UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 2004
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Commission file number 333-68008
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EFOODSAFETY.COM, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 62-1772151
- ------------------------------------------------ -------------------
(STATE OR OTHER JURISDICTION OF INCORPORATION OR I.R.S. EMPLOYER
ORGANIZATION) IDENTIFICATION NO.)
1361 KWANA COURT, PRESCOTT, AZ 86301
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(Address of principal executive offices)
(928) 717-1088 (Issuer's
telephone number)
Securities registered Under 12(g) of the Exchange Act
COMMON STOCK, $0.0001 PAR VALUE
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X]
No [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X ]
Issuer's revenues for its most recent fiscal year: $2,383
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common
equity, as of a specified date within the past 60 days:
44,451,632 common shares @ $0.58(1) = 25,781,947.
(1)Market price at July 23, 2004.
As of July 26, 2004, the Company had 94,836,632 common shares issued
and outstanding
Documents Incorporated By Reference: NONE
Transitional Small Business Disclosure Format: Yes [ ] No [X]
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
This annual report contains forward-looking statements as that term is defined
in the Private Securities Litigation Reform Act of 1995. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may", "will",
"should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled "Risk Factors", that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.
As used in this annual report, the terms "we", "us", "our", and "eFood" mean
eFoodSafety.com, Inc., unless otherwise indicated.
DESCRIPTION OF BUSINESS
eFoodSafety.com, Inc. was incorporated in Nevada on October 28, 1996 as DJH
International, Inc. to market products through the Internet. The founder,
Michael J. Daniels, saw a need for good products and services to be marketed
traditionally and via the World Wide Web and sought opportunities through
companies that had the ability to sell and deliver in a timely fashion.
On October 16, 2000, we entered into an agreement and plan of reorganization
with Global Procurement Systems, Inc. whereby we acquired Global. As a result of
the acquisition, we issued 37,620,000 common shares and changed our name to
eFoodSafety.com, Inc. Upon the merger, Ms. Patricia Ross assumed the official
duties as president and brought us to our present path toward development of
sanitation services and products in the fruit and vegetable market worldwide.
On October 29, 2003, the Company issued 1,500,000 restricted shares of common
stock to acquire Food Safe, Inc. As of October 29, 2003, Food Safe, Inc. is a
wholly owned subsidiary of the Company.
In May 2004, the Company incorporated Knock-Out Technologies, Ltd. ("Knock-Out")
as a wholly-owned subsidiary of the Company. Knock-Out is to be a manufacturer
of all-natural, non-toxic, food-grade products.
We have undergone no bankruptcy, receivership or similar proceedings.
We were organized for the purpose of creating a corporate vehicle to seek,
investigate and, if such investigation warrants, acquire an interest in one or
more business opportunities presented to it. At this time,
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we have completed a merger as per above, and have identified a specific business
that we have targeted for operations. Success of the plan of operation is
contingent on the prudent usage of funds raised, through equity and/or debt
financing, to finance our food safety products and services business.
The company is still considered to be a development stage company. The company
has little revenue and is dependent upon the raising of capital through
placement of its common stock. There can be no assurance that we will be
successful in raising the capital required through the sale of our common stock.
The U.S. Department of Agriculture has estimated that less than 2% of all fruits
and vegetable are pathogen, or "germ free", at the initial packing point, and
less still are provided with a way to continue to eliminate the growth of
pathogens during the distribution cycle. Our research, covering the past four
years and, along with our process development has demonstrated that our
chemical-free Food Safe Program, utilizing ozone or electronic pasteurization,
virtually eliminated all pesticides and pathogens, including E. Coli,
Salmonella, and Listeria, at the packing house or distribution center.
Pesticides are chemical sprays used on a product while it is growing in the
field. The residue is left on the product under the normal packing process.
Pathogens are bacteria typically classified as Salmonella, Listeria, and
eColiH157. Please note that the Food Safe Process effectively removes both
pesticides and pathogens. The Food Safety Program is intended to be a complete
process that incorporates an application and monitoring system utilizing an
ozonated wash to fresh fruit and vegetables. A monitoring device will
continuously monitor water quality, Oxidation Reduction Potential (ORP), ph, and
maintains continuous records that satisfy Hazard Analysis Critical Control Point
(HACCP) requirements. The data supplied by the monitoring device is sent to the
USDA to insure compliance with HACCP standards.
A "run-through" will be completed after the company has acquired a distribution
facility, set up production lines, tested equipment, and insured that all FDA
standards have been met or exceeded. From the time the company takes possession
of a distribution facility, the first test run will be in thirty (30) days of
that point. The company will be fully operational, including equipment, labor,
sales, and product testing, approximately two (2) days after the test run.
eFood's marketing plans will be initiated immediately and those clients
currently awaiting commencement will be serviced.
The program will be marketed locally while the Company is in the process of
seeking patent protection. In order to set up a potential customer base, the
company will introduce its program to various parties in the fruit and vegetable
industry, as well as various government officials. The company sales staff will
carry out its marketing plan in the areas of produce sales, equipment sales,
food safe audits, and distribution center access. The local marketing areas are
the states of Arizona, California, Maryland, Nevada, Oregon and Washington.
The products and services provided by eFoodSafety are available in an array of
formats. Our customers would not have to seek a membership to join the food safe
program. We intend to supply machinery and materials to those patrons who will
be leasing/purchasing the equipment and performing the process at their own (the
vendor) facility. Please note that the equipment will be custom fabricated by
eFoodSafety.com, at its Palm Springs manufacturing facility, thus causing the
company to require a deposit from the customer in order to outlay any initial
manufacturing costs. By performing the process in the vendor's facility, it will
give an extended shelf life to the produce, including a reduction in pathogens,
and an impression of sanitization to the end-customer, but the product will not
meet any certification for Government standards due to cross contamination in
packing, shipping, delivery, etc.
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For the entire sanitization program to be deemed efficient, the process must be
completed at the company's distribution facility upon it being acquired and
operational. The results of such process shall exceed any FDA/USDA standards. As
stated above, the company offers a variety of services implemental in a
multitude of environments.
Therefore, billing for the company's products and services must be determined on
a case-by-case basis further described below:
Outline of the sanitization process listed by service and cost if the
client brings the produce to the company-owned distribution facility
for processing. This process exceeds any FDA, USDA Standards:
1. Inspection of Product Cost per unit $ 0.10
2. Handling Product before Processing Cost per unit $ 0.15
3. Food Safety Process/Packaging Cost per unit $ 2.50
4. Chemical Inspection Cost per unit $ 0.25
5. Sanitizing the Truck Cost per unit $ 0.15
6. Cost of Delivery of Product Cost per unit $ 1.75
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Total Cost per unit $ 4.90
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Please note that all prices are subject to change.
Outline of a la carte services available at the company-owned
distribution facility without utilizing the sanitization process:
1. Load Consolidation Cost per unit $ 1.00
2. Store Drop Delivery Cost per unit $ 1.50
3. Repacking Cost per unit $ 2.25
4. Storage Cost per unit $ 0.50
5. Sales/Marketing Cost per unit $ 1.00
6. Transportation Cost per load $ 250.00
Please note that all prices are subject to change.
