SECURITES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 folling 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.
<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
<PAGE>
RISK FACTORS
Golden Choice's limited operating history increases the risk of loss to
pruchasers 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.
<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(c) 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 March 31, 2000, Golden Choice had a net book value of $161,684 or
$0.008 per share, based on 19,643,274 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 digitalpreviews.com other than being an investor.
Selling Security Holder Number of Shares Offered
----------------------- ------------------------
Paula Averyt 38,000
Paul Stevich 20,000
Robert Reeves 38,000
Jeffrey A. & Kim M. Haar 38,000
Edmond J. Harris 20,000
Ron Rau, Sally Schulte, Tori Lynch 20,000
Terry S. Brand 38,000
Metal Suppy Company 38,000
Ron Rau, Sally Schulte, Tori Lynch 10,000
Robert Reeves 38,000
Everett David Busk 38,000
Michael Pruitt 38,000
Calvin Byrd 19,000
Raymond Byrd 19,000
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George Veronis- IRA account 19,000
Paul Brunner 38,000
Jim Riley 27,000
Emanuel Selya 38,000
Joseph Cerni 38,000
Howard and Joy Brand 19,000
Merlin Corbin 38,000
Bob Rand 38,000
Scott Gill 38,000
Gareth Davies 19,000
Robert & Rebekha Tapie 21,800
Dale Davis 38,000
Lyle Trager 38,000
Bower Family Trust 76,000
David Duncan 29,500
Russell J. Singer Trustee 40,000
Robert Jr & Mary Jenkins 19,000
Richard Ableser revocable L trust 19,000
David H. Euzarraga 51,134
Dayle Reimer 20,000
Gary James Jason 20,000
Guy Edwards 38,000
Alan C. Sickman 19,000
Roger D. May 38,000
Susan N. Iguchi 38,000
Lesslie D. Manley 38,000
Ronald M. Greenburg 38,000
John & Marlene Javage 38,000
Michael P. Trcka 19,000
Fairwinds Investments, Lltd 38,332
Jeffrey J. Ross 42,668
David Euzarraga 37,144
Lance Hall 135,198
Jeff Ross 14,000
Guy Edwards 3,800
Charlie Radovich 5,332
Newport Capital Consultants, Inc. 600,000
The Search For Value 400,000
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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, or that we will sell any of the share we 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 the Company during the applicable
"cooling off" periods prior to the commencement of such distribution. IN
addition, and without limiting the foregoing, the selling Shareholders will be
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<PAGE>
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 incident to the offering and sale of the Shares, other than
commissions, discounts and fees of underwriters, dealers, or agents.
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 the
Company for each of the directors and officers of the Company.
<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 qualify.
The following information on the business experience of each director and
officer.
Richard Damion has been chairman of the Company 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 the Company 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 the Company 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 April 19, 2000, the number and
percentage of the outstanding shares of common stock which, according to the
information supplied to the Company, were beneficially owned by (i) each person
who is currently a director of the Company, (ii) each executive officer, (iii)
all current directors and executive officers of the Company as a group and (iv)
each person who, to the knowledge of the Company, 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) 3,158,566 15.15%
180 Newport Center Drive, Suite 180
Newport Beach, CA 92660
Joseph R. Rodriguez, Jr. (3) 4,590,000 22.02%
180 Newport Center Drive, Suite 180
Newport Beach, CA 92660
A. R. "Bud" Grandsaert, Jr. (4) 925,000 4.63%
180 Newport Center Drive, Suite 180
Newport Beach, CA 92660
David H. Euzarraga 1,400,000 7.13%
No. 2 Robin Hill Lane
Lagoona Hills, CA 92653
All Executive officers and
Directors as a Group (three) (5) 8,673,566 38.78%
</TABLE>
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(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, 1,958,566 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
The Company is authorized to issue 50,000,000 shares of common stock,
par value $0.001 per share, of which 19,643,274 shares are issued and
outstanding. Since March 31, 2000, the common shares of the Company underwent a
forward split on a 2 for 1 basis, which accounts for most of the increase in
common shares outstanding over that reported in the financial statements.
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. The Company's board of directors has
authority, without action by the Company's shareholders, to issue all or any
portion of the authorized but unissued shares of common stock, which would
reduce the percentage ownership of the Company by its present shareholders and
which might dilute the book value of outstanding shares.
Shareholders of the Company 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
the Company, 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 the Company then outstanding. The Shares
offered by the Company, 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. The Company 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 COMMSSION 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 innovative snack food
products. The purpose of Golden Choice is stated in its corporate mission
statement:
To become the preeminent manufacturer and marketer of innovative snack
food products; representing the "cutting edge" to both the consumer and
the snack food industry.
Golden Choice has engaged in product development for the past two and a
half years. The result of which has been the issuance of two U.S. Design
Patents. In November 1998 Golden Choice successfully introduced the first of
these patented products: "G.O.T. Fries TM" - A Crinkle-Cut French Fry Style
Snack into the marketplace. Also during this time, the Company has developed
significant associations with various national sales organizations which affords
the Company a national selling presence in the four major snack food segments:
Grocery, Mass Merchandise, Food Service, and Vending. "G.O.T. Fries TM" was
introduced in November 1998 in Vending and in February 1999 in Retail.
"AW-Shucks TM" - Corn off the Cob, will probably be introduced during the third
quarter of 2000.
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Golden Choice Foods is positioned for rapid growth. Additional new
products will be introduced in 2000 adding to continued expansion of the
Company. 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)
The Company 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". The Company currently has two brands, "G.O.T. Fries
TM", and "AW-Shucks TM" - Corn off the Cob. The Company has other potential
brands under development. The timing 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 the
Company, is a crinkle-cut French fry style snack. "G.O.T. Fries TM" is
the result of almost two years of research & development. Made from
potato and corn, extruded, and baked to a light crunchy texture, they
are a true low fat snack with 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 unique 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. 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.
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"AW-Shucks TM" - Corn off the Cob
"AW-Shucks TM", a corn based product, is the Company's third
major brand entry. It is presently expected to be introduced during the
fourth quarter of 2000. "AW-Shucks TM", also has been awarded a design
patent now. This unique 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
The Company has other products in development. Many of these are
regional while others have national potential. Almost all of these products
revolve around the Company'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 the Company has developed and
subsequently patented, Management believes it can formulate other product
opportunities that will be successful in the consumer market. The Company has
several unique 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. The Company 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 the Company manufactures all of its products through the
use of subcontractors called "Co-Packers". The Company 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. The Company
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 the Company. Strict adherence to quality control
standards is a must.
The Company currently co-packs its products in Illinois and Southern
California. It's co-packer in Illinois is Pate Foods located in South Beloit,
Illinois. Pate Foods is a significant snack food and bakery manufacturer in the
Midwest. Pate operates a snack facility and a bakery, of approximately one
hundred eighty thousand (180,000) square feet. Pate 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 the Company, with the ability to
expand.
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Pate Foods was chosen as the Company's first co-packer, primarily
because of its strategic location. A major cost element in the snack food
industry is the high cost of freight. However, the Company will begin
manufacturing on the West Coast within 30 days and on the East Coast within the
next six to nine months in order to further reduce shipping costs. To facilitate
this expansion, the Company will spend minimal capital resources. The Company
may purchase some extrusion equipment if it deems it to be in its best interest.
Distribution
As was mentioned above, freight is one of the Company'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.
Rather than assume the financial burden of a full time shipping
department, the Company contracted the services of a transportation services
agency, Meredoc Transportation Services (See Management Team). For a monthly
flat fee and a percentage of the actual cost of the shipment, Meredoc acts as
the shipping department for the Company and will coordinate all shipments from
future plant locations as well.
