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EX-23.1 - Kemiao Garment Holding Group | v167593_ex23-1.htm |
As
filed with the Securities and Exchange Commission on November 24,
2009
Registration
No. 333-161941
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
PRE-EFFECTIVE
AMENDMENT NO.
2
TO THE FORM S-1
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Ecochild
Inc.
_________________________________________
(Exact
name of Registrant as specified in its charter)
NEVADA
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5140
|
Pending
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||
(State
or other
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Standard
Industrial
|
IRS
Employer
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||
jurisdiction
of
|
Classification
|
Identification
|
||
incorporation
or
|
Number
|
|||
organization)
|
Galina
Birca
Chief
Executive Officer
40
Warren Street, 3rd
Floor
Charlestown,
MA 02129
Tel:
(617) 886-5154
Fax: (617)
886-5105
___________________________________
(Name,
Address and Telephone Number
Of
Principal Executive Offices and
Agent for
Service)
With
copies to:
Karen
Batcher, Esq.
Synergen
Law Group
744 Otay
Lakes Road, #143
Chula
Vista, CA
Tel:
(619) 475-7882
Fax:
(619) 512-5184
_________________________________________________________________________________________
If any
of the securities being registered on this form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. x
If
this form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ¨
If
this form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If
this form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If
delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. ¨
Large
Accelerated Filer ¨ Accelerated
Filer ¨ Non-Accelerated
Filer ¨ Smaller reporting
Company x (Do not check if a
smaller reporting company)
CALCULATION
OF REGISTRATION FEE
__________________________________________________________________________________________
TITLE
OF EACH
CLASS
OF
SECURITIES
TO
BE
REGISTERED
|
AMOUNT
TO BE
REGISTERED
|
PROPOSED
MAXIMUM
OFFERING
PRICE
PER
SHARE
(1)
|
PROPOSED
MAXIMUM
AGGREGATE
OFFERING
PRICE
(2)
|
AMOUNT
OF
REGISTRATION
FEE
(2)
|
||||||||||||
Common
stock
|
3,625,000 | $ | 0.008 | $ | 29,000 | $ | 1.62 |
__________________________________________________________________________________________
(1)
Based on the last sales price on July 31, 2008 in private placement
transactions. Our common stock is not traded on any national exchange and, in
accordance with Rule 457, the offering price was determined by the price shares
were sold to our shareholders in private placement transactions. The
selling shareholders may sell shares of our common stock at a fixed price of
$0.008 per share until our common stock is quoted on the OTC Bulletin Board and
thereafter at prevailing market prices or privately negotiated
prices. The fixed price of $0.008 has been determined as the selling
price based upon the original purchase price paid by the selling shareholders of
$0.008. A
market maker must file an application on our behalf with the Financial Industry
Regulatory Authority (“FINRA”) in order to make a market for our common stock.
There can be no assurance that a market maker will agree to file the necessary
documents with FINRA, which operates the OTC Bulletin Board, nor can there be
any assurance that such an application for quotation will be
approved.
(2)
Estimated solely for the purpose of calculating the
registration fee in accordance with Rule 457 under the
Securities Act.
_________________________________________________________________________________________
The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
_________________________________________________________________________________________
THE
INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING
STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT
TO COMPLETION, DATED DECEMBER 4,
2009
PROSPECTUS
Ecochild
Inc.
3,625,000
SHARES
COMMON
STOCK
The
selling shareholders named in this prospectus are offering all of the shares of
common stock offered through this prospectus.
Our
common stock is presently not traded on any market or securities
exchange.
THE
PURCHASE OF THE SECURITIES OFFERED THROUGH THIS PROSPECTUS INVOLVES A HIGH
DEGREE
OF RISK. SEE SECTION ENTITLED "RISK FACTORS" ON BEGINNING ON PAGE
2
The information
in this prospectus is not complete and may be changed. We
may not sell these securities until the
registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and
it is not soliciting an offer to
buy these securities in any state where the offer or sale is not
permitted.
The
selling shareholders will sell our shares at $0.008 per share until our shares
are quoted on the OTC Bulletin Board, and thereafter at prevailing market prices
or privately negotiated prices. We determined this offering price based upon the
price of the last sale of our common stock to investors in private placement
transactions. Our common stock is not quoted on any public
market and, although we intend to apply to have our common stock quoted on the
Over-The-Counter Bulletin Board (“OTCBB”) maintained by the Financial Industry
Regulatory Authority (“FINRA”) upon the effectiveness of the registration
statement of which this prospectus is a part, we may not be successful in such
application and our common stock may never trade in any market. . A market maker
must file an application on our behalf with FINRA
in order to make
a market for our common stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of
these securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offence.
The
Date Of This Prospectus Is: November 24,
2009
TABLE
OF CONTENTS
Page
|
||||
PROSPECTUS
SUMMARY
|
1 | |||
SUMMARY
FINANCIAL DATA
|
2 | |||
RISK
FACTORS
|
3 | |||
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
|
10 | |||
USE
OF PROCEEDS
|
10 | |||
DETERMINATION
OF OFFERING PRICE
|
11 | |||
SELLING
SECURITY HOLDERS
|
11 | |||
PLAN
OF DISTRIBUTION
|
12 | |||
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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||||
RESULTS
OF OPERATIONS
|
14 | |||
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
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||||
AND
FINANCIAL DISCLOSURE
|
20 | |||
DESCRIPTION
OF OUR BUSINESS AND PROPERTIES
|
20 | |||
DIRECTORS,
EXECUTIVE OFFICERS AND CONTROL PERSONS
|
27 | |||
EXECUTIVE
COMPENSATION
|
27 | |||
DESCRIPTION
OF SECURITIES
|
28 | |||
MARKET
FOR COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS
|
29 | |||
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT TRANSACTIONS
WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL
PERSONS
|
29 | |||
LEGAL
PROCEEDINGS
|
30 | |||
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR
|
||||
SECURITIES
ACT LIABILITIES
|
31 | |||
INTEREST
OF NAMED EXPERTS AND COUNSEL
|
31 | |||
ADDITIONAL
INFORMATION
|
31 | |||
FINANCIAL
STATEMENTS
|
32 |
You
should rely only on the information contained in this prospectus. We have not
authorized anyone to provide you with different information. We are not making
an offer to sell these securities in any jurisdiction where the offer or sale is
not permitted. You should assume that the information contained in this
prospectus is accurate as of the date on the front of this prospectus only. Our
business, financial condition, results of operations and prospects may have
changed since that date.
