ZHIDALI RADIO & TELEVISION NETWORK, INC. - SB-2/A - 20060124 - DISTRIBUTION_PLAN
PLAN OF DISTRIBUTION
This is a self-underwritten offering. This prospectus is part of a registration
statement that permits our officers and directors to sell the Shares directly to
the public, with no commission or other remuneration payable to them for any
Shares they sell. Messrs. Bell and Thompson will be the officers and directors
who will be selling in this offering. None of these persons is a broker, dealer,
or associated person with a broker-dealer. There are no plans or arrangements to
enter into any contracts or agreements to sell the Shares with a broker or
dealer.
The officers and directors will not purchase Shares in this offering.
In offering the securities on our behalf, our officers and directors will rely
on the safe harbor from broker dealer registration set out in Rule 3a4-1 under
the Securities Exchange Act of 1934. We believe that Messrs. Bell and Thompson
specifically meet the provisions of Rule 3a4-1(a)(1)-(3) and (4)(ii) because
neither is subject to a statutory disqualification, as that term is defined
under Section 3(a)39 of the Securities Exchange Act of 1934; neither will be
compensated, directly or indirectly for his participation in the offering;
neither will not be, at the time of his participation, an associated person of a
broker or dealer; and both will meet all of the elements of Rule
3a4-1(a)(4)(ii).
The Shares will be sold at the fixed price of $0.25 per Share until the
completion of this offering. There is no minimum amount of subscription
required.
This offering will commence on the date of this prospectus and continue for a
period of 120 days, unless we extend the offering period for an additional 90
days, or unless the offering is completed or otherwise terminated by us (the
"Expiration Date").
Because this is a minimum/maximum offering, all monies collected for
subscriptions will be held in a separate escrow account at Community Banks of
Colorado until the minimum number of shares are sold and $100,000 has been
received. At that time, the funds will be released to us for use in the
implementation of our business plans. (See "Use of Proceeds".) The offering will
then continue until the maximum offering is sold and the total of $200,000 is
received, or the offering expires, whichever first occurs. Once the maximum
amount has been raised, all funds collected up to the maximum will be deposited
directly into our operating bank account for use in operations. In the event the
minimum offering amount is not sold prior to the Expiration Date, all monies
will be returned to investors, without interest or deduction.
LEGAL PROCEEDINGS
We are not involved in any pending legal proceeding nor are we aware of any
pending or threatened litigation against us.
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DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Each of our directors is elected by the stockholders to a term of one year and
serves until his successor is elected and qualified. Each of our officers is
elected by the board of directors to a term of one year and serves until his or
her successor is duly elected and qualified, or until he or she is removed from
office. The board of directors has no committees. Each person listed below is
also a director.
The name, address, age and position of our officers and directors is set forth
below:
Name and Address Age Position(s)
----------------- --- -----------
Christopher Bell 29 President, Chief Executive
3029 S. Cherry Way Officer, Treasurer, and
Denver, Colorado 80222 Chief Financial Officer
Travis Thompson 28 Secretary
3029 S. Cherry Way
Denver, Colorado 80222
The persons named above are expected to hold said offices/positions until the
next annual meeting of our stockholders. These officers and directors are our
only officers, directors, promoters and control persons.
Background Information about Our Officers and Directors
Christopher Bell has been the President, Chief Executive Officer, Treasurer,
Chief Financial Officer and a Director of our company since inception in May,
2005. In college, he worked for two years at Strater Hotel in Durango, Colorado,
from 1997 to 1999. From 1999 to 2001, he was a Sous Chef at E.O.'s Chop House in
Durango, CO. (a 4 star rated restaurant). From 2002 to 2005, he worked for
Footers Catering, a catering company in Denver, Colorado as the Executive Chef
until co-founding our company. Mr. Bell received a B.A. in Business
Administration and Tourism and Resort Management at Fort Lewis College in
Durango, CO. He will devote a minimum of forty hours per week to our operations.
Travis Thompson has been the Secretary and Director of our company from
inception in May, 2005. He began his culinary career working at the Timberline
Lodge at the top of Mount Hood outside of Portland, Oregon as a garde manger
cook from 1997 to 1998. He worked in various positions in the culinary industry
at several resort towns including Lake Tahoe, California and Crested Butte,
Colorado from 1998 to 2001. Mr. Thompson moved to San Diego, California where he
helped open and manage a beach side bistro from 2002 to 2003. From 2003 to 2005,
he was a banquet chef at the Lodge at Torrey Pines in La Jolla, California until
co-founding our company. Mr. Thompson received an A.A. degree in culinary arts
at the Colorado Institute of Art in Denver, Colorado.
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EXECUTIVE COMPENSATION
Both of our officers and directors are compensated for the work they perform on
our behalf. Each receive a fixed salary of $2,500 per month as total
compensation. The following table presents compensation through December 31,
2005.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Comp.
Other Awards Payouts
Name and Annual
Position Year Salary Bonus Comp.
--------------------------------------------------------------------------------
Christopher Bell(1) 2005 $7,050 -0- -0- -0- -0-
President
--------------------------------------------------------------------------------
(1) Mr. Bell has personal use of the Company truck, which is also used for
deliveries.
In addition, our officers and directors are reimbursed for any out-of-pocket
expenses they incur on our behalf. In addition, in the future, we may approve
payment of salaries for our management, but currently, no such plans have been
approved. For our officers and directors, we pay for vacation and holidays but
do not provide major medical coverage. In addition, none of our officers,
directors or employees is a party to any employment agreements.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the date of this prospectus, the total
number of shares owned beneficially by each of our directors, officers and key
employees, individually and as a group, and the present owners of 5% or more of
our total outstanding shares. The table also reflects what such ownership will
be assuming completion of the sale of all shares in this offering, which we
can't guarantee. The stockholder listed below has direct ownership of his shares
and possesses sole voting and dispositive power with respect to the shares.
Name and Address No. of No. of Percentage
Beneficial Shares Shares of Ownership
Owner(1) Before After Before After
Offering Offering Offering Offering
Min. Max.
----------------------- -------- --------- -------- ------ -----
Christopher Bell(2) 5,100,000 5,100,000 43% 41.5% 40.5%
3029 S. Cherry Way
Denver, Colorado 80222
Travis Thompson(2) 5,100,000 5,100,000 43% 41.5% 40.5%
3029 S. Cherry Way
Denver, Colorado 80222
Sanders Huttner Partnership(3) 900,000 900,000 8% 7% 7%
651 Bering Drive
Suite 202
Houston, Texas 77057
------------------------
All Officers and 10,200,000 10,200,000 86% 83% 81%
Directors as a Group
(two persons)
------------------------
(1) All shares of owned of record.
(2) Mr. Bell has an option to purchase 5,000,000 shares of Mr. Thompson's
common stock for a period beginning May 4, 2005 and ending May 4, 2008.
This option may be exercised only in the event that all or a substantial
portion of our stock or assets are purchased and/or otherwise transferred
pursuant to a reorganization, merger or acquisition or similar transaction,
and/or in the event of the purchase of fifty percent or more of the
combined voting power of our then outstanding voting securities.
