UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JANUARY 31, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from to .
Commission file number 333-68008
EFOODSAFETY.COM, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
62-1772151
(I.R.S. Employer Identification No.)
2302 SHOREHAM COURT, SUITE E, BEL AIR, MD 21015
(Address of principal executive offices)
(443) 512-0585 (Issuer's
telephone number)
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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 29,335,000 common shares issued and
outstanding as of May 19, 2003
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Our financial statements are prepared in accordance with accounting principles
generally accepted in the United States of America.
It is the opinion of management that the interim financial statements for the
quarter ended January 31, 2003 include all adjustments necessary in order to
ensure that the consolidated financial statements are not misleading.
ROBISON, HILL & CO. CERTIFIED PUBLIC ACCOUNTANTS
A PROFESSIONAL CORPORATION
Brent M. Davies, CPA
David O. Seal, CPA
W. Dale Westenskow, CPA
Barry D. Loveless, CPA
INDEPENDENT ACCOUNTANT'S REPORT
EFoodSafety.com, Inc.
(A Development Stage Company)
We have reviewed the accompanying balance sheets of EFoodSafety.com,
Inc. (a development stage company) as of January 31, 2003, and the related
statements of operations for the three and nine month periods ended January 31,
2003 and 2002 and cash flows for the nine month periods ended January 31, 2003
and 2002. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements referred to above
for them to be in conformity with accounting principles generally accepted in
the United States of America.
We have previously audited, in accordance with auditing standards
generally accepted in the United States of America, the balance sheet of
EFoodSafety.com, Inc. (a development stage company) as of April 30, 2002, and
the related statements of operations, cash flows, and stockholders' equity for
the year then ended (not presented herein); and in our report dated June 10,
2002, we expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying balance sheet as of April
30, 2002, is fairly stated, in all material respects, in relation to the balance
sheet from which it has been derived.
Respectfully submitted
/S/ ROBISON, HILL & CO.
Certified Public Accountants
Salt Lake City, Utah
May 19, 2003
MEMBERS OF AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF THE SEC PRACTICE SECTION and THE PRIVATE COMPANIES PRACTICE SECTION
1366 East Murray-Holladay Road, Salt Lake City, Utah 84117-5050
Telephone 801/272-8045, Facsimile 801/277-9942
EFOODSAFETY.COM, INC.
(A Development Stage Company)
BALANCE SHEETS
(Unaudited)
January 31 April 30
2003 2002
------------------ -----------------
Assets $ - $ -
================== =================
Liabilities $ 8,898 $ 7,855
------------------ -----------------
Stockholders' Equity:
Common Stock, $.0005 Par Value
Authorized 50,000,000 shares, Issued
29,335,000 at January 31, 2003 and 2002 14,667 14,667
Paid-In Capital 619,734 590,999
Deficit Accumulated During the
Development Stage (643,299) (613,521)
------------------ -----------------
Total Stockholders' Equity (8,898) (7,855)
------------------ -----------------
Total Liabilities and
Stockholders' Equity $ - $ -
================== =================
The accompanying notes are an integral part of these financial statements.
EFOODSAFETY.COM, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
Cumulative
since
January 28,
1998
inception
For the three months ended For the nine months ended of
------------------------------------- -------------------------------------
January 31, January 31, development
------------------------------------- -------------------------------------
2003 2002 2003 2002 stage
----------------- ------------------ ------------------ ----------------- ----------------
Revenues: $ - $ - $ - $ - $ -
Expenses: 12,245 2,114 29,778 22,484 643,299
----------------- ------------------ ------------------ ----------------- ----------------
Net Loss $ (12,245) $ (2,114) $ (29,778) $ (22,484) $ (643,299)
----------------- ------------------ ------------------ ----------------- ----------------
Basic loss per share $ - $ - $ - $ -
================= ================== ================== =================
Weighted Average Shares 29,335,000 29,335,000 29,335,000 29,335,000
================= ================== ================== =================
The accompanying notes are an integral part of these financial statements.
EFOODSAFETY.COM, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
Cumulative
Since
January 28,
1998
For the nine months ended Inception of
--------------------------------------
January 31, Development
--------------------------------------
2003 2002 Stage
------------------ ------------------ -----------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $ (29,778) $ (22,484) $ (643,299)
Increase (Decrease) in Accounts Payable 1,043 4,558 8,898
------------------ ------------------ -----------------
Net Cash Used in operating activities (28,735) (17,926) (634,401)
------------------ ------------------ -----------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net cash provided by investing activities - - -
------------------ ------------------ -----------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from sale of stock - - 3,910
Capital contributed by shareholder 28,735 17,926 630,491
------------------ ------------------ -----------------
Net cash provided by Financing Activities 28,735 17,926 634,401
------------------ ------------------ -----------------
Net (Decrease) Increase in
Cash and Cash Equivalents - - -
Cash and Cash Equivalents
at Beginning of Period - - -
------------------ ------------------ -----------------
Cash and Cash Equivalents
at End of Period $ - $ - $ -
================== ================== =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ - $ -
Franchise and income taxes $ - $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
On October 16, 2000, the Company issued approximately 12,540,000 shares
of common stock, par value $.0005, to acquire Global Procurement Systems.
