New Leaf Brands, Inc.

CIK:0000806175|SEC Filings

14. DISCONTINUED OPERATIONS

9 Months Ended

Sep. 30, 2012

NOTE 14 - DISCONTINUED OPERATIONS

On April 9, 2012 the Company completed the sale its non-operating subsidiary Nutritional Specialties, Inc. (NSI) to Deep South Capital, LLC (DSCL). The terms of the divestiture was for a consideration of $1.00 plus the assumption of certain liabilities by DSCL. In addition, the Company issued 6,000,000 shares of the Company’s stock valued at approximately $180,000 to DSCL as a reserve against possible offsets. The Company estimated a charge of approximately $180,000 in connection with this transaction.

The accompanying condensed financial statements have been reclassified for all prior periods to report the assets and liabilities of this subsidiary.

The major classes of assets and liabilities of the discontinued operations on the balance sheet are as follows:

	September 30, 2012 (unaudited)		December 31, 2011

ASSETS	$	—	$	—

LIABILITIES
Note payable and accrued interest to trust		0		915,390
Accounts payable and accrued expenses		0		12,692
Current liabilities of discontinued operations	$	0	$	928,082

Consolidated Statements of Cash Flows (USD $)	9 Months Ended
Consolidated Statements of Cash Flows (USD $)	Sep. 30, 2012	Sep. 30, 2011
Continuing operations:
Net Loss	$ (3,823,123)	$ (4,826,124)
Adjustments to reconcile net loss from continuing operations to net cash used in continuing operating activities:
Depreciation and amortization	147,074	387,877
Allowance of doubtful accounts	(17,222)	6,300
Change in fair value of notes liability	46,567	0
Gain on settlement of accounts payable and extinguishment of long-term debt	(985,727)	241,757
Gain on disposal of discontinued operations	(758,490)	0
Amortization of debt discount & deferred financing cost	448,373	162,052
Warrants issued for services	200,618	10,398
Stock based compensation	173,600	131,862
Common stock issued for services	2,043,854	140,000
Change in fair value of derivative payable	81,383	(528,978)
Impairment of intangible assets	845,000	1,100,000
Changes in continuing operating assets & liabilities:
Accounts receivable	163,908	67,551
Inventory	92,743	(137,603)
Prepaid expenses and other current assets	(196,737)	25,550
Accounts payable	683,810	(400,108)
Accrued expenses	(242,274)	68,422
Due to related parties	61,494	54,259
Interest payable	128,152	59,389
Net cash used in continuing operating activities	(906,997)	(3,437,396)
Financing Activities
Proceeds from issuance of long-term debt	729,107	1,174,600
Exercise of warrants	517,618	500,000
Payments on purchase order financing	(306,037)	0
Proceeds from sale of common stock and warrants, net	0	425,000
Proceeds from sale of preferred stock and warrants	0	1,068,401
Repayment on long-term debt	0	(184,696)
Proceeds from purchase order financing	0	460,124
Net cash provided by financing activiities	940,688	3,443,429
Change in cash & cash equivalents	33,691	6,033
Cash & cash equivalents beginning of period	75,762	13,024
Cash & cash equivalents end of period	109,453	19,057
Cash paid during the period for:
Interest	0	44,432
Non - cash investing and financing activities:
Deemed dividend on Conversion of Series K Preferred and warrants	0	1,967,699
Dividends Series K Preferred stock	42,271	177,971
Settlement of long-term debt for common stock	996,622	4,129,172
Forgiveness of earn-out and reduction of intangibles	0	325,000
Issuance of common stock in connection with disposal of discontinued operations	180,000	0
Settlement of accounts payable for common shares and warrants	0	100,000
Debt discount and beneficial conversion feature on debt issued	260,208	46,655
Fair value of shares used for common stock	0	31,250
Non-cash sale of all assets and liabilities of discontinued operations	$ 938,490	$ 0

Consolidated Balance Sheets (USD $)	Sep. 30, 2012	Dec. 31, 2011
CURRENT ASSETS
Cash & cash equivalents	$ 109,453	$ 75,762
AccoAccounts receivable, net of allowances for doubtful accounts of approximately $20,467 at September 30, 2012 and $37,689 at December 31, 2011	22,804	169,490
Inventories	70,966	163,709
Prepaid expenses and other current assets	375,199	8,462
Total current assets	578,422	417,423
Property and equipment, net	33,538	58,000
Intangible assets, net	149,998	1,117,609
Total assets	761,958	1,593,032
CURRENT LIABILITIES
Accounts payable	907,606	1,805,361
Purchase order financings	0	306,037
Accrued liabilities	249,205	469,447
Accrued liabilities related party	248,092	582,787
Accrued dividends	216,315	196,978
Interest payable	102,999	37,800
Short-term debt	523,712	120,490
Notes payable to related parties - current portions	1,250,761	752,787
Long-term debt – current portion	0	21,119
Other current liabilities	245,275	245,275
Current liabilities of discontinued operations	0	928,082
Total current liabilities	3,743,965	5,466,163
Long-term debt, less current portion	116,974	14,338
Notes payable to related parties, less current portion	88,772	0
Derivative liabilities	113,366	45,613
Total long-term liabilities	319,112	59,951
Total liabilities	4,063,077	5,526,114
STOCKHOLDERS' DEFICIT
Preferred stock, $0.001 par value, convertible 10,000,000 shares authorized Series K 10% Convertible Preferred Stock, 1,000 cumulative shares designated; 18.9 and 30 shares issued and outstanding (Liquidation Preference $626,315 and $860,974) at September 30, 2012 and December 31, 2011, respectively	0	0
Common Stock, $0.001 par value, 500,000,000 shares authorized; issued and outstanding 328,533,316 and 150,811,031 at September 30, 2012 and December 31, 2011, respectively	328,533	150,811
Shares Issuable	0	5,550
Additional paid-in capital	48,350,303	44,025,118
Accumulated deficit	(51,979,955)	(48,114,561)
Total stockholders' deficit	(3,301,119)	(3,933,082)
Total liabilities and stockholders' deficit	$ 761,958	$ 1,593,032