PROSPECTUS
SUMMARY
Prospective
investors are urged to read this prospectus in its entirety.
OUR
COMPANY
Ecochild
Inc. was formed as a corporation pursuant to the laws of the State of Nevada on
December 18, 2007. Our
plan is to build a diverse portfolio of organic, health and wellness grocery
products manufactured by small and mid size North American manufacturers and
sell them to the European market through a network of local and national
distributors. Our product lines and brands will include: organic
products, functional/fortified products, foods for specific intolerances and
dietary needs food products.
To date,
we have entered into a Brokerage Agreement with Segomo Limited, (“Segomo”,
Broker), a food broker with offices in Birmingham, U.K., specializing in product
distribution, marketing and advertising in several European countries, whereby
we appointed and granted a non-exclusive and non-assignable right to re-sell the
products supplied by Ecochild. Our gross revenue for the period from inception
to July 31, 2009 was $9,850. Our cumulative loss since inception is
$7,953.
We are
a development stage company and have limited active business operations and no
significant assets. We have limited revenues and have incurred losses since our
inception on December 18, 2007. The Company to date has funded its initial
operations through the issuance of 9,625,000 shares of capital stock for the net
proceeds of $35,000 and revenue from sales of $9,850. Due to the uncertainty of
our ability to generate sufficient revenues from our operating activities and/or
to obtain the necessary financing to meet our obligations and repay
our liabilities arising from normal business operations when they
come due, in their report on our financial statements for the period from
inception (December 18, 2007) to October 31, 2008, our registered independent
auditors included additional comments indicating concerns about our ability to
continue as a going concern. Our financial statements contain additional note
disclosures describing the circumstances that led to this disclosure by our
registered independent auditors. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
In the
next twelve months we expect, subject to financing, to spend approximately
$12,000 on professional services, $10,000 on inventory, and $8,000 on general
and administrative expenses. Total expenditures, over the next 12 months are
therefore expected to be in the range of $30,000.
To
date, our cash flow requirements have been primarily met by equity financings.
Management expects to keep operating costs to a minimum until cash is available
through financing or operating activities. Management plans to
continue to seek other sources of financing on favorable terms; however, there
are no assurances that any such financing can be obtained on favorable terms, if
at all. If we are unable to generate sufficient profits or unable to obtain
additional funds for our working capital needs, we may need to cease or curtail
operations. Furthermore, there is no assurance the net proceeds from
any successful financing arrangement will be sufficient to cover cash
requirements during the initial stages of the Company's operations. For these
reasons, our independent registered auditors believe that there is substantial
doubt that we will be able to continue as a going concern.
Our
principal offices are located at 40 Warren Street, 3rd Floor,
Charlestown, Massachusetts. Our telephone number is
(617)886-5154.
1
The
Offering
The
shares being offered for resale under this prospectus by the selling
stockholders identified herein consist of 37.66% of the outstanding shares of
our common stock.
Securities
Being Offered:
|
Up
to 3,625,000 shares of common stock.
|
Offering
Price:
|
The selling shareholders
will sell our shares at $0.008 per share until our shares are quoted on
the OTC Bulletin Board, and thereafter at prevailing
market prices or privately negotiated prices.
There is no guarantee that our
shares will be quoted for trading on the
OTC Bulletin Board. We
determined this offering price based upon
the
price of the last sale of
our common stock to investors in private placement
transactions.
|
Terms
of the Offering:
|
The selling shareholders
will determine when and how they will sell
the common stock offered in this
prospectus.
|
Termination
of the Offering:
|
The
offering will conclude when all of the 3,625,000 shares of common stock
have been sold or we, in our sole discretion,
decide to terminate the registration
of the shares. We may decide
to terminate the registration if it is no longer
necessary due to the operation of the
resale provisions of Rule 144.
|
Securities
Issued
|
|
And
to be Issued:
|
9,625,000
shares of our common stock are issued and outstanding as of the date of
this prospectus. All of the common stock to be sold under this prospectus
will be sold by existing
shareholders.
|
Use
of Proceeds:
|
We
will not receive any proceeds from the sale of the common stock by the
selling shareholders.
|
SUMMARY
FINANCIAL DATA
The
following selected financial data have been derived from the Company’s financial
statements which have been audited and reviewed by Ronald R. Chadwick, P.C., an
independent registered public accounting firm, as of and for the period ended
October 31, 2008 (audited), and for the nine-month period ended July 31, 2009
(reviewed) and the related statements of operations, stockholders’ equity and
cash flows for the period ended October 31, 2008, and nine-month period ended
July 31, 2009. The summary financial data as of October 31, 2008, and July 31,
2009 are derived from our audited and reviewed financial statements, which are
included elsewhere in this prospectus. The following data should be read in
conjunction with “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” in this Prospectus and the Financial Statements and
notes thereto included in this Prospectus.
