SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
--------------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the quarterly period ended March 31, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-33029
GFY FOODS, INC.
Incorporated pursuant to the Laws of the State of Nevada
Internal Revenue Service - Employer Identification No. 87-0382438
601 Deerfield Parkway
Buffalo Grove, IL 60089
(847) 353-7554
Address of principal executive offices and Issuer's Telephone Number
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 []
The total number of shares of the registrant's Common Stock, $.001 par value,
outstanding on May 20, 2005, was 1,014,873,262 .
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2005 3
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 2004 AND MARCH 31, 2005 4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED
MARCH 31, 2004 AND MARCH 31, 2005 5
STATEMENT OF SHAREHOLDERS DEFICIT FROM MARCH 31, 2003 THROUGH
MARCH 31, 2005 6
NOTES TO CONSOLIDATED UNAUDITED FINANCIA STATEMENTS 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
ITEM 3. CONTROLS & PROCEDURES 11
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 11
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 15
ITEM 5. OTHER INFORMATION 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURE 15
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements for Period Ending March 31, 2005.
GFY FOODS, INC.
CONSOLIDATED BALANCE SHEET
As of March 31, 2005
(Unaudited)
ASSETS
March 31, 2005
------------------------
CURRENT ASSETS:
Cash $ 71,846
Prepaid expenses -
Inventory 1,800
------------------------
Total current assets 73,646
Property & equipment, net (Note 4) 22,182
Franchise fee, net of amortization 50,545
------------------------
Total assets $ 146,373
========================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 218,315
Accrued expenses 95,047
Other payables 15,000
Notes payable, net of discounts of $105,585 434,521
Payable to former officers 25,997
Payable to current officers 292,976
------------------------
Total current liabilities 1,081,856
Long-term portion of notes -
------------------------
Total liabilities 1,081,856
Stockholders' equity:
Preferred stock, 50,000,000 shares -
authorized, none outstanding
Common stock, par value $0.001; 904,859
8,000,000,000 shares authorized,
904,858,733 shares outstanding
Additional paid-in capital 24,078,134
Prepaid Officer's Compensation (Note 6) (6,677,053)
Accumulated deficit (19,241,423)
------------------------
Total stockholders' equity (935,483)
------------------------
Total liabilities and shareholders' equity $ 146,373
========================
The accompanying notes are an integral part of these consolidated financial
statements.
3
GFY FOODS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Quarter Quarter
Ended Ended
March 31, 2005 March 31, 2004
------------------- ----------------
Net Revenues $ 57,315 $ 26,806
Cost of Sales 16,253 8,751
------------------- ----------------
Gross Profit 41,062 18,055
General and administrative expenses 1,311,061 804,790
------------------- ----------------
Loss from operations (1,269,999) (786,735)
Investment Income - 4,393
Forgiveness of Debt Income - -
Acquisition Costs - (34,702)
Loss on Acquisition Deposit - -
Loss on Disposition of Assets - -
Loss on Discontinued Operations - -
Interest Expense (1,761,647) (298,745)
------------------- ----------------
Loss before provision for income taxes (3,031,646) (1,115,789)
------------------- ----------------
Provision for income taxes - -
------------------- ----------------
Net Loss $ (3,031,646) $ (1,115,789)
================== ================
Basic net loss per weighted share $ (0.01) $ (1,115,789.00)
Basic weighted average shares outstanding 402,271,826 1
The accompanying notes are an integral part of these consolidated financial
statements.