Business Strategy
The Company's three year objective is to reach over three million five
hundred thousand dollars ($3,500,000) in sales volume by December of 2000, over
twelve million six hundred thousand dollars ($12,600,000) by December of 2001,
and over twenty four million dollars ($24,000,000) by December 2002. Although
the projections may appear aggressive management feels that they actually are
conservative considering the size of the category and the potential for a new
innovative snack 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. 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 MIS Department (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 the Company, any operation that can be
subcontracted will be subcontracted. This gives the Company limited exposure to
labor costs and greater flexibility in carrying out its business plan. In all
operational areas, this provides the Company with complete services, from proven
11
<PAGE>
professionals, at reduced costs rather than increased staffing costs that are
not practical at this time, thereby protecting the Company's profit margin.
Of particular concern are the areas of (MF and (DP). These two
strategic areas are the most likely to impact the Company, 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,
requiring less capital for production expense.
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.
Included in this document is a brief resume under "STRATEGIC ALLIANCES"
of each "Associate" responsible for the above operations. At this time, each
"Associate" has the capacity to handle the expected rate of growth. As growth
increases, Management can expand as needed. The Company's ability to manufacture
and deliver its products on a timely basis is of critical importance to the
Company and its customers. These systems give the Company that capability.
In considering the importance of these strategies, Management has
selected an established and well-respected co-packer to manufacture its
products. This manufacturer has more than enough capacity to meet the Company's
needs, throughout the growth projection period, and is centrally located in the
greater metropolitan area of Chicago, Illinois. As sales increase, Management
will select other co-packers, strategically located in areas of concentrated
sales. This will reduce the cost of shipping, and will provide other advantages,
which will further reduce costs.
Sales Overview
The Company 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 the Company's growth to come primarily from Retail,
Vending and Food Service. In order to accomplish this, the Company has entered
into arrangements with two national sales organizations: ABNetwork (ABN) and
National Vend Brokers Association (NVBA). ABN is responsible for Retail and Mass
Merchandise and NVBA is responsible for Vending and Convenience stores.
Management also is finalizing a contract with a national organization for Food
Service. With these sales organizations in place, the Company has over ten
thousand (10,000) sales representatives working throughout the United States and
Canada. Through these sales organizations and Management's own contacts, it has
access to every major account that the Company would like to have as a customer.
By mid-July the Company will send product and sales kits to key members of each
of the selling networks, including selected regional and national distribution
outlets. Management will schedule presentations for major national accounts such
as Target, K-Mart, Subway stores, and others.
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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. The company is making
every effort to court the trade to insure distribution, promotion and placement
of "G.O.T. Fries TM". The Company 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", the company 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. The company 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
The company feels the most significant volume opportunity lies
with the Retail sector. Volume will be achieved through our recently
installed national sales network. We are pleased to announce that the
Company has contracted with ABNet, probably the most comprehensive and
professional, retail sales brokerage organization in the country. ABNet
members operate independently in their individual coverage areas
representing different principals but as an entity it can execute true
national coverage for a single brand. Their headquarters has a policy
of seeking out high potential brands to align themselves with - "G.O.T.
Fries TM" is one of two new brands selected by the group this year for
a national rollout. Though the Company is very pleased to be associated
with ABNet, it is clearly Management's intention to make as many
Headquarters calls as possible representing its own interest.
Vending
Vending represents a twofold opportunity for Golden Choice.
The first is the obvious sales potential of vending. The Industry is
twenty two billion dollars ($22,000,000,000) in sales with thousands of
operators managing millions of vending machines. The other side of this
opportunity is the exposure and sampling that this number of machines
represents. This becomes a form of advertising or introduction for the
retail package. We have initiated a contractual relationship with the
National Vend Brokers Association ( NVBA), the largest and most
professional vend sales organization in the country.
Institutional - 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. The Company has already met with senior management of
Sysco Corp., the Nation's largest food service provider, and has been
assured of several pilot programs. Also, a test has been promised in a
region of the largest sandwich chain in the USA. A broker network is
being assembled presently to address the two hundred billion dollar
($200,000,000,000) food service industry.
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.
Golden Choice Foods, using proven ingredients and original seasonings,
has developed totally new shapes and styles with unique production methods. This
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approach has resulted in the company's obtaining a rarely issued design patent
from the US Patent Office, for its "G.O.T. Fries TM". Therefore, there is no
specific brand, product, or group of products that currently competes or can
compete directly with "G.O.T. Fries TM". On the other hand, every product in the
snack aisle represents competition for the consumers' dollar. However, "G.O.T.
Fries TM" appeals to both French fry and potato chip consumers, giving it a huge
advantage in the snack aisle.
Employees
The Company's operations are conducted primarily through the use of
independent contractors. Independent contractors perform such duties as selling,
manufacturing, shipping and even in-house accounting. Because of this operating
structure, the Company has only three full time employees and no part time
employees.
Government regulations
As a developer and distributor of food products, the Company 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 the Company. It also stipulates the format and
content of specific information mandatory on food product labels.
In addition, the FDA enforces the Public Health Service Act, which
regulates conduct required in preventing the transmission or spread of
communicable diseases. The Company is also subject to state and local
regulation, through the licensing of manufacturing facilities. State and local
health agencies enforce standards for the Company's products; and inspects the
Company's facilities (see Manufacturing, Co-Packers); and regulate the Company's
trade practices.
To monitor product quality, the Company maintains quality control
programs during all stages of processing. Management believes that the Company'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, 1999 and June 30 1998 and for the unaudited financial statements
as of March 31, 2000 and for the three month and nine month periods ended March
31, 2000 and 1999.
The Company was formed in April 1996 in the state of Delaware and was
redomiciled in the state of Nevada on June 1, 2000. Golden Choice is engaged in
the wholesale distribution of snack food products. Sales of the Company's
snack-food products commenced in fiscal year 1997.
The Company's product for the past 21 months has consisted of its new
potato based snack-food called "G.O.T. FRIES"TM. These products are produced to
Company specifications by a third party food processor ("co-packer"). Individual
product bags and shipping boxes are designed by the Company and provided to the
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"co-packers". The Company currently produces in Chicago, Illinois, and San
Bernardino, California. In general, the "co-packer" produces and packs the
product while the Company maintains responsibility for shipping the products.
The Company is concentrating its efforts on the distribution of "G.O.T.
FRIES"TM through retail grocery chains, mass merchandisers, convenience stores
and food service outlets. The Company plans to introduce one or two new products
in fiscal year 1999.
Results of Operations for the Year Ended June 30, 1999.
Net Sales. Net sales for the year ended June 30, 1999 compared to the
year ended June 30, 1998 increased approximately 174% from $305,030 to $834,925.
During the year ending June 1998 the Company sold through limited distribution,
a Rice-snack product, while devoting most of its efforts in developing two new
products "G.O.T. FRIES"TM and "AW-SHUCKS"TM, both of which the Company was
successful in obtaining US Design Patents. As these new products neared
completion, the Company, for lack of surplus capital, discontinued the sales of
its Rice-snack in order to concentrate on building "G.O.T. FRIES"TM into a
national brand. The company plans to reintroduce the Rice-snack product after it
introduces "AW-SHUCKS"TM. The increase in sales can be attributed to the
restructuring of the Company's product mix in favor of "G.O.T. FRIES"TM and
redirecting its energies form research and development into product sales.
Cost of Sales. The Cost of Sales for the year ended June 30, 1999 were
$680,537 or approximately 82% of net sales, as compared to $269,756 or
approximately 88% of net sales for the year ended June 30, 1998. Net profit
margins were approximately 18% for the year ended June 30, 1999 and 12% of net
sales for the year ended June 30, 1998. The decrease in cost of sales is
primarily attributed to the decrease in obsolete and damaged inventory included
in cost of sales. It decreased from approximately $92,000 for year ended June
30, 1998 to approximately $68,000 for the year ended June 30, 1999.
Selling Expenses. Selling Expenses for the year ended June 30, 1999
compared to the year ended June 30, 1998 decrease from $309,904 to 180,090. This
decrease was the result of the Company paying $100,000 less in retail slotting
fees and a decrease is sales management salaries of $24,000. Selling expenses
for the year ending June 30, 1998 included package design expenses of $61,566,
advertising expenses of $14,255 and travel expenses of 4,800 that were directly
related to the sales of "G.O.T. FRIES"TM which commenced sales in year ending
June 30, 1999.
