<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
JUNE 7, 1999 (MARCH 10, 1999)
IRWIN NATURALS/4HEALTH, INC.
(Exact name of registrant as specified in its charter)
UTAH 0-18160 87-046822
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
10549 WEST JEFFERSON BLVD.,
CULVER CITY, CA 90232
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (310) 253-5305
N/A
(Former name and former address, if changed since last report)
<PAGE>
ITEM 7. . . . . . . . . . . . . . . . FINANCIAL STATEMENTS AND EXHIBITS.
This Form 8-K/A amends the Form 8-K filed with the Securities and
Exchange Commission on March 24, 1999 (the "Prior Form 8-K"), by Irwin
Naturals/4Health, Inc., a Utah corporation ("IN"), in connection with the
Asset Purchase Agreement dated March 10, 1999, between IN, and Inholtra
Investment Holdings and Trading, N.V., a Netherlands Antilles corporation
("Holdings"), Inholtra, Inc., a Florida corporation ("Inc."), Inholtra
Natural, Ltd., a Maine corporation ("INL"), and Vito V. Florio (together with
Holdings, Inc. and INL, "Seller"), providing for the sale by Seller to IN of
Seller's business of manufacturing, marketing, distributing and selling
certain nutritional supplements and related products throughout the United
States and in certain other countries, as a going concern, and other than
certain excluded assets, all of the assets and rights related thereto.
This Form 8-K/A amends the Prior Form 8-K by setting forth the following
financial information required to reported on Form 8-K by Item 7 of Form 8-K.
(a) Financial Statements of Businesses Acquired.
Balance Sheets of Inholtra Natural, Ltd. as at December 31, 1997
and 1998 and the related statements of operations, shareholder's
equity (deficit) and cash flows for the years then ended together
with the notes thereto, as audited by Arthur Andersen, LLP,
independent accountants, as stated in their report therein.
(b) Pro Forma Financial Information.
Pro Forma statement balance sheet as of December 31, 1998 and Pro
Forma statement of operations for the year ended December 31, 1998
and explanatory notes.
1
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THIS REPORT ON FORM 8-K/A INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"). ALL STATEMENTS OTHER THAN STATEMENTS OF
HISTORICAL FACTS INCLUDED IN THIS REPORT, INCLUDING, WITHOUT LIMITATION,
THOSE REGARDING THE COMPANY'S FINANCIAL POSITION, BUSINESS, MARKETING AND
PRODUCT INTRODUCTION AND DEVELOPMENT PLANS AND OBJECTIVES OF MANAGEMENT FOR
FUTURE OPERATIONS, ARE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY
BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS
ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO
HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS ("CAUTIONARY STATEMENTS")
ARE DISCLOSED UNDER "RISKS RELATED TO THE BUSINESS OF 4HEALTH" AND ELSEWHERE
IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K AND IN "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND ELSEWHERE
IN THE ANNUAL REPORT. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING
STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON BEHALF OF THE
COMPANY, ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY
STATEMENTS.
ITEM 7 (a), Financial Statements of Business Acquired
Report of Independent Public Accountants
To Inholtra Natural, Ltd.:
We have audited the accompanying balance sheets of Inholtra Natural, Ltd. as
of December 31, 1997 and 1998, and the related statements of operations,
shareholder's equity (deficit) and cash flows for the years then ended.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide 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 Inholtra Natural, Ltd. as of
December 31, 1997 and 1998, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen, LLP.
Boston, Massachusetts
May 13, 1999
2
<PAGE>
INHOLTRA NATURAL, LTD.
