations, obtain sufficient additional
financing or obtain a line of credit. The accompanying financial
statements do not include any adjustments that might result from
the outcome of these uncertainties.
6
Note 3 - Summary of Significant Accounting Policies:
a. Estimates
---------
The preparation of financial statements in conformity with
accounting standards generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
b. Cash Equivalents
----------------
The Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents.
c. Accounts Receivable
-------------------
The Company provides for the possible inability to collect
accounts receivable by recording an allowance in doubtful
accounts. The Company writes off an account when it is considered
to be uncollectable. As of December 31, 2000, there was no
allowance for doubtful accounts deemed necessary.
d. Inventories
-----------
Inventories are stated at the lower of cost (first-in, first-out)
or market. Inventories consist of nutraceutical products
manufactured by an affiliated company, The RiceX Company, which
the Company enhances for final distribution to its customers.
While the Company has an inventory of these products, which
contain ingredients supplied by the The RiceX Company, any
significant prolonged shortage of these ingredients or of the
supplies used to enhance these ingredients could materially
adversely affect the Company's results of operations.
e. Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation and
amortization expense is computed using the straight-line method
based over the estimated useful lives of the respective assets,
which range from three to seven years.
f. Intangible Assets
-----------------
The Company has exclusive licenses for several patents. All costs
associated with the patents are capitalized. Amortization is
computed on the straight-line method based on the estimated
useful life of twenty years. The Company also has several
registered trademarks which are amortized over the estimated
useful life of ten years.
7
g. Revenue Recognition
-------------------
Revenue is generally recognized upon shipment of product with a
provision for estimated returns and allowances recorded at that
time, if applicable.
h. Advertising
-----------
The Company expenses all advertising costs, including direct
response advertising, as they are incurred. Advertising expense
for the period ended December 31, 2000 was $17,640.
i. Income Taxes
------------
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes. Deferred income tax assets and
liabilities are recognized based on the temporary differences
between the financial statement and income tax basis of assets,
liabilities, and carryforwards using enacted tax rates. Valuation
allowances are established for deferred tax assets to the extent
of the likelihood that the deferred tax assets may not be
realized.
j. 401(k) Profit-Sharing Plan
--------------------------
Effective June 1, 2000, the Company adopted a 401(k)
profit-sharing plan for the exclusive benefit of eligible
employees and their beneficiaries. Substantially all employees
are eligible to participate. Matching contributions to the plan
are based on employee salary deferrals made, not to exceed a
certain percentage. For the period ended December 31, 2000, the
Company did not make any matching contributions. Discretionary
contributions of $14,157 were made by the Company during the same
period.
k. Adoption of New Accounting Pronouncements
-----------------------------------------
In June 1999 and June 2000, the Financial Accounting Standards
Board (FASB) issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities and SFAS No. 138, Accounting
for Certain Derivative Instruments and Certain Hedging
Activities, an amendment of SFAS No. 133, respectively. In June
2000, the FASB also issued SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133, which amends SFAS No.
133 to be effective, concurrently with SFAS No. 138, for all
fiscal quarters of all fiscal years beginning after June 15,
2000.
8
SFAS No. 133 and No. 138 require companies to recognize all
derivative contracts as either assets or liabilities in the
balance sheet and to measure them at fair value. If certain
conditions are met, a derivative may be specifically designated
as a hedge, the objective of which is to match the timing of gain
or loss recognition on the hedging derivative with the
recognition of (i) the changes in the fair value of the hedged
assets or liabilities that are attributable to the hedged risk or
(ii) the earnings effect of the hedged forecasted transaction.
For a derivative not designated as a hedging instrument, the gain
and loss is recognized in income in the period of change.
The Company has not entered into derivative contracts either to
hedge existing risks or for speculative purposes. Accordingly,
the adoption of the new standard did not have a material impact
on the Company's financial position, results of operations, or
cash flows.
