SECURITES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO.1 TO FORM SB-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933
GOLDEN CHOICE FOODS CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 8400 33-0903004
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identified No.)
organization)
180 Newport Center Drive, Suite 180
Newport Beach, CA 92660
(949) 720-8470
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JOSEPH R. RODRIGUEZ, JR.
Golden Choice Foods Corporation
180 Newport Center Drive, Suite 180
Newport Beach, CA 92660
(949) 720-8470
(Name, address, including zip code, and telephone number, including area code,
of agent for services)
Copies to:
GARY R. HENRIE, ESQ.
FABIAN & CLENDENIN
215 South State, 12th Floor
Salt Lake City, Utah 84111
(801) 531-8900
Fax: (801) 531-1716
Approximate date of commencement of proposed sale
of the securities to the public: from time to
time after this registration statement becomes
effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ______
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.______
<PAGE>
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. ______
Calculation of Registration Fee
<TABLE>
<CAPTION>
Title of each class of securities Amount to be Proposed Proposed Maximum Amount of
to be registered Registered Maximum offering Aggregate offering registration fee
price per share price
--------------------------------------- ---------------------- ------------------- -------------------- -----------------
<S> <C> <C> <C> <C>
Common Stock ($0.001 per value) 2,638,908 $2.00(1) $5,277,816.00 $1,393.35
--------------------------------------- ---------------------- ------------------- -------------------- -----------------
Total 2,638,908 $2.00(1) $5,277,816.00 $1,393.35
</TABLE>
(1) Selling shareholder's stock registration fee was based on a bona fide
estimate of the maximum offering price pursuant to Rule 457(a) of Regulation C.
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective time until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
P R O S P E C T U S
GOLDEN CHOICE FOODS CORPORATION
2,638,908 shares of common stock(1)
(1) The 2,638,908 shares of common stock (the "shares") are issued and
outstanding shares owned by the persons specified in this prospectus under the
caption "Selling Security Holders." Golden Choice Foods Corporation will receive
no part of the proceeds from the sale of the 2,638,908 shares.
----------------------
Investing in Golden Choice Foods Corporation involves significant risks.
Investors need to read the "Risk Factors" beginning on page 3
----------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
The 2,638,908 shares were acquired by the selling security holders in private
placement transactions which were exempt from the registration and prospectus
delivery requirements of the Securities Act of 1933.
The selling securities holders may from time to time sell the shares on any
securities exchange or automated quotation system on which our common stock may
be listed on traded, in negotiated transactions or otherwise, at prices then
prevailing or related to the then correct market price or at negotiated prices.
The shares may be sold directly or through brokers or dealers. We note that our
common stock is not listed on any exchange or quotation system at the present
time.
The Date of this prospectus is May , 2000
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<PAGE>
RISK FACTORS
Golden Choice's limited operating history increases the risk of loss to
purchasers of shares.
Even though Golden Choice has been conducting full operations for some
time, as of yet its operations are not profitable. Unless operations become
profitable in the near future it will still be uncertain as to whether we can
continue successfully implementing our business plan or that we will ever
operate profitably.
If Golden Choice does not obtain enough money to continue to operate, purchasers
of shares will lose their investment.
With the exception of the rights to products we have developed and the
value inherent in contractual relationships with manufacturers and vendors, we
have no significant assets or operating capital. Golden Choice is dependent upon
receipt of investment capital to provide the working capital necessary to
continue product development. We have no commitments at the present time for
additional cash funding. At present we have plans to seek funding which we hope
will move us to internal funding and profitability. However, there is no
guarantee additional funding will be available to Golden Choice on acceptable
terms, if at all.
Purchasers of shares must rely on the services of the officers and directors for
the success of their investment.
Golden Choice relies exclusively on the expertise of its officers and
directors for the development, and distribution of product. The ability of
Golden Choice to develop products that will be attractive to the market place
would be significantly compromised if current officers and directors are either
unable or unwilling to perform these responsibilities. We do not carry key
person life insurance with respect to the officers and directors.
Purchasers of shares may lose their investment if Golden Choice's products are
not accepted in the market place.
Golden Choice's business plan is based upon the assumption that the
U.S. consumer will be interested in its snack food products. We cannot determine
with any accuracy the size of market for our particular products or the market
share Golden Choice will be able control. An investor's investment may be lost
if Golden Choice is not successful in obtaining acceptance of its products into
the market place.
If Golden Choice does not develop a public trading market for its common shares,
it is unlikely purchasers in the offering will be able to liquidate their
investments.
Following the offering, it is the intention of Golden Choice to seek a
quotation on the OTC bulletin board and to establish a public trading market for
its common shares. If Golden Choice does not succeed in developing a public
trading market, an investor can only liquidate his or her investment through a
private sale of the investors shares. Golden Choice believes a private sale of
its common shares would be very difficult to arrange. Golden Choice believes
that it will be able to obtain a quotation on the OTC bulletin board and to
develop a public trading market for its common shares. However, Golden Choice's
success in accomplishing these intentions cannot be assured.
A purchaser is purchasing penny stock which limits the ability of the purchaser
to sell the stock.
The shares offered in this offering constitute penny stock under the
Securities and Exchange Act. The shares will remain penny stock for the
foreseeable future. The classification of penny stock makes it more difficult
for a broker-dealer to sell the stock into a secondary market which makes it
more difficult for a purchaser to liquidate his or her investment. Any
broker-dealer engaged by the purchaser for the purpose of selling his or her
shares in Golden Choice will be subject to rules 15g-1 through 15g-10 of the
Securities and Exchange Commission. Rather than creating a need to comply with
those rules, some broker-dealers will refuse to attempt to sell penny stock.
Unless Golden Choice is able to achieve profitable operations it is likely
investors will lose their investments.
Golden Choice has posted a loss in each quarter of its operations since
its inception. It is necessary for Golden Choice to eventually achieve
profitable operations if investors are to realize a gain on their investments.
We believe that given continued development of our business plan, Golden Choice
will eventually become profitable on its day to day operations. However,
obtaining profitability cannot be guaranteed.
If Golden Choice is unable maintain acceptable freight costs, it is unlikely
that it will be able to achieve economic viability.
4
<PAGE>
Golden Choice relies on common carriers to deliver its products to
customers. These freight costs are a major expense for Golden Choice and rising
fuel costs causes the carriers to add fuel surcharges to the cost of shipping.
Rising fuel costs are totally beyong the control of Golden Choice. It is
possible that fuel costs for its carriers could rise to levels that would
threaten Golden Choice's ability to ever achieve profitability. Should this
happen, it is likely that investors would lose their investments.
If the sub-contractors of Golden Choice prove unreliable or if Golden Choice is
ever in a position where it cannot obtain the necessary assistance from
sub-contractors to pursue its business operations, Golden Choice's business
operations would cease, thereby causing a lose to its investors.
Golden Choice relies 100% on sub-contractors, known as co-packers, to
produce its products. Since all contracts are verbal, they are subject to
cancellation at any time. If this were to occur, it would significantly impact
Golden Choice's ability to meet its customers demands because Golden Choice
would have to replace its co-packers immediately. If Golden Choice was not able
to replace its co-packers in a timely manner its operations would cease and
investors would likely lose their investments.
Golden Choice's reliance on national sales organizations representing numerous
products means Golden Choice products may not receive as much exposure to the
market that would occur if Golden Choice had its own sales force.
Since Golden Choice relies on various brokers and other third party
representatives that do not sell its products exclusively, Golden Choice may not
get the same exposure to the market as if it had its own sales force. As such,
the growth of Golden Choice market share penetration may be slower than would
otherwise be the case.
Golden Choice discontinued the production and sale of a product which
contributed to revenue in the past and from which Golden Choice will not have
revenue in the future.
Golden Choice temporarily discontinued the production and sale of Rice
Snax product in 1999. Discontinuation of the sale of a product line can
significantly reduce sales revenues. At this time Golden Choice sells and
markets a single product. A discontinuation of this product would cause revenues
to cease. In that event it is unlikely that Golden Choice would be able to
continue operations and investors would likely lose their investments.
The exercise of options and the sale of shares by Golden Choice in the future
could have the effect of diluting the investments of current investors.
At the present time there are options outstanding for the purchase of
6,100,000 common shares of Golden Choice. Golden Choice is also contemplating
the sale of additional common shares in the future through a private placement.
The investments of current investors would be diluted if the sale price of
shares in a private placement or if the exercise price of options exercised is
below the price that investors pay for their shares.
A lack of liability insurance on the part of Golden Choice could lead to claims
against Golden Choice which it cannot pay, in which event it is likely Golden
Choice could not maintain operations and investors would lose their investments.
Golden Choice has operated without the benefit of its own general and
products liability insurance coverage since its inception in 1996. Golden Choice
is named as an additional insured with respect to general and product liability
insurance on the liability policies of its two co-packers. If Golden Choice is
held responsible for acts or events that are not covered by the co-packers
insurance policies, it could have an adverse effect on operating results. Even
though we have no knowledge of the existence of any act or event creating
liability for Golden Choice, it is possible that such an act or event could
occur at any time.
5
<PAGE>
USE OF PROCEEDS
The proceeds from the sale of shares will belong to the applicable
selling shareholders and will not be available for use by Golden Choice.
Accordingly, Golden Choice will have no use of the proceeds of any sale.
DETERMINATION OF OFFERING PRICE
The offering price of the selling shareholders was calculated pursuant
to Rule 457(a) of Regulation C using a price at which Golden Choice hopes to
able to raise capital at in a private offering in the near future.
DILUTION
On June 30, 2000, Golden Choice had a net book value of $548,728 or
$0.03 per share, based on 18,623,274 shares outstanding after giving effect to
the stock split on June 1, 2000. The net tangible book value per share is equal
to Golden Choice's total tangible assets, less its total liabilities and divided
by its total number of shares of common stock outstanding. Accordingly, any
purchase of shares would represent an approximate 99% dilution in the
purchaser's investment when viewed as ownership of a percentage of net tangible
book value. Any investment decision to purchase shares must be premised upon an
expectation of profitability by Golden Choice in the future.
SELLING SECURITY HOLDERS
The following table sets forth the number of shares which may be
offered for sale from time to time by the selling security holders. The shares
offered for sale constitute all of the shares known to Golden Choice to be
beneficially owned by the selling security holders. None of the selling security
holders has held any position or office with Golden Choice nor has any had a
material relationship with Golden Choice other than being an investor.
Number of shares Owned % Owned
Selling Security Holder Shares Offered After Offering After Offering
----------------------- ---------------- -------------- --------------
Paula Averyt 38,000 0 0.0%
Paul Stevich 20,000 0 0.0%
Robert Reeves 76,000 0 0.0%
Jeffrey A. & Kim M. Haar 38,000 0 0.0%
Edmond J. Harris 20,000 0 0.0%
Ron Rau, Sally Schulte, Tori Lynch 30,000 0 0.0%
Terry S. Brand 38,000 0 0.0%
Metal Suppy Company 38,000 0 0.0%
Everett David Busk 38,000 0 0.0%
Michael Pruitt 38,000 0 0.0%
Calvin Byrd 19,000 0 0.0%
Raymond Byrd 19,000 0 0.0%
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<PAGE>
George Veronis- IRA account 19,000 0 0.0%
Paul Brunner 38,000 0 0.0%
Jim Riley 27,000 0 0.0%
Emanuel Selya 38,000 0 0.0%
Joseph Cerni 38,000 0 0.0%
Howard and Joy Brand 19,000 0 0.0%
Merlin Corbin 38,000 0 0.0%
Bob Rand 38,000 0 0.0%
Scott Gill 38,000 0 0.0%
Gareth Davies 19,000 0 0.0%
Robert & Rebekha Tapie 21,800 0 0.0%
Dale Davis 38,000 0 0.0%
Lyle Trager 38,000 0 0.0%
Bower Family Trust 76,000 0 0.0%
David Duncan 29,500 0 0.0%
Russell J. Singer Trustee 40,000 0 0.0%
Robert Jr & Mary Jenkins 19,000 0 0.0%
Richard Ableser revocable L trust 19,000 0 0.0%
Dayle Reimer 20,000 0 0.0%
Gary James Jason 20,000 0 0.0%
Alan C. Sickman 19,000 0 0.0%
Roger D. May 38,000 0 0.0%
Susan N. Iguchi 38,000 0 0.0%
Lesslie D. Manley 38,000 0 0.0%
Ronald M. Greenburg 38,000 0 0.0%
John & Marlene Javage 38,000 0 0.0%
Michael P. Trcka 19,000 0 0.0%
Fairwinds Investments, Lltd 38,332 0 0.0%
Jeffrey J. Ross 56,668 598,500 3.2%
David Euzarraga (1) 88,278 1,400,000 7.5%
Lance Hall 135,198 400,000(1) 2.1%
Guy Edwards 41,800 0 0.0%
Charlie Radovich 5,332 0 0.0%
Newport Capital Consultants, Inc. 600,000 0 0.0%
The Search For Value 400,000 0 0.0%
-----------
(1) The shares indicated are actually options to purchase 400,000 common shares
at $0.75 per share.