General and Administrative expenses. General and Administrative
expenses for the year ending June 30, 1999 increased to $206,381 from $200,955
for the year ending June 30, 1998. Although General and Administrative expenses
increased by approximately $5,876, they decreased as a percentage of sales from
approximately 66% to 24%.
Other Income. Other income for the year ending June 30, 1999 increased
to $17,792 from ($48) for the year ending June 30, 1998. This increase in Other
Income was the result of a settlement with a vendor.
Net Income (Loss). For the year ending June 30, 1999, the Company had
net loss of $215,091 or $0.03 per share as compared to a net loss of $476,433 or
$0.06 per share of the year ending June 30,1998. This decrease in the net loss
to the Company was a direct result of an increase in sales.
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Liquidity and Capital Resources. Since its inception, the Company 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. The
Company's principal sources of liquidity as of June 30, 1999 consisted of
approximately $4,265 in cash and cash equivalents and $122,624 in Accounts
Receivable.
Total assets increased from $109,965 as of the year ended June 30, 1998
to $378,171 for the year ended June 30, 1999. This increase of approximately
244% was due to an increase in Account Receivable of $109,204, an increase in
inventories of $146,037 and a decrease in cash of $25,045. Total liabilities
increased from $104,394 as of the year ended June 30, 1998 to $427,691 for the
year ended June 30, 1999. The increase in Accounts payable to $324,706 accounted
for most of the difference.
The Total Shareholders Equity decreased from $5,571 as of the year
ended June 30, 1998 to a deficit of $49,520 as of year ended June 30, 1999. This
decrease in shareholders equity was limited in part by the raising of additional
capital by the selling of common stock in the amount of $130,000.
Results of Operations for the nine-month periods ended March 31, 2000 and 1999.
Net Sales. Net sales for the nine-month period ending March 31, 2000
compared to the nine-month period ending March 31, 1999 increased approximately
59% from $553,221 to $934,216. This increase was the result of a continuing
expansion of the Company's customer base and because "G.O.T. FRIES"TM was only
in the market place since October 1998.
Cost of Sales. The Cost of Sales for the nine-month period ending March
31, 2000 were $704,033 or approximately 75% of net sales, as compared to
$432,401 or approximately 78% of net sales for the nine-month period ending
March 31, 1999. The percentage difference was the result of a larger amount of
damaged and spoiled product in the nine-month period ending March 31, 1999.
Selling Expenses. Selling expenses for the nine-month period ending
March 31, 2000 were $166,106 or approximately 18% of net sales, as compared to
$109,677 or approximately 20% of net sales for the nine-month period ending
March 31, 1999. This difference is reflected in the slightly less Slotting fees
that were paid, 4.4% verses 2.6%, for the nine-month periods ending March 31,
1999 and 2000.
General and Administrative expenses. General and Administrative
expenses for the nine-month period ending March 31, 2000 were $304,718 or
approximately 33% of net sales, as compared to $139,257 or approximately 25% of
net sales for the nine-month period ending March 31, 1999. This increase in
General and Administrative expenses was the result of the addition of officer
compensation during the nine-month period ending March 31, 2000.
Other Income (Expense). Other Income for the nine-month period ending
March 31, 2000, compared to the nine-month period ending March 31, 1999
decreased from $18,024 to ($7,646). This is mainley due to two factors. First,
vendor refunds decreased and second, interest expense increased for short term
borrowing by the Company from $1,593 for the period ending March 31, 1999 to
$7,583 for the period ending March 31, 2000.
Net Income (Loss). For the nine-month period ending March 31, 2000, the
Company had a net loss of $249,125 or $0.03 per share as compared to a net loss
of $110,090 or $0.01 per share for the nine-month period ending March 31, 19998.
The loss increased from 20% of net sales for the nine-month period ending March
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31, 1999, to 27% of net sales for the nine-month period ending March 31, 2000.
This increase was due in part to the company initiating salaries for officers,
and was mitigated with the volume of sales approaching a break-even figure.
Results of Operations for the three-month periods ended March 31, 2000 and 1999.
Net Sales. Net sales for the three-month period ending March 31, 2000,
compared to the three-month period ending March 31, 1999 increased approximately
19% from $338,590 to $404,167. This increase in net sales resulted from the
continued expansion of the Company's customer base and because of the
introduction of "GOT FRIES"TM in different bag sizes.
Cost of Sales. The Cost of Sales for the three-month period ending
March 31, 2000 were $300,717 or approximately 74% of net sales, as compared to
$257,375 or approximately 76% of net sales for the three-month period ending
December 31, 1999. The percentage difference was the result of a significant
amount of damaged and spoiled product in the three-month period ending March 31,
1999.
Selling Expenses. Selling expenses for the three-month period ending
March 31, 2000, were $53,640 or approximately 13% of net sales, as compared to
$58,096 or approximately 17% of net sales for the three-month period ending
March 31, 1999. This decrease is due to the fact that slotting fees were
significantly lower in the three-month period ending March 31, 2000.
General and Administrative expenses. General and Administrative
expenses for the three-month period ending March 31, 2000, were $111,839 or
approximately 28% of net sales, as compared to $72,909 or approximately 22% of
net sales for the three-month period ending March 31, 1999. This increase in
General and Administrative expenses was the result of the addition of officer
compensation during the three-month period ending March 31, 2000.
Other Income (Expense). Other Income for the three-month period ending
March 31, 2000, compared to the three-month period ending March 31, 1999,
decreased from $18,479 to ($4,340). This is due to a decrease in vendor refunds
and an increase interest expense for short term borrowing by the Company.
Net Income (Loss). For the three-month period ending March 31, 2000,
the Company had a net loss of $67,207 or $0.01 per share as compared to a net
loss of $31,311 or $0.00 per share for the three-month period ending March 31,
1999. The loss increased from 9% of net sales for the three-month period ending
March 31, 1999, to 17% of net sales for the three-month period ending March 31,
2000. This increase was due in part to the company initiating salaries for
officers, and was mitigated with the volume of sales approaching a break-even
figure
Liquidity and Capital Resources. Since its inception, the Company 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. The
Company's principal sources of liquidity as of March 31, 2000, consisted of
approximately $33,562 in cash and cash equivalents and $216,242 in Trade
accounts receivable, net.
Total assets increased from $393,105 as of the period ended March 31,
1999, to $510,938 for the period ended March 31, 2000. This increase was due
primarily to an increase in inventory from $97,564 to $229,869. Total
liabilities decreased from $366,654 as of the period ended March 31, 1999, to
$344,958 for the period ended March 31, 2000. The decrease was attributable to a
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<PAGE>
decrease in accounts payable from $287,705 to $272,750, an increase in accrued
expenses from $30,151 to $72,208, and the repayment of a note which amounted to
$48,797 at March 31, 1999.
The Total Shareholders Equity increased from $26,452 as of the period
ended March 31, 1999, to $165,980 as of the period ended March 31, 2000. For the
nine-month period ended March 31, 2000, the Company sold common shares of stock
for $464,625.
Material events and uncertainties. The Company anticipates that it will
continue to operate on a negative cash flow basis for the next 18 months. This
will require the Company to continue to raise additional capital, factor
accounts receivable or obtain additional debt financing. Additionally, the
Company must be able to continue to develop expanded markets and consumer
acceptance of it's products.
Forward Looking Statements. Certain of the statements contained in this
document involve risks and uncertainties. The future results of the Company
could differ materially from those statements. Factors that could cause or
contribute to such differences include, but are not limited to those discussed
in this document.
While the Company believes that these statements are accurate, the
Company's business is dependent upon general economic conditions and various
conditions specific to the food industry. Accordingly, future trends and results
cannot be predicted with certainty.
PROPERTIES
Third party contractors produce and ship the products of the Company.