4
GFY FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Quarter Quarter
ended ended
March 31, 2005 March 31, 2004
------------------- ----------------
Cash flows from Operating Activities:
Net loss $ (3,031,646) $ (1,115,789)
Adjustments to reconcile net loss to net cash
required by operating activities:
Depreciation and amortization 3,478 2,673
Amortization of discounts on notes payable
and deferred issuance costs 46,294 43,819
Change in receivables 0 (2,527)
Change in prepaid expenses 25,000 (5,232,675)
Deferred expenses 0 -
Change in payables 16,660 724,348
Change in accrued expenses 25,409 (58,645)
Items paid with common stock 2,854,795 5,422,850
------------------- ----------------
Net cash used in operating activities (60,010) (215,946)
Cash flows from investing activities:
Disposition of property and equipment 0 1,735
Deposit on acquisition 0 (500)
Cash included in acquisition 0 7,380
Acquisition costs 0 34,702
Inventory 0 -
Investment 0 10,000
------------------- ----------------
Net cash provided by investing activities 0 53,317
Cash flows from financing activities:
Sale of common stock 0 -
Note repayment 0 (4,269)
Net proceeds from notes issued 131,500 118,900
Shareholder loans 0 (1,246)
Repayment of shareholder loans (2,000) (11,516)
------------------- ----------------
Net cash provided by financing activities 129,500 101,869
------------------- ----------------
Net increase (decrease) in cash 69,490 (60,760)
Cash, at beginning of period 2,356 62,256
------------------- ----------------
Cash, at end of period $ 71,846 $ 1,496
=================== ================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ - $ -
Cash paid for taxes $ - $ -
The accompanying notes are an integral part of these consolidated financial
statements.
5
GFY FOODS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
Common Stock Additional Prepaid
Paid-In Compensation Accumulated
Shares Amount Capital to Officers Deficit Total
----------- --------- ------------ -------------- ------------- -------------
Balance at March 31, 2003 1 $ - $ 1,852,090 $ - $ (2,544,004) $ (691,914)
Stock issued to retire options 1 - - - -
Stock issued in exchange for debt 1 0 725,842 - 725,842
Stock issued for services 1 0 5,168,900 - 5,168,900
Stock issued to officer in exchange for debt 1 0 150,000 - 150,000
Proceeds of Stock Subscription received - 503,058 - 503,058
Cancellation of remaining Regulation S Offering (1) (0) (5,482) - (5,482)
Stock issued for Purchase Option - - 1,500 - 1,500
Value of conversion feature on debt issued - 90,687 - 90,687
Stock issued for acquisition of GFY, Inc. 1 - 20,000 - 20,000
Net loss for period ended March 31, 2004 - - - - (1,910,846) (1,910,846)
----------- --------- ------------ -------------- ------------- -------------
Balance at March 31, 2004 5 0 8,506,595 - (4,454,850) 4,051,745
Stock issued for exercise of options 1 0 462,000 - 462,000
Stock issued for services 420,342 420 10,552,421 - 10,552,841
Stock issued to retire debts 34,012 34 1,254,966 - 1,255,000
Stock issued for acquisition 2,073 2 932,198 - 932,200
Value of conversion feature on debt issued 136,600 - 136,600
Reclassification of prepaid officer's compensation - - - (6,450,448) (6,450,449)
Net loss for period ended December 31, 2004 - - - - (11,754,926) (11,754,926)
----------- --------- ------------ -------------- ------------- -------------
Balance at December 31, 2004 456,433 456 21,844,780 (6,450,448) (16,209,777) (814,989)
Stock issued for services 904,232,300 904,233 477,167 - 1,381,400
Stock issued to retire debts 170,000 170 1,699,830 - 1,700,000
Prepaid officer's compensation - - - (226,605) (226,605)
Value of conversion feature on debt issued - - 56,357 - 56,357
Net loss for quarter ended March 31, 2005 - - - - (3,031,646) (3,031,646)
----------- --------- ------------ -------------- ------------- -------------
Balance at March 31, 2005 904,858,733 $ 904,859 $ 24,078,134 $ (6,677,053)$ (19,241,423) $ (935,483)
=========== ========= ============ ============== ============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
6
GFY FOODS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2005
NOTE 1 - OVERVIEW AND BASIS OF PRESENTATION
Overview
GFY Foods, Inc, formerly F10 Oil & Gas Properties, Inc., (hereinafter referred
to as "GFY" or the "Registrant"), is a company that owns and operates franchised
restaurants in Illinois. Until January 12, 2004, the Registrant was in the
business of making investments in oil and natural gas exploration and oil and
natural gas producing properties.