2
Balance Sheet
|
October 31, 2008
|
July 31, 2009
|
||||||
(Audited)
|
(Unaudited)
|
|||||||
Cash
|
$ | 344 | $ | 34,312 | ||||
Total
Assets
|
$ | 344 | $ | 37,662 | ||||
Liabilities
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$ | 2,567 | $ | 10,615 | ||||
Total
Stockholders' Equity
|
$ | (2,223 | ) | $ | 27,047 |
Statement of Operations
|
Statement of Operations
|
|||||||
From December 18, 2007 (Inception)
|
Nine Months Ended
|
|||||||
Through October 31, 2008
|
July 31, 2009
|
|||||||
(Audited)
|
(Unaudited)
|
|||||||
Net
Sales
|
$ | - | $ | 9,850 | ||||
Net
Loss
|
$ | (2,223 | ) | $ | (5,730 | ) |
RISK
FACTORS
An
investment in our common stock involves a high degree of risk. You
should carefully consider the risks described below and the other information in
this prospectus before investing in our common stock. If any of the following
risks occur, our business, operating results and financial condition could be
seriously harmed. The trading price of our common stock could decline due to any
of these risks, and you may lose all or part of your
investment.
WE
HAVE INCURRED OPERATING LOSSES SINCE INCEPTION AND WE MAY NEVER BECOME
PROFITABLE.
We expect
to incur significant increasing operating losses for the foreseeable future,
primarily due to the expansion of our operations. The negative cash flow from
operations is expected to continue for the foreseeable future. Our ability to
earn a profit depends upon our ability to grow our sales to achieve a meaningful
market share, and to re-sell the product lines on a consistent and cost
effective basis. We cannot give any assurance that we will ever earn a profit
from the sale of our product lines.
OUR
AUDITOR HAS EXPRESSED SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING
CONCERN.
In his
report dated September 3, 2009, our independent registered auditor, Ronald R.
Chadwick, P.C. stated that our financial statements for the fiscal year ended
October 31, 2008, were prepared assuming that we would continue as a going
concern. However, he also expressed substantial doubt about our ability to
continue as a going concern. Our ability to continue as a going concern is an
issue raised as a result of losses suffered from operations and a working
capital deficiency. We continue to experience operating losses. We can give no
assurance as to our ability to raise sufficient capital or our ability to
continue as a going concern.
WE
WILL NEED ADDITIONAL CAPITAL TO CONTINUE OPERATING OUR BUSINESS, AND WE HAVE NO
COMMITMENTS TO PROVIDE THAT CAPITAL.
Our
business plan calls for ongoing expenses in connection with the re-sale of food
product lines. As of July 31, 2009, we have generated $9,850 in revenue from
operations. Therefore we will be dependent upon additional capital in the form
of either debt or equity to continue our operations. At the present time, we do
not have arrangements to raise all of the needed additional capital, and we will
need to identify potential investors and negotiate appropriate arrangements with
them. We cannot give any assurances that we will be able to arrange enough
investment within the time the investment is required or that if it is arranged,
that it will be on favorable terms.
3
If we
cannot get the needed capital, we may not be able to become profitable and may
have to curtail or cease our operations. The most likely source of future funds
presently available to us is through the sale of additional shares of common
stock.
WE
MAY BE UNABLE TO MANAGE OUR GROWTH OR IMPLEMENT OUR EXPANSION
STRATEGY.
We may
not be able to expand our product offerings, our client base and markets, or
implement the other features of our business strategy at the rate or to the
extent presently planned. Our projected growth will place a significant strain
on our administrative, operational and financial resources. If we cannot
successfully manage our future growth, establish and continue to upgrade our
operating and financial control systems, recruit and hire necessary personnel or
effectively manage unexpected expansion difficulties, our financial condition
and results of operations could be materially and adversely
affected.
BECAUSE
WE WILL BE SELLING FOOD PRODUCTS, WE MAY FACE THE RISK OF EXPOSURE TO PRODUCT
LIABILITY CLAIMS.
Ecochild,
like any other re-seller of food products, faces the risk of exposure to product
liability claims in the event that the use of products re-sold by it causes
injury or illness. With respect to product liability claims, the
Company will seek contractual indemnification and insurance coverage from
parties supplying its products, but this indemnification
or insurance coverage is limited, as a
practical matter, to
the creditworthiness of the indemnifying party and the
policy limits of any insurance provided
by suppliers. If Ecochild will not have adequate insurance
or contractual indemnification available, product liability relating to
defective products could materially reduce its net income and earnings per
share.
OUR
BUSINESS MAY BE ADVERSLY AFFECTED BY GOVERNMENTAL RESTRICTIONS AND
REGULATIONS
Our
international activities are subject to regulation in each country in which we
intend to sell or distribute our products. In markets outside the
United States, before commencing operations or marketing our products, we may be
required to obtain approvals, licenses or certifications from a country’s
ministry of health or comparable agency. We must also comply
with product labeling and packaging regulations that vary from country to
country. Furthermore, the regulations of these countries may conflict
with those in the United States and with each other, sometimes causing higher
costs and expenses, changes in product labeling, and delay. We cannot
assure you that we will not have to make such changes or revisions in the
future, which could have a material adverse effect on our results of operations
and financial condition. In countries in which we do not have direct
relationships with retailers, independent distributors generally have
responsibility for compliance with applicable foreign laws and
regulations. These distributors are independent contractors over whom
we will have limited or no control.