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(3) The partnership is controlled by Mr. Frederick A. Huttner and 50% owned by
Mr. Huttner. Mr. Huttner has a consulting services contract to provide
general business strategic consulting and management advisory services to
us, for which he is paid $750 per month. The contract is for eighteen
months from October 1, 2005. Mr. Huttner is the step-father of Mr. Bell.
Mr. Bell disclaims beneficial ownership of the Partnership's shares.
Future Sales by Existing Stockholders
A total of 11,868,333 shares have been issued to the existing stockholders, all
of which are restricted securities, as that term is defined in Rule 144 of the
Rules and Regulations of the SEC promulgated under the Act. Under Rule 144, such
shares can be publicly sold, subject to volume restrictions and certain
restrictions on the manner of sale. Any sale of shares held by the existing
stockholders (after applicable restrictions expire) and/or the sale of shares
purchased in this offering (which would be immediately resalable after the
offering), may have a depressive effect on the price of our common stock in any
market that may develop, of which there can be no assurance.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 50,000,000 shares of common stock,
$0.001 par value per share and 1,000,000 shares of Preferred Stock, $0.01 par
value per share to have such preferences as our board of directors may determine
from time to time. At September 30, 2005 a total of 11,868,333 common shares and
no shares of Preferred Stock were issued and outstanding.
Common Stock
The holders of common stock are entitled to one vote for each share held. The
affirmative vote of a majority of votes cast at a meeting which commences with a
lawful quorum is sufficient for approval of most matters upon which shareholders
may or must vote, including the questions presented for approval or ratification
at the Annual Meeting. However, amendment of the articles of incorporation
require the affirmative vote of a majority of the total voting power for
approval. Common shares do not carry cumulative voting rights, and holders of
more than 50% of the common stock have the power to elect all directors and, as
a practical matter, to control the company. Holders of common stock are not
entitled to preemptive rights, and the common stock may only be redeemed at our
election.
Preferred Stock
Our preferred shares are entitled to such rights, preferences and limitations as
determined by our board of directors. At the present time, no rights,
preferences or limitations have been established for our preferred shares.
Options
We have not issued any options or other derivative securities.
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Shares Eligible for Future Sale
When we complete the maximum offering, we will have 12,668,333 outstanding
shares of common stock. The 800,000 shares of our common stock sold in this
offering will be freely transferable unless they are purchased by our
affiliates, as that term is defined in Rule 144 under the Securities Act. The
remaining outstanding shares of our common stock will be restricted, which means
they were originally issued in offerings that were not registered on a
registration statement filed with the SEC. These restricted shares may be resold
only through registration under the Securities Act or under an available
exemption from registration, including the exemption provided by Rule 144.
A total of 5,100,000 shares of our common stock are subject to an option
agreement dated May 4, 2005. Mr. Bell has an option to purchase 5,000,000 shares
of Mr. Thompson's common stock for a period beginning May 4, 2005 and ending May
4, 2008. This option may be exercised only in the event that all or a
substantial portion of our stock or assets are purchased and/or otherwise
transferred pursuant to a reorganization, merger or acquisition or similar
transaction, and/or in the event of the purchase of fifty percent or more of the
combined voting power of our then outstanding voting securities.
Rule 144
In general, under Rule 144, beginning 90 days after the date of this prospectus,
a person, or persons whose shares are aggregated, including a person who may be
deemed our affiliate, who has beneficially owned restricted shares of common
stock for at least one year would be entitled to sell publicly within any
three-month period a number of shares that does not exceed the greater of:
1% of the number of shares of our common stock then outstanding, which
will equal approximately 120,000 shares immediately after the maximum
offering; or
the average weekly trading volume of our common stock on The Nasdaq
Stock Market's National Market during the four calendar weeks before
the filing of a notice on Form 144 relating to the sale.
Sales under Rule 144 are governed by manner of sale provisions and notice
requirements and to the availability of current public information about us. As
of May, 2006, all of the 11,868,333 restricted shares of our common stock will
become eligible for sale pursuant to Rule 144, if these volume and manner of
sale limitations are complied with. Until May, 2007, none of the restricted
shares of our common stock will become eligible for sale pursuant to Rule
144(k). At that time, a total of up to 1,100,000 shares of our common stock
could become subject to sale under Rule 144(k). We are unable to estimate
accurately the number of restricted shares that will actually be sold under Rule
144 because this will depend in part on the market price of our common stock,
the personal circumstances of the sellers and other factors.
INDEMNIFICATION
Pursuant to the Articles of Incorporation and By-Laws of the corporation, we may
indemnify an officer or director who is made a party to any proceeding,
including a law suit, because of his position, if he acted in good faith and in
a manner he reasonably believed to be in our best interest. In certain cases, we
may advance expenses incurred in defending any such proceeding. To the extent
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that the officer or director is successful on the merits in any such proceeding
as to which such person is to be indemnified, we must indemnify him against all
expenses incurred, including attorney's fees. With respect to a derivative
action, indemnity may be made only for expenses actually and reasonably incurred
in defending the proceeding, and if the officer or director is judged liable,
only by a court order. The prior discussion of indemnification in this paragraph
is intended to provide indemnification to the fullest extent permitted by the
laws of the State of Colorado.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
provisions above, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act, and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities, other
than the payment by us of expenses incurred or paid by one of our directors,
officers, or controlling persons in the successful defense of any action, suit
or proceeding, is asserted by one of our directors, officers, or controlling
person sin connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification is against public policy as expressed in the Securities Act, and
we will be governed by the final adjudication of such issue.
DESCRIPTION OF OUR BUSINESS
General Information
Kurrant Food Enterprises, Inc. was incorporated in the State of Colorado on May
3, 2005. We develop, own, and operate a catering business in Colorado through
our subsidiary corporation, Kurrant Cuisine Enterprises, Inc. We plan to expand
our operations to other lines of business in the food industry, such as
production of food products. However, we have no definitive plans to be involved
in any other activities at the present time other than our catering business.
Through our catering business, we organize and cater a number of different
events, from cocktail parties, to buffets of various kinds, to multi-course
plated dinners.
Our headquarters are located at 3029 S. Cherry Way, Denver, Colorado 80222. Our
phone number at our headquarters is (303) 300-5255. Our fiscal year end is
September 30th.
Overview of our Operations
We have chosen to focus on the high-end catering market, which requires an
emphasis on fresh products and gourmet selections. We plan to develop our
operations to appeal to two different customer segments. The first segment is
social catering, which is composed of individuals who contract for private
events, such as cocktail parties and buffet dinners. The other segment is
business catering, which is composed of companies which use catering services
primarily for breakfasts, lunches and meetings.
We use the term social catering to describe catering for individuals hosting a
special event such as a cocktail party, holiday dinner, or private buffet. These
events are generally held in private homes. Such customers generally seek
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caterers who offer high-end food products as well as service for hors d'oeuvers
and related activities. Customers generally contract for evening or weekend
events involving dinner or cocktail parties.