Golden Choice will pay all expenses in connection with the registration
and sale of the shares, except any selling commissions or discounts allowable to
sell the shares, fees, and disbursements of counsel and other representatives of
the selling security holders, and any stock transfer taxes payable by reason of
any sale.
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<PAGE>
PLAN OF DISTRIBUTION
The selling shareholders may from time to time sell all or a portion of
their shares in the over-the-counter market, or on any other national securities
exchange on which the common stock is or becomes listed or traded, in negotiated
transactions or otherwise, at prices then prevailing or related to the then
current market price or at negotiated prices. The shares will not be sold in an
underwritten public offering. The shares may be sold directly or through brokers
or dealers. The methods by which the shares may be sold include: (a) a block
trade (which may involve crosses) in which the broker or dealer so engaged will
attempt to sell the securities as agent but may position and resell a portion of
the block as principal to facilitate the transaction; (b) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account
pursuant to this prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; and (d) privately selling
shareholders may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions or discounts from selling shareholders (or, if
any such broker-dealer acts as agent for the purchaser of such shares, from such
purchaser) in amounts to be negotiated which are not expected to exceed those
customary in the types of transactions involved. Broker-dealers may agree with
the Selling Shareholders to sell a specified number of such shares at a
stipulated price per share, and, to the extent such purchase as principal any
unsold shares at the price required to fulfill the broker-dealer commitment to
such Selling Stockholder. Broker-dealers who acquire shares as principal may
thereafter resell such shares from time to time in transactions (which may
involve crosses and block transactions and sales to and through other
broker-dealers (including transactions of the nature described above) in the
over-the-counter market or otherwise at prices and on terms then prevailing at
the time of sale, at prices then related to the then-current market price or in
negotiated transactions and`, in connection with such re-sales, may pay to or
receive from the purchasers of such shares commissions as described above.
In connection with the distribution of the shares, the Selling
Shareholders may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the shares in the course of hedging the positions they assume with the selling
shareholders. The selling shareholders may also sell the shares short and
redeliver the shares to close out the short positions. The selling shareholders
may also loan or pledge the shares to a broker-dealer and the broker-dealer may
sell the shares so loaned or upon a default the broker-dealer may effect sales
of the pledged shares. In addition to the foregoing, the selling shareholders
may enter into, from time to time, other types of hedging transactions.
The selling shareholders and any broker-dealers participating in the
distributions of the shares may be deemed to be "underwriters" within the
meaning of Section 2(11) of the 1933 Act and any profit on the sale of shares by
the selling shareholders and any commissions or discounts given to any such
broker-dealer may be deemed to be underwriting commissions or discounts under
the 1933 Act. The shares may also be sold pursuant to Rule 144 under the 1933
Act beginning one year after the shares were issued.
We have filed the registration statement, or which this prospectus
forms a part, with respect to the sale of the shares. There can be no assurance
that the Selling Shareholders will sell any or all of the shares they desire to
sell.
Under the Securities Exchange Act of 1934 ("Exchange Act") and the
regulations thereunder, any person engaged in a distribution of the shares
offered by this prospectus may not simultaneously engage in market making
activities with respect to the common stock of Golden Choice during the
applicable "cooling off" periods prior to the commencement of such distribution.
In addition, and without limiting the foregoing, the selling Shareholders will
8
<PAGE>
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, which provisions may limit the timing of purchases and
sales of common stock by the Selling Shareholders. We will pay all of the
expenses of the preparation and filing of this registration statement including
payment of the registration fee to the Securities and Exchange Commission.
Otherwise we will not pay any costs or fees incident to the offering and sale of
the shares.
We have advised the selling shareholders that, during such time as they
may be engaged in a distribution of any of the shares we are registering by this
Registration Statement, they are required to comply with Regulation M
promulgated under the Securities Exchange Act of 1934. In general, Regulation M
precludes any Selling Stockholder, any affiliated purchasers and any
broker-dealer or other person who participates in such distribution from bidding
for or purchasing, or attempting to induce any person to bid for or purchase,
any security which is the subject of the distribution until the entire
distribution is complete. Regulation M defines a "distribution" as an offering
of securities that is distinguished from ordinary trading activities by the
magnitude of the offering and the presence of special selling efforts and
selling methods. Regulation M also defines a "distribution participant" as an
underwriter, prospective underwriter, broker, dealer, or other person who has
agreed to participate or who is participating in a distribution.
Regulation M prohibits any bids or purchases made in order to stabilize
the price of a security in connection with the distribution of that security,
except as specifically permitted by Rule 104 of Regulation M. These stabilizing
transactions may cause the price of the common stock to be higher than it would
otherwise be in the absence of those transactions. We have advised the Selling
Shareholders that stabilizing transactions permitted by Regulation M allow bids
to purchase our common stock so long as the stabilizing bids do not exceed a
specified maximum, and that Regulation M specifically prohibits stabilizing that
is the result of fraudulent, manipulative, or deceptive practices. Selling
Shareholders and distribution participants will be required to consult with
their own legal counsel to ensure compliance with Regulation M.
It should be noted that notwithstanding any of the foregoing discussion
in this section on plan of distribution, at the present time the common shares
of Golden Choice are not listed on any exchange or quoting service nor does any
public market exist for the shares. It remains uncertain at the present time
whether this offering will create a public market for the common shares.
LEGAL PROCEEDINGS
As of the date of this prospectus, there is no pending litigation
involving Golden Choice.
MANAGEMENT OF Golden Choice
The following table sets forth the names, ages, and positions with
Golden Choice for each of the directors and officers of Golden Choice.
<TABLE>
<CAPTION>
Name Age Position (1) Since
<S> <C> <C> <C>
Richard Damion 57 Chairman and Director 1996
Joseph R. Rodriguez, Jr. 51 CEO, CFO and Director 1996
A. R. "Bud" Grandsaert, Jr. 58 President and Director 1998
</TABLE>
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<PAGE>
(1) All executive officers are elected by the Board and hold office until
the next Annual Meeting of shareholders and until their successors are
elected and agree to serve.
The following information on the business experience of each director and
officer.
Richard Damion has been chairman of Golden Choice since it began
operations in 1996. From 1992 through 1996 he was the president and CEO of
Pacific Snax Corporation, a snack food company where he was in charge of general
operations and product development.
Joseph R. Rodriguez, Jr. has been CEO of Golden Choice since 1996. From
1987 through 1995, Mr. Rodriguez was the president of EFC Mortgage Corporation
where he was responsible for operations and secondary marketing.
A. R. "Bud" Grandsaert, Jr. has been president of Golden Choice since
1998. From 1996 through 1998, Mr. Grandsaert was the president of Cocktails
International. From 1991 through 1996 he was executive V. P. of sales and
marketing with Dioptic Medical Products.
PRINCIPAL SHAREHOLDERS
The following table sets forth as of October 4, 2000, the number and
percentage of the outstanding shares of common stock which, according to the
information supplied to Golden Choice, were beneficially owned by (i) each
person who is currently a director of Golden Choice, (ii) each executive
officer, (iii) all current directors and executive officers of Golden Choice as
a group and (iv) each person who, to the knowledge of Golden Choice, is the
beneficial owner of more than 5% of the outstanding common stock. Except as
otherwise indicated, the persons named in the table have sole voting and
dispositive power with respect to all shares beneficially owned, subject to
community property laws where applicable.
<TABLE>
<CAPTION>
Common Percent of
Name and Address Shares Class (1)
<S> <C> <C>
Richard Damion (2) 3,138,566 15.83%
180 Newport Center Drive, Suite 180
Newport Beach, CA 92660
Joseph R. Rodriguez, Jr. (3) 4,590,000 23.15%
180 Newport Center Drive, Suite 180
Newport Beach, CA 92660
A. R. "Bud" Grandsaert, Jr. (4) 925,000 4.88%
180 Newport Center Drive, Suite 180
Newport Beach, CA 92660
David H. Euzarraga 1,488,278 7.99%
No. 2 Robin Hill Lane
Laguna Hills, CA 92653
All Executive officers and
Directors as a Group (three) (5) 8,653,566 40.54%
</TABLE>
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<PAGE>
(1) All percentages are calculated by giving effect to the potential
exercise of options held by the applicable person, entity or group, but
without giving effect to the potential exercise of options held by any
other person, entity or group.
(2) Of the 3,158,566 common shares held by Mr. Damion, 1,938,566 shares are
owned outright. The remaining 1,200,000 shares are shares which can be
acquired by Mr. Damion through the exercise of options. The option
price on 1,200,000 of the shares is $.25 per share.
(3) Of the 4,590,000 common shares held by Mr. Rodriguez, 3,390,000 shares
are owned outright. The remaining 1,200,000 shares are shares which can
be acquired by Mr. Rodriguez through the exercise of options. The
option price on 1,200,000 of the shares is $.25 per share.
(4) Of the 925,000 common shares held by Mr. Grandsaert, 600,000 shares are
owned outright. The remaining 325,000 shares are shares which can be
acquired by Mr. Grandsaert through the exercise of options. The option
price on 325,000 of the shares is $.25 per share.
(5) The 8,673,566 common shares represented are the aggregate of shares
held by Messrs. Damion, Rodriguez and Grandsaert. See footnotes (2),
(3), and (4) above for the explanation of the beneficial ownership of
the shares.
DESCRIPTION OF THE SECURITIES OF Golden Choice
Golden Choice is authorized to issue 50,000,000 shares of common stock,
par value $0.001 per share, of which 18,623,274 shares are issued and
outstanding. Holders of common stock are entitled to one vote per share on each
matter submitted to a vote at any meeting of shareholders. Shares of common
stock do not carry cumulative voting rights, and therefore, holders of a
majority of the outstanding shares of common stock will be able to elect the
entire board of directors, and if they do so, minority shareholders would not be
able to elect any members to the board of directors. Golden Choice's board of
directors has authority, without action by Golden Choice's shareholders, to
issue all or any portion of the authorized but unissued shares of common stock,
which would reduce the percentage ownership of Golden Choice by its present
shareholders and which might dilute the book value of outstanding shares.
Shareholders of Golden Choice have no pre-emptive rights to acquire
additional shares of common stock. The common stock is not subject to redemption
and carries no subscription or conversion rights. In the event of liquidation of
Golden Choice, the shares of common stock are entitled to share equally in
corporate assets after satisfaction of all liabilities and any preference in
liquidation on preferred stock of Golden Choice then outstanding. The shares
offered by Golden Choice, when issued, will be fully paid and non-assessable.
Holders of common stock are entitled to receive such dividends as the
board of directors may from time to time declare out of funds legally available
for the payment of dividends, after payment of any preference on preferred stock
then outstanding. Golden Choice has not paid dividends on its common stock, and
does not anticipate that it will pay dividends in the foreseeable future.
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<PAGE>
We intend to raise $7,000,000 in equity capital through the private
placement of common shares in the near future. We intend that the private
placement will be exempt from registration under Rule 506 of Regulation D. If
and as the money is raised, this registration statement will be amended as
necessary to reflect all material changes in the prospectus.
The Transfer Agent and Registrar for the common stock will be Colonial
Stock Transfer, 455 E. 400 South, Suite 100, Salt Lake City, Utah 84111 (801)
355-5740, fax (801) 355-6505.
INTEREST OF NAMED EXPERTS AND COUNSEL
No "expert" as that term is defined pursuant to Section 228.509(a) of
Regulation S-B, or the "counsel" of Golden Choice as that term is defined
pursuant to Section 228.509(b) of Regulation S-B, was hired on a contingent
basis, or will receive a direct or indirect interest in Golden Choice, or was a
promoter, underwriter, voting trustee, director, officer, or employee of Golden
Choice at any time prior to the filing of this registration statement.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Golden Choice's articles of incorporation provide that Golden Choice
will indemnify any officer, director or former officer or director, to the full
extent permitted by law. This could include indemnification for liabilities
under securities laws enacted for shareowner protection. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 (the
"Act") may be permitted to directors, officers and controlling persons of Golden
Choice pursuant to the foregoing provisions, or otherwise, we have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
DESCRIPTION OF BUSINESS
Corporate History
Golden Choice Foods Corporation was incorporated in April 1996 pursuant
to the laws of the state of Delaware. On June 1, 2000, Golden Choice was
redomiciled in the state of Nevada. At the time Golden Choice was redomiciled,
its common shares were forward split on a 2 for 1 basis.
General Overview
Golden Choice is a developer and marketer of new snack food products.
The purpose of Golden Choice is stated in its corporate mission statement:
To become the preeminent manufacturer and marketer of new snack food
products; representing the "cutting edge" to both the consumer and the
snack food industry.