Outline of services available at the customer's facility, not including
the cost for leasing/purchasing eFood approved equipment:
1. Process Cost per unit $ 0.30
Please note that a unit could be defined as follows: a) trays
(berries); b) cartons (oranges, peppers, bananas); c) lugs (grapes,
tomatoes); d) sacks (potatoes, cucumbers), etc.
The program will use common materials, as will the manufacture of equipment, so
that we will have a multitude of vending sources from which to choose. In
addition, we plan to market our products and services
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so as not to become dependent on any one customer.
We also plan to market all services, products and produce through outside
commissioned sales persons and through our website, http://www.e-foodsafety.com.
RISK FACTORS
An investment in our Common Stock offered hereby is speculative in nature and
involves a high degree of risk. In addition to the other information contained
in this filing, the following factors should be considered carefully before
making any investment decisions with respect to purchasing our Common Stock.
This filing contains, in addition to the lack of historical information,
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from the results discussed in the forward-looking
statements. This Risk Factors section includes all risks that we consider to be
material.
(1) WE ARE A DEVELOPMENT STAGE COMPANY, WITH LIMITED OPERATING HISTORY, AND YOU
COULD LOSE YOUR ENTIRE INVESTMENT.
Our business has not shown a profit. Since we commenced operations, we have
accumulated a negligible net loss through the present. Although we expect to be
profitable for the year ending April 30, 2005, we cannot assure that a year-end
profit will be realized or that profitability will continue in the future.
(2) RISK OF ENTERING INTO TRANSACTIONS WITH PARTIES RELATED TO THE COMPANY
Our company intends to enter into an agreement with Clarence W. Karney, who is
our CEO and a Director of the Company, for the right to use the Global
Inspection Service (GIS) that is a concept created by Mr. Karney. The company
plans to negotiate an agreement whereby GIS can be implemented and offered as a
standard service. No contract has been entered into to date although a letter of
intent to contract has been signed. Failure to reach a definitive agreement with
Mr. Karney for the right to offer GIS could adversely affect the company's
ability to continue in business. Furthermore, no assurances can be given that a
contract entered into would be the product of arms length negotiations and
result in terms favorable to the Company.
(3) FINANCIAL RISK OF DEPENDENCE ON KEY PERSONNEL.
The success of the company will depend to a great extent on Patricia Ross and
her management team. These individuals may not remain with the company due to
the lack of employment contracts. If we lose our key personnel, our business may
suffer. We depend substantially on the continued services and performance of our
senior management and, in particular, their contracts and relationships,
especially within the fresh fruit and vegetable industry.
(4) RISK OF LOSS OF INVESTMENT DUE TO HIGHLY COMPETITIVE NATURE OF OUR INDUSTRY.
The market for sanitation products for fruits and vegetables is intensely
competitive. We have limited operating history and minimal revenues from
operations. We currently have assets and financial resources, but the company
had operated at a loss for some time and must now fully execute its business
plan. We are smaller than our national competitors, and consequently lack
comparable financial resources to enter into
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certain markets. In fact, we compete with several companies that specialize in
the $5 billion dollar fruit and vegetable sanitation market. Most of these
companies have longer histories, greater name recognition and more financial
resources than we do. The success of the company will depend to a great extent
on Patricia Ross and her select management team. There is no assurance that
these individuals will remain with the company due to the lack of employment
contracts.
(5) RISK OF INCURRING HIGH LEGAL COST DUE TO LITIGATION.
While the company is not currently involved in any litigation, that is no
indication that the company will be precluded from being sued in the future. In
the past, especially during periods of market volatility, securities class
action litigation has often been instituted against companies similar to ours.
Such litigation, if instituted, could result in substantial costs and diversions
of management's attention and resources, which could have a material adverse
effect on our business, results of operations and financial condition.
(6) RISK OF EXTERNAL INFLUENCES
The price or our stock could be affected by external influences, which are
beyond our control. Examples of these influences are:
o An abrupt economic change resulting in an unexpected downturn
in demand;
o Governmental restrictions or excessive taxes on imports;
o Over-abundance of products and services related to the
sanitation industry;
(7) RISKS OF REDUCED LIQUIDITY OF "PENNY STOCKS"
The Securities and Exchange Commission has adopted regulations that generally
define a "penny stock" as any equity security that has a market price of less
than $5.00 per share and that is not traded on a national stock exchange, NASDAQ
or the NASDAQ National Market System. Now, or sometime in the future, penny
stocks could be removed from NASDAQ or the NASDAQ National Market System or the
securities may become subject to rules of the Commission that imposes additional
sales practice requirements on broker-dealers effecting transactions in penny
stocks. In most instances, unless the purchaser a penny stock is (i) an
institutional accredited investor, (ii) the issuer, (iii) a director, officer,
general partner or beneficial owner of more than five per cent (5%) of any class
of equity security of the issuer of the stock that is the subject of the
transaction or (iv) an established customer of the broker-dealer, the
broker-dealer must make a special suitability determination for the purchase of
such securities and have received the purchaser's prior written consent to the
transaction. Additionally, on any transaction involving the rules of the
Commission require, among other things, the delivery, prior to the transaction,
of a disclosure schedule prepared by the Commission relating to the penny stock
market and the risks associated with investing in penny stocks. The broker
dealer also must disclose the commissions payable to both the broker-dealer and
registered representative and current quotations for the securities. Finally,
among other requirements, monthly statements must be sent to the purchaser of
the penny stock disclosing recent price information for the penny stock held in
the purchaser's account and information on the limited market in penny stocks.
Consequently, the penny stock rules may restrict the ability of broker-dealers
to sell the securities and may affect the ability of purchasers to sell the
securities in the secondary market.
(8) RISK DUE TO MINORITY STATUS OF NEW INVESTORS
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Our directors and executive officers beneficially own approximately 50,385,000
common shares; approximately 53.12% of the outstanding common stock if all the
shares offered are sold. As a result, these stockholders, if they act as a
group, will have a significant influence on all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions. Such control may have the effect of delaying or
preventing a change in control of the Company.
(9) RISKS DUE TO RESALE RESTRICTIONS IMPOSED BY STATE "BLUE SKY LAWS"
There are state regulations, which might affect the transferability of our
shares. We have not registered its shares for resale under the securities or
"blue sky" laws of any state and we have no plans to register or qualify its
shares in any state. Current shareholders, and persons who desire to purchase
the shares in any trading market that may develop in the future, should be aware
that there may be significant state restrictions upon the ability of new
investors to purchase the securities.
SEC and "blue sky" laws, regulations, orders, or interpretations place
limitations on offerings or sales of securities by development stage companies,
or if such securities represent "cheap stock" previously issued to promoters or
others. These limitations typically provide, in the form of one or more of the
following limitations, that such securities are:
o not eligible for sale under exemption provisions permitting
sales without registration to accredited investors or
qualified purchasers;
o not eligible for the transactional exemption from registration
for non-issuer transactions by a registered broker-dealer;
o not eligible for registration under the simplified small
corporate offering registration (SCOR) form available in many
states;
o required to be placed in escrow and the proceeds received held
in escrow subject to various limitations; or
o not permitted to be registered or exempted from registration,
and thus not permitted to be sold in the state under any
circumstances.
