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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                          ============================

                                  FORM 10-KSB/A
                                 Amendment No. 1

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                          ============================

            For the Fiscal Year Ended          Commission File Number
               December 31, 2002                      0-32565

                                    NUTRACEA
                 (Name of Small Business Issuer in Its Charter)

                  California                                     87-0673375
       (State or Other Jurisdiction of                          IRS Employer
        Incorporation or Organization)                       Identification No.)

         1261 Hawk's Flight Court
         El Dorado Hills, CA 95762                                   95762
(Address of Principal Executive Offices)                           (Zip Code)

                                 (916) 933-7000
                (Issuer's Telephone Number, Including Area Code)

      Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class             Name of Each Exchange on Which Registered
-------------------             -----------------------------------------
       None                                        None

      Securities registered pursuant to Section 12(g) of the Exchange Act:

                                  Common Stock
                                (Title of Class)

     Check  whether  the  issuer  (1)  filed all reports required to be filed by
Section  13  or 15(d) of the Exchange Act during the past 12 months (or for such
shorter  period  that the registrant was required to file such reports), and (2)
has  been subject to such filing requirements for the past 90 days.  Yes [X]  No
[ ]

     Check  if  there  is no disclosure of delinquent filers in response to Item
405  of  Regulation S-B is not contained in this form, and no disclosure will be
contained,  to  the  best  of  registrant's  knowledge,  in  definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

     State issuer's revenues for its most recent fiscal year. $1,536,153.

     As  of June 30, 2004, 2004, the aggregate value of the voting stock held by
non-affiliates  of  the  registrant, computed by reference to the average of the
bid and ask price on such date was approximately $16,665,348.



                    ISSUER INVOLVED IN BANKRUPTCY PROCEEDING
                           DURING THE PAST FIVE YEARS

     Check whether the issuer has filed all documents and reports required to be
filed  by  Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities  under  a  plan  confirmed  by  a  court.  Yes  [X]  No  [ ]

     As  of  June  30, 2004, the registrant had outstanding 26,101,048 shares of
common  stock.

     Transitional  Small  Business  Disclosure  Format:  Yes  [ ]  No  [X]

================================================================================



                                EXPLANATORY NOTE

     This  Amended  Annual  Report  on Form 10-KSB/A is filed for the purpose of
amending  and replacing the Financial Statements and Management's Discussion and
Analysis  and  Plan  of  Operations  filed  on  March  report  is filed with the
Securities  Exchange  Commission on April 15, 2003. Pursuant to Rule 12b-15 only
the  following  items  in  Form  10-KSB  have  been  included in this amendment:

ITEM  6.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  AND  PLAN  OF  OPERATIONS.

ITEM  7.  FINANCIAL  STATEMENTS.

ITEM  8A.  CONTROLS  AND  PROCEDURES.



ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

For  more  detailed  financial information, please refer to the audited December
31,  2002  Financial  Statements  included  in  this  Form  10-KSB.

CAUTION  ABOUT  FORWARD-LOOKING  STATEMENTS

This  Form  10-KSB  includes "forward-looking" statements about future financial
results,  future  business  changes  and other events that haven't yet occurred.
For  example,  statements  like we "expect," we "anticipate" or we "believe" are
forward-looking  statements.  Investors  should be aware that actual results may
differ  materially  from  our  expressed  expectations  because  of  risks  and
uncertainties  about  the future.  We do not undertake to update the information
in  this  Form  10-KSB  if  any  forward-looking statement later turns out to be
inaccurate.  Details  about  risks  affecting  various  aspects of the Company's
business  are  discussed  throughout  this  Form 10-KSB and should be considered
carefully.

PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS

NTI  was  formed  on  February 4, 2000 and became the wholly-owned subsidiary of
NutraStar  on  December  14,  2001.  To  date,  NutraStar  has  focused  on  its
relationship with the producer of its raw materials, RiceX, and on its strategic
alliances.  NutraStar  has  commenced the limited distribution of its stabilized
rice  bran and rice bran products on the Internet and through direct-to-consumer
response  advertising  campaigns.  In the very near future, NutraStar intends to
commence  the  full distribution of its products as private label brands through
strategic  distributors  on  the  occurrence  of  certain  events, including the
raising  of  additional  capital  required  to  implement  its  business  plan.
NutraStar's  fiscal  year  is  the  calendar  year.

NutraStar  anticipates  that  in  the  next  12  to  24  months, it will need an
additional  $10 to $20 million in financing.  NutraStar anticipates that it will
need  $5  to  $15  million to make certain acquisitions, $2.5 million to further
increase  production  capacity, and $2.5 million for additional working capital,
including  the  purchase  of  inventory for anticipated sales growth.  NutraStar
expects  to  obtain  this  additional  funding  from  private  placements of the
Company's  debt  and/or equity securities, or through the public offering of its
Common  Stock.

RESULTS OF OPERATION

Year Ended December 31, 2002 versus 2001
----------------------------------------

NutraStar  generated revenues of $1,286,439 during the fiscal year 2002 compared
to  total revenues of $1,610,222 generated in fiscal year 2001.  While net sales
remained  virtually  the same for both years, commission revenue of $317,668 was
realized  in  fiscal  year  2001 compared to no such revenues realized in fiscal
year  2002.


                                        1

Cost of goods sold for fiscal year 2002 decreased by 15% to $800,255 compared to
costs  of  goods  sold  of $945,633 in fiscal year 2001.  This decrease reflects
lower  product  sales and increasing the standard product canister size from 360
grams  to  600 grams.  Gross profits decreased from $664,589 in fiscal year 2001
to  $486,184  in  fiscal  year  2002.  This  27%  decline  in  gross profits was
primarily  due  to  the  20%  decrease in total revenues realized in fiscal year
2002.  Operating expenses of $3,592,337 reflect a 7% increase from $3,356,904 of
operating  expenses incurred in fiscal year 2001.  Operating expenses for fiscal
year  2002  include legal and accounting costs of approximately $63,400 incurred
in  the preparation of the Company's SB-2 registration statement which was filed
with  the  SEC  in  June  2002,  and  $403,906  in  non-cash  consulting  fees.

The  Company's  operating  loss  increased to $3,106,153 during fiscal year 2002
compared  to  an  operating  loss of $2,692,315 during the previous fiscal year.
This  increase  in  operating  loss  reflects the 20% decrease in total revenues
during  fiscal  year 2002 which was offset to some extent by a decrease in costs
of  goods  sold.  The  net  loss  for  fiscal  year  2002  declined  $567,031 to
$3,204,443  compared  to  a  net  loss  of $3,771,474 for fiscal year 2001.  The
decrease  in net loss for 2002 was due primarily to the significant reduction in
interest  expense  which  fell from $1,080,602 in fiscal year 2001 to $98,927 in
fiscal  year 2002, offset by $403,906 in 2002 non-cash expense.  The decrease in
interest  expense  reflects  the  reduction  of  debt  resulting  primarily from
exchanging  $1,590,000  of  debt  for  equity  during  fiscal  year  2002.

Due  to  the  December  14,  2001  share  exchange with Alliance, for accounting
purposes,  the  acquisition  has been treated as a recapitalization of NutraStar
(formerly  Alliance)  with  NTI  as  the  acquirer  (reverse  acquisition).
Consequently,  the  financial  statements  of  NTI are presented as those of the
Company.  As  a  result,  a  comparison  of  the current financial statements as
compared  to  those of Alliance as previously reported in its Form 10-SB may not
be  deemed  relevant.

CAPITAL FINANCING

As  a  part  of  the  exchange  transaction with NTI, Alliance issued 17,000,000
shares of its common stock to the shareholders of NTI in exchange for all of the
outstanding  shares  of  NTI.  An  additional  $249,770  shares  were issued for
services rendered in connection with the exchange transaction.  This transaction
has  been  accounted for as a reverse acquisition, whereby NTI is considered the
acquiring  company  and  Alliance  the  acquired  company.

In  connection with the exchange agreement, Alliance obtained $1,000,000 in 2001
from  the  sale  of  one  million shares of its common stock which was issued at
$1.00  per  share.  The  Company  issued  an additional 249,770 shares of common
stock  for  services  rendered  valued  at  $249,770.

During  fiscal year 2001, NutraStar also issued 2,084,707 shares of its Series A
Preferred  Stock  for  services,  settlement  of  a lawsuit, payment of accounts
payable  and  in  exchange for outstanding promissory notes and interest thereon
valued  at  $1,899,000.


                                        2

During  fiscal  year 2002, NutraStar raised an aggregate of $234,800 through the
issuance  of  short-term promissory notes.  These notes bear interest of 10% per
annum.  At December 31, 2002, certain of these notes were delinquent. Subsequent
to  year end, all of those notes were modified to be due on demand.  In addition
to  the  above,  NutraStar  entered into two secured promissory note agreements.
Both  notes were in the principal amount of $50,000 and collateralized by shares
of  the Company's stock.  One of the notes was repaid during the year 2002.  The
other  note  bears  interest of 2% per month and is secured by 634,121 shares of
the  Company's  Series  A  preferred  stock.

During fiscal year 2002, NutraStar's CEO gave personal NutraStar common stock to
an  investment  banker  for  the  benefit of the Company, as compensation to the
consultant.  No  services  were performed by this consultant, and the consultant
acknowledged  that  the  stock  should  be  returned  to  the  Company.  As  the
investment  capital company is currently involved in litigation with their stock
broker,  it  is uncertain when these shares will be returned to the Company.  As
of  December  31,  2002,  the  Company  recorded  $75,400 in non-cash consulting
expense  related  to  this  transaction.

LIQUIDITY AND CAPITAL RESOURCES

NutraStar  has  incurred  significant operating losses for its last three fiscal
years  and,  as  of  December  31, 2002, NutraStar had an accumulated deficit of
$8,682,746.  At  December 31, 2002, the Company had cash and cash equivalents of
$34,718  and  a  net  working  capital  deficit  of  $1,386,173.

To  date, NutraStar has funded its operations through a combination of revenues,
short term debt and the issuance of common and preferred stock.  During December
2001  NutraStar  completed  two  private placements; the first raised $1,000,000
from  the  sale  of  common  stock  at  $1.00  per  share; and the second raised
approximately  $1,841,707  through  the  conversion of debt into preferred stock
that  was  priced  at  $1.00  per  share  which  is  classified  as convertible,
redeemable Series A Preferred Stock to conform with SEC accounting requirements.
During  fiscal  year  2002,  NutraStar  raised  $100,000  from the sale of units
consisting of one share of common stock and a warrant to purchase one additional
share.  The  Company also committed to issue 1,060,000 shares of common stock in
payment  of  consulting  fees  valued  at  $172,500.

The  Company is dependent on the proceeds from future debt or equity investments
to  expand NutraStar's operations and fully implement NutraStar's business plan.
If  the  Company  is  unable  to  raise  sufficient capital, the Company will be
required  to delay or forego some portion of its business plan, which may have a
material adverse effect on the Company's anticipated results from operations and
financial  condition.  Alternatively,  the Company may seek interim financing in
the  form of bank loans, private placement of debt or equity securities, or some
combination thereof.  Such interim financing may not be available in the amounts
or  at  the  times  when  the  Company requires, and will likely not be on terms
favorable  to  the  Company.

The Company has various financial commitments including the following:


                                        3

     -    as  of  December  31,  2002,  the  Company owed $150,129 in cumulative
          dividends  on  its
          Series  A  Preferred  Stock.
     -    the  Company  owes  $244,333 on the remaining four years of its office
          lease.
     -    the  Company  has  entered into several employment agreements with key
          employees  with  terms  ranging  from 3 to 10 years and minimum future
          payments  under  such  agreements  aggregating  $2,130,416.

DEPENDENCE ON KEY SUPPLIER

NutraStar  has  entered  into an agreement with The RiceX Company, whereby RiceX
will  sell  NutraStar  its rice bran derivatives at prices equal to the lower of
RiceX's  standard  price  or  the  price  negotiated by other customers for like
quantities  and products.  The agreement also provided that RiceX would not sell
any  rice  bran  derivatives  products in the United States except to NutraStar.
This  latter  part of the agreement was terminated on July 9, 2002.  To purchase
products  from  RiceX, NutraStar is required to pay for all purchase orders on a
COD  basis.

In  addition  to the risks associated with the potential termination of RiceX as
NutraStar's  major  supplier,  the  inability  of RiceX to deliver the amount of
product  that  NutraStar  requires, any interruption in product delivery for any
reason,  or  the inability of RiceX to fulfill its contractual obligations would
have a material adverse effect on NutraStar's business, results from operations,
and  financial  condition,  as  NutraStar  could  not readily find and implement
alternative  suppliers and likely not on advantageous terms.  RiceX's ability to
manufacture  certain  of  NutraStar's  core products is currently limited to the
production  capability  of  RiceX's  Dillon, Montana plant (the "Dillon Plant").
Currently,  the  Dillon Plant is capable of producing only a limited quantity of
NutraStar's products, which will not be sufficient to meet NutraStar's long-term
sales  goals.  The  Company  and/or RiceX plan to add production capacity during
the  current  year.

CRITICAL ACCOUNTING POLICIES

NutraStar's  discussion  and analysis of its financial conditions and results of
operations are based upon its consolidated financial statements, which have been
prepared  in  accordance  with  generally  accepted accounting principles in the
United States.  The preparation of financial statements require managers to make
estimates  and  disclosures  on  the  date  of  the financial statements.  On an
on-going  basis,  NutraStar  evaluates its estimates, including, but not limited
to,  those  related  to  revenue  recognition.  The  Company  uses authoritative
pronouncements,  historical  experience  and  other assumptions as the basis for
making  judgments.  Actual results could differ from those estimates.  NutraStar
believes  that  the  following  critical  accounting  policies  affect  its more
significant  judgments  and  estimates  in  the  preparation of its consolidated
financial  statements.


                                        4

Revenue  recognition
--------------------

NutraStar  is  required  to  make  judgments  based on historical experience and
future expectations, as to the realizability of shipments made to its customers.
These  judgments  are  required  to  assess  the propriety of the recognition of
revenue  based  on  Staff  Accounting  Bulletin  ("SAB")  No.  101,  "Revenue
Recognition,"  and related guidance.  NutraStar makes these assessments based on
the  following  factors:  i) customer-specific information, ii) return policies,
and  iii)  historical  experience  for  issues  not  yet  identified.

Valuation  of  long-lived  assets
---------------------------------

Long-lived  assets,  consisting primarily of property and equipment, patents and
trademarks,  and goodwill, comprise a significant portion of the Company's total
assets. Long-lived assets are reviewed for impairment whenever events or changes
in  circumstances  indicate  that  their carrying values may not be recoverable.
Recoverability of assets is measured by a comparison of the carrying value of an
asset to the future net cash flows expected to be generated by those assets. The
cash  flow  projections are based on historical experience, management's view of
growth  rates  within  the  industry,  and  the  anticipated  future  economic
environment.

Factors NutraStar considers important that could trigger a review for impairment
include  the  following:

     (a)  significant  underperformance  relative  to  expected  historical  or
          projected  future  operating  results,

     (b)  significant changes in the manner of its use of the acquired assets or
          the  strategy  of  its  overall  business,  and

     (c)  significant  negative  industry  or  economic  trends.

When  the  Company determines that the carrying value of patents and trademarks,
long-lived  assets and related goodwill and enterprise-level goodwill may not be
recoverable  based  upon the existence of one or more of the above indicators of
impairment, it measures any impairment based on a projected discounted cash flow
method  using  a  discount  rate determined by its management to be commensurate
with  the  risk  inherent  in  its  current  business  model.