Balance Sheets
December 31, 1997 and 1998
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 129,591 $ 361,654
Accounts receivable, net of allowance for doubtful accounts of
$28,735 and $71,645 at December 31, 1997 and 1998, respectively 23,565 804,677
Prepaid expenses and other current assets 6,811 5,986
----------- -----------
Total current assets 159,967 1,172,317
Property and Equipment, at cost:
Office furniture 5,500 8,500
Computer equipment 2,944 2,944
----------- -----------
8,444 11,444
Less--Accumulated depreciation (2,749) (5,749)
----------- -----------
5,695 5,695
Patent costs, net of accumulated amortization of $1,167 and $3,500
at December 31, 1997 and 1998, respectively 33,833 31,500
----------- -----------
Total assets $ 199,495 $ 1,209,512
=========== ===========
Liabilities and Shareholder's Equity (Deficit)
Current Liabilities:
Accounts payable $ 45,371 $ 52,891
Accrued expenses 214,968 947,202
----------- -----------
Total current liabilities 260,339 1,000,093
Commitments and Contingencies (Note 7) - -
Shareholder's Equity (Deficit):
Common stock, no par value: 2,000 shares authorized, 100 shares issued and
outstanding 100 100
Retained earnings (deficit) (60,944) 209,319
----------- -----------
Total shareholder's equity (deficit) (60,844) 209,419
----------- -----------
Total liabilities and shareholder's equity (deficit) $ 199,495 $ 1,209,512
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
INHOLTRA NATURAL, LTD.
Statements of Operations
for the Years Ended December 31, 1997 and 1998
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Net Revenue $ 3,570,002 $ 4,839,432
Cost of Revenue 2,608,107 3,218,202
----------- -----------
Gross profit 961,895 1,621,230
Selling, General and Administrative Expense 895,692 1,246,860
----------- -----------
Income from Operations 66,203 374,370
Other Income, net 11,758 7,367
----------- -----------
Net income $ 77,961 $ 381,737
=========== ===========
Basic and Diluted Net Income Per Share $ 780 $ 3,817
=========== ===========
Weighted Average Common Equivalent Shares Outstanding 100 100
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
INHOLTRA NATURAL, LTD.
Statements of Shareholder's Equity (Deficit)
for the Years Ended December 31, 1997 and 1998
<TABLE>
<CAPTION>
Retained Total
Common Stock Earnings Shareholder's
Number of Shares No Par Value (Deficit) Equity (Deficit)
<S> <C> <C> <C> <C>
Balance, December 31, 1996 100 $ 100 $ - $ 100
Distribution to shareholder - - (138,905) (138,905)
Net income - - 77,961 77,961
--- ----- ---------- ----------
Balance, December 31, 1997 100 100 (60,944) (60,844)
Distribution to shareholder - - (111,474) (111,474)
Net income - - 381,737 381,737
--- ----- ---------- ----------
Balance, December 31, 1998 100 $ 100 $ 209,319 $ 209,419
=== ===== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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INHOLTRA NATURAL, LTD.
Statements of Cash Flows
for the Years Ended December 31, 1997 and 1998
<TABLE>
<CAPTION>
1997 1998
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 77,961 $ 381,737
Adjustments to reconcile net income to net cash provided by
operating activities-
Depreciation and amortization 3,916 5,333
Changes in current assets and liabilities-
Accounts receivable, net (23,565) (781,112)
Prepaid expenses and other current assets (6,811) 825
Accounts payable 45,371 7,520
Accrued expenses 214,968 732,234
---------- ----------
Net cash provided by operating activities 311,840 346,537
---------- ----------
Cash Flows from Investing Activities:
Purchases of property and equipment (8,444) (3,000)
Increase in patent costs (35,000) -
---------- ----------
Net cash used in investing activities (43,444) (3,000)
---------- ----------
Cash Flows from Financing Activities:
Distribution to shareholder (138,905) (111,474)
---------- ----------
Net Increase in Cash and Cash Equivalents 129,491 232,063
Cash and Cash Equivalents, beginning of year 100 129,591
---------- ----------
Cash and Cash Equivalents, end of year $ 129,591 $ 361,654
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
INHOLTRA NATURAL, LTD.
Notes to Financial Statements
December 31, 1998
(1) Organization and Sale of Certain Assets
Inholtra Natural, Ltd. (the Company), a Maine subchapter S corporation
incorporated on December 1, 1996, is a supplier of a product that is a
dietary regimen and combination of nutritional supplements which provide
symptomatic relief from arthritis. The Company commenced operations in
January 1997.
On March 10, 1999, the Company sold its operating assets and liabilities to
Irwin Naturals/4Health, Inc. (the Buyer). The sale price totaled
$13,250,000, of which $3,250,000 was paid in cash. The remaining
$10,000,000 is payable through a promissory note secured by the assets
sold. The note bears interest at an annual rate of 8% and is due on June
10, 1999.