The operations of the Registrant during the period in which it was solely
engaged in the investment in oil and gas opportunities is shown as discontinued
business operations in the consolidated financial statements. The Registrant
held the investments until December 31, 2004. The net income derived from these
holdings after January 12, 2004 is shown as investment income in the
consolidated financial statements.
The Registrant approved a ten thousand for one reverse stock split on January
25, 2005. The effective date of the reverse stock split was February 9, 2005.
The consolidated financial statements reflect the effects of this reverse stock
split.
Interim Financial Information
The financial statements presented in this report have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission for interim
reporting and include all adjustments which are, in the opinion of management,
necessary for fair presentation. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been omitted pursuant to
such rules and regulations for interim reporting. These financial statements for
the three-month period ended March 31, 2005 are not necessarily indicative of
the results which may be expected for an entire fiscal year. For further
information, refer to the audited consolidated financial statements and notes
thereto included in the Report on Form 10-KSB, for the period ended December 31,
2004.
NOTE 2 - PER SHARE INFORMATION
Basic loss per common share for the three months ended March 31, 2005 and March
31, 2004 have been computed based on net income (loss) divided by the weighted
average number of common shares outstanding during the period. Dilutive net loss
per share is not reported since the effects are anti-dilutive and the Registrant
is in a net loss position. After accounting for the reverse stock split approved
on January 25, 2005, the weighted average number of shares outstanding for the
three months ended March 31, 2005 was 402,271,086. The weighted average number
of shares outstanding for the three months ended March 31, 2004 was 1 (one)
after adjusting for the reverse stock splits on February 9, 2005, October 26,
2004 and July 13, 2004.
NOTE 3 - GOING CONCERN
As shown in the accompanying financial statements, the Registrant incurred a net
loss of $3,031,646 for the three months ended March 31, 2005. The Registrant has
incurred total losses of $19,241,423 since its inception. Therefore, the ability
of the Registrant to continue as a going concern is dependent on obtaining
additional capital and financing. The accompanying financial statements do not
include any adjustments that might be necessary if GFY is unable to continue as
a going concern.
The Registrant's is currently in default with the State of Nevada. Approximately
$4,325 in current fees are due and an additional $4,300 is due by May 31, 2005.
If the Registrant does not make these payments by May 31, 2005, its corporate
charter will be revoked. The Registrant will be required to make additional
payments to get the corporation reinstated.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of March 31, 2005:
Equipment $ 36,970
Less accumulated depreciation ( 14,788)
---------
$ 22,182
===========
7
GFY FOODS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
March 31, 2005
NOTE 5 - NOTES PAYABLE
In the quarter ended March 31, 2005, the Registrant issued promissory notes to
third parties totaling $131,500 under various private placements. The notes
carry an interest rate of 15% per annum and are due on March 31, 2006. All of
these notes are convertible into common stock of the Registrant at a discount to
the market price of the stock. The discount rate is 30% (a 30% discount rate
would allow a $10,000 note holder to convert his note into approximately $14,286
worth of the Registrant's common stock). An aggregate value of $56,357 was
assigned to the conversion feature on the notes. This was accounted for as a
discount to the notes payable and is being amortized over the term of the notes.
As of March 31, 2005, the discount on these notes payable, and similar notes
entered into since December of 2003, is $105,585.
The principal balance on all of the remaining notes totals $434,521 as of March
31, 2005.
In the quarter ended March 31, 2005, the Registrant issued 170,000 reverse-split
adjusted shares (1,700,000,000 shares prior to the reverse stock split approved
on January 25, 2005) of its restricted common stock to pay interest on a past
due note. The stock was valued at par value at the time of issuance in the
amount of $1.7 million. The fair market value of the stock was a fraction of
this amount at the time of issuance.