We use the term business catering to describe customers seeking food service for
meetings and breakfast and lunch delivery, primarily in a business setting.
These customers generally seek convenience and reliability. However, they are
generally also attracted to gourmet quality food products which cannot be found
in conventional take-out restaurants.
Our sales are generated for individual events. The more events we hold, the more
sales we generate. Through December 31, 2005, we held forty-three social
catering events. Our typical sale per event for a social catering was $1,300.
Through December 31, 2005, we held fifty-three business catering events. Our
typical sale per event for a business catering was $1,000. Our plan is to
attempt to generate as many events as possible with our current resources. We
have four full-time employees, including our two officers and directors. We do
not plan to hire additional employees at this time, but we typically hire
part-time help as needed on an individual event basis.
We believe that the catering industry is thriving industry and has been steadily
growing for the past thirty years. The catering industry is a subset of the
restaurant industry and has been termed the accommodation and food services
sector. The catering industry comprises establishments primarily engaged in
providing single event-based food services. The catering industry is
experiencing strong growth according to the trade journal Specialty Food News,
which states that off-premise catering is the second biggest growth sector,
second only to home meal replacement.
According to the National Catering industry, the number of catering companies is
currently approximately 46,000 to caterers nationally.
We plan to target social catering customers in select, upscale metropolitan
Denver areas such as Cherry Hills Village, Cherry Creek, Castle Rock, Greenwood
Village, and Washington Park. These areas have been chosen based on their
proximity to us and the area's relative affluence Upper income households are
most likely to host catering events. Furthermore, these areas typically contain
homes which are spacious and suitable for entertaining.
We also believe that we must provide a high level of service for our customers.
We believe that it is our responsibility to make certain that our products and
services are satisfying for our catering customers.
Operations, Management and Employees
We believe that initially operating from one location will be central to our
overall success. Our plan is to concentrate our operations in the Denver
Metropolitan area. With the proceeds of the minimum offering, we plan to operate
our catering business. With the maximum proceeds, we can expand the number of
events. We have no plans to operate in additional locations.
We have four full-time employees, including our two officers and directors. As
we expand, we intend to hire additional employees. However, we have no present
plans to do so. We typically hire part-time help as needed from time-to-time for
specific events.
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While our Messrs. Bell and Thompson have had extensive catering experience, we
must eventually recruit additional personnel. We will strive to maintain quality
and consistency through the careful training and supervision of personnel and
the establishment of, and adherence to, high standards relating to personnel
performance, customer service, and maintenance of our facilities. We believe
that we will be able to attract high quality, experienced personnel by paying
competitive wages and salaries.
Marketing and Promotion
We plan to market through direct contact with prospective customers. We have no
sales representative who solicits potential clients. However, Messrs. Bell and
Thompson plan to use their contacts to generate the initial customers and will
attempt to develop repeat business from catering events.
Patents and Trademarks
We do not currently have any patent or trademark protection. If we determine it
is feasible to file for such trademark protection, we still have no assurance
that doing so will prevent competitors from using the same or similar names,
marks, concepts or appearance.
Competition
The catering industry, in general, is intensely competitive. It is a fragmented
industry, with no one company, or groups of companies in control. The
relationships are typically local and based upon providing quality service and
products. Generally, we compete with a number of local caterers, all of whom are
larger and better-financed than we are. We must rely upon our contacts,
referrals from customers, and repeat business to be successful.
In general, we expect our primary competition to be from established local
caterers. In the Denver, Colorado market, we expect to compete principally with
five competitors: Whirled Peas, Epicurean Catering, the Bistro Boys, Tony's
Meats, and Gourmet Alternative. We believe that our products are more attractive
to ourcustomers than our competitors because we provide what we consider to be
superior quality and fresher cuisine. We also believe that we offer our
customers flexibility and cost savings because our overhead is lower than many
of our competitors. However, we cannot guarantee that we will be able to
successfully compete.
Government and Industry Regulation
We are subject to regulation as to our food service by health authorities. We do
not believe this regulation is material. Otherwise, we are not subject to any
material government or industry regulation.
Employees and Employment Agreements
We have four full-time employees, including our two officers and directors. In
addition, they serve as our officers and directors. We reimburse them for any
out-of-pocket expenses they incur on our behalf. In addition, in the future, we
may approve additional payment of salaries for our management, but currently, no
such plans have been approved. We do not currently pay for vacation, holidays or
provide major medical coverage. None of our officers or directors is a party to
any employment agreement. However, we may adopt such plans in the future.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following table provides selected financial data about us on a consolidated
basis from inception through September 30, 2005. We were incorporated on May 3,
2005. For detailed financial information, see the audited Financial Statements
included in this prospectus.
Balance Sheet Data: 9/30/05
------------------ --------
Cash $30,885
Total assets $83,592
Total liabilities $ 4,749
Shareholders' equity $78,843
Results of Operations
We have a limited operating history and have had a loss for the fiscal ended
September 30, 2005. However, our losses may continue into the future. For the
period from inception through September 30, 2005, total sales were $45,269.
Costs of goods include all direct costs incurred in providing services. Direct
costs consist of food, beverages, and catering supplies. Our standard contract
requires payment in thirty days from the date of services. We customarily
receive an initial fifty percent deposit when we are hired. The average amount
of time on our receivables has been approximately fifteen to thirty days. We
have had no collection problems to date.
The difference between total sales and costs of goods is gross profit. Our costs
of goods for the period from inception through September 30, 2005 was $34,206.
Operating expenses, which includes depreciation and general and administrative
expenses for the period from inception through September 30, 2005 was $41,660.
The major components of operating expenses include professional fees, salaries
and associated payroll costs, rent and telephone expenses.
As a result, we had a net loss of $30,597 for the period from inception
through September 30, 2005.
We believe that overhead cost in current operations should remain fairly
constant as sales improve. Each additional sale and correspondingly the gross
profit of such sale have minimal offsetting overhead cost. Thus, additional
sales could become profit at a higher return on sales rate as a result of not
needing to expand overhead at the same pace.
Liquidity and Capital Resources
As of September 30, 2005, we had cash or cash equivalents of $30,885.
Net cash used in operating activities was $41,365 for the period from inception
through September 30, 2005. We anticipate that overhead costs in current
operations will remain fairly constant as sales improve.
Cash flows used by investing activities were $19,525 for the period from
inception through September 30, 2005
Cash flows provided by financing activities accounted for $91,775 for the period
from inception through September 30, 2005. These cash flows were all related to
sales of stock.
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Over the next twelve months our capital costs will be approximately $10,000 to
$12,000 primarily to expand our current operations. We plan to buy additional
equipment to be used in our operations.
The offering will provide sufficient capital in the short term for our current
level of operations, which includes becoming profitable. Additional resources
will be needed to expand into additional locations.
Otherwise, we do not anticipate needing to raise additional capital resources in
the next twelve months.