(2) Summary of Significant Accounting Policies
The accompanying financial statements reflect the application of accounting
policies described in this note and elsewhere in the accompanying notes to
the financial statements.
(a) Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with 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.
(b) Cash and Cash Equivalents
The Company classifies all highly liquid investments with original
maturities of less than 90 days as cash equivalents. The Company
values its cash equivalents in accordance with Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". Under SFAS No. 115, the
Company's cash equivalents are classified as held-to-maturity and
valued at amortized cost, which approximates market value. As of
December 31, 1997 and 1998, cash equivalents consisted primarily of
investments in U.S. Treasury securities and money market accounts.
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<PAGE>
(c) Property and Equipment
Property and equipment are carried at cost and depreciated under the
double-declining method over the estimated useful lives of the assets
as described below.
<TABLE>
<CAPTION>
Asset Classification Estimated Useful Life
<S> <C>
Office furniture 7 years
Computer equipment 5 years
</TABLE>
(d) Patent Costs
Patent costs are being amortized under the straight-line method over
the estimated useful life of 15 years.
(e) Revenue Recognition
Revenue from product sales is recognized upon shipment.
(f) Income Taxes
The Company has elected subchapter S Corporation status for federal
and for the State of Maine income tax purposes. Provisions for
federal and Maine income taxes have not been made as the Company's
results from operations are included in the individual income tax
return of its sole shareholder. During 1997 and 1998, the Company
made distributions to its shareholder of $138,905 and $111,474,
respectively, to pay estimated tax payments.
(g) Financial Instruments
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments",
requires disclosure about fair value of financial instruments.
Financial instruments consist of cash and cash equivalents, accounts
receivable and accounts payable. The estimated fair value of these
financial instruments approximates their carrying value.
(h) Concentration of Credit Risk
SFAS No. 105, "Disclosure of Information about Financial
Instruments with Off-Balance-Sheet Risk and Financial Instruments
with Concentration of Credit Risk", requires disclosure of any
significant off-balance-sheet risk. The Company has no
significant off-balance-sheet risk. The Company maintains its
cash and cash equivalents with one financial institution and
invests in investment-grade securities.
One customer accounted for 100% and 87% of accounts receivable and
58% and 61% of net revenue as of and for the years ended December
31, 1997 and 1998, respectively.
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<PAGE>
(i) long-lived Assets
The Company has assessed the realizability of its long-lived
assets in accordance with SFAS No. 121, "Accounting for the
Impairment of long-lived Assets and for long-lived Assets To Be
Disposed Of". As of December 31, 1997 and 1998, management
believes there has been no impairment of its long-lived assets.
(j) New Accounting Standards
AICPA Statement of Position (SOP) 98-5, "Reporting on the Costs of
Start-Up Activities" was issued in April 1998. SOP 98-5 requires
that all non-governmental entities charge the costs of start-up
activities, including organizational costs to operations, as those
costs are incurred. The Company has recorded such costs as
expense in the period incurred.
In June 1997, the Financial Accounting Standards Board issued SFAS
No. 130, "Reporting Comprehensive Income". SFAS No. 130 requires
disclosure of all components of comprehensive income on an annual
and interim basis. Comprehensive income is defined as the change
in equity of a business enterprise during a period from
transactions and other events and circumstances from non-owner
sources. SFAS No. 130 is effective for fiscal years beginning
after December 15, 1997. The Company's comprehensive income was
the same as its reported net income for all periods presented.
(3) Earnings Per Share
In accordance with SFAS No. 128, "Earnings Per Share", basic and
diluted net income per common share is calculated by dividing the net
income by the weighted average number of common shares outstanding for
all periods presented. The Company has no outstanding potentially
dilutive securities.