Golden Choice introduced a rice snack product into retail grocery
shortly after being incorporated. Golden Choice used this product to help
develop its relationships with snack food brokers and national selling
organizations in the 5 major snack food segments: retail, mass merchandise, food
service, vending, and club stores. Golden Choice was also engaged in product
development since incorporation. The result of which has been the issuance of 2
U.S. design patents. Prior to the product introduction of one of these products,
Golden Choice decided to suspend sales of its rice snack product at the time
that it introduced a new product, because Golden Choice did not have enough
capital resources to support 2 brands at the same time. Management believes that
the new product - "G.O.T. Fries TM" - a crinkle-cut french fry style snack is
going to be a leading seller for Golden Choice. In November 1998 Golden Choice
successfully introduced "G.O.T. Fries TM". Golden Choice expects to introduce
either "AW-Shucks TM"- corn off the cob, its 2nd patented product, or a popcorn
product in the 1st or 2nd quarter of calendar year 2001. Because the
introduction of AW-Shucks TM" will require additional capital, it is likely that
Golden Choice will introduce the popcorn product first.
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Golden Choice is positioned for rapid growth. Additional new products
will be introduced in 2001 adding to continued expansion of Golden Choice.
Product alone does not make a company successful. The best idea or product still
requires execution and capital. Management has been planning and preparing for
the anticipated growth, and is committed to achieving optimum results. The
requisite capital is the only remaining ingredient.
The products (trade marks, brands, & patents)
Golden Choice is proud of its "Golden Choice Foods R" logo. Management
believes that there is an inherent value being created in its name, as the
consumer becomes more aware of the quality of the products associated with
"Golden Choice Foods R". As the distribution of Golden Choice's products
continues to expand, the consumer should become more familiar with the name -
Golden Choice. This familiarity should help draw them to try one of Golden
Choice's products. As they try the products, the quality and good taste,
hopefully, will cause them to continue to eat our products as well as increase
their desire to try other new products introduced by Golden Choice. The G.O.T.
Fries brand can be found in limited distribution in almost every state in the
country, including Hawaii and Alaska. To date the brand has distribution in all
of the major areas or trade: Grocery, mass merchandisers, convenience, food
service, vend, and drug. Golden Choice continues to add retail outlets weekly to
its breadth of distribution primarily in grocery and mass merchandisers. The
result of product development during the last 2 fiscal years Golden has resulted
in the creation of two brands, "G.O. TM", and "AW-Shucks TM" -Corn off the Cob.
The cost to develop these brands has cost less than $80,000 of which no cost has
been passed on to the consumer. "G.O.T. Fries tm" is currently being sold while
"Aw-Shucks tm" has yet to be introduced into the market place. Golden Choice has
other brands under development The time of market introduction is to be
determined.
"G.O.T. Fries TM"
"G.O.T. Fries TM" (great original tasting!), the first
mainstream brand to be introduced into the consumer market by Golden
Choice, is a crinkle-cut french fry style snack. "G.O.T. Fries TM" is
the result of almost two years product development. Made from potato
and corn, extruded, and baked to a light crunchy texture. They contain
less fat than most traditional snacks found on the snack isle in most
grocery stores, yet have an extraordinarily high flavor profile. It
cannot be overemphasized that their originality has been recognized
with the issuance of a US design patent. "G.O.T. Fries TM" are
currently available in three flavors: "All American", "Southwestern",
and "Traditional Lightly Salted".
We believe "G.O.T. Fries TM" is as interesting a product to
enter the snack food industry as any in the past twenty years. We
believe it stands alone on the chip aisle without a direct competitor.
Although all salty snacks compete for the same customer, most of these
snacks are grouped under broad headings such as potato chips, corn
chips, tortilla chips, cheese puffs or pretzels. G.O.T. Fries does not
fall under one of these types of classifications, thereby causing it to
standout amongst the crowd of salty snacks. This is one of the reasons
that many snack buyers have wanted to place G.O.T. on their isle,
because of this distinction. It is a product that is identifiable and
recognizable to all consumers. The french fry is one of the most
popular foods in America. MacDonald's, alone, sells over nine million
(9,000,000) orders of french-fries per day. Sandwich shops, not
possessing a deep fryer, want a product that will attract French-fry
customers. "G.O.T. Fries TM" appears to be the first potential product
to fill this requirement, particularly because it is microwavable.
"G.O.T. Fries TM" also benefits indirectly from the advertising by the
"milk industry" - with its got milk campaign. This benefit is a result
of the consumer awareness with the term "got". The got milk ad campaign
appeared to be very successful in drawing the attention of viewers with
its funny and interesting tales. Since most consumers have seen at
least 1 or more of the got milk commercials, it is management's belief
that when the consumer sees the word got in G.O.T. Fries that they will
be more apt to look closer at the packaging, thereby increasing the
chance for a purchase. Golden Choice has no existing relationship with
the "got milk" advertising campaign nor does any of its advertising
mimic that of the "got milk advertising campaign.
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"AW-Shucks TM" - Corn off the Cob
"AW-Shucks TM", a corn based product, is Golden Choice's third
major brand. Golden Choice would like to introduce this product in the
fourth quarter of 2001. For this to happen Golden Choice will have to
raise more capital to have a successful introduction of the product.
"AW-Shucks TM", also has been awarded patent. This snack will be
marketed along with "G.O.T. Fries TM" in all of the major snack venues.
The "AW-Shucks TM" brand will be marketed in three flavors: "roasted
corn", "fajita grill", and "simply butter". It looks just like it was
sliced right off the cob. This fun snack will contain less than half
the fat of potato chips. It is a baked, extruded snack, possessing
great taste and sensational mouth-feel. Management expects it to have a
major impact in the salty snack category.
Other Products
Golden Choice has other products in development. Many of these have
regional potential while others have national potential. Almost all of these
products revolve around Golden Choice's ability to manufacture unique,
recognizable, 3-dimensional shapes; as well as management's expertise with
licensing. Most of these shapes are proprietary and timing of their introduction
into the market has yet to be determined.
Product Development
As is apparent from the current products Golden Choice has developed
and subsequently patented, management believes it can formulate other product
opportunities that will be successful in the consumer market. Golden Choice has
several projects in various stages of development. Management takes great pride
in its hands-on approach to product development. Much of its time is spent on
creating new and unique opportunities. Golden Choice works with various
flavor-creators, to formulate new and interesting seasonings. It also draws on
the creative artistry of advertising agencies and independent artists. The
management team is experienced, and knowledgeable, in the operation of all
equipment utilized in the extrusion manufacturing process.
Manufacturing and Quality Control
At this time Golden Choice manufactures all of its products through the
use of subcontractors called "co-packers". Golden Choice evaluates potential
candidates thoroughly in its selection process. A candidate must be in
compliance with all federal, state, and local government regulations. To be
considered, candidates must also be well capitalized, possess the necessary
production capacity, and have a reputation for quality production. Golden Choice
provides the technical knowledge, skills, and training required to manufacture
and quality control its products, to its standards. Each co-packer must maintain
a lab staffed with trained quality control personnel, capable of performing the
required tests established by Golden Choice. Strict adherence to quality control
standards is a must.
Golden Choice currently co-packs its products in Illinois and Southern
California. It's co-packer in Illinois is Consolidated Biscuit Company (CBC),
located in South Beloit, Illinois and its co-packer in California is Anita's
Mexican Foods (AMF). Both CBC and AMF are significant snack food manufacturers
and have the capacity to produce product in excess of Golden Choice's needs for
many years. Both plants have ample room to expand products if needed. CBC
operates a snack facility and a bakery, of approximately one hundred eighty
thousand (180,000) square feet. CBS and its sister plant in Fort Wayne, Indiana,
have the capacity to produce in excess of five hundred thousand (500,000) cases
of product per month for Golden Choice, with the ability to expand.
The raw material used in the manufacture of its products can be sourced
from a variety suppliers. The grains and corrugated boxes are universally
available from many sources throughout the country. The film used is supplied by
one source. This is typical in the industry because of the cost of the plates
required to print the film. Golden Choice has chosen a large stable supplier for
this purpose. The last ingredient, seasoning, is supplied by various seasoning
manufactures. Golden Choice uses various suppliers and has a backup for each
flavor.
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As production volume continues to increase, Golden Choice will continue
to expand its use of additional co-packers in order to continue to lower its
freight costs. Golden Choice is currently in discussions with co-packers on the
east coast. At this time, no decisions have been made as to when Golden Choice
will begin production in any other facility. Distribution
As was mentioned above, freight is one of Golden Choice's most
significant costs. As a result of this, management continues to find and
implement strategies for reducing the cost of shipping. Two current strategies
are outlined below.
First, rather than assume the financial burden of a full time shipment,
Golden Choice contracted the services of a transportation services agency,
Meredoc Transportation Services (MTS) (See Associates). For a monthly flat fee
and a percentage of the actual cost of the shipment, MTS acts as the shipping
department for Golden Choice. MTS coordinates all shipments for Golden Choice.
As Golden Choice adds more shipping points, MTS will also service these
locations. Secondly, as mentioned above, Golden Choice plans on increasing the
number of co-packers in the areas centered around the concentration of its
business.
Business Strategy
Golden Choice's three year objective is to reach over three million
five hundred thousand dollars ($3,500,000) in sales volume by June of 2001, over
twelve million six hundred thousand dollars ($12,600,000) by June of 2002, and
over twenty four million dollars ($24,000,000) by June 2003. Although the
projections may appear aggressive management feels that they actually are
conservative considering the size of the category and the potential for new
snack introductions such as "G.O.T. Fries TM". During this time period,
management does plan new product introductions, however; they have not been
factored into the financial projections. June 1999 and June 2000
year-to-date gross sales were nine hundred sixty nine seven hundred fifty three
dollars ($969,753) and one million six hundred twenty thousand two hundred
eleven ($1,620,211). In order to accomplish this objective, management must
execute in the following areas: 1) Operations and 2) Sales.
Operations Overview
For the purpose of this document, "Operations" shall refer to the
integrated utilization of the following resources:
o financial management (fm)
o accounting department (ad)
o inventory management (im)
o management information services (mis)
o manufacturing (mf)
o distribution of products (shipping & freight management) (dp)
Since the inception of the business, management has maintained a policy
that during the early growth years of Golden Choice, any operation that can be
subcontracted will be subcontracted. This gives Golden Choice limited exposure
to labor costs and greater flexibility in carrying out its business plan. In all
operational areas, this provides Golden Choice with complete services, from
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proven professionals, at reduced costs rather than increased staffing costs that
are not practical at this time, thereby protecting Golden Choice's profit
margin.
Of particular concern are the areas of manufacturing and distribution
of product. These two strategic areas are the most likely to impact Golden
Choice, in terms of capital resources and its ability to meet its customer's
demands for on-time deliveries. By sub-contracting its manufacturing, cost of
goods sold becomes a fixed cost, thereby requiring less investment in production
assets.
Similarly, a full-service associate, experienced and proficient in all
aspects of the transportation industry provides delivery and distribution of
products. Although this service may initially cost marginally more than in-house
employees may, it allows management the time to concentrate on growth and
administrative needs.
See the section "Associates" for a discussion of these sub-contractors.
At this time, each "associate" has the capacity to handle the expected rate of
growth. As growth increases, management can expand as needed. Golden Choice's
ability to manufacture and deliver its products on a timely basis is of critical
importance to Golden Choice and its customers. These systems give Golden Choice
that capability.
In considering the importance of these objectives; to reduce operating
costs and at the same time to maintain the highest quality of services and
expertise, Golden Choice has chosen the strategy of using sub-contractors where
ever feasible. By using sub-contractors, Golden Choice is able to get the
highest quality of service for a fixed cost, giving it the flexibility to make
rapid business decisions, allowing for immediate expansion or reduction with
little impact to the internal structure of Golden Choice. This strategy gives
Golden Choice the ability to grow operationally at a rapid rate without the need
for additional capital or personnel. It also makes it easier to manage and
itegrate all of its resources. As an example, sales increase, management will
select other co-packers, strategically located in areas of concentrated sales.
This will reduce the cost of shipping, by selecting the manufacturer closest to
the point of origination of the ordering customer, as well as, increasing Golden
Choice's ability to make on-time-deliveries. This alone will lead to better
customer service. As a result of the lower freight costs and the fixed cost of
production Golden Choice will be able to sell its products at a reduced cost to
its customers, thereby enabling the stores to sell to the ultimate consumer at a
lower price. This lower price should also expand the number of consumers that
can afford to purchase products. By using the service of multiple co-packers,
Golden Choice will not be faced with the additional overhead resulting from the
variable costs associated with owning its own plant or having to provide the
capital to acquire its own facility. Another great benefit is the fact that
Golden Choice will be able to keep finished goods inventory at a minimum because
of the shortened shipping times and being nearer to the customer and will
provide other advantages which will further reduce costs. This can be
accomplished without the expenditure of any additional capital.
Associates
Software Business Solutions (SBS) is a fourteen-year-old company that
helps businesses grow through information technology. It is a full service
accounting and management information services (mis) firm. It brings together,
state of the art in computing power and software, and matches these elements to
the financial, accounting, sales, and marketing needs of its clients. One of
SBS's major functions is to keep Golden Choice at the leading edge of technology
as well as maintaining all sales and marketing software and internet presence.