Until the offering is complete and the current operations become cash flow
positive, our officers and directors will fund the operations to continue the
business. At this time we have no other resources on which to get cash if needed
without their assistance.
Our principle source of liquidity is our operations. Our variation in sales
is based upon the level of our catering event activity and will account for the
difference between a profit and a loss. Also business activity is closely tied
to the economy of Denver and the U.S. economy. A slow down in entertaining
activity will have a negative impact to our business. In any case, we try to
operate with minimal overhead. Our primary activity will be to seek to expand
the number of catering events and, consequently, our sales. If we succeed in
expanding our customer base and generating sufficient sales, we will become
profitable. We cannot guarantee that this will ever occur. Our plan is to build
our Company in any manner which will be successful.
Plan of Operation
We are currently in operation and have been since our inception. We will attempt
to operate for this fiscal year at a profit or at break even.
Currently, we are conducting business in only one location in the Denver
Metropolitan area. We have no plans to expand into other locations or areas. The
timing of the completion of the milestones needed to become profitable are not
directly dependent on the success of this Offering. We believe that we can
achieve profitability as we are presently organized with sufficient catering
business.
In the event only minimum offering proceeds are received, we would be limited in
our operations to our current location. However, we would still be in operation.
We could only expand operations beyond our current location with a significant
influx of capital beyond the maximum proceeds to be raised, of which there is no
assurance. Alternatively, we could expand our operations to additional locations
as and when funds become available, either through sales or through bank loans
or secondary financing.
Other than the shares offered by this prospectus no other source of capital has
been identified or sought.
If we are not successful in our operations we will be faced with several
options:
1. Cease operations and go out of business;
2. Continue to seek alternative and acceptable sources of capital;
3. Bring in additional capital that may result in a change of control; or
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4. Identify a candidate for acquisition that seeks access to the public
marketplace and its financing sources.
Currently, we have sufficient capital to implement our proposed business
operations or to sustain them for the next twelve months. If we can become
profitable, we could operate at our present level indefinitely.
If we raise less than the maximum in this offering, we will use the funds raised
as disclosed in "Use of Proceeds" as discussed in this registration statement.
To date, we have never had any discussions with any possible acquisition
candidate nor have we any intention of doing so.
Proposed Milestones to Implement Business Operations
At the present time, we are operating from one location in the Denver
Metropolitan area. Our plan is to operation profitable. We estimate that we must
generate at least $27,000 in sales per month to be profitable.
We believe that we can be profitable or at break even within nine months after
the closing of the Offering, assuming sufficient sales.
If the net proceeds received from this Offering are not enough to accomplish the
above, we will be forced to seek alternate sources of capital through an
additional offering, bank borrowing or capital contributions from existing
shareholders. We do not anticipate the need to raise additional capital
resources in the next twelve months unless we are more successful than we have
anticipated, and we determine to expand further go into other cities in this
period. In such a case, we expect the source of such funding to be generated
internally or and through another offering.
No commitments to provide additional funds have been made by management or
current shareholders. There is no assurance that additional funds will be made
available to us on terms that will be acceptable, or at all, if and when needed.
We expect to continue to generate and increase sales, but there can be no
assurance we will generate sales sufficient to continue operations or to expand.
We also are planning to rely on the possibility of referrals from customers
and will strive to satisfy our customers. We believe that referrals will be an
effective form of advertising because of the quality of service that we bring to
customers. We believe that satisfied customers will bring more and repeat
customers.
In the next 12 months, we do not intend to spend any substantial funds on
research and development and do not intend to purchase any large equipment.
Recently Issued Accounting Pronouncements
We do not expect the adoption of any recently issued accounting pronouncements
to have a significant impact on our net results of operations, financial
position, or cash flows.
Seasonality
We do not expect our sales to be impacted by seasonal demands for our services.
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DESCRIPTION OF PROPERTY
We currently own a van and a delivery truck, as well as office equipment. We
have entered into a lease agreement with an unaffiliated third party for kitchen
space, which is located at 3003 Arapahoe Street, Denver, Colorado 80204. This
was a written lease which ended on December 13, 2005 but has orally been
extended on a month-to-month basis under the same terms and conditions. We pay a
fixed cost of $570 per month, plus possible additional rent of $16 per hour,
based upon the usage. We lease space for our office from our President, Mr.
Bell, for which we pay no rent. We accrue $250 per month for this donated space.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We lease space for our office from our President, Mr. Bell, for which we pay no
rent. We accrue $250 per month for this donated space
Mr. Bell has an option to purchase 5,000,000 shares of Mr. Thompson's common
stock for a period beginning May 4, 2005 and ending May 4, 2008. This option may
be exercised only in the event that all or a substantial portion of our stock or
assets are purchased and/or otherwise transferred pursuant to a reorganization,
merger or acquisition or similar transaction, and/or in the event of the
purchase of fifty percent or more of the combined voting power of our then
outstanding voting securities.
Mr. Frederick A. Huttner, who owns and controls Sanders Huttner Partnership and
owns 50% of the partnership, has a consulting services contract to provide
general business strategic consulting and management advisory services to us,
for which he is paid $750 per month. The contract is for eighteen months from
October 1, 2005. Mr. Huttner is the step-father of Mr. Bell.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
No public market currently exists for shares of our common stock. Following
completion of this offering, we intend to contact an authorized market maker to
apply to have our common stock listed for quotation on the Over-the-Counter
Bulletin Board. As of September 30, 2005, we had fifteen holders of our common
stock.
The Securities and Exchange Commission has also adopted rules that regulate
broker-dealer practices in connection with transactions in penny stocks. Penny
stocks are generally equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system).
22
A purchaser is purchasing penny stock which limits the ability to sell the
stock. The shares offered by this prospectus constitute penny stock under the
Securities and Exchange Act. The shares will remain penny stocks for the
foreseeable future. The classification of penny stock makes it more difficult
for a broker-dealer to sell the stock into a secondary market, which makes it
more difficult for a purchaser to liquidate his/her investment. Any
broker-dealer engaged by the purchaser for the purpose of selling his or her
shares in us will be subject to Rules 15g-1 through 15g-10 of the Securities and
Exchange Act. Rather than creating a need to comply with those rules, some
broker-dealers will refuse to attempt to sell penny stock.
The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, to deliver a standardized risk
disclosure document prepared by the Commission, which:
- contains a description of the nature and level of risk in the market for
penny stocks in both public offerings and secondary trading;
- contains a description of the broker's or dealer's duties to the customer
and of the rights and remedies available to the customer with respect to a
violation to such duties or other requirements of the Securities Act of
1934, as amended;
- contains a brief, clear, narrative description of a dealer market,
including "bid" and "ask" prices for penny stocks and the significance of
the spread between the bid and ask price;
- contains a toll-free telephone number for inquiries on disciplinary
actions;
- defines significant terms in the disclosure document or in the conduct of
trading penny stocks; and
- contains such other information and is in such form (including language,
type, size and format) as the Securities and Exchange Commission shall
require by rule or regulation;
The broker-dealer also must provide, prior to effecting any transaction in a
penny stock, to the customer:
- the bid and offer quotations for the penny stock;
- the compensation of the broker-dealer and its salesperson in the
transaction;
- the number of shares to which such bid and ask prices apply, or other
comparable information relating to the depth and liquidity of the market
for such stock; and
- monthly account statements showing the market value of each penny stock
held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a
penny stock not otherwise exempt from those rules; the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements will have the effect of reducing the trading
activity in the secondary market for our stock because it will be subject to
these penny stock rules. Therefore, stockholders may have difficulty selling
their securities.