Virtually all 50 states have adopted one or more of these limitations, or other
limitations or restrictions affecting the sale or resale of stock of development
stage companies, or "cheap stock" issued to promoters or others.
Specific limitations on offerings by development stage companies have been
adopted in:
Alaska Maryland Rhode Island
Arkansas Nebraska South Carolina
California New Mexico South Dakota
Delaware Ohio Tennessee
Florida Oklahoma Utah
Georgia Oregon Vermont
Idaho Pennsylvania Washington
Indiana
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Any secondary trading market, which may develop, may only be conducted in those
jurisdictions where an applicable exemption is available or where the shares
have been registered.
ITEM 2. DESCRIPTION OF PROPERTY.
The issuer has an office and equipment in Prescott, Arizona and an
equipment manufacturing facility in North Palm Springs, California. The Company
has finalized a lease for 10,000 square feet of industrial warehouse space to be
used as a manufacturing facility. The warehouse space is located at 19125 N.
Indian Avenue North, Palm Springs, California. This is a two year lease
beginning June 1, 2004. The Company will pay $4,500 per month for the lease.
ITEM 3. LEGAL PROCEEDINGS.
We know of no material, active or pending legal proceedings against our company,
nor are we involved as a plaintiff in any material proceeding or pending
litigation. There are no proceedings in which any of our directors, officers or
affiliates, or any registered or beneficial shareholder, is an adverse party or
has a material interest adverse to our interest.
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The stock is traded on the OTC Bulletin Board with the trading symbol
EFSF.OB..
The following table set forth the high and low bid of the Company's
Common Stock for each quarter within the past two years. The Company's Common
Stock was not publicly traded during the year ended April 30, 2003, and during
the first quarter of the year ended April 30, 2004.
2004: HIGH LOW
First Quarter $ - $ -
Second Quarter $ 0.68 $ 0.15
Third Quarter $ 0.53 $ 0.32
Fourth Quarter $ 0.69 $ 0.36
As of July 26, 2004, there were 94,836,632 shares of common stock
issued and outstanding that were held of record by approximately 40
shareholders. We have 37,620,000 outstanding common shares registered for resale
by the selling shareholders in accordance with the Securities Act of 1933 and we
are in the process of applying with the OTC Bulletin Board.
DIVIDEND POLICY
We don't plan to pay dividends at this time. We don't expect to pay
dividends on common stock anytime soon. Our board will decide on any future
payment of dividends, depending on our results of operations, financial
condition, capital requirements, and any other relevant factors.
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TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Signature
Stock Transfer, Inc., 2301 Ohio Drive, Suite #100, Plano, Texas 75093; telephone
(972) 612-4120.
RECENT SALES OF UNREGISTERED SECURITIES
On October 29, 2003, the Company issued 1,500,000 restricted shares of
common stock to acquire Food Safe, Inc. As of October 29, 2003, Food Safe, Inc.
is a wholly owned subsidiary of the Company.
On November 10, 2003, the Company issued 1,800,000 shares of common
stock for general and administrative expenses valued at $30,000.
On April 19, 2004, the Company issued 200,000 shares of common stock
for general and administrative expenses valued at $100,000.
On April 21, 2004, the Company issued 1,500,000 shares of common stock
for research and development expenses valued at $750,000.
During March and April of 2004, the Company issued 40,816 shares of
common stock for general and administrative expenses valued at $19,184.
On November 14, 2003, the Company changed the number of authorized
Common shares from 50,000,000 to 500,000,000. Par value of the Company's Common
shares was changed from $.0005 to $.0001. On December 5, 2003, the Company did a
3 for 1 forward stock split. All references in the accompanying financial
statements to the number of Common shares and per-share amounts since inception
have been restated to reflect the equivalent number of post stock split shares.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
We plan to market all services, products and produce through already established
relationships between management and potential clients, as well as through
outside commissioned sales persons and through our website,
http://www.e-foodsafety.com.
All funds raised by the company, if any, derived either through a debt and/or
equity financing, will be allocated to a tentative plan of operations for the
next twelve (12) months outlined as follows:
First 45 Days (Pre-Opening)
* Set Up West Coast Facility
* Set Up all administrative operations for the west coast
facility including job descriptions, & hiring for positions
* Set Up Safe Processing Room
* Start Food Safe Audit Program
* Start Quality Condition Inspection Program
* Write Contracts for all services
* Run Through of Food Safe Process
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* Begin Patent Process for Food Safe Process
* Start equipment manufacturing of truck washers
* Start writing the specifications for all government agencies
of Food Safe produce, eggs, poultry and meat
Month One
* Food Safe Produce
* Process west coast facility in full operation
* All services in operation at west coast facility
* Set contracts for all food safe products
* Start selling Food Safe Produce to government agencies
* Start retail, food service sales of Food Safe Produce
* Open negotiations for Mexico border facility
* Open truck washing facilities
* Open negotiations for New York/ New Jersey facility
Month Two
* Increase equipment sales
* Open three truck-washing facilities
* Open first Mexico border facility Increase food safe audit
program * Increase our brand name Food Safe produce sales
operations
Month Three
* Open first facility in New York/ New Jersey
* Increase government contracts
* Expand quality inspection program Increase first operation on
the Mexico border * Open three more truck washing facilities *
Increase equipment sales
Month Four
* Increase volume of Food Safe produce sales of east and west
facilities
* Introduce seminars reference word food safety
* Increase government services for food safety
* Open two truck-washing facilities
Month Five
* Start the process to open first port facility
* Open next facility on the Mexico border
* Increase Food Safe audit program
* Open five truck-washing facilities
Month Six
* Increase contract client base
* Expand sales for the New York/New Jersey facility
* Open four truck-washing facilities
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Month Seven
* Open first port facility on the east coast
* Expand Food Safe audit program to Mexico and Canada
* Expand the government sales program
Month Eight
* Open a concentrated advertising program for our food safe
* Increase client base for inspection, chemical inspection
* Open five truck-washing facilities
Month Nine
* Increase sales at all facilities
* Look for join venture partners
* Open three truck-washing facilities
Month Ten
* Survey international market place
* Start international sale of Food Safe Produce
* Open additional Mexico border facility
* Open four truck-washing facilities
* Start first operation in New Zealand
Month Eleven
* Increase Sales at all facilities
* Open the Health Food Produce Program
* Open discussion with the Food Drug Administration, Customs and
United States Department of Agriculture for Food Safe Audit
Programs
* Open seven truck-washing facilities
Month Twelve
* Evaluate opening three facilities for the south, central and
northwest United States
* Move into the South American markets
* Increase international Food Safe Audit program
* Expand into the organic produce market
* Open twelve truck-washing facilities
COMPETITION
The on-line food-safe products and services marketplace is in its infancy, with
no dominant business-to- business leader.
The fresh fruits, vegetables and produce industries are extremely competitive
and have become highly fragmented over the years. Operators have been attempting
to hold or increase market share through the development and operating of
traditional sales and distribution outlets. We believe that on-line marketing
will be effective and that others will emulate our business model.