(4) Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1998
<S> <C> <C>
Royalties $ 100,000 $ 320,600
Manufacturing costs 47,318 268,305
Advertising costs 36,250 61,445
Consulting fees 10,000 195,418
Other 21,400 101,434
--------- ---------
$ 214,968 $ 947,202
========= =========
</TABLE>
9
<PAGE>
(5) Line of Credit
On July 10, 1998, the Company entered into a line of credit agreement with
a bank, which allows for borrowings up to a maximum of $200,000, based on
eligible accounts receivable, as defined. The line of credit matures on
May 31, 1999 and bears interest on outstanding borrowings at the prime rate
(7.75% as of December 31, 1998) plus 1%. The line of credit is
collateralized by all assets of the Company and is personally guaranteed by
its sole shareholder. At December 31, 1998, there were no borrowings
outstanding under this line of credit.
(6) Royalty Agreements
A technology license agreement with two individuals requires the Company to
make royalty payments up to a maximum of $1.60 per bottle to each
individual, based on the terms as defined in the agreement. A trademark
agreement with an individual requires the Company to make royalty payments
up to a maximum of $0.80 per bottle to the individual, based on the terms
as defined in the agreement. The Company recorded $704,471 and $820,974 of
royalty expenses pursuant to these agreements for the years ended December
31, 1997 and 1998, respectively, which is included in cost of revenue in
the accompanying statements of operations.
(7) Commitments and Contingencies
In the ordinary course of business, the Company is party to various types
of litigation. The Company believes it has meritorious defense to all
claims and, in its opinion, all litigation currently pending or threatened
will not have a material effect on the Company's financial position or
results of operations.
(8) Retirement Plan
On December 30, 1998, the Company began funding a Simplified Employee
Pension Plan (the Plan). All employees in the Plan who have completed
one year of service, with the exception of the initial plan year, are
eligible to contribute 15% of their annual compensation, subject to IRS
limitations. The Company may elect to make discretionary contributions
to the Plan. The Company made discretionary contributions totaling
$24,000 to the Plan for the year ended December 31, 1998.
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<PAGE>
(9) Valuation and Qualifying Accounts
A summary of the valuation and qualifying accounts of the Company related
to the allowance for doubtful accounts for the two years ended December 31,
1997 and 1998 is as follows:
<TABLE>
<S> <C>
Allowance for doubtful accounts at
December 31, 1996 $ -
Additions 28,735
Reductions -
--------
Allowance for doubtful accounts at December
31, 1997 28,735
Additions 42,910
Reductions -
--------
Allowance for doubtful accounts at December
31, 1998 $ 71,645
========
</TABLE>
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<PAGE>
ITEM 7 (b), Pro Forma Financial Information
On March 10, 1999, the Company purchased for $13,250,000 certain assets and
liabilities of Inholtra Investment Holdings and Trading, N.V., Inholtra,
Inc., and Inholtra Natural, Ltd. (collectively the Sellers). The purchase
price consisted of the payment of $3,250,000 in cash at closing, and the
issuance of a $10,000,000 promissory note secured by the acquired assets. The
Company has accounted for the acquisition as a purchase. The purchase price
has been allocated to the patents and trademarks associated with the Inholtra
product, and is being amortized over a fifteen-year period.
The following unaudited pro forma condensed income statement gives effect to
the acquisition as if it had occurred at the beginning of the period, while
the unaudited pro forma condensed balance sheet gives effect to the
acquisition as if it had occurred as at December 31, 1998. Pro forma
adjustments include only the effects of events directly attributable to the
transaction that are expected to have a continuing impact and that are
factually supportable. The notes to the pro forma financial information
describe the pro forma amounts and adjustments described below. The pro
forma financial information does not necessarily reflect the operating
results that would have occurred had the acquisition been consummated as of
the above dates, nor is such information indicative of future operating
results. See the discussion relating to the "Forward Looking" information
above. The information shown below should be read in conjunction with the
historical financial statements of Inholtra and IN, including the respective
notes thereto.