RECENTLY  ISSUED  ACCOUNTING  PRONOUNCEMENTS

In  June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, "Business Combinations."  This statement addresses financial accounting and
reporting for business combinations and supersedes APB Opinion No. 16, "Business
Combinations," and SFAS No. 38, "Accounting for Pre-Acquisition Contingencies of
Purchased Enterprises." All business combinations in the scope of this statement
are  to  be accounted for using one method, the purchase method.  The provisions
of  this  statement  apply to all business combinations initiated after June 30,
2001.  Use of the pooling-of-interests method for those business combinations is
prohibited.  This  statement also applies to all business combinations accounted


                                        5

for  using the purchase method for which the date of acquisition is July 1, 2001
or  later.  The  Company  does  not  expect  adoption  of SFAS No. 141 to have a
material  impact,  if  any,  on its financial position or results of operations.

In  June  2001,  the  FASB  issued  SFAS No. 142, "Goodwill and Other Intangible
Assets."  This  statement  addresses  financial  accounting  and  reporting  for
acquired goodwill and other intangible assets and supersedes APB Opinion No. 17,
"Intangible  Assets."  It  addresses  how  intangible  assets  that are acquired
individually  or  with  a  group  of  other  assets (but not those acquired in a
business combination) should be accounted for in financial statements upon their
acquisition.  This  statement  also  addresses how goodwill and other intangible
assets  should be accounted for after they have been initially recognized in the
financial statements.  It is effective for fiscal years beginning after December
15,  2001.  Early  application  is  permitted  for  entities  with  fiscal years
beginning  after  March  15,  2001,  provided  that  the first interim financial
statements  have  not  been  issued  previously.  The  Company  does  not expect
adoption  of  SFAS  No.  142 to have a material impact, if any, on its financial
position  or  results  of  operations.

In  June  2001,  the  FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations."  This  statement  applies to legal obligations associated with the
retirement  of long-lived assets that result from the acquisition, construction,
development,  and/or  the  normal  operation  of  long-lived  assets, except for
certain obligations of lessees. This statement is not applicable to the Company.

In  August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal  of  Long-Lived Assets."  This statement addresses financial accounting
and  reporting  for  the  impairment  or  disposal  of  long-lived assets.  This
statement  replaces  SFAS  No. 121, "Accounting for the Impairment of Long-Lived
Assets  and  for  Long-Lived  Assets  to  be  Disposed  of,"  the accounting and
reporting  provisions  of  APB  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, and amends Accounting Research Bulletin No. 51,
"Financial  Statements,"  to  eliminate  the  exception  to  consolidation for a
subsidiary  for  which  control is likely to be temporary.  The Company does not
expect  adoption  of  SFAS  No.  144  to  have a material impact, if any, on its
financial  position  or  results  of  operations.

In April 2002, the Financial Accounting Standards Board ("FASB") issued SFAS No.
145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections." SFAS No. 145 updates, clarifies,
and simplifies existing accounting pronouncements. This statement rescinds SFAS
No. 4, which required all gains and losses from extinguishment of debt to be
aggregated and, if material, classified as an extraordinary item, net of related
income tax effect. As a result, the criteria in Accounting Principles Board No.
30 will now be used to classify those gains and losses. SFAS No. 64 amended SFAS
No. 4 and is no longer necessary as SFAS No. 4 has been rescinded. SFAS No. 44
has been rescinded as it is no longer necessary. SFAS No. 145 amends SFAS No. 13
to require that certain lease modifications that have economic effects similar
to sale-leaseback transactions be accounted for in the same


                                        6

manner as sale-lease transactions. This statement also makes technical
corrections to existing pronouncements. While those corrections are not
substantive in nature, in some instances, they may change accounting practice.
This statement is not applicable to the Company.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." This statement
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred. Under EITF Issue 94-3, a
liability for an exit cost, as defined, was recognized at the date of an
entity's commitment to an exit plan. The provisions of this statement are
effective for exit or disposal activities that are initiated after December 31,
2002 with earlier application encouraged. This statement is not applicable to
the Company.

In October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions." SFAS No. 147 removes the requirement in SFAS No. 72 and
Interpretation 9 thereto, to recognize and amortize any excess of the fair value
of liabilities assumed over the fair value of tangible and identifiable
intangible assets acquired as an unidentifiable intangible asset. This statement
requires that those transactions be accounted for in accordance with SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." In addition, this statement amends SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," to include certain financial
institution-related intangible assets. This statement is not applicable to the
Company.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," an amendment of SFAS No. 123. SFAS
No. 148 provides alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee compensation. In
addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to
require more prominent and more frequent disclosures in financial statements
about the effects of stock-based compensation. This statement is effective for
financial statements for fiscal years ending after December 15, 2002. SFAS No.
148 will not have any impact on the Company's financial statements as management
does not have any intention to change to the fair value method.


                                        7

                        ITEM 7.     FINANCIAL STATEMENTS

                                                                           Page

INDEPENDENT  AUDITOR'S  REPORT. . . . . . . . . . . . . . . . . . . . . . . . 9

CONSOLIDATED  FINANCIAL  STATEMENTS

     Consolidated  Balance  Sheet. . . . . . . . . . . . . . . . . . . . . . 10

     Consolidated  Statements  of  Operations. . . . . . . . . . . . . . . . 12

     Consolidated  Statements  of  Shareholders'  Deficit. . . . . . . . . . 13

     Consolidated  Statements  of  Cash  Flows. . . . . . . . . . . . . . . .16

     Notes  to  Consolidated  Financial  Statements. . . . . . . . . . . . . 20


                                        8

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

NutraStar Incorporated and subsidiaries

We have audited the accompanying consolidated balance sheet of NutraStar
Incorporated and subsidiaries as of December 31, 2002, as restated, and the
related consolidated statements of operations, shareholders' deficit, and cash
flows for each of the two years in the period ended December 31, 2002, as
restated. 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 the standards of the Public Company
Accounting Oversight Board (United States). 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 consolidated financial statements referred to above, as
restated, present fairly, in all material respects, the financial position of
NutraStar Incorporated and subsidiaries as of December 31, 2002, as restated,
and the consolidated results of their operations and their cash flows for each
of the two years in the period ended December 31, 2002, as restated, in
conformity with accounting principles generally accepted in the United States of
America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to the
financial statements, during the year ended December 31, 2002, as restated, the
Company incurred a net loss of $3,204,443, as restated, and had negative cash
flows from operations of $871,266, as restated. In addition, the Company had an
accumulated deficit of $8,682,746 at December 31, 2002, as restated. These
factors, among others, as discussed in Note 3 to the financial statements, raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 3. The
consolidated financial statements, as restated, do not include any adjustments
that might result from the outcome of this uncertainty. As discussed in Note 2
to the consolidation financial statements, the December 31, 2002 consolidated
financial statements have been restated to correct a reporting error.

SINGER LEWAK GREENBAUM & GOLDSTEIN LLP

Los Angeles, California
March 29, 2003


                                        9



                      NUTRASTAR INCORPORATED AND SUBSIDIARIES
                                CONSOLIDATED   BALANCE  SHEET
                                  December 31,2002 (restated)

=============================================================
                            ASSETS
                                                  
CURRENT ASSETS
  Cash                                               $ 34,718
  Accounts receivable                                   7,273
  Inventory                                            42,695
  Prepaid expenses                                     27,180
                                                     --------
      Total current assets                            111,866

PROPERTY AND EQUIPMENT, net                           155,712
PATENTS AND TRADEMARKS, net                            48,748
GOODWILL                                              250,001
                                                     --------

        TOTAL ASSETS                                 $566,327
                                                     ========



                                       10
        The accompanying notes are an integral part of these financials




                           NUTRASTAR INCORPORATED AND SUBSIDIARIES
                                     CONSOLIDATED   BALANCE  SHEET
                                       December 31,2002 (restated)
==================================================================

              LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES
                                                   
  Accounts payable                                    $   707,331
  Accrued salaries and benefits                            51,192
  Deferred compensation                                   325,962
  Accrued expenses                                         81,455
  Customer deposits                                        44,316
  Due to officer                                           16,457
  Due to related party                                     40,526
  Notes payable - related party                           180,800
  Note payable                                             50,000
                                                      ------------
    Total current liabilities                           1,498,039
PUT OPTION                                                130,000
                                                      ------------
      Total liabilities                                 1,628,039
                                                      ------------

COMMITMENTS AND CONTINGENCIES

CONVERTIBLE, REDEEMABLE SERIES A PREFERRED STOCK,
  no par value, $1 stated value
    3,000,000 shares authorized
    2,144,707 shares issued and outstanding             2,060,931
                                                      ------------

SHAREHOLDERS' DEFICIT
  Common stock, no par value
    50,000,000 shares authorized
    23,758,071 shares issued and outstanding            5,861,702
  Committed common stock                                  571,674
  Deferred compensation                                  (873,273)
  Accumulated deficit                                  (8,682,746)
                                                      ------------
      Total shareholders' deficit                      (3,122,643)
                                                      ------------

         TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT  $   566,327
                                                      ============



                                        11
   The accompanying notes are an integral part of these financials




                                     NUTRASTAR INCORPORATED AND SUBSIDIARIES
                                               CONSOLIDATED   BALANCE  SHEET
                                                 December 31,2002 (restated)
============================================================================

                                                      2002          2001
                                                  ------------  ------------
                                                          
                                                   (restated)    (restated)
REVENUES
  Net sales                                       $ 1,286,439   $ 1,292,554
  Commission revenue                                        -       317,668
                                                  ------------  ------------

    Total revenues                                  1,286,439     1,610,222

COST OF GOODS SOLD                                    800,255       945,633
                                                  ------------  ------------

GROSS PROFIT                                          486,184       664,589

OPERATING EXPENSES                                  3,592,337     3,356,904
                                                  ------------  ------------

LOSS FROM OPERATIONS                               (3,106,153)   (2,692,315)
                                                  ------------  ------------

OTHER INCOME (EXPENSE)
  Interest income                                         637         1,443
  Interest expense                                    (98,927)   (1,080,602)
                                                  ------------  ------------

    Total other income (expense)                      (98,290)   (1,079,159)
                                                  ------------  ------------

NET LOSS                                           (3,204,443)   (3,771,474)

CUMULATIVE PREFERRED DIVIDENDS                        150,129             -
                                                  ------------  ------------

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS      $(3,354,572)  $(3,771,474)
                                                  ============  ============

BASIC AND DILUTED LOSS ATTRIBUTABLE TO COMMON
  SHAREHOLDERS PER COMMON SHARE                   $     (0.15)  $     (0.20)
                                                  ============  ============

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES
  USED TO COMPUTE BASIC AND DILUTED LOSS
  ATTRIBUTABLE TO COMMON SHAREHOLDERS PER SHARE    22,070,881    18,686,078
                                                  ============  ============



                                        12
         The accompanying notes are an integral part of these financials




                                                                                           NUTRASTAR INCORPORATED AND SUBSIDIARIES
                                                                                                     CONSOLIDATED   BALANCE  SHEET
                                                                                                       December 31,2002 (restated)
==================================================================================================================================


                              Convertible, Redeemable
                             Series A Preferred Stock        Common Stock        Committed   Deferred
                             -------------------------  ------------------------  Common      Compen-   Accumulated
                               Shares        Amount       Shares       Amount      Stock      sation      Deficit        Total
                             -----------  ------------  -----------  -----------  --------  ----------  ------------  ------------
                                                                                              
BALANCE, DECEMBER
  31, 2000                            -   $         -   15,943,906   $  382,877   $      -  $       -   $(1,556,700)  $(1,173,823)
PREFERRED STOCK ISSUED
  for settlement of
    litigation for payment      100,000       100,000
    for accounts payable
  for conversion of notes       130,000       130,000
    payable and accrued
    interest                  1,775,707     1,671,802
  for services rendered          13,000        13,000
  for deposits payable           56,000        56,000
  as interest expense            10,000        10,000
COMMON STOCK ISSUED
  for cash                                                  28,546       20,000                                            20,000
  for acquisition of
    registered trademark                                    21,409       21,409                                            21,409
  to extend note payable                                   356,824      356,824                                           356,824
  for services rendered                                    249,314      249,314                                           249,314
  for acquisition of
  NutraGlo                                                 250,001      250,001                                           250,001
  for settlement
  of litigation                                            150,000      150,000                                           150,000
  for cash in conjunction with
  acquisition by Alliance                                4,649,520    1,000,000                                         1,000,000
COMMITTED STOCK FOR
  CONVERSION OF NOTES
  PAYABLE                                                                          399,174                                399,174
STOCK OPTIONS ISSUED
  for compensation                                               -      647,429              (449,515)                    197,914
  for services rendered                                          -    1,273,861              (476,360)                    797,501
  for settlement of
  litigation                                                     -      107,047                                           107,047


                                        13
                 The accompanying notes are an integral part of these financials


                                                                                           NUTRASTAR INCORPORATED AND SUBSIDIARIES
                                                                                                     CONSOLIDATED   BALANCE  SHEET
                                                                                                       December 31,2002 (restated)
==================================================================================================================================

WARRANTS ISSUED WITH
  CONVERTIBLE DEBT                                               -      114,083                                           114,083
PUT OPTION                            -      (130,000)
NET LOSS                                                                                                 (3,771,474)   (3,771,474)
                             -----------  ------------  -----------  -----------  --------  ----------  ------------  ------------

BALANCE, DECEMBER
  31, 2001 (RESTATED)         2,084,707     1,850,802   21,649,520    4,572,845    399,174   (925,875)   (5,328,174)   (1,282,030)
PREFERRED STOCK ISSUED
  for expense
  reimbursement                  60,000        60,000
PREFERRED STOCK DIVIDEND              -       150,129                                                      (150,129)    (150,129)
COMMON STOCK ISSUED
  for cash                                               1,908,551      395,000                                           395,000
  for services rendered                                    200,000       90,000                                            90,000
ISSUANCE COSTS                                                   -      (39,499)                                          (39,499)
COMMITTED STOCK FOR
  SERVICES RENDERED                                                                172,500                                172,500
STOCK OPTIONS ISSUED
  for compensation                                 -       193,750                           (145,312)                     48,438
  for services rendered                            -       173,250                                                        173,250
  as interest expense                              -         5,600                                                          5,600
WARRANTS ISSUED FOR
  SERVICES RENDERED                                -           850                                                            850
BENEFICIAL CONVERSION
  FEATURE FOR THE ISSUANCE
  OF CONVERTIBLE DEBT                              -        66,000                                                         66,000


                                        14
                 The accompanying notes are an integral part of these financials


                                                                                           NUTRASTAR INCORPORATED AND SUBSIDIARIES
                                                                                                     CONSOLIDATED   BALANCE  SHEET
                                                                                                       December 31,2002 (restated)
==================================================================================================================================

COMMON STOCK ISSUED
  FOR CONSULTING FEES                                                   403,906                                           403,906
AMORTIZATION OF DEFERRED
  COMPENSATION                                                                                197,914                     197,914
NET LOSS                                                                                                 (3,204,443)   (3,204,443)
                             -----------  ------------  -----------  -----------  --------  ----------  ------------  ------------

BALANCE, DECEMBER
  31, 2002 (RESTATED)         2,144,707   $ 2,060,931   23,758,071   $5,861,702   $571,674  $(873,273)  $(8,682,746)  $(3,122,643)
                             ===========  ============  ===========  ===========  ========  ==========  ============  ============



                                        15
                 The accompanying notes are an integral part of these financials




                                     NUTRASTAR INCORPORATED AND SUBSIDIARIES
                                               CONSOLIDATED   BALANCE  SHEET
                                                 December 31,2002 (restated)
============================================================================

                                                      2002        2001
                                                 ------------  ------------
                                                   (restated)   (restated)
                                                         