Until June 30,2000, SBS also provide financial management and accounting for
Golden Choice. SBS is paid on an hourly basis. As of July 1, 2000, Golden Choice
has hired a full-time CPA to handle these responsibilities
Meredoc Transportation Services (MTS) is a freight consolidator and
carrier agency that operates throughout Canada and the United States. It is
aligned with most major common carriers and contract carriers to meet all
shipping needs. Each carrier has been qualified for their utmost reliability,
professionalism, and customer driven philosophies. MTS matches Golden Choice's
specific shipping requirements with the right carrier for the job. MTS
specializes in excellent customer service, coordinating pick-ups and follow
through, to destination, to ensure that the customer receives the merchandise on
time, in good condition and at the lowest available cost. MTS handles all types
of transportation needs, from the simplest move to the most complex intermodal
requirement. MTS is linked to Golden Choice from the time an order is received
until the shipment has been delivered. Additionally, MTS coordinates inventory
availability with the manufacturer. Golden Choice and MTS operate under a verbal
agreement that is cancelable at anytime. Golden Choice pays MTS a flat monthly
fee and a percentage of the actual freight cost.
As noted previously, Currently Golden Choice uses the service of 2
unrelated co-packers, (CBC) and (AMF). Both facilities are organic; kosher; and
A.I.B. certified and inspected. They both have extensive lab facilities and
quality assurance capabilities on site. They also provide centralized warehouse
and distribution capabilities. Both companies are ready for the expected
expansion from growth in sales of "G.O.T. Fries TM and plant personnel have
already been trained and are prepared for increased production. To the benefit
of Golden Choice, both companies produce at a fixed cost regardless of the
quantity ordered. There are no contracts in force with either co-packer. Both
AMF and CBC purchase all raw ingredients, while Golden Choice purchases film and
corrugated.
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Sales Overview
Golden Choice will focus the sale of its products in the following
market segments:
o retail (grocery chains, food markets, & drug stores)
o mass merchandisers
o food service (sandwich shops, arenas, stadiums, etc.)
o vending and convenience stores
o club stores
Management expects Golden Choice's growth to come primarily from
retail, mass merchandisers and food service. Golden Choice, originally, had
entered into arrangements with two national sales organizations: ABNetwork and
Vend Brokers Association. Golden Choice soon determined that national
organizations were structured in such a fashion that did not give flexibility in
assigning accounts in the various market segments and geographic regions. Golden
Choice is currently pursuing sales to its existing and potential customers
through direct sales and through individual brokers with experience in selected
market segments and with strong corporate ties in specific geographical regions.
At the same time, Golden Choice is in the process of hiring 2 to 3 regional
sales managers to make direct sales calls and to grow the broker networks in the
various market segments. The brokers that agree to represent Golden Choice
receive compensation in the form of commissions on net sales. All of these
agreements can be terminated within 30 days by either party. Management has
presented "G.O.T. Fries tm" to many major retailers such as Target Stores,
K-Mart, Southland, Wal-Mart and many other grocery chains. The aforementioned
Companies, although they have all become customers of Golden Choice, are not
representative of its customer base. Golden Choice's customer base is comprised
of snack distributors and all sizes of retail outlets. In fiscal year 2000 over
65% of Golden Choice's sales were to the retail segment of the industry. Publix
Supermarket's represented over 10% of Gross Sales during fiscal year 2000. It
should be noted from the following table, that vending and convenience sale have
dropped between fiscal year 1999 and fiscal year 2000. During fiscal year 1999,
Golden Choice used sales to vending customers as a means to get some quick
product exposure and to advertise G.O.T. Fries introduction. Many of these sales
were made at a loss or very low profit margin. During fiscal year 2000, Golden
Choice decided to sell less vend product at these lower prices because of the
increase in retail exposure.
The following table provides a breakdown for the last 2 fiscal years by
product and market segment.
----------------------------------------- ---------------- ----------------
Gross Sales by Market Segment and
Product type
----------------------------------------- ---------------- ----------------
Fiscal Year Fiscal Year
ended 2000 ended 1999
G.O.T. Fries
Retail $1,072,402 $200,334
mass merchandisers $27,125 $4,906
food service $121,720 $89,437
vending & convenience $357,300 $599,277
club stores $41,664 $27,342
Rice Snax
Retail $0 $46,457
------------------------------------- --- ---------------- ----------------
Total Gross Sales $1,620,211 $967,753
------------------------------------- --- ---------------- ----------------
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The Market
As discussed earlier, every segment of retail is a target market for
Golden Choice Foods. The most significant is the grocery industry; which is one
of the largest and most competitive business sectors in our economy. Like many
businesses, consolidation has been the operative word in the last few years. Of
the total retail grocery business nationally, of two hundred and fifty billion
dollars ($250,000,000,000), the top ten chains represent forty percent (44%) or
one hundred and ten billion dollars ($110,000,000,000). Likewise, the suppliers
or vendors to the retail trade are also merging. The result is that many of the
consumer identifiable brands are part of large national and multi-national
companies, all competing for the precious selling space provided by the retail
trade. While Fortune 500 companies own many of the "household" names, over
twenty thousand (20,000) different companies are represented in the average
supermarket. The grocery business is truly a multi-varied, multi-opportunistic,
and entrepreneurial microcosm of the American economy.
Within the consumer goods retail business, the snack food industry is
one of the largest and highest volume categories - a fifty billion-dollar
($50,000,000,000) business worldwide and over twenty billion dollars
($20,000,000,000) domestically. Growing at an annual rate of ten percent (10%),
this "power" category is dominated by one multinational company. However, this
dominance presents many opportunities. Because snack foods appeal to nearly
every consumer, regardless of demographics, literally every type of retailer -
grocery chains, gas stations, mass merchandisers, food service, vending
machines, drug stores, military and club stores carries some snack selections.
These retailers are on the lookout for more varied sources of supply, not
wishing to be dependent upon the dominant company. Consumers, ever fickle, are
constantly looking for new snacks to try because snacks are an impulse driven
purchase. To put these dynamics into statistical perspective, a one-tenth of one
percent (.1%) share of the snack business represents fifty million dollars
($50,000,000) in business. That spells opportunity!
Sales and Marketing Strategy
Because the snack business is essentially an impulse business,
aggressive sales and marketing techniques are mandatory. Golden Choice is making
every effort to insure strong distribution, promotion and good placement of of
"G.O.T. Fries TM". Golden Choice also plans to use various promotions and
advertising to create consumer awareness and trial of the product. Once the
consumer tries "G.O.T. Fries TM", Golden Choice is confident of repeat
purchases.
Every class of trade and channel of distribution has different
merchandising and promotion requirements. For example, one major grocery chain
may require an "every day low price" (edlp), while another, in the same market,
may look for aggressive promotional support several times a year. Also,
different classes of trade have different distribution or gross margin
requirements. A "club" store works on a lower gross margin than a mass
merchandiser; which works on a lower gross margin than a grocery store; which
works on a lower gross margin than a chain drug store. Some accounts want the
product shipped to their warehouse for them to distribute to the stores. Others
require the product shipped directly to each store and stocked on the shelves by
a third party. Golden Choice has developed a comprehensive and flexible pricing,
distribution and promotion schedule that is tailored for each class of trade and
channel of distribution..
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Retail
Golden Choice feels the most significant volume opportunity lie with
the retail segment. Golden Choice's goal is to get product placement in as many
retail outlets as possible. It intends to accomplish this goal by increasing its
sales representation in the retail industry, thereby, enabling Golden Choice to
be in front of many grocery chains in a short period of time. Golden Choice has
found that when the product is introduced to a buyer it has met with a very
positive reaction and a large percentage of these buyers have agreed to give
G.O.T. Fries placement in their stores.
Vending
The vending segment is a twenty two billion dollar ($22,000,000,000)
industry with thousands of operators managing millions of vending machines. This
is a good venue for G.O.T. Fries to achieve considerable advertising exposure.
Golden Choice will continue to sell into this market segment, looking for
opportunities to promote its products balancing the need for increased public
exposure to the need to keep acceptable profit margins.
Food Service
This aspect of the business addresses schools, restaurants, hotels and
in-plant facilities at major corporate centers. In total volume it is
considerably larger than vending, and represents larger opportunities. Golden
Choice is in the process of structuring a plan to proceed in this market
segment. At this time Golden Choice is leaning to the selection of regional and
local brokers to reach the distribution networks necessary to penetrate this
market segment.
Competition
First there is PepsiCo/Frito Lay, a twenty one billion dollar
($21,000,000,000) behemoth with approximately twenty five percent (25%) of the
international snack food business and sixty percent (60%) of the domestic
business. The other competitors represent an interesting mix. For the most part
they fall into two groups: 1) local or regional suppliers of the basic core
snacks: potato chips, tortilla chips, popcorn, pretzels or cheese puffs or 2)
specialty companies, that provide much of the same basic products and shapes
with different ingredients. Examples of these would be pasta, carrot, terra, and
multi-grain chips. These two groups have produced a wide variety of choices to
an increasing array of consumers. The established brands maintain their
traditional market share, but the consumer clamors for something new.
Therefore, there is no specific brand, product, or group of products
that compete directly with "G.O.T. Fries TM". Although every product in the
snack isle represents competition for the consumers' dollar, "G.O.T. Fries TM"
appeals to both french fry and potato chip consumers giving it a positive
advantage on the snack isle. "G.O.T. Fries TM" essentially is a new product to
the snack category in all market segments. At this time it would generally be
considered a new brand with growing brand awareness. It is competitively
positioned in terms of pricing in all market segments.
"G.O.T. Fries TM" is packaged in a very attractive and appealing bag.
The main goal of Golden Choice from a competitive standpoint is to get good
product placement in all market segments, either on an end of isle display or
isle level shelf placement. Since "G.O.T. Fries TM" is new to most consumers, it
is important for it to be placed where it can easily be seen until it acquires
brand recognition. It has been shown that where the product is placed in a
display easily seen by the consumer, that it has sold very well, such as in
Pulbix Stores. Golden Choice also is relying on in store demonstrations to help
drive the consumer to become aware of the product. This has worked very well for
Golden Choice in stores such as Costco, where the product sells extremely well
when it is being demonstrated. Golden Choice has also offered free product to
customers of some chains to develop product awareness. As sales grow and capital
permits, Golden Choice plans to begin media advertising in print, radio, and
television. At this time no such programs have been undertaken by Golden Choice.
Employees
Many of Golden Choice's operations are conducted through the use of
independent contractors. Independent contractors perform such duties as selling,
manufacturing, shipping and computer services. Because of this policy, Golden
Choice has only four full time employees and no part time employees.
Government regulations
As a developer and distributor of food products, Golden Choice is
subject to the "Federal Food, Drug and Cosmetic Act" and regulations promulgated
thereunder, by the Food and Drug Administration ("FDA"). This comprehensive
regulatory agency governs the manufacture (including composition and
ingredients), labeling, packaging and safety of food. The FDA regulates
manufacturing practices for foods through its current "good manufacturing
practices" regulations, specifies the standards of identity of certain foods,
including the products sold by Golden Choice. It also stipulates the format and
content of specific information mandatory on food product labels.
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In addition, the FDA enforces the Public Health Service Act, which
regulates conduct required in preventing the transmission or spread of
communicable diseases. Golden Choice is also subject to state and local
regulation, through the licensing of manufacturing facilities. State and local
health agencies enforce standards for Golden Choice's products; and inspects
Golden Choice's facilities; and regulate Golden Choice's trade practices.
To monitor product quality, Golden Choice maintains quality control
programs during all stages of processing. Management believes that Golden
Choice's production and manufacturing practices comply with applicable
government regulations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction with the
information set forth in the audited financial statements for the year ended
June 30, 2000 and June 30 1999.
Golden Choice was formed in April 1996 in the state of Delaware and was
re-domiciled in the state of Nevada on June 1, 2000. Golden Choice is engaged in
development, marketing and sales of snack food products. Sales of its snack-food
products commenced in fiscal year 1997.
Golden Choice's products for the past twenty three months have consisted of its
potato based snack-food called "G.O.T. FriesTM". These products are produced to
Golden Choice's specifications by third party food processors (co-packers).
Golden Choice currently produces its products Illinois and southern California.
In general, the co-packer produces, packs, and warehouses the product while
Golden Choice maintains responsibility for shipping.
Golden Choice is concentrating its efforts on the sales and distribution of
"G.O.T. FriesTM" through retail grocery chains, mass merchandisers, food service
outlets, vending and convenience outlets and club stores. It is the intention of
Golden Choice to continue to introduce new products into the market place
providing that Golden Choice has the necessary capital resources to make such
introductions.
Plan of Operations
Under current operating conditions, management believes that Golden Choice's
sources of cash are sufficient to last for the next twelve months. For Golden
Choice to continue to grow its sales it will need to raise additional capital.
