RICHARD I. ANSLOW & ASSOCIATES
4255 Route 9, Suite D
Freehold, New Jersey 07728
September 24, 1998
Anthony G. Barone, Esq.
Office of Small Business
United States Securities and Exchange Commission
Division of Corporate Finance
Washington, D.C. 20549
RE: SILVER STAR FOODS, INC.
REGISTRATION STATEMENT ON FORM SB-2
FILED DECEMBER 16, 1997
FILE # 333-42311
Dear Mr. Barone:
On behalf of Silver Star Foods, Inc., (the "Company"), we hereby file an
edgarized copy of the above-referenced Registration Statement. It is
our understanding that the Post-Effective Amendment will undergo the
standard review process and we look forward to your reply as to its
status as soon as possible.
In response to your January 16, 1998 letter regarding the above
referenced Registration Statement on Form SB-2, the following are the
responses to the comments in such letter:
1. Discuss further the reasons for Silver Star's "production problems
and business decline" prior to dissolving. Describe the affect that
stronger competition had on the Company's sales.
The discussion of Silver Star Ravioli and Macaroni, Inc. ("SSRM")
has been reduced and de-emphasized in the Amendment. Page 21
does note that SSRM filed bankruptcy due to "financial problems
caused by SSRM's outdated manufacturing facilities." This issue is
discussed in greater detail on page 47 in the Historical Background"
section of the Business section.
2. Add a new risk factor that discusses the Company's current
liquidity problem, stockholder's equity deficiency and that the
Company's independent auditor's opinion noted that there is
substantial doubt about the Company's ability to continue as a going
concern.
A risk factor has been added on page 26 entitled "Recent Losses,
Going Concern Letter in Auditor's Report, Working Capital Deficit"
which addresses the issues raised in the comment.
3. The following Risk Factor shall be added to the Registration
Statement:
CONTINUING INFLUENCE OF THE UNDERWRITER ON THE
COMPANY
- ------------------------------------------------------
It is suggested that the Company add a risk factor outlining the
influence of the Underwriter on the Company.
On page 37, a risk factor was added entitled "Relationship of
Representative to Trading, Influence of Underwriter on the Company"
which addresses Regulation M restrictions, the consulting agreement
and the right of the Representative to appoint a director. Page 38
contains a risk factor entitled "Representative's Warrants and
Registration Rights" which addresses risks related to the warrants
issued to the underwriter in connection with the offering. The
following has been added on Page 28 entitled "Dependence on Key
Personnel; Need for Additional Executive Officers."
4. Indicate when the company intends to purchase key man life
insurance.
The following has been added on page 28 under "Dependence on
Key Personnel; Need for Additional Executive Officers, "The Company
intends to purchase Key man life insurance on Michael Trotta and Louis
Trotta in the amounts of $750,000 and $100,000, respectively, upon
receipt of the proceeds of this Offering".
5. Indicate further that the regulation requires that a broker-dealer must
provide the customer with current bid and offer quotations for the
penny stock, and the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing
the market value of each penny stock held in the customer's account.
The risk factor entitled "Penny Stock Regulation" on page 35 has
been revised and includes the requested language at the end of the first
paragraph.
6. The first three sentences are not clear; please revise as appropriate.
The risk factor entitled "Shares Eligible for Future Sale" on page 32
has been revised and clarified.
7. To the extent the factory building or equipment to be bought or
leased from the proceeds of the Offering is owned by an affiliate of the
Company, so indicate.
The Company has no present intention to buy or lease any part of it's
manufacturing facility from an affiliate. As noted on Page 62, any
transactions with affiliates in the future will require approval of a
majority of the disinterested directors and such transaction will be on
terms no less favorable than those available to disinterested third
parties.
8. Provide an additional table that summarizes the investments of all
existing stockholders and new investors after giving effect to this
Offering, assuming no exercise of the Over-allotment option. With
respect to the Company's existing stockholders and new investors,
respectively, indicate the total number of shares of Common Stock
purchased, the percentage of total shares this number represents, the
aggregate consideration paid for the shares, the percent of the total
dollar amount invested in the Company the aggregate consideration
represents, and the average price per share paid.
The table has been provided on page 41 under the heading Dilution.
9. Describe the reasons why the Company was unable to participate "in
all store circulars and promotions for the majority of the period."
The Company has added the following disclosure as the second
paragraph of the Management's Discussion and Analysis section on
page 44.
"A substantial portion of the Company's sales to supermarkets are made
during promotions or "specials" that the Company advertises in
supermarket circulars. Normally, these specials are booked by the
Company's food brokers eight weeks in advance of the scheduled sale.
In conjunction with the specials, the supermarket will usually purchase
additional quantity of the Company's products. During the year ended
March 31, 1998 ("fiscal 1998"), the Company decided to change food
brokers because the main principal of its food broker left the Company
and decided to pursue other beneficial opportunities in the food
industry. Therefore, the Company decided to utilize a new food broker.
During this transaction period (August and September, 1997) the
Company had a lapse of promotions which caused sales to decline. The
Company is dependent upon its food brokers to promote sales of its
products to supermarkets; however, the Company is not required to
utilize such food brokers and has established relationships in the
industry based on the background of its principals."
10. The staff notes that the Company believes that it can "achieve
between $10 and $20 million in sales annually." Either delete such
projection, or indicate when the Company believes it can achieve such
sales figures, and describe all material assumptions used to support such
sales figures. We may have further comments.
The Company has deleted this statement.
11. Please file the agreements with Mount Rose Ravioli and Macaroni
Co. and with Savignano Food Corporation as exhibits to the
registration statement.
The original registration statement included the agreements for
Mount Rose and Savignano. Additional copies will be provided to you
under separate cover.
12. To the extent the Company will have only one director (i.e. Michael
Trotta) immediately following the Offering, so indicate. If the Company
plans on naming additional directors soon after the offering is
completed, so indicate. In this regard, please add a risk factor
discussing the significant control over the affairs of the Company
Michael Trotta will have after the completion of this Offering. Include
in such discussion, if true, that he is the only director of the Company.
As noted on pages 57 and 58, the Company has added four (4)
directors, two of which are independent directors. Information required
by Regulation S-B is included in this amendment.
13. Any written indemnification agreements with the Company's
officers and directors should be filed as exhibits to the registration
statement.
There are no written indemnification agreements between the
Company and its officers and directors.
14. The principals of K&V Investments should be identified. See
General Instruction C to Schedule 13D for guidance.
The Company has repurchased the shares that it issued to K&V
Investments. The repurchase agreement is filed as an exhibit to the
registration statement.
15. Either revise, or confirm supplementally that there is no disclosure
to report pursuant to Item 404 of Regulation S-B.
The Company has added a section entitled "Certain Relationships and
Related Transactions" on Page 61 which discloses transactions as
required by Item 404 of Regulation S-B.
16. In regard to the indemnification for liabilities under the Securities
Act, please indicate that the Company has been advised that in the
opinion of the Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. See
Item 510 of Regulation S-B.
In the Underwriting section, on Page 70, the Company has added the
following: "To the extent that this section may purport to provide
exculpation from possible liabilities arising under the federal securities
laws, the Company has been advised that it is the opinion of the
Commission that such indemnification is against public policy and is
therefore unenforceable."
17. State that the Commission maintains a website that contains reports,
proxy and information statements and other information regarding
issuers that file electronically with the Commission and state the address
of such site (http:/www.sec.gov).
The section entitled "Additional Information" on Page 71 states that
"Electronic registration statements (as well as proxy reports and other
information, when filed) filed through the Electronic Data Gathering,
Analysis and Retrieval System are publicly available through the
Commission's Website (http://www.sec.gov)."
18. In general, where Section 4(2) of the Securities Act is relied upon,
the basis for such exemption, including the sophistication of the
purchaser should be indicated. In this regard, please either affirmatively
state in connection with each issuance of securities by the Company in
reliance upon Section 4(2) whether the investors were accredited
investors or sophisticated purchasers, or indicate the basis for the
Company's belief that such investors were either accredited or
sophisticated. To the extent any investors in the Company's securities
issued in reliance upon Section 4(2) were deemed sophisticated
investors, indicate whether they had access to information on the
Company necessary to make an informed investment decision.
As noted above, Daniel Kodsi and K&V Investments sold their
shares back to the Company for a return of their purchase price. As
such investors are no longer shareholders, no additional information
about them or the nature of the transaction in which they acquired
shares has been added to the Amendment.
19. A legal opinion pursuant to Item 601(b)(5) of Regulation S-B
should be filed with the next amendment.
Enclosed herewith as an exhibit, is a legal opinion pursuant to Item
601(b)(5) of Regulation S-B.
20. The selected dealer agreement and financial data schedule should be
listed in the Exhibit Index and filed as exhibits to the Registration
Statement.
The Financial Data Schedule has been filed as an exhibit. The
Selected Dealer Agreement will be filed as an exhibit by amendment.
21. The date the filing was signed should be indicated. To the extent
that Michael Trotta occupies more than one specified position with the
Company, please indicate such positions. See instructions for Signature
in Part II of Form SB-2.
The signature page has been revised to reflect that currently Michael
Trotta is the Chairman of the Board of Directors, Chief Executive
Officer, President and Secretary.
22. Each director and officer for whom the power of attorney is
applicable should be listed and the date of the power of attorney
provided.
This has been done on the signature page on Page 76.
23. Please provide the disclosures required by paragraphs (e) and (f) of
Item 502 of Regulation S-B.
"Until , 1998, all dealers effecting transactions in the
registered securities, whether or not participating in this distribution,
may be required to deliver a prospectus. This is in addition to the
obligation of dealers to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions."
In addition to the above, a detailed Table of Contents has been added to
the Prospectus after the Front Page.
24. Please see Staff Legal Bulletin No. 5 (CF/IM). In the bulletin, we
explain what public companies should disclose about Year 2000 issued
in their filing. Please supplementally confirm to us that you disclose in
this filing all required information about Year 2000 issues.
The following disclosure has been added to the Management's
Discussion and Analysis section on page 47:
"Many computer systems and software products worldwide and
throughout all industries will not function properly as the Year 2000
approaches unless changes, due to a once common programming
standard that represents years using only the last two digits. The
Company believes that its current systems are Year 2000 compliant.
The Company intends to ensure that all modifications made to its
operating systems as it adds a manufacturing facility will be Year 2000
compliant".
25. Revise to indicate the name of the independent accountant.
The Independent Accountant's Report on Page F-2 indicates the
name of the independent accountant.
26. Revise the Notes to the financial statements to provide appropriate
disclosure of significant commitments. In this regard, the disclosure
under Properties in the forepart of the registration statement should be
revised to include relevant information regarding the ownership status
of the offices referred to. If leased, refer to the disclosure requirements
of FASB statement No. 13, particularly paragraph 16.
The Company does not presently own its office space. Note 8 of the
financial statements has been revised to reflect same.
27. The financial statements should now be updated to at least
September 30, 1997 to comply with Item 310(g) of Regulation S-B.
Included with the Amendment are financial statements containing
interim period financial statements for the six months ended June 30,
1998.
28. A current consent of the independent accountant should be
included in the amendment to the registration statement that is
expected to become effective.
This will be included in the amendment to the registration statement.
29. The following risk factor regarding forward looking statements shall be
amended in the Registration Statement:
Forward-Looking Statements
This Prospectus includes "forward looking
statements" within the meaning of Section 27A of the Securities
Act, and Section 21E of the Exchange Act. The actual results of
the Company may differ significantly from the results
discussed in such forward-looking statements. Certain factors
that might cause such differences include, but are not limited to,
the factors discussed in this "Risk Factors" section. The
safe harbors contained in Section 27A of the Securities Act and
Section 21E of the Securities Act, which apply to certain
forward-looking statements, are not applicable to this Offering."
Since the filing of the Registration Statement on December 16, 1997,the
following has occurred:
I. The Company has sold shares and warrants in the
Company in accordance with a Confidential Private Placement
Memorandum pursuant to Regulation D, Rule 504. The
following sections of the Registration Statement have been
amended to reflect such transaction:
(A) Risk Factor - Shares Eligible for Future Sale:
This section shall be revised to indicate that the
Company has outstanding 3,256,000 shares (in
lieu of 4,800,000 shares). This is based on the
Private Placement shares and the
shares discussed in II below.
(B) Certain Relationships and Related Transactions: the
following shall be added:
"As of September ,1998, the Company raised
$700,000.00 pursuant to a Confidential Private Offering
Memorandum. There were twenty (20) investors in such
Private Placement Memorandum. The Offering consisted of
twenty-eight (28) Units, with each Unit consisting of a
$25,000 Promissory Note, 2,000 shares of Common Stock
(56,000 shares in the aggregate) and 2,000 Redeemable
Common Stock Purchase Warrants (56,000 Warrants in the
aggregate). Each Unit sold for $25,000.00. The
Warrants entitled the holder thereof to purchase one
share of common stock of the Company at the purchase
price of $6.00 per share at any time commencing one (1)
year after the effective date of the Company's proposed
initial public offering until five (5) years
from the Effective Date of the Confidential Private
Offering Memorandum. The Warrants are subject to
redemption by the Company at a price of $.25 per Warrant
at any time commencing one (1) year from the Effective
date, upon notice of not less than thirty (30) days,
mailed within ten (10) days, after the average of the
last bid prices of the Common Stock of the Company, if
and as listed on a national securities exchange, for a
period of ten (10) consecutive trading days has equaled
or exceeded $8.50. The Offering was made solely to
persons who qualified as accredited investors as
defined under Regulation D Rule 501 under the Act. The
Shares and Warrants offered in the Confidential Private
Placement Memorandum are not to be registered under this
Registration Statement.
Very truly yours,
RICHARD I. ANSLOW & ASSOCIATES
By:/s/ Richard I. Anlsow
________________________________
RICHARD I. ANSLOW
RIA/tp
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
AMENDMENT NO. 1 TO
FORM SB-2
------------------
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
<TABLE>
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NEW YORK 0638 11-3265942
(State or other Jurisdiction of (Primary Standard Industrial I.R.S.Employer
Incorporation or Organization) Classification Code No.) Identification
Number)
</TABLE>
1000 South Avenue
Staten Island, New York 10314
Telephone: (718) 763-3000
Facsimile: (718) 763-6004
(Address and Telephone Number of Principal
Executive Offices and Principal
Place Of Business)
MICHAEL TROTTA
CHIEF EXECUTIVE OFFICER, PRESIDENT AND SECRETARY
(Name, Address and Telephone Number of Agent for Service)
1000 South Avenue
Staten Island, New York 10314
Telephone: (718) 763-3000
Facsimile: (718) 763-6004
----------------------------
Copies to:
<TABLE>
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Richard I. Anslow, Esq. Jay M. Kaplowitz, Esq.
Richard I. Anslow & Associates Gersten, Savage, Kaplowitz &
Freehold Office Plaza Fredericks, LLP
4255 Route 9, Suite D 101 East 52nd Street
Freehold, New Jersey 07728 New York, New York 10022
Telephone: (732) 409-1212 Telephone: (212) 752-9700
Facsimile: (732) 577-1188 Facsimile: (212) 980-5192
</TABLE>
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable 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 of Act, check the
following box and list the Securities Act registration statement number
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.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
===========================================================
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PROPOSED PROPOSED
MAXIMUM OFFERING MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE PRICE PER AGGREGATE
OF SECURITIES TO BE REGISTERED SECURITY (1) OFFERING
REGISTERED PRICE
- ----------------------------------------------------------------------------
Common Stock, par
value $0.0001 per share 1,265,000 $5.25 $6,641,250
(2)
- ----------------------------------------------------------------------------
Redeemable Common
Stock Purchase A 2,530,000 $ .25 $632,500
Warrants (3)
- -----------------------------------------------------------------------------
Common Stock, par
value $0.0001 per share
(4) (5) 2,530,000 $6.00 $15,180,000
- -----------------------------------------------------------------------------
</TABLE>
Total
- -----------------------------------------------------------------------------
(1) Estimated solely for purposes of computation of the registration
fee pursuant to Rule 457.
(2) Includes 165,000 shares of Common Stock issuable upon
exercise of the Underwriters' over-allotment option.
(3) Includes 330,000 Redeemable Common Stock Purchase A
Warrants ("Warrants") issuable upon exercise of the Underwriters' over-
allotment option.
(4) Represents shares of Common Stock issuable upon exercise of
the Warrants.
(5) Pursuant to Rule 416, there are also being registered such
additional securities as may become issuable pursuant to the
anti-dilution provisions of the Warrants.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION
STATEMENT ON SUCH A DATE OR DATES AS MAY BE
NECESSARY TO DELAY ITS EFFECTIVE DATE 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 SUCH SECTION 8(A), MAY
DETERMINE.
SILVER STAR FOODS, INC.
CROSS REFERENCE SHEET
Showing Location in Prospectus of Part I Items of Form SB-2
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Item Number and Heading Location in Prospectus
in Form SB-2 Registration Statement
- ------------------------------------------------------------------------------
1. Front of Registration Statement and
Outside Front Cover Page of Prospectus....... Outside Front
Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus......................... Inside Front Cover
Page; Outside B
3. Summary Information and Risk Factors..... Prospectus Summary;
Risk Factors
4. Use of Proceeds.................................. Prospectus Summary;
Use of Proceeds.
5. Determination of Offering Price.....................Outside Front Cover
Page; Risk Factors
6. Dilution........................................... Risk Factors;
Dilution
7. Selling Security Holders.......................... Not Applicable
8. Plan of Distribution................................Outside Front Cover
Page; Underwriter
9. Legal Proceedings................................ Not Applicable.
10. Directors, Executive Officers, Promoters
and Control Persons....................... Management;
Principal
Shareholders
11. Security Ownership of Certain Beneficial
Owners and Management.............................. Management;
Principal
Shareholders
12. Description of Securities......................... Risk Factors;
Capitalization;
Shares Eligible
For Future Sale
13. Interest of Names Experts and Counsel............... Legal Matters
14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities......................................... Management
15. Organization within Last Five Years.......... ..... Management;
Principal
Shareholders
16. Description of Business............................. Prospectus
Summary; Business
17. Management's Discussion and Analysis or
Plan of Operation...............................Management's
Discussion and
Analysis
18. Description of Property.......................... Proposed Business
19 Certain Relationships and Related Transaction....... Certain
Transactions
20. Market for Common Equity and Related
Stockholder Matters................................. Outside Front
Cover Page;
Risk Factors;
Description
Of the Securities
21. Executive Compensation......... .......... ........ Management;
Executive
Compensation
22. Financial Statements................................ Financial
Statements
23. Change in and Disagreements with Accountants
On Accounting and Financial Disclosure............ Not Applicable
</TABLE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO
COMPLETION OR AMENDMENT. A REGISTRATION
STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE
COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME
THE REGISTRATION STATEMENTS BECOMES EFFECTIVE.
THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY
STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
SILVER STAR FOODS, INC.
1,100,000 Shares of Common Stock,
2,200,000 Redeemable Common Stock Purchase Warrants
OFFERING PRICE: $5.25 PER SHARE and $.25 PER
A WARRANT
Silver Star Foods, Inc. (the "Company"), a New York
corporation, is offering hereby 1,100,000 shares of Common Stock, par
value $.0001, and 2,200,000 Redeemable Common Stock Purchase
Warrants (the "A Warrants"), through Royal Hutton Securities Corp.
(the "Underwriter"). The shares of Common Stock and Warrants may
be purchased separately and will be transferable separately upon
issuance.
Each of the A Warrants entitles the holder thereof to purchase
one share of Common Stock (the "Shares") at a price of $6.00 per
share, subject to adjustment in certain circumstances, at any time
commencing on the first anniversary of the Effective Date of the
registration statement and expiring on the four year anniversary of the
effective date of the registration statement of which this Prospectus is a
part (the "Effective Date").
The Warrants are subject to redemption by the Company,
commencing on the first anniversary of the Effective Date at a price of
$0.01 per A Warrant, upon notice of not less than thirty (30) days mailed
within ten (10) days after the average of the last bid prices of the
Common Stock, as listed on a national securities exchange, for a period
of ten (10) consecutive trading days that has equaled or exceeded
$8.50. See "Description of Securities."
Prior to this offering (the "Offering"), there has been no public
market for the Common Stock or A Warrants and there is no assurance
that such a public market will develop or be sustained after the
Completion of the Offering. The initial public offering prices of the
Common Stock and A Warrants and the exercise price and terms of the A
Warrants have been determined by negotiation between the Company
and the Underwriter and bear no relation to the Company's earnings,
assets, book value, net worth, or any other recognized criteria of value.
See "Underwriting." Application has been made for listing of the
Common Stock and A Warrants for quotation on the NASDAQ SmallCap Market
("NASDAQ") under the symbols "SILV" and "SILVW," respectively.
See "Risk Factors" beginning on page 8 for a discussion of
certain factors to be considered by prospective investors.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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Price to Public Underwriting Discounts Proceeds to Company
(2)
--------------- ---------------------- ------------------
Per Share $5.25 $0.525 $4.725
Per A Warrant $0.25 $0.025 $0.225
Total (3) $6,325,000 $632,500 $5,692,500
</TABLE>
(Footnotes appear on page 2)
(1) See "Underwriting" for additional compensation to the
Underwriter consisting of: (i) three (3%) percent of the gross
proceeds of the Offering ($189,750, or $218,213 if the
Over-Allotment Option (as defined below) is exercised in full) as a
non-accountable expense allowance; (ii) a $36,000 annual financial
consulting fee.
(2) The Company has granted to the Underwriter a forty-five (45) day
option to purchase up to an additional 165,000 Shares and 330,000 A
Warrants at the price to the public less Underwriting Discount of ten (10%)
percent, solely to cover Over-Allotments, if any (the
"Over-Allotment Option"). If the Over-Allotment Option is exercised in
full the total price to the public, underwriting discount and net proceeds
to the Company, before Offering costs will be $7,273,750, $727,375,
$6,546,375 respectively (see "Underwriting").
The Common Stock and A Warrants are offered on a "best
efforts" basis by the Underwriter, subject to prior sale, when, as, and if
delivered and accepted by it and subject to approval of certain legal
matters by the Underwriter's legal counsel and certain other conditions. The
Underwriter reserves the right to reject orders in whole or in part
and to withdraw, cancel or modify the offer without notice. It is
expected that delivery of the Common Stock and Warrants will be made
at the offices of the Underwriter, 1700 South Dixie Highway, Boca
Raton, Florida 33432, on or about November , 1998.
----------------
ROYAL HUTTON SECURITIES CORP.
----------------
The date of this Prospectus is ________________, 1998.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT
CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OF ANY SECURITIES OTHER THAN THE SECURITIES
TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN
ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY
TIME DOES NOT IMPLY THAT THE INFORMATION SET
FORTH HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO ITS DATE.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING
MAY ENGAGE IN TRANSACTIONS THAT STABILIZE,
MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF
THE SHARES AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE AFFECTED ON THE
OVER-THE-COUNTER ELECTRONIC BULLETIN BOARD OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements after the end of each fiscal year,
and make available such other periodic reports as the Company may
deem to be appropriate or as may be required by law. The Company's
fiscal year ends on March 31 of each year.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should
be read in conjunction with, the more detailed information, including the
financial statements and notes thereto, appearing elsewhere in this
Prospectus. Each prospective investor is therefore urged to read this
prospectus in its entirety. Unless the context otherwise requires, the
term "the Company" refers to Silver Star Foods, Inc., a New York
corporation. This Prospectus contains forward looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward looking
statements as a result of certain factors in "Risk Factors." The Company
- ------------
Silver Star Foods, Inc. (the "Company") is a distributor of a wide
range of pre-packaged frozen pasta products in the New York
metropolitan area. The Company sells its products primarily to
supermarkets or to distributors who resell the products to supermarkets.
The Company's products are primarily "stuffed" pasta such as ravioli and
tortellini, which must be refrigerated or frozen when stored. The
Company intends to establish a manufacturing facility with the proceeds
of this Offering. The Company believes, although there can be no
assurance, that acquiring manufacturing capacity and entering into
agreements with additional sales representatives will enable it to expand
its customer base to supermarket chains in other regions and small
distributors throughout the country. See "Business- Expansion
Strategy."
The family of the Company's Chairman Chief Executive Officer and
Principal Shareholder, Michael Trotta, owned and operated Silver Star
Ravioli & Macaroni, Inc. ("SSRM") for over fifty years. SSRM was
engaged in the business of selling pasta products under the Silver Star
name. In 1992, SSRM declared bankruptcy, largely due to financial
problems caused by SSRM's outdated manufacturing facilities, and was
liquidated. In March 1995, Michael Trotta, who had been an employee
at SSRM, formed the Company to distribute a select number of food
products under that label. The Company purchased the "Silver Star"
trade name in 1997 from Vincent Trotta, the father of the Company's
President. See "Business - Background" and "Certain Transactions."
The Company has become a distributor of a variety of pre-packaged
Italian stuffed pasta food products, including ravioli, tortellini, cavatelli,
gnocchi and manicotti. According to a report by A.C. Nielson & Co., in
1997, sales of the Company's products accounted for approximately
7.5% of the frozen pasta market among supermarkets in the New York
Metropolitan area. The Company promotes its products to these
supermarkets with the assistance of food brokers, who receive
commissions for such sales. The Company regularly offers discounts or
"specials," on its products and arranges for such specials to be listed in
the supermarket circular which is available to each of the supermarket
customers as they enter the store. See "Business."
The Company also sells its products to small distributors who resell
the frozen pasta to grocery stores and restaurants. Although this
constitutes a small portion of the Company's business, the Company has
distributors in locations such as Nevada and California. The Company
intends, although there can be no assurance it will be able to, to establish
relationships with additional distributors in order to expand into other
regions and markets. See "Business- Sales and Distribution."
The Company's marketing efforts emphasize the Silver Star tradition
of quality. The Company also hopes to capitalize on the growing
popularity of pasta, many types of which are lower in fat than most
other frozen food products. See "Business - Marketing."
Currently, the Company has manufacturing agreements with Mount
Rose Ravioli and Macaroni, Inc. ("Mount Rose") and Savignano Foods
Corporation ("Savignano"). These companies manufacture and package
the products that the Company sells under the Silver Star name. The
Company believes that this arrangement is satisfactory for sales to its
existing customer base. However, this arrangement limits the Company's
ability to increase profit margins and to pursue certain types of
customers. In order to achieve significant sales growth and to operate
profitably, the Company's management believes it needs to establish its
own manufacturing facility or to seek better manufacturing terms from
its suppliers. See "Business - Principal Suppliers
The Company believes, although there can be no assurance, that
establishing a manufacturing facility will enable it to produce its
products at a lower cost without sacrificing quality. A manufacturing
facility should also allow the Company to respond to customer orders
more quickly and to allow it more flexibility in changing its product mix.
The Company intends to establish a manufacturing facility. This will be
done by considering either (i) acquiring land and constructing and
equipping a new facility on such land; or (ii) leasing an existing facility
(possibly with an option to buy such facility), which is likely to require
an investment to update or improve the facility. See "Business
- -Manufacturing."
The Company was incorporated in New York in March 1995 under
the name Silver Star Ravioli, Inc. The Company changed its name in
July 1997. The Company maintains its principal offices at 1000 South
Avenue, Staten Island, New York, 10314 and its telephone number is
(718) 763-3000.