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There are presently, to the best of our knowledge, no companies that provide
complete inspection services, processes and equipment. There are, however,
competitors that do provide partial food-safe programs.
We will compete with many different companies regarding certain commodities in
the market place including, but not limited to:
* Dole, Castle & Cook, Del Monte, Baskovitch, Redi Pack,
Grimmway Farms, Tony Vitrano, Fresh Express, T& A, Fresh
America, Sysco, Wal-Mart, K Mart, Costco, Cub Stores, Super
Value, Fresh Point, AmeriServ, Kraft, and Monarch Foods;
* Safeway, Albertons's, Winn Dixie, Publix, Kroger, Food Lion,
Stop & Shop, Wegman's, Giant Foods, Path Mart, Cash & Carry
and Raley's;
* Burger King, Wendy's, McDonald's, In and Out Burger, Chili's
Subway, Hardee's, Jack-in-the Box, White House, What-a-Burger,
PepsiCo, Hyatt Hotels, Marriott Hotels and Hilton Hotels
* Private inspection services such as McDonalds's Inspections
and FBI Inspections.
The only license required will be a PACA (Perishable Agricultural Commodities
Act) License and a State's License issued by the State Department in each state
the company is conducting its business. On December 9, 2003, the Company
received its PACA license from the U.S. Department of Agriculture.
The management team will eventually consist of approximately ten officers and/or
directors. Six supervisors will oversee the operations divisions at each
distribution center. The employees at each facility will be contracted through
local vendors. Mr. Karney, his colleagues, and associates plan to devote one
hundred percent of their professional time to the success of the business.
EMPLOYEES
We currently have six (6) paid full time employees.
CRITICAL ACCOUNTING POLICIES
Our critical accounting policies are those which we believe require significant
judgements, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain. A discussion of our critical accounting
policies is set forth in the Notes to our Financial Statements included as part
of this Report.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements of the Company and supplementary data are included
beginning immediately preceding the signature page to this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
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There are not and have not been any disagreements between the Company and its
accountants on any matter of accounting principles, practices or financial
statements disclosure.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
The management team consisting of the following individuals is conducting the
business of the company:
NAME POSITION AGE
PATRICIA ROSS-GRUDEN PRESIDENT/TREASURER/DIRECTOR 63
CLARENCE W. KARNEY CEO/CFO/SECRETARY/DIRECTOR 64
RICHARD SPEIDELL CHIEF OPERATIONS OFFICER/DIRECTOR 59
WILLIAM R. NELSON DIRECTOR OF RESEARCH AND DEVELOPMENT/DIRECTOR 69
ROBERT BOWKER PRESIDENT OF KNOCK-OUT TECHNOLOGIES, LTD/DIRECTOR 55
RALPH BAUGHMAN DIRECTOR 65
SCOTT MCFEE DIRECTOR 46
BUSINESS EXPERIENCE OF DIRECTORS
PATRICIA ROSS-GRUDEN is the President/Treasurer and a Director and has served in
those capacities since the merger of DJH International, Inc. and Global
Procurement Systems now renamed eFoodSafety.com, Inc. Ms. Ross-Gruden had been
selected as one of the ten most influential women in the transportation and
travel industry and honored as one of the 100 most influential women in Arizona.
Ms. Ross was with Prime World Travel, Inc. and succeeded in the turnaround of
this net-deficit organization by achieving a 375% turnaround in annual sales.
Ms. Ross was elected the first woman President of the Chamber of Commerce in
Arizona, selected to represent Arizona at the White House Conference for Small
Business and was President of the Board of Directors for the Arizona Small
Business Association.
CLARENCE W. KARNEY, Chairman, CEO, CFO, and Director has over nineteen years
experience with the Federal Government Department of Defense and the USDA. He
founded Karney & Associates and spent fifteen years building the company as a
leader in the operations and inspections of fresh fruit and vegetables from
Central America. Mr. Karney is a member of the United Fresh Fruit and Vegetable
Association, Western Growers Association, Institute of Food Technologists,
International Food Processors, Fresh Cut Produce Association, and the Produce
Marketing Association.
RICHARD SPEIDELL, Chief Operations Officer and Director, is a 35 year veteran in
the produce and marketing industries whose responsibilities have encompassed
procurement, retail, quality assurance, warehousing, distribution, and
production. As demonstrated by Mr. Speidell's impressive career history, he
provides the Company with the proper skill and ability to carry forward his
corporate duties as COO, as well as impart direction to the present operations
and future endeavors of the Company. He is a pivotal point of contact and an
integral part of the decision-making activities for the management team, while
working in all levels of the business.
14
WILLIAM R. NELSON, Director of Research and Development and Director, has been a
well-known pioneer of the use of ozonated ice in the Alaskan fisheries. After
spending more than a decade at the University of Washington, as a senior
developer, College of Fisheries and Food Science, Bill applied for and received
three consecutive grants, from the Alaska Department of Commerce. He proved in
his grant studies that by using an ozonated rinse, and ozonated ice to remove
bacteria, that he could significantly improve the quality of the product, and
extend the shelf life. Since then, he has worked relentlessly on developing
methods of simplifying the practical application of ozone for food safety. After
nearly a million dollars worth of prototypes and research, Mr. Nelson now has
several patented equipment designs that will be available for exclusive use by
e-FoodSafety.com, Inc. For the past ten years, Mr. Nelson was President and
Founder of Clean Air & Water Systems, Inc. which specialized in the application
of chemical-free ozone solutions to the seafood, beef, pork, poultry, and
produce industries on all commercial levels.
ROBERT BOWKER, President of Knock-Out Technologies, Ltd. and Director, has an
extensive background in herbs, natural supplements and natural healing. Mr.
Bowker has been involved with exotic and domestic animals since childhood, thus
finding himself challenged with varying diseases and illnesses with these
animals. The challenge was to effectively treat the viral, bacterial, and
protozoan borne illnesses while doing no harm to the animal. Mr. Bowker began
experimenting with an unorthodox approach on humans, using acquired knowledge,
intuition, and true passion for the work. Further, having traveled on three
continents, Mr. Bowker's proficiency in holistic methods and natural healing
properties was also broadened.
RALPH BAUGHMAN, Director, is the majority stockholder of International
Fumigators, Inc. and has been involved in the fumigation business for over forty
years. His company, holding licenses with both the Texas and Louisiana
Departments of Agriculture, provides pest control services to waterfront related
import/export companies and steamship lines. Mr. Baughman will be relied on by
the Company for consult due to his vast experience, involvement in the industry,
and knowledge of current fumigation technology.
SCOTT MCFEE, Director, has over ten years experience in various operational,
distribution and production capacities with Del Monte Fresh Produce. In his most
recent position he was General Manager for Production and Distribution for Del
Monte in Sanger, California, a 250,000 square foot packing and cooling facility.
As G.M., Mr. McFee was responsible for a budget of approximately $14 million per
year and 230 employees. Prior to Del Monte, Mr. McFee was employed at Sea-Land
Service for seven years in various supervisory and advisory positions.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that
our executive officers and directors and persons who own more than 10% of a
registered class of our equity securities file with the Securities and Exchange
Commission initial statements of beneficial ownership, reports of changes in
ownership and annual reports concerning their ownership of our common stock and
other equity securities, on Forms 3, 4 and 5 respectively. Executive officers,
directors and greater than 10% shareholders are required by the Securities and
Exchange Commission regulations to furnish us with copies of all Section 16(a)
reports they file.