FOREIGN
CURRENCY EXCHANGE RATE FLUCTUATIONS MAY ADVERSELY AFFECT OUR
BUSINESS.
Since we
intend to market and sell our products in many different countries, changes in
exchange rates can adversely affect our cash flows and results of operations.
Furthermore, reported sales and purchases made in non-U.S. currencies, when
translated into U.S. dollars for financial reporting purposes, fluctuate due to
exchange rate movement. Due to the number of currencies involved, the
variability of currency exposures and the potential volatility of currency
exchange rates, we cannot predict the effect of exchange rate fluctuations on
future sales and operating results.
OUR
COMPETITIVE POSITION AND FUTURE PROSPECTS DEPEND ON OUR SENIOR
MANAGERS.
Our
ability to implement our business strategy is dependent to a large degree on the
services, knowledge and experience in food and beverage distribution of our
senior management team, Galina Birca and Vladimir Enachi. Moreover, competition
for personnel with relevant expertise in the international food distribution
industry is intense due to the small number of qualified individuals and, as a
result, we due to the start up nature of our business and limited resources may
not be able to attract qualified replacement personnel in case of departure of
our senior management. We are not insured against the detrimental effects to our
business resulting from the loss or dismissal of our key
personnel.
4
The
loss or decline in the services of members of our senior management team or an
inability to attract, retain and motivate qualified key personnel would have a
material adverse effect on implementation of our business plan, financial
condition and results of operations.
WE
FACE STRONG COMPETITION FROM LARGER AND BETTER-CAPITALIZED
COMPANIES.
Competition
in the food distribution industry is intense. The Company’s primary
competitors are multinational food distributors (such as Unilever, Kraft Foods,
Inc., Nestle, etc.), national food distributors, and regional food distributors.
The principal competitive factors include product price, quality and assortment
of product lines, schedules and reliability of delivery, and the range and
quality of customer services. Our competitors are well established and
significantly better funded than us. If we cannot successfully compete, our
marketing and sales will suffer and we may not ever be profitable. Due to
limited financing, and fierce competition from multinational food distributors
we may not be able to generate revenues and will have to cease
operations.
BECAUSE
WE HAVE NO LONG-TERM CONTRACTS WITH SUPPLIERS AND DO NOT CONTROL THE ACTUAL
PRODUCTION OF THE PRODUCTS WE RE-SELL, WE MAY BE UNABLE TO MAINTAIN ADEQUATE
INVENTORY OF THE PRODUCTS.
Ecochild
intends to obtain all of its food products from third-party
suppliers. The company does not plan to have long-term contracts with
its suppliers committing them to provide products to it. Although the Company’s
purchasing volume should provide leverage when
dealing with suppliers, suppliers may
not provide the food products and supplies Ecochild needs
in the quantities it requests. Because the Company does not control
the actual production of the products it re-sells, the Company is also subject
to delays caused by interruption in production based on conditions outside its
control. These conditions include job actions or strikes by employees
of suppliers, weather, crop conditions, transportation
interruptions and natural disasters or
other catastrophic events. The Company’s
inability to obtain adequate supplies of its food products, as a result of any
of the foregoing factors or otherwise, could mean that Ecochild could not
fulfill its obligations to customers, and customers may turn to other
wholesalers or distributors.
WE
ARE IN A LOW MARGIN BUSINESS AND ITS PROFITABILITY MAY BE NEGATIVELY IMPACTED BY
FOOD PRICE DEFLATION AND OTHER FACTORS.
The food
distribution and wholesale industry is characterized by relatively high
inventory turnover with relatively low profit margins. The Company intends to
make a significant portion of its sales at prices that are based on the cost of
products it re-sells plus a percentage markup. As a result, the Company’s profit
levels may be negatively impacted during periods of food price deflation, even
though its gross profit percentage may remain relatively constant. The food
marketing and distribution industry is sensitive to international, national and
regional economic conditions. The Company’s operating results may be adversely
affected by other factors, including difficulties with the collectability of
accounts receivable, inventory control, competitive price pressures, severe
weather conditions and unexpected increases in fuel or other
transportation-related costs. Therefore the Company can provide no assurance
that one or more of these factors will not adversely affect its future operating
results.
BECAUSE
OUR DIRECTORS OWN 62.33% OF OUR OUTSTANDING STOCK, THEY WILL MAKE AND CONTROL
CORPORATE DECISIONS THAT MAY BE DISADVANTAGEOUS TO MINORITY
SHAREHOLDERS.
Our
directors, own approximately 62.33% of the outstanding shares of our common
stock. Accordingly, they will have significant influence in determining the
outcome of all corporate transactions or other matters, including the election
of directors, mergers, consolidations and the sale of all or substantially all
of our assets, and also the power to prevent or cause a change in
control.
The
interests of these individuals may differ from
the interests of the other stockholders and thus result in corporate
decisions that are disadvantageous to other shareholders.
5
FAILURE
TO ACHIEVE AND MAINTAIN EFFECTIVE INTERNAL CONTROLS IN ACCORDANCE
WITH SECTION 404 OF THE SARBANES-OXLEY ACT COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS AND OPERATING RESULTS.
It may be
time consuming, difficult and costly for us to develop and implement the
additional internal controls, processes and reporting procedures required by the
Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal
auditing and other finance staff in order to develop and implement appropriate
additional internal controls, processes and reporting procedures. If we are
unable to comply with these requirements of the Sarbanes-Oxley Act, we may not
be able to obtain the independent accountant certifications that the
Sarbanes-Oxley Act requires of publicly traded companies.