THE OFFERING
Securities Offered 1,100,000 shares of Common Stock, and
2,200,000 A Warrants. The Common
Stock and the A Warrants may be
purchased separately upon issuance. See
"Description of Securities"
and"Underwriting."
Exercise Price of Warrants Each A Warrant exercisable at an exercise
price of $6.00 per share
. The exercise price of the A Warrants is
subject to adjustment in certain
circumstances. See "Description of
Securities - Warrants."
Exercise Period Each A Warrant is exercisable commencing
on the first anniversary of the Effective
Date of the Registration Statement. The A
Warrants expire on the four year
anniversary of the Effective date of the
Registration Statement.
Redemption The A Warrants are redeemable by the
Company commencing on the first
anniversary of the Effective Date of the
Registration Statement at a price of $0.01
per Warrant, upon notice of not less than
thirty (30) days mailed within ten (10) days
after the average of the last bid prices of
the Common Stock, as listed on a national
securities exchange, for a period of ten (10)
consecutive trading days that has equaled or
exceeded $8.50.
Offering Price $5.25 per share of Common Stock and $.25 per
Warrant.
Use of Proceeds Opening of manufacturing facilities;
purchase of additional machinery and
equipment; general administrative expenses;
repayment of bridge loan promissory notes;
and for general corporate purposes.
Risk Factors An investment in the Shares offered hereby
involves a high degree of risk and therefore
the Shares should not be purchased by anyone
who cannot afford the loss of their entire
investment. Prospective purchasers of the
Shares should carefully review and consider
the factors set forth under "Risk Factors"
as well as other information contained
herein, before purchasing any of the Shares.
See "Risk Factors."
Summary Financial Information
The following table sets forth summary historical financial
information of the Company for the years ended March 31, 1997 and March 31,
1998 and the three months ended June 30, 1997 and June 30,1998.
The summary historical financial data should be read in conjunction
with the financial statements (and notes thereto) of the Company and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<S> <C> <C>
For the Years ended For the three months
March 31, ended June 30,
------------------- ---------------------
1997 1998 1997 1998
---- ---- ---- ----
(Unaudited) (Unaudited)
Statement of Operating Data:
Revenues $1,450,438 $1,343,276 $375,193 $254,421
Gross Profit $ 478,190 $ 144,521 $ 31,481 $50,963
Operating Expenses $ 407,381 $ 426,884 $ 53,818 $124,071
Net Income (Loss) $ 19,557 ($340,354) ($ 36,398) ($ 91,547)
Per Share Data:
Net Earnings (Loss)
Per Share $.01 ($.08) ($.01) ($.02)
Weighted Average Number
of Shares Outstanding 3,200,000 4,300,274 3,200,000 3,789,011
March 31 June 30, 1998
1997 1998 Actual As Adjusted
(1),(2),(3)
(4)
--------------------------------------------------
Total Assets $258,134 $429,418 $420,795 5,108,984
Working Capital (Deficiency) ($295,311) ($316,443) ($868,801) 4,349,949
Stockholders' Equity
(Deficiency) ($ 50,098) $ 9,548 ($491,999) 4,651,065
</TABLE>
(3) Assumes proceeds of $700,000 from Bridge Financing, less
placement agent fees and expenses of $84,000 and other related costs
of $40,000.00. Of the remaining $576,000, assumes that $440,000 will
be used to repay existing loans and that the Company will receive
approximately $136,000 for working capital purposes.
(4) Attributes a value of $3.00 per share of Common Stock and $.10
per Redeemable Common Stock Purchase Warrant for the shares and
warrants issued in connection with the bridge financing.
(5) Assumes gross proceeds from the offering of $6,325,000, less
underwriter's discount and expenses and other costs of the registration
of $632,500, $189,750 and $150,000, respectively. Also assumes
repayment of the bridge loans of $700,000 and the amortization of
deferred financing costs of $297,600. Does not include any amount
payable to the underwriter under a consulting agreement.
(6) Does not assume the sale of any of the shares or warrants
available to cover the underwriter's over-allotment option, the exercise
of the warrants or the exercise of the underwriter's warrants.
RISK FACTORS
An investment in the Securities being offered hereby involves a
high degree of risk. Prior to making any investment decision,
prospective investors should carefully consider the following risk factors
together with the other information presented in this Prospectus
including the financial statements (and notes thereto).
Recent Losses, Going Concern Letter in Auditor's Report, Working
Capital Deficit
- -------------------------------------------------------
For the three months ended June 30, 1998, the year ended March 31,
1998 and the year ended March 31, 1997, the Company has recorded a
net income (loss) of ($91,547), ($340,354) and $19,557, respectively.
At June 30, 1998, the Company had a working capital deficit of
$868,801 and an accumulated deficit of $481,999. The auditor's report
to the Company's financial statements for the year ended March 31,
1998, states that the working capital deficit and stockholder equity
deficit raise doubts about the Company's ability to operate as a going
concern. For at least the current fiscal year, the Company is likely to
incur losses from operations as a result of, among other things, its
expansion strategy. There can be no assurance that the Company will
achieve profitability at any time in the future or, if achieved, sustain such
profitability. See "Financial Statements".
Risks Related to Expansion Strategy
- -----------------------------------
The Company's expansion strategy and the opening and success of its
proposed manufacturing facilities will depend on various factors (which
factors will vary depending on how the Company implements its
expansion strategy), including, the availability of a manufacturing plant
and equipment, the negotiation of acceptable lease terms, licensing and
regulatory compliance, the ability to meet production and construction
schedules, the general ability to manage successfully its anticipated
growth (including monitoring its production facilities, controlling costs,
and maintaining effective quality control), and general economic and
business conditions. Not all of the foregoing factors are in control of the
Company. The implementation of the Company's expansion strategy
will increase operating costs which, in turn, could adversely affect its
business, financial condition or results of operations. Having recently
embarked on its expansion strategy, there can be no assurance that the
Company will successfully implement its strategy or that its strategy will
result in profitability. Consistent with its expansion strategy, the
Company anticipates entering into new geographic regions in which it
has no previous operating experience. No assurance can be given that
the Company will be successful in new geographic regions. See
"Business - Expansion Strategy" and "Business - Suppliers."
Limited Operating History, New Business Activities
- --------------------------------------------------
The Company has operated only since 1995. The Company is not
directly affiliated with SSRM, which was dissolved in 1992. The
Company has never engaged in the manufacturing of food products or
sold significant quantities of products outside the New York area or to
institutional customers. Therefore, the Company's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by a new small business in a highly competitive industry.
See "Business."
Failure of Previous Business
- ----------------------------
The Company's management participated in the management of
SSRM. In 1992, SSRM declared bankruptcy and was liquidated. SSRM
had experienced financial problems largely brought on by its outdated
manufacturing plant. Competitors with newer facilities were able to
offer products at lower prices and on a more flexible schedule. SSRM's
attempts to upgrade the facility were ineffective and the debts incurred
in connection with the attempted upgrade eventually caused SSRM to
go bankrupt. The Company is engaged in the same business operating
under the same trade name as SSRM. The Company intends to avoid
the problems encountered by SSRM, however the Company's prospects
for success must be evaluated in light of the factors which led to the
failure of SSRM. See "Business - Historical Background."
Competition
- ------------
The food industry is highly competitive. Competition for shelf space
in grocery stores and supermarkets is intense and poses great difficulty
for smaller companies. The Company competes with numerous
companies in the New York area, including the Company's two
suppliers. The Company will likely encounter similar competition as it
enters new markets. Many of these competitors are larger and have
greater financial and other resources, including production and distribution
facilities, than the Company. The Company's products
compete with frozen food products, other pasta products and all food
products in general. Increased competition could result in price
reductions, reduced margins or loss of market share, any of which could
materially adversely affect the Company's business, prospects, financial
condition and results of operations. Further, there can be no assurance
that the Company will be able to compete successfully against current
and future competitors or that competitive pressures faced by the
Company will not have a material adverse effect on its business,
prospects, financial condition and results of operations. See "Business -
Competition."
Dependence on Key Customers, Dependence on Key Sales
Representatives
- -----------------------------------------------------------
For the year ended March 31, 1998 and the three months ended June
30, 1998, the Company's five largest customers accounted for an
aggregate of approximately 97% and 98% of its total sales. The
Company has no long term arrangements with any of these customers.
While the Company generally believes its relationships with its
customers are good, there can be no assurance that these or any other
customers will continue to purchase the Company's products. See
"Business - Sales and Distribution."
The Company sells its products through sales representatives who
are known in the industry as food brokers. For the year ended March
31, 1998 and the three months ended June 30, 1998, approximately 98%
of its sales in the New York market were undertaken by Douglas Sales
Associates, Inc. See "Business - Sales and Distribution."
The loss of the Company's relationships with these or other key
customers or food brokers could adversely affect the Company's
business, prospects, financial condition and results of operations.
Dependence on Key Suppliers, Risk of Price Fluctuations
- --------------------------------------------------------
The Company purchases all of its products from two suppliers,
Mount Rose and Savignano. The prices of products purchased from
Mount Rose are revised every six months. The prices of products
purchased from Savignano are subject to increase if the Company fails
to order certain minimum amounts of products. The Company has
historically been able to pass significant price increases through to its
customers. However, no assurance can be given that it will be able to do
so in the future. The agreement with Mount Rose is terminable by either
party at any time and the agreement with Savignano is terminable by
either party upon 120 days notice. Both Mount Rose and Savignano sell
products that compete with the Company's products directly to
supermarkets and distributors. There can be no assurance that such
agreements will not be terminated, particularly since Mount Rose and
Savignano are aware of the Company's plans to establish its own
manufacturing facility. The Company believes that alternative sources
for its products are available, however, the loss of any of its current
suppliers would have a material adverse effect on it business, financial
condition or results of operations until a relationship could be
established with new suppliers or a manufacturing facility could be
established. See "Business- Suppliers" and "Business - Competitors."
Dependence on Key Personnel; Need for Additional Executive Officers
- -----------------------------------------------------------
The Company is dependent to a great extent upon the experience,
abilities and continued services of Michael Trotta, the Company's
President and Chief Executive Officer and Louis Trotta, the Company's
Vice President. The loss of services of Mr. Michael Trotta or Mr. Louis
Trotta could have a material adverse effect on the Company's business,
financial condition or results of operation. The Company has entered
into three year employment agreements with, and is purchasing Key man
life insurance on the life of each of, these individuals. The Company
intends to purchase Key man life insurance on Michael Trotta and Louis
Trotta in the amounts of $750,000 and $100,000 respectively, upon
receipt of the proceeds of this Offering. In order to implement the
Company's expansion strategy, the Company will need to hire additional
executive officers, including an experienced chief financial officer.
There can be no assurance that the Company will be able to identify the
proper individuals or that such individuals would be willing to be
employed by the Company on terms acceptable to the Company. See
"Management."
Absence of Trademark Registration, Absence of Patent Protection
- -----------------------------------------------------
The Company acquired the Silver Star trademark from Vincent
Trotta in 1997. Mr. Trotta had acquired the trademark from SSRM,
who had registered the trademark with the US Patent and Trademark
Office. The Company failed to renew its registration of the trademark.
Although it does maintain certain rights in the trademark, it currently
does not have the protection against infringement offered by
registration. If the Company were required to cease using "Silver Star",
it could have a material adverse effect on the Company. The Company
is in the process of filing its application to register the trademark. There
can be no assurance that the Company's application will be accepted.
Although registration affords the Company the protection of federal
trademark laws against the unauthorized use of the protected mark or a
use deemed "confusingly similar" under federal trademark law, there can
be no assurance that third parties will not infringe on the Company's
current or future trademark registrations or that the Company will have
sufficient resources to defend against any such infringement successfully
or at all. See "Business Proprietary Rights."
The Company does not have any patents on its recipes or production
processes or trademarks on the names of its products. Because it
currently uses other businesses in the industry to manufacture it
products, competitors are familiar with the Company's recipes,
production processes and products. There can be no assurance that
these competitors will not be able to utilize this information to gain a
competitive advantage over the Company.
Potential Liability; Availability of Insurance
- -----------------------------------------------
The Company, from time to time, is subject to lawsuits as a result of
its business and currently maintains insurance relating to personal injury
in amounts that it considers adequate and customary for the food
industry. No assurance can be given that the Company will be able to
obtain insurance policies in the future. In addition, any successful claim
against the Company, in an amount exceeding its insurance coverage,
could have a material adverse effect on its business, financial condition
or results of operation.
Dependence on Effective Distribution System
- -------------------------------------------
The Company's success depends upon an effective system of
distribution for its products. To distribute its products, the Company
uses common carriers. The dependence on other companies for delivery
of its products poses a risk to the Company, particularly as the
Company increases its distribution to the eastern United States. There
can be no assurance that the Company will continue to be able to
negotiate acceptable freight rates in the future or that delivery will not
be disrupted for reasons including, but not limited to, adverse weather,
natural disasters or labor disputes in the trucking industry. See
"Business".
Continued Control by Management
- -------------------------------
Upon completion of the Offering, management of the Company will
beneficially own approximately 73.46% of the Company's outstanding
Common Stock. The Company's stockholders do not have the right to
cumulative voting in the election of directors. Accordingly,
Management will be in a position to exert control over the business and
operations of the Company, including the election of all directors of the
Company and approval of significant corporate transactions. See
"Principal Stockholders."
Government Regulation
- -----------------------
The Company is subject to numerous state regulations relating to the
preparation and sale of food. It is also subject to federal and state laws
governing the Company's relationship with its employees, including
minimum wage requirements, overtime, working and safety conditions, and
citizenship requirements. Commencement of manufacturing of food
would subject the Company to numerous other regulations of the U.S.
Food and Drug Administration and the U.S. Department of Agriculture
including unannounced on site inspections. The failure to obtain or
retain required food licenses or to be in compliance with applicable
governmental regulations, or any increase in the minimum wage rate,
employee benefits costs (including costs associated with mandated
health insurance coverage) or other costs associated with employees,
could adversely affect the business, results of operations or financial
condition of the Company. Proposals are under consideration at the
federal level to introduce a system of mandated health insurance. This
and other initiatives could adversely affect the Company's operations as
well as the food industry in general. A failure to comply with one or
more regulatory requirements could result in a variety of sanctions,
including fines and the withdrawal of the Company's products from store
shelves. The Company is not aware of any currently existing facts or
circumstances that would cause it to fail to comply with any of the
regulations to which it is currently subject.
Risks Inherent in the Food Industry
- -----------------------------------
The results of operations in the food industry can be affected by,
among other things, changes in consumer tastes, national, regional and
local economic conditions and demographic trends. The Company
believes that the pasta market is a growing market, but there can be no
assurance that changes in the market will not occur which would
adversely affect the Company.
The Company faces all of the risks inherent in the production and
distribution of frozen food products, including contamination,
adulteration and spoilage, and the associated risks of product liability
litigation. Such risks will be increased if the Company establishes a
manufacturing facility. There can be no assurance that the Company's
procedures will be adequate to prevent the occurrence of such events.
See "Business."
Shares Eligible for Future Sale
- -------------------------------
The Company has outstanding 3,256,000 shares of common stock all
of which were issued and sold by the Company in private transactions in
reliance upon exemptions from registration under the Securities Act.
Such shares may be sold only pursuant to an effective registration
statement filed by the Company or an applicable exemption, including
the exemption contained in Rule 144 promulgated under the Securities
Act. In general, under Rule 144 as currently in effect, a shareholder,
including an affiliate of the Company, may sell shares of common stock
after at least one year has elapsed since such shares were acquired from
the Company or an affiliate of the Company. The number of shares of common
stock which may be sold within any three-month period is
limited to the greater of one percent of the then outstanding common
stock or the average weekly trading volume in the common stock during
the four calendar weeks preceding the date on which notice of such sale
was filed under Rule 144. Certain other requirements of Rule 144
concerning availability of public information, manner of sale and notice
of sale must also be satisfied. In addition, a shareholder who is not an
affiliate of the Company (and who has not been an affiliate of the
Company for 90 days prior to the sale) and who has beneficially owned
shares acquired from the Company or an affiliate of the Company for
over two years may resell the shares without compliance with the
foregoing requirements under Rule 144.
No predictions can be made as to the effect, if any, that future sales
of shares, or the availability of shares for future sale, will have on the
market price of the common stock prevailing from time to time.
Nevertheless, sales of substantial amounts of common stock, or the
perception that such sales may occur, could have a material adverse
effect on prevailing market prices. See "Description of Securities -
Shares Eligible for Future Sale."
Dilution
- ---------
The investors in this Offering will suffer immediate dilution of $4.25
per share, assuming $.25 is attributed to each Warrant. See "Dilution."
Additional Financing
- ---------------------
The Company anticipates that the proceeds from the Offering,
together with projected cash flow from operations, will be sufficient to
fund its operations, including its proposed expansion, for at least the
next 12 months. Thereafter, the Company may need to raise additional
funds to continue to implement its expansion strategy. There can be no
assurance that additional financing will be available or if available will be
on favorable terms.
Quarterly Fluctuations; Seasonality; Possible Volatility of Stock Price
- -----------------------------------------------------------
The Company's business is somewhat seasonal. Although there exists
a steady market for the Company's products from September through
June, with sales rising during the Christmas holidays, sales usually
decline in July and August. As a result, the Company believes that
period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as any indication of
future performance. In the event the Company's operating results fall
below the expectations of public market analysts and investors, the
market price of the Common Shares would likely be materially adversely
affected. See "Selected Financial Data" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
Absence of Dividends
- --------------------
The Company has never declared or paid any cash
dividends on its Common Stock. The Company intends to retain its
earnings, if any, to finance the growth and development of its business
and therefore does not anticipate paying any cash dividends on its
Common Stock in the foreseeable future. Although dividends are not
limited currently by any agreements, it is anticipated that future
agreements, if any, with institutional lenders or others may limit the
Company's ability to pay dividends on the Common Stock. Any future
determination to pay cash dividends will be at the discretion of the
Board of Directors and will be dependent upon the Company's financial
condition, results of operations, capital and legal requirements and such
other factors as the Board of Directors deems relevant. See "Dividend
Policy."
Current Prospectus and State Registration Required to Exercise
Warrants and Options
- ------------------------------------------------------
At such time as the Shares and Warrants become registered under
the Securities Act, holders of the Warrants will be able to exercise the
Warrants only if (i) a current Prospectus under the Securities Act
relating to the Shares is then in effect and (ii) the Shares are qualified for
sale or exempt from qualification under the applicable securities laws of
the state in which the various holders of Warrants reside. Although the
Company has agreed to use its best efforts to maintain a current
registration covering the Shares, there can be no assurance that the
Company will be able to do so. The value of the Shares may be greatly
reduced if a registration statement covering the Shares is not kept
current or if the Shares are not qualified, or exempt from qualification,
in the states in which the holders of warrants reside. Persons holding
warrants who reside in jurisdictions in which the Shares are not qualified
and in which there is no exemption will be unable to exercise their
Warrants and would either have to sell their Warrants or allow them to
expire unexercised.
Forward Looking Statements
- --------------------------
This Prospectus includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act, and Section 21E of the
Exchange Act. The actual results of the Company may differ
significantly from the results discussed in such forward-looking
statements. Certain factors which may cause such differences include,
but are not limited to, the factors discussed in this "Risk Factors"
section. The safe harbors contained in Section 27A of the Securities Act and
Section 21E of the Exchange Act, which apply to certain
forward-looking statements, are not applicable to this Offering.
Potential Liability for Possible Violation of Section 5 of the Securities
Act: Integration of August Bridge Financings with this Offering
- -----------------------------------------------------------
In September 1998, the Company completed a private placement of
28 units each consisting of a $25,000 Promissory Note, 2,000 shares of
Common Stock and 2,000 Redeemable Common Stock Purchase
Warrants to accredited investors at a price of $25,000 per unit. There
was no cost attributed to either the Common Shares or the Redeemable
Common Stock Purchase Warrants contained in the units. The Company
believes that these financings were exempt from registration under
Regulation D of the Securities Act of 1933 (the "Securities Act"),
however, an investor in such financings could take the position that
these financings should be deemed to be integrated with the Offering
with the result that these financings would not have complied with
Regulation D of the Securities Act. Such position might subject the
Company to litigation with its attendant costs and risks. If it were
determined that these financings should have been integrated with the
Offering, it would give rise, among other things, to the investors having
a right of rescission and the Company having liability in connection with
the 1998 Bridge Financings.
Offering Price Arbitrarily Determined
- -------------------------------------
The offering price of the Securities has been determined by
negotiation between the Company and the Representative and is not
necessarily related to the Company's assets, earnings, book value or any
other objective standard of value.
Authorization and Discretionary Issuance of Preferred Stock
- -----------------------------------------------------------
The Company's Certificate of Incorporation authorizes the issuance
of 1,000,000 shares of "blank check" preferred stock, par value $.001,
with such designations, rights and preferences as may be determined
from time to time by the Board of Directors. Accordingly, the Board of
Directors is empowered, without stockholder approval, to issue
preferred stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the voting power or other rights of
the holders of the Company's Common Stock. In the event of issuance,
the preferred stock could be utilized, under certain circumstances, as a
method of discouraging, delaying or preventing a change in control of
the Company. Although the Company has no present intention to issue
any shares of its preferred stock, there can be no assurance that the
Company will not do so in the future. See "Description of Securities -
Preferred Stock."
Effect of Issuance of Common Stock Upon Exercise of Warrants and Options;
Possible Issuance of Additional Common Stock and Options
- ------------------------------------------------------------
Immediately after the Offering, assuming the Representative's
Over-Allotment Option is not exercised, the Company will have an
aggregate of 7,173,000 shares of Common Stock authorized but
unissued and not reserved for specific purposes and an additional
3,471,000 shares of Common Stock unissued but reserved for issuance
pursuant to (i) the Company's 1998 Stock Option Plan, (ii) outstanding
options and warrants, (iii) exercise of the Redeemable Warrants, (iv)
exercise of the Over-Allotment Option and the Redeemable Warrants
underlying the Over-Allotment Option and (v) exercise of the
Representative's Warrants and the Redeemable Warrants included
therein. All of such shares may be issued without any action or approval
of the Company's stockholders. Although there are no present plans,
agreements, commitments or undertakings with respect to the issuance
of additional shares or securities convertible into any such shares by the
Company, any shares issued would further dilute the percentage
ownership of the Company held by the public stockholders. The
Company has agreed with the Representative that, except for the
issuances disclosed in or contemplated by this Prospectus and issuances
in connection with any merger or acquisition of another entity by the
Company, it will not issue any securities without the Representative's
consent, including but not limited to any shares of Common Stock, for a
period of 24 months following the Effective Date, without the prior
written consent of the Representative. See "Underwriting."
The exercise of warrants or options and the sale of the underlying
shares of Common Stock (or even the potential of such exercise or sale)
may have a depressive effect on the market price of the Company's
securities. Moreover, the terms upon which the Company will be able
to obtain additional equity capital may be adversely affected since the
holders of outstanding warrants and options can be expected to exercise
them, to the extent they are able, at a time when the Company would, in
all likelihood, be able to obtain any needed capital on terms more
favorable to the Company than those provided in the warrants and
options. See "Management - Stock Option Plan," "Description of
Securities" and "Underwriting."
Absence of Public Market; Determination of Offering Price;
Volatility; Nasdaq Maintenance Requirements.
- -----------------------------------------------------------
Prior to this offering, there has been no public market for the Shares,
and there can be no assurance that any active trading market therefor
will develop or, if any such market develops, that it will be sustained.
Accordingly, unless and until a public market develops, purchasers of
the Shares may experience difficulty selling or otherwise disposing of
such securities.
The initial public offering price of the Shares was arbitrarily
determined by negotiations between the Company and the
Representative, and does not necessarily bear any relationship to the
Company's assets, book value, results of operations, or any other
generally accepted indicia of value. See "Underwriting." From time to
time after this offering, there may be significant volatility in the market
price of the Common Shares. Quarterly operating results of the
Company or other developments affecting the Company, such as
announcements by the Company or its competitors regarding
acquisitions or dispositions, new procedures or technology, changes in
general conditions in the economy, and general market conditions could
cause the market price of the Common Stock to fluctuate substantially.
The equity markets have, on occasion, experienced significant price and
volume fluctuations that have affected the market prices for many
companies' securities and have often been unrelated to the operating
performance of these companies.
Under the currently effective criteria for listing of securities on the
Nasdaq SmallCap Market, for initial listing, a company must have at
least $4,000,000 in net tangible assets, a minimum bid price of $4.00 per
share, and a public float of at least $5,000,000. For continued listing, a
company must maintain $2,000,000 in net tangible assets, a minimum
bid price of $1.00, and a public float of at least $1,000,000. In the event
that the Company should be unable to maintain the standards for
continued listing, the Common Shares could be subject to de-listing
from the Nasdaq SmallCap Market. Trading, if any, in the Common
Shares would thereafter be conducted in the over-the-counter market on
the OTC Bulletin Board established for securities that do not meet the
Nasdaq SmallCap Market listing requirements or in what are commonly
referred to as the "pink sheets." As a result, an investor may find it
more difficult to dispose of, or to obtain accurate quotations as to the
price of, the Shares.
Should the Company be unable to satisfy the NASDAQ maintenance
criteria for listing, its Securities may be de-listed from NASDAQ. In
such event, trading, if any, of the Securities would thereafter be
conducted in the over-the-counter market, the so-called "pink sheets,"
or the National Association of Securities Dealers, Inc.'s (the "NASD")
"Electronic Bulletin Board." As a consequence of such de-listing, an
investor would likely find it more difficult to dispose of, or to obtain
quotations as to, the price of the Securities.
Penny Stock Regulation
- -----------------------
In the event that the Company is unable to satisfy NASDAQ's initial
listing of maintenance criteria requirements, trading of the Securities
would be conducted in the "pink sheets" or the NASD's Electronic
Bulletin Board. In the absence of the Common Stock being quoted on NASDAQ,
at a market price of at least $5.00 per share or certain other
exemptions, trading of the Common Stock would be covered by Rule
15g-9 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), for non-NASDAQ and non-exchange
listed securities. Under such rule, broker-dealers who recommend such
securities to persons other than established customers and accredited
investors must make a special written suitability determination for the
purchaser and receive the purchaser's written agreement to a transaction
prior to sale. Furthermore, broker-dealer's must disclose the
compensation of the Broker dealer and its sales person in the
transaction, and monthly account statements showing the market value
of each penny stock held in the customer's account.
The Commission has adopted regulations that generally define a
"penny stock" to be an equity security that has a market price of less
than $5.00 per share or an exercise price of less than $5.00 per share
subject to certain exceptions. Such exceptions include equity securities
listed on NASDAQ and equity securities issued by an issuer that has (i)
net tangible assets in excess of $2,000,000, if such issuer has been in
continuous operation for at least three years, or (ii) net tangible assets of
at least $5,000,000, if such issuer has been in continuous operation for
less than three years, or (iii) average revenue of at least $6,000,000 for
the preceding three years. Unless an exception is available, the
regulations require the delivery, prior to any transaction involving a
penny stock, of a risk disclosure schedule explaining the penny stock
market and the risks associated therewith.
If the Securities were to become subject to the regulations applicable
to penny stocks, the market liquidity for the Securities would be
severely affected, limiting the ability of broker-dealers to sell the
securities and the ability of purchasers in this Offering to sell their
Securities in the secondary market. There is no assurance that trading in
the Securities will not be subject to these or other regulations that would
adversely affect the market for such securities.