23
Reports
Once our registration statement under Form SB-2 has been declared effective, we
will be subject to certain reporting requirements and will furnish annual
financial reports to our stockholders, certified by our independent accountants,
and will furnish unaudited quarterly financial reports in our quarterly reports
filed electronically with the SEC. All reports and information filed by us can
be found at the SEC website, www.sec.gov.
Stock Transfer Agent
The stock transfer agent for our securities is X-Clearing Corp, of Denver,
Colorado. Their address is 535 Sixteenth Street, Suite 810, Denver, Colorado
80202. Their phone number is (303)573-1000.
SUBSCRIPTION AGREEMENT AND PROCEDURES
We will accept no subscriptions or indications of interest until our
registration statement is effective. At that point, all subscriptions must be
made by the execution and delivery of a subscription agreement, a form of which
is attached to this prospectus as Annex A. By executing the subscription
agreement, each purchaser will agree to pay the purchase price of the shares
subscribed for at the closing at which such subscription is accepted. We have
the right to revoke any offers made under this prospectus and to refuse to sell
shares to a particular subscriber if the subscriber does not promptly supply all
information we request or if we disapprove the sale. Subscriptions are not
binding until accepted. We will refuse any subscription by giving written notice
to the subscriber by personal delivery or first-class mail. We may reject any
subscription at any time prior to acceptance, in whole or in part, in our sole
discretion.
In order to subscribe for shares, a prospective investor must deliver the
following documents to the placement agent:
1. a complete and executed subscription agreement, in the form attached
to this prospectus as Annex A;
2. a complete and executed investor suitability questionnaire, in the
form provided by us; and
3. The full amount of the subscription price paid in United States
dollars in cash or by check, bank draft or money order made payable to
Kurrant Food Enterprises, Inc.-Community Banks of Colorado Escrow
Account.
EXPERTS AND LEGAL COUNSEL
Our financial statements from inception through September 30, 2005 included in
this prospectus have been audited by independent certified public accountants.
We include those financial statements in reliance on the report of the firm of
Ronald R. Chadwick, P.C., of Aurora, Colorado, given upon their authority as
experts in accounting and auditing.
The law firm of David Wagner & Associates, P.C. of Greenwood Village, Colorado
has passed upon the validity of the shares being offered and certain other legal
matters and is representing us in connection with this offering. This firm owns
150,000 shares of our common stock.
24
AVAILABLE INFORMATION
We have filed this registration statement on Form SB-2, of which this prospectus
is a part, with the U.S. Securities and Exchange Commission. Upon completion of
this registration, we will be subject to the informational requirements of the
Exchange Act and, in accordance therewith, will file all requisite reports, such
as Forms 10-KSB, 10-QSB and 8-KSB, proxy statements, under Sec.15(d) of the
Exchange Act, and other information with the Commission. Such reports, proxy
statements, this registration statement and other information, may be inspected
and copied at the public reference facilities maintained by the Commission at
100 F. Street N.E., Washington, D.C. 20549. Copies of all materials may be
obtained from the Public Reference Section of the Commission's Washington, D.C.
office at prescribed rates. The Commission also maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission at
http://www.sec.gov.
25
Annex A
Form of Common Stock Subscription Agreement
Kurrant Food Enterprises, Inc.
3029 S. Cherry Way
Denver, Colorado 80222
Gentlemen:
This subscription agreement relates to the offer made Kurrant Food Enterprises,
Inc., a Colorado corporation (the "Company"), to sell between $100,000 (the
"Minimum Offering") and $200,000 (the "Maximum Offering") in shares of Company
common stock (the "Shares"), pursuant to the prospectus filed with the SEC under
Rule 424(b)(3) on ______, 2006, and as same may be amended or supplemented from
time to time (the "Prospectus'). The undersigned has received a copy of the
Prospectus and wishes to purchase Shares on the terms, and subject to the
conditions, set forth below and in the Prospectus.
1. Subscription.
1.1 The undersigned hereby irrevocably subscribes, in accordance with the
terms and conditions of this Subscription Agreement (the "Agreement"), for the
purchase of the number of Shares, at the price per Share, set forth on the
signature page to the Agreement. The undersigned hereby delivers to the Company
(i) an executed copy of this Agreement, (ii) an executed copy of the Investor
Suitability Questionnaire, and. (iii) personal, bank, cashier's check or wire
transfer for the aggregate purchase price, as reflected on the signature page to
this Agreement (the "Purchase Price") payable to "Community Banks of Colorado,
Escrow Agent, for Kurrant Food Enterprises, Inc., as Escrow agent", as follows:
1.2 The Purchase Price and the executed Agreement will be held, for the
benefit of the undersigned until accepted by the Company pursuant to Section 2
below. If the Agreement is not accepted by , 2006 in accordance with
Section 2 of this Agreement (the "Termination Date"), then, the Purchase Price
will be promptly returned to the undersigned.
1.3 After a determination has been made, based upon the undersigned's
representations herein and the Investor Suitability Questionnaire, that the
undersigned is a suitable purchaser of the Shares and the conditions set forth
in Section 2 are met, the Company will accept this Agreement and the Escrow
Agent will deliver the Purchase Price to the Company. Following delivery of the
Purchase Price, the Company shall promptly deliver to the undersigned a stock
certificate representing the number of Shares for which the undersigned hereby
subscribes.
2. Acceptance of Agreement. It is understood and agreed that the Company
shall have the right to accept or reject this Agreement, in whole or in part,
for any reason whatsoever. The shares will be offered at a price of $0.25 per
share for a period of one hundred and twenty (120) days from the date of this
prospectus, subject to a ninety (90) day extension.
3. Representations and Warranties of Subscriber. Tie undersigned hereby
represents and warrants to the Company (knowing that the Company will be relying
on these matters to determine the undersigned's suitability as an investor and
the availability of securities law exemptions) that:
A-l
3.1 The undersigned has received the Prospectus. Additionally, the Company
has afforded the undersigned or the undersigned's representative with access to
and an opportunity to obtain other information regarding the Company requested
by the undersigned. The undersigned has not relied on any oral representations
of any kind.
3.2 The undersigned is an "accredited investor" as that term is defined in
Rule 501 of Regulation D under the Securities Act of 1933 (the `Securities
Act"), meaning that the undersigned has either (i) an individual net worth or
joint net worth with the undersigned's spouse in excess of$l,000.000, or(ii) an
individual annual income in excess of $200,000 in each of the two most recent
years r a joint income with the undersigned's spouse in excess of $300,000 in
each of those years, and has a reasonable expectation of reaching the same
income level (ii) the current year, or (iii) if a corporation. trust or
partnership net formed for the specific purpose of the investment in the Shares,
total assets in excess of $7,000.000. All statements made by the undersigned in
the Investor Suitability Questionnaire are true, complete and correct.