The accompanying notes are an integral part of these financial statements.
EFOODSAFETY.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for eFoodSafety.com, Inc. (a
development stage company) is presented to assist in understanding the Company's
financial statements. The accounting policies conform to generally accepted
accounting principles and have been consistently applied in the preparation of
the financial statements.
Interim Financial Statements
The unaudited financial statements for the nine months ended January
31, 2003 reflect, in the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to fairly state the financial
position and results of operations for the three and nine months ended January
31, 2003 and 2002. Operating results for interim periods are not necessarily
indicative of the results which can be expected for full years.
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 12,540,000 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.
Nature of Business
The company has no products or services as of January 31, 2003. 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.
EFOODSAFETY.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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.
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 January 31, 2003 and 2002.
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.
NOTE 2 - INCOME TAXES
As of April 30, 2002, the Company had a net operating loss carryforward
for income tax reporting purposes of approximately $613,000 that may be offset
against future taxable income through 2022. 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.
EFOODSAFETY.COM, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Continued)
NOTE 3 - DEVELOPMENT STAGE COMPANY
The Company has not 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.
NOTE 4 - COMMITMENTS
As of January 31, 2003 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 16,795,000 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 12,540,000 shares of common stock
in exchange for the outstanding shares of GPS and changed its name to
eFoodSafety.com, Inc.
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
16,795,000) and the par value of the Common Stock changed from no par value to
$.0005. 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.
NOTE 6 - RELATED PARTY TRANSACTIONS
During 2003 and 2002, 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 $28,735 and $17,926 for the nine months ended January
31, 2003 and 2002 respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FORWARD-LOOKING STATEMENTS
This quarterly 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 quarterly report, the terms "we", "us", "our", and "eFood" mean
eFoodSafety.com, Inc., unless otherwise indicated.
DESCRIPTION OF BUSINESS AND PLAN OF OPERATION
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 12,540,000 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.
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, we have completed a
merger as per above, and have identified a specific business that we have
targeted for operations. This plan of operation assumes that we will be able to
raise the necessary funds, through equity and/or debt financing, to finance our
food safety products and services business.
We presently have no cash on hand and management serves without compensation.
The company is still considered to be a development stage company. The company
has no 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 two
years and, along with our process development has demonstrated that our Food
Safe Program, utilizing chlorine in conjunction with Food Safe 1600, 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 either existing or custom designed spray applications of Food Safe
materials to fresh fruit and vegetables after the initial chlorine bath. A
monitoring device will continuously monitor water quality, Oxidation Reduction
Potential (ORP), ph, chlorine concentration, 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 facility, set
up production lines, tested equipment, and insured that all FDA standards have
been met or exceeded. From the time the company is in receipt of the initial
(pre-opening) funding and it takes possession of the 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.
Patent protection will be sought immediately after operations commence. The
management has decided to wait until after the Food Safety Program has had a
thorough run-through in an eFood-approved facility. If any improprieties in
their process are detected, although they believe this to be highly unlikely,
certain changes will be made with a patent application to follow. The company
has started the preliminary paperwork required for the patent application
submission.
The program will be marketed locally prior to receiving 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, thus causing the company to require a portion of the desired
funding amount 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.
For the entire sanitization program to be deemed efficient, the process must be
completed at the company facility. 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 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
-----------------
Total Cost per unit $ 4.90
=================
Please note that all prices are subject to change.
Outline of a la carte services available at the company-owned 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 so as not to become
dependent on any one customer.
We plan to market all services, products and produce from our off-line
supply/distribution facilities through outside sales persons and through a web
site, http://www.e-foods-safety.com, which is currently under construction.
The commencement of operations is contingent upon receipt of funding. The
company requires approximately $1.8 million prior to the commencement of
operations.
These funds will enable our company to be fully operational and generate
revenues in forty-five days from the date of funding. However a specific plan of
operations for the next twelve (12) months has been 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
* 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
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.
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. The Company has not applied for any
licenses to date. The company intends to apply for its PACA license. No other
steps are necessary and the application process will take approximately 30 days
before receipt of the license.
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. The company currently has no paid employees. The company has no
payroll. Mr. Karney, his colleagues, and associates plan to devote one hundred
percent of their professional time to the success of the business upon the
receipt of funding for the proposed plan of operations.
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 NO 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, 2004, we cannot assure that a year-end
profit will be realized or that profitability will continue in the future. In
addition we are in poor financial condition from lack of capital.