Accordingly, the only facilities utilized by the Company are 500 square feet of
office space located at 180 Newport Center Drive, Suite 180, Newport Beach,
California. The Company occupies the space pursuant to a lease agreement in
which the lease is renewed annually. The Company believes that if it should ever
lose the lease, it would not be difficult to obtain a comparable and
satisfactory office location.
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. The Company has agreed to register
2,638,908 common shares is not planning a registered offering at the present
time.
Since its inception, no dividends have been paid on the Company's
common stock. The Company 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 the Company's Common Stock.
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Executive Compensation
The Company's agreement with its three officers is that each shall
receive a salary of $10,000.00 per month with the reservation that salary will
neither be paid nor accrue until such time as the Company is proftable. However,
in 1999, the Company did pay Mr. Damion and Mr. Grandsaert a total of $15,000.00
each.
The officers have been granted options to purchase common shares of
stock in the Company. Mr. Damion and Mr. Rodriguez have each received options to
purchase 1,500,000 common shares for $0.25 per share and 500,000 common shares
for $.75 per share. Mr. Grandsaert has received options to purchase 650,000
common shares for $0.25 per share and 1,350,000 common shares for $.75 per
share.
FINANCIAL STATEMENTS
Golden Choice Foods Corporation
Financial Statements
(Unaudited)
As of March 31, 2000 and
For the Three Month and Nine Month Periods Ended March 31, 2000 and 1999
20
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Golden Choice Foods Corporation
Index to the Financial Statements
(Unaudited)
As of March 31, 2000 and
For the Three Month and Nine Month Periods Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
<S> <C>
Financial Statements of Golden Choice Foods (Unaudited):
Balance Sheet, March 31, 2000 22
Statements of Operations For the Three Month and Nine
Month Periods Ended March 31, 2000 and 1999 24
Statement of Shareholders' Deficit For the Nine Month
Period Ended March 31, 2000 25
Statement of Cash Flows For the Nine Month Periods
Ended March 31, 2000 and 1999 26
Notes to the Financial Statements (Unaudited) 28
</TABLE>
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Golden Choice Foods Corporation
Balance Sheet
(Unaudited)
March 31, 2000
--------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and equivalents $ 33,562
Trade accounts receivable, net 216,242
Inventories 229,869
Prepaid expenses 2,297
------------
Total current assets 481,970
Notes receivable from officer 10,442
Property and equipment, net 1,951
Intangible assets, net 4,296
Other assets 12,279
------------
Total assets $ 510,938
============
The accompanying notes are an integral part of the financial statements.
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Golden Choice Foods Corporation
Balance Sheet
(Unaudited)
March 31, 2000
--------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 258,244
Accounts payable, related party 14,506
Accrued payroll 45,169
Other accrued expenses 27,039
------------
Total liabilities 344,958
Commitments and contingencies
Shareholders' deficit:
Common stock; $0.001 par value; 10,000,000
shares authorized; 8,905,432 shares
issued and outstanding at March 31, 2000. 8,905
Additional paid-in capital 1,632,713
Accumulated deficit (1,474,663)
Amount receivable from officer on common stock (975)
------------
Total shareholders' equity 165,980
Total liabilities and shareholders' deficit $ 510,938
============
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
Golden Choice Foods Corporation
Statements of Operations
(Unaudited)
For the Three Month and the Nine Month Periods Ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Three Month For the Nine Month
Periods Ended March 31, Periods Ended March 31,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net sales $ 404,167 $ 338,590 $ 934,216 $ 553,221
Cost of sales 300,717 257,375 704,033 432,401
---------- ----------- ---------- -----------
Gross profit 103,450 81,215 230,183 120,820
Selling expenses 53,640 58,096 166,106 109,677
General and administrative expenses 111,839 72,909 304,718 139,257
---------- ----------- ---------- -----------
Loss from operations (62,029) (49,790) (240,641) (128,114)
---------- ----------- ---------- -----------
Other income (expense):
Other Income (expense) (798) 18,787 (799) 18,787
Interest expense (3,901) (597) (7,583) (1,593)
Interest income 359 289 736 830
---------- ----------- ---------- -----------
(4,340) 18,479 (7,646) 18,024
---------- ----------- ---------- -----------
Loss before provision for income taxes (66,369) (31,311) (248,287) (110,090)
Provision for income taxes (838) - (838) -
---------- ----------- ---------- -----------
Net loss $ (67,207) $ (31,311) $ (249,125) $ (110,090)
========== =========== ========== ===========
Net loss per share, basic and diluted (0.01) - $ (0.03) $ (0.01)
========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
Golden Choice Foods Corporation
Statement of Shareholders' Deficit
(Unaudited)
For the Nine Month Period Ended March 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional Amount Receivable Total
Common Common Paid-in From Officer on Accumulated Shareholder's
shares stock capital Common Stock Deficit Deficit
--------- -------- ---------- ----------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1999 8,528,183 $ 8,529 $ 1,168,463 $ (975) $(1,225,538) $ (49,521)
Common shares issued pursuant
to a private placement offering 342,499 342 464,284 - - 464,626
Common shares issued as commission 34,750 34 (34) - - -
Net loss - - - - (249,125) (249,125)
---------- -------- ----------- ---------- ----------- ----------
Balance, March 31, 2000 8,905,432 $ 8,905 $ 1,632,713 $ (975) $(1,474,663) $ 165,980
========== ======== =========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
Golden Choice Foods Corporation
Statement of Cash Flows
(Unaudited)
For the Nine Month Periods Ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Nine Month
Periods Ended March 31,
2000 1999
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (249,125) (110,090)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 1,442 5,635
Amortization 1,032 1,086
Provision for losses on trade accounts receivable 8,000 -
Decrease (increase) in assets:
Trade accounts receivable (101,609) (191,836)
Inventories (61,567) (75,298)
Prepaid expenses 26,511 (2,103)
Other assets 13,756 (591)
Increase (decrease) in liabilities:
Accounts payable (66,462) 250,184
Accounts payable, related party (7,859) (14,734)
Other current liabilities 38,798 7,242
----------- ---------
Net cash used in operating activities (397,083) (130,505)
----------- ---------
Cash flows provided by (used in) investing activities:
Acquisition of intangible assets - (1,908)
Purchases of property and equipment (656) (1,197)
(Increase) decrease of notes receivable from an officer 9,446 (2,780)
----------- ---------
Net cash provided by (used in) investing activities 8,790 (5,885)
----------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
Golden Choice Foods Corporation
Statement of Cash Flows
(Unaudited)
For the Nine Month Periods Ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Nine Month
Periods Ended March 31,
2000 1999
---- ----
<S> <C> <C>
Cash flows provided by financing activities:
Payment on a note payable to officers $ (32,000) 32,000
Proceeds from issuance of notes payable to others (15,000) (7,000)
Proceeds from the issuance of common stock 464,590 130,000
----------- ---------
Cash provided by financing activities 417,590 155,000
----------- ---------
Net increase (decrease) in cash 29,297 18,610
Cash and equivalents at beginning of year 4,265 29,310
----------- ---------
Cash and equivalents at end of year $ 33,562 47,920
=========== =========
Supplemental Disclosures of Cash Flow Information
Interest paid 8,020 -
Income taxes paid 838 -
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
(Unaudited)
As of March 31, 2000 and
For the Three Month and Nine Month Periods Ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
1. Basis of Presentation
---------------------
In the opinion of the Golden Choice Foods Corporation (the "Company"), the
accompanying unaudited condensed financial statements contain all
adjustments, consisting of only normal recurring adjustments, except as
noted elsewhere in the notes to the condensed financial statements,
necessary to present fairly its financial position as of March 31, 2000,
the results of its operations for the three month and nine month periods
ended March 31, 2000 and 1999, the related statement of shareholders'
deficit for the nine month period ended March 31, 2000 and the related
statements of cash flows for the nine month periods ended March 31, 2000
and 1999. These statements are condensed and therefore do not include all
of the information and footnotes required by generally accepted accounting
principals for complete financial statements. The statements should be
read in conjunction with the financial statements and footnotes included
elsewhere in Golden Choice's financial statements for the year ended June
30, 1999. The results of operations for the nine months ended March 31,
2000 are not necessarily indicative of the results to be expected for the
full year.