Potential Adverse Effect of Redemption of Redeemable Warrants
- -----------------------------------------------------
The Redeemable A Warrants offered hereby are redeemable, in
whole or in part, at a price of $.01 per Redeemable Warrant (the
"Redemption Price"), commencing one year after the date of this
Prospectus and prior to their expiration on the fourth anniversary of the
date of this Prospectus provided that (i) prior notice of not less than 30
days is given to the Warrant holders, (ii) the closing bid price of the
Company's Common Stock shall have exceeded $8.50 per share for a
period not less than 10 Consecutive trading days in any 30 day trading
period ending not more than 10 days prior to the date on which the
notice of redemption is given. Warrant holders shall have exercise rights
until the close of the business day preceding the date fixed for
redemption. Notice of redemption of the Redeemable A Warrants could
force the holders to exercise the Redeemable A Warrants and pay the
Exercise Price at a time when it may be disadvantageous for them to do
so, or to sell the Redeemable A Warrants at the current market price
when they might otherwise wish to hold them, or to accept the
Redemption Price, which may be substantially less than the market value
of the Redeemable A Warrants at the time of redemption. The
Redeemable A Warrants may not be exercised unless the registration
statement pursuant to the Securities Act, covering the underlying shares
of Common Stock is current and such shares have been qualified for
sale, or there is an exemption from applicable qualification requirements,
under the securities laws of the state of residence of the Warrant holder.
Although the Company does not presently intend to do so, the Company
reserves the right to call the Redeemable A Warrants for redemption
whether or not a current prospectus is in effect or such underlying
shares are not, or cannot be, registered in the applicable states. Such
restrictions could have the effect of preventing certain Warrant holders
from liquidating their Redeemable A Warrants. See "Description of
Securities - Redeemable Warrants."
Current Prospectus and State Blue Sky Registration Required to
Exercise Redeemable Warrants
- -----------------------------------------------------------
Warrant holders have the right to exercise the Redeemable A
Warrants for the purchase of shares of Common Stock only if a current
prospectus which will permit the purchase and sale of the Common
Stock underlying the Redeemable A Warrants is then effective, but there
can be no assurance that the Company will be able to keep effective
such a Prospectus. Although the Company intends to seek to qualify for
sale the shares of Common Stock underlying the Redeemable A
Warrants in those states in which the Securities are to be offered, no
assurance can be given that such qualification will occur. In addition,
purchasers may buy Redeemable A Warrants in the aftermarket or may
move to jurisdictions in which the shares of Common Stock issuable
upon exercise of the Redeemable A Warrants are not so registered or
qualified during the period that the Redeemable A Warrants are
exercisable. In such event, the Company would be unable to issue
shares of Common Stock to those persons desiring to exercise their
Redeemable A Warrants unless and until the shares of Common Stock
could be registered or qualified for sale in the jurisdictions in which such
purchasers reside, or an exemption to such qualification exists or is
granted in such jurisdiction. The Redeemable A Warrants may lose or
be of no value if a prospectus covering the shares of Common Stock
issuable upon the exercise thereof is not kept current or if such
underlying shares of Common Stock are not, or cannot be, registered in the
applicable states. See "Description of Securities - Redeemable
Warrants."
Relationship of Representative to Trading, Influence of Underwriter on
the Company
- -------------------------------------------------------
The Representative may act as a broker or dealer with respect to the
purchase or sale of the Common Stock and the Redeemable Warrants in
the over-the-counter market where each is expected to trade. The
Representative also has the right to act as the Company's exclusive
agent in connection with any future solicitation of Warrant holders to
exercise their Redeemable Warrants. Regulation M, which was recently
adopted to replace Rule 10b-6, under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), may prohibit the
Representative from engaging in any market-making activities with
regard to the Company's securities for a period of up to five business
days (or such other applicable period as Regulation M may provide)
prior to any solicitation by the Representative of the exercise of
Warrants until the later of the termination of such solicitation activity or
the termination (by waiver or otherwise) of any right that the
Representative may have to receive a fee for the exercise of Warrants
following such solicitation. As a result, the Representative and any
soliciting broker/dealer may be unable to provide a market for the
Company's securities during certain periods while the Redeemable
Warrants are exercisable. Any temporary cessation of such
market-making activities could have an adverse effect on the market
price of the Company's securities.
The Representative has the right to designate a director to be one of
management's nominees to the board of directors and also has the right
to designate an observer to attend meetings of the board. The Company
also agreed, subject to certain exceptions, not to issue common stock or
Preferred stock for a period of two years without the consent of the
representative. Additionally, the Representative and the Company have
entered into a consulting agreement whereby the Representative will
provide strategic business and merger and acquisition consulting.
Therefore, the Representative may be able to exert influence over the
operation of the Company. See "Underwriting."
Representative's Warrants and Registration Rights
- -------------------------------------------------
In connection with this Offering, the Company has agreed to sell to
the Representative, for nominal consideration, the Representative's
Warrants which entitle the Representative to purchase up to 110,000
shares of Common Stock and/or 110,000 Redeemable Warrants. The
securities issuable upon exercise of the Representative's Warrants are
identical to those offered pursuant to this Prospectus. The
Representative's Warrants are exercisable at a price of $per share and $per
Redeemable Warrant for a period of four years
commencing one year from the date of this Prospectus. The exercise of
the Representative's Warrants and the Redeemable Warrants contained
in the Representative's Warrants may (i) dilute the value of the shares of
Common Stock to be acquired by holders of the Redeemable Warrants,
(ii) adversely affect the Company's ability to obtain equity capital and
(iii) adversely affect the market price of the Common Stock if the
Common Stock issuable upon the exercise of the Representative's
Warrants and the Redeemable Warrants contained in the
Representative's Warrants are sold in the public market. The
Representative has been granted certain "piggyback" and demand
registration rights for a period of five years from the date of this
Prospectus with respect to the registration under the Securities Act of
the securities directly or indirectly issuable upon exercise of the
Representative's Warrants. The exercise of such rights could result in
substantial expense to the Company. See "Underwriting."
USE OF PROCEEDS
Assuming the sale of the securities offered hereby (based on an
assumed offering price of $5.25 per share of Common Stock and $.25
per Redeemable A Warrant), the net proceeds to the Company, after
deducting estimated underwriting discounts and commissions and
expenses payable by the Company in connection with the Offering are
estimated to be approximately $5,352,750 ($6,103,125 if the
Underwriter's Over-Allotment Option is exercised in full). The
Company expects to use the net proceeds as follows:
<TABLE>
<S> <C> <C>
Purpose Amount Percentage of Net
Proceeds
- ------- ------ --------------------
Purchase and/or Renting of
a Manufacturing Facility (1) $1,302,859 24.34%
Working Capital $ 697,999 13.04%
Buying and/or Leasing
of Equipment (2) $2,187,134 40.86%
General Corporate Purposes (3) $ 464,758 8.68%
Repayment of Bridge Loan
Promissory Notes (4) $700,000 13.08%
Total $5,352,750 100%
</TABLE>
- ----------------
(1) Includes purchase of production equipment for the Facility. The
Company intends to either (i) acquire land in the New York
metropolitan area and construct and equip a new facility; or (ii) lease an
existing facility, which is likely to require an investment to update or
improve the facility.
(2) The Company intends to lease its equipment. Such leases generally
require a fifty (50%) percent down payment based on the purchase price
and include an option to purchase at the end of the lease term for a
nominal amount. The Company requires certain equipment which shall
include, but not be limited to, the following: filling and processing
machine, dough extruders, assorted ravioli machines, mechanical spiral
freezers, general conveyor work, vertical form and fill machines,
blanchers (pre-cook products), other miscellaneous machinery, trucks
for delivery (which shall include a 24 foot reefer and a tractor-trailer) .
(3) Included as part of this category, the Company shall purchase a new
computer system and a new telephone system.
(4) The Bridge Financing in the amount of $700,000 which consisted in
part of twenty eight $25,000 Promissory Notes, require repayment in
full of such notes upon receipt of the proceeds of this Offering.
Prior to expenditure, the net proceeds of this Offering will be
invested in principally short-term money-market instruments. Any
proceeds received upon exercise of the Over-Allotment Option or
exercise of outstanding options and warrants will be used for working
capital.
Pending application of the proceeds of this Offering, the Company
intends to invest the net proceeds in certificates of deposit, money
market accounts, United States government obligations or other
short-term interest bearing obligations of investment grade.
The foregoing represents the Company's best estimate of its
allocation of the net proceeds of the sale of the Shares based upon the
Company's currently contemplated operations, the Company's business
plan and current economic and industry conditions and is subject to
reapportionment among the categories listed above in response to,
among other things, changes in its plans, regulations, industry conditions
and future revenues and expenditures. The amount and timing of
expenditures will vary depending on a number of factors, including
changes in the Company's contemplated operations or business plan and
changes in economic and industry conditions.
Based on the Company's operating and expansion plans, the
Company believes that the net proceeds of this offering, together with
available cash and anticipated revenues from operations, will be
sufficient to satisfy its capital and legal requirements and finance its
plans for expansion for at least the next 12 months. Such beliefs are
based upon assumptions and there can be no assurance that the
assumptions underlying the Company's plans will prove to be correct.
After such 12-month period, or sooner if the Company's assumptions
prove to be incorrect, the Company may require additional capital in
order to meet its then current plans for expansion and capital
requirements. Such financing may take the form of ordinary or preferred equity
securities or debt securities, or may involve bank
financing. There can be no assurance that the Company will be able to
obtain additional capital on a timely basis, on favorable terms, or at all.
In any of such events, the Company may be unable to implement its
current plans for expansion. See "Capitalization" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
DIVIDEND POLICY
The Company has never paid dividends on its Common Stock and
does not anticipate paying such dividends in the foreseeable future. The
payment of future cash dividends by the Company on its Common Stock
will be at the discretion of the Board of Directors and will depend on its
earnings, financial condition, cash flows, capital requirements and other
considerations as the Board of Directors may consider relevant.
Although dividends are not limited currently by any agreements, it is
anticipated that future agreements, if any, with institutional lenders or
others may limit the Company's ability to pay dividends on the Common
Stock.
DILUTION
As of June 30, 1998, the pro forma net tangible book value of the
Company's Common Stock was ($872,996) or ($0.27) per share of the
Common Stock. The net tangible book value of the Company's
Common Stock is the tangible assets less total liabilities. The Company
has net intangible assets amounting to $380,997 at June 30, 1998.
Dilution per share represents the difference between the amount paid per
share by purchasers in this Offering and the pro-forma net tangible book
value per share after the Offering.
After giving effect to the sale by the Company of 1,100,000 shares of
Common Stock and 2,200,000 Warrants offered hereby and the
applications of the net proceeds thereof, the pro-forma net tangible book
value of the Company's Common Stock as of June 30, 1998 would have
been approximately $4,355,754 or $1.00 per share. This represents an
increase in the net tangible book value per share of $1.27 to the
Company's existing shareholders and an immediate dilution of $4.25 per
share to new stockholders purchasing Common Stock and Warrants in
this Offering.
The following table illustrates this dilution on a per share basis:
<TABLE>
<S> <C>
Assumed public offering price per share $5.25
Pro forma net tangible book value per share before
Offering.................................................. ($.27)
Increase per share attributable to payments by new
stockholders.............................. $1.27
Pro forma net tangible book value per share after Offering $1.00
Dilution per share $4.25
</TABLE>
The following table summarizes the differences between the existing
stockholders and new investors with respect to the number of shares of
Common Stock purchased from the Company, and the total
consideration and the average price per share paid:
<TABLE>
<S> <C> <C> <C> <C> <C>
Percentage of Average
Outstanding Percent of Price
Shares of Shares of Total Total per
Common Stock Common Consideration Consideration Share
Stock Paid Paid of
Common
Stock
- ------------------------------------------------------------------------------
Existing
Stockholders.3,256,000 74.7% $320 11.0% $0.22
New
Investors.. 1,100,000 25.3% $5,775,000 89.0% $5.25
--------- ------ ----------- ------- -------
4,356,000(1) 100.0% $5,775,320 100.0% $1.33
</TABLE>
(1) Does not include: (i) 2,200,000 shares of Common Stock issuable
upon exercise of the A Warrants offered hereby; (ii) up to an additional
495,000 shares of Common Stock issuable upon exercise of the
Representative's Over-Allotment Option and the underlying Redeemable
Warrants; (iii) 220,000 shares of Common Stock issuable upon exercise
of the Representative's Warrants and the Redeemable Warrants included
therein; (iv) 500,000 shares of Common Stock issuable upon exercise of
options available for grant under the 1998 Stock Option Plan; (v)
56,000 shares of Common Stock reserved for issuance pursuant to
options and warrants issued in connection with the Company's Bridge
Financing.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
June 30, 1998 and as adjusted to give effect to the sale by the Company
of 1,100,000 Common Shares, 2,200,000 Warrants and the 56,000
Common Shares and 56,000 Redeemable Common Stock Purchase
Warrants issued in conjunction with the bridge financing. The table
should be read in conjunction with the financial statements and notes
thereto appearing elsewhere in this Prospectus.
<TABLE>
<S> <C> <C>
June 30, 1998 June 30, 1998
Actual(Unaudited) As Adjusted(1), (2)
----------------- -------------------
Total current liabilities: $912794 $457,919(3)
Long-term debt: -0- -0-
Stockholder's equity:
Common Stock $.0001
par value, 15,000,000
shares authorized;
3,200,000 shares outstanding;
4,356,000 shares outstanding
as adjusted 480 596
------------------ ------------------
Additional paid-in 399,840 5,840,388
capital (482,319) (779,919)(4)
Deficit (410,000) (410,000)
Treasury Stock
- -------------------------------------------------------------------------------
Total Stockholders Equity (491,999) 4,651,065
- -------------------------------------------------------------------------------
Total Capitalization $420,795 $5,108,984
-------- ---------
-------- ---------
</TABLE>
(1) Assumes sale of 1,100,000 shares of Common Stock at $5.25 per
share and 2,200,000 A Warrants at $.25 per Warrant for gross proceeds
of $6,325,000, less the Underwriters Discount of $632,500 and other
expenses estimated to aggregate $339,750.
(2) Does not assume exercise of the Underwriter's Over-Allotment
Option, the Underwriter's Warrant, any of the A Warrants or any of the
Bridge Warrants.
(3) Assumes repayment of the bridge notes of $700,000 and the notes
payable to former stockholders of $410,000.
(4) Assumes amortization of deferred financing costs of $297,600
resulting from the bridge financing.
SUMMARY FINANCIAL DATA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
- -------
The Company currently is a manufacturer and wholesaler of stuffed and
other frozen pasta products which it markets under the "Silver Star"
trade name. The Company commenced operations in May, 1995.
A substantial portion of the Company's sales to supermarkets are made
during promotions or "specials" that the Company advertises in
supermarket circulars. Normally, these specials are booked by the
Company's food brokers eight weeks in advance of the scheduled sale. In
conjunction with the specials, the supermarket will usually purchase
additional quantity of the Company's products. During the year ended
March 31, 1998 ("fiscal 1998"), the Company decided to change food
brokers because the main principal of its food broker left the Company
and decided to pursue other beneficial opportunities in the food
industry. Therefore, the Company decided to utilize a new food broker.
During this transition period (August and September, 1997) the
Company had a lapse of promotions which caused sales to decline. The
Company is dependent upon its food brokers to promote sales of its
products to supermarkets; however, the Company is not required to
utilize such food brokers and has established relationships in the industry
based on the background of its principals.
The Company does not presently have it's own manufacturing facilities,
but plans to construct one from the anticipated proceeds of the Offering.
Management believes that manufacturing it's own product would enable
the Company to increase it's profit margins and participate more fully in
"price competitive" marketing which is common in the retail
marketplace. Concurrent with the construction of a plant facility, the
Company anticipates that both it's direct expenses and general and
administrative expenses will increase as the Company adds a full-time
work force. There can be no assurances that the Company will be able
to increase revenue, increase gross profit margins or be profitable as a
result of these expenditures.
At June 30, 1998, the Company's financial statements included an asset
of $134,729 of slotting fees, which are payments to a supermarket to
obtain shelf space for the Company's products. The slotting fees do not
ensure continued availability of shelf space for the Company's products.
The slotting fees have been capitalized and are being amortized over
three (3) years. Management periodically reviews these slotting fees to
determine whether their economic benefit has been impaired and should,
therefore, be reserved for or written off.
Results of Operations
- ---------------------
Three Months Ended June 30, 1998 as Compared to June 30, 1997
- --------------------------------------------------------
The Company had net sales of $254,000 for the three months ended
June 30, 1998 as compared to $375,000 for the three months ended
June 30, 1997, a decrease of $121,000 (32%). The decrease is
attributed to the Company's inability to participate in store promotions
due to its working capital deficiencies.
Costs of sales decreased during the three months ended June 30, 1998
to $203,000 from $344,000 in the three months ended June 30, 1997, a
decrease of $141,000 (41%). The decrease is due to the Company's
decreased volume for the comparative periods. As a percentage of net
sales, cost of sales decreased to 80% for the three months ended June 30,
1998 from 92% for the three months ended June 30, 1997.
Operating expenses increased to $124,000 for the three months ended
June 30, 1998, as opposed to $54,000 for the three months ended June
30, 1997, an increase of $70,000 (130%). The increase in operating
expenses is partially attributable to increased selling costs incurred by
the Company to try to maintain market share.
Amortization expenses for the three months ended June 30, 1998
increased $4,000 (29%) to $18,000 as compared to $14,000 for the
three months ended June 30, 1997. The increase is attributable to
increased slotting fees incurred for the procurement of retail shelf space.
The Company had a net loss of $92,000 for the three months ended June
30, 1998 as opposed to $36,000 for the three months ended June 30,
1997, an increase of $56,000 (156%).
Year Ended March 31, 1998 as Compared to Year Ended March 31,
1997
- ----------------------------------------------------------
The Company had net sales of $1,343,000 for fiscal 1998 as compared
to $1,450,000 for fiscal 1997, a decrease of $107,000 (7%). The
decrease is attributed to the Company's lack of working capital.
Also, the Company was unable to participate in many store promotions
due to the loss of its principal food broker during fiscal 1998.
Cost of sales increased $227,000 or 23% to $1,199,000 for fiscal 1998
from $972,000 for fiscal 1997. As a percentage of net sales, cost of
sales increased to 89% for fiscal 1998 from 67% in fiscal 1997. These
increases are attributed to price promotions by the Company in order to
maintain market share during fiscal 1998.
Operating expenses were $427,000 for fiscal 1998 as compared to
$407,000 in fiscal 1997, an increase of $20,000 (5%).
Amortization expenses were $57,000 for fiscal 1998 as compared to
$47,000 for fiscal 1997, an increase of $10,000 (21%). The increase is
attributed to additional slotting fees capitalized during fiscal 1998.
The Company had a net loss of $340,000 in fiscal 1998, compared to a
profit of $20,000 for fiscal 1997, a decrease of $360,000 (1,800%)
Liquidity and Capital Resources
- --------------------------------
At June 30, 1998, the Company had a cash overdraft of $15,000, a
decrease in the overdraft of $6,000 from the end of fiscal 1998. The
Company generated cash flows from operations of $82,000 for the three
months ended June 30, 1998. It used $73,000 of these cash flows to
pay for slotting fees for the procurement of retail shelf space. The
Company also spent an additional $6,000 on registration costs for its
planned public offering of stock. At June 30, 1998, the Company had a
working capital deficit of $878,801.
At the end of fiscal 1998, the Company had a cash overdraft of $21,000 as
opposed to a cash balance of $2,000 at the end of fiscal 1997. In July
1997, the Company sold 1,600,000 shares of it's common stock for
$400,000 in cash. The Company also received $55,000 in loans from its
principal shareholder. The Company used funds for operations
($263,000), for slotting fees ($58,000), for note payments relating to the
purchase of the Silver Star trade name ($77,000) and for registration
costs ($80,000).
Cash at the end of fiscal 1997 was $2,000, a decrease of $3,000 from
the end of fiscal 1996. Cash flows from operations amounted to
$187,000. Proceeds from marketable securities amounted to $21,000.
These increases were offset primarily by expenditures for slotting fees
($73,000), debt service on the trade name purchase ($111,000),
payments for stock margin purchases ($16,000) and repayments of
loans from a stockholder ($11,000).
In August 1998, the Company completed a bridge financing whereby it
netted proceeds of $616,000. The bridge financing consisted of 28
units, each unit comprised of a promissory note in the principle amount
of $25,000, 2,000 shares of the Company's common stock and warrants
to purchase 2,000 share of the Company's common stock. The
Company used $410,000 of the proceeds to repurchase 1,600,000
shares of the Company's common stock which were sold in a private
placement in July 1997, leaving the Company $216,000 for working
capital purposes.
Management believes the bridge financing in conjunction with the
Company's planned initial public offering would give the Company
sufficient working capital to fund its operations and expansion plans for
the next twelve months, although there can be no assurance of the
Company's successful stock offering.
Year 2000
- ---------
Many computer systems and software products worldwide and
throughout all industries will not function properly as the Year 2000
approaches unless changes, due to a once common programming
standard that represents years using only the last two digits. The
Company believes that its current systems are Year 2000 compliant.
The Company intends to ensure that all modifications made to its
operating systems as it adds a manufacturing facility will be Year 2000
compliant.
BUSINESS
The Company
- -----------
Silver Star Foods, Inc. (the "Company") is a distributor of a wide
range of pre-packaged frozen pasta products in the New York
metropolitan area. The Company sells its products such as ravioli and
tortellini, primarily to supermarkets. The Company intends to raise
additional equity in order to establish a manufacturing facility. The
Company believes, although there can be no assurance, that acquiring
manufacturing capacity and entering into agreements with additional
sales representatives will enable it to expand its customer base to
supermarket chains and small distributors.
Historical Background
- ---------------------
In 1930, the grandfather of the Company's President opened a pasta
shop in Brooklyn, New York under the name Silver Star Ravioli &
Macaroni Co., Inc., ("SSRM"). During the next twenty years, SSRM
developed an excellent reputation for its hand-made pasta around New
York. In the early 1950's, SSRM expanded by opening a 25,000 square
foot factory with one of the first mechanized ravioli machines. With
increased production capabilities, SSRM was able to supply large
supermarket chains with its food products. During this time, SSRM
distributed its food products to a number of grocery chains and
numerous independent stores in the five boroughs of New York and
Long Island. In addition to retail outlet stores, SSRM opened
institutional accounts that included airlines and cruise ships. SSRM also
expanded its geographic area and, with a select network of brokers,
began to distribute its food products to the tri-state area, in addition to
upstate New York, Philadelphia, Baltimore, Florida, Arizona and
California. During this time, SSRM was owned and operated by
members of the Trotta family, including Michael Trotta, the Company's
President, Louis Trotta, the Company's Vice-President, and Vincent
Trotta, who serves as an advisor to the Company. Sales for 1986-1989,
exceeded $9,000,000 on an annualized basis.
By the late 1980's, SSRM's manufacturing equipment was outdated.
Competitors with newer factories and equipment were able to produce
products at lower cost and on a more flexible schedule. As a result,
sales margins suffered. SSRM's attempts to upgrade the facility, which
was over thirty years old, were ineffective. Debts incurred in connection
with the attempted upgrade eventually led to the bankruptcy of SSRM.
In 1995, Michael Trotta formed the Company under the name Silver
Star Ravioli. The Company changed its name to Silver Star Foods in
July 1997. The Company, which had been using the Silver Star
trademark since it was formed, acquired the trademark from Vincent
Trotta in 1997 for $205,000 and acquired the right to use Vincent
Trotta's name in connection with its promotions in April 1998.
Industry Overview
- ------------------
Today, retail pasta products sales in the United States total over
$500 million. [as published in the trade magazine, Modern Grocer].
Management believes that the appeal of frozen pasta products to
American consumers has increased since the 1980's and shows no sign
of abating.
The Company believes that the U.S. retail market for frozen pasta is
growing and fragmented. The Company believes that the growth in the
frozen pasta category has been aided by several factors including both
the growth in popularity of frozen foods and the changing consumer
taste preferences to favor distinctive, high quality, healthy foods. The
Company further believes that consumers are demanding more healthful
food products as they learn more about the importance of one's diet in a
healthy lifestyle. For example, the U.S. Surgeon General has
recommended that consumers lower the percentage of calories from fat
in their diets at no more than 30% (from the existing 37% average) and
the U.S. Department of Agriculture recommends that 60-70% of
Americans' daily caloric intake come from complex carbohydrates.
Consequently, much of consumers' demand for more healthful food
products is focused on lowering the fat content of their diets and
increasing their intake of complex carbohydrates. The Company
believes that the sale of pasta, which is generally low in fat and high in
complex carbohydrates, is benefitting from the trend towards healthier
eating.
No assurance can be given that the frozen pasta market will continue
to expand. Nor can there be any assurance that current levels of public
attention to personal health, fitness and diet or current perceptions of
healthfulness associated with pasta and pasta sauces will continue in the
future. In particular, the public perception of the healthfulness
associated with pasta-based meals may decline due to a recent study by
the Center for Science in the Public Interest finding high fat content in
cheese and cream-based pastas and pasta sauces. Similarly, sales of beef
ravioli will not be aided by the increased demand for healthy foods.
Additionally, as the Company expands to different regions of the
United States, the Company may encounter differing public perceptions
and concerns about health and diet. This may adversely impact the
Company's marketing and expansion strategy and cause it to incur
greater expenses in promoting its products.
Sales and Distribution
- ----------------------
The Company primarily sells it products through sales
representatives, known in the industry as food brokers. The Company
currently has representative agreements with four food brokers. The
Company pays its food brokers a commission which ranges from 3-5%
of the net amount received from customers on all sales in the respective
brokers territory. The Company's brokers service the New York City
metropolitan area, New Jersey/Eastern Pennsylvania/Maryland and
Florida. The broker for the New York area served as broker on 97% of the
Company's sales. The agreement with the New York broker can be
terminated by either party at any time. The other agreements contain
termination provisions as well. Although the Company believes it could
replace its food brokers, the loss of a food broker could have a material
adverse effect on the Company, particularly in the short term.
The primary function of the food broker is to act as a liaison between
the manufacturer and the Company's customers. Working with
Company management, the broker will place advertisements in the
supermarket circular and arrange "specials" or discounts on the
Company's products. If the Company determines that it desires to place
its product in a supermarket chain, the broker will negotiate for the
payment by the Company of a "slotting fee," which is a fee that a
potential supplier must pay to obtain shelf space for a product in the
supermarket chain. The Company believes that such "slotting fee" has
a beneficial life of three (3) years. However, payment of a slotting fee
does not ensure continued shelf space availability for the Company's
product. The Company intends, although there can be no assurance it
will be able to, to establish relationships with additional food brokers in
order to expand into other regions. Food brokers are particularly
helpful when expanding into new geographic markets because a single
broker may have existing relationships with numerous supermarkets.
The Company recently entered into an agreement with Kelly Clarke,
Inc., a food broker that works with club stores such as Costco and Price
Club. The Company plans to package its products in a manner that
would be suitable to club stores. However, the Company believes that it
will not be able to effectively service club store customers until it has
established a manufacturing facility. The Company has no plans to make
any sales to club store customers at this time, and there can be no
assurance that the Company will be able to sell its products to club store
customers in the future, even if it established a manufacturing facility.