If we
fail to comply in a timely manner with the requirements of Section 404 of
the Sarbanes-Oxley Act regarding internal control over financial reporting or to
remedy any material weaknesses in our internal controls that we may identify,
such failure could result in material misstatements in our financial statements,
cause investors to lose confidence in our reported financial information and
have a negative effect on the trading price of our common stock.
Pursuant
to Section 404 of the Sarbanes-Oxley Act and current SEC regulations,
beginning with our annual report on Form 10-K for our fiscal period ending
October 31, 2009, we will be required to prepare assessments regarding internal
controls over financial reporting and beginning with our annual report on Form
10-K for our fiscal period ending October 31, 2009, furnish a report by our
management on our internal control over financial reporting. We have begun the
process of documenting and testing our internal control procedures in order to
satisfy these requirements, which is likely to result in increased general and
administrative expenses and may shift management time and attention from
revenue-generating activities to compliance activities. While our management is
expending significant resources in an effort to complete this important project,
there can be no assurance that we will be able to achieve our objective on a
timely basis. There also can be no assurance that our auditors will be able to
issue an unqualified opinion on management’s assessment of the effectiveness of
our internal control over financial reporting. Failure to achieve and maintain
an effective internal control environment or complete our Section 404
certifications could have a material adverse effect on our stock
price.
In
addition, in connection with our on-going assessment of the effectiveness of our
internal control over financial reporting, we may discover “material weaknesses”
in our internal controls as defined in standards established by the Public
Company Accounting Oversight Board, or the PCAOB. A material weakness is a
significant deficiency, or combination of significant deficiencies, that results
in more than a remote likelihood that a material misstatement of the annual or
interim financial statements will not be prevented or detected. The PCAOB
defines “significant deficiency” as a deficiency that results in more
than a remote likelihood that a misstatement of the financial statements
that is more than inconsequential will not be prevented or
detected.
In the
event that a material weakness is identified, we will employ qualified personnel
and adopt and implement policies and procedures to address any material
weaknesses that we identify. However, the process of designing and implementing
effective internal controls is a continuous effort that requires us to
anticipate and react to changes in our business and the economic and regulatory
environments and to expend significant resources to maintain a system of
internal controls that is adequate to satisfy our reporting obligations as a
public company. We cannot assure you that the measures we will take will
remediate any material weaknesses that we may identify or that we will implement
and maintain adequate controls over our financial process and reporting in the
future. Any failure to complete our assessment of our internal control over
financial reporting, to remediate any material weaknesses that we may identify
or to implement new or improved controls, or difficulties encountered in their
implementation, could harm our operating results, cause us to fail to meet our
reporting obligations or result in material misstatements in our financial
statements. Any such failure could also adversely affect the results of the
periodic management evaluations of our internal controls and, in the case of a
failure to remediate any material weaknesses that we may identify, would
adversely affect the annual auditor attestation reports regarding the
effectiveness of our internal control over financial reporting that are required
under Section 404 of the Sarbanes-Oxley Act. Inadequate internal controls
could also cause investors to lose confidence in our reported financial
information, which could have a negative effect on the trading price of our
common stock.
6
WE
WILL INCUR INCREASED COSTS AS A RESULT OF BEING A PUBLIC COMPANY, WHICH COULD
AFFECT OUR PROFITABILITY AND OPERATING RESULTS.
The
Sarbanes-Oxley Act of 2002 and the new rules subsequently implemented by the
Securities and Exchange Commissions, the Financial Industry Regulatory Authority
(“FINRA”) and the Public Company Accounting Oversight Board have imposed various
new requirements on public companies, including requiring changes in corporate
governance practices. We expect these rules and regulations to increase our
legal and financial compliance costs and to make some activities more
time-consuming and costly. These costs could affect profitability and our
results of operations.
RISKS RELATED TO OUR
STOCK
THERE
IS NO PUBLIC (TRADING) MARKET FOR OUR COMMON STOCK AND THERE IS NO ASSURANCE
THAT THE COMMON STOCK WILL EVER TRADE ON A RECOGNIZED EXCHANGE OR DEALERS’
NETWORK; THEREFORE, OUR INVESTORS MAY NOT BE ABLE TO SELL THEIR
SHARES.
Our common stock is not
quoted on any exchange or any similar quotation service, and there is currently
no public market for our common stock. We have not taken any steps to
enable our common stock to be quoted on the OTC Bulletin Board, and can provide
no assurance that our common stock will ever be quoted on any quotation service
or that any market for our common stock will ever develop. As a result,
stockholders may be unable to liquidate their investments, or may encounter
considerable delay in selling shares of our common stock. Neither we nor our
selling stockholders have engaged an underwriter for this offering, and we
cannot assure you that any brokerage firm will act as a market maker of our
securities. A trading market may not develop in the future, and if one does
develop, it may not be sustained. If an active trading market does develop, the
market price of our common stock is likely to be highly volatile due to, among
other things, the nature of our business and because we are a new public company
with a limited operating history. Further, even if a public market develops, the
volume of trading in our common stock will presumably be limited and likely be
dominated by a few individual stockholders. The limited volume, if any, will
make the price of our common stock subject to manipulation by one or more
stockholders and will significantly limit the number of shares that one can
purchase or sell in a short period of time. The market price of our common stock
may also fluctuate significantly in response to the following factors, most of
which are beyond our control:
•
|
variations
in our quarterly operating results;
|
||
|
•
|
changes
in general economic conditions and in the specialty organic food
industry;
|
|
|
•
|
changes
in market valuations of similar companies;
|
|
|
•
|
announcements
by us or our competitors of significant new contracts, acquisitions,
strategic partnerships or joint ventures, or capital
commitments;
|
|
|
•
|
loss
of a major customer, partner or joint venture participant;
and
|
|
|
•
|
the
addition or loss of key managerial and collaborative
personnel.
|
The
equity markets have, on occasion, experienced significant price and volume
fluctuations that have affected the market prices for many companies’ securities
and that have often been unrelated to the operating performance of these
companies. Any such fluctuations may adversely affect the market price of our
common stock, regardless of our actual operating performance. As a result,
stockholders may be unable to sell their shares, or may be forced to sell them
at a loss.