2. Description of the Company's Business
-------------------------------------
The Company was formed in April 1996 in Delaware and is engaged in the
purchase and wholesale distribution of snack food products. Sales of the
Company's snack food products commenced in fiscal year 1997.
The Company's product for the past 21 months has consisted of its new
potato-based snack food called "G.O.T. Fries". This product is produced to
Company specifications by third party food processors ("co-packers").
Individual product bags and shipping boxes are designed by the Company and
provided to the co-packers. The Company's co-packers currently produce the
products in Chicago, Illinois and will soon be packing in Southern
California. In general, the co-packers produces and packs the product,
while the Company maintains responsibility for shipping the products.
The Company is concentrating its efforts on the distribution of "G.O.T.
Fries" through retail grocery chains, mass merchandisers, convenience
stores and food service outlets. The Company plans to introduce one or two
new products in the fiscal year ended June 30, 2000.
28
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
(Unaudited)
As of March 31, 2000 and
For the Three Month and Nine Month Periods Ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
3. Notes Payable
-------------
During the first quarter of the fiscal year ended June 30, 2000, the
Company obtained an amendment to the terms of a note payable. The original
maturity date of October 7, 1999 was extended until June 30, 2000, with
the remaining principal of $8,500 and accrued interest due and payable on
that date. This note was paid in full in the third quarter of the fiscal
year ended June 30, 2000.
During the second quarter of the fiscal year ended June 30, 2000, the
Company received proceeds of $90,000 from the issuance of three separate
notes payable. The notes bear interest at rates ranging from 13% to 73%,
with principal and interest due at maturity, these notes were paid in full
in the third quarter of the fiscal year ended June 30, 2000.
4. Deferred Income Taxes
---------------------
The components of the provision for income taxes are as follows:
For the Nine Month
Periods Ended March 31,
2000 1999
---- -----
Current tax expense:
Federal $ 800 $ 800
State - -
------ ------
800 800
------ ------
Deferred tax expense:
Federal - -
State - -
------ ------
- -
------ ------
Total provision 800 800
====== ======
29
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
(Unaudited)
As of March 31, 2000 and
For the Three Month and Nine Month Periods Ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
4. Deferred Income Taxes, Continued
--------------------------------
Significant components of the Company's deferred income tax assets and
liabilities at March 31, 2000 and 1999 are as follows:
For the Nine Month
Periods Ended March 31,
2000 1999
---- ----
Deferred income tax assets:
Net operating loss carryforward $ 620,165 $ 477,842
Allowance for doubtful accounts 7,353 857
Depreciation 485 485
Other 272 272
---------- -----------
Total deferred income tax asset 628,275 479,456
Valuation allowance (628,275) (479,456)
---------- -----------
Net deferred income tax asset - -
========== ===========
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:
For the Nine Month
Periods Ended March 31,
2000 1999
---- ----
Tax expense at U.S. statutory rate (34.0)% (34.0)%
State tax provision 0.3 0.7
Other 0.4 0.7
Change in valuation allowance 33.6 33.3
------- ------
Effective income tax rate 0.3 % 0.7%
======= ======
30
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
(Unaudited)
As of March 31, 2000 and
For the Three Month and Nine Month Periods Ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
4. Deferred Income Taxes, Continued
--------------------------------
The Company also has Federal and state net operating loss carryforwards of
$1,448,290 and $1,445,090 respectively. The Federal and state net
operating loss carryforwards will begin to expire in the years 2018 and
2003, respectively.
5. Contingencies
-------------
Lack of Insurance Coverage
The Company has operated from its inception in 1996 without the benefit of
general and products liability insurance coverage. 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.
6. Loss Per Share
--------------
Basic and diluted loss per common share have 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:
For the Nine Month
Periods Ended March 31,
2000 1999
---- ----
Basic loss per common share:
Net loss $ (67,207) $ (31,311)
Weighted-average shares
basic and diluted 8,827,088 8,482,406
------------- ------------
Basic and diluted loss per
common share $ (0.01) $ -
============= ============
31
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
(Unaudited)
As of March 31, 2000 and
For the Three Month and Nine Month Periods Ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
6. Loss Per Share, Continued
-------------------------
For the Nine Month
Periods Ended March 31,
2000 1999
---- ----
Basic loss per common share:
Net loss $ (249,125) $ (110,090)
Weighted-average shares
basic and diluted 8,715,100 8,426,702
------------- ------------
Basic and diluted loss per
common share $ (0.03) $ (0.01)
============= ============
The effect of the potentially dilutive securities listed below were not
included in the computation of diluted loss per share, because to do so
would have been antidilutive for the periods presented.
For the Three Month
Periods Ended March 31,
2000 1999
---- ----
Shares of common stock issuable under:
Employee stock options 1,825,000 1,825,000
Nonemployee stock options 50,000 50,000
For the Three Month
Periods Ended March 31,
2000 1999
---- ----
Shares of common stock issuable under:
Employee stock options 1,825,000 1,825,000
Nonemployee stock options 50,000 50,000
32
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
(Unaudited)
As of March 31, 2000 and
For the Three Month and Nine Month Periods Ended March 31, 2000 and 1999
--------------------------------------------------------------------------------
7. Common Stock
------------
Private Placement Offering
During the first three quarters of the fiscal year ended June 30, 2000,
the Company sold common stock pursuant to a private placement offering
(which began in June 1998). Accordingly, the Company issued 342,499 shares
of common stock at $1.50 per share with net proceeds totaling $464,626. In
connection with the private placement offering, the Company issued 34,756
shares of common stock as a finder's fee.
33
<PAGE>
Golden Choice Foods Corporation
Financial Statements
As of June 30, 1999 and 1998 and for
Each of the Two Years in the Period Ended June 30, 1999
34
<PAGE>
Golden Choice Foods Corporation
Index to the Financial Statements
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Auditors 1
Financial Statements of Golden Choice Foods:
Balance Sheets, June 30, 1999 and 1998 2
Statements of Operations For Each of the Two Years in
the Period Ended June 30, 1999 4
Statements of Shareholders' Equity For Each of the Two
Years in the Period Ended June 30, 1999 5
Statements of Cash Flows For Each of the Two Years in
the Period Ended June 30, 1999 6
Notes to the Financial Statements 8
</TABLE>
35
<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, 1999 and 1998 and the related statements of
operations, shareholders' equity and cash flows for each of the two years in the
period ended June 30, 1999. 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, 1999 and 1998, and the results of its operations and its cash
flows for each of the two years in the period ended June 30, 1999, in conformity
with generally accepted accounting principles.