In September 2000, the FASB issued SFAS No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities. The statement provides accounting and reporting
standards for transfers and servicing of financial assets and
extinguishments of liabilities, and revises the accounting
standards for securizations and transfers of financial assets and
collateral. The adoption of SFAS No. 140 did not have a material
impact on the Company's financial position, results of
operations, or cash flow.
In June 2001, the FASB issued SFAS No. 141, Business
Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets. SFAS No. 141 requires business combinations initiated
after June 30, 2001 to be accounted for using the purchase method
of accounting. It also specifies the types of acquired intangible
assets that are required to be recognized and reported separately
from goodwill. The Company does not anticipate any material
impact from the adoption of this standard. SFAS No. 142 will
require that goodwill and certain intangibles no longer be
amortized, but instead be tested for impairment at least
annually. SFAS No. 142 is effective for all fiscal years
beginning after December 15, 2001, with early application
permitted in certain circumstances. The Company does not expect
the adoption of FAS 141 and 142 to have a material impact on the
Company's financial position, results of operations or cash
flows.
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. The statement addresses financial
accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset
retirement costs. The statement is effective for all fiscal years
beginning after June 15, 2002, with early application permitted.
The Company does not expect the adoption of SFAS no. 143 to have
a material impact on the Company's financial position, results of
operations, or cash flows.
9
In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. This statement
supercedes SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of,
and the accounting and reporting provisions of APB Opinion No.
30, Reporting the Results of Operations - Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions, for
the disposal of a segment of a business. The statement is
effective for all fiscal years beginning after December 15, 2001,
with early application permitted. The Company does not expect the
adoption of SFAS No. 144 to have a material impact on the
Company's financial position, results of operations, or cash
flows.
Note 4 - Inventories:
Inventories consist of the following at December 31, 2000:
Purchased materials $ 11,416
Finished goods 504,356
-----------------------------------------------------------------
$ 515,772
-----------------------------------------------------------------
Note 5 - Property and Equipment:
Property and equipment consist of the following at December 31,
2000:
Furniture and equipment $ 14,826
Software 55,866
-----------------------------------------------------------------
70,692
Less accumulated depreciation and amortization (5,059)
-----------------------------------------------------------------
$ 65,633
-----------------------------------------------------------------
Depreciation and amortization expense for the period ended
December 31, 2000 was $5,059.
10
Note 6 - Intangible Assets:
Intangible assets consist of the following at December 31, 2000:
Patents $ 44,581
Trademarks 20,800
-----------------------------------------------------------------
65,381
Less: accumulated amortization (2,113)
-----------------------------------------------------------------
$ 63,268
-----------------------------------------------------------------
Amortization expense for the period ended December 31, 2000 was
$2,113.
Note 7 - Deposits Payable:
During the year the Company received deposits aggregating
$896,500 from potential investors. As of December 31, 2000, their
intent to permanently invest in the Company had not been
determined. The total amount has been reflected as a current
liability in the financial statements. Subsequent to year end,
some of these deposits were refunded and the balance converted to
preferred stock. See further discussion at Note 15.
Note 8 - Notes Payable:
Notes payable consist of the following at December 31, 2000:
Note payable to Newgold, Inc. with interest at 8%
per annum, originally due March 1, 2001 the note
was converted to preferred stock during 2001 $ 250,000
Note payable to an individual, non-interest bearing,
due January 31, 2001 5,000
-----------------------------------------------------------------
$ 255,000
-----------------------------------------------------------------
11
Note 9 - Income Taxes:
Net operating loss carryforwards at December 31, 2000 were
approximately $1,538,000 for both federal and California income
tax purposes. The net operating loss carryforwards are subject to
certain limitations and expire on various dates through the year
2020. The Company believes sufficient uncertainty exists
regarding the realization of the tax benefit associated with the
loss carryforwards. Accordingly, a valuation allowance has been
provided for the entire amount related thereto.