As of March 31, 2005, GFY was in default on notes with a principal balance
totaling $199,106. These notes have accrued interest of $28,142. The Registrant
is actively involved in negotiating settlements with the holders of some of
these notes.
NOTE 6 - PREPAID OFFICER'S COMPENSATION
The Registrant has issued stock to its sole officer and director, Edward
Schwalb, under the terms of his employment agreement with the Registrant. This
agreement calls for Mr. Schwalb to maintain an ownership level of 70% of the
Registrant's outstanding common stock. Although Mr. Schwalb has waived this
clause, the Registrant has periodically issued common stock to Mr. Schwalb. This
stock has generally been valued at par value at the time of issuance. The total
value of the stock issued to Mr. Schwalb has been booked at $8,170,000. This
value is amortized over the remaining term of his employment agreement with the
Registrant, which runs through December 31, 2008. The remaining balance of the
prepaid officer's compensation as of March 31, 2005 is $6,677,053. The
Registrant determined that this value should more properly be recorded as an
equity section item instead of recording the remaining balance as an asset.
NOTE 7 - SUBSEQUENT EVENTS
In April of 2005, the Registrant closed its Willowbrook Frulatti cafe. This
leaves the Registrant with one operating restaurant in Buffalo Grove, IL.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Period Ending March 31, 2005)
Unaudited Financial Data
The discussion and analysis contained herein should be read in conjunction with
the preceding financial statements, the information contained in the
Registrant's Form 10-KSB and other filings with the SEC. Except for the
historical information contained herein, the matters discussed in this 10-QSB
contain forward looking statements that are based on management's beliefs and
assumptions, current expectations, estimates, and projections. Statements that
are not historical facts, including without limitation statements which are
preceded by, followed by or include the words "believes," "anticipates,"
"plans," "expects," "may," "should," or similar expressions are forward-looking
statements. Many of the factors that will determine the company's future results
are beyond the ability of the Registrant to control or predict. These statements
are subject to risks and uncertainties and, therefore, actual results may differ
materially. All subsequent written and oral forward-looking statements
attributable to the Registrant, or persons acting on its behalf, are expressed
qualified in their entirety by these cautionary statements. The Registrant
disclaims any obligation to update any forward-looking statements whether as a
result of new information, future events or otherwise.
Results of Operations -
Revenues
GFY reported total revenues of $57,315 from the operations of its two Frullati
Cafe franchises in the quarter ended March 31, 2005. This amount represented a
114% increase from the revenues of $26,806 reported in the quarter ended March
31, 2004.
After the end of the quarter ended March 31, 2005, the Registrant closed its
location in Willowbrook. This franchise accounted for $30,564 of the current
quarter's revenues.
Cost of Sales
GFY's cost of sales for the quarter ended March 31, 2005 was equal to $16,253.
This amount reflects an 86% increase from the cost of sales figure of $8,751 in
the quarter ended March 31, 2004.
General and Administrative Expenses
General and administrative expenses in the three-month period ended March 31,
2005 totaled $1,311,061. This expense amount is an increase of 62.9% from the
general and administrative expenses for the quarter ended March 31, 2005 of
$804,790. Of the expenses in the current quarter, amounts paid to consultants
and officer's salaries represented the largest portion of expenses. The
Registrant incurred consulting fees of $361,810 in the current quarter. This
amount was primarily paid in stock and represented 27.6% of total general and
administrative expenses. The Registrant also accrued and paid $498,395 in
salaries to officers. This amount represented 38% of total general and
administrative costs. Nearly all of the officer's compensation was paid through
the issuance of common stock to Ed Schwalb, the President and sole officer and
director of the Registrant.