Obtaining product placement in the retail market segment requires the payment of
slotting fees. Increasing the capital available for slotting fees will enable
Golden Choice to increase sales on a more rapid basis. Hence, Golden Choice
plans to raise additional capital through a private stock offering over the next
twelve months. This capital will be used to increase market penetration of
"G.O.T. FriesTM" and to introduce new products into the market place. Golden
Choice plans to introduce at least one new product in fiscal year 2001. If
sufficient capital is raised, Golden Choice will likely introduce a second new
product. Since the stated goal of Golden Choice is to be a developer of new
products; management will continue to work on the creation of new, exciting
potential products that Golden Choice may eventually introduce into the market
place. Golden Choice plans on implementing a co-packing relationship in the
eastern part to the United States sometime within the next six to nine months.
Manufacturing at a new location has no impact on Golden Choice's liquidity, it
will however, have a positive impact on the amount of freight paid by Golden
Choice.
Results of Operations:
Comparison of 2000 to 1999
Net sales improved $528,456 to $1,338,731 or 65% over the prior year. This
increase in sales was primarily due to the growth in sales of G.O.T. FRIES into
the retail market segment coupled with a significant growth in Golden Choice's
overall customer base.
Cost of sales for the year was $794,709, or 59% of sales. This represents an
increase of $256,511, or 48% over the prior year. This rise in cost of sales was
attributed primarily to increased volume.
Selling Expenses were $225,819 or 17% of sales. This represents an increase of
$59,658 or 36% over the prior year. This rise was primarily due to marketing
costs incurred to support the growth in sales and due to an increase in
expenditures for in-store demonstrations. Prior to fiscal year 1999, Golden
Choice had incurred significant slotting fees (i.e. fees paid to retailers for
shelf space). During 1999, Golden Choice phased out its existing product
offering and stopped marketing to retailers that required high slotting fees. At
this time, Golden Choice also developed a new product, G.O.T. FRIES. G.O.T.
FRIES was introduced in fiscal year 1999.
General and administrative expenses were $653,193, or 49% of sales. This
represents an increase of $307,169, or 89% over the prior year. The major factor
contributing to this rise in General and Administrative expenses was payroll and
payroll related charges. Fiscal year 2000 was the first year that officers were
compensated for their services. General and Administrative expenses decreased as
a percentage of sales in fiscal year 1999 versus fiscal year 1998, because sales
in 1999 were more than 300% higher than sales in 1998.
20
<PAGE>
Other expense for the year was $2,842, or 0% of sales. This represents a
decrease of $20,634, or 116% from other income of $17,792 in the prior year.
Other income in fiscal year 1999 consists primarily of a credit received from a
vendor to compensate for defective product sold to Golden Choice earlier in the
year. Other expense during the current year consists of interest expense of
$7,583 incurred on short term borrowings used to finance working capital needs.
This interest expense was partially offset by interest and other miscellaneous
income.
For the year ending June 30, 2000, Golden Choice had a net loss of $339,470
compared to a loss of $215,090 in fiscal year 1999. The increase in the loss
during the current year was due to the payment of officer salaries, partially
offset by income generated by the growth in sales revenues.
Liquidity and Capital Resources
Since its inception, Golden Choice has financed its cash requirements from cash
generated from operations, the sale of equity securities, vendor lines of credit
and long-term and short-term debt. Golden Choice's principal sources of
liquidity as of June 30, 2000 consisted of approximately $381,428 in cash and
cash equivalents and $239,774 in Accounts Receivable.
Total assets increased $475,728, or 126% over the prior year. This change was
primarily due to an increase in cash of $377,163 and a sales related increase in
accounts receivable of $117,150. The increase in cash was the result of common
shares sold in a private offering which raised $936,750.
Total liabilities decreased $122,528, or 29% compared to the prior year. Golden
Choice used the funds generated from its private offering to pay down most of
its liabilities including some accounts payable.
Total stockholders' equity increased to $548,736 as of the year ended June 30,
2000 from a deficit of $49,520 as of the year ended June 30, 1999. The change in
stockholders' equity was the result of the issuance of common shares to raise
additional capital, partially offset by an increase in accumulated deficit.
Management is of the opinion that Golden Choice's current sources of cash are
sufficient for the ensuing twelve months. Golden Choice intends, prior to the
end of the twelve months, to raise additional capital through another private
stock offering.
Certain Trends and Uncertainties:
Golden Choice has in the past and may in the future make forward-looking
statements. These statements are subject to risks and uncertainties that could
cause actual results to differ materially from those predicted. Such risks and
uncertainties include, but are not limited to the following:
Commodity Prices and Competition:
Golden Choice is subject to market risk with respect to the cost of commodities,
because Golden Choice's ability to recover increased costs through higher
pricing may be limited by the competitive environment in which it operates. The
markets for Golden Choice's products are characterized by frequent new product
introductions. Golden Choice's future success is dependent upon the timely
completion and introduction of new products at competitive prices and quality
levels. In addition, Golden Choice must respond to competitors in Golden
Choice's markets. If Golden Choice is not able to make timely introduction of
new products, increase market share of existing products, or to respond
effectively to competition, its business and operating results could be
adversely affected.
Raw Materials and Other Supplies:
The snack food industry has ample manufacturing capacity and is expected to
continue to do so in the future. The prices Golden Choice pays for its raw
materials are subject to fluctuation. When prices increase, Golden Choice may or
may not be able to pass on such increases to its customers. Golden Choice's
results of operations could be adversely affected if its raw material suppliers
are unwilling or unable to supply a timely and sufficient supply of product to
Golden Choice and if Golden Choice is unable to pass on price increases to its
customers.
Freight Costs:
The cost to ship product is the single most important cost to reduce. Golden
Choice must continue to find new and cost effective ways to reduce its freight
costs. Golden Choice must continue to manufacture as close as possible to its
customers and manage orders that are less than truckload in size. If Golden
Choice is not able to reduce these costs; its business and operating results
could be adversely affected
PROPERTIES
Third party contractors produce and ship the products of Golden Choice.
Accordingly, the only facilities utilized by Golden Choice are 500 square feet
of office space located at 180 Newport Center Drive, Suite 180, Newport Beach,
California. Golden Choice occupies the space pursuant to a lease agreement in
which the lease is renewed annually. Golden Choice believes that if it should
ever lose the lease, it would not be difficult to obtain a comparable and
satisfactory office location.
21
<PAGE>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no public trading market for the common stock. There are
outstanding options to purchase 3,750,000 shares of common stock at a price of
$0.25 per share and options to purchase 2,350,000 shares of common stock at a
price of $.75 per share. 326,666 shares of common stock presently outstanding
may be sold without restriction because it was issued pursuant to Rule 504
during time periods when Rule 504 allowed for the issuance of shares which would
not be restricted by Rule 144. 9,250,000 shares of common stock presently
outstanding may be sold with restriction pursuant to Rule 144(k) promulgated
under the Securities Act of 1933, and 6,579,300 shares may be sold subject to
complying with all of the terms and conditions of Rule 144, except the one-year
holding period which has been satisfied. Golden Choice has agreed to register
2,638,908 common shares for certain existing shareholders. Golden Choice is not
planning a registered offering at the present time for the sale of non-issued
shares.
Since its inception, no dividends have been paid on Golden Choice's
common stock. Golden Choice intends to retain any earnings for use in its
business activities, so it is not expected that any dividends on the common
stock will be declared and paid in the foreseeable future.
At April 19, 2000, there was approximately 165 holders of record of
Golden Choice's Common Stock.
22
<PAGE>
Executive Compensation
Following is a summary compensation table detailing compensation
information for all of the officers of Golden Choice.
<TABLE>
<CAPTION>
Summary Compensation Table
-----------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term Compensation
----------------------------------------------------------------------------------------
Name and Awards Payouts
Principle -----------------------------------
Position
Other Securities
Annual Restricted Underlying LTIP All Other
Year Salary Bonus Compensation Stock Awards Options Payouts Compensation
$ $ $ $ $ $
----------------------------- ------ ---------- -------- ------------ ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph R. Rodriguez, Jr. CEO 2000 $50,000 $3,700 -0- -0- 500,000 -0- -0-
1999 -0- -0- -0- -0- -0- -0- -0-
1998 -0- -0- -0- -0- -0- -0- -0-
Richard Damion Chairman 2000 $50,000 $3,700 -0- -0- 500,000 -0- -0-
1999 -0- -0- -0- -0- -0- -0- -0-
1998 -0- -0- -0- -0- -0- -0- -0-
A.R. Grandsaert Prsident 2000 $50,000 $10,000 -0- -0- 1,350,000 -0- -0-
1999 -0- -0- -0- -0- -0- -0- -0-
1998 -0- -0- -0- -0- 650,000 -0- -0-
----------------------------- ------ ---------- -------- ------------ ------------ ---------- ------- ------------
</TABLE>
The following table provides information concerning individual grants
of stock options made during the last completed fiscal year to the officers of
Golden Choice.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Options/SAR Grants in last Fiscal Year
(Individual grants)
------------------------------------------------------------------------------------------------------------------------------------
Name Number of Securities Percent of Total Exercise or Base Price Expiration Date
underlying Options/SARs options/SARs granted to ($/SH)
granted (#) employees in fiscal year
------------------------------ ---------------------------- --------------------------- ---------------------------- ---------------
<S> <C> <C> <C> <C> <C>
Joseph R. Rodriguez, JR CEO 500,000 21% $0.75 July 31, 2009
Richard Damion Chairman 500,000 21% $0.75 July 31, 2009
A.R. Grandsaert President 1,350,000 58% $0.75 July 31, 2009
------------------------------ ---------------------------- --------------------------- ---------------------------- ---------------
2,350,000
------------------------------ ---------------------------- --------------------------- ---------------------------- ---------------
</TABLE>
Golden Choice has entered into employment contracts with the officers
named in this Section. Pursuant to the contracts each officer is entitled to
gross salary of $10,000 per month, family medical insurance, six weeks vacation
per year and life insurance in the face amount of $1,000,000.
FINANCIAL STATEMENTS
Golden Choice Foods Corporation
Financial Statements
As of June 30, 2000 and 1999 and for
Each of the Two Years in the Period Ended June 30, 2000
23
<PAGE>
Golden Choice Foods Corporation
Index to the Financial Statements
As of June 30, 2000 and 1999 and for
For Each of the Two Years in the Period Ended June 30, 2000
--------------------------------------------------------------------------------
Report of Independent Auditors .....................................25
Financial Statements of Golden Choice Foods:
Balance Sheets, June 30, 2000 and 1999.....................26
Statements of Operations For Each of the
Two Years in the Period Ended June 30, 2000..............28
Statements of Shareholders' Equity For
Each of the Two Years in the Period
Ended June 30, 2000......................................29
Statements of Cash Flows For Each of the
Two Years in the Period Ended June 30,
2000.....................................................30
Notes to the Financial Statements...................................32
24
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Golden Choice Foods Corporation
We have audited the accompanying balance sheets of Golden Choice Foods
Corporation as of June 30, 2000 and 1999 and the related statements of
operations, shareholders' equity and cash flows for each of the two years in the
period ended June 30, 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Golden Choice Foods Corporation
as of June 30, 2000 and 1999, and the results of its operations and its cash
flows for each of the two years in the period ended June 30, 2000, in conformity
with generally accepted accounting principles.