3.3 Immediately prior to the undersigned's execution of this Agreement, the
undersigned had such knowledge and experience in financial and business matters:
(including experience with investments of a similar nature), that the
undersigned was capable of evaluating the merits and risks of an investment in
the Shares.
3.4 The undersigned recognizes that the purchase of the Shares is a
speculative investment that involves a high degree of risk, including but not
limited to those risks referred to in the Prospectus, and is suitable only for
persons with the financial capability of making and holding long-term
investments not readily reducible to cash.
3.5 The undersigned, if not an individual investor, is empowered and duly
authorized to enter into tins Agreement under its governing document, trust
instrument, pension plan, charter, certificate of incorporation, bylaw provision
and the like.
3.6 The type of ownership in which the undersigned is applying to purchase
Shares is as follows: (Check One)
______ JOINT TENANTS WITH RIGHT OF SURVIVORSHIP (Both parties must sign)
______ TRUST (Please include name of trustee, date trust was formed and a copy
of the Trust Agreement or other authorization)
______ CORPORATION (Please include Certified Corporate Resolution authorizing
signature)
______ PARTNERSHIP (Please include a copy of the Statement of Partnership or
Partnership Agreement authorizing signature)
_____ COMMUNITY PROPERTY (Two signatures required)
_____ TENANTS-IN-COMMON (Both parties must sign)
4. , Continuing Obligation to Furnish Information. These representations
and warranties are true, complete and accurate as of the date hereof and shall
be true, complete and accurate as of the date of delivery of the Purchase Price
to the Company and shall survive such delivery. If, in ally respect, such
representations and warranties shall not be true and accurate prior to receipt
of notice of acceptance of this Agreement, the undersigned shall give written
notice of such fact to the Company, specifying which representations and
warranties are not true and accurate and the reasons therefore.
A-2
5. Miscellaneous.
5.1 Survival. The representations and warranties made herein shall survive
the consummation of the transaction contemplated hereby.
5.2 Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Colorado, without regard
to principles of conflicts of laws.
5.3 In the event that any dispute where to arise in connection with this
Agreement or with the undersigned's investment in the Company, except as it may
apply to the federal securities laws, the undersigned agrees, prior to seeking
any other relief at law or equity, to submit the matter to binding arbitration
in accordance with the rules of the National Association of Securities Dealers
at a place to be designated by the Company.
5.4 Entire Agreement; Amendment. This agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof, and
supersedes all other written or oral agreements, understandings and
negotiations. This Agreement may not be amended except by a writing signed by
both the Company and the undersigned.
5.5 Attorneys' Fees. If any action at law and in equity (including
arbitration) is necessary to enforce or interpret the terms of this Agreement
the prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements in addition to any other relief to which such party
maybe entitled.
5.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
A-3
IN WITNESS WHEREOF, the undersigned has executed this Agreement this _______ day
of ________________________________, 2006.
Signature(s) ____________________________________
Name(s) of Subscriber(s)
Address
Social Security or Tax I.D. No.
Purchaser Representative (if any)
Name and Address
ACCEPTANCE
The foregoing subscription is hereby accepted and receipt of payment is hereby
acknowledged with respect to Shares.
Dated:
Kurrant Food Enterprises, Inc.
By
Authorized Officer
A-4
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of directors and officers.
Pursuant to the Articles of Incorporation and By-Laws of the corporation, we may
indemnify an officer or director who is made a party to any proceeding,
including a law suit, because of his position, if he acted in good faith and in
a manner he reasonably believed to be in our best interest. In certain cases, we
may advance expenses incurred in defending any such proceeding. To the extent
that the officer or director is successful on the merits in any such proceeding
as to which such person is to be indemnified, we must indemnify him against all
expenses incurred, including attorney's fees. With respect to a derivative
action, indemnity may be made only for expenses actually and reasonably incurred
in defending the proceeding, and if the officer or director is judged liable,
only by a court order. The prior discussion of indemnification in this paragraph
is intended to be to the fullest extent permitted by the laws of the State of
Colorado.
Indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to directors or officers pursuant to the foregoing
provisions. However, we are informed that, in the opinion of the Commission,
such indemnification is against public policy, as expressed in the Act and is,
therefore, unenforceable.
Item 25. Other expenses of issuance and distribution.
Expenses incurred or (expected) relating to this Registration Statement and
distribution are as follows:
Legal and consulting fees $ 15,000
Accounting 5,000
Registration fees 100
Printing of Prospectus 2,000
Miscellaneous 900
----------
TOTAL $ 23,000
Item 26. Recent sales of unregistered securities.
Set forth below is information regarding the issuance and sales of securities
without registration since inception. No such sales involved the use of an
underwriter; no advertising or public solicitation were involved; the securities
bear a restrictive legend; and no commissions were paid in connection with the
sale of any securities.
On May 4, 2005, we issued common shares at $.001 per share for cash, or past
Services (to the following persons and entities:
26
Name Number of Shares Consideration
---- ---------------- -------------
Christopher Bell 5,100,000 past services
Travis Thompson 5,100,000 past services
David Wagner & Associates, P.C. 150,000 past services
Douglas Parker 50,000 past services
Christine Wehmeyer 5,000 past services
----------------
Total 10,405,000
On September 1, 2005, we issued common shares at $.06 per share for cash (the
price of the shares issued for past services were valued at fair market value
and negotiated in an arms length transaction) to the following persons and
entities:
Name Number of Shares
---- ----------------
Richard Dole 33,333
WinWin Asset Management, LLC 100,000
David Gregarek 100,000
James Hanosh 25,000
Michael Hopkins 100,000
Albert and Elizabeth Karza 25,000
Timothy and Kathy Kuzava 10,000
Michael and Judith Malone 25,000
Middleton Enterprises, LLC 20,000
Kathy Sheehan 20,000
Tom Bieging 25,000
Jesse Marion 80,000
Sanders Huttner Partnership 900,000
--------------
Total 1,463,333
All shares were issued at the same price in consideration of the efforts of
these persons or entities to incorporate the Company, create its business plan,
and to establish its business and financial structure.
In the transactions shown above, the issuance, delivery and sale of our common
stock were made pursuant to the private offering exemption within the meaning of
Section 4(2) of the Act because the offers were made to a limited number of
people, all of whom received all material information concerning the investment
and all of whom have had sophistication and ability to bear economic risk based
upon their representations to us and their prior experience in such investments.
In all of the transactions shown above, we have issued stop transfer orders
concerning the transfer of certificates representing all the common stock issued
and outstanding as reported in this section.
There have been no further issuances of securities through the date of this
Registration Statement.
27
Item 27. Exhibits.