The food brokers generally arrange sales to supermarket chains.
These supermarkets then either place an order with the broker or with
distributors, who then immediately place orders with the Company.
There is not a significant difference in pricing or delivery procedures
based on whether the supermarket uses a distributor.
According to a report by A.C. Nielson & Co., 1997 sales of the
Company's products accounted for approximately 7.5% of the frozen
pasta market among supermarkets in the New York Metropolitan area.
Sales to these supermarket chains (directly or through distributors)
account for virtually all of the Company's revenue. For the three
months ended June 30, 1998, the Company's five largest customers
accounted for approximately 97% of its sales. These customers consist
of two supermarket chains and three distributors who resell the
Company's products primarily to other supermarket chains. During
1997, one of the two supermarkets, Pathmark Stores, Inc. changed the way they
place orders and are now utilizing one of the three distributors.
The Company's management does not anticipate that this change will
affect the price or quantity of the Company's products purchased by
Pathmark supermarkets. The Company has no long term agreements
with any of its customers, and the loss of any of these large customers
could have a material adverse affect on the Company.
The Company sells to a number of supermarkets chains that have
stores (operating under the same name or through affiliated companies)
in other regions. These supermarkets have buying departments in each
region. The Company would have to establish relationships with
different buyers to sell its products in these regions. However,
Company management believes that its relationships in the New York
region with these supermarket chains will aide it in establishing
relationships with supermarket buyers in other regions.
Generally, competition for shelf space in supermarkets is intense.
Companies that supply to supermarkets, are often required to pay large
slotting fees in order to commence business with a supermarket chain.
The Company believes that such slotting fees have a beneficial life of
three (3) years. Food suppliers may attempt to use their relationship
with the supermarket or pricing arrangements to obtain the optimum
shelf space. This usually creates an advantage for larger companies who
are able to obtain the most visible shelf space. The Company's
management believes that this advantage is reduced in frozen products,
all of which must be stored in a freezer section. Additionally, the
Company believes that its use of coupons and store circulars, along with
customer loyalty, will enable it to overcome the advantage of the larger
companies in obtaining optimum shelf space.
The Company also sells its products to distributors who resell the
frozen pasta to delicatessens, grocery stores and restaurants. Currently,
these customers make up approximately 2% of the Company's business.
In the past year, the Company has sold frozen pasta to four different
small distributors, located in California, New York, Nevada, Arizona
and Florida. The Company intends, although there can be no assurance
that it will be able to do so, to establish relationships with additional
distributors in order to expand into other regions and markets.
If the Company is able to acquire a manufacturing facility, it intends
to pursue institutional customers, such as hotels, restaurants, schools,
nursing homes, hospitals and prisons. These institutional customers buy
products in large volumes. Without a manufacturing facility, the
Company does not have the flexibility or the cost structure to pursue
such customers.
Upon obtaining additional financing, the Company intends to employ
a marketing and sales director. This individual will be in charge of
establishing relationships with additional food brokers and distributors, and
for pursuing institutional customers and other retail customers.
The Company's success depends upon an effective system of
distribution for its products. The Company utilizes central warehouse
delivery for all its supermarket customers. In central warehouse
delivery, the products are delivered to a warehouse for a chain of
supermarkets for later delivery by the chain to its stores. To distribute
its products to other parts of the country (which is a small part of the
Company's business at the present time), the Company uses local and
regional distributors. In any event, the Company uses common carriers
to deliver its products to these distributors. The dependence on other
companies for delivery of its products poses a risk to the Company.
While this method of delivery has been reliable and available at
acceptable rates thus far, there can be no assurance that the Company
will continue to be able to negotiate acceptable freight rates in the future
and that delivery will not be disrupted for reasons including, but not
limited to, adverse weather, natural disasters or labor disputes in the
trucking industry.
Marketing
- ----------
An emphasis of the Company's marketing to both its customers and
consumers is on the association of the Silver Star name with a quality
pasta product produced by a family operated business. The Company's
promotional materials and packaging for some of its products contain a
short statement from Vincent Trotta, Sr. which, among other things,
offers a personal guarantee of quality, thanks customers for loyalty, and
explains the Silver Star's products are "true to a family tradition." On all
products, the Company has begun to use the name "Aversa Silver Star"
after the founder of SSRM and the grandfather of the Company's
President. The Company expects to continue to use the Aversa Silver
Star name as it enters new markets because management believes that
customers are more likely to associate that name with Italian food
products from a family operated business.
The Company hopes to use advertising, primarily in supermarket
circulars, to familiarize customers with the Silver Star name. The
Company hopes positive experiences with the Company's product will
create customer loyalty and promote repeat business.
The Company also intends to capitalize on the nutritional value of its
products. As is now required by law, the Company discloses the
nutritional information about its products on the packaging. The
Company believes that the nutritional value of some of its frozen pasta
compares favorably with many other alternatives among frozen foods.
The Company's most effective advertising to consumers is by placing
advertisements in supermarket circulars, which are available to
customers of a supermarket upon entering a store. Occasionally,
supermarkets distribute the circular via direct mail or as in enclosure in
newspapers. The advertisements in the circular inform the consumer of
any specials or discounts that are available on the Company's products
and may contain coupons. The advertisement in the circular is arranged
by the food broker and generally are placed approximately eight weeks
in advance.
The Company's Products
- ----------------------
The Company specializes in stuffed pasta, a form of pasta that
includes stuffing such as ricotta, eggs and cheese, among others. The
products that the Company currently distributes are: jumbo cheese
round 13 oz. ravioli; mini cheese round 16 oz. ravioli; mini square
cheese 16 oz. ravioli; mini square meat 16 oz. ravioli; tortellini,
including meat and cheese, 16 oz.; cavatelli, 16 oz.; gnocchi 16 oz.; six
count manicotti, 19 oz.; and twelve count stuffed shells, 21 oz.
The Company's most popular product, mini square cheese ravioli
should provide a meal for 5 people and is sold at a suggested retail price
of $3.19, usually advertised for half price at $1.59.
Like plain pasta, the Company's products must be boiled before they
should be eaten. The Company does not sell its products with
ready-made pasta sauce, although it may do so in the future.
The Company's products are packaged in polyethylene bags. The
Company may in the future market its ravioli in a box, which was the
packaging method utilized by SSRM for its most popular ravioli
products. The current packaging includes the nutritional information,
ingredients and cooking directions. Also prominently featured is the
Silver Star trademark. The packaging for some of the Company's
products contains a statement from Vincent Trotta Sr. guaranteeing the
quality of the Company's products. The packaging design is based on
SSRM's packaging. The manufacturer of the polyethylene bags ships
them directly to the Company's suppliers.
The Company has no current plans to introduce new products, and is
unlikely to do so in the near future. If the Company is able establish a
manufacturing facility, it intends to introduce new products and new
packaging of existing products. For example, the Company intends to
create packaging aimed at club stores, including a "bulk pack," which
will be a single oversize pack weighing approximately 3 lbs.
Additionally, the Company may sell its products with a ready made
sauce. The sauce could be produced by a private manufacturer to the
Company's specifications, or the Company could enter into a joint
venture arrangement with an existing pasta sauce manufacturer.
Principal Suppliers and Ingredients
- -----------------------------------
Currently, the Company uses two private label manufacturers to
prepare and package all of its products. The Company provides these
manufacturers with recipes for its products. Each of the Company's
manufacturers use a quick freeze process to ensure that the product is
frozen while it is still fresh. The Company believes that it could replace
its suppliers on similar terms, however the loss of any supplier could
have a material adverse affect on the Company, particularly in the short
term.
The ingredients used by the Company's suppliers are primarily flour,
eggs and water. Depending on the type of stuffed pasta the Company is
producing, the ingredients may include whole milk ricotta, eggs,
Romano cheese, mozzarella, parsley, salt, pepper, meat filling chopped
meat, onions and spices. The Company's suppliers buys flour from
Congra and Ricotta from either Pollyo or Sorrento. Other ingredients
come from local distributors and manufactures. If the Company
establishes a manufacturing facility, it intends to purchase directly from
these suppliers.
The Company's two production agreements are with Mount Rose
Ravioli and Macaroni Co. and Savignano Foods Corporation. Each
supplier is able to fill the Company's product orders in approximately
seven days.
Mount Rose Ravioli and Macaroni Co. On June 13, 1995, the
following Company executed an agreement which provides that Mount
Rose will manufacture and package the following "Silver Star" products:
Square Meat and Cheese Ravioli -- bag 24/16 oz.
Square Meat and Cheese Ravioli -- box 18/16 oz.
Round Cheese Ravioli 24/13 oz.
Cavatelli 24/16 oz.
Cheese and Meat Tortellini 24/16 oz.
Gnocchi 24/16 oz.
Six Count Manicotti 10/19 oz.
Twelve Count Stuffed Shells 10/21 oz.
The agreement is terminable at any time by either party. The
agreement provides that the product is to be paid for by either cashiers
or certified check at the time the order is placed. The above prices, in
accordance with the agreement, are to be reviewed every six months
with respect to raw material and packaging costs. An increase or
decrease in such costs will be passed on to the Company. The agreement
further provides that in the event that the agreement is terminated the
Company gives Mount Rose permission to use any packaging left on
hand at the time of termination in any way it chooses.
Savignano Food Corporation. Savignano has agreed to manufacture
the following "Silver Star" products for the Company:
Large Round Cheese Ravioli 24/13 oz.
Cavatelli 24/16 oz.
Mini Round Cheese Ravioli 24/16 oz.
The agreement, executed on June 12, 1995, provides that these
prices are contingent with the Company having monthly sales of 7,000
cases of Ravioli and 3,000 cases of Cavatelli. In accordance with the
agreement, if the Company fails to purchase from Savignano the
above-mentioned volume over a 52-week period, Savignano has the
right to raise prices relative to the Company's lack of demand. As per
the agreement, the Company cannot order less than 250 cases of each of
the above products.
The agreement also provides that Savignano is responsible for all
bags, labels and corrugated boxes needed to manufacture and package
the product at Savignano sole expense. However, Savignano is not
responsible for art work, plates, or dyes of any kind needed for product
packaging. The agreement further provides that either party may
terminate the agreement upon 120 days notice. The Company agreed
that Savignano was to be the exclusive producer for the above products.
The agreement's prices are to be reviewed every three months.
Manufacturing
- -------------
Currently, the Company does not have any manufacturing ability.
The Company intends to establish a manufacturing facility. The
Company has no present plans for the establishment of a facility but is
considering either (i) acquiring through merger or acquisition a
company with an existing facility, which may require an investment to
update the facility, (ii) constructing and equipping a new facility or (iii)
leasing an existing facility, which is likely to require an investment to
update or improve the facility.
The Company's intends to establish a facility that would be
20,000-25,000 square feet. The Company requires a facility with
capability for drainage and refrigeration. The facility will be built with
the intent on receiving a USDA plant number with the capability of
processing meat and chicken, in addition to cheese. Only after USDA
inspection and approval will it be able to process meat and chicken.
However, it does not require USDA approval to process cheese. The
Company would like to locate the facility in the New York area to be
near the majority of its customers. The Company intends to equip the
facility with new equipment that has the capacity to produce its
specialized products quickly and efficiently.
Management believes that manufacturing capacity will allow the
Company to produce its goods at a lower cost, particularly if it is able to
increase volume. Furthermore, manufacturing capacity is likely to allow
the Company greater flexibility in its product mix and enable it to
require less advance notice of its orders.
Competition
- -----------
In the pasta market, the Company competes with national, regional, and
local pasta manufacturers and specialty stores. Many of these
competitors are larger, more established and have greater financial and
other resources than the Company. Competition in the pasta industry is
based on product quality, brand name awareness, brand loyalty and
price. Non-frozen, non-stuffed pasta, such as spaghetti is significantly
less expensive then the Company's products and is less expensive to
ship and to store. The Company also faces competition from fresh,
refrigerated pasta, which is sold by, among others, Contadina, produced
by Nestle Fresh Foods, Co., and DiGorno, produced by Kraft General
Foods, Inc. Such companies have significantly more resources than the
Company. Refrigerated pasta is significantly more expensive than
frozen pasta.
The Company competes directly with a number of regional and
national frozen pasta producers, including Celentano and Italian Village,
who are in most markets nationwide. In the New York market, the
Company competes with these national and several regional pasta
makers. The following table, which is based on reports prepared by
A.C. Nielson and Co., sets forth the market share in the New York retail
frozen pasta market based on sales in supermarkets.
<TABLE>
<S> <C> <C> <C>
Company(1) Market Share(%)(2) Percentage of
Chains(3) Items(4)
- ------------- ------------------ ------------- ---------
Italian Village 26.0 100 12
Celantano 24.0 100 15
Andrea (Savignano) 8.5 100 8
Silver Star 7.5 80 3
Severoli 5.0 100 6
Mount Rose 4.5 50 6
</TABLE>
(1) Among the Company's competitors are Mount Rose and
Savignano (Savignano's products are sold under the
trade name "Andrea's"), who are the Company's two
suppliers.
(2) Market share is based on sales of frozen pasta products in the
New York City metropolitan area, which includes Long Island, parts of
New Jersey, and other surrounding counties.
(3) This is the percentage of the supermarket chains in the New York
area that carry each listed company's products. Currently, King Cullen,
Shop Rite, Pathmark, Grand Union and Key Food, all of the five chains
with over fifty stores, carry the Company's products.
(4) Items are the number of items that each company has on sale in
the supermarkets.
Competition for shelf space in grocery stores is intense and poses
great difficulty for smaller food companies. Other Competitors with
significant economic and other resources could, at any time, enter the
frozen pasta industry. Supermarkets could choose to carry such
companies products in addition to or instead of the Company's products
due to existing relationships with the makers of such products.
Trademark
- ---------
The Company purchased the "Silver Star" trademark from Vincent
Trotta in 1997 for $205,000. Mr. Trotta had acquired the trademark
from SSRM. SSRM had registered the trademark with the U.S. Patent
and Trademark Office, however, the Company failed to renew the
application and the trademark protection has lapsed. The Company has
filed a new application for registration. Even if the application is
approved, there can be no assurance as to the degree of protection its
registered trademark may afford the Company.
Expansion Strategy
- ------------------
The Company's expansion strategy is dependant on obtaining
additional financing to establish a manufacturing facility. The
Company's management believes that it will be able to produce its
products at a lower cost, which will allow it more flexibility in pricing.
Management believes that discount pricing is often necessary to gain
customers and establish market share.
Management believes that the manufacturing facility will also allow
the Company greater flexibility in adjusting its product mix or packaging
because the Company has direct control of the allocation of labor and
machinery at its facilities. Similarly, the management expects to be able
to respond to customer orders more quickly. There can be no assurance
that establishing a facility will be a more cost effective, efficient or
quicker way for the Company to acquire its products.
Management believes that the advantages of the manufacturing
facility will allow the Company to pursue institutional customers such as
hotels, nursing homes, schools and hospitals, and discount buyers such
as club stores. The Company may also offer to manufacture pasta
products for other companies on a private label basis. There can be no
assurance that institutional or private label markets for the Company's
products will develop.
The Company intends to establish relationships with additional food
brokers and small distributors. Food brokers are particularly helpful
when expanding into new geographic markets because a single broker
may have existing relationships with numerous supermarkets. The
Company intends to expand into areas where pasta products are
popular. Initially, the Company intends to focus expansion in the
Northeast, in markets such as Philadelphia and Boston, where it already has
some customers, and then expand into cities such as Washington,
Baltimore and Chicago.
The Company believes that the frozen pasta market is a growing
market, and that the market for stuffed pasta is likely to grow as well.
The Company believes, although there can be no assurance, that its
marketing will put it in position to take advantage of this growth.
Employees
- ---------
As of August 30, 1998, the Company had 2 full-time employees.
Legal Proceedings
- -----------------
The Company is not currently subject to any material legal
proceedings.
MANAGEMENT
Directors and Executive Officers
- --------------------------------
The following table sets forth certain information with respect to the
directors and executive officers of the company:
<TABLE>
<S> <C> <C>
Name Age Position
Michael Trotta 33 President/CEO/Secretary/
Director
Louis Trotta 37 Vice President, Director
Vincent Trotta 70 Director
Barry Sherman 53 Director
Dennis Lore 48 Director
</TABLE>
Each director is elected for a period of one (1) year at the Company's
annual meeting of shareholders and serves until the next such meeting
and until his or her successor is duly elected and qualified. Directors
may be re-elected annually without limitation. Officers are appointed
by, and serve at the discretion of, the Board of Directors. The
Company's directors do not presently receive any compensation for their
services as directors' but it is contemplated that directors will be granted
options pursuant to the Plan. In addition, for a period of three years
following the date of this Prospectus, the Representative shall have the
right, at its option, to designate one director or observer to the Board of
Directors, which director shall be reasonably acceptable to the Board of
Directors.
Set forth below is a biographical description of each director and
executive officer of the Company based on information supplied by each
of them.
Michael Trotta has served as the Company's Chief Executive Officer,
President, Secretary and Director since its formation in 1995. Prior to
founding the Company, Mr. Trotta served as Vice-President
Manufacturing of Little Italy Frozen Foods, Inc. from 1993 to 1994.
Mr. Trotta worked for SSRM from 1987 to 1992 in various positions
including Plant Manager and Vice President. Initially, Mr. Trotta was
employed in the Shipping and Receiving department. Shortly thereafter,
Mr. Trotta was named Plant Manager where he supervised over 30
employees and was responsible for all the plant's daily operations. Mr.
Trotta was Vice-President of SSRM when it filed bankruptcy and was
subsequently liquidated in 1992. In December 1996, Mr. Trotta filed
for personal bankruptcy, primarily as a result of debts incurred
personally in connection with SSRM. Mr. Trotta emerged from
bankruptcy protection in March 1997. Mr. Trotta is Louis Trotta's
brother and Vincent Trotta's son.
Louis Trotta has served as the Company's Vice President since
August 1997, Director since September, 1998 and as a salesmen from its
formation until January 1997. From March 1994 to August 1995, Mr.
Trotta worked at the Trotta Brothers Pork Store in Old Bridge, New
Jersey. From March 1993 to February 1994 Mr. Trotta worked for
Little Italy Foods as a shipping receiver. Mr. Trotta worked for SSRM
from 1979 to 1985 and 1986 to 1992. Mr. Trotta's positions included
Plant Manager and Quality Control Manager. Mr. Trotta also managed
SSRM's Food Service sales unit. Mr. Trotta is Michael Trotta's brother
and Vincent Trotta's son.
Vincent Trotta has served as a director of the Company since
September 1998. He has been involved in the food business since 1949
when he became SSRM's production manager. Mr. Trotta has also
served as SSRM's Plant Manager and President. He retired from SSRM
in 1979. Mr. Trotta, who is a high school graduate, is the father of
Michael Trotta and Louis Trotta.
Barry Sherman has served as a director of the Company since
September 1998. Mr. Sherman has been involved in the retail sales
and brokerage business for nearly fifty years. For 32 years, Mr.
Sherman was employed by Waldbaum's, where he served as Vice
President of Merchandising for 15 years. Mr. Sherman is currently
Vice President of Red Apple Supermarkets. He commenced
employment with Red Apple Supermarkets in July, 1997. From
1993 until his employment with Red Apple Supermarkets, he was a
principal of RDI/Enterprise Marketing, which was involved in the
food brokerage industry.
Dennis Lore has served as a director of the Company since
September 1998. Presently, Mr. Lore is the owner and operator of
Pineview Development Company, a developer of real estate in
Upstate New York. Mr. Lore was the principal owner of RDO
Brokerage from 1987 to 1993. RDO Brokerage specializes in frozen
food sales and marketing in the New York metropolitan area. From 1985 to
1987, he was a partner in Norlen Futuran Brokerage Co.,
specializing in dairy and fast food accounts in the New York
metropolitan area. Prior to such time, he worked for M.W. Houck
food brokers in such capacities as Director of Sales and Marketing,
Liaison between manufacturers, brokers and customers and account
manager.
Committees of the Board
- -----------------------
The Board of Directors intends to formalize the creation of a
Compensation Committee, which will be comprised of at least two (2)
independent directors. The Compensation Committee will have (i) full
power and authority to interpret the provisions of, and supervise the
administration of, the Plan and (ii) the authority to review all
compensation matters relating to the Company. The Compensation
Committee has not yet been formed and therefore, has not yet
formulated compensation policies for senior management and executive
officers. However, it is anticipated that the Compensation Committee
will develop a company-wide program covering all employees and that
the goals of such program will be to attract, maintain, and motivate the
Company's employees. It is further anticipated that one of the aspects of
the program will be to link an employee's compensation to his or her
performance, and that the grant of stock options or other awards related
to the price of the Common Shares will be used in order to make an
employee's compensation consistent with shareholders' gains. It is
expected that salaries will be set competitively relative to the frozen
food industry and that individual experience and performance will be
considered in setting salaries.
The Board of Directors intends to formalize the creation of an Audit
Committee, which shall be comprised of at least two independent
directors. The Audit Committee will be charged with reviewing the
following matters and advising and consulting with the entire Board of
Directors with respect thereto: (i) the preparation of the Company's
annual financial statements in collaboration with the Company's
chartered accountants; (ii) annual review of the financial statements and
annual report of the Company; and (iii) all contracts between the
Company and the officers, directors and other affiliates thereof. The
Audit Committee, like most independent committees of public
companies, does not have explicit authority to veto any actions of the
entire Board of Directors relating to the foregoing or other matters;
however, the Company's senior management, recognizing their own
fiduciary duty to the Company and its stockholders, is committed not to
take any action contrary to the recommendation of the Audit Committee
in any matter within the scope of its review.
Executive Compensation
- ----------------------
The following table sets forth the annual and long-term
compensation for services in all capabilities to the Company.
<TABLE>
<S> <C> <C> <C>
Name and Principal Position Year Salary Other
Compensation
Michael Trotta, Chief Executive
Officer, President and Secretary 1998 $104,000(1) Stock Options of
1997 $ 44,658(2)
----------------
Louis Trotta, Vice President 1998 $52,000(1) Stock
Options of
1997 $27,756(2)
----------------
</TABLE>
(1) Based on employment agreements entered into in September,
1998.
(2) For fiscal year ending March 31, 1998.
The Company has no retirement, pension or profit sharing
program for the benefit of its directors, officers or other employees but
the Board of Directors may recommend one or more such programs for
adoption in the future.
Director Compensation
- ---------------------
Directors of the Company who are not salaried officers will
receive no fee for attending each Board meeting or meeting of a
committee of the Board. All directors will be reimbursed for their
reasonable out-of-pocket expenses incurred in connection with attending
Board and committee meetings. In the future, the Company reserves the
right to issue shares of the Company's common stock to non-officer
Board members for their agreement to become a Board member.
Employment Agreements
- ---------------------
Michael Trotta entered into a three (3) year employment agreement
with the Company on September 15, 1998. Mr. Trotta's compensation
under the Agreement is $104,000 during the initial annual term with
increases in the succeeding two (2) years of the term equal to the greater
of 10% from the previous year's salary or the cost of living adjustment
recognized in the area where Mr. Trotta resides. Mr. Trotta is also
entitled to reimbursement of substantiated expenses, a monthly car
expense equal to $750 per month and ________ stock options of the
Company
Louis Trotta entered into a three (3) year employment agreement
with the Company on September 15, 1998. Mr. Trotta's compensation
under the Agreement is $52,000 during the initial annual term with
increases in the succeeding two (2) years of the term equal to the greater
of 10% from the previous year's salary or the cost of living adjustment
recognized in the area where Mr. Trotta resides. Mr. Trotta is also
entitled to reimbursement of substantiated expenses, a monthly car
expense equal to $400 per month and ________ stock options of the
Company
Option Plan
- -----------
The Plan will be administered by the Compensation Committee or
the Board of Directors, which will determine among other things, those
individuals who shall receive options, the time period during which the
options may be partially or fully exercised, the number of Common
Shares issuable upon the exercise of the options and the option exercise
price.
The Plan is effective for a period for ten years, expiring in 2008.
Options to acquire 500,000 Common Shares may be granted to officers,
directors, consultants, key employees, advisors and similar parties who
provide their skills and expertise to the Company. The Plan is designed
to enable management to attract and retain qualified and competent
directors, employees, consultants and independent contractors. Options
granted under the Plan may be exercisable for up to ten years, generally
require a minimum two year vesting period, and shall be at an exercise
price all as determined by the Board of Directors provided that,
pursuant to the terms of the Underwriting Agreement between the
Company and the Underwriters, the exercise price of any options may
not be less than the fair market value of the Common Shares on the date
of the grant. Options are non-transferable, and are exercisable only be
the participant (or by his or her guardian or legal representative) during
his or her lifetime or by his or her legal representatives following death.
Upon a change in control of the Company, the acceleration date of any
options that were granted but not otherwise exercisable accelerates to
the date of the Change in Control. Change in control includes (i) the
sale of substantially all of the assets of the Company and merger or
consolidation with another Company, or (ii) a majority of the members
of the Board of Directors changes other than be election by the
Shareholders pursuant to Board of Directors solicitation or by vacancies
filled by the Board of Directors caused by death or resignation of such
person.
If a participant ceases affiliation with the Company, by reason of
death, permanent disability or retirement at or after age 65, the option
remains exercisable for one year from such occurrence but not beyond the
option's expiration date. Other types of termination allow the
participant 90 days to exercise the option, except for termination for
cause which results in immediate termination of the option.
The Company has agreed with the Representative not to grant any
options under the Plan at less than 100% of the fair market value of the
Common Shares at the date of the grant of the option.
Any unexercised options that expire or that terminate upon an
employee's ceasing to be employed by the Company become available
again for issuance under the Plan, subject to applicable securities
regulation.
The Plan may be terminated or amended at any time by the Board of
Directors, except that the number of Common Shares reserved for
issuance upon the exercise of options granted under the Plan may not be
exercised without the consent of the shareholders of the Company.
Certain Relationships and Related Transactions
- ----------------------------------------------
In June 1997, two unaffiliated investors each invested $200,000
in the Company. In consideration of their investment, each received a
sixteen and two thirds (16 2/3%) percent share of the Company at the
time of such investments. In April 1998 and May, 1998, respectively, the
Company repurchased such shares and agreed to repay such investors a
total of $410,000 within six (6) months of the date of each repurchase.
Such $410,000 amount has been paid from the proceeds of the bridge
financing.
In July 1997, the Company purchased the Silver Star trademark
from Vincent Trotta, the father of the Company's President and majority
shareholder. The purchase price was $205,000. Of such amount, it
included a payment of $55,000 to Michael Trotta, an officer, director
and majority shareholder of the Company; and an assignment of
accounts receivable of the Company equaling $82,000 to Louis Trotta,
(an officer and director of the Company) and his brother, Vincent Trotta
Jr.