/s/ Kelly & Company
Kelly & Company
Newport Beach, California
October 11, 1999
36
<PAGE>
Golden Choice Foods Corporation
Balance Sheets
June 30, 1999 and 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
1999 1998
---- ----
<S> <C> <C>
Current assets:
Cash and equivalents $ 4,265 $ 29,310
Trade accounts receivable, net 122,624 13,420
Inventories 168,303 22,266
Prepaid expenses 28,808 1,600
------------- -------------
Total current assets 324,000 66,596
Notes receivable from officer 19,888 18,060
Property and equipment, net 2,737 9,131
Intangible assets, net 5,511 4,621
Other assets 26,035 11,557
------------- -------------
Total assets $ 378,171 $ 109,965
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Golden Choice Foods Corporation
Balance Sheets
June 30, 1999 and 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
1999 1998
---- ----
<S> <C> <C>
Current liabilities:
Accounts payable $ 324,706 $ 37,616
Accounts payable, related party 22,365 30,927
Note payable, related party-current portion 37,000 22,000
Other current liabilities 33,620 13,851
------------ --------------
Total current liabilities 417,691 104,394
Notes payable, related party-long term portion 10,000 -
------------ --------------
Total liabilities 427,691 104,394
------------ --------------
Commitments and contingencies
Shareholders' equity (deficit):
Common stock; $0.001 par value; 10,000,000 shares
authorized; 8,528,183 and 8,385,517 shares issued and
outstanding at June 30, 1999 and 1998, respectively. 8,529 8,386
Additional paid-in capital 1,168,464 1,008,607
Accumulated deficit (1,225,538) (1,010,447)
Amount receivable from officer on common stock (975) (975)
------------ --------------
Total shareholders' equity (deficit) (49,520) 5,571
------------ --------------
Total liabilities and shareholders' equity $ 378,171 $ 109,965
============ ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE>
Golden Choice Foods Corporation
Statements of Operations
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- -----
<S> <C> <C>
Net sales $ 834,925 $ 305,030
Cost of sales 680,537 269,756
------------ -------------
Gross profit 154,388 35,274
Selling expenses 180,090 309,904
General and administrative expenses 206,381 200,955
------------ --------------
Loss from operations (232,083) (475,585)
------------ --------------
Other income (expense):
Interest expense (2,204) (2,154)
Interest income 1,120 1,286
Other income 18,876 820
------------ --------------
17,792 (48)
------------ --------------
Loss before provision for income taxes (214,291) (475,633)
Provision for income taxes 800 800
------------ --------------
Net loss $ (215,091) $ (476,433)
============ ==============
Net loss per share, basic and diluted $ (0.03) $ (0.06)
============ ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
39
<PAGE>
Golden Choice Foods Corporation
Statements of Shareholders' Equity
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
<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, 1997 7,906,250 $ 7,906 $ 671,087 $ (975) $ (534,014) $ 144,004
Common shares issued in payment
of debt 120,000 120 59,880 - - 60,000
Common shares issued in second
private placement offering,
net of offering costs 208,000 208 106,792 - - 107,000
Common shares issued in third
private placement offering 56,667 57 84,943 - - 85,000
Common shares issued to private
investors 94,600 95 85,905 - - 86,000
Net loss - - - - (476,433) (476,433)
--------- -------- ----------- ------- ----------- ----------
Balance, June 30, 1998 8,385,517 8,386 1,008,607 (975) (1,010,447) 5,571
Common shares issued pursuant
to a private placement offering 86,666 87 129,913 - - 130,000
Common shares issued in payment
of debt 30,000 30 29,970 - - 30,000
Common shares issued as commission 26,000 26 (26) - - -
Net loss - - - - (215,091) (215,091)
--------- -------- ----------- ------- ----------- ----------
Balance, June 30, 1999 8,528,183 $ 8,529 $ 1,168,464 $ (975) $(1,225,538) $ (49,520)
========= ======== =========== ======= =========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE>
Golden Choice Foods Corporation
Statements of Cash Flows
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (215,091) $ (476,433)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation 7,590 6,579
Amortization 1,366 -
Provision for losses on trade accounts receivable 7,165 -
Obsolescence write down of inventory - 57,324
Decrease (increase) in assets:
Trade accounts receivable (116,368) 92,972
Inventories (146,037) (12,019)
Prepaid expenses (27,208) (1,600)
Other assets (16,324) (6,396)
Increase (decrease) in liabilities:
Accounts payable 287,091 (46,616)
Accounts payable, related party (8,562) 14,743
Other current liabilities 19,772 13,376
----------- -----------
Net cash used in operating activities (206,606) (358,070)
----------- -----------
Cash flows used in investing activities
Acquisition of intangible assets (1,415) (3,961)
Purchases of property and equipment (1,197) (2,445)
Increase of notes receivable from an officer (828) (800)
----------- -----------
Net cash used in investing activities (3,440) (7,206)
----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
41
<PAGE>
Golden Choice Foods Corporation
Statements of Cash Flows
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
Cash flows provided by financing activities:
<S> <C> <C>
Proceeds from issuance of a note payable to officers - $ 22,000
Proceeds from issuance of notes payable to others $ 25,000 -
Proceeds from the issuance of common stock 160,000 278,000
---------- -----------
Cash provided by financing activities 185,000 300,000
---------- -----------
Net decrease in cash (25,046) (65,276)
Cash and equivalents at beginning of year 29,310 94,586
---------- -----------
Cash and equivalents at end of year $ 4,264 $ 29,310
========== ===========
Supplemental Disclosures of Cash Flow Information
Interest paid - -
Income taxes paid - $ 2,400
Supplemental Schedule of Non-Cash Investing and Financing Activities
Satisfaction of debt through issuance of common stock:
Liabilities satisfied $ 30,000 $ 60,000
Shares issued $ 30,000 $ 60,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
1. Description of the Company's Business
-------------------------------------
Golden Choice Foods Corporation (the "Company") was formed in April 1996
in Delaware and is engaged in the purchase and wholesale distribution of
snack food products. Sales of the Company's snack food products commenced
in fiscal year 1997.
The Company's products in the year ended June 30, 1998 consisted of
various flavored rice-based snack foods. 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 a third
party food processor ("co-packer"). Individual product bags and shipping
boxes are designed by the Company and provided to the co-packer located in
Chicago, Illinois to package product orders. In general, the co-packer
produces, packs, and ships the finished products directly to the
customers.
During the year ended June 30, 1999, the Company decided to concentrate
its efforts on the distribution of "G.O.T. Fries" through mass market
retailers. In connection with this change in distribution, the Company
also decided to terminate the marketing of the rice product.
2. Financial Results and Liquidity
-------------------------------
The Company has incurred net losses of $215,091 and $476,433 in fiscal
years 1999 and 1998, respectively, and at June 30, 1999 has an accumulated
deficit of $1,225,538. Despite its negative cash flows from operations of
$206,606 and $358,070 in fiscal years 1999 and 1998, respectively, the
Company has been able to secure 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 its products is strong and will enhance its
ability to generate additional revenues from the sale of the Company's
products.
3. Summary of Significant Accounting Policies
------------------------------------------
Revenue Recognition
Revenues are recognized when the products are shipped.
43
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
3. Summary of Significant Accounting Policies, Continued
-----------------------------------------------------
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 did not
have cash balances that exceeded the federally insured limits at June 30,
1999 and 1998.
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. 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.
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 estimated useful lives of the
assets. Accumulated amortization was $1,366 at June 30,1999. The costs of
obtaining patents and trademarks are recorded as deferred costs until the
patent or trademark is granted.
44
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
3. Summary of Significant Accounting Policies, Continued
-----------------------------------------------------
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, 1999 and 1998.
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 and nonemployee compensation plans.
The Company accounts for stock-based employee compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees as permitted by SFAS No.
123. Compensation cost for stock options, if any, is measured as the
excess 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. Compensation
cost is recorded over the requisite vesting periods based on the market
value on the date of grant.
Earnings 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.
Earnings per common share have been calculated in accordance with the
requirements of this statement for the years ended June 30, 1999 and 1998,
respectively.
45
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
3. Summary of Significant Accounting Policies, Continued
-----------------------------------------------------
Advertising Costs
Advertising costs are expensed when they are incurred. Advertising expense
was $31,891 and $45,463 for the years ended June 30, 1999 and 1998,
respectively.
4. Trade Accounts Receivable
-------------------------
During the year ended June 30, 1999 and 1998, the Company maintained an
allowance for doubtful accounts of $9,165 and $2,000 and recognized bad
debt expense of $7,165 and $30,703, respectively. Collection on accounts
previously written off are included in income as they are received.