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                       $(3,204,443)  $(3,771,474)
  Adjustments to reconcile net loss to net cash
    used in operating activities
      Depreciation and amortization                  126,460        94,397
      Loss reserve for patents and trademarks         75,359             -
      Non-cash issuances of preferred stock           60,000       468,511
      Non-cash issuances of common stock              90,000       756,138
      Non-cash issuances of committed stock          172,500       130,487
      Non-cash issuances of stock options            425,202     1,102,462
      Non-cash issuances of warrants                     850        10,178
      Non-cash payment of consulting fees            403,906             -
      Beneficial conversion feature                   66,000             -
      (Increase) decrease in
        Accounts receivable                           (5,680)      114,043
        Inventory                                     51,191       421,886
        Prepaid expenses                             (18,392)        6,597
        Deposits                                     181,071       (80,546)
      Increase (decrease) in
        Accounts payable                             325,214      (333,773)
        Accrued salaries and benefits                 (9,822)       36,079
        Deferred compensation                        325,962             -
        Accrued expenses                              24,475       157,670
        Customer deposits                             44,316             -
        Due to officer                                (5,435)       32,029
                                                 ------------  ------------

          Net cash used in operating activities     (871,266)     (855,316)
                                                 ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of property and equipment                 (61,150)     (234,348)
  Purchase of patents and trademarks                 (24,669)      (30,199)
                                                 ------------  ------------

          Net cash used in investing activities      (85,819)     (264,547)
                                                 ------------  ------------



                                        16
         The accompanying notes are an integral part of these financials




                                     NUTRASTAR INCORPORATED AND SUBSIDIARIES
                                               CONSOLIDATED   BALANCE  SHEET
                                                 December 31,2002 (restated)
============================================================================

CASH FLOWS FROM FINANCING ACTIVITIES
                                                           
  Proceeds from convertible notes payable                    -    1,230,000
  Principal payments on convertible notes payable            -     (490,000)
  Proceeds from notes payable                          334,800            -
  Principal payments on notes payable                 (104,000)           -
  Refunds from deposits payable                              -     (240,500)
  Proceeds from the issuance of common stock, net      355,501    1,020,000
                                                     ----------  -----------

          Net cash provided by financing activities    586,301    1,519,500
                                                     ----------  -----------

            Net increase (decrease) in cash           (370,784)     399,637

CASH, BEGINNING OF YEAR                                405,502        5,865
                                                     ----------  -----------

CASH, END OF YEAR                                    $  34,718   $  405,502
                                                     ==========  ===========


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

  INTEREST PAID                                      $       -   $        -
                                                     ==========  ===========

  INCOME TAXES PAID                                  $       -   $        -
                                                     ==========  ===========



                                        17
         The accompanying notes are an integral part of these financials


                                         NUTRASTAR INCORPORATED AND SUBSIDIARIES
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                 FOR THE YEARS ENDED DECEMBER 31
================================================================================
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the year ended December 31, 2002, the Company

-    issued 200,000 shares of common stock for services rendered totaling
     $90,000.

-    issued options to purchase 155,000 shares of common stock to an employee of
     the Company. In relation to these issuances, the Company recorded
     compensation expense totaling $193,750 and deferred compensation expense
     totaling $145,312.

-    issued options to purchase 425,000 shares of common stock for services
     rendered. In relation to these issuances, the Company recorded consulting
     expense totaling $173,250.

-    issued options to purchase 28,000 shares of common stock for debt issued.
     In relation to these issuances, the Company recorded interest expense
     totaling $5,600.

-    issued warrants to purchase 2,500 shares of common stock for services
     rendered. In relation to these issuances, the Company recorded consulting
     expense totaling $850.

-    committed to issue 1,060,000 shares of common stock for services rendered.
     In relation to these commitments, the Company recorded consulting expense
     totaling $172,500.

-    recorded interest expense totaling $66,000 related to the beneficial
     conversion feature for the issuance of convertible debt.

-    issued 60,000 shares of preferred stock as payment for an expense
     reimbursement totaling $60,000.

-    recorded 7% cumulative preferred stock dividends totaling $150,129

During the year ended December 31, 2001, the Company

-    converted notes with a principal balance of $1,340,000 and accrued interest
     of $90,196 into 1,430,196 shares of the Company's Series A preferred stock.
     Related to these conversions, the Company issued an additional 345,511
     shares of Series A preferred stock to certain of the note holders and
     recorded related interest charges of $345,511. The remaining notes with a
     principal balance of $250,000 and accrued interest of $18,687 had been
     converted into committed common stock. Related to the conversion, the
     Company recorded interest charges of $130,487 for additional shares that
     will be issued.

-    issued 100,000 shares of Series A preferred stock as a settlement of
     certain litigation. Related to this transaction, the Company recorded
     expenses totaling $100,000



                                       18
     The accompanying notes are an integral part of these financials


                                         NUTRASTAR INCORPORATED AND SUBSIDIARIES
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                 FOR THE YEARS ENDED DECEMBER 31
================================================================================
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES (CONTINUED)

-    issued 130,000 shares of Series A preferred stock to a related party as
     payment of accounts payable totaling $130,000 and subsequently executed a
     put/call option with the related party (see Note 11).

-    issued 13,000 shares of Series A preferred stock for services rendered
     valued at $13,000.

-    issued 56,000 shares of Series A preferred stock for deposits payable
     totaling $56,000. In relation to one of these transactions, the Company
     issued 10,000 shares of preferred stock as interest expense totaling
     $10,000.

-    issued 21,409 shares of common stock to acquire a registered trademark
     valued at $21,409.

-    issued 356,824 shares of common stock to extend the term of a note payable
     and recorded interest expense totaling $356,824.

-    issued 249,314 shares of common stock for services rendered valued at
     $249,314.

-    issued 250,001 shares of common stock in exchange for the remaining 20% of
     the common stock of NutraGlo owned by a third party.

-    issued 150,000 shares of common stock as a settlement for the cancellation
     of a consulting agreement and recorded consulting expense totaling
     $150,000.

-    recorded committed common stock of $399,174 for the conversion of a note
     payable and accrued interest.

-    issued options to purchase 935,564 shares of common stock to employees of
     the Company. In relation to these issuances, the Company recorded
     compensation expense totaling $197,914 and deferred compensation expense
     totaling $449,515.

-    issued options to purchase 1,498,660 shares of common stock. In relation to
     these issuances, the Company recorded consulting expense totaling $797,501
     and deferred compensation expense totaling $476,360.

-    issued options to purchase 142,730 shares of common stock in settlement of
     certain disputes. In relation to these issuances, the Company recorded
     settlement expenses totaling $107,047.


                                       19
        The accompanying notes are an integral part of these financials


NOTE  1  -  ORGANIZATION  AND  LINE  OF  BUSINESS

     General
     -------
     NutraStar  Incorporated  ('NutraStar"),  a  California corporation, markets
     proprietary  whole  food  dietary  supplements  derived from nutrient-dense
     stabilized  rice  bran (a nutraceutical) produced by an affiliated company,
     The  RiceX  Company  ("RiceX"), a current shareholder and a publicly traded
     company.  The  Company  (as  defined in Note 4) has a license to distribute
     certain  derivatives  of  RiceX's  stabilized  rice  bran,  as  well  as
     valued-added rice bran products in the United States of America.

     On  December  14,  2001, Alliance Consumer International, Inc. ("Alliance")
     acquired  all  of the outstanding common stock of NutraStar. For accounting
     purposes,  the  acquisition  has  been  treated  as  a  recapitalization of
     NutraStar  with  NutraStar  as  the  acquirer  (reverse  acquisition).

     Effective  April  27,  2000,  NutraStar  became  an  80%  owner of NutraGlo
     Incorporated ("NutraGlo"), a Nevada corporation. NutraGlo was non-operative
     during  2000.  During  the  year  ended December 31, 2001, NutraGlo started
     marketing, manufacturing, and distributing NutraStar's stabilized rice bran
     and  other  nutraceuticals  to  the  equine  market.  In  connection  with
     NutraStar's  acquisition  of  Alliance,  NutraStar issued 250,001 shares of
     common  stock  in  exchange  for  the  remaining 20% of the common stock of
     NutraGlo.

     The  transaction  has  been  accounted  for in accordance with Statement of
     Financial  Accounting  Standards ("SFAS") No. 141, "Business Combinations,"
     which  is  required  for all transactions occurring after June 30, 2001. In
     accordance  with  SFAS  No.  141,  the purchase price is to be allocated to
     assets  acquired and liabilities assumed based on the estimated fair market
     value  at  the  closing  date  of  the  acquisition, with the excess of the
     purchase price being allocated to goodwill. Since there were not any assets
     acquired  and  liabilities assumed in connection with this transaction, the
     value of the shares issued of $250,001 has been recorded as goodwill in the
     accompanying  consolidated balance sheet. As NutraStar was the 80% owner of
     NutraGlo, the operations of NutraGlo have been consolidated with NutraStar.
     Therefore,  pro  forma  information  is  not  required.

     Lines  of  Business
     -------------------
     The Company has four primary divisions through which it sells its products:
     (1)  TheraFoods(R),  which  distributes  consumer  products  including
     RiSolubles(R),  RiceMucil(R),  NutraFlex(TM),  and  StaBran(R),  (2)
     NutraCea(R),  which  was  created  to compliment medical food products, (3)
     NutraBeauticals(R), which provides natural products to improve skin health,
     and  (4)  NutraGlo(R),  which  developed  a derivative of the NutraFlex(TM)
     product  for  horses.

     For internal reporting purposes, management segregates the Company into two
     segments:  (1)  NutraStar, including  the  transactions  of  TheraFoods(R),
     NutraCea(R),  and  NutraBeauticals(R),  and  (2)  NutraGlo.

NOTE  2  -  RESTATEMENT

     DECEMBER  31,  2001
     -------------------
     During  the year ended December 31, 2001, the Company issued 130,000 shares
     of  Series  A  preferred  stock  to  a related party as payment of accounts
     payable totaling $130,000. Related to these issuances, on January 15, 2002,
     these holders executed a put/call agreement with the Company (see Note 11).
     The  Company  previously  had  not recorded the put option on its financial
     statements.  The  Company  has  also  reclassified its convertible Series A
     preferred  stock


                                       20

     to  convertible,  redeemable  Series  A preferred stock to conform with the
     accounting  requirements  of  the  United  States  Securities  and Exchange
     Commission.

     This  restatement  does  not  have  any  effect  on  the Company's reported
     earnings.  Its  impact  on  the  previously  reported total liabilities and
     convertible, redeemable Series A preferred stock as of December 31, 2001 is
     as  follows:



                                        As Previously
                                           Reported      Restatement   As Restated
                                        --------------  -------------  ------------
                                                              

  Total liabilities                     $      562,529  $    130,000   $    692,529
  Total convertible, redeemable Series
    A preferred stock                   $    1,980,802  $   (130,000)  $  1,850,802


     DECEMBER 31, 2002
     -----------------
     NutraStar has restated its Consolidated Financial Statements for 2002 to
     correct a reporting error that was discovered in the fourth quarter of
     2003. During 2002, NutraStar's CEO transferred personal shares of common
     stock to third-party consultants as compensation for services rendered to
     NutraStar and to settle certain contingencies related to the failure to
     file an effective registration statement by June 30, 2002. These
     transactions were omitted in error from the financial statements as
     originally reported. This restatement increases the net loss attributable
     to common shareholders and common stock by $403,906.

     The following table presents the effects of the correction and restatement
     on a condensed basis.



                                         FOR THE YEAR ENDED DECEMBER 31, 2002
                                     -------------------------------------------
                                      As previously    Restatement        As
                                         reported      adjustments     restated
                                     ---------------  ------------  ------------
                                                           
Shareholder's deficit:
  Common stock                       $    5,457,796       403,906   $ 5,861,702
  Accumulated deficit                $   (8,278,840)     (403,906)  $(8,682,746)

Operating expenses                   $    3,188,431       403,906   $ 3,592,337
Net loss attributable to common
  shareholders                       $   (2,950,666)     (403,906)  $(3,354,572)

Basic and diluted loss attributable
  to common shareholders per
  common share                       $        (1.34)        (0.18)  $     (1.52)


NOTE  3  -  GOING  CONCERN

     The accompanying financial statements have been prepared in conformity with
     United  States  generally  accepted accounting principles which contemplate
     continuation  of  the  Company  as  a  going concern. During the year ended
     December  31,  2002,  the Company incurred a net loss of $3,204,443, and it
     had  negative  cash  flows  from  operations  of $871,266. In addition, the
     Company  had  an  accumulated  deficit  of $8,682,746 at December 31, 2002.
     These  factors  raise  substantial  doubt  about  the  Company's ability to
     continue  as  a  going  concern.

     Recovery  of  the  Company's  assets  is  dependent upon future events, the
     outcome  of  which  is


                                       21

     indeterminable.  Successful  transition of the Company to the attainment of
     profitable  operations  is  dependent upon the Company achieving a level of
     sales  adequate  to  support  the  Company's  cost structure. The financial
     statements  do  not  include any adjustments relating to the recoverability
     and  classification of recorded asset amounts or amounts and classification
     of  liabilities  that  might  be  necessary should the Company be unable to
     continue  in  existence.

     Management's  plans  to  alleviate  substantial concern about the Company's
     ability to continue as a going concern include the following:

     -    The  Company  anticipates  that  it  will  be able to raise additional
          equity  that  will  be  sufficient for it to continue to implement its
          current  business  strategy. It plans on registering all of its common
          stock  with  the  Securities  and  Exchange  Commission not previously
          registered  as  well  as  any  future common stock issued. This should
          result in more market liquidity for the Company's common shareholders.

     -    The  Company  plans  on  implementing an aggressive marketing strategy
          that  will  enhance  consumer  awareness of its products. The strategy
          includes  establishing  and/or  expanding  existing  strategic
          relationships;  using  an  Internet  business-to-business  and
          business-to-consumer  Web  site  that  will  handle  increased product
          demand  if  its  marketing  strategy  is successful; creating a direct
          response  marketing  campaign;  and  advertising in targeted, industry
          specific  magazines.

     -    The  Company  is  reducing  its  fixed  overhead expenses and plans to
          continue  to  control  such  items  for  the  foreseeable  future.

NOTE  4  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

     Principles  of  Consolidation
     -----------------------------
     The consolidated financial statements include the accounts of NutraStar and
     its  wholly  owned  subsidiaries,  NutraStar  Technologies Incorporated and
     NutraGlo  (collectively,  the  "Company").  All  significant  inter-company
     accounts  and  transactions  are  eliminated  in  consolidation.

     Revenue  Recognition
     --------------------
     Revenue  is  generally recognized upon shipment of product with a provision
     for  estimated returns and allowances recorded at that time, if applicable.
     Commissions  revenue  is generally recognized when earned and collection is
     reasonably  assured.

     Comprehensive  Income
     ---------------------
     The  Company  utilizes SFAS No. 130, "Reporting Comprehensive Income." This
     statement  establishes standards for reporting comprehensive income and its
     components  in  a  financial  statement.  Comprehensive  income  as defined
     includes  all changes in equity (net assets) during a period from non-owner
     sources.  Examples  of  items to be included in comprehensive income, which
     are  excluded  from  net  income,  include  foreign  currency  translation
     adjustments,  minimum  pension  liability adjustments, and unrealized gains
     and  losses  on  available-for-sale securities. Comprehensive income is not
     presented  in  the Company's financial statements since the Company did not
     have  any  changes  in  equity  from  non-owner  sources.

     Accounts  Receivable
     --------------------
     The  Company  provides  for  the  possible  inability  to  collect accounts
     receivable  by  recording  an  allowance for doubtful accounts. The Company
     writes  off  an  account  when  it is considered to be uncollectible. As of
     December  31,  2002,  an  allowance  for  doubtful  accounts was not deemed
     necessary.