As of September 1998, the Company raised $700,000 pursuant to
a Confidential Private Offering Memorandum. There were twenty (20)
investors in such Private Placement Memorandum. The Offering
consisted of twenty-eight (28) units, with each Unit consisting of a
$25,000 Promissory Note, 2,000 shares of Common Stock (56,000
shares in the aggregate) and 2,000 Redeemable Common Stock
Purchase Warrants (56,000 Warrants in the aggregate). Each Unit sold
for $25,000.00. The Warrants entitled the holder thereof to purchase
one share of common stock of the Company at the purchase price of
$6.00 per share at any time commencing one (1) year after the effective
date of the Company's proposed initial public offering until five (5) years
from the effective date of the Confidential Private Offering
Memorandum. The Warrants are subject to redemption by the Company at a price
of $.25 per Warrant at any time commencing one
(1) year from the Effective Date, upon notice of not less than thirty (30)
days, mailed within ten (10) days, after the average of the last bid prices
of the Common Stock of the Company, if and as listed on a national
securities exchange, for a period of ten (10) consecutive trading days
has equaled or exceeded $8.50. The Offering was made solely to
persons who qualified as accredited investors as defined under
Regulation D Rule 501 under the Act. The Shares and Warrants offered
in the Confidential Private Placement Memorandum are not to be
registered under this Registration Statement.
In the future, the Company will present all proposed transactions
between the Company and its officers, directors or 5% stockholders,
and their affiliates to the Board of Directors for its consideration and
approval. Any such transaction will require approval by a majority of the
disinterested directors and such transactions will be on terms no less
favorable than those available to disinterested third parties.
Limitations on Personal Liability of Directors and Officers
- -----------------------------------------------------------
The New York Business Corporation Law, in general, allows
corporations to indemnify their directors and officers against expenses
(including attorney's fees), judgments, fines and settlement amounts
actually and reasonably incurred by such person in connection with suits
or proceedings, if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests
of the corporation. In the case of a criminal action, the director or
officer must have had no reasonable cause to believe that person's
conduct was unlawful. Under current law, no indemnification may be
made if in connection with a proceeding or in the right of the
corporation in which the director or officer was adjudged to be liable to
the corporation or that person derived an improper personal benefit.
The Company's Certificate of Incorporation and By-Laws
provided that the Company shall indemnify its directors and officers to
the fullest extent permitted by New York Law. The Company will enter
into an indemnification agreement with each of its directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the
Company 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.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding
beneficial ownership of the Company's Common Stock as of the date of
this Prospectus by (i) each person known by the Company to be the beneficial
owner of more than 5% of the outstanding Common Stock,
(ii) by each officer and director of the Company, and (iii) by all officers
and directors of the Company as a group. Unless otherwise indicated,
each of the following persons has sole voting and investment power with
respect to the shares of Common Stock set forth opposite his name.
<TABLE>
<S> <C> <C> <C>
Percent of Percent of
Amount and Nature of Class Before Class After
Name of Beneficial Owner Beneficial Ownership(1) Offering Offering
- ------------------------ ----------------------- --------- ---------
Michael Trotta (2) 3,200,000 98.28% 73.46%
All Officers and Directors as a
Group 3,200,000 98.28% 73.46%
- -------------------
</TABLE>
(1) The persons named in the table have sole voting and investment
power with respect to all shares of Common Stock.
(2) The address for Michael Trotta is 7520 Avenue V, Brooklyn,
New York 11234.
DESCRIPTION OF SECURITIES
The following summary description of the Securities is qualified
in its entirety by reference to the Company's Certificate of
Incorporation, as amended, and its By-laws, copies of which have been
filed as Exhibits to the Registration Statement of which this Prospectus
is a part.
The Company is authorized to issue 15,000,000 shares of
Common Stock, $.0001 par value per share. As of the date of this
Prospectus, prior to giving effect to the securities to be issued in the
Offering, there are 3,256,000 shares of Common Stock outstanding and
held by 21 stockholders of record. An additional 556,000 shares of
Common Stock are reserved for issuance upon the exercise of various
options and warrants outstanding as of the date of this Prospectus.
Common Stock
- ------------
Holders of shares of Common Stock are entitled to one vote per
share of Common Stock on all matters submitted to a vote of
stockholders of the Company and to receive dividends when declared by
the Board of Directors from funds legally available therefor. Upon the
liquidation, dissolution or winding up of the Company, holders of shares
of Common Stock are entitled to share ratably in any assets available for
distribution to stockholders after payment of all obligations of the
Company and after provision has been made with respect to each class
of stock, if any, having preference over the Common Stock. Holders of
shares of Common Stock do not have cumulative voting rights or
preemptive, subscription or conversion rights. See "Risk Factors -
Dividend Policy."
Preferred Stock
- ---------------
The Company's Certificate of Incorporation authorizes the issuance of
1,000,000 shares of "blank check" preferred stock, par value $.001, with
such designations, rights and preferences as may be determined from
time to time by the Board of Directors. Accordingly, the Board of
Directors is empowered, without stockholder approval, to issue
preferred stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the voting power or other rights of
the holders of the Company's Common Stock. In the event of issuance,
the preferred stock could be utilized, under certain circumstances, as a
method of discouraging, delaying or preventing a change in control of
the Company. Although the Company has no present intention to issue
any shares of its preferred stock, there can be no assurance that the
Company will not do so in the future. See "Description of Securities -
Preferred Stock."
Warrants
- --------
The following is a brief summary of certain provisions of the A
Warrants, but such summary does not purport to be complete and is
qualified in all respects by reference to the actual text of the form of
Warrant.
Warrant. The Company is issuing 2,200,000 A warrants as part of
this initial public offering. The Company intends to apply to NASDAQ
for listing of the A Warrants, although there can be no assurance that
NASDAQ will allow the Warrant to be listed.
Exercise Price and Terms. Each A Warrant entitles the holder thereof
to purchase, at any time commencing one year after the effective date of
this Registration Statement, through four years from the Effective Date
as set forth above, one share of Common Stock at a price of $6.00 per
share, subject to adjustment in accordance with the anti-dilution and
other provisions referred to below. The A Warrants expire on the fourth
anniversary of the Effective Date unless extended at the sole option of
the Board of Directors of the Company. The holder of any A Warrant
may exercise such A Warrant by surrendering the certificate
representing the A Warrant to the Warrant Agent, with the subscription
form on the reverse side of such certificate properly completed and
executed, together with payment of the exercise price. The A Warrants
may be exercised at any time in whole or in part at the applicable exercise
price until the date of expiration of the A Warrants. No
fractional shares will be issued upon the exercise of the Warrants.
Commencing on a date which shall be twelve months from the
Effective Date, the A Warrants are subject to redemption at $0.01 per A
Warrant upon written notice of not less than thirty (30) days; provided,
that in order for the Company to call the A Warrants for early
redemption, the average of the closing bid price of the Company's
Common Stock, as then listed on NASDAQ or another national
securities exchange, over the ten (10) consecutive trading days ending
within ten (10) days of the notice of redemption, must equal or exceed
$8.50. In the event the Company exercises the right to redeem the A
Warrants, such A Warrants will be exercisable until the close of business
on the date of redemption fixed in such notice. If any A Warrant called
for redemption is not exercised by such time, it will cease to be
exercisable and the holder will be entitled only to the redemption price.
The exercise price of the A Warrants bears no relation to any
objective criteria of value and should in no event be regarded as an
indication of any future market price of the securities offered hereby.
Adjustments. The exercise price and the number of shares of
Common Stock purchasable upon the exercise of the Warrants are
subject to adjustment upon the occurrence of certain events, including
stock dividends, stock splits, combinations or reclassification of the
Common Stock, or sale by the Company of shares of its Common Stock
(or other securities convertible into or exercisable for Common Stock)
at a price per share or share equivalent below the then-applicable
exercise price of the Warrants or the then-current market price of the
Common Stock. Additionally, an adjustment would be made in the case
of a reclassification or exchange of Common Stock, consolidation or
merger of the Company with or into another corporation, or sale of all
or substantially all of the assets of the Company, in order to enable
Warrant holders to acquire the kind and number of shares of stock or
other securities or property receivable in such event by a holder of that
number of shares of Common Stock that would have been issued upon
exercise of the Warrant immediately prior to such event. No adjustments
will be made until the cumulative adjustments in the exercise price per
share amount to $1.00 or more. No adjustment to the exercise price of
the shares subject to the Warrants will be made for dividends (other than
stock dividends), if any, paid on the Common Stock or upon exercise of
the Warrants, the Underwriter's Warrants or any other warrants
outstanding as of the date of this Prospectus.
Transfer, Exchange and Exercise. The Warrants are in registered
form and may be presented to the Transfer and Warrant Agent for
transfer, exchange or exercise at any time after the Effective Date and
prior to their expiration date four years from the date of this Prospectus,
at which time the Warrants become wholly void and of no value. If a market
for the Warrants develops, the holder may sell the Warrants
instead of exercising them. There can be no assurance, however, that a
market for the Warrants will develop or continue. If the Company is
unable to qualify for sale in particular states the Common Stock
underlying the Warrants, holders of the Warrants residing in such states
and desiring to exercise the Warrants will have no choice but to sell such
Warrants or allow them to expire. See "Description of Securities --
Transfer and Warrant Agent."
Warrant holder Not a Shareholder. The Warrants do not confer upon
holders any voting or any other rights as stockholders of the Company.
SHARES ELIGIBLE FOR FUTURE SALE
All Shares of common stock being offered hereby will be
immediately tradable without restriction or further registration under the
Securities Act. The outstanding Shares of common stock include
3,256,000 Shares of common stock outstanding deemed to be
"restricted securities," as that term is defined under Rule 144
promulgated under the Securities Act, in that such Shares were
purchased or acquired by such stockholders of the Company in
transactions not involving a public offering, and, as such, may only be
sold pursuant to a registration statement under the Securities Act, in
compliance with the exemption provisions of Rule 144, or pursuant to
another exemption under the Securities Act. Substantially all of such
restricted Shares of common stock are eligible for sale under Rule 144,
subject to the volume limitations prescribed by the Rule.
In general, under Rule 144 as currently in effect, a shareholder,
including an affiliate of the Company, may sell shares of Common Stock
after at least one year has elapsed since such shares were acquired from
the Company or an affiliate of the Company. The number of shares of
Common Stock which may be sold within any three-month period is
limited to the greater of one percent of the then outstanding Common
Stock or the average weekly trading volume in the Common Stock
during the four calendar weeks preceding the date on which notice of
such sale was filed under Rule 144. Certain other requirements of Rule
144 concerning availability of public information, manner of sale and
notice of sale must also be satisfied. In addition, a shareholder who is
not an affiliate of the Company (and who has not been an affiliate of the
Company for 90 days prior to the sale) and who has beneficially owned
shares acquired from the Company or an affiliate of the Company for
over two years may resell the shares of Common Stock without
compliance with the foregoing requirements under Rule 144.
No predictions can be made as to the effect, if any, that future
sales of shares, or the availability of shares for future sale, will have on
the market price of the Common Stock prevailing from time to time.
Nevertheless, sales of substantial amounts of Common Stock, or the
perception that such sales may occur, could have a material adverse effect on
prevailing market prices and could impair the Company's
ability to raise capital through the sale of its equity securities.
Transfer and Warrant Agent
- ---------------------------
The Company has retained American Stock Transfer & Trust
Company as Transfer Agent for its Common Stock.
UNDERWRITING
The Underwriter has agreed, subject to the terms of the
Underwriting agreement, to purchase from the Company, 1,100,000
shares of Common Stock and 2,200,000 Warrants. The Underwriting
Agreement provides that the obligations of the Underwriter are subject
to certain conditions precedent.
The Company has been advised by the Underwriter that the
Underwriter proposes initially to offer the Common Stock and Warrants
to the public at the public offering price per share of Common Stock and
per Warrant set forth on the cover of this Prospectus and to certain
dealers, who are members of the National Association of Securities
Dealers, Inc. ("NASD").
The Underwriter Agreement provides further that the
Underwriter will receive a non-accountable expense allowance of 3% of
the aggregate public offering price of the Common Stock and Warrants
sold hereunder, including any Common Stock and Warrants sold
pursuant to the Over-allotment Option (which allowance amounts to
$189,750 or $218,213 if the Over-allotment Option is exercised in full).
The Company has also agreed to pay all expenses in connection with
qualifying the Common Stock and Warrants offered hereby for sale
under the laws of such states the Underwriter may designate, including
expenses of counsel retained for such purpose by the Underwriter.
The Company has also granted the Over-allotment Option to the
Underwriter, exercisable during the 45-day period commencing on the
Effective Date, to purchase up to a maximum of 165,000 Shares of
Common Stock and 330,000 Warrants at the public offering price less
the underwriting discounts, commissions and expense allowance. The
Underwriter may exercise this option only to cover over-allotments in
the sale of the Common Stock and Warrants, if any. The 165,000 shares
of Common Stock included in such Over-allotment Option will be
purchased by the Underwriter for the account of the Company.
The Company has agreed to sell to the Underwriter, for nominal
consideration, the Underwriter's Warrants to purchase an amount equal
to 10% of the number of Shares of Common Stock and 10% of the
Warrants sold to the public. The Underwriter's Warrants shall be
exercisable for a period of five (5) years commencing _____________
at an exercise price equal to 120% of the offering price of the Shares of
Common Stock and warrants sold to the public in the offering. The
Underwriter's Warrants are not transferable prior to ____________, except to
officers of the Underwriter, members of the selling group and
their officers, directors and partners.
The Company has also granted certain registration rights to
holders of the Underwriter's Warrants. These registration rights
generally provide that in the event the Company files a post-effective
amendment to the Registration Statement of which this Prospectus
forms a part, or any new registration statement covering any securities
of the Company, the Company will include in such registration statement
such information as may be required to permit a public offering of the
Underwriter's Warrant, the Warrant's issuable upon exercise of the
Underwriter's Warrant, and the Common Stock issuable upon the
exercise of the Underwriter's Warrant and upon exercise of the Warrants
underlying the Underwriter's Warrant (the "Registrable Securities"). If
the offering of the Company securities is underwritten, the number of
Registrable Securities to be included in the offering is subject to
limitation by the managing underwriter of the offering; provided,
however, in the event of such limitation, the Company shall file a new
registration statement covering the excluded Registrable Securities, at
the Company's expense, within six months after completion of the
underwritten offering. In addition, the Company is required to file a
post-effective amendment to the Registration Statement of which this
Prospectus forms a part or a new registration statement registering the
Registrable Securities upon the request of the holder(s) of at least 50%
of the Underwriter's Warrant and/or the Common Stock underlying the
Underwriter's Warrants and the Warrants issuable upon exercise of the
Underwriter's Warrant.
For the life of the Underwriter's Warrants, the holders thereof are
given, at nominal costs, the opportunity to profit from a rise in the
market price of the Company's securities with a resulting dilution in the
interest of other stockholders. Further, the holders may be expected to
exercise the Underwriter's Warrants at a time when the Company would
in all likelihood be able to obtain equity capital on terms more favorable
than those provided in the Underwriter's Warrants.
The Company has agreed to retain the Underwriter as a financial
consultant to the Company for a period of three (3) years after the
Offering for an aggregate fee of $108,000 ($36,000 per year) payable in
full upon consummation of the Offering.
In addition, the Company has agreed to compensate the
Underwriter upon consummation of certain material transactions
initiated by the Underwriter during the three-year period commencing
on the Effective Date. These transactions include (i) any transaction
originated by the Underwriter, other than in the ordinary course of
business, whereby, directly or indirectly, control of, or a material interest
in, the Company or any of its businesses or assets is transferred for
consideration (stock, cash of other property), (ii) any transaction
originated by the Underwriter whereby the Company acquires any other
company or the assets of or interest in any other company, or (iii) any
joint venture or line of credit arranged by the Underwriter for the benefit
of the Company. In the event of the foregoing, the Underwriter will be
paid 5% of the first $4,000,000; 4% of the next $1,000,000; 3% of the
next $1,000,000; and 2% of the excess over $6,000,000 of the
consideration received by the Company in any of the above-described
transactions. In addition, in the event the Underwriter originates a line
of credit with a lender or a corporate partner, or the Underwriter
introduces the Company to a joint venture partner or customer and sales
develop as a result of the introduction, the Company and the
Underwriter will mutually agree on a satisfactory fee and the terms of
payment of such fee.
In addition, subject to the rules of the NASD, the Company has
agreed to engage the Underwriter as warrant solicitation agent, in
connection with which it would be entitled to a 5% fee upon exercise of
the Warrants. In accordance with the NASD Notice to Members 81-38,
no fee shall be paid: (i) upon the exercise where the market price of the
underlying Common Stock is lower than the exercise price; (ii) for the
exercise of the Warrants is held in any discretionary account; (iii) upon
the exercise of Warrants where the disclosure of compensation
arrangements has not been made and where documents have not been
provided to customers not as part of the original Offering and at the
time of exercise; or (iv) upon the exercise of Warrants in unsolicited
transactions. Notwithstanding the foregoing, no fees will be paid to the
Underwriter or any other NASD member upon exercise of the Warrants
within the first twelve months after the Effective Date. Unless granted
an exemption by the Commission from Regulation M under the
Securities Exchange Act of 1934, the Underwriter will be prohibited
from engaging in any market-making activities with regard to the
Company's securities for the period from five business days (or other
such applicable periods as Regulation M may provide) prior to any
solicitation of the exercise of the Warrants until the later of the
termination of such termination of such solicitation activity or the
termination (by waiver or otherwise) of any right the Underwriter may
have to receive a fee. As a result, the Underwriter may be unable to
continue to provide a market for the Company's securities during certain
periods while the Warrants are exercisable. If the Underwriter has
engaged in any of the activities prohibited by Regulation M during the
periods described above, the Underwriter undertakes to waive
unconditionally its right to receive a commission on the exercise of such
warrants.
The Company has agreed, for a period of two years from the
Effective Date, not to issue any shares of Common Stock or Preferred Stock or
any warrants, options or other rights to purchase Common
Stock or Preferred Stock without the prior written consent of the
Underwriter. Notwithstanding the foregoing, the Company may, without
the consent of the Underwriter, issue shares of Common Stock upon
exercise of any warrants or options outstanding on the date hereof or to
be outstanding upon completion of the Offering pursuant to the terms
hereof.
The Underwriting Agreement provides for reciprocal
indemnification between the Company and the Underwriter against
liabilities in connection with the Offering, including liabilities under the
Securities Act. To the extent this section may purport to provide
exculpation from possible liabilities arising under the federal securities
laws, the Company has been advised that it is the opinion of the
Commission that such indemnification is against public policy and is
therefore unenforceable.
The Company has agreed, if requested by the Underwriter at any
time within two years after consummation of the Offering, to nominate
and use its best efforts to elect a designee of the Underwriter as a
director of the Company, or, at the Underwriter's option, as a
non-voting advisor to the Company's Board of Directors. Such designee
may be a director, officer, partner, employee or affiliate of the
Underwriter. As of the Effective Date, the Underwriter has not
determined whether to exercise such right to designate a director, nor
has it identified such individual, and the Underwriter has advised the
Company that it does not intend to designate a director immediately
following consummation of the Offering.
The foregoing is a brief summary of certain provisions of the
Underwriting Agreement and related agreements and does not purport
to be a complete statement of terms and conditions. Copies of the
Underwriting Agreement and the other documents described above are
on file with the Commission as exhibits to the Registration Statement of
which this Prospectus is a part. See "Additional Information."
Determination of Offering Price
- -------------------------------
Prior to this Offering, there has been no public market for the
Common Stock and Warrants. Accordingly, the offering or exercise
price of such securities being offered hereby was determined, in large
part, by negotiation between the Company and the Underwriter. Factors
considered in determining such prices, in addition to prevailing market
conditions, included the history of and the prospects for the industries in
which the Company competes, the prospects of the Company, an
assessment of the earnings, net worth and financial conditions of the
Company, and such other factors as were deemed relevant, including an
evaluation of management and the general economic climate. The prices
should in no event, however, be regarded as an indication of any future
market price of the Common Stock or Warrants.
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon
for the Company by Richard I. Anslow, Esq., Freehold, New Jersey
07728. Certain legal matters will be passed upon for the Underwriter by
Gersten, Savage, Kaplowitz & Fredericks, LLP, New York, New York
10022. Mr. Anslow has previously acted as counsel to the Underwriter.
EXPERTS
The audited balance sheets of the Company as at March 31, 1998
and March 31, 1997, and the related Statements of Operations,
Statements of Stockholders' Equity and Statements of Cash Flows have
been included herein and in the Registration Statement in reliance upon
the report, appearing elsewhere herein, of Weinick Sanders Leventhal
& Co., LLP, independent certified public accountants, and upon the
authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration
Statement under the Act with respect to the Common Shares offered
hereby. This Prospectus omits certain information contained in the
Registration Statement and the exhibits thereto, and references are made
to the Registration Statement and the exhibits thereto for further
information with respect to the Company and the Common Shares
offered hereby. Statements contained herein concerning the provisions
of any documents are not necessarily complete, and in each instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such statement is qualified in its entirety
by such reference. The Registration Statement, including exhibits and
schedules filed therewith, may be inspected without charge at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the
regional offices of the Commission located at 7 World Trade Center,
Suite 1300, New York, New York 10048, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained from the Public Reference
Section of the Commission, Judiciary Plaza, 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and its public reference facilities
in New York, New York and Chicago, Illinois upon payment of the
prescribed fees. Electronic registration statements (as well as proxy
reports and other information when filed) filed through the Electronic
Data Gathering, Analysis, and Retrieval System are publicly available
through the Commission's Website (http://www.sec.gov). At the date
hereof, the Company was not a reporting company under the Exchange
Act.
PART II
ITEM 24. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The New York Business Corporation Law, in general, allows
corporations to indemnify their directors and officers against expenses
(including attorneys' fees), judgments, fines and settlement amounts
actually and reasonably incurred by such person in connection with suits
or proceedings, if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests
of the corporation. In the case of a criminal action, the director or
officer must have had no reasonable cause to believe that person's
conduct was unlawful. Under current law, no indemnification may be
made if in connection with a proceeding or in the right of the
corporation in which the director or officer was adjudged to be liable to
the corporation or that person derived an improper personal benefit.
The Company's Certificate of Incorporation and By-Laws provide
that the Company shall indemnify its directors and officers to the fullest
extent permitted by New York Law. The Company will enter into an
indemnification agreement with each of its directors and officers.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND
DISTRIBUTION
The following table sets forth the estimated expenses to be borne
by the Company (also referred to herein as the Registrant) in connection
with the issuance and distribution of the Securities pursuant to the
Offering (other than underwriting discounts and commissions).
<TABLE>
<S> <C>
SEC registration fee $ 2,000.00
NASD filing fee $ 1,500.00
NASDAQ SmallCap Market fee $ 30,000.00
Legal fees and expenses $ 100,000.00
Accounting fees $ 60,000.00
Blue Sky fees and expenses $ 35,000.00
Printing and engraving expenses $ 60,000.00
Miscellaneous $ 11,500.00
Total fees and expenses $ 300,000.00
* To be completed by amendment.
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
The following paragraphs set forth certain information with
respect to all securities sold by the Company within the past three years
without registration under the Securities Act of 1933, as amended (the
"Securities Act"). The information includes the names of the purchasers,
the date of issuance, the title and number of securities sold and the
consideration received by the Company for the issuance of these shares.
The following securities were issued by the Company without
registration under the Securities Act by reason of the exemption from
registration afforded by the provisions of Section 4(2) thereof, as
transactions by an issuer not involving a public offering:
<TABLE>
<S> <C> <C> <C>
Name of Purchaser Date of Issuance Title and Number
of Securities Sold Consideration
- ------------------ --------------- ------------------- --------------
K & V Investments July 23, 1997 Common Stock $200,000
800,000 Shares
Daniel Kodsi July 23, 1997 Common Stock $200,000
800,000 Shares
</TABLE>
In April 1998 and May, 1998, respectively, the Company repurchased
such shares and agreed to repay such investors a total of $410,000
within six (6) months of the date of each repurchase. Such $410,000
amount has been paid from the proceeds of the bridge financing.
In September 1998, the Company completed a private placement of 28
units, with each unit consisting of a $25,000 Promissory Note, 2,000
shares of Common Stock and 2,000 Redeemable Common Stock
Purchase Warrants. Therefore, an additional 56,000 shares of Common
Stock and 56,000 Redeemable Common Stock Purchase Warrants were
issued.
ITEM 28. UNDERTAKINGS
1. The Registrant will, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement 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 20
percent 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. The Registrant will, for determining liability under the Securities Act,
treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be
the initial bona fide offering.
3. The Registrant will file a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
4. The Registrant will provide to the Underwriter at the closing
certificates in such denominations and registered in such names as
required by the Underwriter to permit prompt delivery to each
purchaser.
5. 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.
6. For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant under Rule 424(b)(1) or (4)
or 497(h) under the Act shall be deemed to be part of this registration
statement as of the time the Commission declared it effective.
SIGNATURES
Pursuant to the requirements of the 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 has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York
on the 24th day of September, 1998.
SILVER STAR FOODS, INC.
By: /s/ Michael Trotta
-------------------
Michael Trotta
Chief Executive Officer,
President and Secretary
POWER OF ATTORNEY
Pursuant to the requirements of the Act, this Registration
Statement has been signed by the following persons in the capacities and
on the dates indicated.
We, the undersigned officers and directors of SILVER STAR
FOODS, INC. hereby severally constitute and appoint Michael Trotta,
our true and lawful attorney-in-fact and agent with full power of
substitution for us in our stead, in any and all capacities, to sign any and
all amendments (including post-effective amendments) to this Registration
Statement and all documents relating thereto, and to file the
same, with all exhibits thereto and other documents in connection
therewith with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent in full power and authority to do and
perform each and every act and thing necessary or advisable to be done
in and about the premises, as fully to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent or his substitute or substitutes, any lawfully
do or cause to be done by virtue hereof.
<TABLE>
<S> <C> <C>
Signature Title Date
- ----------------- ---------------------- -------------------
/s/Michael Trotta
-----------------
Chairman of the Board of
Michael Trotta Directors, Chief Executive
Officer, President and
Secretary September 24, 1998
/s/Louis Trotta
- ----------------
Louis Trotta Vice President and September 24, 1998
Director
/s/Vincent Trotta
-----------------
Vincent Trotta Director September 24, 1998
s/s Barry Sherman
- -----------------
Barry Sherman Director September 24, 1998
s/s Dennis Lore
- ----------------
Dennis Lore Director September 24, 1998
</TABLE>
SILVER STAR FOODS, INC.
JUNE 30, 1998
I N D E X
<TABLE>
<S> <C>
Page No.
INDEPENDENT ACCOUNTANTS' REPORT . . . . . . . . . . . . . . . ........F-2
FINANCIAL STATEMENTS:
Balance Sheets as at June 30, 1998 (Unaudited)
and March 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . F-3
Statements of Operations
For the Three Months Ended June 30, 1998 and 1997 (Unaudited)
and For the Years Ended March 31, 1998 and 1997 . . . . . . . . F-4
Statements of Stockholders' Equity (Deficiency)
For the Three Months Ended June 30, 1998 (Unaudited)
and For the Years Ended March 31, 1998 and 1997 . . . . . . . . F-5
Statements of Cash Flows
For the Three Months Ended June 30, 1998 and 1997 (Unaudited)
and For the Years Ended March 31, 1998 and 1997 . . . . . . . . F-6- F-7
NOTES TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . F-8 -F-12
</TABLE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
Silver Star Foods, Inc.