(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.
Additionally, Mr. Karney has personally made offers to purchase property in both
Fresno County, California and Nogales, Arizona that are intended to be used by
the company for cold storage and processing. Mr. Karney has also agreed to make
earnest money deposits should any be required before a final agreement of sale
can be reached. Failure to reach an agreement of sale for these facilities, or
similar facilities, could adversely affect the company's ability to conduct
business. Furthermore, if the properties were to come under Mr. Karney's
ownership or control, no assurances can be given that a final sales contract
with the company would be the result of arms length negotiations with 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 no operating history or any revenues from operations. We
have no assets or financial resources. We have operated at a
loss and will continue to do so for some time. We are smaller than our national
competitors, and consequently lack the financial resources to enter new markets
or increase existing market share. 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.
(5) THE MARKET FOR SANITATION PRODUCTS FOR FRUITS AND VEGETABLES IS INTENSELY
COMPETITIVE, AND THE SPECIFIC NICHE THE COMPANY IS ENTERING ALSO CARRIES WITH IT
A HIGH DEGREE OF RISK.
While the market for sanitation products for fruits and vegetables is intensely
competitive, the specific niche the company is entering also carries with it a
high degree of risk. We have no operating history or any revenues from
operations. We have no significant assets or financial resources. We have
operated at a loss and will continue to do so for some time or at least until
the company has obtained financing and can fully execute its business plan. 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.
(6) 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.
(7) 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;
(8) 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 in this Offering
to sell the securities in the secondary market.
(9) RISK DUE TO MINORITY STATUS OF NEW INVESTORS
Our directors and executive officers beneficially own approximately 16,795,000
common shares; approximately 57.25% 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.
(10) RISK DUE TO LACK OF FUNDS
The company presently lacks sufficient funds to begin operations. No products or
services are presently being offered.
(11) 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
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.
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.
RECENTLY ENACTED AND PROPOSED REGULATORY CHANGES
From time to time, the Financial Accounting Standards Board ("FASB") issues
pronouncements regarding financial accounting standards, including standards
regarding accounting and reporting standards for business combinations and other
matters. For more information regarding the significant accounting policies and
standards applicable to our operations, see the Notes to the Financial
Statements.
ITEM 3. 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 quarterly report on Form 10-QSB, that the Company's disclosure
controls and procedures have functioned effectively so as to provide those
officers the information necessary whether:
(i) this quarterly report on Form 10-QSB 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
quarterly report on Form 10-QSB, and
(ii) the financial statements, and other financial information
included in this quarterly report on Form 10-QSB, 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 quarterly report on Form
10-QSB.
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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We are not a party to any pending legal action, suit, or proceeding nor is any
of our property the subject of any legal proceeding. 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 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
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)
99-1 CEO Certification
99-2 CFO Certification
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, Secretary, Director
Date: May 23, 2003
By: /s/ Lindsey Lee
Lindsey Lee, Chief Financial Officer
Date: May 23, 2003
I, Clarence W. Karney, certify that:
1. I have reviewed this quarterly report on form 10-QSB of
EFoodSafety.com, Inc.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit 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 quarterly report.
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in exchange act rules 13a-14 and 15d-14) for the registrant and
have:
A) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
B) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "evaluation
date"); and
C) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the evaluation date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
A) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
B) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls.
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 23, 2003
By: /s/ Clarence W. Karney
Clarence W. Karney, CEO, Secretary, Director
I, Lindsey Lee, certify that:
1. I have reviewed this quarterly report on form 10-QSB of
EFoodSafety.com, Inc.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit 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 quarterly report.
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report.
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in exchange act rules 13a-14 and 15d-14) for the registrant and
have:
A) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
B) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "evaluation
date"); and
C) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the evaluation date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
A) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
B) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls.
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 23, 2003
By: /s/ Lindsey Lee
Lindsey Lee, Chief Financial Officer
EXHIBIT 99.1
CEO CERTIFICATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of EFoodSafety.com, Inc. on Form 10-QSB
for the period ending January 31, 2003, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Clarence W. Karney,
CEO, Secretary, Director of the Company, certify, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of my knowledge and belief:
(1) the Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in
all material respects, the financial condition and result of
operations of the Company.
By: /s/ Clarence W. Karney
Clarence W. Karney, CEO, Secretary, Director
Date: May 23, 2003
EXHIBIT 99.2
CFO CERTIFICATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of EFoodSafety.com, Inc. on Form 10-QSB
for the period ending January 31, 2003, as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Lindsey Lee, Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to
the best of my knowledge and belief:
(1) the Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in
all material respects, the financial condition and result of
operations of the Company.
/s/ Lindsey Lee
Lindsey Lee, Chief Financial Officer
Date: May 23, 2003