Note 10 - Commitments and Contingencies:
The Company leases its office space under a non-cancelable
operating lease with The RiceX Company, an affiliated company,
that expires September 2006 and requires monthly payments
approximating $5,230. Total rent expense for the period ended
December 31, 2000 was approximately $74,550.
Future minimum payments under this lease for the five years
subsequent to December 31, 2000 and thereafter are as follows:
Year Ending
December 31,
2001 $ 62,730
2002 63,122
2003 64,298
2004 64,700
2005 65,906
Thereafter 49,429
-----------------------------------------------------------------
$ 370,185
-----------------------------------------------------------------
12
Note 11 - Employment Agreements:
The Company has entered into several employment agreements with
key employees with terms ranging from three to ten years. Minimum
future payments under these agreements for the years subsequent
to December 31, 2000 are as follows:
2001 $ 625,000
2002 625,000
2003 508,750
2004 380,000
2005 283,333
Thereafter 937,497
-----------------------------------------------------------------
$ 3,359,580
-----------------------------------------------------------------
Generally if the Company terminates these agreements without
cause or the employee resigns with good reason, as defined, the
Company shall pay the employee salaries, bonuses and benefits
payable for the remainder of the term of the agreements.
Note 12 - Legal Proceedings:
The Company was involved in litigation with several potential
investors. The plaintiffs requested a return of $750,000 in
moneys deposited with the Company representing potential
permanent investments. These matters have been resolved in
connection with the merger with Alliance Consumer International,
Inc. (Alliance) during December 2001, wherein the Company is to
pay back $305,000 in cash to the plaintiffs, with the remaining
portion of the debt being converted into common and Series A
preferred stock of Alliance.
There are various other claims that have been made against the
Company by certain of its vendors. Management expects that the
settlement of these claims will not have a significantly adverse
effect on the Company's financial position and results of
operations.
13
Note 13 - Related Parties:
The Company has entered into a ten year agreement with The RiceX
Company (RiceX), its key product supplier, under which the
Company has the exclusive right to sell RiceX's rice bran
products in the US nutraceutical and human consumption market.
The sales price to the Company will be the lower of RiceX's
published standard price or the price negotiated by other
customers for like quantities and products. Under this agreement,
the Company maintained a $100,000 advance payment with RiceX
which is included in deposits as of December 31, 2000 and every
six months the Company must commit to purchase a certain amount
of RiceX products and if they fail to take delivery within twelve
months, they will forfeit any prepaid funds, as well as the right
to the product. To maintain rights under this agreement, the
Company must purchase $2,000,000 of product from RiceX by April
30, 2001, $5,000,000 in 2002, $6,000,000 in 2003, $7,200,000 in
2004, $8,640,000 in 2005, and increasing thereafter by 5% per
annum through the remaining term of the agreement. Purchases from
RiceX were approximately $620,000 (96% of total purchases) for
the period ended December 31, 2000. As of December 31, 2000, the
Company has recorded a payable to RiceX totaling approximately
$583,000 for inventory purchases. In consideration of the
exclusive rights granted by RiceX, the Company will pay RiceX a
quarterly royalty of 2% of gross receipts, less $250,000, from
the sale of nutraceutical products. As of December 31, 2000 there
were no royalty fees payable to RiceX. This agreement has been
cancelled subsequent to December 31, 2000 and has been replaced
with a new agreement which terms are described in Note 15.
As a result of entering into the above agreement, the Company
issued 1,240 shares to RiceX, which were subject to a stock split
in October 2000, bringing the total shares owned by RiceX to
372,000.
RiceX paid certain operating expenses on behalf of the Company
during the period. The expenses, approximating $310,000, were
reimbursed by the Company.
RiceX assigned the rights for two of its patents to the Company.
The value of these rights has not been determined and is not
reflected in the Company's financial statements, except for
additional costs incurred in the filing of these patents in other
countries.