We have audited the accompanying balance sheets of Silver Star Foods,
Inc. as at March 31, 1998 and 1997, and the related statements of
operations, stockholders' equity (deficiency) and cash flows for the years
then ended. 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 Silver Star Foods, Inc. ,
as at March 31, 1998 and 1997 and the results of its operations and its
cash flows for the years then ended, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the
financial statements, the Company has a working capital deficiency of
$316,443 at March 31, 1998. This condition raises substantial doubt about
the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
New York, N. Y.
July 29, 1998 (Except for Note 11, as
to which the date is August 31, 1998)
<TABLE>
SILVER STAR FOODS, INC.
BALANCE SHEETS
<S> <C>
June 30, March 31,
1998 1998
1997
(Unaudited)
----------- -------- ---------
Current assets:
Cash $ - $ - $ 2,312
Accounts receivable 32,993 103,427 10,043
Other current assets 1,000 - 566
--------- -------- ---------
Total current assets 33,993 103,427 12,921
--------- --------- ---------
Other assets:
Deferred registration costs 85,686 79,686 -
Tradename, less accumulated amortization
of $44,418, $41,001 and $27,334,
respectively 160,582 163,999 177,666
Slotting fees, less accumulated
amortization of $66,680, $63,358
and $19,708, respectively 134,729 77,051 62,292
Deposits 5,805 5,255 5,255
------- -------- -------
Total other assets 386,802 325,991 245,213
$420,795 $429,418 $258,134
------- -------- --------
------- -------- --------
LIABILITIES AND STOCKHOLDER'S EQUITY
(DEFICIENCY)
Current liabilities:
Cash overdraft $ 14,875 $ 20,937 $ -
Accounts payable 304,853 247,533 $206,978
Accrued expenses 107,810 78,771 6,500
Demand loan payable without interest 30,000 - -
Stockholder's loan 28,164 55,537 912
Note payable - tradename 17,092 17,092 93,842
Notes payable - former stockholders 410,000 - -
------- ------ -------
Total current liabilities 912,794 419,870 308,232
------- ------ -------
------- ------ -------
Commitments and contingencies - - -
Stockholder's equity (deficiency):
Common stock - $.0001 par value
Authorized - 15,000,000 shares
Issued - 4,800,000, 4,800,000 and
3,200,000 shares, respectively
Preferred stock - $.001 par value
Authorized and unissued - 1,000,000 shares 480 480 320
Paid-in capital 399,840 399,840 -
Deficit ( 482,319) ( 390,772) (50,418)
--------- ------- -------
( 81,999) 9,548 (50,098)
Less: Treasury stock at cost -
1,600,000 shares 410,000 - -
---------- ------- ---------
Total stockholder's equity (deficiency) ( 491,999) 9,548 ( 50,098)
---------- ------- ---------
$420,795 $429,418 $258,134
---------- ------- ---------
See notes to financial statements.
</TABLE>
SILVER STAR FOODS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<S> <C> <C> <C> <C>
For the Three
Months Ended For the Years Ended
June 30, March 31,
--------------------- -----------------------
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited) (Unaudited)
Net sales $254,421 $375,193 $1,343,276 $1,450,438
------- ------- --------- ---------
Costs and expenses:
Cost of sales 203,458 343,712 1,198,755 972,248
Operating expenses 124,071 53,818 426,884 407,381
Amortization 18,239 13,861 57,317 47,389
------- ------ -------- -------
Total of costs and expenses 345,768 411,391 1,682,956 1,427,018
------- ------ -------- -------
Income (loss) from operations ( 91,347) ( 36,198) ( 339,680) 23,420
-------- --------- --------- -------
Other income (expense):
Gain (loss) on investment
in securities - - - 798
Sundry expenses - - - (51)
-------- -------- ---------- -------
Total other income (expense) - - - 747
-------- -------- ---------- -------
Income (loss) before provision
for income taxes ( 91,347) ( 36,198) ( 39,680) 24,167
Provision for income taxes 200 200 674 4,610
--------- --------- ---------- ------
Net income (loss) $ 91,547) ($ 36,398) $ 340,354) $ 19,557
-------- --------- ---------- ------
--------- --------- ---------- ------
Basic earnings (loss) per share
(Note 3) ($.02) ($.01) ($.08) $.01
--------- -------- ---------- ------
--------- -------- ---------- ------
Weighted average number
of shares outstanding 3,789,011 3,200,000 4,300,274 3,200,000
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See notes to financial statements.
SILVER STAR FOODS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(DEFICIENCY)
FOR THE THREE MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
AND THE YEARS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Total
Retained Stockholders'
Common Stock Paid-In Earnings Treasury Equity
Shares Value Capital (Deficit) Stock (Deficiency)
Balance at April 1,
1996 3,200,000 $320 $ - ($69,975) $ - ($69,655)
Net income for the year
ended March 31, 1997 - - - 19,557 - 19,557
--------- ---- ------ ------- -------- ---------
Balance at March 31,
1997 3,200,000 320 - (50,418) - ( 50,098)
Issuance of common stock
for cash 1,600,000 160 399,840 - - 400,000
Net loss for the year
ended March 31, 1998 - - - (340,354) - ( 340,354)
-------- ---- ----- -------- ------- -----------
Balance at March 31,
1998 4,800,000 480 399,840 (390,772) - 9,548
Purchase of treasury stock
at cost - 1,600,000 shares - - - - ( 410,000) (410,000)
Net loss for the three
months ended June 30, 1998
(Unaudited) - - - ( 91,547) - ( 91,547)
--------- ---- ----- --------- ------- ------------
Balance at June 30, 1998
(Unaudited) 4,800,000 480 $399,840 $482,319) ($410,000)($491,999)
--------- ---- ------- -------- --------- ---------
--------- ---- ------- -------- --------- ---------
</TABLE>
See notes to financial statements.
SILVER STAR FOODS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<S> <C> <C> <C> <C>
For The Three
Months Ended For the Years Ended
June 30, March 31,
------------------- ----------------
1998 1997 1998 1997
------ ---- ---- ----
(Unaudited)(Unaudited)
Cash flows from operating
activities:
Net income (loss) ($ 91,547) ($ 36,398) ($340,354) $ 19,557
-------- ------ ------- -------
Adjustments to reconcile
net income
(loss) to net cash provided by
(used in) operating activities:
Amortization 18,239 13,861 157,317 47,389
Loss on sale of securities - - -
( 798)
Increase (decrease) in cash flows as
a result of changes in asset and
liability account balances:
Accounts receivable 70,434 ( 194,205)( 93,384) 30,061
Other current assets ( 1,000) 355 566 2,150
Deposits ( 550) - - -
Accounts payable 57,320 ( 4,851) 40,555 82,728
Accrued expenses 29,039 ( 1,800) 72,271 5,796
--------- --------- ------- -------
Total adjustment 173,482 ( 186,640) 77,325 167,326
--------- --------- ------- -------
Net cash provided by (used in)
operating activities 81,935 ( 223,038) ( 263,029) 186,883
Cash flows from investing activities:
Marketable securities - - - 20,629
Slotting fees ( 72,500) ( 44,000) ( 58,409) ( 72,500)
-------- --------- -------- --------
Net cash used in investing
activities ( 72,500) ( 44,000) ( 58,409) ( 51,871)
-------- --------- ------ -------
Cash flows from financing activities:
Cash overdraft ( 6,062) - 20,937 -
Payments to brokers for
margin purchases - - - (15,579)
Payments on notes payable
- tradename - ( 41,021) ( 76,750) (111,158)
Stockholder's loan ( 27,373) ( 912) 54,625 ( 10,714)
Proceeds of demand loan 30,000 - - -
Proceeds from sale of
common stock - 400,000 400,000 -
Expenditures for
registration costs ( 6,000) - ( 79,686) -
---------- -------- --------- -----------
Net cash provided by (used in)
financing activities ( 9,435) 358,067 319,126 ( 137,451)
---------- -------- -------- -----------
Net increase (decrease) in cash
and cash equivalents - 91,029 ( 2,312) ( 2,439)
Cash and cash equivalents
at beginning of period - 2,312 2,312 4,751
----------- ------- ------ ------
Cash and cash equivalents
at end of period $ - $ 93,341 $ - $ 2,312
---------- -------- -------- ----------
---------- -------- -------- ----------
</TABLE>
See notes to financial statements.
SILVER STAR FOODS, INC.
STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<S> <C> <C> <C> <C>
For The Three
Months Ended For the Years Ended
June 30, March 31,
--------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited)(Unaudited)
Supplemental Disclosures of
Cash Flow Information:
Cash paid during the period:
Income taxes $ - $ - $ - $ 814
------ -------- --------- --------
Interest $ - $ - $ - $ 51
------ -------- --------- --------
Supplemental Schedule of Non-Cash
Investing and Financing Transactions:
Expenditures for offering costs
resulting in the following:
Deferred registration costs $ 6,000 $ - $ - $ -
-------- -------- ---------- ---------
Accrued expense $ 6,000 $ - $ - $ -
-------- -------- ---------- ---------
Acquisition of treasury stock
resulting in the following:
Notes payable -
former stockholders $410,000 $ - $ - $ -
-------- --------- ----------- -----------
Treasury stock - at cost $410,000 $ - $ - $ -
-------- --------- ---------- ----------
See notes to financial statements.
</TABLE>
SILVER STAR FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED) AND MARCH 31, 1998 AND 1997
(The Information As At And For The Three
Months Ended June 30, 1998 AND 1997 Is Unaudited)
NOTE 1 - GOING CONCERN.
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplate continuation of the Company as a going concern. The
Company has a working capital deficiency of $316,443 at March 31,
1998. At June 30, 1998, the Company has a working capital deficiency
of $468,801.
The Company has negotiated a letter of intent with an underwriter for an
initial public offering of its common stock and has filed a preliminary
draft of a registration statement for said offering with the Securities and
Exchange Commission. If the Company were to successfully complete
this offering, it would receive in excess of $5,000,000 after all offering
costs.
The Company has also undertaken a bridge financing with its
underwriter as placement agent which will net the Company an
additional $216,000 for working capital purposes.
Based on these events, management believes that the Company has the
ability to continue operations during the subsequent fiscal year. The
accompanying financial statements do not include any adjustments
relating to the recoverability and classification of asset values or the
amount and classification of liabilities that might result should the
Company be unable to continue as a going concern.
NOTE 2 - DESCRIPTION OF BUSINESS.
Silver Star Foods, Inc. ("the Company") was incorporated in the State
of New York on March 28, 1995 under the name of Silver Star Ravioli
Co., Inc. On July 21, 1997, the Company filed a Certificate of
Amendment of Incorporation authorizing the Company to issue an aggregate of
up to 15,000,000 shares, $.0001 par value.
On July 23, 1997, the Board of Directors resolved to approve a 75,000
to 1 stock split for all outstanding shares of common stock prior to that
date. The common stock presented in the accompanying financial
statements have been retroactively adjusted to reflect this split.
NOTE 2 - DESCRIPTION OF BUSINESS. (Continued)
On July 28, 1997, the Board of Directors resolved to change the name
of the Company to Silver Star Foods, Inc. and filed a Certificate of
Amendment of the Certificate of Incorporation to that effect.
The Company is presently a distributor of frozen pasta food products
which it markets under the "Silver Star" name. The Company acquires
its prepared pre-packaged products from two local manufacturers.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES.
(a) Uses of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
(b) Cash:
The Company places its temporary cash investments with high credit
quality financial institutions, which at times may be in excess of the
FDIC insurance limit.
(c) Intangible Assets:
Intangible assets, consisting of a tradename and certain slotting fees,
are periodically reviewed by management to evaluate their future
economic benefits or potential impairments which may affect their
recorded values to the Company. The tradename and slotting fees are
being amortized on straight-line basis over 15 and 3 years, respectively.
(d) Income Taxes:
The Company has adopted Statement of Financial Accounting
Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes" at its
inception. Under SFAS 109, the deferred tax provision is determined
under the liability method. Under this method, deferred tax assets and
liabilities are recognized based on the differences between the financial
statement carrying amount and the tax basis of assets and liabilities using
presently enacted tax rates.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES. (Continued)
(e) Earnings Per Share:
The income (loss) per share for the three months ended June 30,
1998 and 1997 and the years ended March 31, 1998 and 1997 has been
calculated based on the weighted average number of common shares
outstanding, giving effect retroactively for the 75,000 to 1 stock split on
July 23, 1997 to the beginning of all periods presented. As of June 30,
1998, the Company had no common stock equivalents issued or
outstanding. Therefore, basic and diluted earnings per share are the
same.
(f) Unaudited Financial Statements:
The financial statements as at and for the three months ended June
30, 1998 and 1997 and the information in notes to the financial
statements pertaining thereto are unaudited, but include all adjustments,
consisting only of normal recurring adjustments, and disclosures which
management of the Company considers necessary for a fair presentation
of its financial position as at June 30, 1998 and 1997 and the results of
its operations, statement of stockholders' equity and cash flows for the
three months then ended.
The results of operations for the three month periods ending June 30,
1998 and 1997 are not necessarily indicative of the results that may be
expected for the full year.
NOTE 4 - ACCOUNTS RECEIVABLE.
Accounts receivable consist of trade receivables arising in the
ordinary course of business and are presented net of estimated discounts
and allowances of $-0-, $3,500 and $21,651 as at June 30, 1998 and
March 31, 1998 and 1997, respectively. Management continually
reviews its trade receivable credit risk and has adequately allowed for
potential losses.
NOTE 5 - TRADENAME.
The Company acquired the rights to the "Silver Star" tradename
from a related party of the principle stockholder pursuant to an
agreement which was formalized in July 1997 at a cost of $205,000.
The Company has been using the tradename since it's inception.
NOTE 6 - INCOME TAXES.
At March 31, 1996, the Company had a net operating loss
carryforward amounting to approximately $70,000 available to reduce
future taxable income which expires in the year 2011. The Company
utilized approximately $24,000 of this loss carryforward to eliminate
federal income tax obligations for the year ended March 31, 1997.
Accordingly, the Company has a net operating loss carryforward
available for income tax purposes of approximately $381,000 at March
31, 1998, which upon recognition may result in future tax benefits of
approximately $130,000. At March 31, 1998 management is unable to
determine if the utilization of the future tax benefit is more likely than
not and accordingly, the asset of approximately $130,000 has been fully
reserved.
A reconciliation of the statutory income tax effective rate is as
follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
For the Three For the
Months Ended Years Ended
June 30, March 31,
-------------- -------------
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited)
Federal statutory rate (34.0%)(34.0%) (25.0%) 15.0%
State and local taxes - 1.0 0.2 19.1
Creation (utilization) of net
operating loss carryforward 34.0 34.0 25.0 (15.0 )
----- ----- ----- ------
Effective tax rate - % 1.0% 0.2% 19.1%
----- ----- ----- ------
----- ----- ----- ------
</TABLE>
NOTE 7 - NOTES PAYABLE - FORMER STOCKHOLDERS.
On April 21, and May 16, 1998, the Company reacquired 800,000 and
800,000 shares, respectively, of its common stock from two investors at
a total cost of $410,000. The shares were originally sold in private
placements in July 1997. The notes require the Company to pay the
balance due in full by the six month anniversary date of each note. The
Company intends to repay the notes from the proceeds of the bridge
financing, as discussed in Note 12.
NOTE 8 - COMMITMENTS AND CONTINGENCIES.
The Company leases office space from its principal shareholder on a
month to month basis at a cost of $1,000 per month and presently has
no leasehold obligations.
The Company has entered into two manufacturing agreements for
the procurement of product. The first agreement calls for price
adjustments semiannually based on cost increases if any, relating to raw
materials The second agreement requires the Company to meet certain
minimum annual purchase quantities. Failure to meet these minimums
could result in price increases to the Company. The Company has never
achieved the minimum quantities required.
NOTE 9 - TRANSACTIONS WITH MAJOR CUSTOMERS AND SUPPLIERS.
During the three months ended June 30, 1998, the Company had
sales to five customers which comprised approximately 98% of the
Company's total sales for the period. For the year ended March 31,
1997, these customers accounted for approximately 97% of the
Company's total sales. The loss of any of these customers could be
expected to have a material impact on the Company's results of operations in
future periods.
Since its inception, the Company has purchased all of its products
from two suppliers. The loss of either of these suppliers could have a
material impact on the Company's ability to obtain product for resale to
its customers in future periods.
NOTE 10 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS.
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130 (SFAS 130), "Reporting
Comprehensive Income", No. 131 (SFAS 131), "Disclosures about
Segments of an Enterprise and Related Information", No. 132 (SFAS
132), Employer's Disclosures about Pension and other Postretirement
Benefits and No. 133 (SFAS 133), Accounting for Derivative
Instruments and Hedging Activities. Management does not believe that
the effect of implementing these new standards will be material to the
Company's financial position, results of operations and cash flows.
NOTE 11 - YEAR 2000.
The Company recognizes the need to ensure its operations will not
be adversely affected by year 2000 software failures. The Company is
communicating with suppliers, customers and others with which it does
business to coordinate year 2000 conversion. The cost of achieving
compliance is estimated to be a minor increase over the cost of normal
software upgrades and replacements.
NOTE 12 - SUBSEQUENT EVENT.
The Company is finalizing completion of a bridge financing, whereby
it raised an aggregate of $700,000 and received net proceeds of
$616,000 after underwriter's commissions and before other related
expenses. The Company plans to use $410,000 of said proceeds to
satisfy the notes payable incurred in the purchase of 800,000 shares of
the Company's common stock in April and May, 1998.
In addition to the promissory note in the principal sum of $25,000,
each of the 28 units sold includes 2,000 shares of the Company's
common stock and 2,000 redeemable common stock purchase warrants.
The promissory notes bear no interest and are payable at the earlier of
the completion of the Company's planned initial public offering of its
common stock, or June 23, 1999.
EXHIBITS INDEX
3.1 Certificate of Incorporation and Certificates of Amendments
of the Certificate of Incorporation
5. Opinion of Richard I. Anslow, Esq. of Richard I.Anslow &
Associates
10.1 Employment Agreement - Michael Trotta
10.2 Employment Agreement - Vincent Trotta
23.1 Independent Auditors Consent
23.2 Consent of Richard I. Anslow & Associates
27 Financial Data Schedule
99.1 Agreement between Vincent Trotta and Michael Trotta and
Mount Rose Ravioli and Mac Co.,Inc.
99.2 Manufacturers Agreement for Private Label Companies
99.3 Warrant for Purchase of Common Stock of Silver Star Foods, Inc.
99.4 Selected Dealer Agreement
99.5 Repurchase Agreement for K&V Investments
EXHIBIT 3.1
- ------------
CERTIFICATE OF INCORPORATION
OF
SILVER STAR RAVIOLI CO., INC.
Under Section 402 of the Business Corporation Law
The undersigned, for the purpose of forming a corporation pursuant
to the Business Corporation Law of the State of New York, does hereby
certify and set forth:
FIRST: The name of the corporation is:
SILVER STAR RAVIOLI CO., INC.
SECOND: The purpose for which the corporation is formed are as
follows:
To engage in any lawful act or activity for which corporations may
be formed under the Business Corporation Law, provided that the
corporation is not formed to engage in any act or activity which
requires that consent or approval of any State official, department,
board, agency or other body, without such consent or approval first
being obtained.
For the accomplishment of the aforesaid purposes, and in further
hereof, the corporation shall have and may exercise all of the powers
conferred by the Business Corporation Law of the State of New York
upon corporations formed thereunder, subject to any limitations
contained in Article 2 of said law, or in accordance with the provisions
of any other statute of the State of New York.
THIRD: The office of the corporation within the State of New
York shall be located in the County of Kings.
FOURTH: The aggregate number of shares which the corporation
shall have the authority to issue is Two Hundred (200), all of which shall
be without par value.
FIFTH: The Secretary of State is designated as agent of the
corporation upon whom process against it may be served. The post
office address to which the Secretary of State shall mail a copy of any
process against the corporation served upon him is:
2446 East 73rd Street
Brooklyn, New York 11234
IN WITNESS WHEREOF, This Certificate of Incorporation has
been signed this 28th days of March, 1995, by the undersigned, who
affirms that the statements made herein are true under the penalties of
perjury.
/s/ Fred Larison
- ------------------
Fred Larison
307 Hamilton Street
Albany, New York 12210
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION OF
SILVER STAR RAVIOLI CO., INC.
Under Section 805 of the Business Corporation Law
IT IS HEREBY CERTIFIED THAT:
(1) The name of the corporation is: SILVER STAR RAVIOLI
CO., INC.
(2) The Certificate of Incorporation was filed at the Department of
State of the State of New York on the 28th day of March, 1995.
(3) The Certificate of Incorporation is hereby amended to effect a
change in the aggregate number of shares the corporation has the
authority to issue. The corporation is currently to issue 200 shares with
no par value, none of which are issued or outstanding. The unissued
shares shall be changed into 15,000,000 shares at a par value of .0001 at
a rate of 75,000 for 1.
Article FOURTH of the Certificate is amended to read as follows:
"FOURTH: The aggregate number of shares which the
corporation shall have the authority to issue is 15,000,000 shares, all of
which are to with .0001 par value."
(4) The amendment to the Certificate of Incorporation was
authorized by written consent of the Board of Directors and followed by
written consent of the sole incorporator there being no shareholders of
record, and no subscribers for shares whose subscriptions have been
accepted.
IN WITNESS WHEREOF, this certificate has been subscribed this
18th day of July, 1997, by the undersigned, who affirms that the
statements made herein are true under the penalties of perjury.
/s/ Michael Trotta
- --------------------
Michael Trotta, President
/s/ Michael Trotta
- --------------------
Michael Trotta, Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
SILVER STAR RAVIOLI CO., INC.
Under Section 805 of the Business Corporation Law
We, the undersigned, being respectfully the President and Secretary
of SILVER STAR RAVIOLI CO., INC. do hereby certify:
1. The name of the Corporation is:
SILVER STAR RAVIOLI CO.,INC.
2. The Certificate of Incorporation was filed by the Department of
State on the twenty-eighth day of March, 1995.
3. The Certificate of Incorporation is hereby amended to change
the corporations name.
Paragraph One of the Certificate of Incorporation is amended to
read as follows:
"1. The name of the corporation is: SILVER STAR FOODS,
INC."
4. This amendment to the Certificate of Incorporation was
authorized by a vote of the Board of Directors followed by
written consent of the Sole Shareholder.
IN WITNESS WHEREOF, we have signed this Certificate of
Amendment this 28th day of July, 1997, and hereby affirm the truth of
the statements contained herein under the penalties of perjury.
/s/ Michael Trotta
- --------------------
Michael Trotta, Sole Shareholder
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION
OF SILVER STAR FOODS, INC.
(Under Section 805 of the Business Corporation Law)
IT IS HEREBY CERTIFIED THAT:
FIRST: The name of the corporation is: SILVER STAR FOODS,
INC. The corporation was formed under the name Silver Star Ravioli
Co., Inc.
SECOND: The certificate of incorporation of the corporation was
filed at the Department of State of the State of New York on the 28th
day of March, 1995.
THIRD: The name of the corporation was amended to Silver Star
Foods, Inc. by an amendment to the certificate of incorporation filed
with the Department of State of the State of New York on the 28th day
of July, 1997.
FOURTH: The amendment of the certificate of incorporation of the
corporation effected by this certificate of amendment is as follows:
A. The corporation shall add to its total authorized shares
1,000,000 shares of preferred stock, $.001 par value ("Preferred
Stock"), none of which are currently outstanding.
.
B. The holders of the Common Stock and the Preferred Stock
shall have such rights and powers as designated by this Amendment.
FIFTH: To accomplish the foregoing amendment, Article FOURTH
of the certificate of incorporation relating to authorized shares, is
amended to read as follows:
"Fourth, the aggregate number of shares which the corporation is
authorized to issue is 16,000,000, divided into classes as follows:
A. 15,000,000 shares of Common Stock, $.0001 par value.
B. 1,000,000 shares of Preferred Stock, $.001 per share par value,
to be issued in series (hereinafter called the "Preferred Stock").
The following is a statement of the designations, and powers, of
preferences and rights, and the qualifications, limitations or restrictions
with respect to the Preferred Stock of the Corporation: The shares of
Preferred Stock may be issued in one or more series, and each series
shall be so designated as to distinguish the shares thereof from the
shares of all other series. Authority is hereby expressly granted to the
Board of Directors of the corporation to fix, subject to the provisions
herein set forth, before the issuance of any shares of a particular series,
the number, designation, and relative rights, preferences, and limitations
of the shares of such series including (1) voting rights, if any, which may
include the right to vote together as a single class with the Common
Stock and any other series of the Preferred Stock with the number of
votes per share accorded to shares of such series being the same as or
different from that accorded to such other shares, (2) the dividend rate
per annum, if any, and the terms and conditions pertaining to dividends
and whether such dividends shall be cumulative, (3) the amount or
amounts payable upon such voluntary or involuntary liquidation, (4) the
redemption price or prices, if any, and the terms and conditions of the
redemption, (5) sinking fund provisions, if any for the redemption or
purchase of such shares, (6) the terms and conditions on which such
shares are convertible, in the event the shares are to have conversion
rights, and (7) any other rights, preferences and limitations pertaining to
such series which may be fixed by the Board of Directors pursuant to
the New York Business Corporation Law."
SIXTH: The foregoing amendment was authorized by unanimous
written consent of the board of directors of the corporation, and by the
unanimous written consent of the sole shareholder of the corporation.
IN WITNESS WHEREOF, this certificate has been subscribed this
23rd day of September , 1998, by the undersigned, who affirms that the
statements made herein are true under the penalties of perjury.
/s/ Michael Trotta
- ----------------------
Michael Trotta, President
/s/ Michael Trotta
- ---------------------
Michael Trotta, Secretary
EXHIBIT 5
RICHARD I. ANSLOW & ASSOCIATES
4255 Route 9 Suite D
Freehold, New Jersey 07728
September , 1998
Silver Star Foods, Inc.
1000 South Avenue
Staten Island, New York 10314
Gentlemen:
You have requested our opinion, as counsel for Silver Star Foods, Inc.,
a New York corporation ( the "Company"), in connection with the
registration statement on Form SB-2 (the "Registration Statement"),
under the Securities Act of 1933 (the "Act"), being filed by the
Company with the Securities and Exchange Commission.
The Registration Statement relates to an offering of 1,100,000 shares
(the "Shares") of common stock (the "Offering"), par value $.0001 (the
"Common Stock") and 2,200,000 Redeemable Common Stock Purchase
Warrants (the "Warrants").
We have examined such records and documents and made such
examination of law as we have deemed relevant in connection with this
opinion. It is our opinion that when there has been compliance with the
Act, the Shares and Warrants, when issued, delivered, and paid for, will
be fully paid validly issued and non-assessable.
No opinion is expressed herein as to any laws other that the State of
New York of the United States.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the
caption "Legal Matters" in the Registration Statement. In so doing, we
do not admit that we are in the category of persons whose consent is
required under Section 7 of the Act and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
Very truly yours,
RICHARD I. ANSLOW & ASSOCIATES
By: s/s/ Richard I. Anslow
------------------------
Richard I. Anslow
EXHIBIT 10.1
SILVER STAR FOODS, INC.
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of this 15TH day of
September, 1998 by and between SILVER STAR FOODS, INC., a
New York corporation, having an office at 1000 South Avenue, Staten
Island, New York 10314 (hereinafter referred to as "Employer") and
MICHAEL TROTTA, an individual residing at 7520 Avenue V,
Brooklyn, New York 11234 (hereinafter referred to as "Employee");
W I T N E S S E T H:
WHEREAS, Employer desires to employ Employee as President;
and
WHEREAS, Employee is willing to be employed as the President
in the manner provided for herein, and to perform the duties of the
President upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein set forth it is agreed as follows:
1. Employment of the President. Employer hereby employs
Employee as President.