9
Interest Expense
The Registrant incurred total interest expense of $1,761,647 in the quarter
ended March 31, 2005. The majority of this interest was incurred on the payments
made on one note. The Registrant issued a total of 1,700,000,000 pre-reverse
split shares of its restricted common stock (170,000 shares of reverse split
adjusted shares) to pay interest on a delinquent note. The Registrant valued the
stock issuance at par value, for a total valuation of $1,700,000. This was
charged to interest expense despite the fact that the fair market value of the
stock was substantially less than par value. The remaining interest expense was
from the accrual of interest on the Registrant's various notes payable.
The Registrant incurred interest expense of $298,745 in the quarter ended March
31, 2004.
The current quarter's interest expense represents an increase of 490% from the
interest expense incurred in the same quarter of 2004. This increase is
primarily due to the stock payments made on a delinquent note as described
above.
Net Loss
GFY incurred a net loss of $3,031,646 in the current quarter ended March 31,
2005. This represents a loss per share of $(0.01) after accounting for the ten
thousand to one reverse stock split approved on January 25, 2005.
The Registrant's net loss for the quarter ended March 31, 2004 was $1,115,789.
This represents a reverse split adjusted net loss per share of $(1,115,789) per
share after accounting for the three reverse stock splits that have occurred in
the past year.
The net loss in the current quarter is 172% more than the loss from the quarter
ended March 31, 2004. The Registrant has incurred substantial losses due to the
payment of consulting fees with its common stock and through the payment of
interest on debts through the issuance of common stock.
Liquidity and Capital Resources
During the quarter ended March 31, 2005 net cash used by the operating
activities of the Registrant was $60,010. This loss was primarily supported
through the issuance of notes payable.
During the quarter ended March 31, 2004 net cash used by operating activities
was $215,946.
As of March 31, 2005 the Company's current assets were $73,646 and
its current liabilities equaled $1,081,856, generating net working capital
deficit of $1,008,210.
The Registrant hopes to be able to fund future operations through private
placements of notes and common stock, although no assurances can be made that
additional funds will be received through these contemplated private placement
offerings.
10
ITEM 3. CONTROLS & PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
As of March 31, 2005, we carried out an evaluation, under the
supervision and with the participation of company management, including the
Chief Executive Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that our disclosure
controls and procedures are effective.
(b) Changes in Internal Controls
There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation.
PART II. OTHER INFORMATION
ITEM 1 - Legal Proceedings
GFY, Inc. acquired the Buffalo Grove, Illinois Frullati franchise from
an individual. GFY was required to make a balloon payment of $28,000 in December
of 2003 under the terms of that agreement. GFY failed to make the requisite
payment and, as a result, the entire balance of the note then due of
approximately $61,000 was immediately payable. GFY has not made required monthly
payments on the note and, although the note holder has threatened legal action,
no formal proceedings have occurred. The current balance on the note is $58,506,
including accrued interest, as of March 31, 2005.
SEC v. David M. Wolfson, United States District Court, District of Utah, Central
Division, Case No. 2:03- CV-0914K.
On October 16, 2003, the Securities and Exchange Commission through its Salt
Lake City, Utah, office filed a complaint in the United States District Court
for the District of Utah against 21 defendants including F10 Oil & Gas
Properties, Inc., Jon H. Marple, the former Chief Executive Officer of F10, Mary
E. Blake, the former President of F10, Jon R. Marple, a consultant to F10 and
Grateful Internet Associates, LLC, a Colorado limited liability company owed by
Jon R. Marple. The complaint alleges that overseas investors were defrauded by a
scheme organized by defendants David Wolfson, Gino Carlucci and Sukumo Ltd. to
sell securities in five United States-based issuers including F10. F10, with its
former officers Jon H. Marple and Mary E. Blake, are alleged to have made false
or incomplete filings with the SEC and to have manipulated the price of F10's
securities in violation of the antifraud provisions of Section 17(a) of the
Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and
Rule 10b-5 promulgated thereunder, the issuer reporting provision of Section
13(a) of the Exchange Act, and Rules 12b-20, 13a-1 and 13a-13 promulgated under
the Exchange Act.