Kelly & Company
Newport Beach, California
September 26, 2000
25
<PAGE>
Golden Choice Foods Corporation
Balance Sheets
June 30, 2000 and 1999
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
2000 1999
---- ----
<S> <C> <C>
Current assets:
Cash and equivalents $ 381,428 $ 4,265
Trade accounts receivable, net 239,774 122,624
Inventories 184,277 168,303
Prepaid expenses 2,972 28,808
------------- --------------
Total current assets 808,451 324,000
Notes receivable - related parties 9,014 19,888
Property and equipment, net 9,959 2,737
Intangible assets, net 8,255 5,511
Other assets 18,220 26,035
------------- --------------
Total assets $ 853,899 $ 378,171
============= ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
Golden Choice Foods Corporation
Balance Sheets
June 30, 2000 and 1999
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
2000 1999
---- ----
<S> <C> <C>
Current liabilities:
Accounts payable $ 271,922 $ 324,706
Account payable to a shareholder - 22,365
Accrued liabilities 33,249 19,108
Note payable - current portion - 15,000
Notes payable, related party-current portion - 22,000
Other current liabilities - 14,512
------------- --------------
Total current liabilities 305,171 417,691
Notes payable, related party-long term portion - 10,000
------------- --------------
Total liabilities 305,171 427,691
------------- --------------
Commitments and contingencies
Shareholders' equity (deficit):
Common stock; $0.001 par value; 50,000,000
shares authorized; 18,623,274 and 17,056,366
shares issued and outstanding at June 30, 2000
and 1999, respectively 18,623 17,056
Additional paid-in capital 2,095,120 1,159,937
Accumulated deficit (1,565,015) (1,225,538)
Amount receivable from an officer on common stock - (975)
------------- --------------
Total shareholders' equity (deficit) 548,728 (49,520)
------------- --------------
Total liabilities and shareholders' equity $ 853,899 $ 378,171
============= ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
Golden Choice Foods Corporation
Statements of Operations
For Each of the Two Years in the Period Ended June 30, 2000
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Gross sales $ 1,620,212 $ 969,753
Less: returns and allowances (281,481) (151,453)
-------------- --------------
Net sales 1,338,731 818,300
Cost of sales 794,709 538,198
------------- --------------
Gross profit 544,022 280,102
Selling expenses 225,819 166,161
General and administrative expenses 653,238 346,024
------------- --------------
Loss from operations (335,035) (232,083)
------------- --------------
Other income (expense):
Interest expense (7,001) (655)
Interest expense - related party (582) (1,549)
Interest income 1,837 88
Interest income - related parties 622 1,032
Other income 2,282 18,876
------------- --------------
(2,842) 17,792
------------- --------------
Loss before provision for income taxes (337,877) (214,291)
Provision for income taxes 1,600 800
------------- --------------
Net loss $ (339,477) $ (215,091)
============= ==============
Net loss per share, basic and diluted $ (0.02) $ (0.01)
============= ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
Golden Choice Foods Corporation
Statements of Shareholders' Equity
For Each of the Two Years in the Period Ended June 30, 2000
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional Amount Receivable Total
Common Common Paid-in From Officer on Accumulated Shareholder's
Shares Stock Capital Common Stock Deficit Equity
------ ------ ------- ----------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1998 16,771,034 $ 16,771 $ 1,000,222 $ (975) $ (1,010,447) $ 5,571
Shares issued in a private
placement, including 52,000
shares issued as commissions 225,332 225 129,775 - - 130,000
Shares issued in satisfaction of
debt 60,000 60 29,940 - - 30,000
Net loss for the year ended June
30, 1999 - - - - (215,091) (215,091)
---------- --------- ----------- --------- ------------ ---------
Balance, June 30, 1999 17,056,366 17,056 1,159,937 (975) (1,225,538) (49,520)
Payment of a receivable arising
from the issuance of stock - - - 975 - 975
Shares issued in a private
placement, including 186,142
shares issued as commissions and
net of cash commissions of
$97,308 1,566,908 1,567 935,183 - - 936,750
Net loss for the year ended June
30, 2000 - - - - (339,477) (339,477)
---------- --------- ----------- --------- ------------ ---------
Balance, June 30, 2000 18,623,274 $ 18,623 $ 2,095,120 - $ (1,565,015) $ 548,728
========== ========= =========== ========= ============ =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
Golden Choice Foods Corporation
Statements of Cash Flows
For Each of the Two Years in the Period Ended June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (339,477) $ (215,091)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 2,202 7,590
Amortization 1,592 1,366
Provision for uncollectible accounts 8,000 7,165
Provision for sales discounts, returns and allowances 281,480 159,478
Decrease (increase) in assets:
Trade accounts receivable (406,623) (275,845)
Inventories (15,974) (146,037)
Prepaid expenses 25,836 (27,208)
Other assets 7,815 (16,324)
Increase (decrease) in liabilities:
Accounts payable (52,786) 287,091
Accounts payable to a shareholder (22,365) (8,562)
Other current liabilities 1,570 19,772
------------- --------------
Net cash used in operating activities (508,730) (206,605)
------------- --------------
Cash flows used in investing activities
Acquisition of intangible assets (4,336) (1,415)
Purchases of property and equipment (9,424) (1,197)
Increase of notes receivable from a related party - (828)
Issuance of notes receivable - related parties (2,500) -
Payment on notes receivable - related parties 2,403 -
------------- --------------
Net cash used in investing activities (13,857) (3,440)
------------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
Golden Choice Foods Corporation
Statements of Cash Flows
For Each of the Two Years in the Period Ended June 30, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash flows provided by financing activities:
Payment on note payable $ (15,000) -
Payments on notes payable - related party (22,000) -
Proceeds from the issuance of a note payable - $ 15,000
Proceeds from issuance of notes payable - related party - 10,000
Proceeds from the issuance of common stock 936,750 160,000
------------- --------------
Cash provided by financing activities 899,750 185,000
------------- --------------
Net decrease in cash 377,163 (25,045)
Cash and equivalents at beginning of year 4,265 29,310
------------- --------------
Cash and equivalents at end of year $ 381,428 $ 4,265
============= ==============
Supplemental Disclosures of Cash Flow Information
Interest paid $ 8,020 -
Income taxes paid $ 800 -
Supplemental Schedule of Non-Cash Investing and Financing Activities
Satisfaction of debt through issuance of common stock:
Liabilities satisfied - $ 30,000
Shares issued - $ 30,000
Satisfaction of related parties debt through offset
of related parties notes receivable:
Notes payable - related party $ 10,000 -
Accrued interest - related parties $ 1,946 -
Notes receivable - related parties $ (11,946) -
</TABLE>
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 2000
--------------------------------------------------------------------------------
1. Description of the Company's Business
-------------------------------------
Golden Choice Foods Corporation (the "Company"), was a Delaware
corporation, and was formed in April 1996 to engage in the marketing and
sales of snack food products. On June 1, 2000, the Company was redomiciled
in the State of Nevada. Sales of the Company's snack food products
commenced in fiscal year 1997.
During the year ended June 30, 1999, the Company added a new potato-based
snack food called "G.O.T. Fries". All products are produced to Company
specifications by third party food processors ("co-packer"). Individual
product bags and shipping boxes are designed by the Company and provided
to the co-packers located in Chicago, Illinois and San Bernardino,
California, to package product orders. In general, the co-packers produce,
pack, and warehouse the finished products until they are ready to ship to
the customers.
During the year ended June 30, 1999, the Company decided to concentrate
its efforts on the marketing and sale of "G.O.T. Fries". In connection
with this change in marketing and sales, the Company also decided to
suspend the marketing and sale of its rice product.
2. Financial Results and Liquidity
-------------------------------
The Company has incurred net losses of $339,477 and $215,091 in fiscal
years 2000 and 1999, respectively. Despite its negative cash flows from
operations of $508,730 and $206,605 in fiscal years 2000 and 1999,
respectively, the Company has been able to obtain additional operating
capital through private funding sources. No assurances can be given that
the Company can or will continue to obtain sufficient working capital
through borrowing, the sale of the Company's securities, or that the sale
of products will generate sufficient revenues in the future to sustain
ongoing operations. However, the Company believes it has sufficient
resources from recent sales of its equity securities to provide the cash
necessary for its ongoing operations for the near future. The Company
believes that the current market interest in its products is strong and
will enhance its ability to generate additional revenues from the sale of
the Company's products.
32
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 2000
--------------------------------------------------------------------------------
3. Summary of Significant Accounting Policies
------------------------------------------
Revenue Recognition
Revenues are recognized when the products are shipped to customers.
Provisions for discounts and rebates to customers, estimated returns and
allowances, and other adjustments are provided for in the same period the
related revenues are recorded.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported in the financial statements.
Changes in these estimates and assumptions are considered reasonably
possible and may have a material impact on the financial statements.
Cash and Equivalents
Cash and equivalents include amounts held in a money market account. The
Company has no requirement for compensating balances. The Company had cash
balances that exceeded the federally insured limits by $324,859 at June
30, 2000. The Company did not have cash balances that exceeded the
federally insured limits at June 30, 1999.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
on a standard cost basis, which approximates the first in-first out method
of valuation. Market is determined based on net realizable value. The
Company's management monitors its inventories for excess, obsolete, and
calendar date sensitive items and makes necessary valuation corrections
when such adjustments are required.
Property and Equipment
Property and equipment are recorded at cost and are depreciated using the
straight-line method over the expected useful lives noted below. The cost
and related accumulated depreciation of assets are removed from the
accounts upon retirement or other disposition, and the resulting profit or
loss is reflected in the statement of operations. Renewals and betterments
that materially extend the life of the assets are capitalized.
33
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 2000
--------------------------------------------------------------------------------
3. Summary of Significant Accounting Policies, Continued
-----------------------------------------------------
Property and Equipment, Continued
Estimated Useful
Life
----------------
Computer equipment 3 years
Furniture and fixtures 3 years
Intangible Assets
Intangible assets includes two patents and a trademark, which are
amortized on a straight line basis over the five-year estimated useful
lives of the assets. Accumulated amortization was $2,959 and $1,366 at
June 30, 2000 and 1999, respectively. The costs involved in the
acquisition of patents and trademarks are recorded as other assets until
the patent or trademark is granted.
Impairment of Long-Lived Assets
The Company annually evaluates its long-lived assets, including
identifiable intangible assets, such as its patents and trademarks for
potential impairment. When circumstances indicate that the carrying amount
of an asset is not recoverable, as demonstrated by the projected
undiscounted cash flows, an impairment loss is recognized. The Company's
management has determined that there was no such impairment present at
June 30, 2000 and 1999.
Income Taxes
The Company accounts for deferred income taxes using the liability method.
Deferred income taxes are computed based on the tax liability or benefit
in future years of the reversal of temporary differences in the
recognition of income or deduction of expenses between financial and tax
reporting. Deferred tax assets and/or liabilities are classified as
current and noncurrent based on the classification of the related asset or
liability for financial reporting purposes, or based on the expected
reversal date for deferred taxes that are not related to an asset or
liability.
Stock-Based Compensation
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation", established accounting and disclosure
requirements using a fair-value-based method of accounting for stock-based
employee compensation plans. As permitted by SFAS No. 123, the Company
will continue to account for stock-based employee compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion
34
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 2000
--------------------------------------------------------------------------------
3. Summary of Significant Accounting Policies, Continued
-----------------------------------------------------
Stock-Based Compensation, Continued
("APB") No. 25, "Accounting for Stock Issued to Employees." Compensation
cost of stock options granted to employees, if any, will be measured as
the excess of the quoted market price of the Company's stock at the date
of grant over the amount an employee must pay to acquire the stock.
Compensation cost is amortized over the requisite vesting periods. The
Company accounts for stock-based compensation to nonemployees in
accordance with SFAS No. 123.
The Company has elected to continue to account for stock-based employee
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations and to provide additional
disclosures with respect to the pro forma effects of adoption had the
Company recorded compensation expense as provided by SFAS No. 123. In
accordance with APB No. 25, compensation cost for stock options is
recognized as the excess, if any, of the market price of the Company's
stock at the date of grant over the amount an employee must pay to acquire
the stock. Generally, the exercise price for stock options granted to
employees equals or exceeds the fair market value of the Company's common
stock at the date of grant, thereby resulting in no recognition of
compensation expense by the Company. Compensation cost is recorded over
the requisite vesting periods based on the market value on the date of
grant.
Common Shares and Per Share Amounts
In June 2000, the Company was redomiciled in the State of Nevada and each
common share of Golden Choice Foods Corporation (Delaware) was exchanged
for two common shares of Golden Choice Foods Corporation (Nevada). All
common shares and per share amounts have been adjusted to give effect to
that share exchange.
Loss per Common Share
In 1997 the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share". This pronouncement replaced the previously reported
primary and fully diluted earnings per share with basic and diluted
earnings per share, respectively. The Company has adopted SFAS No. 128.
Loss per common share has been calculated in accordance with the
requirements of this statement for the years ended June 30, 2000 and 1999,
respectively.
35
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 2000
--------------------------------------------------------------------------------
3. Summary of Significant Accounting Policies, Continued
-----------------------------------------------------
Advertising Costs
Advertising costs are expensed when they are incurred. Advertising expense
was $51,116 and $31,891 for the years ended June 30, 2000 and 1999,
respectively.
Officers' Compensation
In the year ended June 30, 1999 and for all earlier periods, the three
officers of the Company elected to forego compensation. However, in the
year ended June 30, 2000, these officers began receiving a monthly salary.
General and administrative expenses include officers' compensation of
approximately $167,400 and 0 for the years ended June 30, 2000 and 1999,
respectively.
Reclassifications
Certain prior year amounts have been reclassified to conform to fiscal
2000 presentation. These changes had no impact on previously reported
results of operations or shareholders' equity.
Product Development
The Company's product development activities principally involve product
name selection, product shape determination, artistic design of the
product packaging, arrangement for the related manufacturing extrusion
tools and dies, selection of seasonings, grains and other ingredients,
taste and market testing. The costs of these activities are expensed as
incurred.
4. Trade Accounts Receivable
-------------------------
The Company provides allowances for doubtful accounts and returns and
allowances. Accounts receivable are presented net of an allowance for
doubtful accounts of $7,088 and $9,165 and an allowance for sales returns
and allowances of $56,575 and 0 at June 30, 2000 and 1999, respectively.
5. Inventories
-----------
Inventories consisted of the following:
2000 1999
---- ----
Raw materials $ 161,965 $ 137,276
Finished goods 22,312 31,027
-------------- ------------
Total inventories $ 184,277 $ 168,303
============== ============
36
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 2000
--------------------------------------------------------------------------------
6. Notes Receivable - Related Parties
----------------------------------
Notes receivable due from related parties consists of the following:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Uncollateralized notes receivable from
related parties of the Company with principal
and accrued interest at 5% per annum due at
maturity. The notes mature at various dates
from July 2001 through May 2003. $ 9,014 $ 19,888
-------------- ------------
Total notes receivable - related parties $ 9,014 $ 19,888
============== ============
</TABLE>
7. Property and Equipment
----------------------
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Computer equipment $ 31,190 $ 21,747
Furniture and fixtures 1,723 1,724
-------------- ------------
32,913 23,471
Less: accumulated depreciation (22,954) (20,734)
-------------- ------------
Total property and equipment $ 9,959 $ 2,737
============== ============
</TABLE>
Depreciation expense for the years ended June 30, 2000 and 1999 was $2,202
and $7,590, respectively.