                                       22

     Inventory
     ---------
     Inventory  is  stated  at the lower of cost (first-in, first-out) or market
     and  consists  of  nutraceutical  products  manufactured  by  an affiliated
     company,  RiceX,  which  the Company enhances for final distribution to its
     customers.  While  the  Company  has  an inventory of these products, which
     contain  ingredients  supplied by RiceX, 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.

     Property  and  Equipment
     ------------------------
     Property  and  equipment  are  stated  at  cost.  The  Company provides for
     depreciation using the straight-line method over the estimated useful lives
     as  follows:

               Furniture  and  equipment     7  years
               Software                      3  years

     Expenditures  for  maintenance  and  repairs  are  charged to operations as
     incurred while renewals and betterments are capitalized. Gains or losses on
     the  sale  of  property  and  equipment  are reflected in the statements of
     operations.

     Patents  and  Trademarks
     ------------------------
     The Company has exclusive licenses for several patents, which were acquired
     from  independent  third  parties and a related party. All costs associated
     with the patents are capitalized. Patents acquired from related parties are
     recorded at the carryover basis of the transferor. The Company paid cash as
     consideration  for all patents and trademarks acquired, except the Via-Bran
     registered  trademark, which was acquired for 21,409 shares of common stock
     valued  at  $21,409.

     Amortization  is  computed  on  the straight-line method based on estimated
     useful lives of 17 to 20 years. The Company also has registered trademarks,
     which are amortized over estimated useful lives of 10 years.

     The  Company  recorded  a  loss reserve totaling $75,359 as of December 31,
     2002  related  to  the  impairment  of  certain  patents.

     Deferred  Compensation
     ----------------------
     Deferred compensation at December 31, 2002 consisted of salaries payable to
     employees of the Company that have been earned, but not paid.

     Fair  Value  of  Financial  Instruments
     ---------------------------------------
     For  certain  of  the  Company's  financial  instruments,  including  cash,
     accounts receivable, inventory, prepaid expenses, accounts payable, accrued
     salaries  and  benefits,  deferred compensation, accrued expenses, customer
     deposits,  due  to  officer,  due to related party, notes payable - related
     party,  note payable, and put option, the carrying amounts approximate fair
     value  due  to  their  short  maturities.

     Stock-Based  Compensation
     -------------------------
     SFAS  No.  123,  "Accounting  for Stock-Based Compensation," defines a fair
     value  based  method  of  accounting for stock-based compensation. However,
     SFAS  No.  123  allows  an  entity to continue to measure compensation cost
     related  to stock and stock options issued to employees using the intrinsic
     method  of  accounting  prescribed  by  Accounting Principles Board ("APB")


                                       23

     Opinion  No.  25,  "Accounting  for  Stock  Issued  to Employees." Entities
     electing  to  remain with the accounting method of APB No. 25 must make pro
     forma disclosures of net income and earnings per share as if the fair value
     method  of accounting defined in SFAS No. 123 had been applied. The Company
     has  elected to account for its stock-based compensation to employees under
     APB  No.  25.

     Advertising  Expense
     --------------------
     The  Company  expenses  all  advertising  costs,  including direct response
     advertising,  as they are incurred. Advertising expense for the years ended
     December 31, 2002 and 2001 was $57,264 and $24,369, respectively.

     Income  Taxes
     -------------
     The  Company  accounts  for  income taxes under the liability method, which
     requires  the  recognition  of  deferred tax assets and liabilities for the
     expected  future  tax consequences of events that have been included in the
     financial  statements  or  tax  returns. Under this method, deferred income
     taxes  are  recognized  for  the  tax  consequences  in  future  years  of
     differences  between  the  tax  bases  of  assets and liabilities and their
     financial  reporting  amounts  at each period end based on enacted tax laws
     and  statutory tax rates applicable to the periods in which the differences
     are  expected  to  affect  taxable  income.  Valuation  allowances  are
     established,  when  necessary,  to reduce deferred tax assets to the amount
     expected  to  be  realized.

     Loss  Per  Share
     ----------------
     The  Company  utilizes  SFAS  No. 128, "Earnings per Share." Basic loss per
     share  is computed by dividing loss available to common shareholders by the
     weighted-average  number  of  common  shares  outstanding. Diluted loss per
     share  is  computed  similar  to  basic  loss  per  share  except  that the
     denominator  is increased to include the number of additional common shares
     that  would  have  been outstanding if the potential common shares had been
     issued and if the additional common shares were dilutive. Common equivalent
     shares  are excluded from the computation if their effect is anti-dilutive.
     As such, basic and diluted loss per share are the same.

     Estimates
     ---------
     The  preparation  of  financial  statements  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 revenue and
     expenses  during  the  reporting  period.  Actual results could differ from
     those  estimates.

     Concentrations  of  Credit  Risk
     --------------------------------
     The Company sells its services throughout the United States, extends credit
     to  its  customers,  and  performs  ongoing  credit  evaluations  of  such
     customers. The Company evaluates its accounts receivable on a regular basis
     for  collectability  and  provides  for  an  allowance for potential credit
     losses  as  deemed  necessary.

     On  May  1,  2001,  the  Company  entered  into  a  three-year,  exclusive
     distribution  agreement  with a customer, in which the customer is required
     to  purchase  a  minimum  of  90,000  pounds of the Company's product on or
     before  July  1,  2001,  120,000  pounds  before September 1, 2002, 275,000
     pounds  between  September  1, 2002 and August 31, 2003, and 350,000 pounds
     between  September  1,  2003  and  August  31,  2004. During the year ended
     December  31,  2002,  sales to this customer totaled $516,596 (40% of total
     sales).  During  the  year  ended December 31, 2001, sales to this customer
     totaled  $596,627  (46%  of  total  sales).

     In  addition  to  the  above,  during the years ended December 31, 2002 and
     2001,  one  customer


                                       24

     accounted for 10% and 19%, respectively, of the Company's sales.

     Recently  Issued  Accounting  Pronouncements
     --------------------------------------------
     In  April  2002,  the  Financial Accounting Standards Board ("FASB") issued
     SFAS  No.  145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment
     of FASB Statement No. 13, and Technical Corrections." SFAS No. 145 updates,
     clarifies,  and  simplifies  existing  accounting  pronouncements.  This
     statement  rescinds  SFAS  No.  4, which required all gains and losses from
     extinguishment  of debt to be aggregated and, if material, classified as an
     extraordinary  item,  net  of  related  income tax effect. As a result, the
     criteria in Accounting Principles Board No. 30 will now be used to classify
     those  gains  and  losses.  SFAS No. 64 amended SFAS No. 4 and is no longer
     necessary  as SFAS No. 4 has been rescinded. SFAS No. 44 has been rescinded
     as  it  is  no longer necessary. SFAS No. 145 amends SFAS No. 13 to require
     that  certain  lease  modifications  that  have economic effects similar to
     sale-leaseback  transactions  be  accounted  for  in  the  same  manner  as
     sale-lease transactions. This statement also makes technical corrections to
     existing  pronouncements.  While  those  corrections are not substantive in
     nature,  in  some  instances,  they  may  change  accounting practice. This
     statement  is  not  applicable  to  the  Company.

     Recently  Issued  Accounting  Pronouncements  (Continued)
     --------------------------------------------
     In  June  2002,  the  FASB  issued  SFAS  No.  146,  "Accounting  for Costs
     Associated  with  Exit  or  Disposal  Activities." This statement addresses
     financial  accounting  and  reporting  for  costs  associated  with exit or
     disposal activities and nullifies Emerging Issues Task Force ("EITF") Issue
     No.  94-3, "Liability Recognition for Certain Employee Termination Benefits
     and  Other Costs to Exit an Activity (including Certain Costs Incurred in a
     Restructuring)."  This  statement  requires  that  a  liability  for a cost
     associated  with  an  exit  or  disposal  activity  be  recognized when the
     liability is incurred. Under EITF Issue 94-3, a liability for an exit cost,
     as defined, was recognized at the date of an entity's commitment to an exit
     plan.  The  provisions of this statement are effective for exit or disposal
     activities  that  are  initiated  after  December  31,  2002  with  earlier
     application  encouraged.  This  statement is not applicable to the Company.

     In  October  2002,  the  FASB issued SFAS No. 147, "Acquisitions of Certain
     Financial  Institutions."  SFAS No. 147 removes the requirement in SFAS No.
     72  and  Interpretation  9 thereto, to recognize and amortize any excess of
     the  fair  value of liabilities assumed over the fair value of tangible and
     identifiable  intangible  assets  acquired  as an unidentifiable intangible
     asset.  This statement requires that those transactions be accounted for in
     accordance  with  SFAS  No. 141, "Business Combinations," and SFAS No. 142,
     "Goodwill  and Other Intangible Assets." In addition, this statement amends
     SFAS  No.  144,  "Accounting  for  the Impairment or Disposal of Long-Lived
     Assets,"  to  include  certain  financial  institution-related  intangible
     assets.  This  statement  is  not  applicable  to  the  Company.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
     Compensation  -  Transition  and Disclosure," an amendment of SFAS No. 123.
     SFAS  No.  148  provides  alternative methods of transition for a voluntary
     change  to  the  fair  value  based  method  of  accounting for stock-based
     employee  compensation.  In  addition,  SFAS  No. 148 amends the disclosure
     requirements  of  SFAS  No. 123 to require more prominent and more frequent
     disclosures  in  financial  statements  about  the  effects  of stock-based
     compensation.  This  statement  is  effective  for financial statements for
     fiscal  years ending after December 15, 2002. SFAS No.148 will not have any
     impact  on  the  Company's financial statements as management does not have
     any  intention  to  change  to  the  fair  value  method.


                                       25

NOTE  5  -  CASH

     The  Company maintains its cash balances at one bank located in California.
     The  balances  at  the  bank  are  insured by the Federal Deposit Insurance
     Corporation  up to $100,000. At December 31, 2002, the Company did not have
     any  uninsured  cash.

NOTE  6  -  PROPERTY  AND  EQUIPMENT

     Property and equipment at December 31, 2002 consisted of the following:

Furniture and equipment               $ 18,417
Software                               347,773
                                      --------

                                       366,190
Less accumulated depreciation          210,478
                                      --------

      TOTAL                           $155,712
                                      ========

     Depreciation  expense was $116,393 and $89,026 for the years ended December
     31,  2002  and  2001,  respectively.

NOTE  7  -  PATENTS  AND  TRADEMARKS

     Patents and trademarks at December 31, 2002 consisted of the following:

Patents                               $89,399
Trademarks                             52,259
                                       ------

                                      141,658
Less loss reserve                      75,359
Less accumulated amortization          17,551
                                       ------

      TOTAL                           $48,748
                                      =======

     At  December  31, 2002, $67,098 of the Company's patents and trademarks had
     been  purchased  from  a  related  party.

     The  Company  recorded  a  loss reserve totaling $75,359 as of December 31,
     2002  related  to  the  impairment  of  certain  patents.

     Amortization  expense  was  $10,067 and $5,371 for the years ended December
     31,  2002  and 2001, respectively. Future estimated, aggregate amortization
     expense  at  December  31,  2002  was  as  follows:


                                       26

               Year Ending
               December 31,
               ------------

                    2003               $ 9,696
                    2004                 9,696
                    2005                 9,696
                    2006                 9,696
                    2007                 9,694
                                       -------

                    TOTAL              $48,478
                                       =======

NOTE  8  -  GOODWILL

     Goodwill represents the purchase price of the remaining 20% of NutraGlo. As
     of  January  1,  2002,  the  Company  adopted  SFAS  No.  142. SFAS No. 142
     prohibits  the  amortization  of goodwill, but requires that it be reviewed
     for  impairment at least annually or on an interim basis if an event occurs
     or  circumstances  change that could indicate that its value has diminished
     or been impaired. Recoverability of goodwill is measured by a comparison of
     its carrying value to the future net cash flows expected to be generated by
     it.

     Cash flow projections are based on historical experience, management's view
     of  growth  within  the  industry,  and  the  anticipated  future  economic
     environment.  Since  the Company purchased the remaining 20% of NutraGlo on
     December 12, 2001, amortization expense was not recorded as of December 31,
     2001.  As  such,  the transitional disclosure provisions of SFAS No. 142 do
     not  apply.

NOTE 9 - NOTES PAYABLE - RELATED PARTIES

     During the year ended December 31, 2002, the Company raised an aggregate of
     $234,800 through the issuance of short-term promissory notes. Notes payable
     -  related  parties  at  December  31,  2002  consisted  of  the following:



                                                                    
Notes payable to the Chief Executive Officer, bearing interest
     at 10% per annum, with $74,000 due prior to December 31,
     2002, $1,800 due on January 26, 2003, and $100,000 due on
     March 3, 2003.  At December 31, 2002, a total of $74,000
     of these notes were delinquent.  Subsequent to December 31,
     2002, all of these notes were modified to be due on demand.       $ 175,800

Note payable to a related party, bearing interest at 10% per annum
     and due on December 20, 2002.  At December 31, 2002,
     this note was delinquent.  Subsequent to December 31, 2002,
     this note was modified to be due on demand.                           5,000
                                                                       ---------

          TOTAL                                                        $ 180,800
                                                                       =========



NOTE  10  -  NOTE  PAYABLE

     Note  payable  at  December  31, 2002 amounted to $50,000 to a third party,
     bearing  interest  at  2%  per  month,  secured by 243,036 shares of common
     stock,  and  due on December 20, 2002. As of


                                       27

     December  31,  2002,  the Company was in default on the note. Subsequent to
     December  31,  2002,  the  Company entered into an agreement with the third
     party  to  modify  the  collateral to 634,121 shares of preferred stock and
     extended  the  due  date  of  the  note  to  September  20,  2003.

NOTE  11  -  PUT  OPTION

     During  the year ended December 31, 2001, the Company issued 130,000 shares
     of  Series  A  preferred  stock  to  a related party as payment of accounts
     payable totaling $130,000. On January 15, 2002, these holders of the Series
     A  preferred  stock  executed  a put/call agreement. The put allows for the
     holder  to  sell  to the Company all, but not less than all, of the 130,000
     shares of the Company's Series A preferred stock, or common stock if any of
     the  Series  A  preferred  stock  were  converted,  for  $130,000, plus all
     accumulated,  but  unpaid  dividends,  at  any  time  after six months from
     January  15,  2002. Related to the put option and the related conversion of
     debt,  the  Company  has  recorded  a  liability  of  $130,000.

     In  addition,  the  Company  maintains  the  right  to  call the option and
     purchase back the shares of the Series A preferred stock for $130,000, plus
     any  unpaid  and  accrued  dividends  at  any  time,  subject  to  certain
     provisions.

NOTE  12  -  COMMITMENTS  AND  CONTINGENCIES

     Lease
     -----
     The  Company leases its office space under a non-cancelable operating lease
     with  RiceX that expires in September 2006 and requires monthly payments of
     $5,358.  Future minimum payments under this lease agreement at December 31,
     2002  were  as  follows:

               Year Ending
               December 31,
               ------------

                    2003                 $64,298
                    2004                  64,700
                    2005                  65,906
                    2006                  49,429
                                          ------

                       TOTAL            $244,333
                                        ========

     Rent  expense was $63,899 and $66,799 for the years ended December 31, 2002
     and  2001,  respectively.

     Registration  Statement
     -----------------------
     The  Company  will  pay all of the costs connected with the registration on
     Form  SB-2 related to the re-sale of up to 3,709,028 shares of common stock
     originally  filed  on  June  4, 2002, except the holder of the common stock
     will  pay  all  sales  commissions  or  brokers' discounts and the fees and
     expenses  of  the  holders'  legal  counsel  or  accountants,  if  any.