The complaint seeks the entry of a preliminary and permanent injunction against
all defendants including F10 and its former officers, Jon H. Marple and Mary E.
Blake, including the return of "ill gotten" gains, and seeks asset freezes
against 16 of the defendants including F10 and its former officers.
One of GFY's bank accounts with a balance of $60,102 is currently frozen. This
amount has been reserved against on the balance sheet as of March 31, 2005 and
is no longer considered a Company asset.
11
Management of GFY is currently in negotiations with the Commission to settle the
complaint.
ITEM 2 - Changes in Securities
Recent Sales of Unregistered Securities
GFY made the following sales of unregistered securities during the quarter ended
March 31, 2005:
Common Stock
(a) In January 2005, GFY issued 170,000 shares of its reverse-split
adjusted shares of restricted common stock (1,700,000,000 shares prior
to the reverse split) to Richard Hanks in consideration as partial
payment of a delinquent note that Mr. Hanks holds with the Registrant.
This stock was issued in two blocks. The Registrant valued this stock
issuance at $1,700,000, or $10.00 per reverse-split adjusted share.
This valuation was based on par value at the time of issuance. The
Registrant relied on the exemption under Section 4(2) of the
Securities Act of 1933, as amended.
(b) In January 2005, GFY issued 20,000 shares of it reverse-split adjusted
shares of restricted common stock (200,000,000 shares prior to the
reverse split) to John DiSimone for services rendered to the
Registrant. The Registrant valued this stock issuance at $200,000, or
$10.00 per reverse-split adjusted share. This valuation was based on
par value at the time of issuance. The Registrant relied on the
exemption under Section 4(2) of the Securities Act of 1933, as
amended.
(c) In February 2005, GFY issued 650,000,000 shares of restricted common
stock to Edward Schwalb under the terms of his employment contract
with GFY. The total value of the stock was booked at par value of
$650,000, or $0.001 per share. The Registrant relied on the exemption
under Section 4(2) of the Securities Act of 1933, as amended.
(d) In February 2005, GFY issued 25,000,000 shares of its restricted
common stock to Eric Schwalb, a brother of the Registrant's President,
for services rendered to the Registrant. The total value of the stock
was booked at $25,000, or par value of $0.001 per share. The
Registrant relied on the exemption under Section 4(2) of the
Securities Act of 1933, as amended.
(e) In February 2005, GFY issued 25,000,000 shares of its restricted
common stock to Lore Hayes for services rendered to the Registrant.
The total value of the stock was booked at $25,000, or par value of
$0.001 per share. The Registrant relied on the exemption under Section
4(2) of the Securities Act of 1933, as amended.
(f) In February 2005, GFY issued 25,000,000 shares of its restricted
common stock to Kelly Gates for services rendered to the Registrant.
The total value of the stock was booked at $25,000, or par value of
$0.001 per share. The Registrant relied on the exemption under Section
4(2) of the Securities Act of 1933, as amended.
(g) In February 2005, GFY issued 25,000,000 shares of its restricted
common stock to Bret Schwalb, a brother of the Registrant's President,
for services rendered to the Registrant. The total value of the stock
was booked at $25,000, or par value of $0.001 per share. The
Registrant relied on the exemption under Section 4(2) of the
Securities Act of 1933, as amended.
12
Exemption from registration under the Securities Act of 1933 ("Act") is claimed
for the sale of these securities in reliance upon the exemption offered by
Section 4(2) of the Act, which exempts transactions by issuers not involving a
public offering. Use of this exemption is based on the following facts:
* Neither GFY or any person acting on behalf of GFY solicited any offer
to buy or sell the securities by any form of general solicitation or
advertising;
* The purchasers represented that they were acquiring the securities as
a principal for their own account for investment purposes only and
without a view towards distribution or reselling these securities
unless pursuant to an effective registration statement or exemption
from registration in compliance with federal or state securities laws;
and
* The securities were issued with the understanding that they may only
be disposed of pursuant to an effective registration statement or
exemption from registration in compliance with federal or state
securities laws.