5. Inventories
-----------
Inventories consisted of the following:
<TABLE>
<CAPTION>
For the Years Ended
June 30, 1999 and 1998
-----------------------------
<S> <C> <C>
Raw materials $ 137,276 $ 14,040
Finished goods 31,027 8,226
------------ ------------
Total inventories $ 168,303 $ 22,266
============ ============
</TABLE>
6. Notes Receivable from Officers
------------------------------
Notes receivable from officers consisted of the following:
<TABLE>
<CAPTION>
For the Years Ended
June 30, 1999 and 1998
-----------------------------
<S> <C> <C>
Uncollateralized notes receivable from officers
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. $ 19,888 $ 18,060
----------- ------------
Total notes receivable from officers $ 19,888 $ 18,060
============ ============
</TABLE>
46
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
7. Property and Equipment
----------------------
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
For the Years Ended
June 30, 1999 and 1998
-----------------------------
<S> <C> <C>
Computer equipment $ 21,747 $ 20,550
Furniture and fixtures 1,724 1,724
------------ ------------
23,471 22,274
Less: accumulated depreciation (20,734) (13,143)
------------ ------------
Total property and equipment $ 2,737 $ 9,131
=========== ============
</TABLE>
Depreciation expense for the years ended June 30, 1999 and 1998 was $7,591
and $6,579, respectively.
8. Notes Payable
-------------
Note payable to related parties consisted of:
<TABLE>
<CAPTION>
For the Years Ended
June 30, 1999 and 1998
<S> <C> <C>
Notes payable with interest at 5% per annum,
principal and interest due at maturity,
which ranges form June 2000 to September 2004.
The notes are payable to a shareholder, and
two entities which are owned by two officers
of the Company. $ 47,000 $ 22,000
----------- ------------
Less: Current portion (37,000) (22,000)
------------ ------------
Long term portion of notes payable $ 10,000 $ -
=========== ============
</TABLE>
Interest expense during the years ended June 30, 1999 and 1998 was $2,204
and $2,154, respectively.
47
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
9. Deferred Income Taxes
---------------------
The components of the provision for income taxes are as follows:
For the Years Ended
June 30, 1999 and 1998
----------------------
Current tax expense:
Federal $ - $ -
State 800 800
------ ------
800 800
------ ------
Deferred tax expense:
Federal - -
State - -
------ ------
- -
------ ------
Total provision 800 800
====== ======
Significant components of the Company's deferred income tax assets and
liabilities at June 30, 1999 and 1998 are as follows:
For the Years Ended
June 30, 1999 and 1998
----------------------
Deferred income tax assets:
Net operating loss carryforward $ 517,533 $ 435,021
Allowance for doubtful accounts 3,926 866
Depreciation 485 490
Other 272 272
---------- ---------
Total deferred income tax asset 522,216 436,649
Valuation allowance (522,216) (436,649)
---------- ----------
Net deferred income tax asset - -
========== ==========
48
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
9. Deferred Income Taxes, Continued
--------------------------------
Reconciliation of the effective tax rate to the U.S. statutory rate is as
follows:
For the Years Ended
June 30, 1999 and 1998
Tax expense at U.S. statutory rate 34.0% (34.0)%
State tax provision 0.3 0.1
Other 0.1 0.1
Change in valuation allowance (34.0) 34.0
----- -----
Effective income tax rate 0.4% 0.2%
===== =====
The Company also has Federal and state net operating loss carryforwards of
$1,208,556 and $1,206,156, respectively. The Federal and state net
operating loss carryforwards will begin to expire in the years 2018 and
2003, respectively.
10. Commitments
-----------
The Company has an operating lease for its corporate office that expires
December 31, 1999. Future minimum lease payments are $4,656 for the fiscal
year ended June 30, 2000.
Rental expense, resulting from the operating lease agreement, was $8,942
and $7,912 during the years ended June 30, 1999 and 1998, respectively.
In 1997, the Company entered into an agreement with its co-packer to
jointly purchase a piece of manufacturing equipment for production of the
Company's products. Under the agreement, the co-packer assumes full title
to the manufacturing equipment from the date of delivery. The net cost of
the manufacturing equipment was $64,000. A down payment of $12,800 was
paid by the Company, and the remaining $51,200 was paid by the co-packer.
The Company's down payment was repaid by the co-packer by issuing a $.25
per case credit on Company product produced. At June 30, 1999 the entire
down payment had been repaid by the co-packer. To satisfy the co-packers
commitment of $51,200, the Company agreed to provide minimum purchase
orders totaling 16,950 cases per month. If this minimum purchase is not
met, a $.10 per case charge for the difference to cases actually produced
and the minimum required is invoiced to the Company at the end of each
month. The commitment is satisfied once the $.10 per case charges total
$51,200. At June 30, 1999, the balance of the commitment remaining was
$28,000.
49
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
11. Contingencies and Concentrations
--------------------------------
Lack of Insurance Coverage
The Company has operated from its inception in 1996 without the benefit of
general and products liability insurance coverage. 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. No single customer
accounted for more than 10% of revenues for the years ended June 30, 1999
and 1998.
Concentration of Product Co-Packers
The Company contracts with a single co-packer to produce its products. Any
interruption from this production source could adversely affect the
Company's ability to supply customers and correspondingly its operating
results.
12. Stock-Based Compensation
------------------------
On January 2, 1997, the Company granted options to its three officers and
a vendor to purchase a total of 1,875,000 shares of its common stock at an
exercise price of $ .50 per share. The exercise price is equal to the
estimated fair market value of the stock at the date of grant. These
options vest as follows and expire ten to sixteen years after the date
they become vested.
50
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
12. Stock-Based Compensation, Continued
-----------------------------------
Options
on Shares
Of Common
Vesting Date Stock
------------ ---------
January 1, 1998 300,000
June 1, 1998 300,000
January 1, 1999 106,250
June 1, 1999 300,000
January 1, 2000 106,250
June 1, 2000 300,000
January 1, 2001 81,250
June 1, 2001 300,000
January 1, 2002 81,250
The following summarizes information about stock options granted and
outstanding at June 30, 1999 and 1998, and changes during the years then
ended:
<TABLE>
<CAPTION>
For the Years Ended June 30
1999 1998
----------------------------------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------ -------- ------ --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 1,875,000 $ 0.50 1,875,000 $ 0.50
Granted - - - -
------------------- -------------------
Outstanding at end of year 1,875,000 $ 0.50 1,875,000 $ 0.50
=================== ===================
</TABLE>
Options exercisable at June 30, 1999 and 1998 were 1,006,250 at $.50 per
share, and 600,000 at $.50 per share respectively.
SFAS No. 123, Accounting for Stock-Based Compensation, requires the use of
option valuation models to provide supplemental information regarding
options granted after 1994. Pro forma information regarding net income and
earnings per share shown below was determined as if the Company had
accounted for its employee stock options under the fair value method of
that statement.
51
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
12. Stock-Based Compensation, Continued
-----------------------------------
The fair value of each option granted was estimated at the date of grant
using the Black-Scholes Option Pricing Model (the "BSOPM"), but excluding
expected volatility of the stock price over the life of the option, as the
Company's stock is not publicly traded. The exclusion of the volatility of
the stock price in estimating the fair value of an option results in a
minimum value for the option, which is considered to be a reasonable
estimate of the fair value of a nonpublic entity's stock option. The
weighted average assumptions used to calculate the minimum values of the
stock options granted in 1997 are a dividend yield of 0%, risk-free
interest rate at 5.28% and expected contractual life of 10 to 16 years.
The weighted average fair value of options granted during 1997 was $.50.
The BSOPM was developed for use in estimating the fair value of traded
options. The Company's employee stock options have characteristics
significantly different from those of traded options, such as vesting
restriction and extremely limited transferability. In addition, the
assumptions used in option valuation models are highly subjective,
particularly the expected stock price volatility of the underlying stock.
Because changes in these subjective input assumptions can materially
affect the fair value estimate, in management's opinion, the existing
models do not provide a reliable single measure of the fair value of its
employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized over the options' vesting periods. The pro forma
effect on net loss for 1999 and 1998 may not be representative of the
actual results had the Company accounted for the stock options using the
fair value method.
For the Years Ended
June 30, 1999 and 1998
----------------------
Net loss, as reported $ (215,091) $ (476,433)
Pro forma net loss $ (303,125) $ (650,922)
Basic loss per share, as reported $ (0.03) $ (0.06)
Pro forma basic loss per share $ (0.03) $ 0.07
52
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
13. Disclosures about Fair Values of Financial Instruments
------------------------------------------------------
The estimated fair value amounts of all financial instruments, on the
Company's 1999 and 1998 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.