Note 14 - Concentration of Credit Risk:
The Company has identified its financial instruments which are
potentially subject to credit risk. These financial instruments
consist principally of receivables. The Company's receivables are
unsecured, however, credit risk is substantially mitigated by the
Company's timely collection procedures.
14
Note 15 - Subsequent Events:
During the year 2001 and prior to the merger mentioned below, the
Company issued 327,500 shares of common stock in exchange for
cash and professional services rendered. The price of these
shares of stock ranged from $.25 to $1 per share.
Effective April 27, 2000, the Company became an 80% owner of
NutraGlo Incorporated (NutraGlo), a Nevada corporation. There was
no consideration for the shares of common stock received by the
Company. NutraGlo was non-operative during 2000. In 2001 NutraGlo
started marketing, manufacturing and distributing the Company's
stabilized rice bran and other nutraceuticals to the equine
market. In connection with the merger of the Company with
Alliance Consumer International, Inc., the Company issued 175,157
shares of common stock in exchange for the remaining 20% of the
common stock of NutraGlo.
On December 3, 2001, the Company granted 655,480 options to
purchase common stock, to several employees at prices ranging
from $.25 to $1 per share. Effective the same date, the Company
issued 650,000 warrants to various consultants at prices ranging
from $.25 to $1 per share.
Effective December 14, 2001, the Company merged with Alliance
Consumer International, Inc. (Alliance) whereby the Company
became a wholly-owned subsidiary of Alliance. In connection with
the merger, the Company issued an additional 249,770 shares of
common stock for services rendered. Under the terms of the
agreement, all of the issued and outstanding shares of the
Company's common stock were exchanged for 17 million shares of
Alliance common stock. Outstanding unexercised options and
warrants of the Company were also converted into options and
warrants to acquire shares of Alliance common stock on a ratio of
1 to 1.43. Alliance also obtained $1 million from the sale of its
common stock after completion of the merger agreement. These
shares of stock were issued for $1 per share. Prior to the
merger, NutraStar changed its name to NutraStar Technologies
Incorporated. Subsequent to the merger, Alliance changed its name
to NutraStar, Incorporated.
Also subsequent to the merger, the Company converted
approximately $2.1 million of debt, which includes certain notes
payable outstanding as of year-end, additional notes payable
executed during 2001, $300,000 of notes payable to principal
stockholders, investor deposits and vendor payables, into Series
A preferred stock.
The Company entered into a new 15-year agreement with The RiceX
Company (RiceX) to be the exclusive distributor of rice solubles
and rice bran fiber concentrate in the United States of America
and to have the exclusive rights to various patents and
trademarks owned by RiceX. Under the terms of this new agreement,
RiceX has agreed to cancel certain indebtedness by the Company in
exchange for 130,000 shares of Series A preferred stock, has
agreed to new minimum purchase requirements, and has agreed to
extend the term of the agreement for five years, with two
additional renewal periods of 5 years each.
15
PROFORMA FINANCIAL STATEMENTS
FOR
NUTRASTAR INCORPORATED /
ALLIANCE CONSUMER INTERNATIONAL, INC.
--------------------------------------------------------------------
16
EXHIBIT (b)
NUTRASTAR INCORPORATED / ALLIANCE CONSUMER INTERNATIONAL, INC.