The following exhibits are filed as part of this Registration Statement:
Exhibit
Number Description
--------------------------------------------------------------------------------
3.1* Articles of Incorporation
3.2* Bylaws
5.1* Opinion re: Legality
9.0* Form of Escrow Agreement
10.0* Consulting Services Agreement
21* List of Subsidiaries
23.1 Consent of Independent Auditors
23.2* Consent of Counsel (See Exhibit 5.1)
--------------------------------------------------------------------------------
* Previously filed.
Item 28. Undertakings
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after the
effective date of this registration statement, or most recent
post-effective amendment, which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement; and
(c) To include any material information with respect to the plan of
distribution not previously disclosed in this registration
statement or any material change to such information in the
registration statement.
2. That, for the purpose of determining any liability under the Securities Act
of 1933, as amended, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of the
securities being registered hereby which remain unsold at the termination of the
offering.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to our directors, officers and controlling persons pursuant to the
provisions above, or otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act, and is, therefore, unenforceable.
28
In the event that a claim for indemnification against such liabilities, other
than the payment by us of expenses incurred or paid by one of our directors,
officers, or controlling persons in the successful defense of any action, suit
or proceeding, is asserted by one of our directors, officers, or controlling
persons in connection with the securities being registered, we will, unless in
the opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification is against public policy as expressed in the Securities Act, and
we will be governed by the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City and County of Denver, State of Colorado.
Date Kurrant Food Enterprises, Inc.
January 20, 2006 By: /s/ Christopher Bell
--------------------------------------------
Christopher Bell, President
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
January 20, 2006 By: /s/ Christopher Bell
--------------------------------------------
Director, Treasurer and
Principal Accounting Officer
January 20, 2006 By: /s/ Travis Thompson
--------------------------------------------
Director
29
KURRANT FOOD ENTERPRISES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2005
Kurrant Food Enterprises, Inc.
Consolidated Financial Statements
TABLE OF CONTENTS
Page
----
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM ...................................... F-1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheet ................................. F-2
Consolidated statement of operation ........................ F-3
Consolidated statement of stockholders' equity ............. F-4
Consolidated statement of cash flows ....................... F-5
Notes to consolidated financial statements ................. F-7
RONALD R. CHADWICK, P.C.
Certified Public Accountant
2851 South Parker Road, Suite 720
Aurora, Colorado 80014
Telephone (303)306-1967
Fax (303)306-1944
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Kurrant Food Enterprises, Inc.
Denver, Colorado
I have audited the accompanying consolidated balance sheet of Kurrant Food
Enterprises, Inc. as of September 30, 2005, and the related consolidated
statements of operations, stockholders' equity and cash flows for the period
from May 3, 2005 (inception) through September 30, 2005. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I 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. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Kurrant
Food Enterprises, Inc. as of September 30, 2005, and the consolidated results of
its operations and its cash flows for the period from May 3, 2005 (inception)
through September 30, 2005 in conformity with accounting principles generally
accepted in the United States of America.
November 4, 2005
/s/ Ronald R. Chadwick, P.C.
----------------------------
RONALD R. CHADWICK, P.C.
F-1
KURRANT FOOD ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEET
Sept. 30, 2005
ASSETS
Current assets
Cash $ 30,885
Accrued receivables 17,230
------------
Total current assets 48,115
------------
Deferred offering costs 10,000
Fixed assets 25,750
Accumulated depreciation (2,017)
Other assets 1,744
------------
35,477
------------
Total Assets $ 83,592
============
LIABILITIES &
STOCKHOLDERS' EQUITY
Current liabilities
Accrued payables $ 2,050
Related party payables 2,699
------------
Total current liabilities 4,749
------------
Total Liabilities 4,749
------------
Stockholders' Equity
Preferred stock, $.10 par value;
1,000,000 shares authorized;
no shares issued and outstanding
Common stock, $.001 par value;
50,000,000 shares authorized;
11,868,333 shares issued and outstanding 11,868
Additional paid in capital 97,572
Accumulated deficit (30,597)
------------
Total Stockholders' Equity 78,843
------------
Total Liabilities and Stockholders' Equity $ 83,592
============
The accompanying notes are an integral part of the
consolidated financial statements.
F-2
KURRANT FOOD ENTERPRISES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Period From
May 3, 2005
(Inception)
Through
Sept. 30, 2005
Sales $ 45,269
Cost of goods sold 34,206
------------
Gross profit 11,063
------------
Operating expenses:
Depreciation 1,802
General and administrative 39,858
------------
41,660
------------
Gain (loss) from operations (30,597)
------------
Other income (expense): --
------------
Income (loss) before
provision for income taxes (30,597)
Provision for income tax --
------------
Net income (loss) $ (30,597)
============
Net income (loss) per share
(Basic and fully diluted) $ (0.00)
============
Weighted average number of
common shares outstanding 10,892,778
============
The accompanying notes are an integral part of the
consolidated financial statements.
F-3
KURRANT FOOD ENTERPRISES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Common Stock Stock-
Par $.001 Paid In Accumulated holders'
Shares Amount Capital Deficit Equity
---------- ---------- ---------- ---------- ----------
Balances at May 3, 2005 (Inception) -- $ -- $ -- $ -- $ --
Compensatory stock issuances 10,405,000 10,405 -- -- 10,405
Sales of common stock 1,463,333 1,463 86,337 -- 87,800
Paid in capital -- -- 11,235 -- 11,235
Gain (loss) for the period -- -- -- (30,597) (30,597)
---------- ---------- ---------- ---------- ----------
Balances at September 30, 2005 11,868,333 $ 11,868 $ 96,322 $ (29,347) $ 78,843
========== ========== ========== ========== ==========
The accompanying notes are an integral part of the
consolidated financial statements.
F-4
KURRANT FOOD ENTERPRISES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Period From
May 3, 2005
(Inception)
Through
Sept. 30, 2005
--------------
Cash Flows From Operating Activities:
Net income (loss) $ (30,597)
Adjustments to reconcile net loss to net
cash provided by (used
for) operating activities:
Depreciation 1,802
Accrued receivables (17,230)
Deferred offering costs (10,000)
Other assets (1,744)
Accrued payables 2,050
Related party payables 2,699
Donated Office Space 1,250
Compensatory stock issuances 10,405
--------------
Net cash provided by (used for)
operating activities (41,365)
--------------
Cash Flows From Investing Activities:
Fixed assets (19,525)
--------------
Net cash provided by (used for)
investing activities (19,525)
--------------
(Continued On Following Page)
The accompanying notes are an integral part of the
consolidated financial statements.
F-5
KURRANT FOOD ENTERPRISES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Continued From Previous Page)
Period From
May 3, 2005
(Inception)
Through
Sept. 30, 2005
-----------
Cash Flows From Financing Activities:
Sales of common stock 87,800
Paid in capital 3,975
-----------
Net cash provided by (used for)
financing activities 91,775
-----------
Net Increase (Decrease) In Cash 30,885
Cash At The Beginning Of The Period
-----------
Cash At The End Of The Period $ 30,885
===========
Schedule Of Non-Cash Investing And Financing Activities
None
Supplemental Disclosure
Cash paid for interest $ --
Cash paid for income taxes $ --
The accompanying notes are an integral part of the
consolidated financial statements.