Notes Payable
On March 11, 2005, GFY entered into a $24,500 note agreement with Brian Alter.
The terms of the note are for a one-year term at an interest rate of 15%. The
note, including principal and accrued interest, is convertible into shares of
common stock of the Registrant at a 30% discount to the market price of GFY's
common stock at any time during the term of the note.
On March 11, 2005, GFY entered into a $39,000 note agreement with Gail Leetzkow.
The terms of the note are for a one-year term at an interest rate of 15%. The
note, including principal and accrued interest, is convertible into shares of
common stock of the Registrant at a 30% discount to the market price of GFY's
common stock at any time during the term of the note.
On March 11, 2005, GFY entered into a $54,500 note agreement with Merlin Fish.
The terms of the note are for a one-year term at an interest rate of 15%. The
note, including principal and accrued interest, is convertible into shares of
common stock of the Registrant at a 30% discount to the market price of GFY's
common stock at any time during the term of the note.
On March 11, 2005, GFY entered into a $10,000 note agreement with Anthony Hotko.
The terms of the note are for a one-year term at an interest rate of 15%. The
note, including principal and accrued interest, is convertible into shares of
common stock of the Registrant at a 30% discount to the market price of GFY's
common stock at any time during the term of the note.
Stock Issued to Consultants
The Registrant has engaged the services of various consultants to assist the
Registrant and perform various duties for the Registrant. The consultants have
been paid through the issuance of free-trading common stock of the Registrant.
Some of the consultants have retained the services of subcontractors. The
consultants may pay their subcontractors with some of their GFY stock, in cash
or other consideration. GFY has also made payments to its president in the form
of free trading common stock. In the quarter ended March 31, 2005, the
Registrant issued a total of 154,212,300 shares of free-trading reverse stock
split adjusted common stock that were registered under various S-8 filings.
These shares were valued at the bid price of the stock on the date of issuance
or at par value. The total value of these shares was recorded at $431,400. Of
these
13
shares, 18,050,000 reverse stock split adjusted shares were issued to the
Registrant's president at a value of $86,000. The remaining 136,162,300 shares
were issued to consultants at a value of $345,400. The following describes the
services performed and compensation for each of the consultants who received
more than $5,000 in free-trading common stock of the Registrant during the
quarter ended March 31, 2005. To the extent that the Registrant was aware of
subcontractors performing services for the consultants that is disclosed below
as well.
The Registrant engaged the services of Bret Schwalb as an employee in the cafes
of the Registrant. Bret Schwalb is the brother of Ed Schwalb, the sole officer
and director of the Registrant. In the quarter ended March 31, 2005, the
Registrant had issued a total of 70,050,000 shares of its free-trading common
stock to Bret Schwalb. The stock was valued at $190,500.
The Registrant engaged the services of Jason Loebig to manage the cafes of the
Registrant. In the quarter ended March 31, 2005, the Registrant had issued a
total of 10,013,000 shares of its free-trading common stock to Loebig. The stock
was valued at $33,000.
The Registrant engaged the services of White Rhino Consultants, Inc. to perform
various accounting services for the Registrant. White Rhino subcontracted these
services to J.R. Marple and directed the Registrant to pay Marple directly for
these services. In the quarter ended March 31, 2005, GFY issued 10,010,000
shares of reverse split adjusted shares of its free trading common stock to
Marple. This stock was valued at $20,000.
The Registrant engaged the services of Ed Wells to perform legal services for
the Registrant. In the quarter ended March 31, 2005, the Registrant had issued a
total of 10,000,000 shares of its free-trading common stock to Wells. The stock
was valued at $20,000.
The Registrant engaged the services of Assen Mitzev to perform services for the
Registrant. In the quarter ended March 31, 2005, the Registrant had issued a
total of 10,000,000 shares of its free-trading common stock to Mitzev. The stock
was valued at $20,000.