PROFORMA
Balance Sheet
- ------------------------------------------------------------------------------------------------------------------------------------
September 30, 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Alliance Proforma
NutraStar, Consumer Consolidated
Incorporated International, Inc. Total Eliminations Total
Assets
Current Assets
Cash and cash equivalents $ 38,864 $ 484 $ 39,348 $ 39,348
Accounts receivable 254,333 254,333 254,333
Inventories 140,526 140,526 140,526
Prepaid expenses and other 15,357 15,357 15,357
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 449,080 484 449,564 449,564
Property and Equipment, net 230,573 230,573 230,573
Intangible Assets, net 92,176 92,176 92,176
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets 771,829 484 772,313 772,313
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 726,495 $ 22,152 $ 748,647 $ 748,647
Deposits payable 441,000 441,000 441,000
Accrued expenses 295,943 295,943 295,943
Notes payable 1,375,000 1,375,000 1,375,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 2,838,438 22,152 2,860,590 2,860,590
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock:
Series A preferred stock; 3,000,000 shares
authorized; 0 shares issued and outstanding
Common stock:
No par value; 50,000,000 shares authorized;
20,043,024 shares issued and outstanding 746 1,500 2,246 $ (1,500) 746
Additional paid-in capital 488,380 488,380 1,500 489,880
Accumulated deficit (2,555,735) (23,168) (2,578,903) (2,578,903)
- ------------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity (2,066,609) (21,668) (2,088,277) - (2,088,277)
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 771,829 $ 484 $ 772,313 $ - $ 772,313
- ------------------------------------------------------------------------------------------------------------------------------------
NUTRASTAR INCORPORATED / ALLIANCE CONSUMER INTERNATIONAL, INC.
PROFORMA
Income Statement
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For the Nine Months Ended September 30, 2001
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Alliance Proforma
NutraStar, Consumer Consolidated
Incorporated International, Inc. Total Eliminations Total
Net Sales $ 1,134,980 $ 1,134,980 $ 1,134,980
Cost of Sales 729,347 729,347 729,347
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Gross profit 405,633 405,633 1,864,327
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Marketing and Selling 14,022 14,022 14,022
Engineering, Research and Development 47,498 47,498 47,498
General and Administrative 1,210,532 $ 23,168 1,233,700 1,233,700
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Total operating expenses 1,272,052 23,168 1,295,220 1,295,220
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Income from Operations (866,419) (23,168) (889,587) (889,587)
Other Income (Expense):
Interest expense (133,719) (133,719) (133,719)
Interest income 1,103 1,103 1,103
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(132,616) (132,616) (132,616)
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Net Loss $ (999,035) $ (23,168) $ (1,022,203) $ (1,022,203)
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Accumulated Deficit, 12/31/00 (1,556,700) 0 (1,556,700) (1,556,700)
Accumulated Deficit 9/30/01 (2,555,735) (23,168) (2,578,903) 0 (2,578,903)
NUTRASTAR INCORPORATED / ALLIANCE CONSUMER INTERNATIONAL, INC.
PROFORMA
Income Statement
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For the Three Months Ended September 30, 2001
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Alliance Proforma
NutraStar, Consumer Consolidated
Incorporated International, Inc. Total Eliminations Total
Net Sales $ 360,206 $ 360,206 $ 360,206
Cost of Sales 162,122 162,122 162,122
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Gross profit 198,084 198,084 522,328
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Marketing and Selling 3,804 3,804 3,804
Engineering, Research and Development 25,970 25,970 25,970
General and Administrative 339,311 $ 10,696 350,007 350,007
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Total operating expenses 369,085 10,696 379,781 379,781
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Income from Operations (171,001) (10,696) (181,697) (181,697)
Other Income (Expense):
Interest expense (46,451) (46,451) (46,451)
Interest income 123 123 123
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(46,328) (46,328) (46,328)
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Net Loss $ (217,329) $ (10,696) $ (228,025) $ (228,025)
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NUTRASTAR INCORPORATED / ALLIANCE CONSUMER INTERNATIONAL, INC.