8. Note Payable
------------
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Note payable that was uncollateralized with a fixed
interest rate of 5% per annum, with the principal
and interest due at maturity in October 1999. This
note was satisfied during the year ended June 30,
2000. - $ 15,000
Less: current portion - (15,000)
----------- ----------
Long term portion of notes payable - -
=========== ==========
</TABLE>
37
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 2000
--------------------------------------------------------------------------------
9. Notes Payable - Related Party
-----------------------------
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Notes payable - related party that were
uncollateralized with a fixed interest rate
of 5% per annum, with principal and interest
due at maturity, which ranged through September
2004. The notes are payable to an entity, which is
owned by two officers of the Company. These notes
were satisfied during the year ended June 30, 2000. - $ 32,000
Less: current portion - (22,000)
----------- ------------
Long term portion of notes payable - $ 10,000
=========== ============
</TABLE>
Interest expense for the years ended June 30, 2000 and 1999 was $7,583 and
$2,204, respectively.
10. Deferred Income Taxes
---------------------
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
For the Years Ended June 30,
----------------------------
2000 1999
---- ----
<S> <C> <C>
Current tax expense:
Federal - -
State $ 1,600 $ 800
----------- ----------
1,600 800
----------- ----------
Deferred tax expense:
Federal - -
State - -
----------- ----------
- -
----------- ----------
Total provision $ 1,600 $ 800
=========== ==========
</TABLE>
38
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 2000
--------------------------------------------------------------------------------
10. Deferred Income Taxes, Continued
--------------------------------
Significant components of the Company's deferred income tax assets and
liabilities at June 30, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
For the Years Ended June 30,
----------------------------
2000 1999
---- ----
<S> <C> <C>
Deferred income tax assets:
Net operating loss carryforward $ 625,220 $ 517,533
Allowance for doubtful accounts 27,273 3,926
Depreciation 485 485
Other 544 272
----------- ----------
Total deferred income tax asset 653,522 522,216
Valuation allowance (653,522) (522,216)
----------- ----------
Net deferred income tax asset - -
=========== ==========
</TABLE>
The Company, based upon its history of losses and management's assessment
of when operations are anticipated to generate taxable income, has
concluded that it is more likely than not that none of the net deferred
income tax assets will be realized through future taxable earnings and has
established a valuation allowance for them. Reconciliation of the
effective tax rate to the U.S. statutory rate is as follows:
<TABLE>
<CAPTION>
For the Years Ended June 30,
----------------------------
2000 1999
---- ----
<S> <C> <C>
Tax expense at U.S. statutory rate (34.0) % (34.0)%
State tax provision 0.3 0.3
Other 0.4 0.1
Change in valuation allowance 33.8 34.0
-------- -------
Effective income tax rate 0.5% 0.4%
======== =======
</TABLE>
The Company also has Federal and state net operating loss carryforwards of
$1,488,938 and $1,345,947, respectively. The Federal and state net
operating loss carryforwards will begin to expire in the years 2018 and
2003, respectively.
39
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 2000
--------------------------------------------------------------------------------
11. Commitments
-----------
The Company had an operating lease for its corporate office, which expired
on December 31, 1999. The Company's office lease is currently on a month
to month basis. Rental expense, resulting from the operating lease
agreement, was $11,026 and $8,942 during the years ended June 30, 2000 and
1999, respectively.
12. Contingencies and Concentrations
--------------------------------
Lack of Insurance Coverage
In previous years, the Company had operated without the benefit of general
and products liability insurance coverage other than that provided by its
co-packers to certain of the Company's larger customers. During fiscal
year 2000, the Company was named as additional insured with respect to
general liability, on the general liability policies of its two
co-packers, and believes that this provides adequate insurance coverage
for the Company. If the Company is held responsible for acts or events
that are normally covered by general and product liability insurance that
occurred during the uninsured period, it could have an adverse effect on
operating results. Management has no knowledge of the existence of any
such act or event that may have occurred during the uninsured period. The
at-risk period varies by state based on each state's statute of limitation
period.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist primarily of trade accounts
receivable. The Company sells products to both private companies and
public sector entities supplying the food services industry. Exposure to
losses on accounts receivable is principally dependent on the individual
customer's financial condition, as credit sales are not collateralized.
The Company monitors its exposure to credit loss and reserves those
accounts receivable that it deems to be uncollectible. Four customers each
accounted for more than 10% of revenues for the year ended June 30, 2000.
These four customers accounted for a total of 61% of revenues. No single
customer accounted for more than 10% of revenues for the year ended June
30, 1999.
40
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 2000
--------------------------------------------------------------------------------
12. Contingencies and Concentrations, Continued
-------------------------------------------
Concentration of Product Co-Packers
The Company utilizes two co-packers to produce its products. The Company
does not currently have production contracts with either of these
co-packers. Any interruption from these production sources could adversely
affect the Company's ability to supply customers and correspondingly its
operating results.
13. Stock-Based Compensation
------------------------
From time to time, the Company has granted options to its officers and
consultants to promote the success of the Company by providing the options
holders the opportunity to acquire an equity interest in the Company. The
Company accounts for options granted to employees under the provision of
APB No. 25 and FASB No. 123 for nonemployees.
In July 1999, the board of directors granted to the three officers of the
Company a total of 2,350,000 options, each with a ten-year term, to
purchase common stock at $.75 per share. The exercise price was equal to
the estimated fair market value at the date of grant.
In July 1999, the board of directors granted 400,000 options to purchase
common stock at $.75 per share to an individual as additional commission
for assistance in the Company's private placement. The fair value of the
options was determined to be $134,000 and has been offset against the
proceeds received from the private placement.
The following table summarizes information about stock options granted and
outstanding at June 30, 2000 and 1999, and changes during the years then
ended. Unless otherwise noted, options vest on an annual pro rata basis
over various periods of time and are exercisable, upon proper notice, in
whole or in part at any time upon vesting. The options granted have
contractual lives ranging from ten to sixteen years.
41
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 2000
--------------------------------------------------------------------------------
13. Stock-Based Compensation Continued
----------------------------------
The weighted average fair value of the options granted during the year
ended June 30, 2000 was $.34.
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price
----------- -----
<S> <C> <C>
Balance, June 30, 1998 3,750,000 $ 0.25
Granted - -
Exercised - -
Canceled - -
--------- --------
Balance, June 30, 1999 3,750,000 0.25
Granted 2,750,000 0.75
Exercised - -
Canceled - -
--------- --------
Balance, June 30, 2000 6,500,000 $ 0.46
========= ========
</TABLE>
The Company continues to account for stock-based compensation to employees
using the intrinsic value method prescribed in APB No. 25 whereby no
compensation cost is recognized for options granted at or above fair
market value. If under FASB No. 123 the Company determined compensation
costs based on the fair value at the grant date for its stock options, net
loss and loss per share would have been as shown below. For purposes of
pro forma disclosures, the estimated fair value of the options is
amortized over their vesting periods. The pro forma effects of applying
SFAS No. 123 are not indicative of future results because this statement
does not apply to awards granted prior to fiscal year 1997.
<TABLE>
<CAPTION>
For the Year Ended June 30
--------------------------
2000 1999
---- ----
<S> <C> <C>
Net loss:
As reported $ (339,477) $ (215,091)
Pro forma $ (652,720) $ (303,124)
Loss per share, basic and diluted:
As reported $ (0.02) $ (0.01)
Pro forma $ (0.03) $ (0.02)
</TABLE>
For purposes of the above pro forma calculation, the fair value of options
granted by the Company during the years ended June 30, 2000 and 1999, is
estimated using the Black-Scholes Option Pricing Model with the weighted
average assumptions listed below:
42
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 2000
--------------------------------------------------------------------------------
13. Stock-Based Compensation, Continued
-----------------------------------
<TABLE>
<CAPTION>
June 30
-------
2000 1999
---- ----
<S> <C> <C>
Risk-free interest rate 5.86 % - %
Expected dividend yield - -
Expected stock price volatility - -
Expected life in years 10 years 10 years
</TABLE>
Summary information about the Company's options outstanding at June 30,
2000:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-----------------------------------------------------------------------------
Weighted
Average Weighted Weighted
Options Remaining Average Options Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices June 30, 2000 Life Price June 30, 2000 Price
------ ------------- ---- ----- ------------- -----
<S> <C> <C> <C> <C> <C>
$ 0.25 3,750,000 7.5 $ 0.25 2,825,000 $ 0.25
$ 0.75 2,750,000 10.0 $ 0.75 - $ 0.75
---------------- ----------------
6,500,000 2,825,000
================ ================
</TABLE>
14. Disclosures about Fair Values of Financial Instruments
------------------------------------------------------
The estimated fair value amounts of all financial instruments, on the
Company's 2000 and 1999 balance sheets, have been determined by using
available market information and appropriate valuation methodologies. Fair
value is described as the amount at which the instrument could be
exchanged in a current transaction between informed willing parties, other
than in a forced liquidation. However, considerable judgment is
necessarily required in interpreting market data to develop the estimates
of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair
value amounts. The Company does not have any off balance sheet financial
instruments.
43
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 2000
--------------------------------------------------------------------------------
14. Disclosures about Fair Values of Financial Instruments, Continued
-----------------------------------------------------------------
The following methods and assumptions were used by the Company in
estimating fair value disclosures for financial statements:
Cash and equivalents, accounts receivable, notes receivable,
inventory, accounts payable, notes payable, and certain other current
liability amounts approximate fair value due to the short term
maturities of these instruments.
The fair value of non-current notes payable is estimated by
determining the net present value of future payments. The carrying
amount on the balance sheet approximates the fair value as the
interest rates approximate current market rates.
15. Transactions with a Shareholder
-------------------------------
Accounting and MIS Consultants
From its inception through June 30, 2000, the Company outsourced their
monthly accounting functions and management information service ("MIS")
requirements to a consulting group. On January 2, 1997, the consulting
group was granted options to purchase 100,000 shares of the Company's
common stock at an exercise price of $.25 per share for past consulting
services performed. In January 1999, the Company issued 60,000 shares of
common stock to the consulting group as payment in full for $30,000 worth
of consulting services. At June 30, 1999, the consulting group was owed
$22,365, which is shown as accounts payable to a shareholder. As of July
1, 2000, Company employees now perform those functions formerly provided
by the accounting and MIS consultants.
16. Loss Per Share
--------------
Basic and diluted loss per common share has been computed by dividing the
loss available to common shareholders by the weighted-average number of
common shares for the period.
The computations of basic and diluted loss per common share are as
follows:
<TABLE>
<CAPTION>
For the Years Ended June 30,
----------------------------
2000 1999
---- ----
<S> <C> <C>
Loss per common share, basic and diluted:
Net loss available to common shareholders $ (339,477) $ (215,091)
Weighted-average shares basic and diluted 17,597,892 16,888,142
---------------- ---------------
Loss per common share, basic and diluted $ (0.02) $ (0.01)
================ ===============
</TABLE>
44
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 2000
--------------------------------------------------------------------------------
16. Loss Per Share, Continued
-------------------------
The effect of the potentially dilutive securities listed below was not
included in the computation of diluted loss per share, because to do so
would have been antidilutive for the years presented.
<TABLE>
<CAPTION>
For the Years Ended June 30,
----------------------------
2000 1999
---- ----
<S> <C> <C>
Shares of common stock issuable under:
Employee stock options 6,100,000 3,650,000
Nonemployee stock options 400,000 100,000
--------- ---------
6,500,000 3,750,000
========= =========
</TABLE>
17. Stock Transactions
------------------
Private Placement Offerings
In the year ended June 30, 1999, the Company, in a private placement
offering, sold 173,332 shares of its common stock at $.75 per share with
net proceeds totaling $130,000. In connection with the private placement,
the Company issued 52,000 shares as commissions. The fair value of the
shares issued as commissions has been recorded as a reduction to
additional paid-in capital.
In the year ended June 30, 2000, the Company, in a private placement, sold
1,380,766 shares of its common stock at $.75 per share with net proceeds
totaling $936,750. In connection with the private placement, the Company
issued an additional 186,142 shares and paid $97,308 in cash as
commissions. The fair value of the shares issued as commissions and the
cash commissions have been recorded as reductions to additional paid-in
capital.
Shares Issued in Payment of Debt
In January 1999, the Company issued 60,000 shares of stock in full payment
of $30,000 of accounts payable.