To the best of our knowledge, during the fiscal year ended April 30, 2004, all
executive officers, directors and greater than 10% shareholders filed the
required reports in a timely manner.
15
AUDIT COMMITTEE FINANCIAL EXPERT
The Company's board of directors does not have an "audit committee
financial expert," within the meaning of such phrase under applicable
regulations of the Securities and Exchange Commission, serving on its audit
committee. The board of directors believes that all members of its audit
committee are financially literate and experienced in business matters, and that
one or more members of the audit committee are capable of (i) understanding
generally accepted accounting principles ("GAAP") and financial statements, (ii)
assessing the general application of GAAP principles in connection with our
accounting for estimates, accruals and reserves, (iii) analyzing and evaluating
our financial statements, (iv) understanding our internal controls and
procedures for financial reporting; and (v) understanding audit committee
functions, all of which are attributes of an audit committee financial expert.
However, the board of directors believes that there is not any audit committee
member who has obtained these attributes through the experience specified in the
SEC's definition of "audit committee financial expert." Further, like many small
companies, it is difficult for the Company to attract and retain board members
who qualify as "audit committee financial experts," and competition for these
individuals is significant. The board believes that its current audit committee
is able to fulfill its role under SEC regulations despite not having a
designated "audit committee financial expert."
ITEM 10. EXECUTIVE COMPENSATION.
During the year ended April 30, 2004, Clarence W. Karney, C.E.O. of the Company
received $19,700 in compensation. During the year ended April 30, 2004, no
officer received compensation in excess of $100,000. It is possible that upon
completion of an equity financing a compensation package will be developed,
however there is no time frame for the foreseeable future. The Board of
Directors will determine compensation of executives and shareholders of the
company will not have the opportunity to vote on or approve such compensation.
The Board of Directors will be developing a compensation package that will be
within industry standards for executives similarly situated with other companies
in the same industry.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as at July 26, 2004, certain information with
respect to the beneficial ownership of our common stock by each shareholder
known by us to be the beneficial owner of more than five percent (5%) of our
common stock, and by each of our current directors and executive officers, and
all executive officers and directors as a group. Each person has sole voting and
investment power with respect to the shares of common stock, except as otherwise
indicated. Beneficial ownership consists of a direct interest in the shares of
common stock, except as otherwise indicated.
Name and Shares Percentage of
Address of Beneficially Common
Beneficial Owner Owned (1) Stock
- --------------------------------------------------------------------------------
Clarence W. Karney
3244 Oakview Drive
Visalia, CA 93277 25,192,500 26.56
Patricia Ross
16
350 West Caldwell Ave.
Visalia, CA 9327 25,192,500 26.56
All Officers and Directors
as a group (2 in number) 50,385,000 53.12
(1) The information contained in this table with respect to beneficial
ownership reflects "beneficial ownership" as defined in Rule 13d-3
under the Exchange Act. All information with respect to the beneficial
ownership of any shareholder has been furnished by such shareholder
and, except as otherwise indicated or pursuant to community property
laws, each shareholder has sole voting and investment power with
respect to shares listed as beneficially owned by such shareholder.
Pursuant to the rules of the Commission, in calculating percentage
ownership, each person is deemed to beneficially own shares subject to
options or warrants exercisable within 60 days of the date of this
Filing, but shares subject to options or warrants owned by others (even
if exercisable within 60 days) are deemed not to be outstanding.
CHANGES IN CONTROL
We are unaware of any contract or other arrangement, the operation of which may,
at a subsequent date, result in a change in control of our company.
Presently in the by-laws there are no provisions that could delay a change in
control of the company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
To the best of the company's knowledge there are no transactions involving any
Director, Executive Officer, any nominee for election as a Director or Officer
or any security holder who is a beneficial owner or any member of the immediate
family of the same. The Global Inspection Service (GIS) concept was created by
Mr. Karney in l997 to provide time-sensitive information on the availability,
grade, and location of fresh fruit and vegetables in the worldwide market place.
This information is designed to be provided to companies, organizations and
individuals involved in sales, purchase, transportation or distribution segments
of the industry. GIS is a sole proprietorship owned by Mr. Karney, however no
definitive agreement has been reached to date regarding the purchase of the GIS
rights by eFoodSafety.com, Inc. The company plans to negotiate an agreement
whereby GIS can be implemented and made a standard service offered by
eFoodSafety.com, Inc. This concept would provide the company the ability to
offer key data to growers, buyers, and sellers in a cost effective manner giving
a uniformity of grading for all markets. Failure to reach a definitive agreement
with Mr. Karney for the right to offer GIS could adversely affect the company's
ability to continue in business. Furthermore, no assurances can be given that a
contract entered into would be the product of arms length negotiations and
result in terms favorable to the Company. International Fumigators, Inc. is a
fumigation company based in Houston, Texas. There is a definitive agreement
between eFood and International Fumigators to contract for services including;
a.) Fumigation services at company plant facilities; b.) Distribution of food
safe produce processed at company facilities for distribution to customers in
Texas and Mexico; c.) Export and import fumigation on all eFood produce; and d.)
Purchase of three truck washers for use in a joint operation in the Houston,
Texas area.
During 2004 and 2003, shareholders have paid general and administrative
expenses on behalf of the Company. These payments have been recorded as expenses
and as paid-in capital to the Company. The
17
amount of paid-in capital contributed by shareholders totaled $24,630 and
$37,459 for the years ended April 30, 2004 and 2003 respectively.
During the year ended April 30, 2004, shareholders loaned the Company
$325,000. The notes are payable in lump-sum including interest at 5% on July 9,
2009. Interest on the notes began accruing on February 3, 2004.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
Reports on Form 8-K
None
Exhibits
Exhibits Required by Item 601 of Regulation S-B
(3) ARTICLES OF INCORPORATION AND BY-LAWS
3.1 Articles of Incorporation (incorporated by reference from our
Registration Statement on Form SB-2 as amended on February 4, 2003)
3.2 Corporate Bylaws (incorporated by reference from our Registration
Statement on Form SB-2 as amended on February 4, 2003)
31 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
ITEM 14. CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial Officer have
concluded, based on an evaluation conducted within 90 days prior to the filing
date of this annual report on Form 10-KSB, that the Company's disclosure
controls and procedures have functioned effectively so as to provide those
officers the information necessary whether:
(i) this annual report on Form 10-KSB contains any untrue
statement of a material fact or omits to state a material fact
necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this annual
report on Form 10-KSB, and
(ii) the financial statements, and other financial information
included in this annual report on Form 10-KSB, fairly present
in all material respects the financial condition, results of
operations and cash flows of the Company as of, and for, the
periods presented in this annual report on Form 10-KSB.
18
There have been no significant changes in the Company's internal
controls or in other factors since the date of the Chief Executive Officer's and
Chief Financial Officer's evaluation that could significantly affect these
internal controls, including any corrective actions with regards to significant
deficiencies and material weaknesses.