PROFORMA
Balance Sheet
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December 31, 2000
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Alliance Proforma
NutraStar, Consumer Consolidated
Incorporated International, Inc. Total Eliminations Total
Assets
Current Assets:
Cash and cash equivalents $ 5,865 $ 5,865 $ 5,865
Accounts receivable 115,636 115,636 115,636
Inventories 515,772 515,772 515,772
Prepaid expenses and other 15,385 15,385 15,385
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Total current assets 652,658 652,658 652,658
Property and Equipment, net 65,633 65,633 65,633
Intangible Assets, net 63,268 63,268 63,268
Deposits 100,525 100,525 100,525
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Total assets $ 882,084 $ 882,084 $ 882,084
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Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 845,890 $ 845,890 $ 845,890
Deposits payable 896,500 896,500 896,500
Accrued expenses 58,517 58,517 58,517
Notes payable 255,000 255,000 255,000
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Total liabilities 2,055,907 2,055,907 2,055,907
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Stockholders' Equity:
Preferred stock:
Series A preferred stock; 3,000,000 shares
authorized; 0 shares issued and outstanding
Common stock:
No par value; 50,000,000 shares authorized;
15,943,905 shares issued and outstanding 419 419 419
Additional paid-in capital 382,458 382,458 382,458
Accumulated deficit (1,556,700) (1,556,700) (1,556,700)
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Total stockholders' equity (1,173,823) (1,173,823) (1,173,823)
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Total liabilities and stockholders' equity $ 882,084 $ 882,084 $ 882,084
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NUTRASTAR INCORPORATED / ALLIANCE CONSUMER INTERNATIONAL, INC.
PROFORMA
Income Statement
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For the Period Ended December 31, 2000
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Alliance Proforma
NutraStar, Consumer Consolidated
Incorporated International, Inc. Total Eliminations Total
Net Sales $ 127,954 $ 127,954 $ 127,954
Cost of Sales 157,170 157,170 157,170
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Gross profit (loss) (29,216) (29,216) (29,216)
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Marketing and Selling 53,610 53,610 53,610
Engineering, Research and Development 30,985 30,985 30,985
General and Administrative 1,428,426 1,428,426 1,428,426
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Total operating expenses 1,513,021 1,513,021 1,513,021
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Income from Operations (1,542,237) (1,542,237) (1,542,237)
Other Income (Expense):
Interest expense (16,767) (16,767) (16,767)
Interest income 2,304 2,304 2,304
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(14,463) (14,463) (14,463)
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Net income $ (1,556,700) $ (1,556,700) $ (1,556,700)
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NutraStar, Incorporated/
Alliance Consumer International, Inc.
Proforma
Note to Proforma Financial Statements
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Note 1 - Acquisition:
On December 14, 2001, Alliance Consumer International, Inc.
(Alliance) acquired all of the outstanding common stock of
NutraStar, Incorporated (Nutrastar). For accounting purposes, the
acquisition has been treated as a recapitalization of NutraStar
with NutraStar as the acquirer (reverse acquisition). The
principal business of NutraStar is the marketing of proprietary
nutraceutical whole food and arthritic relief products derived
from nutrient-dense stabilized rice bran. Proforma information
giving effect to the acquisition as if the acquisition took place
February 4, 2000 is as reflected in the proforma financial
statements attached. The proforma statements do not purport to be
indicative of the results of operations or financial position of
the combined company that would have actually been obtained had
such transaction been completed as of the assumed dates and for
the periods presented, or which may be obtained in the future.
The proforma financial statements should be read in conjunction
with the separate historical statements of Alliance and NutraStar
and the notes thereto.
The results of operations of the separate companies prior to the
combination are summarized as follows:
Net Sales Net Loss
Nine months ended September 30, 2001:
Alliance Consumer International, Inc. $ (23,168)
NutraStar, Incorporated $ 1,134,980 (999,035)
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$ 1,134,980 $ (1,022,203)
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Three months ended September 30, 2001:
Alliance Consumer International, Inc. $ (10,696)
NutraStar, Incorporated $ 360,206 (217,329)
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$ 360,206 $ (328,025)
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Period Ending December 31, 2000:
Alliance Consumer International, Inc.
NutraStar, Incorporated $ 127,954 $ (1,556,700)
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$ 127,954 $ (1,556,700)
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