IF
OUR COMMON STOCK IS ACCEPTED FOR QUOTATION ON THE OTC BULLETIN BOARD, THE
APPLICATION OF THE “PENNY STOCK” RULES COULD ADVERSELY AFFECT THE MARKET PRICE
OF OUR COMMON SHARES AND INCREASE YOUR TRANSACTION COSTS TO SELL THOSE SHARES.
THE SECURITIES AND EXCHANGE COMMISSION HAS ADOPTED RULE 3A51-1 WHICH ESTABLISHES
THE DEFINITION OF A “PENNY STOCK,” FOR THE PURPOSES RELEVANT TO US, AS ANY
EQUITY SECURITY THAT HAS A MARKET PRICE OF LESS THAN $5.00 PER SHARE OR WITH AN
EXERCISE PRICE OF LESS THAN $5.00 PER SHARE, SUBJECT TO CERTAIN EXCEPTIONS. FOR
ANY TRANSACTION INVOLVING A PENNY STOCK, UNLESS EXEMPT, RULE 15G-9
REQUIRE:
•
|
that
a broker or dealer approve a person’s account for transactions in penny
stocks; and
|
7
•
|
the
broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to
be purchased
|
In order
to approve a person’s account for transactions in penny stocks, the broker or
dealer must:
•
|
obtain
financial information and investment experience objectives of the person;
and
|
•
|
make
a reasonable determination that the transactions in penny stocks are
suitable for that person and the person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks.
|
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the SEC relating to the penny stock market,
which, in highlight form:
•
|
sets
forth the basis on which the broker or dealer made the suitability
determination; and
|
•
|
that
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
|
•
|
Generally,
brokers may be less willing to execute transactions in securities subject
to the “penny stock” rules. This may make it more difficult for investors
to dispose of our common stock and cause a decline in the market value of
our stock.
|
WE
EXPECT THE MARKET PRICE FOR OUR COMMON SHARES WILL BE PARTICULARLY VOLATILE
GIVEN OUR STATUS AS A RELATIVELY UNKNOWN COMPANY WITH A SMALL AND THINLY TRADED
PUBLIC FLOAT, LIMITED OPERATING HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO
WIDE FLUCTUATIONS IN OUR SHARE PRICE. THE PRICE AT WHICH YOU PURCHASE OUR COMMON
SHARES MAY NOT BE INDICATIVE OF THE PRICE THAT WILL PREVAIL IN THE TRADING
MARKET. YOU MAY BE UNABLE TO SELL YOUR COMMON SHARES AT OR ABOVE YOUR PURCHASE
PRICE, WHICH MAY RESULT IN SUBSTANTIAL LOSSES TO YOU.
We expect
the market for our common shares will be characterized by significant price
volatility when compared to seasoned issuers, and we expect that our share price
will continue to be more volatile than a seasoned issuer for the indefinite
future. The volatility in our share price will be attributable to a number of
factors.
First, as
noted above, our common shares will be sporadically and thinly traded. As a
consequence of this lack of liquidity, the trading of relatively small
quantities of shares by our shareholders may disproportionately influence the
price of those shares in either direction. The price for our shares could, for
example, decline precipitously in the event that a large number of our common
shares are sold on the market without commensurate demand, as compared to a
seasoned issuer which could better absorb those sales without adverse impact on
its share price.
Secondly,
we are a speculative or “risky” investment due to our limited operating history
and lack of profits to date, and uncertainty of future market acceptance for our
potential products. As a consequence of this enhanced risk, more risk-adverse
investors may, under the fear of losing all or most of their investment in the
event of negative news or lack of progress, be more inclined to sell their
shares on the market more quickly and at greater discounts than would be the
case with the stock of a seasoned issuer.
Many of
these factors are beyond our control and may decrease the market price of our
common shares, regardless of our operating performance. We cannot make any
predictions or projections as to what the prevailing market price for our common
shares will be at any time, including as to whether our common shares will
sustain their current market prices, or as to what effect that the sale of
shares or the availability of common shares for sale at any time will have on
the prevailing market price.
8
Shareholders
should be aware that, according to SEC Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse. Such
patterns include (1) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer;
(2) manipulation of prices through prearranged matching of purchases and
sales and false and misleading press releases; (3) boiler room practices
involving high-pressure sales tactics and unrealistic price projections by
inexperienced sales persons; (4) excessive and undisclosed bid-ask
differential and markups by selling broker-dealers; and (5) the wholesale
dumping of the same securities by promoters and broker-dealers after prices have
been manipulated to a desired level, along with the resulting inevitable
collapse of those prices and with consequent investor losses. Our management is
aware of the abuses that have occurred historically in the penny stock market.
Although we do not expect to be in a position to dictate the behaviour of the
market or of broker-dealers who participate in the market, management will
strive within the confines of practical limitations to prevent the described
patterns from being established with respect to our securities. The occurrence
of these patterns or practices could increase the volatility of our share
price.
THE
SELLING STOCKHOLDERS MAY SELL THEIR SHARES OF COMMON STOCK IN THE MARKET, WHICH
SALES MAY CAUSE OUR STOCK PRICE TO DECLINE.