The Registrant engaged the services of John DiSimone to perform services for the
Registrant. In the quarter ended March 31, 2005, the Registrant had issued a
total of 10,000,000 shares of its free-trading common stock to DiSimone. The
stock was valued at $20,000.
The Registrant engaged the services of Anastasio Mikroulus to perform services
for the Registrant. In the quarter ended March 31, 2005, the Registrant had
issued a total of 6,000,000 shares of its free-trading common stock to
Mikroulus. The stock was valued at $12,000.
The Registrant engaged the services of Sambria Maritza to perform services for
the Registrant. In the quarter ended March 31, 2005, the Registrant had issued a
total of 10,000,000 shares of its free-trading common stock to Maritza. The
stock was valued at $20,000.
Item 3 - Defaults Upon Senior Securities
As of March 31, 2005, GFY was in default on notes with a principal balance
totaling $199,106. The accrued interest on these notes as of March 31, 2005 was
$28,142.
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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
(a) Exhibits
Exhibit 31.1 Certification of the Chief Executive Officer of GFY
Foods, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
Exhibit 31.2 Certification of the Chief Financial Officer of GFY
Foods, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
Exhibit 32.1 Certification of the Chief Executive Officer and Chief
Financial Officer of GFY Foods, Inc. pursuant to Section 906 of
the Sarbanes Oxley Act of 2002
(b) Reports on Form 8-K
On February 7, 2005, the Registrant filed an 8-K to disclose that on January 19,
2005 it had issued 900,000,000 shares of its restricted common stock to Richard
Hanks in partial settlement of a debt owed to Mr. Hanks. The Registrant valued
these shares at par value of $0.001 for a total of $900,000, which was
substantially higher than the market value of the stock. This report also
disclosed that on January 25, 2005, the Registrant approved a ten thousand for
one reverse stock split on its $0.001 par value common stock. The reverse stock
split applied to shareholders of record on February 7, 2005 and was effective on
February 7, 2005.
Documents Incorporated by Reference
None.
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.
GFY Foods, Inc.
Dated: May 23, 2005 /s/ Edward Schwalb
President
15
Exhibit 31.1 CEO Certification
I, Edward Schwalb, certify that:
1. I have reviewed this Form 10-QSB of GFY Foods, Inc.;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and
have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business
issuer's internal control over financial reporting that occurred
during the small business issuer's most recent fiscal quarter (the
small business issuer's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to materially affect, the small business issuer's internal control
over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer's auditors and the audit committee of
the small business issuer's board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the small business
issuer's ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: May 23, 2005
/s/ Edward Schwalb
Edward Schwalb
Chief Executive Officer
16
Exhibit 31.2 CFO Certification
I, Edward Schwalb, certify that:
1. I have reviewed this Form 10-QSB of GFY Foods, Inc.;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the small business
issuer as of, and for, the periods presented in this report;
4. The small business issuer's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and
have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
small business issuer, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during
the period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based
on such evaluation; and
(c) Disclosed in this report any change in the small business
issuer's internal control over financial reporting that occurred
during the small business issuer's most recent fiscal quarter (the
small business issuer's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to materially affect, the small business issuer's internal control
over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the small business issuer's auditors and the audit committee of
the small business issuer's board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the small business
issuer's ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business
issuer's internal control over financial reporting.
Date: May 23, 2005
/s/ Edward Schwalb
Edward Schwalb
Chief Financial Officer
17
Exhibit 32.1
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 on Form 10-QSB of GFY Foods, Inc. (the
"Company") for the quarter ended March 31, 2005 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), the undersigned Edward
Schwalb, Chief Executive Officer and Chief Financial Officer of GFY Foods, Inc.,
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes- Oxley Act of 2002, that:
(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 results of operations of the Company.
Dated: May 23, 2005
/s/Edward Schwalb
Edward Schwalb
Chief Executive Officer
/s/Edward Schwalb
Edward Schwalb
Chief Financial Officer
18