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<PAGE>
IRWIN NATURALS/4HEALTH, INC
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Pro Forma
Company Adjustments Combined
------- ----------- --------
<S> <C> <C> <C>
ASSETS
Cash $426,000 $ 426,000
Accounts receivable, net 6,023,000 6,023,000
Inventories 2,855,000 2,855,000
Building held for sale 1,521,000 1,521,000
Property and equipment, net 627,000 627,000
Inholtra patents and trademarks $13,350,000 13,350,000 (2)
Other assets 1,635,000 1,635,000
----------- ----------- -----------
Total assets $13,087,000 $13,350,000 $26,437,000
=========== =========== ===========
LIABILITIES AND EQUITY
Accounts payable $2,637,000 $ 100,000 $ 2,737,000 (1)
Accrued expenses 942,000 942,000
Notes payable 1,751,000 10,000,000 11,751,000 (1)
Line of credit 1,000,000 3,250,000 4,250,000 (1)
Other liabilities 888,000 888,000
----------- ----------- -----------
Total liabilities 7,218,000 13,350,000 20,568,000
EQUITY
Common stock 279,000 279,000
Paid in capital 14,333,000 14,333,000
Treasury stock (50,000) (50,000)
Accumulated deficit (8,693,000) (8,693,000)
----------- ----------- -----------
Total equity 5,869,000 - 5,869,000
Total liabilities and equity $13,087,000 $13,350,000 $26,437,000
=========== =========== ===========
</TABLE>
Pro Forma Adjustments for the Unaudited Pro Forma Condensed Balance Sheet at
December 31, 1998 are as follows:
(1) To reflect the cost of acquiring certain assets of Inholtra Natural Ltd.
consisting of
(i) expending $3,250,000 advanced from the line of credit,
(ii) issuing a note payable June 10, 1999 for $10,000,000 bearing
interest at 8 % per annum, and
(iii) incurring $100,000 of acquisition costs and fees. (note -
acquisition cost allocated to acquired trademarks and patents, only
significant asset acquired)
(2) To reflect the allocation of the purchase price to patents and trademarks,
which will be amortized over fifteen years.
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IRWIN NATURALS/4HEALTH, INC
UNAUDITED PRO FORMA CONDENSED INCOME STATEMENT
DECEMBER 31, 1998
<TABLE>
<CAPTION>
Company Inholtra Natural, Pro Forma Combined
Ltd. Adjustments
----------- ----------------- -------------- ------------
<S> <C> <C> <C> <C>
Net sales $30,547,000 $4,839,000 $35,386,000
Cost of sales 12,945,000 3,218,000 16,163,000
----------- ---------- ---------- -----------
Gross Profit 17,602,000 1,621,000 19,223,000
($821,000) (1)
(109,000) (2)
890,000 (3)
Operating Expenses 15,775,000 1,247,000 60,000 (5) 17,042,000
----------- ---------- ---------- -----------
Income from operations 1,827,000 374,000 (20,000) 2,181,000
Other income (expense) (209,000) 7,000 (1,060,000) (4) (1,262,000)
----------- ---------- ---------- -----------
Income before taxes 1,618,000 381,000 (1,080,000) 919,000
140,000 (6)
Provision for taxes 600,000 - (400,000) (7) 340,000
----------- ---------- ---------- -----------
Net income $1,018,000 $381,000 (820,000) 579,000
=========== ========== ========== ===========
Earnings per common share
Basic $0.04 $0.02
Diluted 0.04 0.02
Weighted average common shares
Outstanding - basic 27,747,000 27,747,000
Weighted average common shares
Outstanding - diluted 28,221,000 28,221,000
</TABLE>
Pro Forma Adjustments for the Unaudited Pro Forma Condensed
Income Statement at December 31, 1998 are as follows:
(1) To eliminate royalties paid by Inholtra, as relevant patents and
trademarks have been acquired by the Company
(2) To eliminate Inholtra costs for items not required for combined Company.
(3) To amortize the patents and trademarks assigned to the acquisition for
one year of the fifteen-year life.
(4) To record the cost of borrowing the purchase price at a rate of 8% per
annum for $13,250,000.
(5) To reflect annual consulting expense to be incurred per the acquisition
agreement.
(6) To record normal tax expense for Inholtra as part of a C corporation.
Prior to acquisition, Inholtra was an "S" corporation and not subject to
income taxes.
(7) To reduce tax expense for the deductibility of the added amortization and
interest costs.
14
<PAGE>
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.
IRWIN NATURALS/4HEALTH, INC.
Date: June 7, 1999 By: Lindsey Duncan
------------------------------
Lindsey Duncan
Chairman of the Board
15