ITEM 15. PRINCIPAL ACCOUNTANT FEES & SERVICES
The following is a summary of the fees billed to us by Robison, Hill &
Company for professional services rendered for the years ended April 30, 2004
and 2003:
Service 2004 2003
- ------------------------------ ------------------ ------------------
Audit Fees $ 8,925 $ 8,213
Audit-Related Fees - -
Tax Fees - -
All Other Fees - -
------------------ ------------------
Total $ 8,925 $ 8,213
================== ==================
AUDIT FEES. Consists of fees billed for professional services rendered for the
audits of our consolidated financial statements, reviews of our interim
consolidated financial statements included in quarterly reports, services
performed in connection with filings with the Securities & Exchange Commission
and related comfort letters and other services that are normally provided by
Robison, Hill & Company in connection with statutory and regulatory filings or
engagements.
TAX FEES. Consists of fees billed for professional services for tax compliance,
tax advice and tax planning. These services include assistance regarding
federal, state and local tax compliance and consultation in connection with
various transactions and acquisitions.
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Auditors
The Audit Committee, is to pre-approve all audit and non-audit services
provided by the independent auditors. These services may include audit services,
audit-related services, tax services and other services as allowed by law or
regulation. Pre-approval is generally provided for up to one year and any
pre-approval is detailed as to the particular service or category of services
and is generally subject to a specifically approved amount. The independent
auditors and management are required to periodically report to the Audit
Committee regarding the extent of services provided by the independent auditors
in accordance with this pre-approval and the fees incurred to date. The Audit
Committee may also pre-approve particular services on a case-by-case basis.
The Audit Committee pre-approved 100% of the Company's 2004 audit fees,
audit-related fees, tax fees, and all other fees to the extent the services
occurred after May 6, 2003, the effective date of the Securities and Exchange
Commission's final pre-approval rules.
19
EFOODSAFETY.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
-:-
INDEPENDENT AUDITOR'S REPORT
APRIL 30, 2004 AND 2003
CONTENTS
Page
Independent Auditor's Report...............................................................................F - 1
Consolidated Balance Sheets
April 30, 2004 and 2003,.................................................................................F - 2
Consolidated Statements of Operations for the
Years Ended April 30, 2004 and 2003
And the Cumulative from January 28, 1998 (Inception) to April 30, 2004...................................F - 3
Consolidated Statement of Stockholders' Equity
Since January 28, 1998 (Inception) to April 30, 2004.....................................................F - 4
Consolidated Statements of Cash Flows for the
Years Ended April 30, 2004 and 2003
And the Cumulative from January 28, 1998 (Inception) to April 30, 2004...................................F - 6
Notes to Consolidated Financial Statements.................................................................F - 8
INDEPENDENT AUDITOR'S REPORT
eFoodSafety.com, Inc. & Subsidiary
(A Development Stage Company)
We have audited the accompanying balance sheets of eFoodSafety.com,
Inc. & Subsidiary (a development stage company) as of April 30, 2004 and 2003,
and the related statements of operations and cash flows for the years ended
April 30, 2004 and 2003 and the cumulative from January 28, 1998 (inception) to
April 30, 2004, and the statement of stockholders' equity from January 28, 1998
(inception) to April 30, 2004. 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 audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of eFoodSafety.com,
Inc. & Subsidiary (a development stage company) as of April 30, 2004 and 2003,
and the results of its operations and its cash flows for the years ended April
30, 2004 and 2003 and the cumulative from January 28, 1998 (inception) to April
30, 2004 in conformity with accounting principles generally accepted in the
United States of America.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note 1 to
the consolidated financial statements, the Company has suffered recurring losses
from operations and has no established source of revenue. This raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are described in Note 1. These consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Respectfully submitted
/s/ Robison, Hill & Co.
Certified Public Accountants
Salt Lake City, Utah
July 28, 2004
F - 1
EFOODSAFETY.COM, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
April 30,
--------------------------------------
2004 2003
------------------ ------------------
Assets:
Current Assets
Cash $ 83,600 $ -
Inventory 47,107 -
------------------ ------------------
Total Current Assets 130,707 -
------------------ ------------------
Fixed Assets
Equipment 45,000 -
------------------ ------------------
Total Assets $ 175,707 $ -
================== ==================
Liabilities:
Current Liabilities
Accounts Payable $ 260 $ 2,525
------------------ ------------------
Long-Term Liabilities
Notes Payable 325,000 -
Accrued Interest 3,873 -
------------------ ------------------
Total Liabilities 329,133 2,525
------------------ ------------------
Stockholders' Equity:
Common Stock, $.0001 Par Value
Authorized 500,000,000 shares, Issued
93,045,816 at April 30, 2004
And 88,005,000 at April 30, 2003 9,305 8,800
Paid-In Capital 2,207,634 634,325
Deficit Accumulated During the
Development Stage (2,370,365) (645,650)
------------------ ------------------
Total Stockholders' Equity (153,426) (2,525)
------------------ ------------------
Total Liabilities and
Stockholders' Equity $ 175,707 $ -
================== ==================
The accompanying notes are an integral part of these financial statements.
F - 2
EFOODSAFETY.COM, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Cumulative
since
January 28,
1998
For the year inception
ended of
April 30, development
---------------------------------------
2004 2003 stage
------------------- ------------------ ------------------
Revenues $ 2,383 $ - $ 2,383
Cost of Sales 780 - 780
------------------- ------------------ ------------------
Gross Profit 1,603 - 1,603
------------------- ------------------ ------------------
Expenses
Research and Development 1,408,500 - 1,408,500
General and Administrative 313,945 - 959,595
------------------- ------------------ ------------------
Total Expenses 1,722,445 32,129 2,368,095
------------------- ------------------ ------------------
Net Loss from Operations (1,720,842) (32,129) (2,366,492)
Interest Expense (3,873) - (3,873)
------------------- ------------------ ------------------
Net Loss $ (1,724,715) $ (32,129) $ (2,370,365)
=================== ================== ==================
Basic & Diluted loss per share $ (0.02) $ -
=================== ==================
Weighted Average Shares 89,716,927 29,335,000
=================== ==================
The accompanying notes are an integral part of these financial statements.