2. Term.
a. Subject to Section 10 below and further to Section 2(b)
below, the term of this Agreement shall commence upon the execution
hereof(the "Commencement Date") and expire three years from such
date. Each 12 month period from the Commencement Date forward
during the term hereof shall be referred to as an "Annual Period."
During the term hereof, Employee shall devote substantially all of his
business time and efforts to Employer and its subsidiaries and affiliates.
b. Subject to Section 10 below, unless the Board of Directors
of the Company (the "Board") of Employer shall determine to the
contrary and shall so notify Employee in writing on or before the end of
any Annual Period or unless the Employee notifies Employer in writing
on or before the end of any Annual Period of his desire not to renew this
Agreement, then at the end of each Annual Period, the term of this
Agreement shall be automatically extended for one (1) additional Annual
Period to be added at the end of the then current term of this
Agreement.
3. Duties. The Employee shall perform those functions generally
performed by persons of such title and position, shall attend all meetings
of the stockholders and the Board, shall perform any and all related
duties and shall have any and all powers as may be prescribed by
resolution of the Board, and shall be available to confer and consult with
and advise the officers and directors of Employer at such times that may
be required by Employer. Employee shall report directly and solely to
the Board.
4. Compensation.
a. (i) Employee shall be paid a minimum of $104,000 during
the initial Annual Period. Thereafter, Employee shall receive annual
increases equal to the greater of (i) Ten (10%) percent or (ii) the cost of
living adjustment recognized in the area where the Employee resides.
Employee shall be paid periodically in accordance with the policies of
the Employer during the term of this Agreement, but not less than
monthly.
(ii) Employee is eligible for an annual bonus, if any,
which will be determined and paid in accordance with policies set from time to
time by the Board.
b. Employer shall include Employee in its health insurance
program available to Employer's executive officers and shall pay 100%
of the premiums for such program.
c. Employee shall have the right to participate in any other
employee benefit plans established by Employer.
d. Employee shall receive from Employer Options to purchase
up to _______ shares of Employer's common stock, exercisable at the
fair market price of Employer's common stock as listed on Nasdaq
SmallCap at the close of business on the day immediately preceding the
date of the option agreement. The terms of the option agreement will
include, in part, that (i) if Employee's employment is terminated for any
reason other than cause (as discussed in Section 9(a)(i)), the options will
vest immediately and will be exercisable for one year from the date of
termination, (ii) if, within one year of the date of the option agreement,
the market price of Employer's common stock falls below the exercise
price in the option agreement, Employer will amend the terms of the
option agreement to lower the exercise price to the lower market price,
and (iii) upon written request of Employee, Employer agrees to use its
best efforts to file with the Securities and Exchange Commission, on or
before the first date on which any of said options become exercisable, a
registration statement on Form S-8 (or any replacement therefor) to
register under the Securities Act of 1933, as amended, all shares of
Employer's common stock underlying said options, including those not
yet exercisable.
5. Expenses. Employee shall submit to Employer reasonably
detailed receipts with respect thereto which substantiate the expenses.
Employer shall also provide Employee with a company car for
Employee's use in furthering the business of Employer of the kind and
type similar to that previously provided to Employee. Employee shall be
allowed an allowance of $750.00 per month for such car.
6. Vacation. Employee shall be entitled to receive four (4) weeks
paid vacation time after each year of employment upon dates agreed
upon by Employer. Upon separation of employment, for any reason,
vacation time accrued and not used shall be paid at the salary rate of Employee
in effect at the time of employment separation.
7. Secrecy. At no time shall Employee disclose to anyone any
confidential or secret information (not already constituting information
available to the public) concerning (a) internal affairs or proprietary
business operations of Employer or (b) any trade secrets, new product
developments, patents, programs or programming, especially unique
processes or methods.
8. Covenant Not to Compete. Employee will not, at any time,
anywhere in the areas where Employer does business during the term of
this Agreement, and for one (1) year thereafter, either directly or
indirectly, engage in, with or for any enterprise, institution, whether or
not for profit, business, or company, competitive with the business (as
identified herein) of Employer as such business may be conducted on the
date thereof, as a creditor, guarantor, or financial backer, stockholder,
director, officer, consultant, advisor, employee, member, inventor,
producer, director, or otherwise of or through any corporation,
partnership, association, sole proprietorship or other entity; provided,
that an investment by Employee, his spouse or his children is permitted
if such investment is not more than four percent (4%) of the total debt
or equity capital of any such competitive enterprise or business and
further provided that said competitive enterprise or business is a publicly
held entity whose stock is listed and traded on a national stock exchange
or through the Nasdaq Stock Market.
9. Termination.
a. Termination by Employer
(i) Employer may terminate this Agreement upon written
notice for Cause. For purposes hereof, "Cause" shall mean (A)
engaging by the Employee in conduct that constitutes activity in
competition with Employer; (B) the conviction of Employee for the
commission of a felony against the Employer; and/or (C) the habitual
abuse of alcohol or controlled substances. Notwithstanding anything to
the contrary in this Section 9(a)(i), Employer may not terminate
Employee's employment under this Agreement for Cause unless
Employee shall have first received notice from the Board advising
Employee of the specific acts or omissions alleged to constitute Cause,
and such acts or omissions continue after Employee shall have had a
reasonable opportunity (at least 10 days from the date Employee
receives the notice from the Board) to correct the acts or omissions so
complained of. In no event shall alleged incompetence of Employee in
the performance of Employee's duties be deemed grounds for
termination for Cause.
(ii) This agreement automatically shall terminate upon the
death of Employee, except that Employee's estate shall be entitled to
receive any amount accrued under Section 4(a) and the pro-rata amount payable
under Section 4(e) for the period prior to Employee's death and
any other amount to which Employee was entitled of the time of his
death.
b. Termination by Employee
(i) Employee shall have the right to terminate his
employment under this Agreement upon sixty (60) days' notice to
Employer
10. Consequences of Breach by Employer;
Employment Termination
a. If this Agreement is terminated pursuant to Section 9(b)(i)
hereof, or if Employer shall terminate Employee's employment under
this Agreement in any way that is a breach of this Agreement by
Employer, the following shall apply:
(i) Employee shall be entitled to payment of any
previously declared bonus and additional compensation as provided in
Section 4(a) and (b) above.
b. In the event that Employee's employment is terminated for
any of the following (i) for cause as set forth in Section 9(b)(i) of this
Agreement, (ii) the expiration of the term of this Agreement, or (iii)
resignation by the Employee, then the provisions of Section 8 shall apply
to Employee.
11. Remedies
Employer recognizes that because of Employee's special talents,
stature and opportunities in the frozen food industry, in the event of
termination by Employer hereunder (except under Section 9(a)(i) or (ii),
or in the event of termination by Employee under Section 9(b)(i) before
the end of the agreed term, the Employer acknowledges and agrees that
the provisions of this Agreement regarding further payments of base
salary, bonuses and the exercisability of Rights constitute fair and
reasonable provisions for the consequences of such termination, do not
constitute a penalty, and such payments and benefits shall not be limited
or reduced by amounts' Employee might earn or be able to earn from
any other employment or ventures during the remainder of the agreed
term of this Agreement.
12. Excise Tax. In the event that any payment or benefit
received or to be received by Employee in connection with a termination
of his employment with Employer would constitute a "parachute
payment" within the meaning of Code Section 280G or any similar or
successor provision to 280G and/or would be subject to any excise tax
imposed by Code Section 4999 or any similar or successor provision
then Employer shall assume all liability for the payment of any such tax and
Employer shall immediately reimburse Employee on a "grossed-up"
basis for any income taxes attributable to Employee by reason of such
Employer payment and reimbursements.
13. Arbitration. Any controversies between Employer and
Employee involving the construction or application of any of the terms,
provisions or conditions of this Agreement, save and except for any
breaches arising out of Sections 7 and 8 hereof, shall on the written
request of either party served on the other be submitted to arbitration.
Such arbitration shall comply with and be governed by the rules of the
American Arbitration Association. An arbitration demand must be made
within one (1) year of the date on which the party demanding arbitration
first had notice of the existence of the claim to be arbitrated, or the right
to arbitration along with such claim shall be considered to have been
waived. An arbitrator shall be selected according to the procedures of
the American Arbitration Association. The cost of arbitration shall be
borne by the losing party or in such proportions as the arbitrator shall
decide. The arbitrator shall have no authority to add to, subtract from
or otherwise modify the provisions of this Agreement, or to award
punitive damages to either party.
14. Attorneys' Fees and Costs. If any action at law or in equity
is necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which he may
be entitled.
15. Entire Agreement; Survival. This Agreement contains the
entire agreement between the parties with respect to the transactions
contemplated herein and supersedes, effective as of the date hereof any
prior agreement or understanding between Employer and Employee with
respect to Employee's employment by Employer. The unenforceability of
any provision of this Agreement shall not effect the enforceability of any
other provision. This Agreement may not be amended except by an
agreement in writing signed by the Employee and the Employer, or any
waiver, change, discharge or modification as sought. Waiver of or
failure to exercise any rights provided by this Agreement and in any
respect shall not be deemed a waiver of any further or future rights.
b. The provisions of Sections 4, 7, 8, 9(a)(ii), 10, 11, 12,
13,14, 17, 18, 19 and 20 shall survive the termination of this Agreement.
16. Assignment. This Agreement shall not be assigned to other
parties.
17. Governing Law. This Agreement and all the amendments
hereof, and waivers and consents with respect thereto shall be governed
by the internal laws of the State of New York, without regard to the
conflicts of laws principles thereof.
18. Notices. All notices, responses, demands or other
communications under this Agreement shall be in writing and shall be
deemed to have been given when
a. delivered by hand;
b. sent be telex or telefax, (with receipt confirmed), provided
that a copy is mailed by registered or certified mail, return receipt
requested; or
c. received by the addressee as sent by express delivery service
(receipt requested) in each case to the appropriate addresses, telex
numbers and telefax numbers as the party may designate to itself by
notice to the other parties:
(i) if to the Employer:
SILVER STAR FOODS, INC.
1000 South Avenue
Staten Island, New York 10314
Attention: Michael Trotta
Telefax: (718) 763-6004
Telephone: (718) 763-3000
Richard I. Anslow & Associates
4255 Route 9, Suite D
Freehold, New Jersey 07728
Attention: Richard I. Anslow, Esq.
Telefax: (732) 577-1188
Telephone: (732) 409-1212
(ii) if to the Employee:
Michael Trotta
7520 Avenue V
Brooklyn, New York 11234
19. Severability of Agreement. Should any part of this
Agreement for any reason be declared invalid by a court of competent
jurisdiction, such decision shall not affect the validity of any remaining
portion, which remaining provisions shall remain in full force and effect
as if this Agreement had been executed with the invalid portion thereof
eliminated, and it is hereby declared the intention of the parties that they
would have executed the remaining portions of this Agreement without
including any such part, parts or portions which may, for any reason, be
hereafter declared invalid.
IN WITNESS WHEREOF, the undersigned have executed this
agreement as of the day and year first above written.
SILVER STAR FOODS, INC.
By: /s/ Louis Trotta
----------------
Louis Trotta
Vice President
By: /s/ Michael Trotta
------------------
Michael Trotta
EXHIBIT 10.2
SILVER STAR FOODS, INC.
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of this 15th day of
September, 1998 by and between SILVER STAR FOODS, INC., a
New York corporation, having an office at 1000 South Avenue, Staten
Island, New York 10314 (hereinafter referred to as "Employer") and
LOUIS TROTTA, an individual residing at 55 Dortmunder Drive,
Manalapan, New Jersey 07726 (hereinafter referred to as "Employee");
W I T N E S S E T H:
WHEREAS, Employer desires to employ Employee as Vice
President; and
WHEREAS, Employee is willing to be employed as the Vice
President in the manner provided for herein, and to perform the duties of
the President upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein set forth it is agreed as follows:
1. Employment of the Vice President. Employer hereby employs
Employee as Vice President.
2. Term.
a. Subject to Section 10 below and further to Section 2(b)
below, the term of this Agreement shall commence upon the execution
hereof(the "Commencement Date") and expire three years from such
date. Each 12 month period from the Commencement Date forward
during the term hereof shall be referred to as an "Annual Period."
During the term hereof, Employee shall devote substantially all of his
business time and efforts to Employer and its subsidiaries and affiliates.
b. Subject to Section 10 below, unless the Board of Directors
of the Company (the "Board") of Employer shall determine to the
contrary and shall so notify Employee in writing on or before the end of
any Annual Period or unless the Employee notifies Employer in writing
on or before the end of any Annual Period of his desire not to renew this
Agreement, then at the end of each Annual Period, the term of this
Agreement shall be automatically extended for one (1) additional Annual
Period to be added at the end of the then current term of this
Agreement.
3. Duties. The Employee shall perform those functions generally
performed by persons of such title and position, shall attend all meetings
of the stockholders and the Board, shall perform any and all related
duties and shall have any and all powers as may be prescribed by resolution
of the Board, and shall be available to confer and consult with
and advise the officers and directors of Employer at such times that may
be required by Employer. Employee shall report directly and solely to
the Board.
4. Compensation.
a. (i) Employee shall be paid a minimum of $52,000 during
the initial Annual Period. Thereafter, Employee shall receive annual
increases equal to the greater of (i) Ten (10%) percent or (ii) the cost of
living adjustment recognized in the area where the Employee resides.
Employee shall be paid periodically in accordance with the policies of
the Employer during the term of this Agreement, but not less than
monthly.
(ii) Employee is eligible for an annual bonus, if any,
which will be determined and paid in accordance with policies set from time to
time by the Board.
b. Employer shall include Employee in its health insurance
program available to Employer's executive officers and shall pay 100%
of the premiums for such program.
c. Employee shall have the right to participate in any other
employee benefit plans established by Employer.
d. Employee shall receive from Employer Options to purchase
up to _______ shares of Employer's common stock, exercisable at the
fair market price of Employer's common stock as listed on Nasdaq
SmallCap at the close of business on the day immediately preceding the
date of the option agreement. The terms of the option agreement will
include, in part, that (i) if Employee's employment is terminated for any
reason other than cause (as discussed in Section 9(a)(i)), the options will
vest immediately and will be exercisable for one year from the date of
termination, (ii) if, within one year of the date of the option agreement,
the market price of Employer's common stock falls below the exercise
price in the option agreement, Employer will amend the terms of the
option agreement to lower the exercise price to the lower market price,
and (iii) upon written request of Employee, Employer agrees to use its
best efforts to file with the Securities and Exchange Commission, on or
before the first date on which any of said options become exercisable, a
registration statement on Form S-8 (or any replacement therefor) to
register under the Securities Act of 1933, as amended, all shares of
Employer's common stock underlying said options, including those not
yet exercisable.
5. Expenses. Employee shall submit to Employer reasonably
detailed receipts with respect thereto which substantiate the expenses.
Employer shall also provide Employee with a company car for
Employee's use in furthering the business of Employer of the kind and type
similar to that previously provided to Employee. Employee shall be
allowed an allowance of $400.00 per month for such car.
6. Vacation. Employee shall be entitled to receive four (4) weeks
paid vacation time after each year of employment upon dates agreed
upon by Employer. Upon separation of employment, for any reason,
vacation time accrued and not used shall be paid at the salary rate of
Employee in effect at the time of employment separation.
7. Secrecy. At no time shall Employee disclose to anyone any
confidential or secret information (not already constituting information
available to the public) concerning (a) internal affairs or proprietary
business operations of Employer or (b) any trade secrets, new product
developments, patents, programs or programming, especially unique
processes or methods.
8. Covenant Not to Compete. Employee will not, at any time,
anywhere in the areas where Employer does business during the term of
this Agreement, and for one (1) year thereafter, either directly or
indirectly, engage in, with or for any enterprise, institution, whether or
not for profit, business, or company, competitive with the business (as
identified herein) of Employer as such business may be conducted on the
date thereof, as a creditor, guarantor, or financial backer, stockholder,
director, officer, consultant, advisor, employee, member, inventor,
producer, director, or otherwise of or through any corporation,
partnership, association, sole proprietorship or other entity; provided,
that an investment by Employee, his spouse or his children is permitted
if such investment is not more than four percent (4%) of the total debt
or equity capital of any such competitive enterprise or business and
further provided that said competitive enterprise or business is a publicly
held entity whose stock is listed and traded on a national stock exchange
or through the Nasdaq Stock Market.
9. Termination.
a. Termination by Employer
(i) Employer may terminate this Agreement upon written
notice for Cause. For purposes hereof, "Cause" shall mean (A)
engaging by the Employee in conduct that constitutes activity in
competition with Employer; (B) the conviction of Employee for the
commission of a felony against the Employer; and/or (C) the habitual
abuse of alcohol or controlled substances. Notwithstanding anything to
the contrary in this Section 9(a)(i), Employer may not terminate
Employee's employment under this Agreement for Cause unless
Employee shall have first received notice from the Board advising
Employee of the specific acts or omissions alleged to constitute Cause,
and such acts or omissions continue after Employee shall have had a
reasonable opportunity (at least 10 days from the date Employee
receives the notice from the Board) to correct the acts or omissions so
complained of. In no event shall alleged incompetence of Employee in the
performance of Employee's duties be deemed grounds for
termination for Cause.
(ii) This agreement automatically shall terminate upon the
death of Employee, except that Employee's estate shall be entitled to
receive any amount accrued under Section 4(a) and the pro-rata amount
payable under Section 4(e) for the period prior to Employee's death and
any other amount to which Employee was entitled of the time of his
death.
b. Termination by Employee
(i) Employee shall have the right to terminate his
employment under this Agreement upon sixty (60) days' notice to
Employer
10. Consequences of Breach by Employer;
Employment Termination
a. If this Agreement is terminated pursuant to Section 9(b)(i)
hereof, or if Employer shall terminate Employee's employment under
this Agreement in any way that is a breach of this Agreement by
Employer, the following shall apply:
(i) Employee shall be entitled to payment of any
previously declared bonus and additional compensation as provided in
Section 4(a) and (b) above.
b. In the event that Employee's employment is terminated for
any of the following (i) for cause as set forth in Section 9(b)(i) of this
Agreement, (ii) the expiration of the term of this Agreement, or (iii)
resignation by the Employee, then the provisions of Section 8 shall apply
to Employee.
11. Remedies
Employer recognizes that because of Employee's special talents,
stature and opportunities in the frozen food industry, in the event of
termination by Employer hereunder (except under Section 9(a)(i) or (ii),
or in the event of termination by Employee under Section 9(b)(i) before
the end of the agreed term, the Employer acknowledges and agrees that
the provisions of this Agreement regarding further payments of base
salary, bonuses and the exercisability of Rights constitute fair and
reasonable provisions for the consequences of such termination, do not
constitute a penalty, and such payments and benefits shall not be limited
or reduced by amounts' Employee might earn or be able to earn from
any other employment or ventures during the remainder of the agreed
term of this Agreement.
12. Excise Tax. In the event that any payment or benefit
received or to be received by Employee in connection with a termination
of his employment with Employer would constitute a "parachute
payment" within the meaning of Code Section 280G or any similar or
successor provision to 280G and/or would be subject to any excise tax
imposed by Code Section 4999 or any similar or successor provision
then Employer shall assume all liability for the payment of any such tax
and Employer shall immediately reimburse Employee on a "grossed-up"
basis for any income taxes attributable to Employee by reason of such
Employer payment and reimbursements.
13. Arbitration. Any controversies between Employer and
Employee involving the construction or application of any of the terms,
provisions or conditions of this Agreement, save and except for any
breaches arising out of Sections 7 and 8 hereof, shall on the written
request of either party served on the other be submitted to arbitration.
Such arbitration shall comply with and be governed by the rules of the
American Arbitration Association. An arbitration demand must be made
within one (1) year of the date on which the party demanding arbitration
first had notice of the existence of the claim to be arbitrated, or the right
to arbitration along with such claim shall be considered to have been
waived. An arbitrator shall be selected according to the procedures of
the American Arbitration Association. The cost of arbitration shall be
borne by the losing party or in such proportions as the arbitrator shall
decide. The arbitrator shall have no authority to add to, subtract from
or otherwise modify the provisions of this Agreement, or to award
punitive damages to either party.
14. Attorneys' Fees and Costs. If any action at law or in equity
is necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which he may
be entitled.
15. Entire Agreement; Survival. This Agreement contains the
entire agreement between the parties with respect to the transactions
contemplated herein and supersedes, effective as of the date hereof any
prior agreement or understanding between Employer and Employee with
respect to Employee's employment by Employer. The unenforceability of
any provision of this Agreement shall not effect the enforceability of any
other provision. This Agreement may not be amended except by an
agreement in writing signed by the Employee and the Employer, or any
waiver, change, discharge or modification as sought. Waiver of or
failure to exercise any rights provided by this Agreement and in any
respect shall not be deemed a waiver of any further or future rights.
b. The provisions of Sections 4, 7, 8, 9(a)(ii), 10, 11, 12,
13,14, 17, 18, 19 and 20 shall survive the termination of this Agreement.
16. Assignment. This Agreement shall not be assigned to other
parties.
17. Governing Law. This Agreement and all the amendments
hereof, and waivers and consents with respect thereto shall be governed
by the internal laws of the State of New York, without regard to the
conflicts of laws principles thereof.
18. Notices. All notices, responses, demands or other
communications under this Agreement shall be in writing and shall be
deemed to have been given when
a. delivered by hand;
b. sent be telex or telefax, (with receipt confirmed), provided
that a copy is mailed by registered or certified mail, return receipt
requested; or
c. received by the addressee as sent by express delivery service
(receipt requested) in each case to the appropriate addresses, telex
numbers and telefax numbers as the party may designate to itself by
notice to the other parties:
(i) if to the Employer:
SILVER STAR FOODS, INC.
1000 South Avenue
Staten Island, New York 10314
Attention: Michael Trotta
Telefax: (718) 763-6004
Telephone: (718) 763-3000
Richard I. Anslow & Associates
4255 Route 9, Suite D
Freehold, New Jersey 07728
Attention: Richard I. Anslow, Esq.
Telefax: (732) 577-1188
Telephone: (732) 409-1212
(ii) if to the Employee:
Louis Trotta
55 Dortmunder Drive
Manalapan, New Jersey 07726
19. Severability of Agreement. Should any part of this
Agreement for any reason be declared invalid by a court of competent
jurisdiction, such decision shall not affect the validity of any remaining
portion, which remaining provisions shall remain in full force and effect
as if this Agreement had been executed with the invalid portion thereof
eliminated, and it is hereby declared the intention of the parties that they
would have executed the remaining portions of this Agreement without
including any such part, parts or portions which may, for any reason, be
hereafter declared invalid.
IN WITNESS WHEREOF, the undersigned have executed this
agreement as of the day and year first above written.
SILVER STAR FOODS, INC.
By: /s/ Michael Trotta
-----------------
Michael Trotta
President
By: /s/ Louis Trotta
-----------------
Louis Trotta
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Amendment No. 1 of the Registration
Statement of Silver Star Foods, Inc. on Form SB-2 of our report dated
July 29, 1998, except for Note 11 as to which the date is August 31,
1998 on our audits of Silver Star Foods, Inc. as at March 31, 1998 and
1997 and for the years then ended. We also consent to the reference to
our firm under the caption "Experts".
/s/ Weinick Sanders Leventhal & Co., LLP
- -----------------------------------------
WEINICK SANDERS LEVENTHAL & CO., LLP
New York, New York
September 24, 1998
EXHIBIT 23.2
The consent of Richard I. Anslow & Associates is contained in Exhibit
5.
EXHIBIT 27 FINANCIAL DATA SCHEDULE
SILVER STAR FOODS INC.
[LEGEND]
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE BALANCE SHEETS AS OF JUNE 30,
1998 AND MARCH 31, 1998 THE STATEMENTS OF
OPERATIONS FOR THE THREE MONTHS ENDED JUNE 31, 1998
AND THE YEAR ENDED MARCH 31, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
[/LEGEND]
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] MAR-31-1998
[PERIOD-END] JUNE-30-1998
[CASH] 0
[SECURITIES] 0
[RECEIVABLES] 32,993
[ALLOWANCES] ???
[INVENTORY] ???
[CURRENT-ASSETS] 33,993
[PP&E] 0
[DEPRECIATION] 0
[TOTAL-ASSETS] 420,795
[CURRENT-LIABILITIES] 912,794
[BONDS] 0
[COMMON] 400,320
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] <892,319>
[TOTAL-LIABILITY-AND-EQUITY] 420,795
[SALES] 254,421
[TOTAL-REVENUES] 254,421
[CGS] 203,458
[TOTAL-COSTS] 203,458
[OTHER-EXPENSES] 142,310
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 0
[INCOME-PRETAX] <91,347>
[INCOME-TAX] 200
[INCOME-CONTINUING] <91,547>
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] <91,547>
[EPS-PRIMARY] <0.02>
[EPS-DILUTED] <0.02>
</TABLE>
EXHIBIT 99.1
AGREEMENT BETWEEN VINCENT & MICHAEL TROTTA
AND MOUNT ROSE RAVIOLI AND MAC. CO., INC.
JUNE 13, 1995
Mount Rose Ravioli will package private label Silver Star products to be
sold to Vincent & Michael Trotta, prices to be as listed below:
<TABLE>
<S> <C> <C>
Square Meat & Cheese Ravioli- Bag 24/16 oz $16.50
Square Meat & Cheese Ravioli- Box 18/50 ct $18.85
Round Cheese Ravioli 24/13 oz $14.20
Cavatelli 24/16 oz $ 9.72
Cheese & Meat Tortellini 24/16 oz $19.55
Gnocchi 24/16 oz $12.82
</TABLE>
Product to be paid for with cashier's or certified check at time order is
placed. A 2% cash discount may be taken at this time.
The above prices will remain in place for six (6) months. At the end of
six (6) months, prices will be reviewed with respect to raw material and
packaging costs. If these costs have increased or decreased, the changes
will be passed on accordingly. Prices will be reviewed every six (6)
months thereafter, for as long as our relationship remains intact.
In the event that this agreement should be terminated, and Mount Rose
be left with unused Silver Star packaging, Vincent and Michael Trotta
(Silver Star) do hereby give Mount Rose Ravioli permission to use the
packaging however they choose.
/s/ Sam Minuto
----------------------
Sam Minuto, President
/s/ Michael Trotta
-----------------------
Michael Trotta, President
Silver Star Ravioli Co.,Inc.
EXHIBIT 99.2
MANUFACTURERS AGREEMENT FOR
PRIVATE LABEL COMPANIES
THIS CONTRACT made this Twelfth day of June, 1995 between
SAVIGNANO FOODS CORPORATION, a New Jersey Corporation,
trading as Andrea's, hereinafter referred to as the "Manufacturer", doing
business at 107 South Jefferson Street, in the City of Orange, County of
Essex and State of New Jersey, on the one part, and; SILVER STAR
RAVIOLI COMPANY, INC., P.O. Box 340487, Brooklyn, New York
11234, hereinafter called the "Private Label Company", of the other
part.