     Agreements
     ----------
     The  Company  has  entered  into  several  employment  agreements  with key
     employees  with  terms  ranging  from  three  to  10  years. Minimum future
     payments  under  these  agreements  at  December  31, 2002 were as follows:


                                       28

               Year Ending
               December 31,
               ------------

                    2003                  $508,750
                    2004                   380,000
                    2005                   283,333
                    2006                   250,000
                    2007                   250,000
                    Thereafter             458,333
                                          --------
                          TOTAL         $2,130,416
                                        ==========

     Generally,  if the Company terminates these agreements without cause or the
     employee  resigns  with  good  reason, as defined, the Company will pay the
     employees' salaries, bonuses, and benefits payable for the remainder of the
     term  of  the  agreements.

     On  December  14,  2001,  the  Company  entered  into a 12-month consulting
     services  agreement,  whereby a $15,000 retainer fee is due every month for
     financial  and  accounting  services.  This agreement was canceled in March
     2002.  During  the  year ended December 31, 2002, total consulting expenses
     paid  under  this  contract  were  $37,500.

     On  December  14,  2001,  the  Company  entered  into a 12-month consulting
     services  agreement,  whereby  it  agreed  to pay a $5,000 retainer fee for
     financial  and accounting services. In addition, upon the attainment by the
     consultant  of certain capital transactions, such as any financing business
     combination, sale, or acquisition, a certain percentage, ranging from 2% to
     6%,  of the value of the capital transaction will be paid by the Company to
     the  consultant  in cash. As of December 31, 2002, consulting expenses paid
     under  this  contract  were  $35,000.

     On  February 26, 2002, the Company entered into a master services agreement
     for  certain  e-commerce  services  in  the  amount  of  $9,975.

     On April 12, 2002, the Company entered into a two-year marketing agreement,
     whereby  the  Company  is  to  pay a commission of 10% of gross receipts on
     sales  from  customers introduced to the Company by the consultant, subject
     to  certain  requirements.  In relation to this agreement, the Company must
     grant to the consultants five-year options to purchase up to 150,000 shares
     of  the  Company's  common  stock  upon  the  attainment of customers at an
     exercise  price of $0.75 per share, vesting according to the achievement of
     certain  levels of gross receipts. The agreement automatically renews after
     the  initial two-year term. As of December 31, 2002, the consultant had not
     produced  any sales. Therefore, options had not been issued. Options issued
     upon  procurement  of  customers  will  be valued either at the fair market
     value  of  the  services performed or the fair market value of the options,
     whichever  is  more  readily available, with the expense amortized over the
     service  period.

     On  May  6, 2002, the Company entered into a one-year finder's and advisory
     agreement,  whereby  the  finder  is to seek businesses that are consistent
     with the Company's business and strategic plans or to introduce the Company
     to investors. The fees paid to the finder for finding investors to fund the
     Company  are  based  upon certain percentages, ranging from 2% to 10%, plus
     unaccountable expenses, depending on the amount funded by the investors. In
     addition,  10%  of the transaction value will be paid in cashless warrants.
     If  the finder arranges a credit line or other types of debt placement, the
     fees  paid  to  the  finder  will  be  2%  of  the  total  debt  placement.

     If  the finder introduces a business or entity and the Company engages in a
     merge-type  transaction


                                       29

     or  other  similar transactions, the fees paid to the finder are based upon
     certain  percentages,  ranging  from 3% to 7%, depending on the transaction
     value.  In  addition, 10% of the transaction value will be paid in cashless
     warrants.  This  agreement  is  automatically  renewed  after  the  initial
     one-year  term.  As  of  December  31,  2002,  amounts were not paid to the
     finder.

     On  June  10,  2002,  the  Company  entered  into  a  one-year finder's fee
     agreement,  whereby  the  Company  is  to  pay  the  finder 5% of the gross
     revenues  generated  from  a commercial transaction other than financing, a
     merger,  or  some other form of business combination. For every $100,000 in
     gross  revenues  that  are  generated by the finder, the Company will issue
     warrants to the finder to purchase 5,000 shares of common stock, which will
     be  exercisable immediately, at the then current market price on a cashless
     basis,  subject  to  certain  limitations.

     In  September  2002,  the  Company  entered  into a secured promissory note
     agreement  for $50,000, which was paid off prior to the year ended December
     31,  2002.  The  note was collateralized by 500,000 shares of the Company's
     common  stock.  As of December 31, 2002, these shares had not been returned
     to  the  Company  by  the loaner. The Company has reflected these shares as
     being  issued  and  outstanding  as  of  December  31,  2002.

     In  September  2002,  the  Company  entered  into a secured promissory note
     agreement  for  $50,000,  due  on  December  20,  2002.  The  note  was
     collateralized  by  243,036  shares  of  the  Company's common stock. As of
     December 31, 2002, the Company was in default on this agreement. Subsequent
     to December 31, 2002, the Company and the loaner agreed to modifications in
     the  agreement,  whereby  the note will be secured by 634,121 shares of the
     Company's  convertible, redeemable Series A preferred stock and will be due
     on  demand.

     In  November 2002, the Company entered into a one-year consulting agreement
     with  a  third  party in exchange for a fixed monthly fee. In addition, the
     Company  must  issue  to the consultant $100,000 worth of common stock as a
     commencement  bonus.  The per share price of the Company's common stock was
     $0.10  on  the  date  services  were  first  provided  by  the  consultant.
     Therefore,  the  Company  is  committed to issue 1,000,000 shares of common
     stock  as  of December 31, 2002. The expense related to the transaction has
     been  recorded  in  operating  expenses  on  the  accompanying statement of
     operations.  Furthermore,  the  contract  calls  for  the  issuance  to the
     consultant options to purchase 1,200,000 shares of common stock. Subsequent
     to  December  31, 2002, this agreement was terminated, and the options were
     canceled.  These  stock  options  are  not  included  in  the stock options
     outstanding  at  December  31,  2002.

     On  August 21, 2002, the Company entered into a one-year investment banking
     agreement,  whereby  the  Company is to pay commission of $5,000 a month to
     the  consultant  upon  the raising of $500,000 in capital. In addition, the
     Company's  CEO  gave  290,000  of  personal  NutraStar  common stock to the
     investment  banker  as  compensation  for the benefit of the Company. As of
     December  31,  2002, the consultant had not raised any funds. Therefore the
     Company  was not liable for the 290,000 shares issued upon execution of the
     agreement.  The  investment  banker  acknowledges  these  shares  will  be
     returned, however, since they are involved in litigation with a third party
     who holds these shares, it is uncertain when these shares will be returned.

     Litigation
     ----------
     On  April  4, 2002, a complaint was filed against the Company by Millennium
     Integrated  Services,  Inc.  ("MISI").  MISI  provided Web site development
     services  to  the  Company  at a cost of $204,405. MISI is seeking contract
     payment  of  $204,405,  plus  interest  of  $32,031 and damages for alleged
     conversion  and  misappropriation  of trade secrets. On April 9, 2002, MISI
     filed  a Motion for a Writ of Attachment that would allow MISI to seize and
     hold  the  Company's  assets


                                       30

     worth  $236,436,  pending  the  resolution  of  the  lawsuit.  This Writ of
     Attachment  was  granted  on  April  10,  2002.

     Certain  of  the Company's accounts receivable as of December 31, 2002 have
     been  attached to secure an accounts payable balance to MISI of $188,882 as
     of December 31, 2002. The Company believes that the settlement of this case
     may  have  a  material  effect  on  the  Company's  cash  flows.

     On  July  16, 2002, the Company was summoned to answer a complaint filed by
     Faraday  Financial, Inc. ("Faraday"). Between December 2000 and March 2001,
     the  Company  issued  convertible  promissory notes totaling $450,000 and a
     promissory  note  totaling  $50,000.  On December 13, 2001, Faraday entered
     into  a  settlement  agreement  with the Company, whereby Faraday agreed to
     cancel  the  promissory  notes  in exchange for 735,730 shares of preferred
     stock.  Faraday  claims  that  the  settlement  agreement required that the
     Company  effect  a  registration  statement covering the preferred stock by
     June  30,  2002.  In  the event the Company failed to effect a registration
     statement  by  June  30,  2002,  the  Company was to immediately forfeit to
     Faraday  735,730  shares of common stock in the name of the Chief Executive
     Officer  of  the  Company.  As  of  December 31, 2002, the Company recorded
     $292,506  of  non-cash  compensation  expense  related to this transaction.

     In  addition,  the Chief Executive Officer entered into an escrow agreement
     to  ensure  the automatic forfeiture of the common stock and entered into a
     guarantee to be personally responsible to Faraday for the original $500,000
     loan  amount,  plus  12%  interest  per annum. Faraday has filed its fourth
     claim  for  relief  for  a  judgment against the Company for $500,000, plus
     accrued,  but  unpaid  interest,  attorneys' fees and costs, and other such
     costs.  As  of September 30, 2002, management believes the maximum exposure
     for  the  Company  is  approximately  $500,000,  plus  interest  and  fees.

     The  Company  was  involved in litigation with several potential investors.
     The  plaintiffs  requested a return of $750,000 in funds deposited with the
     Company,  representing  potential permanent investments. These matters have
     been  resolved  in  connection  with  the  acquisition  of  Alliance during
     December  2001.  As  of  December  31,  2002, there were not any additional
     liabilities  related  to  these  matters.

     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  significant  effect  on the Company's financial
     position  and  results  of  operations.

     From February through July 2000, a third party solicited funds on behalf of
     an  undetermined  public shell company, into which it was contemplated that
     the Company might merge. In this regard, the Company received approximately
     $320,000  in  deposits  to  be  used for such purpose. As a result of these
     solicitations,  there  may  have  been  violations  of federal and/or state
     securities  laws  by such third party. The Company never proceeded with the
     contemplated  merger.  Instead,  the  Company  applied  such  funds  to  a
     subsequent private placement that the Company conducted, in which shares of
     the  Company's  common  stock  were issued for the $320,000 investment. The
     Company  has  offered full refunds to all people who provided monies to the
     Company.  There are not any assurances that federal and/or state securities
     authorities  will  not investigate and possibly bring an action against the
     third  party  who  solicited  the  funds  and  the  Company.

NOTE  13  -  SHAREHOLDERS'  DEFICIT


                                       31

     Convertible,  Redeemable  Series  A  Preferred  Stock
     -----------------------------------------------------
     In  December 2001, the Company approved the issuance of 3,000,000 shares of
     convertible, redeemable Series A preferred stock and executed a certificate
     of  designation  of the rights, preferences, and privileges of the Series A
     preferred  stock.  Each shareholder of Series A preferred stock is entitled
     to  receive  a 7% cumulative dividend, which is only payable in the case of
     liquidation  or redemption. The Series A preferred stock has a $1 per share
     stated  value  and  will  receive  certain  liquidation  preferences  after
     satisfaction of claims of creditors, but before payment or distributions of
     assets  and  surplus  funds.

     Furthermore,  the  Series A preferred stock is convertible at the option of
     the  holder  at  $1  per  share into the Company's common stock, subject to
     certain anti-dilution provisions. In addition, the Series A preferred stock
     will  automatically  convert  into common stock in the event of a qualified
     public  trading  benchmark,  which  is  defined  as (i) the common stock is
     listed  on  a  national  exchange at twice its conversion price or (ii) the
     common stock is quoted on the over-the-counter bulletin board at an average
     bid  price  of  at  least  $1.25  per share over any 30-day trading period.

     The Company may redeem any and all outstanding shares of Series A preferred
     stock.  Upon the five-year anniversary of the date of issuance, the Company
     is  required  to redeem all of its outstanding shares of Series A preferred
     stock  at  $1 per share, plus all accrued and unpaid dividends declared. As
     of  December  31,  2002,  cumulative  dividends  totaled  $150,129.

     During  the year ended December 31, 2001, the Company issued 100,000 shares
     of  Series A preferred stock as a settlement of certain litigation. Related
     to this transaction, the Company recorded expenses totaling $100,000 during
     the  year  ended  December  31,  2001.

     During  the year ended December 31, 2001, the Company issued 130,000 shares
     of  Series  A  preferred  stock  to  a related party as payment of accounts
     payable  totaling $130,000 and subsequently executed a put/call option with
     the  related  party  (see  Note  11).

     During  the  year ended December 31, 2001, the Company issued 13,000 shares
     of  Series  A  preferred  stock  for services rendered. In relation to this
     transaction, the Company recorded consulting expense totaling $13,000 as of
     December  31,  2001.

     During  the  year ended December 31, 2001, the Company issued 56,000 shares
     of  Series  A  preferred  stock  for  deposits payable totaling $56,000. In
     relation  to one of these transactions, the Company issued 10,000 shares of
     preferred  stock  as  interest  expense totaling $10,000 as of December 31,
     2001.

     Convertible,  Redeemable  Series  A  Preferred  Stock  (Continued)
     -----------------------------------------------------
     During  the year ended December 31, 2001, notes with a principal balance of
     $1,340,000  and  accrued  interest  of  $90,196  had  been  converted  into
     1,430,196  shares  of  the  Company's  Series A preferred stock. Related to
     these  conversions,  the  Company  issued  an  additional 345,511 shares of
     Series  A  preferred  stock  to  certain  of  the note holders and recorded
     related  interest charges of $345,511. The remaining notes with a principal
     balance of $250,000 and accrued interest of $18,687 had been converted into
     committed  common  stock.  Related  to the conversion, the Company recorded
     interest  charges  of  $130,487  for additional shares that will be issued.

     Common  Stock
     -------------
     During  the year ended December 31, 2002, The Company issued 180,000 shares
     of  common  stock  to consultants at a price of $.20 per share for services
     received.  In  relations  to  this


                                       32

     transaction,  the  Company  recorded  non-cash  consulting expense totaling
     $36,000.

     On  March  4,  2002,  the  Company  commenced  a private placement of up to
     6,666,667  units.  Each unit consisted of one share of common stock and one
     warrant  to  purchase  an  additional share of common stock. The units were
     offered  at  $0.65 per unit. The warrants have an exercise price of 120% of
     the  current  market  value  of  the  Company's common stock at the time of
     exercise.

     In relation to this offering, on March 15, 2002, the Company issued 153,333
     shares  of  common  stock  with  a  detachable purchase warrant to purchase
     153,333  shares  of common stock at an exercise price of $1.20 per share in
     exchange  for  $100,000.

     Effective  December  14,  2001,  the  Company  was  combined with Alliance,
     whereby  the  Company  became  a  wholly  owned  subsidiary of Alliance. In
     connection  with  the acquisition, 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  17,000,000  shares of Alliance's common stock.

     The  transaction  has  been accounted for as a reverse acquisition, whereby
     NutraStar  is  considered  the  acquiring company and Alliance the acquired
     company.  The  equity  section of NutraStar has been restated, similar to a
     recapitalization,  to  reflect  the  pro-rata  shares  it  received  in the
     acquisition.  The  ratio  of  shares  issued  in  the  share-exchange  was
     approximately  1.43 shares of Alliance's common stock to every one share of
     NutraStar's outstanding common stock. All share and per share data prior to
     the  acquisition  have  been  restated  to  reflect  this  ratio.

     Common  Stock  (Continued)
     -------------
     Outstanding  unexercised  options  and  warrants  of  the Company were also
     converted  into options and warrants to acquire shares of Alliance's common
     stock  at  a ratio of 1 to 1.43. Alliance also obtained $1,000,000 from the
     sale  of  its  common  stock  in connection with the acquisition agreement.
     These  shares  of  stock were issued for $1 per share. There were 3,649,520
     shares  outstanding  as  of  the  date  of  the  acquisition.  Prior to the
     acquisition,  NutraStar  changed  its  name  to  NutraStar  Technologies
     Incorporated.  Subsequent  to the acquisition, Alliance changed its name to
     NutraStar  Incorporated.