F - 3
EFOODSAFETY.COM, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SINCE JANUARY 28, 1998 (INCEPTION) TO APRIL 30, 2004
Deficit
Accumulated
Since
January 28,
1998
Inception of
Common Stock Paid-In Development
Shares Par Value Capital Stage
----------------- ----------------- ------------------ ------------------
Balance at January 28, 1998 (inception) - $ - $ - $ -
February 9, 1998 Issuance of
Stock for cash 16,795,000 8,397 (4,487) -
Capital contributed by shareholder - - 44,154 -
Net Loss - - - (48,064)
----------------- ----------------- ------------------ ------------------
Balance at April 30, 1998 16,795,000 8,397 39,667 (48,064)
Retroactive adjustment for 3 to 1
Stock split and change in par value
From $.0005 to $.0001 33,590,000 (3,359) 3,359 -
----------------- ----------------- ------------------ ------------------
Restated balance at April 30, 1998 50,385,000 5,038 43,026 (48,064)
Capital contributed by shareholder - - 265,612 -
Net Loss - - - (265,612)
----------------- ----------------- ------------------ ------------------
Balance at April 30, 1999 50,385,000 5,038 308,638 (313,676)
Capital contributed by shareholder - - 246,897 -
Net Loss - - - (246,897)
----------------- ----------------- ------------------ ------------------
Balance at April 30, 2000 50,385,000 5,038 555,535 (560,573)
October 16, 2000 Shares issued for
Acquisition of GPS 37,620,000 3,762 (3,762) -
Capital contributed by shareholder - - 23,101 -
Net Loss - - - (23,101)
----------------- ----------------- ------------------ ------------------
Balance at April 30, 2001 88,005,000 8,800 574,874 (583,674)
Capital contributed by shareholder - - 21,992 -
Net Loss - - - (29,847)
----------------- ----------------- ------------------ ------------------
Balance at April 30, 2002 88,005,000 8,800 596,866 (613,521)
F - 4
EFOODSAFETY.COM, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SINCE JANUARY 28, 1998 (INCEPTION) TO APRIL 30, 2004
(continued)
Deficit
Accumulated
Since
January 28,
1998
Inception of
Common Stock Paid-In Development
Shares Par Value Capital Stage
----------------- ----------------- ------------------ ------------------
Capital contributed by shareholder - $ - $ 37,459 $ -
Net Loss - - - (32,129)
----------------- ----------------- ------------------ ------------------
Balance at April 30, 2003 88,005,000 8,800 634,325 (645,650)
Common stock issued to acquire
Food Safe, Inc. 1,500,000 150 649,850 -
Common stock issued for expenses 3,540,816 355 898,829 -
Capital contributed by shareholder - - 24,630 -
Net Loss - - - (1,724,715)
----------------- ----------------- ------------------ ------------------
Balance at April 30, 2004 93,045,816 $ 9,305 $ 2,207,634 $ (2,370,365)
================= ================= ================== ==================
The accompanying notes are an integral part of these financial statements.
F - 5
EFOODSAFETY.COM, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cumulative
Since
January 28,
For the year 1998
ended Inception of
April 30, Development
--------------------------------------
2004 2003 Stage
------------------ ------------------ -----------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $ (1,724,715) $ (32,129) $ (2,370,365)
Common stock issued for expenses 1,549,184 - 1,549,184
(Increase) Decrease in Inventory (47,107) - (47,107)
Increase (Decrease) in Accrued Interest 3,873 - 3,873
Increase (Decrease) in Accounts Payable (2,265) (5,330) 260
------------------ ------------------ -----------------
Net Cash Used in operating activities (221,030) (37,459) (864,155)
------------------ ------------------ -----------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of equipment (45,000) - (45,000)
------------------ ------------------ -----------------
Net cash provided by investing activities (45,000) - (45,000)
------------------ ------------------ -----------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from sale of stock - - 3,910
Proceeds from loans 325,000 - 325,000
Capital contributed by shareholder 24,630 37,459 663,845
------------------ ------------------ -----------------
Net cash provided by Financing Activities 349,630 37,459 992,755
------------------ ------------------ -----------------
Net (Decrease) Increase in
Cash and Cash Equivalents 83,600 - 83,600
Cash and Cash Equivalents
at Beginning of Period - - -
------------------ ------------------ -----------------
Cash and Cash Equivalents
at End of Period $ 83,600 $ - $ 83,600
================== ================== =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ - $ -
Franchise and income taxes $ - $ - $ -
F - 6
EFOODSAFETY.COM, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(continued)
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
On October 16, 2000, the Company issued approximately 37,620,000 shares
of common stock, par value $.0005, to acquire Global Procurement Systems.
On October 29, 2003, the Company issued 1,500,000 restricted shares of
common stock to acquire Food Safe, Inc. As of October 29, 2003, Food Safe, Inc.
is a wholly owned subsidiary of the Company.
On November 10, 2003, the Company issued 1,800,000 shares of common
stock for general and administrative expenses valued at $30,000.
On April 19, 2004, the Company issued 200,000 shares of common stock
for general and administrative expenses valued at $100,000.
On April 21, 2004, the Company issued 1,500,000 shares of common stock
for research and development expenses valued at $750,000.
During March and April of 2004, the Company issued 40,816 shares of
common stock for general and administrative expenses valued at $19,184.
The accompanying notes are an integral part of these financial statements.
F - 7
EFOODSAFETY.COM, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for eFoodSafety.com, Inc. &
Subsidiary (a development stage company) is presented to assist in understanding
the Company's consolidated financial statements. The accounting policies conform
to generally accepted accounting principles and have been consistently applied
in the preparation of the consolidated financial statements.
Organization and Basis of Presentation
The Company was incorporated in Nevada on October 28, 1996 as DJH
International, Inc. to market products through the Internet. On October 16,
2000, the Company entered into an agreement and plan of reorganization with
Global Procurement Systems, Inc. ("GPS") whereby the Company acquired GPS. This
business combination was accounted for as a reverse merger with GPS being the
surviving entity for financial reporting purposes. As a result of the
acquisition, the Company issued 37,620,000 shares of common stock in exchange
for the outstanding shares of GPS and changed its name to eFoodSafety.com, Inc.
GPS was incorporated under the laws of the State of Nevada on January
28, 1998. Since January 28, 1998 the Company is in the development stage, and
has not commenced planned principal operations.
On October 29, 2003, the Company issued 1,500,000 restricted shares of
common stock to acquire Food Safe, Inc. As of October 29, 2003, Food Safe, Inc.
is a wholly owned subsidiary of the Company.
Nature of Business
The Company was organized as a vehicle to provide methods and products
to ensure the safety of fruits and vegetables being marketed worldwide.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F - 8
EFOODSAFETY.COM, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Business Condition
These accompanying consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of business. As
of April 30, 2004, the Company has accumulated operating losses of 2,370,105
since its inception. The continuation of the Company is dependent upon the
continuing financial support of directors and stockholders. It is the intention
of the Company to raise new equity financing of approximately $2,500,000 within
the upcoming year. Amounts raised will be used to implement the company's plan
of operations. While the Company is expending its best efforts to achieve the
above plans, there is no assurance that any such activity will generate funds
that will be available for operations.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. These financial statements do not include any
adjustments that might arise from this uncertainty.
Principles of Consolidation
The consolidated financial statements for the year ended April 30, 2004
include the accounts of eFoodSafety.com, Inc. and its subsidiary Food Safe, Inc.
Food Safe, Inc. was acquired by the Company on October 29, 2003.
The results of subsidiaries acquired or sold during the year are
consolidated from their effective dates of acquisition through their effective
dates of disposition.
All significant intercompany balances and transactions have been
eliminated.
Earnings (Loss) per Share
Basic loss per share has been computed by dividing the loss for the
year applicable to the common stockholders by the weighted average number of
common shares outstanding during the years. There were no common equivalent
shares outstanding at April 30, 2004 and 2003.
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements. The Company maintains the majority of its cash
balances with one financial institution, in the form of demand deposits.
Revenue recognition
Revenue is recognized from sales of product at the time of shipment to
customers. Title passes to the customer at the time the items are shipped, and
are no longer owned by the Company.