F-6
KURRANT FOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Kurrant Food Enterprises, Inc. (the "Company"), was incorporated in the State of
Colorado on May 3, 2005. The Company was formed to act as a holding corporation
for its wholly owned subsidiary Kurrant Cuisine Enterprises, Inc., a Colorado
corporation actively engaged in the food catering business. The Company may also
engage in any other business permitted by law, as designated by the Board of
Directors of the Company. Kurrant Cuisine Enterprises, Inc. was incorporated in
the State of Colorado on May 5, 2005.
Principles of consolidation
The accompanying consolidated financial statements include the accounts of
Kurrant Food Enterprises, Inc. and its wholly owned subsidiary. All intercompany
accounts and transactions have been eliminated in consolidation.
Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less as cash equivalents.
Accounts receivable
The Company reviews accounts receivable periodically for collectability and
establishes an allowance for doubtful accounts and records bad debt expense when
deemed necessary. At September 30, 2005 the Company had no balance in its
allowance for doubtful accounts.
Property and equipment
Property and equipment are recorded at cost and depreciated under accelerated
methods over each item's estimated useful life, which is five years for
vehicles, computers and other items.
Revenue recognition
Revenue is recognized on an accrual basis after services have been performed
under contract terms, the event price to the client is fixed or determinable,
and collectibility is reasonably assured. Standard contract policy calls for
partial payment up front with balance due upon receipt of final billing. .
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect 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-7
KURRANT FOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued):
Income tax
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 ("SFAS 109"). Under SFAS 109 deferred taxes are provided on a
liability method whereby deferred tax assets are recognized for deductible
temporary differences and operating loss carryforwards and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.
Net income (loss) per share
The net income (loss) per share is computed by dividing the net income (loss) by
the weighted average number of shares of common outstanding. Warrants, stock
options, and common stock issuable upon the conversion of the Company's
preferred stock (if any), are not included in the computation if the effect
would be anti-dilutive and would increase the earnings or decrease loss per
share.
Financial Instruments
The carrying value of the Company's financial instruments, including cash and
cash equivalents and accrued payables, as reported in the accompanying balance
sheet, approximates fair value.
Recent Accounting Pronouncements
In August 2005, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 154, "Accounting Changes
and Error Corrections." SFAS 154 changes the requirements for the accounting for
and reporting of a change in accounting principle, requiring in general
retrospective application to prior periods' financial statements of changes in
accounting principle. The Company has adopted the provisions of SFAS No. 154
which are effective for accounting changes and corrections of errors beginning
after December 15, 2005. The adoption did not have a material effect on the
results of operations of the Company.
In December 2004, the FASB issued SFAS No. 153, "Exchange of Nonmonetary Assets
(An Amendment of APB No. 29)". SFAS 153 amends Opinion 29 to eliminate the fair
value accounting exception for nonmonetary exchanges of similar productive
assets, and replaces that exception with a general exception for nonmonetary
assets that do not have
F-8
KURRANT FOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued):
commercial substance. The Company has adopted the provisions of SFAS No. 153
which are effective in general for nonmonetary asset exchanges occurring in
fiscal years beginning after June 15, 2005. The adoption did not have a material
effect on the results of operations of the Company.
In December 2004, the FASB issued SFAS No. 152, "Accounting for Real Estate
Time-Sharing Transactions (An Amendment of FASB Statements No. 66 and 67)". SFAS
152 amends FASB 66 and 67 to reference the accounting and reporting guidance for
real estate time-sharing transactions provided for in AICPA Statement of
Position 04-2. The Company has adopted the provisions of SFAS No. 152 which are
effective for financial statements for fiscal years beginning after June 15,
2005. The adoption did not have a material effect on the results of operations
of the Company.
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs (An Amendment
of ARB No. 43, Chapter 4)". SFAS 151 amends and clarifies financial accounting
and reporting for abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage). The Company has adopted the provisions of
SFAS No. 151 which are effective in general for inventory costs incurred during
fiscal years beginning after June 15, 2005. The adoption did not have a material
effect on the results of operations of the Company.
NOTE 2. FIXED ASSETS
Fixed asset values recorded at cost are as follows:
Cost
--------
Vehicles $ 22,573
Computers 2,760
Other 417
--------
25,750
Less accumulated depreciation (2,017)
--------
Total $ 23,733
========
NOTE 3. LEASE COMMITMENT
The Company rents kitchen space under a noncancellable lease which expired in
December, 2005 but has been orally continued on a month-to-month basis under the
same terms. The required monthly payment is approximately $570, with possible
additional rent expense depending on time used. The Company incurred rent
expense under this lease for the five months ended September 30, 2005 of $4,141.
The Company also recorded rent expense of $250 per month for the use of office
space donated to the Company by an officer. Total rent expense under this
arrangement was $1,250.
F-9
KURRANT FOOD ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. INCOME TAXES
Deferred income taxes arise from the temporary differences between financial
statement and income tax recognition of net operating losses and other items.
Loss carryovers are limited under the Internal Revenue Code should a significant
change in ownership occur.
The Company accounts for income taxes pursuant to SFAS 109. The components of
the Company's deferred tax assets and liabilities are as follows:
September 30,
2005
-----------
Deferred tax liability $ --
Deferred tax asset arising from:
Net operating loss carryforwards 5,858
-----------
5,858
Valuation allowance (5,858)
-----------
Net Deferred Taxes $ --
===========
Income taxes at Federal and state statutory rates are reconciled to the
Company's actual income taxes as follows:
September 30,
2005
Tax at federal statutory rate (15%) $ (4,589)
State income tax (5%) (1,530)
Book to tax differences 261
Change in valuation allowance 5,858
-----------
$ --
===========
NOTE 5. STOCK OFFERING
The Company is currently planning to sell up to 800,000 shares of its common
stock on a best efforts basis for $0.25 per share, or $200,000, under a Form
SB-2offering. The costs of this offering through September 30, 2005 amounted to
$10,000. This amount will reduce the offering proceeds if the offering is
successful, or will be deducted as part of operations if the offering is
unsuccessful.
F-10
Exhibit 23.1
RONALD R. CHADWICK, P.C.
Certified Public Accountant
2851 South Parker Road, Suite 720
Aurora, Colorado 80014
Telephone (303)306-1967
Fax (303)306-1944
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
I consent to the incorporation by reference in this Registration Statement of
KURRANT FOOD ENTERPRISES, INC. on Form SB-2, of my report dated November 4, 2005
(included in exhibits to such registration statement) on the financial
statements of Kurrant Food Enterprises, Inc. from May 3, 2005 (inception)
through September 30, 2005.
/s/ Ronald R. Chadwick
-------------------------------
RONALD R. CHADWICK, P.C.
Aurora, Colorado
January 10, 2006
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