     During  the  year ended December 31, 2001, the Company issued 28,546 shares
     of  common  stock  for  cash  totaling  $20,000.

     During  the  year ended December 31, 2001, the Company issued 21,409 shares
     of  common  stock  to  acquire  a  registered  trademark valued at $21,409.

     During  the year ended December 31, 2001, the Company issued 356,824 shares
     of  common stock to extend the term of a note payable and recorded interest
     expense  totaling  $356,824.

     During  the year ended December 31, 2001, the Company issued 249,314 shares
     of common stock for services rendered. In relation to this transaction, the
     Company  recorded  consulting  expense totaling $249,314 as of December 31,
     2001.

     During  the year ended December 31, 2001, the Company issued 250,001 shares
     of  common  stock to a third party in exchange for the remaining 20% of the
     common  stock  of  NutraGlo.

     During  the year ended December 31, 2001, the Company issued 150,000 shares
     of  common  stock  as  settlement  for  the  cancellation  of  a consulting
     agreement  and  recorded  consulting  expense


                                       33

     totaling  $150,000.

     Committed  Common  Stock
     ------------------------
     During  the  year  ended  December  31,  2001,  the Company converted notes
     payable  with  a  principal  balance  of  $250,000  and accrued interest of
     $18,687  into  committed  common  stock.  Related  to  this conversion, the
     Company  recorded  interest  charges of $130,487 for additional shares that
     will  be  issued.

     During  the  year  ended  December 31, 2002, the Company committed to issue
     1,060,000  shares  of  common  stock  for services rendered. In relation to
     these  commitments,  the  Company  recorded  consulting  expense  totaling
     $172,500.

     The  following  table reconciles total shares and amount recorded as common
     stock  committed:



                                                     Shares     Amount
                                                    ---------  --------
                                                         
     Committed upon conversion of debt and accrued
       interest                                       399,174  $399,174
     Committed for consulting services              1,060,000   172,500
                                                    ---------  --------

          TOTAL                                     1,459,174  $571,674
                                                    =========  ========


     Common Stock Warrants
     ---------------------
     A summary of the Company's warrant activity is listed below:



                                                   Weighted-     Weighted-
                                      Weighted-     Average       Average
                                       Average      Exercise      Exercise
              Stock        Stock      Remaining     Price of      Price of
Exercise    Warrants     Warrants    Contractual    Warrants      Warrants
Price      Outstanding  Exercisable     Life      Outstanding   Exercisable
---------  -----------  -----------  -----------  ------------  ------------
                                                 
$    1.00      300,000      300,000      5 years  $       1.00  $       1.00


     Options
     -------
     The  expense,  if  any,  of stock options issued to employees is recognized
     over  the  shorter of the term of service or vesting period. The expense of
     stock  options  issued to consultants or other third parties are recognized
     over  the  term of service. In the event services are terminated early, the
     entire  amount  is recognized. The unamortized portion of the expense to be
     recognized  is  recorded  as  deferred  compensation.

     During  the  year  ended  December  31, 2001, the Company issued options to
     purchase  935,564  shares  of common stock to employees of the Company. The
     exercise  prices  of  the  options issued ranged from $0.25 to $1. The fair
     market  value  of  the common stock at the grant date was $1. The intrinsic
     values  ranged  from  $0.73  to  $0.75.  The options are amortized over the
     vesting  period,  which  ranges between two to five years, with the current
     year  amortization  recorded  as compensation expense. In relation to these
     issuances,  the Company recorded compensation expense totaling $197,914 and
     deferred  compensation  expense  totaling $449,515 as of December 31, 2001.

     During  the  year  ended  December  31, 2001, the Company issued options to
     purchase  1,498,660  shares  of  common  stock.  The  exercise price of the
     options  issued  ranged  from  $0.25  to  $1.  The


                                       34

     fair  market value of the options at grant date ranged from $0.75 to $0.89.
     The  fair  market value of the common stock at the grant date was $1. These
     options  are  amortized  over the period of service of the consultant, with
     the  current year amortization recorded as consulting expense. In addition,
     certain  of  these  options  vest immediately, with others vesting upon the
     attainment of certain performance criteria. In relation to these issuances,
     the  Company  recorded  consulting  expense  totaling $797,501 and deferred
     compensation  expense  totaling  $476,360  as  of  December  31,  2001.

     During  the  year  ended  December  31, 2001, the Company issued options to
     purchase  142,730 shares of common stock in settlement of certain disputes.
     The  exercise  price of the options issued was $1. The fair market value of
     the  options  at  grant date was $0.75. The fair market value of the common
     stock at grant date was $1. In addition, these options vest immediately. In
     relation  to  these  issuances,  the  Company  recorded settlement expenses
     totaling  $107,047  as  of  December  31,  2001.

     On  January  7,  2002,  the  Company  entered  into  a five-year employment
     agreement  with  an  employee.  In  relation to this agreement, the Company
     issued options to purchase 155,000 shares of common stock. The options vest
     over  four  years in increments of 80,000, 25,000, 25,000, and 25,000, have
     an  exercise price of $1 per share, and expire on January 7, 2012. The fair
     market value of the common stock at the grant date was $2.25. The intrinsic
     value  was $1.25. The options are amortized over the vesting periods. As of
     December  31,  2002, the Company recorded compensation expense and deferred
     compensation  totaling  $48,438  and $145,312, respectively, in relation to
     this  transaction.

     On  January  10,  2002,  the  Company  entered  into a six-month consulting
     services  agreement  for marketing services. In relation to this agreement,
     the Company issued options to purchase 25,000 shares of common stock valued
     at  $47,250  at  an  exercise  price  of  $1  per  share.  The options vest
     immediately and expire in 10 years. The fair market value of the options at
     grant  date  was  $1.89. The fair market value of the common stock at grant
     date was $1. The Company recorded consulting expense of $47,250 in relation
     to  this  transaction.

     On  February  4,  2002,  the  Company  entered into a three-month marketing
     services  agreement  for  public  relations  and  advertising  services. In
     relation  to  this  agreement,  the Company paid a retainer of $35,000 upon
     execution of the agreement, issued 35,000 shares of restricted common stock
     valued  at  $47,250,  and  issued  options to purchase 50,000 shares of the
     Company's  common  stock  valued  at $43,000 at an exercise price of $3 per
     share.  The  options  vest  immediately  and  expire in two years. The fair
     market  value of the options at grant date was $0.86. The fair market value
     of  the  common  stock  at  grant  date  was  $1.35.  The  Company recorded
     consulting  expense  totaling  $90,250  in  relation  to  this transaction.

     On  February  21,  2002,  the  Company  entered  into  a one-year financial
     advisory  services  agreement.  In  relation to this agreement, the Company
     paid a non-refundable retainer of $20,000, issued 200,000 restricted shares
     of  common  stock valued at $90,000, and issued options to purchase 100,000
     restricted  shares  of  common  stock  at  $1  per share valued at $29,000,
     100,000  at  $2.50 per share valued at $22,000, and 100,000 at $4 per share
     valued  at  $18,000.  The options vest immediately and expire in two years.
     The  fair  market  value  of the options at grant date ranged from $0.18 to
     $0.29.  The  fair market value of the common stock at grant date was $0.45.
     The  Company  recorded  consulting expense totaling $159,000 in relation to
     this  transaction.

     On  June  19, 2002, the Company issued options to purchase 50,000 shares of
     common  stock  at  an


                                       35

     exercise  price  of  $1  per  share to a consultant for consulting expenses
     valued  at $14,000. The options vest over two years and expire in 10 years.
     The  fair  market  value  of  the options at grant date was $0.28. The fair
     market  value  of  the  common  stock  at  grant  date  was  $0.51.

     On August 13, 2002, the Company issued options to purchase 28,000 shares of
     common  stock  at  an  exercise  price  of $0.25 per share to a debtor. The
     options  vest  immediately and expire in 10 years. The fair market value of
     the  options  at  grant date was $0.20. The fair market value of the common
     stock at grant date was $0.21. In relation to this transaction, the Company
     recorded  interest  expense  of  $5,600.

     The  following  table  summarizes  all  of  the  Company's  stock  option
     transactions:



                              Employee  Options           Consultant  Options
                         ---------------------------  -----------------------------
                                         Weighted-                     Weighted-
                                          Average                       Average
                         Stock Options   Exercise     Stock Options    Exercise
                          Outstanding      Price       Outstanding       Price
                          -----------  --------------  ------------  --------------
                                                         
     Outstanding,
       December 31, 2000            -  $            -  $          -  $            -
         Granted              935,564  $         0.31     1,641,390  $         0.51
                          -----------                  ------------

     Outstanding,
       December 31, 2001      935,564  $         0.31     1,641,390  $         0.51
          Granted             155,000  $         1.00       455,500  $         2.16
                          -----------                  ------------

     OUTSTANDING,
       DECEMBER 31, 2002    1,090,564  $         0.41     2,096,890  $         0.87
                          ===========                  ============

     EXERCISABLE,
       DECEMBER 31, 2002      351,683  $         0.44     1,433,198  $         1.09
                          ===========                  ============


     The  weighted-average remaining contractual life of the options outstanding
     at  December  31,  2002  was 7.97 years. The exercise prices of the options
     outstanding  at  December  31,  2002  ranged from $0 to $4, and information
     relating  to  these  options  is  as  follows:



                                                      Weighted-     Weighted-
                                         Weighted-     Average       Average
                                          Average      Exercise      Exercise
Range of         Stock        Stock      Remaining     Price of      Price of
Exercise        Options      Options    Contractual    Options       Options
Prices        Outstanding  Exercisable     Life      Outstanding   Exercisable
------------  -----------  -----------  -----------  ------------  ------------
                                                    
0.00 - 0.28    1,962,671      827,313   8.90 years  $       0.25  $       0.25
0.29 - 1.00      974,783      707,568   7.82 years  $       1.00  $       1.00
1.01 - 4.00      250,000      250,000   1.20 years  $       3.20  $       3.20
              -----------  -----------

                3,187,454    1,784,881
              ===========  ===========


     The  Company  has  adopted  the disclosure-only provisions of SFAS No. 123.
     Accordingly, no compensation cost other than that required to be recognized
     by APB 25 for the difference between the fair value of the Company's common
     stock  at  the  grant  date


                                       36

     and the exercise price of the options has been recognized. Had compensation
     cost  for the Company's stock option plan been determined based on the fair
     value  at  the grant date for awards consistent with the provisions of SFAS
     No.  123,  the  Company's  net  loss and loss per share for the years ended
     December  31,  2002  and  2001  would  have been increased to the pro forma
     amounts  indicated  below:



                                              2002          2001
                                          ------------  ------------
                                               
       Net loss
           As reported                     $(3,354,572)  $(3,771,474)
           Pro forma                       $(3,486,838)  $(4,099,194)
       Basic loss per common share
           As reported                     $     (0.15)  $     (0.20)
           Pro forma                       $     (0.16)  $     (0.22)


     The  fair  value  of these options was estimated at the date of grant using
     the  minimum  value  method with the following weighted-average assumptions
     for  the  years ended December 31, 2002 and 2001: dividend yields of 0% and
     0%,  respectively;  risk-free  interest  rates  of  2.19%  and  3.12%,
     respectively;  and  expected life of 2.79 and 2.85 years, respectively. The
     weighted-average  exercise  price  was  $0.71  at  December  31,  2002.

     The weighted-average fair value of the options issued during the year ended
     December  31,  2002  was  $0.84.

     Warrants
     --------
     In connection with the issuance of certain promissory notes during the year
     ended  December  31,  2001, the Company issued warrants to purchase 350,000
     shares  of the Company's common stock at an exercise price of $1 per share.
     The  warrants  expire on June 25, 2006 and are immediately exercisable. The
     Company recorded a discount related to the detachable warrants of $114,083,
     which  represented  the  portion  of the proceeds allocated to the warrants
     based  on the relative fair values of the debt and warrants. At the date of
     conversion,  $103,905  of  the  discount  remained unamortized and has been
     debited  to convertible Series A preferred stock as part of the conversion.
     In  relation  to these issuances, interest expense of $10,178 was recorded.

     On  June  10, 2002, the Company issued warrants to purchase 2,500 shares of
     common  stock  at  $0.50  per share to a consultant for consulting expenses
     valued  at  $850.

NOTE  14  -  INCOME  TAXES

     Significant components of the Company's deferred tax asset for income taxes
     consisted  of  the  following  at  December  31,  2002:

     Deferred  tax  asset
          Net  operating  loss  carryforwards     $     3,241,401
     Less  valuation  allowance                         3,241,401
                                                        ---------

               NET  DEFERRED  TAX  ASSET                  $     -
                                                        =========

     A  reconciliation  of  the  expected  income tax computed using the federal
     statutory  income  rate to the Company's effective rate for the years ended
     December  31,  2002  and  2001  was  as  follows:


                                       37



                                                         2002    2001
                                                        ------  ------
                                                          
     Income tax computed at federal statutory tax rate   34.0%   34.0%
     State taxes, net of federal benefit                  5.8     5.8
     Change in valuation allowance                      (39.8)  (39.8)
                                                        ------  ------

          TOTAL                                             -%      -%
                                                        ======  ======


     Realization  of  the  future tax benefits related to the deferred assets is
     dependent  on  many  factors,  including  the Company's ability to generate
     taxable  income  within  the  net  operating  loss  carryforward  period.
     Management  has  considered  these factors in reaching its conclusion as to
     the  valuation  allowance  for  financial  reporting  purposes.

     At  December 31, 2002, the Company had net operating loss carryforwards for
     federal  and  state  income tax purposes of approximately $8,129,000, which
     begin  to  expire  in 2020. Certain of the net operating loss carryforwards
     are  limited  to  each  year  in accordance with the Internal Revenue Code.

NOTE  15  -  RELATED  PARTY  TRANSACTIONS

     On  December  12,  2001,  the Company entered into a 15-year agreement with
     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  agreement,  RiceX  has  agreed  to cancel certain indebtedness by the
     Company  in  exchange  for  130,000  shares of Series A preferred stock and
     payment  of  $41,335  in  interest,  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  five  years  each.

     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. In January 2002, the Company revised the 15-year
     agreement  with  RiceX.

     To  maintain rights under this revised agreement, the Company must purchase
     $250,000  of  product  from  RiceX  by  April  2002, $500,000 by July 2002,
     $750,000  by  October  2002, $1,250,000 by January 2003, $1,500,000 by July
     2003,  $2,250,000  by  January  2004,  $6,000,000  by  January  2005,  and
     increasing  thereafter  by  10% per annum through the remaining term of the
     agreement.  During  the  year ended December 31, 2002, the Company received
     notice  from RiceX, stating that the Company was in default under the terms
     of this distribution agreement with RiceX. On July 9, 2002, RiceX exercised
     its right to terminate the exclusive distribution agreement and the related
     license  agreements with the Company due to the Company's default. However,
     RiceX  has  agreed  that  the Company has license to use the patents in its
     business pursuits. Purchase of inventory from RiceX as of December 31, 2002
     totaled  $441,739.  The Company has recorded a loss reserve for the license
     agreement  totaling  $75,359  as  of  December  31,  2002.

     In connection with this agreement, the Company was granted exclusive patent
     and  licensing  rights  by  RiceX  for  which  the Company will pay RiceX a
     royalty equal to 2% of gross receipts received by the Company from the sale
     of  the  Company's  products that incorporate any of RiceX's products, less
     certain  selling  expenses.  At  December  31,  2002,  the Company recorded
     patents  and  licenses  in the amount of $12,132 related to these exclusive
     rights.

     During  the  year  ended  December 31, 2001, the Company was unable to meet
     customer  demands  for  inventory.  Therefore,  RiceX  sold  its  inventory
     directly  to  the  Company's  customers.  RiceX


                                       38

     remitted  the  gross profit for these sales to the Company, and the Company
     recorded  commissions revenue totaling $317,668 from RiceX related to sales
     made  by  RiceX  to  customers  of  the  Company.