WITNESSETH, that the said party of the first part, for and in
consideration of the sum of FIVE THOUSAND ($5,000.00) DOLLARS
to be paid and satisfied as hereinafter mentioned, and also in
consideration of the covenants and agreements hereinafter mentioned,
made and entered into by the said party of the second part, agrees as
follows:
The manufacturer shall make the following product lines to be
purchased by the Private Label Company for sale in the retail and/or
wholesale marketplace, by said Private Label Company:
<TABLE>
<S> <C>
1. Product (A) - 13 oz. Large Round Cheese Ravioli
Packed 12 Ravioli Per Bag -
24 Units Per Case, $13.85 Per Case.
2. Product (B) - 16 oz. Cavatelli
Packed One Pound Per Bag -
24 Units Per Case, $9.95 Per Case.
</TABLE>
The prices listed in this Agreement are contingent upon the Private
Label Company's monthly sales of 7,000 cases of Product (A) and 3,000
cases of Product (B). If Private Label Company fails to purchase from
Manufacturer the above mentioned volume over a fifty-two (52) week
period, the Manufacturer reserves the right to raise prices according to
usage or lack there of.
No order by Private Label Company shall be less than 250 cases of
Product (A) or Product (B).
2. The Manufacturer shall pay for all bags, labels and corrugated
boxes as needed in its sole discretion, to manufacture and package the
product line set forth in Paragraph 1 above for the Private Label
Company, at the Manufacturer's sole cost and expense.
However, the Manufacturer shall not pay for or be responsible for
artworks, plates, dyes of any kind needed for the packaging of said
product lines. Manufacturer will not purchase more than sixteen (16)
weeks supply of packaging. The amount will initially be based on
projections made by Private Label Company. After a history of sales
has been established, the 16-week supply will be determined by the sales
of the Private Label Company.
3. If the Private Label Company "ceases to do business" for any
reason whatsoever with the Manufacturer, the Private Label Company
shall reimburse the Manufacturer for all costs and expenses incurred or
contracted for by the Manufacturer for purposes of fulfilling this
agreement such as, finished product, inventory of finished product, raw
material and supplies, paper products, manufacturing expenses, legal
fees, storage expenses, etc. "Ceases to do business" with Manufacturer
is hereby defined to be the failure by Private Label Company to purchase
7,000 cases of Product (A) and 3,000 cases of Product (B) within any
one (1) month period. If the Private Label Company "ceases to do
business" as defined herein, it shall constitute a default under this
Agreement.
4. The Private Label Company shall pay the Manufacturer a
minimum retainer of Five Thousand ($5,000.00) Dollars to offset the
Manufacturer's start up costs to be put in an interest bearing account.
The interest will accumulate and paid in full yearly to Private Label
Company. If, prior to one (1) year from the date hereof, Private Label
Company elects to terminate this Agreement of Manufacture, the
$5,000.00 will be returned to Private Label Company upon payment in
full of all end product, packaging, corrugated, etc. If Private Label
Company does not pay for the above mentioned costs, Manufacturer shall retain
the retainer fee in full. If the Manufacturer extends credit
terms to the Private Label Company, the $5,000.00 retainer shall be
released to Private Label Company.
5. In the event of a Default by the Private Label Company of this
Agreement, the Manufacturer shall be entitled to keep all deposit monies
paid as liquidated damages plus all other advances paid by the Private
Label Company on order given to date, plus the Private Label Company
agrees to be liable for all consequential damages resulting from the
default and/or breach of this Agreement including attorneys fees, costs
of suit and interest on amounts due and owing the Manufacturer from
the date of all open purchase orders. Damages shall also include
discharging, reloading, handling, storing or any other reasonable
services or expenses incurred in the manufacture, storage, preservation,
resale and distribution (where applicable) of the product line of the
Private Label Company. A Default by Private Label Company shall
occur upon the failure to (1) pay the orders as provided for hereunder;
(2) to make the minimum purchases; or (3) to comply with all other
terms of this Agreement.
6. The Manufacturer agrees to produce in accordance with Good
Manufacturing Practices and Federal and State Food Regulation, and
will deliver same to Private Label Company. However, the
Manufacturer shall not be liable for damages after the product has left its
control or for damages arising out of label misstatements or false
advertising statements. The Manufacturer will be liable for any short
weight product or improperly packaged product.
7. The Manufacturer disclaims any and all warranties either
express or implied warranties for a Particular Purpose or
Merchantability. The Manufacturer will provide the Private Label
Company with a certificate of insurance naming the Private Label
Company as an additional insured.
8. Payment shall be made by Private Label Company in cash,
certified check, bank check or wired to Manufacturer's bank account by
11:00 a.m. to the Manufacturer for the entire amount due and payable to
the Manufacturer one (1) day prior to shipment/pickup of end product.
This payment procedure will apply for twelve months from the first
invoice date. After six (6) months from the first invoice date, the
Manufacturer will review the payment procedure set forth in this
Agreement and will decide to alter or not alter the payment procedure.
9. The Manufacturer shall not be responsible for its failure to meet
any manufacturing product, packaging or distribution deadline
established by the Private Label Company if the Private Label Company
does not give the Manufacturer proper lead time on confirmed ads and
proper and reasonable sales projections of at least four (4) weeks in
advance.
10. All formulas and manufacturing procedures used by the
Manufacturer are proprietary to the Manufacturer and will be kept
confidential and not revealed to any party.
11. Either party may terminate this Agreement at any time by
giving the other party notice in writing of such desire of termination at
least one hundred twenty (120) days upon which date such termination
is to occur. A notice shall be supplied by certified mail return receipt
requested effective upon delivery or by hand delivery of said notice.
Effective upon termination of the Private Label Company shall
immediately pay the Manufacturer for any open outstanding invoices, if
any, and agrees to pay in full on all pending orders for said product line.
12. During the term of this Agreement, the Private Label
Company agrees to make the Manufacturer its exclusive manufacturer
and packager of said product lines. The Private Label Company shall be
allowed, in emergent circumstances, to obtain product from any other
supplier or producer at any price, to satisfy its order requirements in the
event the Manufacturer cannot satisfy such requirements, upon
providing telephone notice to Manufacturer.
13. The decision of manufacturing and packaging of the Private
Label Company's private line of said product line shall be exclusively
that of the Manufacturer. The parties mutually agree and understand
that the price of manufacturing and packaging may escalate without
notice due to factors beyond the control of the Manufacturer. The
Private Label Company agrees to pay for any and all increases in
manufacturing and packaging costs incurred directly by the
Manufacturer upon Manufacturer giving ten (10) days written notice.
Concurrently, the Manufacturer will also pass along decreases in
manufacturing and packaging costs as they occur. The Manufacturer
will review these prices with the Private Label Company every three (3)
months.
14. The Private Label Company agrees to place all outside orders
with Manufacturer . The Private Label Company agrees that the
Manufacturer shall not be responsible for the nonperformance of any
order that is not confirmed with a written acceptance of the purchase
order or be responsible for any penalties the Private Label Company
may incur as a result of nonperformance.
15. The Private Label Company represents that it is a New York
Corporation and that this contract was approved by duly authorized
corporate resolution.
16. The Private Label Company will arrange for all orders to be
picked up at the Manufacturer's plant address or its nearest storage
facility by Private Label customers. In the event that pick-up is not
made by Private Label customer, the Manufacturer will not be
responsible or liable for delivery and will not deliver product for Private
Label Company. Consequently, the Private Label Company will be
solely responsible to arrange for pick-up of product by any means necessary.
17. This Agreement shall be governed by the laws of New Jersey.
Private Label Company does hereby submit to the jurisdiction of the
New Jersey courts and agrees it may be served with a Complaint by
certified mail.
18. All Notices shall be in writing and shall be by certified mail,
return receipt requested, to the party at the addresses stated in this
Agreement, attention to the party signing the Agreement.
19. This Agreement sets forth the understanding of the parties and
there are no oral agreements. This Agreement may only be modified by
a written agreement signed by the parties.
20. This Agreement shall be binding on the parties and their
successors and assigns.
WITNESSETH: SAVIGNANO FOODS CORPORATION
A New Jersey Corporation,
Manufacturer
/s/ Rose Marie Savignano BY: /s/ Michael Savignano
- ------------------------- ---------------------
ROSE MARIE SAVIGNANO MICHAEL SAVIGNANO,President
Assistant Secretary
WITNESSETH: SILVER STAR RAVIOLI COMPANY,
INC.
/s/ Michael Trotta BY: /s/ Vincent Trotta Sr.
- ------------------------- ----------------------
MICHAEL TROTTA, President VINCENT TROTTA SR., C.E.O.
EXHIBIT 99.3
Shares Exercisable
-------- subject to the provisions set forth
below.
Warrant for Purchase
of Common Stock of
SilverStar Foods, Inc.
(a New York
Corporation)
THIS WARRANT WILL BE VOID AFTER_______________,
199_.
This certifies that_____________ is entitled to purchase at
any time on or before_______________, 199_ , but not thereafter,
shares, $ par value, which have been duly authorized and set aside
for issuance, of the common stock of Silver Star Foods, Inc., (the
"Company"), a corporation duly organized and existing under the
laws of the State of New York as such stock shall be constituted at the
time of purchase, at the price of $ per share and the surrender
of this warrant with the subscription form on the reverse side
hereof, duly executed, at the office of American Stock Transfer (the
"Warrant Agent") in the City of New York, State of New York, with
payment in full for the stock purchased in cash or by certified or bank
cashiers check payable to the order of the Company at the time of the
surrender of this warrant, as aforesaid.
This warrant is issued and subject to the terms and provisions of a
Warrant Agreement dated as of__________________,
199 , between the Company and the Warrant Agent, to all of which
terms and provisions the holder hereof assents by accepting this warrant.
Anything herein or in the said stock purchase Warrant Agreement
contained to the contrary notwithstanding, in case of consolidation or
merger of the company with or into any other corporation, or in case of
sale by the Company of all or substantially all its assets, as more
particularly set forth in the said stock purchase warrant agreement, or in
case of issue by the Company of additional shares of common stock at a
lower price than the price at which shares of common stock might have
been purchased hereunder immediately prior to the issue of such
additional shares, the number and character of the shares of stock or
other securities or assets which the holder hereof shall thereafter have
the right to purchase, and the price to be paid therefor, shall be adjusted
and determined as provided in the said warrant agreement. The holder of
this warrant, as such, shall have none of the preemptive or other rights
of a holder of common stock. This warrant is issued subject, also, to the
following terms and conditions, to all of which each and every holder
hereof assents by accepting this warrant; all rights under and by virtue of
this warrant shall pass and be transferred by the delivery hereof by any
person in possession of the same, however, such possession may have
been acquired, if properly assigned in blank or if properly assigned to a
specified person by delivery hereof to such person; shall vest title thereto
in the transferee to the same extent, for all intents and purposes, as in
the case of the delivery under similar circumstances of a negotiable
instrument payable to bearer. Subject to the foregoing, the Company
and the Warrant Agent shall be entitled to treat the bearer of this
warrant as the absolute owner hereof for all purposes and shall not be
affected by any notice to the contrary.
This warrant does not entitle any holder hereof to any of the rights of
a shareholder of the Company.
This warrant shall be wholly void and of no effect
after______________,199_.
Silver Star Foods, Inc.
/s/ Michael Trotta
------------------
Michael Trotta, President
Countersigned
Warrant Agent
Transfer Clerk
(Reverse Side)
In case, prior to the expiration of this warrant by exercise hereof or
by its term:
1. (a) The Company shall be recapitalized through the subdivision of
its outstanding shares of common stock into a greater number of shares,
or shall by exchange or substitution of or for its outstanding common
stock or otherwise, reduce the number of such shares, then in each such
case the number of shares deliverable upon the exercise of this warrant
shall be changed in proportion to such increase or decrease of the
outstanding shares of such common stock of the Company, without any
change in the payment by the warrant holder from the payment specified
on the faces of the warrant.
(b) A dividend shall be declared or paid at any time on the
common stock of the Company in its common stock or in securities
convertible into common stock of the corporation, then in each such
case the number of shares deliverable upon the exercise thereafter of this
warrant, shall, without requiring any payment by the warrant holder in
addition to the one specified on the face hereof, be increased in
proportion to the increase, through such dividend, in the number of
outstanding shares of common stock of the corporation. In the
computation of the increased number of shares deliverable upon the
exercise of this warrant, any dividend paid or distributed upon the
common stock in securities convertible into shares of common stock,
shall be treated as a dividend paid in common stock to the extent that
shares of stock are issuable upon the conversion thereof. The obligations
of the Company and the rights of the holder hereof shall not be affected
by the exercise of any conversion privileges heretofore granted to the
holders of any of the stock or securities of the Company or of any other
company.
(c) On or before__________, pm.,_______________, 199_ the
Company shall offer any shares of common stock of any class, or
securities convertible into or evidencing the right to purchase common
stock of any class, of record on a date subsequent to the issue of this
warrant, the holder hereof will become entitled, provided this warrant is
not exercised on or before the record date of the common stockholders
entitled to such subscription rights, to subscribe for and purchase, at the
same price at which such stock or securities is offered to the holders of
the common stock, the amount of such stock or securities for which he
would have been entitled to subscribe if he had been the holder of record on
such record date of the number of shares of common stock then
purchasable under this warrant. The record date for determining the
warrant holders entitled to such subscription rights shall be the same as
the record date for determining the holders of the common stock
entitled thereto, and when notice of such subscription rights is given to
the common stockholders of record, notice thereof shall likewise be
given to the registered holders of warrants outstanding at the time, and
the warrant holders shall be given the same opportunity to exercise such
subscription rights as the holders of the common stock.
(d) The Company shall, at any time while any of the warrants be
outstanding, declare a dividend on its common stock (other than a
dividend not in excess of the regular dividend per share for any fiscal
year) and shall give notice thereof to the registered holder of this
warrant and such dividends so declared shall be made payable only to
the stockholders of record on a date at least ten days subsequent to the
exercise of such warrants prior to such record date.
(e) The Company shall be recapitalized by reclassifying its
outstanding common stock without par value into stock with par value,
or changing common stock of par value to stock without par value, or
the Company or a successor corporation shall consolidate or merge
with, or convey all, or substantially all, of its or any successor
corporation's property or assets to, any other corporation or
corporations (any such corporation being included within the meaning
"successor corporation" hereinbefore used in the event of any
consolidation or merger of such corporation with, or the sale of, all or
substantially all of the property of such corporation to another
corporation or corporations) then, as a condition to such recapitalization
consolidation, merger, or conveyance, lawful and adequate provision
shall be made whereby the holder of each warrant shall thereafter have
the right to purchase, upon the basis and upon the terms and conditions
specified in this warrant, in lieu of the shares of common stock of the
corporation theretofore purchasable upon the exercise of this warrant,
such shares of stock, security, or assets as may be issued or payment
with respect to, or in exchange for, the number of shares of common
stock of the Company theretofore purchasable upon the exercise of this
warrant had such recapitalization, consolidation, merger, or conveyance
not taken place; and in any such event the rights of the warrant holder to
an adjustment of the number of shares of common stock purchasable
upon the exercise of this warrant as hereinbefore provided, shall
continue and be preserved in respect of any stock which the warrant
holder becomes entitled to purchase. It shall be a condition of such
consolidation, merger, or conveyance that each successor corporation
shall assume in manner and form satisfactory to the transfer agent, the
obligation to deliver to the warrant holder, upon the exercise of this
warrant, such shares of stock, securities, or assets as, in accordance with
the provisions of this warrant, shall have been provided for the purpose.
The said transfer agent shall assume no liability for its exercise of
discretion hereunder other than willful wrongdoing.
2. This warrant shall be deemed to have been exercised, and the
person exercising the same to have become a common stockholder of
record of the corporation, for the purposes of receiving dividends and
for all other purposes whatsoever as of the date when he surrendered
this warrant accompanied by payment in cash, as herein provided. The
corporation agrees that, while this warrant shall remain valid and
outstanding, its stock transfer books shall not be closed for any purpose
whatsoever except under arrangements which shall insure to persons
exercising warrants or applying for transfer of stock within three days
after the books shall have been reopened all rights and privileges which
they might have had or received if the stock transfer books had not been
closed and they had exercised their warrants at any time during which
such transfer books shall have been closed.
3. Upon each increase of the number of shares of common stock
of the Company deliverable upon the exercise of this warrant, or in the
event of changes in the rights of the warrant holders by reason of other
events hereinbefore set forth, then in each such case the Company shall
forthwith file with the transfer agent a certificate executed by its
president or one of its vice-presidents, and attested by its secretary or
one of its assistant secretaries, stating the increased number of shares so
deliverable or specifying the other shares of stock, securities or assets,
and the amount thereof so deliverable and setting forth in reasonable
detail the method of calculation and the facts upon which such
calculation is based.
Upon each increase of the number of shares of common stock of the
Company, deliverable upon the exercise of this warrant, the increased
number of shares so deliverable shall be calculated only to the nearest
hundredth of one share. No fractions of shares shall be issued upon the
exercise of this warrant, but in lieu thereof the Company shall issue
fractional scrip certificates in bearer form and in denominations of
one-one-hundredth of one share, and multiples thereof, not entitling the
bearer to vote or receive dividends but which may be surrendered with
other similar scrip certificates so as to aggregate one or more whole
shares for a stock certificate or certificate representing the number of
whole shares so aggregated at any time on or before ten days after the
expiration date of this warrant.
4. The Company covenants, at all times when the warrants are
outstanding and in effect, to reserve unissued, sufficient common stock,
and to deliver stock pursuant to the exercise of this warrant, subject to
consolidation, merger, or sale, as above set @orth. The Company
covenants that in the event that stock or other securities of the Company
or subsidiaries are hereafter issued, carrying conversion privileges or
bearing stock purchase warrants for common stock of the Company,
then the rates of conversion, or the purchase prices provided by such
warrants, shall not be more favorable for any period than the prices
provided (for such period) by this warrant, unless the holder hereof shall
be entitled to exercise this warrant at prices at least as favorable as the
price so specified in such purchase warrants, or to an increase in the
number of shares purchasable so as to give to the holder hereof equal
rights with the holders of such conversion privileges. In such case, the
Company covenants to file with the transfer agent a statement of the
rights of the warrant holders as so modified.
5. Wherever the term "holder", "warrant holder", or "holder of this
warrant", is used herein, it shall be construed to mean the registered
holder and wherever notice is required by this warrant to be given to the
warrant holder it shall be sufficient if mailed to the last known address of
said holder as same appears on the books of the Company.
EXHIBIT 99.4
Royal Hutton Securities Corp.
2255 Glades Road, Suite 301E
Boca Ratonon, Florida 33431
SELECTED DEALERS AGREEMENT
,l997
Gentlemen:
Royal Hutton Securities, Corp., as Underwriter, is offering for sale
1,100,000 Shares of Common Stock ("Stock") and 2,200,000 Class A
Warrants ("A Warrants") of Silver Star Foods, Inc., a New York
corporation, (the "Company"). Such offer will be made pursuant to the
terms and conditions of the Underwriting Agreement between the
Company and the Underwriter. The shares to be offered for sale are
more particularly described in the enclosed Prospectus. We invite your
participation, as a Selected Dealer, on the terms and conditions stated
herein.
1. Offering Price. The Shares and A Warrants, which will be
offered to the public at a price of $5.25 per Share and $.25 per A
Warrant, shall not be directly or indirectly offered or sold to the public
by Selected Dealers at any other price during the period this Agreement
is in effect. The Company proposes to issue and sell 1,100,000 Shares
and 2,200,000 A Warrants.
2. Selected Dealers. Members of the National Association of
Securities Dealers, Inc. (the "NASD") who shall agree to offer Shares
and A Warrants hereunder (hereinafter referred to as "Selected Dealers"
or "Participating Dealers") will be allowed a selling concession of
percent of the full ten percent (10%) commission and payable as
hereinafter provided. No concession shall be earned or paid unless
1,100,000 Shares and 2,200,000 A Warrants are sold within ninety days from
the effective date of the Registration Statement under the
Securities Act of 1933 filed by the Company with the Securities and
Exchange Commission ("Termination Date"), which date may be
extended for an additional sixty (60) days by mutual agreement of the
Company and the Underwriter.
3. Subscriptions The underwriter reserves the right to reject all
subscriptions, in whole or in part, to make allotments and to close the
subscription books at any time without notice. The Shares and A
Warrants allotted to you will be confirmed, subject to the terms and
conditions of this Agreement. Payments for Shares and A Warrants sold
by you is to be made by check or money order only and shall be made
payable to . In respect of all
Shares and A Warrants sold by you pursuant hereto, you will promptly
transmit (within three business days) to the Escrow Agent all checks
and money orders received in payment for the full amount of the Public
Offering Price for the number of Shares and A Warrants purchased,
without deduction for any commission or concession in compliance with
the Securities Exchange Act of 1934. Your transmittal letter
accompanying checks or money orders to the Escrow Agent shall set
forth the names and addresses, together with Social Security or
appropriate tax I.D. numbers, of the purchases with the number of
Shares and A Warrants purchased and a copy of said transmittal letter
shall be concurrently sent to us.
NO COMMISSIONS SHALL BE PAYABLE, AND ALL
SUBSCRIPTIONS AND SUBJECT TO REJECTION BY THE
UNDERWRITER, UNLESS AND UNTIL THE SELECTED
DEALER HAS COMPLIED WITH THE ABOVE UNDERLINED
PROVISION.
Each sale shall be contingent upon the sale of 1,100,000 Shares and
2,200,000 A Warrants being sold on or before the Termination Date
(which date may be extended for sixty (60) days), and upon the
acceptance of such sale by the undersigned. In the event any order
submitted to you is not accepted, the Escrow Agent will return all funds
paid by the purchases. Payment of the selling concessions in respect of
each such sale will be made to the Selected Dealer, by the Underwriter
when and only in the event that 1,100,000 Shares and 2,200,000 A
Warrants are sold by the Termination Date, (which date may be
extended by sixty (60) days), and the proceeds released by the Escrow
Agent. The offering is made subject to the issuance and delivery of the
Shares and A Warrants and the acceptance hereof by the Underwriter,
to the approval of legal matters by counsel, and to the terms and
conditions herein set forth.
If an order is rejected or if a payment is received which proves
insufficient or worthless, any compensation paid to the Selected Dealer
shall be returned wither by the Selected Dealer's remittances in cash or by a
charge against the account of the Selected Dealer, as the
Underwriter may elect.
4. Offering to Public. Shares sold to the public by Dealers shall be
sold by the Selected Dealers as agents for the Company. Neither you
nor any other person is, or has been, authorized to give any information
or to make any representations in connection with the sale of the Shares
and A Warrants other than as contained in the Prospectus. The Selected
Dealer will not sell the Shares and A Warrants pursuant to this
Agreement unless the Prospectus is furnished to the purchaser at least
48 hours prior to the mailing of the confirmation of sale, or is sent to the
person under such circumstances that it would be received by him 48
hours prior to his receipt of a confirmation of the sale. The Dealer
understands that during the 90 day period after the first date upon which
the Shares and A Warrants of the Company are bona fide offered to the
public, all Dealers effecting transactions in the Shares and A Warrants
shall be required to deliver the Company's current Prospectus to any
purchasers thereof prior to or concurrent with the receipt of the
confirmation of sale. Additional copies of the then current Prospectus
will be supplied by the Underwriter in reasonable quantities upon
request. No Selected Dealer is authorized to act as agent for the
undersigned in any respect. No Selected Dealer is authorized to act as
agent for the Company except in offering the Shares and A Warrants to
the public pursuant to this Agreement.
5. Compliance with Securities Laws. Upon becoming a Selected
Dealer, and in offering and selling the Shares and A Warrants, you agree
to comply with all applicable requirements of the Securities Act of 1933,
as amended (the "1933 Act"), the 1934 Act, any applicable state
securities or "Blue Sky" laws, and the Rules of Fair Practice of the
NASD, including, but not limited to, Article III, Section 1 thereof, and
the interpretations of said section promulgated by the Board of
Governors of such Association, including and "Interpretation with
respect to 'free-riding and withholding' dated November 1, 1970, and as
thereafter amended, and including information concerning the Board of
Governor's Interpretation thereof dated March 2, l979, to NASD
members. Upon application, you will be informed as to the states in
which we have been advised by counsel to the Company that the Shares
and A Warrants have been qualified for sale under the respective
securities or Blue Sky Laws of such states, but we assume no obligation
or responsibility as to the right of any Selected Dealer to sell the Shares
and A Warrants in any state or as to any sale therein.
By acceptance of this Agreement, you represent that you are a
member in good standing of the NASD.
By acceptance of this Agreement, each Selected Dealer has assumed
full responsibility for thorough and prior training of its representatives
concerning the selling methods to be used in connection with the offer and sale
of the Shares and A Warrants, giving special emphasis to the
NASD's principles of full and fair disclosure to prospective investors,
suitability standards and the prohibitions against "Free-Riding and
Withholding."
Each Selected Dealer agrees to indemnify and hold harmless the
Underwriter, the Company and the other Selected Dealers against and
from any liability, loss, damage, or expense arising out of any failure by
the Selected Dealer to comply with the 1933 Act, the 1934 Act,
applicable securities laws of any state, the rules and regulations of the
Securities and Exchange Commission and the Rules of Fair Practice of
the NASD, due to any act of omission by the Selected Dealer.
6. Prospectus and Offering. We have been advised by the Company
that the offering under the Registration Statement on Form SB-2 (File
No. 333-42311)with respect to the subject Shares and A Warrants
commenced on l998. By signing this Agreement, each Selected Dealer
acknowledges receipt of a copy of the Prospectus included in said
Registration Statement. Additional copies of the Prospectus will be
supplied to you in reasonable quantities upon request.
7. Liability. Nothing will constitute the Selected Dealers, an
association or other separate entity or partners with us or with each
other, but you will be responsible for your share of any liability or
expense based upon any claim to the contrary. As the Underwriter, we
shall have full authority to take such action as we may deem advisable in
all matters pertaining to the offering or in respect of the value, validity,
or form of the Shares and A Warrants, or the delivery of the certificates
for the Shares and A Warrants, or the qualifications of the Shares and A
Warrants for sale under the laws of any jurisdiction, or for or in respect
of any matter connected with this Agreement, except for lack of good
faith obligations expressly assumed by using this Agreement and any
liability due to our act or omission arising under the 1933 Act.
EXHIBIT 99.5
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SILVER STAR FOODS, INC.
P.O. BOX 3400487
BROOKLYN, NEW YORK 11234
MAY 16, 1998
K&V INVESTMENTS CO INC.
RE: 800,000 SHARES OF SILVER STAR FOODS, INC.
DEAR SIR/MADAM:
THIS LETTER IS TO CONFIRM THAT YOU HAVE
TENDERED YOUR 800,000 SHARES OF SILVER STAR FOODS,
INC. FOR SALE TO SILVER STAR FOODS, INC. SILVER STAR
FOODS, INC. AGREES TO PAY K&V INVESTMENTS $210,000
FOR THE ENTIRE 800,000 SHARES WITHIN 6 MONTHS FROM
THE DATE NOTED ABOVE, MAY 16, 1998
VERY TRULY YOURS,
BY: /S/ MICHAEL TROTTA, President
-----------------------------
SILVER STAR FOODS, INC.
ACCEPTED & AGREED TO BY:
K&V INVESTMENTS CO INC.
By: /s/
-----------------------------