The following methods and assumptions were used by the Company in
estimating fair value disclosures for financial statements:
Cash and equivalents, accounts receivable, inventory, accounts
payable, notes payable, and certain other current liability amounts
approximate fair value due to the short term maturities of these
instruments. Noncurrent notes receivable from officers are estimated
by discounting future cash flows using the current rates at which
loans with similar credit risks would be made. The notes receivable
from officers with carrying amounts of $19,888 and $18,060 at June
30, 1999 and 1998, respectively, have estimated fair values of
$16,238 and $16,876, respectively at those dates.
14. Related Party Transactions
--------------------------
Accounting and MIS Consultants
Since inception, the Company has outsourced their monthly accounting
functions and management information service requirements to a consulting
group. On January 2, 1997, the consulting group was granted options to
purchase 50,000 shares of the Company's common stock at an exercise price
of $ .50 per share for past consulting services performed. In January
1999, the Company issued to the consulting group 30,000 shares of common
stock for the $30,000 in accounts payable owed to the consulting group at
June 30, 1998.
53
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
14. Related Party Transactions. Continued
-------------------------------------
Officer Compensation
The three officers of the Company have each elected not to receive
compensation for their performance as full-time employees of the Company.
At the time the Company becomes profitable, the officers will then draw
salaries. The officers do not have employment contracts with the Company.
Majority Ownership
A corporate entity controlled by two of the officers and directors of the
Company owns 4,573,750 shares (54%) of the Company's outstanding common
stock. Those same individuals also have been granted options to purchase
1.5 million shares of the Company's common stock.
15. Earnings Per Share
------------------
Basic and diluted loss per common share have 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:
For the Years Ended
June 30, 1999 and 1998
----------------------
Basic earnings per common share:
Net loss $ (215,091) $ (476,433)
Weighted-average shares
basic and diluted 8,444,071 8,171,281
------------ -----------
Basic and diluted loss per
common share $ (0.03) $ (0.06)
=========== ===========
The effect of the potentially dilutive securities listed below were not
included in the computation of diluted loss per share, because to do so
would have been antidilutive for the periods presented.
For the Years Ended
June 30, 1999 and 1998
----------------------
Shares of common stock issuable under:
Employee stock options 1,825,000 1,825,000
Nonemployee stock options 50,000 50,000
54
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
16. Common Stock
------------
Private Placement Offerings
In February 1998, the Company completed a private offering of 208,000
shares of Class A common stock at a price of $1.50 per share. The proceeds
from the offering were $312,000 of which the Company received $107,000
that were used to finance working capital. The Company engaged J.C.
Campbell Company ("JCC") to sell a minimum of 20 and a maximum of 80 units
at $15,000 per unit. Each unit consisted of 10,000 shares of the Company's
common stock. Under the terms of the offering, JCC guaranteed the sale of
all 80 units and a minimum of $400,000 in net proceeds to the Company. JCC
was unable to perform relative to the terms of the offering, and the
Company agreed to relieve JCC of its obligation and closed the offering at
the amounts indicated above.
In June 1998, the Company began a third private offering to sell a minimum
of 3 and a maximum of 35 units of its common stock at $28,500 per unit.
Each unit consists of 17,100 shares of Class A and 1,900 shares of Class B
common stock. However, the Company has only one class of common stock
authorized. At June 30, 1998, a total of 56,667 shares of Class A common
stock were issued at $1.50 per share with net proceeds totaling $85,000,
and at June 30, 1999, a total of 86,666 shares of Class A common stock
were issued at $1.50 per share with net proceeds totaling $130,000. The
proceeds are to be used to finance production and general and
administrative costs for the 1999 fiscal year.
Common Shares Issued in Exchange for Debt
In October 1997, the Company issued 120,000 shares of common stock at
market value in payment of debt of $60,000 to note holders at June 30,
1997.
In January 1999, the Company issued 30,000 shares of common stock in full
payment of $30,000 of accounts payable.
Issuance of Common Stock to Private Investors
In January 1998, the Company issued 86,000 shares of common stock at a
price of $1.00 per share to two private investors, who are not related to
the Company. The Company issued 8,600 common shares, at the par value, to
a third party as a finder's fee.
55
<PAGE>
Golden Choice Foods Corporation
Notes to Financial Statements
For Each of the Two Years in the Period Ended June 30, 1999
--------------------------------------------------------------------------------
17. Impact of the Year 2000 (Unaudited)
----------------------------------
The Company anticipates that the Year 2000 could impact the business of
the Company. Many business software applications use only the last two
digits to indicate the applicable year. Unless these programs are
modified, computers running time-sensitive software may be unable to
distinguish between the year 1900 and the year 2000, which would result in
system failures, miscalculations, and general disruption of operations,
including, among other things, a temporary inability to process
transactions or engage in other normal business activities. Many Year 2000
problems might not be readily apparent when they first occur, but instead,
could imperceptibly degrade technology systems and corrupt information
stored in computerized databases, in some cases before January 1, 2000.
The Company has updated their computer systems and does not believe the
Year 2000 issue will pose significant problems for the Company's computer
systems. The Company recognizes, however, that the Year 2000 issue could
have a material impact on the operations of the Company. There is no
guarantee that the systems of other companies on which the Company's
systems rely will be timely readied for the Year 2000. Moreover, there can
be no guarantee that the Company's suppliers, customers, or other parties
with whom the Company does business will not experience significant Year
2000 problems, which might result in an adverse effect on the Company's
operations.
56
<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 Balance Sheets as of June 30, 1999 and 1998 and the Statements of Income,
Shareholders Equity, and Cash Flows, for each of the 2 years in the period ended
June 30, 1999, included in this Form SB-2, have been included herein and
reliance on the report of Kelly & Company, independent accountants, given on the
authority of that firm as experts in accounting and auditing.
57
<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
digitalpreviews.com 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
58
<PAGE>
a Prospectus when acting as Underwriters and with respect to their unsold
allotments of subscriptions.
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 the Company
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 the Company since the date hereof.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation eliminate, subject to certain
exceptions, directors' personal liability to the Company 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 the Company 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.
The Company's Bylaws provide that the Company shall indemnify its
directors, officers, employees, and against to the fullest extent permitted
under the laws of the state of Nevada. In addition, the Company has entered or
will enter into indemnification agreements with its directors and officers that
provide for indemnification in addition to the indemnification provided in the
Company's Bylaws. The indemnification agreements contain provisions that may
require the Company, 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 the
Company or other entities to which they provide service at the request of the
Company and to advance expenses they may incur as a result of any proceeding
against them as to which they could be indemnified. The Company believes that
these provisions and agreements are necessary to attract and retain qualified
directors and officers. The Company 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 the Company is required to indemnify them,
subject to certain exclusions.
59
<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 338,000 common shares at a price of $0.50 per share 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 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
the Company or with an officer of the Company 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
the Company or with an officer of the Company 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.
Beginning on July 12, 1999, and ending on April 2, 2000, Golden Choice
sold 627,818 common shares at a price of $1.50 per share 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
43 persons close to Golden Choice and/or its officers and directors, no public
solicitation took place. Offering proceeds totaled $941,727. The non-public
offering was also exempt from registration under section 5(a) of the Act
pursuant to rule 504 promulgated under Regulation D 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 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.
60
<PAGE>
EXHIBITS
Copies of the following documents are filed with this Registration
Statement, Form SB-2, as exhibits:
Exhibit No.
3.1 Articles of Incorporation
3.2 By-Laws
23 Consent of Experts & Counsel
27 Financial Data Schedule
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 July ___, 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. July ____, 2000
---------------------------
Principal Executive Officer,
Principal Financial Officer,
Principal Accounting Officer,
and Director
/s/ Richard Damion July ____, 2000
---------------------------
Vice President and Director
/s/ A. R. (Bud) Grandsaert, Jr. July ____, 2000
---------------------------
President and Director
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