     During  the year ended December 31, 2001, the Company issued 300,000 Series
     A  preferred  stock  to  the  Chief Executive Officer in exchange to cancel
     $300,000  of  convertible  promissory  notes.

     During  the  year  ended  December  31,  2001,  the  Company entered into a
     non-interest-bearing loan agreement with the Chief Executive Officer of the
     Company.  Related  to this agreement, the Company recorded a Due to Officer
     in  the  amount  of  $16,457  at  December  31,  2002.

     During  the year ended December 31, 2001, certain operating expenses of the
     Company  totaling  $111,313  were  paid  by  RiceX.  These  expenses  were
     reimbursed  by  the  Company,  and at December 31, 2002, there were not any
     amounts  owed  to  RiceX.

NOTE 16 - 401(K) PROFIT SHARING PLAN

     Effective April 2000, the Company adopted a 401(k) profit sharing plan (the
     "Plan")  for  the  exclusive  benefit  of  eligible  employees  and  their
     beneficiaries.  Substantially  all employees are eligible to participate in
     the Plan. Matching contributions to the Plan are 3% of the employees' gross
     salary,  not  to  exceed a certain percentage. For the years ended December
     31,  2002  and 2001, the Company made matching contributions of $14,696 and
     $18,620,  respectively.


NOTE  17  -  LINES  OF  BUSINESS

     For internal reporting purposes, management segregates the Company into two
     segments  as  follows  for  the  years  ended  December  31, 2002 and 2001:



                                         2002
                      ---------------------------------------
                       NutraStar     NutraGlo    Eliminations      Total
                      ------------  ----------  --------------  ------------
                                                    
Total revenues        $   683,097   $ 603,342   $           -   $ 1,286,439
Loss from operations  $(2,983,311)  $(122,842)  $           -   $(3,106,153)
Identifiable assets   $   287,588   $ 433,909   $    (155,170)  $   566,327
Capital expenditures  $    61,150   $       -   $           -   $    61,150
Depreciation and
  amortization        $   126,460   $       -   $           -   $   126,460


                                       2001
                      ---------------------------------------
                       NutraStar     NutraGlo    Eliminations      Total
                      ------------  ----------  --------------  ------------
Total revenues        $ 1,018,688   $ 591,534   $           -   $ 1,610,222
Income (loss) fro
  operations          $(2,947,059)  $ 254,744   $           -   $(2,692,315)
Identifiable assets   $   964,944   $ 537,277   $    (238,920)  $ 1,261,301
Capital expenditures  $   234,348   $       -   $           -   $   234,348
Depreciation and
  amortization        $    94,397   $       -   $           -   $    94,397



                                       39

NOTE  18  -  SUBSEQUENT  EVENTS  (UNAUDITED)

Effective November 12, 2003 and pursuant to adoption of the Company's
"Certificate of Amendment of Restated Articles of Incorporation" dated October
27, 2003, the Company effected a reverse split of all previously issued common
stock on the basis of one-for-ten shares. Additionally, per the "Certificate of
Amendment of Restated Articles of Incorporation", the number of authorized
shares of common stock was increased from 50,000,000 to 100,000,000, and the
number of authorized shares of preferred stock was increased from 10,000,000 to
20,000,000. All share amounts reflected in Note 18, "Subsequent Events" have
been adjusted to account for the one-for-ten reverse split.

On February 23 and March 19, 2004, respectively, Eliot Drell, MD and Ernie
Bodai, MD were appointed to serve on the Board of Directors until the next
annual meeting and election.

Notes Payable-Related Parties

At December 31, 2002, NutraCea owed Ms. Patricia McPeak, Chief Executive Officer
of NutraCea, $175,800 on a demand note payable bearing interest at 10%. NutraCea
borrowed an additional $20,422, bearing interest at 10%, from her during 2003.
All of this debt was repaid prior to December 31, 2003. NutraCea also borrowed
$50,000 and $40,000 in June and September 2003, respectively, from a then
greater than 5% shareholder. The notes were convertible at the option of the
holder into shares of the Company's common stock at a conversion price of $.20
per share, bearing interest at 10% per annum and due in June and September 2004,
respectively. Upon conversion of the notes payable, the holder will be entitled
to receive one warrant to purchase common stock for each common share issued.
The warrant will have an exercise price of $.20 per share and will expire one
year from the date of issuance. In November 2003 the holder exercised the
conversion option and 451,517 shares of common stock were issued in full
satisfaction of the debt. The relative fair value of the warrants was $30,939.
The discount for the warrants created a beneficial conversion feature of
$16,128, which was amortized until conversion and fully expensed upon
conversion.

There was no outstanding debt due to related parties at December 31, 2003. Notes
Payable

At December 31, 2002, NutraCea owed $50,000 to a third party, bearing interest
at 2% per month, secured by 243,036 shares of common stock, and due on December
20, 2002. As of December 31, 2002, NutraCea was in default on the note.
Subsequent to December 31, 2002, NutraCea agreed to modify the collateral to
634,121 shares of preferred stock and extended the due date of the note to
September 20, 2003. In addition, at December 31, 2002 NutraCea owed $5,000 to a
third party, bearing interest at 10% per annum, and due on December 20, 2002.
Both of these notes were retired in full by cash payments during 2003.

In March 2003, NutraCea executed two promissory notes totaling $45,000 to a
third party investor. The $40,000 note was convertible at the option of the
holder into shares of NutraCea's common stock at a conversion price of $.20 per
share. The notes bear interest at 2% per month, are due on demand, and are
collateralized by shares of NutraCea's common stock. NutraCea retired $5,000 of
this debt in September, 2003. The balance of the note, $40,000, was converted
into 203,320 shares of common stock of NutraCea prior to December 31, 2003.
There was no beneficial conversion feature associated with this note payable.

During 2003, NutraCea borrowed $339,000 from various third party investors. The
notes bear interest at 10% per annum, mature twelve months from the date of
issue, and are convertible at the option of the holder into shares of NutraCea's
common stock at a conversion price of $0.20 cents per share. Upon conversion of
the notes payable, the holders will be entitled to receive one warrant to
purchase common stock for each common share issued. The warrant will have an
exercise price of $.20 per share and will expire one year from the date of
issuance. Prior to December 31, 2003, at the option of the holders, all of the
notes were converted into 1,625,911 shares of common stock in full satisfaction
of the debts. The


                                       40

relative fair value of the warrants was $111,225. The discount for the warrants
created a beneficial conversion feature of $83,388, which was amortized until
conversion and fully expensed upon conversion.

In June and July, 2003, NutraCea borrowed $160,000 from a third party investor.
The notes were convertible at the option of the holder into shares of NutraCea's
common stock at a conversion price of $0.20 per share. Upon conversion of the
notes, the holder is entitled to receive one warrant to purchase one share of
common stock for each share of common stock issued. The warrants will have an
exercise price of $0.20 per share and will expire five years from the date of
the issuance. Prior to December 31, 2003, at the option of the holder, these
notes were converted into 805,547 shares of common stock in full satisfaction of
the debt. The relative fair value of the warrants was $41,691. The discount for
the warrants was amortized until conversion and fully expensed upon conversion.
There was no beneficial conversion feature associated with this note payable.

Agreements

On March 5, 2003, the Company hired a consultant to assist with fundraising. As
compensation for any funding, the consultant is to be paid 7.5% of any cash
received, 2.5% in value of such funding in warrants to purchase common stock of
the Company, based on the closing price on the day any agreement is signed, and
a warrant to purchase one share of the Company's common stock for every dollar
funded. The warrants are exercisable at $5.00 per share on or before three years
from the anniversary of any funding. Pursuant to this agreement, during the
twelve months ended December 31, 2003, the Company issued warrants to purchase
8,955 shares of common stock at an exercise price of $0.01 per share and
warrants to purchase 6,021 shares of common stock at an exercise price of $5.00
per share. Non-cash compensation expense of $20,662 was recorded as a result of
these awards. As of December 31, 2003, all of the warrants had been exercised.

In April 2003, the Company entered into a three-year employment agreement with
its Chief Operating Officer, whereby the Company is to pay the officer a base
salary of $10,000 per month. The agreement states that the first four months
salary will be deferred, except for a 10% bonus to be paid to the officer
dependent upon certain reductions in monthly operation costs or conversion of
debt into equity. The agreement also provides that the officer is entitled to an
annual bonus based upon performance and a monthly car allowance of $500,
beginning on the seventh month of employment. In addition, the officer was
issued warrants to purchase 1,000,000 shares of the Company's common stock.

During July 2003, the Company entered into a settlement agreement with a
consultant for $60,000 as payment on accounts payable. The Company executed a
convertible promissory note for $60,000, bearing interest of 10%, due on July
21, 2004, and committed to execute an agreement for future consulting services
for a total obligation of $25,000. The note is convertible at the option of the
holder into shares of the Company's common stock at a conversion price of $0.20
per share. Upon conversion of the note, the holder is entitled to receive one
warrant to purchase one share of common stock for each share of common stock
issued. The warrant will have an exercise price of $0.20 per share and will
expire five years from the date of issuance. As part of this transaction, the
Company also issued warrants to purchase 15,000 shares of common stock at an
exercise price of $0.01 per share. The warrants expire on the earlier date of
July 12, 2008 or upon the Company's change of control through acquisition or
sale of substantially all of its assets. Non-cash compensation expense of
$12,000 was recorded related to issue of these warrants. As of August 6, 2003,
all of the warrants had been exercised.

During July 2003, the Company entered into a compensation agreement with a
consultant, whereby the Company will pay a total of $17,000 of earned and unpaid
compensation due to the consultant in monthly payments of $3,000, payable on the
first of the month beginning September 1, 2003. Per the compensation agreement,
the Company also issued warrants to purchase 32,900 shares of common stock at an
exercise price of $0.01 per share, thereby retiring an additional $23,000 in
earned and unpaid compensation. In addition, in September 2003, the Company
issued warrants to purchase 50,000 shares of common stock at an exercise price
of  $0.01  per  share  to  the consultant in exchange for a technology


                                       41

agreement relating to NutraCea/NutraStar product formulas. Non-cash compensation
of $40,000 was recorded as a result of this award. As of December 31, 2003, all
of the warrants had been exercised.

In July 2003, the Company hired a consultant to provide investor relations
services. The consultant will be compensated by the issuance of 250,000 shares
of restricted common stock, with the expectation that those shares will be
registered or released from restriction within one year of issue. These shares
were not issued to the consultant until the first quarter of 2004.

On July 30, 2003, the Company issued 100,000 shares of common stock previously
recorded in committed stock, and entered into an additional agreement with a
consultant as payment on accounts payable totaling $24,000. The consultant
accepted a cash payment of $2,500 and a commitment to provide product valued at
$2,500; a promissory note payable at $2,000 a month beginning November 1, 2003
was executed for the balance of $19,000.

During 2003 the Company issued 8,231 shares of common stock to a consultant for
services valued at $9,795. In addition, under an agreement dated August 6, 2003,
the Company was committed to issue 1,000 pre-reverse split shares of common
stock per month up to a value of $2,000, plus an additional $2,000 per month in
cash, for future services.

On September 18, 2003, the Company entered into a Technology Agreement with a
third party, whereby the initial term of a distribution agreement dated May 1,
2001 granting the exclusive worldwide distributorship of a food supplement
formulation based on NutraCea's proprietary technology rights was extended to
September 17, 2006. In addition, the Technology Agreement restates certain
minimum purchase requirements under the distribution agreement and transfers all
rights to the production and distribution of certain nutraceutical products
created using NutraCea's technology. Under the terms of the agreement, NutraCea
will receive the sum of $100,000, to initially be recorded as a deposit towards
the minimum purchase requirement. Should the payor at a later date desire to
obtain certain additional rights to the NutraCea technology, the payor will pay
to NutraCea a lump sum option fee of $300,000. The aforementioned payment of
$100,000 towards the minimum purchase requirement shall be deemed a deposit
against the option fee to the degree it has not been used for product purchases.

In December 2003 the hired a consultant to provide marketing services. Under the
terms of the agreement, the Company will issue 400,000 warrants to purchase
shares of common stock at $0.50 per share. As of December 31, 2003, 120,000 of
the warrants had been exercised.

Effective January 1, 2004, the Company amended two executive employment
contracts to reflect quarterly bonuses. Under the contract, compensation shall
be $45,000 per calendar quarter, with 250,000 shares of common stock to be
granted in the event the Company achieves gross revenues of $1 million or more
for the quarter. In addition, a one-time stock grant of 550,000 shares of common
stock will be awarded for the first quarter gross revenues equal or exceed $5
million. This bonus agreement is effective until April 15, 2006, unless extended
by the board. The Company also agreed to maintain an annual bonus program for
members of the senior management group, including the Chief Executive Officer.
The Chief Executive Officer shall be eligible to receive an annual bonus under
terms otherwise governing the annual bonus program.

Effective January 1, 2004, the Company amended the stock options section of an
executive employment contract dated April 15, 2003. The amendment changed the
vesting conditions on 250,000 shares of common stock to "upon the completion of
the twelfth month of employment " instead of "upon the Company achieving two
successful calendar quarters of net profits from operations of the business of
the Company before interest, taxes, depreciation and amortization as
conclusively determined by the independent certified public accountant for the
Company".

On  January  12,  2004, the Company entered into a one-year consulting agreement
with  a  sales  and  marketing  company.  Under  the  terms  of  the  agreement,
compensation  shall  be warrants to purchase 4,000,000 shares of common stock as
follows:  300,000  shares  at  $.50  per  share  on  or before January 12, 2004;
400,000  shares  at $.50 per share on or before February 17, 2004; and 3,300,000
shares  at  $.50  per


                                       42

share on or before April 19, 2004. Non-cash compensation expense of $3,200,000
was recorded relating to this agreement. All of the warrants had been exercised
at March 31, 2004.

On January 28, the Company entered into a one-year consulting agreement with a
sales and marketing company. Under the terms of the agreement, compensation
shall be warrants to purchase 90,000 shares of common stock at an exercise price
of $.01 per share. Non-cash compensation expense of $136,800 was recorded
relating to this agreement. As of March 31, 2004, these warrants had been
exercised.

On February 2, 2004, the Company entered into a six -month consulting agreement
with a communications company. Under the terms of the agreement, compensation
shall be $2,500 per month, plus shares of common stock valued at $6,000 issued
at signing of contract. Either party may terminate the agreement with sixty days
written notice. At March 31, 2004, the shares had been issued in full.

On February 23, 2004, the Company entered into a one-year consulting agreement
with a marketing company. Under the terms of the agreement, compensation shall
be monthly issuance of shares of common stock valued at $7,500 per month. In
addition, the consultant is entitled to a 3% commission on equity or debt
financing introduced to the Company.

On March 1, 2004, the Company entered into a 90-day consulting agreement with an
advertising and promotional services company. Compensation shall be the issuance
of 100,000 shares of common stock per month.

On March 1, 2004, the Company entered into a one-year consulting agreement with
a sales and marketing company. Compensation shall be the issuance of 25,000
shares of common stock. At March 31, 2004, these shares had been issued.
Non-cash compensation expense of $35,500 was recorded relating to this
agreement.

On March 9, 2004, the Company entered into a one-year consulting agreement with
a communications company. Under the terms of the agreement, compensation shall
be issuance shares of common stock valued at $36,000. At March 31, 2004, these
shares have been issued in full.

On March 15, 2004, the Company entered into a six-month consulting agreement
with a sales and marketing company. Under the terms of the agreement,
compensation shall be warrants to purchase 400,000 shares of common stock, at an
exercise price of $.001 and warrants to purchase up to 1,000,000 shares of
common stock at an exercise price of $1.20, to be exercised within three years.
At March 31, 2004, the 400,000 warrants exercisable at $.001 had been exercised.