F - 9
EFOODSAFETY.COM, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 2 - INCOME TAXES
As of April 30, 2004, the Company had a net operating loss carryforward
for income tax reporting purposes of approximately $1,800,000 that may be offset
against future taxable income through 2024. Current tax laws limit the amount of
loss available to be offset against future taxable income when a substantial
change in ownership occurs. Therefore, the amount available to offset future
taxable income may be limited. No tax benefit has been reported in the financial
statements, because the Company believes there is a 50% or greater chance the
carryforwards will expire unused. Accordingly, the potential tax benefits of the
loss carryforwards are offset by a valuation allowance of the same amount.
NOTE 3 - DEVELOPMENT STAGE COMPANY
The Company has recently begun principal operations and as is common
with a development stage company, the Company has had recurring losses during
its development stage. The Company's financial statements are prepared using
generally accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. However, the Company does not have significant cash
or other material assets, nor does it have an established source of revenues
sufficient to cover its operating costs and to allow it to continue as a going
concern. In the interim, shareholders of the Company have committed to meeting
its minimal operating expenses. Revenues as of April 30, 2004 are not considered
significant enough for the Company to come out of the development stage.
NOTE 4 - COMMITMENTS
As of April 30, 2004 all activities of the Company have been conducted
by corporate officers from either their homes or business offices. Currently,
there are no outstanding debts owed by the company for the use of these
facilities and there are no commitments for future use of the facilities.
NOTE 5 - COMMON STOCK TRANSACTIONS
On February 9, 1998, the Company issued approximately 50,385,000 shares
(post split) of common stock to its officers and directors for payments made on
the Company's behalf during its formation in the amount of approximately $3,910.
On October 16, 2000, the Company entered into an agreement and plan of
reorganization with Global Procurement Systems, Inc. ("GPS") whereby the Company
acquired GPS. This business combination was accounted for as a reverse merger
with GPS being the surviving entity for financial reporting purposes. As a
result of the acquisition, the Company issued 37,620,000 shares of common stock
in exchange for the outstanding shares of GPS and changed its name to
eFoodSafety.com, Inc.
F - 10
EFOODSAFETY.COM, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 5 - COMMON STOCK TRANSACTIONS (continued)
The merger was recorded as a recapitalization. In connection with this
recapitalization, the number of shares outstanding prior to the merger have been
restated to their post merger equivalents (increased from 360 shares to
50,385,000) and the par value of the Common Stock changed from no par value to
$.0001. All references in the accompanying financial statements to the number of
Common shares and per-share amounts since inception have been restated to
reflect the equivalent number of post merger shares.
On October 29, 2003, the Company issued 1,500,000 restricted shares of
common stock to acquire Food Safe, Inc. As of October 29, 2003, Food Safe, Inc.
is a wholly owned subsidiary of the Company.
On November 10, 2003, the Company issued 1,800,000 shares of common
stock for general and administrative expenses valued at $30,000.
On April 19, 2004, the Company issued 200,000 shares of common stock
for general and administrative expenses valued at $100,000.
On April 21, 2004, the Company issued 1,500,000 shares of common stock
for research and development expenses valued at $750,000.
During March and April of 2004, the Company issued 40,816 shares of
common stock for general and administrative expenses valued at $19,184.
On November 14, 2003, the Company changed the number of authorized
Common shares from 50,000,000 to 500,000,000. Par value of the Company's Common
shares was changed from $.0005 to $.0001. On December 5, 2003, the Company did a
3 for 1 forward stock split. All references in the accompanying financial
statements to the number of Common shares and per-share amounts since inception
have been restated to reflect the equivalent number of post stock split shares.
NOTE 6 - RELATED PARTY TRANSACTIONS
During 2004 and 2003, shareholders have paid general and administrative
expenses on behalf of the Company. These payments have been recorded as expenses
and as paid-in capital to the Company. The amount of paid-in capital contributed
by shareholders totaled $24,630 and $37,459 for the years ended April 30, 2004
and 2003 respectively.
During the year ended April 30, 2004, shareholders loaned the Company
$325,000. The notes are payable in lump-sum including interest at 5% on July 9,
2009. Interest on the notes began accruing on February 3, 2004.
F - 11
EFOODSAFETY.COM, INC.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
NOTE 7 - ACQUISITION
On October 29, 2003, the Company issued 1,500,000 restricted shares of
common stock to acquire Food Safe, Inc. Food Safe, Inc. had no assets or
liabilities, except for a patent pending that has been valued at $650,000 and
expensed as part of research and development expense in the financial
statements. As of October 29, 2003, Food Safe, Inc. is a wholly owned subsidiary
of the Company.
NOTE 8 - INVENTORY
During the year ended April 30, 2004, the Company purchased inventory
of $47,887. The inventory consists of ozonation equipment that will be resold to
clients. The inventory has been recorded at cost. In April 2004, $780 of
inventory was sold to a third-party.
NOTE 9 - SUBSEQUENT EVENTS
In May 2004, the Company incorporated Knock-Out Technologies, Ltd.
("Knock-Out") as a wholly- owned subsidiary of the Company. Knock-Out is to be a
manufacturer of all-natural, non-toxic, food-grade products.
The Company has finalized a lease for 10,000 square feet of industrial
warehouse space to be used as a manufacturing and distribution facility. The
warehouse space is located at 19125 N. Indian Avenue North, Palm Springs,
California. This is a two year lease beginning June 1, 2004. The Company will
pay $4,500 per month for the lease.
On July 21, 2004, the Company sold $2.0 million in convertible
debentures. The convertible debentures carry an interest rate of 6% per annum,
payable quarterly. The Company is seeking an additional $500,000 on or before
August 9, 2004. The debentures carry a conversion price of $.40 per share of the
Company's common stock.
The purchasers of the debentures will receive an A Warrant to purchase
an amount of common stock equal to 50% of the number of shares of common stock
purchased via this investment. The A Warrants shall expire two years from the
date of issuance and the exercise price of the A Warrants shall be $.80 per
share.
The purchasers of the debentures will also receive a B Warrant to
purchase an amount of common stock equal to 50% of the number of shares of
common stock purchased via this investment. The B Warrants shall expire two
years from the date of issuance and the exercise price of the B Warrants shall
be $1.00 per share.
F - 12
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EFOODSAFETY.COM, INC.
By: /s/ Clarence W. Karney
Clarence W. Karney, CEO, CFO, Secretary, Director
Date: August 11, 2004
By: /s/ Patricia Ross-Gruden
Patricia Ross-Gruden, President, Treasurer, Director
Date: August 11, 2004
By:/s/ Richard Speidell
Richard Speidell, Chief Operations Officer/Director
Date: August 11, 2004
By:/s/ William R. Nelson
William R. Nelson, Director of Research and Development/Director
Date: August 11, 2004
By:/s/ Robert Bowker
Robert Bowker, President of Knock-Out Technologies, Ltd./Director
Date: August 11, 2004
By:/s/ Ralph Baughman
Ralph Baughman, Director
Date: August 11, 2004
By:/s/ Scott McFee
Scott McFee, Director
Date: August 11, 2004
20