45
<PAGE>
ORGANIZATION WITHIN LAST FIVE YEARS
Transactions with promoters. Richard Damion and Joseph R. Rodriguez,
Jr. were the promoters of Golden Choice. At the time of the organization of
Golden Choice, each promoter received 2,000,000 common shares in exchange for an
investment in Golden Choice of $6,000. Other disclosure applicable to this
section is set forth in the section discussing executive compensation.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the accountants of
Golden Choice since the formation of Golden Choice required to be disclosed
pursuant to Item 304 of Regulation S-B.
LEGAL MATTERS
The validity of the sale of shares of Golden Choice's common stock
offered hereby has been passed upon for Golden Choice by Fabian & Clendenin,
located in Salt Lake City, Utah.
EXPERTS
The audited financial statements of Golden Choice Foods Corporation
included herein and elsewhere in the Registration Statement have been audited by
Kelly & Company, independent certified public accountants, for the periods and
to the extent set forth in their report appearing herein and elsewhere in the
Registration Statement. Such financial statements have been so included in
reliance upon the report of such firm given upon their authority as experts in
auditing and accounting.
46
<PAGE>
WHERE CAN YOU FIND ADDITIONAL INFORMATION
A registration statement on Form SB-2, including amendments thereto,
relating to the shares offered hereby has been filed with the Securities and
Exchange Commission. This prospectus does not contain all of the information set
forth in the registration statement and the exhibits and schedules thereto.
Statements contained in this prospectus as to the contents of any contract or
other document referred to are not necessarily complete and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the registration statement, each such statement being qualified in
all respects by such reference. For further information with respect to Golden
Choice and the units offered hereby, reference is made to such registration
statement, exhibits and schedules. A copy of the registration statement may be
inspected by anyone without charge at the Commission's principal office location
at 450 Fifth Street, N.W., Washington, D.C. 20549, the Northeast Regional Office
location at 7 world Trade Center, 13th Floor, New York, New York, 10048, and the
Midwest Regional Office location at Northwest Atrium Center, 500 Madison Street,
Chicago, Illinois 60661-2511 and copies of all or any part thereof may be
obtained from the Public Reference Branch of the Commission upon the payment of
certain fees prescribed by the Commission. The Commission also maintains a site
on the world wide wed at http://www.sec.gov that contains information regarding
registrants that file electronically with the Commission.
TABLE OF CONTENTS
Page
Risk Factors...........................0
Use of Proceeds........................0
Dividend Policy........................0
Capitalization.........................0
Dilution...............................0
Management's Discussion and
Analysis of Financial Condition and
Results of Operations.................0
Business...............................0
Management.............................0
Certain Transactions...................0
Prinicpal Stockholders.................0
Description of Capital Stock...........0
Shares Eligible for Future Sale........0
Underwriting...........................0
Legal Matters..........................0
Experts................................0
Additional Information.................0
Index to Financial Statements..........0
Until all shares registered are sold or until 25 days after the effective date
of this prospectus, whichever is later, all dealers effecting transactions in
the Common Stock, whether or not participating in this distribution, may be
required to deliver a prospectus. This delivery requirement is in addition to
the obligation of dealers to deliver a prospectus when acting as Underwriters
and with respect to their unsold allotments of subscriptions.
47
<PAGE>
No dealer, salesperson or other individual has been authorized to give any
information or to make any representation not contained in this prospectus in
connection with the Offering. If given or made, such information or
representation must not be relied upon as having been authorized by Golden
Choice or any of the Underwriters. This prospectus does not constitute an offer
to sell, or a solicitation of an offer to buy, the Common Stock in any
jurisdiction where, or to any person to whom, it is unlawful to make such offer
or solicitation. Neither the delivery of this prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that there has
not been any change in the facts set forth in this prospectus or in the affairs
of Golden Choice since the date hereof.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Golden Choice's Articles of Incorporation eliminate, subject to certain
exceptions, directors' personal liability to Golden Choice or its stockholders
for monetary damages for breaches of fiduciary duties. The Articles of
Incorporation do not, however, eliminate or limit the personal liability of a
director for (i) any breach of the director's duty of loyalty to Golden Choice
or its stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payments of
dividends or unlawful stock repurchases or redemptions as provided in the Nevada
Corporate Code or (iv) for any transaction from which the director derived an
improper personal benefit.
Golden Choice's Bylaws provide that Golden Choice shall indemnify its
directors, officers, employees, and against to the fullest extent permitted
under the laws of the state of Nevada including without limitation Nevada
Revised Statutes Sections 78.7502 and 78.751. In addition, Golden Choice has
entered or will enter into indemnification agreements with its directors and
officers that provide for indemnification in addition to the indemnification
provided in Golden Choice's Bylaws. The indemnification agreements contain
provisions that may require Golden Choice, among other things, to indemnify its
directors and executive officers against certain liabilities (other than
liabilities arising from intentional or knowing and culpable violations of law)
that may arise by reason of their status or service as directors or executive
officers of Golden Choice or other entities to which they provide service at the
request of Golden Choice and to advance expenses they may incur as a result of
any proceeding against them as to which they could be indemnified. Golden Choice
believes that these provisions and agreements are necessary to attract and
retain qualified directors and officers. Golden Choice will obtain an insurance
policy covering directors and officers for claims that such directors and
officers may otherwise be required to pay or for which Golden Choice is required
to indemnify them, subject to certain exclusions.
48
<PAGE>
OTHER EXPENSES OF ISSUANCE AND DISTRIBTUION
Accounting $ 18,000 *
Attorney Fees $ 25,000 *
Printing Expense $ 1,000 *
Registration Fees - SEC $ 1,393
Transfer Agent $ 2,000 *
-----------
Total Offering Expense $ 47,393 *
* These figures represent estimations by management.
RECENT SALES OF UNREGISTERED SECURITIES
Beginning on July 25, 1997, and ending on February 12, 1998, Golden
Choice sold 336,600 common shares. 208,000 of the shares were sold for cash at a
price of $0.50 per share. 120,000 of the shares were issued in exchange for the
cancellation of debt totaling $60,000 or $0.50 per share. 8,600 of the shares
were issued as commissions in exchange for selling shares. All shares were
issued in a series of transactions not involving any public offering within the
meaning of section 4(2) of the Securities Act of 1933 (the "Act") and therefore
exempt from registration under section 5(a) of the Act. The shares were sold to
a total of 22 persons close to Golden Choice and/or its officers and directors,
no public solicitation took place and no selling commissions were received by
the officers and directors who sold the shares.
On January 1, 1997, Golden Choice issued 375,000 options, each for the
purchase of one share of common stock at the price of $0.50 per share. On the
date the options were issued, there was neither a market for the options nor for
the common shares underlying the options. Accordingly, the board of directors
determined the options had no value on the date of issue but were issued
nevertheless in exchange for services rendered by the recipients for Golden
Choice. 50,000 of the options were issued to Dennis Van Baale. 325,000 of the
options were issued to A.R. Grandsaert. Mr. Grandsaert is an officer and
director of Golden Choice. The issuance of the options did not involve any
public offering within the meaning of section 4(2) of the Securities Act of 1933
(the "Act") and was therefore exempt from registration under section 5(a) of the
Act. The options were issued to business affiliates of Golden Choice and no
public solicitation took place. The options held by Mr. Grandsaert are also
discussed elsewhere in this registration statement. In those contexts, they are
listed after having undergone a 2 for 1 forward split. Accordingly, they may
appear as having twice the number listed here and at one-half the exercise
price.
On January 12, 1998, Golden Choice sold 20,000 shares of Golden
Choice's common stock for cash at $1.00 per share, or $20,000. The transaction
was an isolated transaction with a person having a close affiliation with either
Golden Choice or with an officer of Golden Choice and was exempt from
registration under the Securities Act of 1933 (the "Act") pursuant to Section
4(2) of the Act because of not being part of a public offering.
On January 20, 1998, Golden Choice sold 66,000 shares of Golden
Choice's common stock for cash at $1.00 per share, or $66,000. The transaction
was an isolated transaction with a person having a close affiliation with either
Golden Choice or with an officer of Golden Choice and was exempt from
registration under the Securities Act of 1933 (the "Act") pursuant to Section
4(2) of the Act because of not being part of a public offering.
In May and June of 1998, Golden Choice sold 56,667 shares of Golden
Choice's common stock for cash at $1.50 per share for a total of $85,000. The
offering did not involve any public offering within the meaning of section 4(2)
of the Securities Act of 1933 (the "Act") and was therefore exempt from
registration under section 5(a) of the Act. The shares were sold to a total of 4
persons close to Golden Choice and/or its officers and directors, and no public
solicitation took place.
During the fiscal year beginning July 1, 1998, and ending June 30,
1999, Golden Choice sold 86,666 shares of Golden Choice's common stock for cash
at $1.50 per share for a total of $130,000. Golden Choice also issued 26,000
shares as commissions. The offering did not involve any public offering within
the meaning of section 4(2) of the Securities Act of 1933 (the "Act") and was
therefore exempt from registration under section 5(a) of the Act. The shares
were sold to a total of 8 persons close to Golden Choice and/or its officers and
directors, and no public solicitation took place.
In January 1999, Golden Choice issued 60,000 shares of common stock in
full payment of $30,000 of accounts payable. The issuance of stock did not
involve any public offering within the meaning of section 4(2) of the Securities
Act of 1933 (the "Act") and was therefore exempt from registration under section
5(a) of the Act. The shares were transferred to a business affiliate of Golden
Choice and no public solicitation took place.
In July 1999, Golden Choice issued 1,375,000 options, each for the
purchase of one share of common stock at the price of $1.50 per share. The board
of directors estimated that the value of the common shares of Golden Choice on
the date the options were issued was $1.50 per share. Accordingly, the options
had no value on the date of issue but were issued nevertheless in exchange for
services rendered by the recipients for Golden Choice. 250,000 of the options
were issued to Joseph R. Rodriquez, Jr. 250,000 of the options were issued to
Richard Damion. 675,000 of the options were issued to A.R. Grandsaert. 200,000
of the options were issued to Lance Hall. Mr. Rodriguez, Mr. Damion and Mr.
Grandsaert are officers and directors of Golden Choice. The issuance of the
options did not involve any public offering within the meaning of section 4(2)
of the Securities Act of 1933 (the "Act") and was therefore exempt from
registration under section 5(a) of the Act. The options were issued to business
affiliates of Golden Choice and no public solicitation took place. The options
held by the officers and directors are also discussed elsewhere in this
registration statement. In those contexts, they are listed after having
undergone a 2 for 1 forward split. Accordingly, they may appear as having twice
the number listed here and at one-half the exercise price.
During the fiscal year beginning July 1, 1999 and ending June 30, 2000,
Golden Choice issued 783,454 common shares. Of the shares issued, 690,383 were
issued for cash at a price of $1.50 per share and 93,071 were issued as
commissions for the sale of stock at a value of $1.50 per share. All stock was
issued in a series of transactions not involving any public offering within the
meaning of section 4(2) of the Securities Act of 1933 (the "Act") and was
therefore exempt from registration under section 5(a) of the Act. The shares
were issued to a total of 49 persons close to Golden Choice and/or its officers
and directors, and no public solicitation took place. Of the 783,454 common
shares issued, 666,383 of the shares were also issued pursuant to Rule 504
promulgated under Regulation D and therefore exempt from registration under
section 5(a) of the Act in that: o Golden Choice was not subject to the
reporting requirements of section 13 or 15(d) of the Securities and Exchange Act
of 1934; o Golden Choice was not an investment company; o Golden Choice was not
a development stage company that either had no specific business plan or purpose
or had indicated that its business plan was to engage in a merger or acquisition
with an unidentified company or companies, or other entity or person; o The
aggregate selling price for the Shares sold under Rule 504 did not exceed
$1,000,000, less the aggregate offering price for all securities sold within the
twelve months before the start of and during the offering, in reliance on any
exemption under the section 3(b) of the Act, or in violation of section 5(a) of
the Act.
49
<PAGE>
EXHIBITS
Copies of the following documents are filed with this Registration
Statement, Form SB-2, as exhibits:
Exhibit No. Title of Document Location
3.1 Articles of Incorporation (1)
3.2 By-Laws (1)
23 Consent of Experts & Counsel Page ___
27 Financial Data Schedule Page ___
(1) Previously filed as an exhibit to the Form SB-2 on July 18, 2000.
UNDERTAKINGS
Golden Choice will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) Include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as anew registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
If an underwriter is used in the offering, Golden Choice will provide
to the underwriter at the closing specified in the underwriting agreement
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
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In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Newport
Beach, State of California, on October 25, 2000.
Golden Choice Foods Corporation, a Nevada
corporation
By: /s/ Joseph R. Rodriguez, Jr.
--------------------------------------
CEO
In accordance with the requirements of the Securities Act of 1933, the
registration statement was signed by the following persons in the capacities and
on the dates stated.
/s/ Joseph R. Rodriguez, Jr. October 25, 2000
---------------------------
Principal Executive Officer,
Principal Financial Officer,
Principal Accounting Officer,
and Director
/s/ Richard Damion October 25, 2000
---------------------------
Vice President and Director
/s/ A. R. (Bud) Grandsaert, Jr. October 25, 2000
---------------------------
President and Director
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