On March 19, 2004, the Company approved granting a one-time cash bonus of 2/3 of
normal salary to the CEO and President. The bonus amount for both executives is
$180,000, payable April 1, 2004.

On March 25, 2004, the Company entered into two, two-year consulting agreements
with two medical advisors. Under the terms of the agreement, compensation shall
be 100,000 shares of common stock each, payable in advance, and options to
purchase 100,000 shares of common stock at a price of $.50 per share for the
second year of service. The 200,000 shares of common stock are valued at
$78,920.

On March 25, 2004, the Company entered into a three-year consulting agreement
with a development and marketing company. Under the terms of the agreement,
compensation shall be $1 per unit (a minimum 30-day supply of NutraCea product)
for up to a total accumulated payment of $750,000, and $.50 per unit thereafter,
payable quarterly within 45 days after the end of the quarter. In addition, the
Company will issue 100,000 shares of common stock for each formulation the
company markets, and options to purchase 300,000 shares of common stock at an
exercise price of $1 per share with 100,000 options to be vested immediately and
50,000 shares per year thereafter. The vested options are valued at $39,840.

On April 2, 2004, the Company entered into a 180-day consulting agreement with a
marketing and investor relations company. The term can be extended another 180
days by mutual agreement. Under the terms of the agreement, compensation shall
be 400,000 shares of common stock, and $4,000 cash per month. Compensation shall
also include an 8% cash commission on equity or debt financing introduced


                                       43

to the Company, as well as a warrant, exercisable within 3 years, for common
shares to equal 10% of the gross financing proceeds. The warrant is to be priced
at 110% of the closing bid price for the preceding 30 business days of the day
of closing, such warrant or shares to be issued at closing.

On April 29, 2004, the Company entered into a one-year consulting agreement
(with options to extend for four successive terms of one year each) with two
retired employees of the Company. Under the terms of the agreements, annual
compensation of $75,000 each is payable on a monthly basis. In addition, each of
the consultants received warrants to purchase 50,000 shares of common stock at
$.20 a share. The 100,000 warrants are valued at $91,370 and expire in 5 years.
Either party can cancel this agreement with 30-day written notice.

Litigation

A Complaint was filed against NTI by Millennium Integrated Services, Inc.
("MISI") in Superior Court, Sacramento County, on April 4, 2002 (Case No.
02A502006). A Settlement Agreement and Mutual Release was executed on May 27,
2003. In consideration, the NutraCea defendants agreed to pay MISI one hundred
and forty-eight thousand dollars ($148,000). The settlement was fully paid on
July 1, 2003 and the complaint was dismissed on August 28, 2003.

On July 16, 2002, the Company was summoned to answer a Complaint filed by
Faraday Financial, Inc. ("Faraday") in District Court, County of Salt Lake, Utah
(Case No. 020906477). A Settlement Agreement was executed on December 10, 2003.
In consideration for the mutual releases, Faraday converted 735,730 preferred
into 735,730 common shares and $90,127 of accrued preferred dividends into
1,201,692 common shares. Within the next year, if Faraday cannot realize
$551,797 and approximately $9800 in legal expenses from the sale of the common
shares, NutraCea will make up any deficiency. If stock sale exceeds $561,597,
Faraday is entitled to keep any excess. Subsequent to December 31, 2003, the
Company issued an additional 250,000 shares to Faraday. Concurrently, with the
executed Settlement Agreement, a joint stipulated motion to stay all proceedings
was filed with the Court. After all the above conditions are met, if Faraday has
not lifted the stay within 18 months of December 10,2003, NutraCea shall deliver
to Faraday an executed stipulation for dismissal with prejudice of the Complaint
and Counterclaim.

Convertible,  Redeemable  Series  A  Preferred  Stock

On July 7, 2003, the Company cancelled 634,121 shares of preferred stock
previously issued to a shareholder as collateral and issued 20,000 shares of
preferred stock for accrued interest totaling $8,351 on a promissory note dated
September 23, 2002.

During the year ended December 31, 2003, the Company converted 1,674,707 shares
of preferred stock to 254,323 shares of common stock valued at $1,651,860.

During the year ended December 31, 2003, the Company issued 278,766 shares of
common stock in payment of preferred stock dividends due in the amount of
$190,043.

As  of  December  31,  2003,  cumulative  dividends  totaled  $274,540.

Common  Stock

During 2003, NutraCea issued 134,048 shares of common stock for $104,500, net of
$7,000  in  related  commissions.

During  2003,  NutraCea  issued 4,519,373 shares of common stock pursuant to the
exercise  of  stock  options  and  warrants  for  $427,575.

During  2003,  NutraCea  issued  28,688  shares  of  common  stock  to  various
consultants  for  services  rendered  with  a  fair  value  of  $29,795.

On  August  18, 2003, NutraCea agreed to pay a consultant for unpaid fees in the
amount  of  $9,236.  NutraCea will pay $4,636 in monthly installments of $1,159,
payable  on  the  first  of each month


                                       44

beginning October 1, 2003. NutraCea also agreed to issue 2,421 shares of common
stock, valued at $4,600, to the consultant as payment in full.

In September 2003, NutraCea agreed to pay $38,771 of unpaid fees to a
consultant, of which $8,771 is payable upon execution of the agreement and the
balance, $30,000, is payable in monthly installments of $2000, payable on the
first of each month beginning October 1, 2003. NutraCea also agreed to issue
73,519 shares of common stock, valued at $56,037, to the consultant as payment
in full.

On October 31, 2003, the Board of Directors approved the issuance of common
stock in lieu of compensation to the Company's Chief Operating Officer and Chief
Executive Officer. Chief Operating Officer John Howell received 72,911 shares of
common stock in lieu of $94,784 in salary and other compensation accrued for
past services; Chief Executive Officer Patricia McPeak received 402,644 shares
of common stock in lieu of $322,115 in salary and other accrued compensation for
past services. These shares of common stock were issued under the 2003 Stock
Compensation Plan.

Due  to the termination of certain employees during 2003, the Company recorded a
reversal  of  deferred  compensation  totaling  $243,605.

During  2003,  the  Company  issued  3,431,251 shares of common stock, valued at
$823,119,  to  various  parties  for conversion of convertible notes payable and
accrued  interest  in  the  amount  of  $776,887  and  $46,232,  respectively.

At December 31, 2002, the Company was committed to issue 145,917 shares of
common stock representing $399,174 for conversion of debt and accrued interest
and $172,500 for consulting services. These shares were issued in 2003, and no
committed stock remains at December 31, 2003.

On March 25, 2004, the Company established the NutraCea Patent Incentive Plan,
which grants 15,000 shares of common stock to each named inventor on each
granted patent.

During the quarter ended March 31, 2004, the Company issued 544,965 shares of
common stock to consultants for services rendered valued at $723,381. Subsequent
to March 31, 2004, the Company issued an additional 660,797 shares of common
stock to consultants for services rendered valued at $905,650.

During the quarter ended March 31, 2004, the Company issued 168,095 shares of
common stock to vendors in payment of accounts payable totaling $120,789.
Subsequent to March 31, 2004, the Company issued an additional 531 shares of
common stock to a vendor in payment of accounts payable in the amount of $833.

During the quarter ended March 31, 2004, the Company issued 6,490,711 shares of
common stock pursuant to the exercise of stock options and warrants for cash
totaling $2,744,507. Of these issuances, 1,200,000 shares valued at $557,500
were issued pursuant to the 2003 Stock Compensation Plan. Subsequent to March
31, 2004, the Company issued an additional 309,445 shares of common stock
pursuant to the exercise of stock options and warrants for cash totaling
$10,344.

During  the  quarter  ended March 31, 2004, the Company issued 280,000 shares of
common  stock  to two consultants in settlement of contractual agreements valued
at  $477,816.

During the quarter ended March 31, 2004, the Company issued 5,500,000 shares of
common stock, valued at $8,360,000, to the Company's Chief Executive Officer in
exchange for execution of a non-compete agreement and transfer to the Company of
all intellectual property owned by the Chief Executive Officer.

On April 1, 2004, the Company repurchased 344,956 shares of common stock valued
at $230,000 from the Chief Executive Officer of the Company pursuant to a
repurchase agreement of that date.

Stock  Options  and  Warrants


                                       45

On October 31, 2003, the Board of Directors approved and adopted the 2003 Stock
Compensation Plan and authorized the President of the Company to execute a
registration statement under the Securities Act of 1933 for 10,000,000 shares of
common stock.

In April 2003, the Company issued warrants to purchase 1,000,000 shares of
common stock to its Chief Operating Officer in accordance with an employment
agreement dated April 15, 2003. The warrants have an exercise price of $0.001
per share and vest as follows:

          -    250,000 on April 15, 2003
          -    250,000 upon the fourth month of employment
          -    250,000 upon the eighth month of employment
          -    250,000 upon the twelfth month of employment

In relation to this transaction, the Company recorded deferred compensation
expense totaling $109,000. As of December 31, 2003, $34,750 of the deferred
compensation remains unamortized. In addition, because this grant as modified
due to the reverse split of November 21, 2003 must be accounted for as a
variable award, an additional $303,750 was recorded relating to this award as of
December 31, 2003.

On June 20, 2003, the Company issued warrants to purchase 32,900 shares of
common stock to a vendor as payment on accounts payable totaling $27,786. The
warrants have an exercise price of $.01 per share and expire June 18, 2008. In
addition, the Company entered into a note payable agreement with the consultant
totaling $17,000, payable at $3,000 per month beginning September 2003.

On July 31, 2003, the Company issued warrants to purchase 7,143 shares of common
stock to a vendor as payment on accounts payable totaling $5,676. The warrants
have an exercise price of $0.01 per share and expire June 12, 2008. In addition,
the Company entered into a note payable agreement with the consultant totaling
$4,000, payable at $1,000 a month beginning October 1, 2003.

During September 2003, the Company entered into a compensation agreement with a
consultant, whereby the Company will pay a total of $5,356 of unpaid fees due to
the consultant in monthly payments of $670, payable on the first of the month
beginning October 1, 2003. Per the agreement, the Company also issued warrants
valued at $7,065 to purchase 4,167 shares of common stock at an exercise price
of $0.01 per share. The warrants expire on August 5, 2008.

During the six months ended June 30, 2003, the Company issued warrants to
purchase 321,285 shares of common stock at exercise prices ranging from $0.01 to
$0.70 per share to employees in lieu of deferred salaries totaling $150,465. The
warrants expire five years from date of issue.

During the year ended December 31, 2003, options and warrants representing
4,519,373 shares of common stock were exercised for a total value of $427,575.

During the year ended December 31, 2003 the Company issued 3,796,563 options to
various consultants for services rendered. The options have exercise prices
between $.001 and $5.00 and expire at varying times between six months and five
years. Non-cash consulting expense of $1,165,584 was recorded relating to these
agreements.

During the year ended December 31, 2003, the Company issued warrants to purchase
2,545,000 shares of common stock exercisable at $.20 per share and expiring five
years from date of issue. The warrants were issued in connection with the
conversion of $823,119 of convertible notes payable and accrued interest to
common shares of the Company, and non-cash expense of $183,855 was recorded
relating to these warrants.

During the quarter ended March 31, 2004, the Company issued 6,547,263 warrants
with exercise prices between $.001 and $5.00 per share to consultants. The
warrants expire at varying times between six months and five years. A total of
$7,271,062 in non-cash compensation expenses was recorded relating to the issue
of these warrants. Subsequent to March 31, 2004 the Company issued an additional
401,230


                                       46

warrants with exercise prices between $.001 and $5.00 to consultants. The
warrants expire at varying times between four and five years. A total of
$443,698 in non-cash compensation expense was recorded relating to the issue of
these warrants.

Modification of Employee Awards Accounted for Under APB 25
----------------------------------------------------------

NutraCea granted 1,000,000 options in 2003 to an employee where the option
agreement contained a provision whereby the number of options nor the exercise
price would be adjusted by reverse splits. Effective November 12, 2003, NutraCea
authorized a 1 for 10 reverse split. This triggered variable accounting for this
award. As of November 12, 2003, 500,000 options had been exercised and only
500,000 remained. Variable accounting requires any intrinsic value at the
modification date in excess of the amount measured at the original measurement
date shall be recognized as compensation cost over the remaining future service
period if the award is unvested, or immediately if the award is vested, for any
employee who could benefit from the modification. The award vests 75% in 2003
and 25% in 2004. The award will be marked to market each balance sheet date with
the changes charged to compensation expense and additional paid in capital. As
of December 31, 2003, the additional intrinsic value on the vested portion
totaled $303,750.

Modification of Non-Employee Awards Accounted for Under FAS 123
---------------------------------------------------------------

NutraCea granted 5,725,000 warrants to outsiders in 2003 where the warrant
agreements contained a provision whereby the number of warrants nor the exercise
price would be adjusted by reverse splits. Effective November 12, 2003, NutraCea
authorized a 1 for 10 reverse split. This triggered a modification for this
award. A modification of the terms of an award that makes it more valuable shall
be treated as an exchange of the original award for a new award. In substance,
the entity repurchases the original instrument by issuing a new instrument of
greater value, incurring additional compensation cost for that incremental
value. The incremental value shall be measured by the difference between (a) the
fair value of the modified option determined in accordance with the provisions
of this section and (b) the value of the old option immediately before its terms
are modified, determined based on the shorter of (1) its remaining expected life
or (2) the expected life of the modified option. As of December 31, 2003, the
additional value totaled $9,811,002 which was recorded as non-cash compensation
expense.


                                       47

ITEM  8A.  CONTROLS  AND  PROCEDURES.

The Company has adopted and implemented internal disclosure controls and
procedures designed to provide reasonable assurance that all reportable
information will be recorded, processed, summarized and reported within the time
period specified in the SEC's rules and forms. Under the supervision and with
the participation of the Company's management, including the Company's President
and Chief Executive Officer and the Company's Controller and Principal Financial
Officer, the Company has evaluated the effectiveness of the design and operation
of its disclosure controls and procedures pursuant to Exchange Act Rule
13a-15(e) as of the end of the year covered by this report. Based on that
evaluation, the President and Chief Executive Officer and the Controller and
Principal Financial Officer have concluded that these disclosure controls and
procedures are effective. There were no changes in the Company's internal
controls or in other factors during or since the end of the fiscal year covered
by this report that have had a material affect or are reasonably likely to have
a material affect on internal controls subsequent to the end of the year covered
by this report.


                                       48

SIGNATURES

     In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                 NUTRACEA

Date:  July 20, 2004             By    /s/  Patricia  McPeak
                                       ---------------------------
                                       Patricia  McPeak
                                       President and Chief Executive Officer

     In  accordance  with the Exchange Act, this report has been signed below by
the  following  persons on behalf of the registrant and in the capacities and on
the  dates  indicated.

SIGNATURE                                  TITLE                      DATE
---------                                  -----                      ----

/s/  Patricia  McPeak
---------------------
Patricia  McPeak               Director, Chairman of the
                               Board and Chief Executive
                               Officer                             July 20, 2004

/s/John  Howell
---------------
John  Howell                   Director  and  President            July 20, 2004


/s/Eliot  Drell                Director                            July 20, 2004
---------------
Eliot  Drell

/s/Ernie  Bodai                Director                            July 20, 2004
---------------
Ernie  Bodai

/s/  Edward  G.  Newton
-----------------------
Edward  G.  Newton             Secretary                           July 20, 2004

/s/  Joanna  Hoover
-------------------
Joanna  Hoover                 Chief Financial Officer             July 20, 2004
                               (Principal Financial and Accounting Officer)


                                       49