The
selling stockholders may sell in the public market up to 3,625,000 shares of
common stock being registered in this offering. That means that up to 3,625,000
shares may be sold pursuant to this registration statement. Such sales may cause
our stock price to decline. The officers and directors of the Company and the
non-registered shareholders will continue to be subject to the provisions of
various insider trading and rule 144 regulations. Consequently, if
shareholders are selling shares pursuant to the prospectus underlying this
registration statement, it may be more difficult for us to sell equity
securities or equity-related securities in the future at a time and price that
our management deems acceptable or at all as public market sales by our
shareholder may deflate the market price of our stock.
THE
SALE OF MATERIAL AMOUNTS OF COMMON STOCK UNDER THE ACCOMPANYING REGISTRATION
STATEMENT COULD ENCOURAGE SHORT SALES BY THIRD PARTIES.
In many
circumstances the issuance of securities for companies that are traded on the
OTCBB has the potential to cause a significant downward pressure on the price of
common stock. This is especially the case if the shares being placed into the
market exceed the market’s ability to take up the increased stock or if we have
not performed in such a manner to show that the debt raised will be used to grow
the Company. Such an event could place further downward pressure on the price of
common stock.
If there
are significant short sales of our stock, the price decline that would result
from this activity will cause our share price to decline more so which in turn
may cause long holders of our stock to sell their shares thereby contributing to
sales of stock in the market. If there is an imbalance on the sell side of the
market for our stock the price will decline. It is not possible to predict if
the circumstances where by a short sales could materialize or to what our share
price could drop. In some companies that have been subjected to short sales
their stock price has dropped to near zero. We cannot provide any assurances
that this situation will not happen to us.
VOLATILITY
IN OUR COMMON SHARE PRICE MAY SUBJECT US TO SECURITIES LITIGATION, THEREBY
DIVERTING OUR RESOURCES THAT MAY HAVE A MATERIAL EFFECT ON OUR PROFITABILITY AND
RESULTS OF OPERATIONS.
As
discussed in the preceding risk factors, we expect the market for our common
shares will be characterized by significant price volatility when compared to
seasoned issuers, and we expect that our share price will continue to be more
volatile than a seasoned issuer for the indefinite future. In the past,
plaintiffs have often initiated securities class action litigation against a
company following periods of volatility in the market price of its securities.
We may in the future be the target of similar litigation. Securities litigation
could result in substantial costs and liabilities and could divert management’s
attention and resources.
WE
HAVE NOT PAID DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY DIVIDENDS IN THE
FUTURE. ANY RETURN ON INVESTMENT MAY BE LIMITED TO THE VALUE OF OUR COMMON
STOCK.
We have
never paid cash dividends on our common stock and do not anticipate paying cash
dividends in the foreseeable future. The payment of dividends on our common
stock will depend on earnings, financial condition and other business and
economic factors affecting it at such time as the board of directors may
consider relevant. If we do not pay dividends, our common stock may be less
valuable because a return on your investment will only occur if its stock price
appreciates.
9
As of
July 31, 2009, and
November 24,
2009, we had 9,625,000 shares of common stock outstanding and
no shares of preferred stock outstanding. We are authorized to issue up to
75,000,000 shares of common stock and no shares of preferred stock. To the
extent of such authorization, our Board of Directors will have the ability,
without seeking stockholder approval, to issue additional shares of common stock
or preferred stock in the future for such consideration as the Board of
Directors may consider sufficient. The issuance of additional common stock or
preferred stock in the future may reduce your proportionate ownership and voting
power.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements which involve assumptions and
describe our future plans, strategies, and expectations, are generally
identifiable by use of the words “may,” “will,” “should,” “expect,”
“anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of
these words or other variations on these words or comparable terminology. These
statements are expressed in good faith and based upon a reasonable basis when
made, but there can be no assurance that these expectations will be achieved or
accomplished.
Such
forward-looking statements include statements regarding, among other things, (a)
the potential markets for our products, our potential profitability, and cash
flows (b) our growth strategies, (c) anticipated trends in the food
industry, (d) our future financing plans and (e) our anticipated needs for
working capital. This information may involve known and unknown risks,
uncertainties, and other factors that may cause our actual results, performance,
or achievements to be materially different from the future results, performance,
or achievements expressed or implied by any forward-looking statements. These
statements may be found under “Management’s Plan of Operation” and “Description
of Our Business and Properties,” as well as in this prospectus generally. Actual
events or results may differ materially from those discussed in forward-looking
statements as a result of various factors, including, without limitation, the
risks outlined under “Risk Factors” and matters described in this prospectus
generally. In light of these risks and uncertainties, there can be no assurance
that the forward-looking statements contained in this filing will in fact occur.
In addition to the information expressly required to be included in this filing,
we will provide such further material information, if any, as may be necessary
to make the required statements, in light of the circumstances under which they
are made, not misleading.
Although
forward-looking statements in this report reflect the good faith judgment of our
management, forward-looking statements are inherently subject to known and
unknown risks, business, economic and other risks and uncertainties that may
cause actual results to be materially different from those discussed in these
forward-looking statements. Readers are urged not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
report. We assume no obligation to update any forward-looking statements in
order to reflect any event or circumstance that may arise after the date of this
report, other than as may be required by applicable law or regulation. Readers
are urged to carefully review and consider the various disclosures made by us in
our reports filed with the Securities and Exchange Commission which attempt to
advise interested parties of the risks and factors that may affect our business,
financial condition, results of operation and cash flows. If one or more of
these risks or uncertainties materialize, or if the underlying assumptions prove
incorrect, our actual results may vary materially from those expected or
projected. We will have little likelihood of long-term success unless we
are able to continue to raise capital from the sale of our securities until, if
ever, we generate positive cash flow from operations.
