Annual report pursuant to section 13 and 15(d)


12 Months Ended
Dec. 31, 2011
Notes to Financial Statements  


7.           ACQUISITION


Pursuant to the Agreement, and Plan of Merger dated November 10, 2010, between the Company and Target, the Company issued 4,000,000 shares of its common stock to the stockholders of Target in exchange for all the outstanding common stock of BTI.  Under the terms of the agreement, Target merged into the Company with the Company being the surviving entity and the Company’s name was changed to Boston Therapeutics, Inc.


The total consideration consisted of 4,000,000 shares of the Company in exchange for all the issued and outstanding shares of Target.  The liability for Target Advances was assumed by the Company upon closing of the Merger described in Note 7.  A valuation of the Company’s common stock was performed resulting in a fair value per share of $0.2466.  The adjusted net assets approach was selected to value the Stockholders' equity of the Company.  This approach was deemed to be the most relevant method due to the lack of market transactions and a lack of available financial projections as of the valuation date. Based on the 4,000,000 shares of common stock issued for Target the total consideration was valued at $986,400.  However, because the Company’s CEO was a 10% shareholder of Target, 10% of Target was valued at his historical cost basis and 90% of Target was valued at its fair value of $878,647.  The acquisition of Target includes SUGARDOWN®, a ready for market dietary supplement to reduce the sharp spikes in blood sugar associated with eating high carbohydrate foods. The following table summarizes the fair value assigned to the acquired assets and liabilities:



 Cash  $8,397
 Inventory   4,370
 Prepaid expense   2,917
 Accounts payable and accrued expenses   (46,819)
 Note payable shareholder   (60,000)
 SUGARDOWN®  technology and provisional patent   900,000
 Net assets acquired   808,865
 Goodwill   69,782


The fair value of SUGARDOWN® was determined by estimating future cash flows associated with SUGARDOWN® and applying a 20% discount factor.  The selected discount rate was based upon contemplating the inherent risk of the cash flows to the assets. The estimated useful life was determined to be 14 years based on the period of the associated estimated future cash flows.  The fair value of the consideration exceeded the net assets acquired resulting in goodwill.  The Company does not expect any of the goodwill to be deductible for tax purposes.


The Company’s Statement of Operations includes the results of operations of Target since the date of the acquisition.


Pro Forma Combined Results (unaudited)


The following unaudited pro forma financial information represents the combined results of operations of the Company and Target as if the acquisition had happened January 1, 2010. The unaudited pro forma results are not necessarily indicative of future results or the results that would have occurred had the acquisitions been consummated on January 1, 2010.




For the year ended

December 31, 2010

 Pro forma revenue   3,377
 Pro forma net loss   (352,176)
 Pro forma basic and diluted loss per share  $(0.02)


Pro forma adjustments include increased amortization of acquired intangible assets of $53,571 for the year ended December 31, 2010.