USE
OF PROCEEDS
We will
not receive any of the proceeds from the sale of shares of the common stock
offered by the selling stockholders. We are registering 3,625,000 of our
9,625,000 currently outstanding shares of common stock for resale to provide the
holders thereof with freely tradable securities, but the registration of such
shares does not necessarily mean that any of such shares will be offered or sold
by the holders thereof.
10
DETERMINATION
OF OFFERING PRICE
The
selling shareholders will sell our shares at $0.008 per share until our shares
are quoted on the OTC Bulletin Board, and thereafter at prevailing market prices
or privately negotiated prices. The offering price of the shares of our common
stock has been determined arbitrarily by us and does not necessarily bear any
relationship to our book value, assets, past operating results, financial
condition or any other established criteria of value. We determined this
offering price, based upon the price of the last sale of our common stock to
investors in private placement transactions.
Dilution
The
common stock to be sold by the selling shareholders is common stock that is
currently issued and outstanding. Accordingly, there will be no
dilution to our existing shareholders.
SELLING
SECURITY HOLDERS
In April
through July of 2009, we issued 3,625,000 shares of common stock to 29 non-U.S.
investors at $0.008 per share in a private placement raising an aggregate of
$29,000 cash. We have completed the first tranche of this private placement on
April 18, 2009 whereby we sold 875,000 shares of our common stock to seven
individuals for total proceeds of $7,000. On July 31, 2009, we have completed
the second tranche of this private placement whereby we sold 2,750,000 shares of
our common stock to twenty two individuals for total proceeds of
$22,000.
The
selling shareholders named in this prospectus are offering all of the 3,625,000
shares of common stock offered through this prospectus. These shares
were acquired from us in a private placement that was exempt from registration
under Regulation S of the Securities Act of 1933 and was completed on July 31,
2009. No selling shareholders are broker-dealers or affiliates of
broker-dealers.
The
following table provides as of the date of this prospectus, information
regarding the beneficial ownership of our common stock held by each of the
selling shareholders, including:
1. the
number of shares owned by each prior to this offering;
2. the
total number of shares that are to be offered for each;
3. the
total number of shares that will be owned by each upon completion of the
offering; and
4. the
percentage owned by each upon completion of the offering.
TOTAL
NUMBER
|
|||||||||||
OF
SHARES TO
|
TOTAL
SHARES
|
PERCENT
|
|||||||||
BE
OFFERED FOR
|
OWNED
UPON
|
OWNED
UPON
|
|||||||||
NAME
OF
|
SHARES
OWNED
|
SELLING
|
COMPLETION
|
COMPLETION
|
|||||||
SELLING
|
PRIOR
TO THIS
|
SHAREHOLDERS
|
OF
THIS
|
OF
THIS
|
|||||||
STOCKHOLDER
|
OFFERING
|
ACCOUNT
|
OFFERING
|
OFFERING
|
|||||||
Vera
Bulbas
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Viorica
Barbaneagra
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Maria
Bectoras
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Maria
Burenta
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Mihai
Cosciug
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Diana
Donici
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Lucia
Gaiduc
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Silvia
Glodeanu
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Nicolae
Lapteacru
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Lilia
Livadaru
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Raisa
Melnic
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Evghenia
Morosanu
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Raisa
Munteanu
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Maria
Nanu
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Maria
Negara
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Natalia
Negura
|
125,000 | 125,000 |
Nil
|
Nil
|
11
TOTAL
NUMBER
|
|||||||||||
OF
SHARES TO
|
TOTAL
SHARES
|
PERCENT
|
|||||||||
BE
OFFERED FOR
|
OWNED
UPON
|
OWNED
UPON
|
|||||||||
NAME
OF
|
SHARES
OWNED
|
SELLING
|
COMPLETION
|
COMPLETION
|
|||||||
SELLING
|
PRIOR
TO THIS
|
SHAREHOLDERS
|
OF
THIS
|
OF
THIS
|
|||||||
STOCKHOLDER
|
OFFERING
|
ACCOUNT
|
OFFERING
|
OFFERING
|
|||||||
Sofia
Novac
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Vera
Pavel
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Liliana
Plugaru
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Raisa
Puscasu
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Ivan
Rotari
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Ana
Saitan
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Tatiana
Samotchi
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Larisa
Schirca
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Alexandru
Soltoianu
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Nina
Suceveanu
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Lidia
Ticu
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Elena
Tugui
|
125,000 | 125,000 |
Nil
|
Nil
|
|||||||
Nadejda
Ungureanu
|
125,000 | 125,000 |
Nil
|
Nil
|
The named
party beneficially owns and has sole voting and investment power over all shares
or rights to these shares. The numbers in this table assume that none of the
selling shareholders sells shares of common stock not being offered in this
prospectus or purchases additional shares of common stock, and assumes that all
shares offered are sold. The percentages are based on 9,625,000 shares of common
stock outstanding on the date of this prospectus.
None of
the selling shareholders:
(1) has
had a material relationship with us other than as a shareholder at any time
within the past three years;
(2) has
ever been one of our officers or directors; or
(3) is
a broker-dealer or affiliate of a broker dealer.
PLAN
OF DISTRIBUTION
Following
the effective date of this registration statement, we intend to apply to have
our shares quoted for trading on the OTC Bulletin Board. In order to accomplish
this, we will need to retain a market maker to file an application on our
behalf. We have not engaged a market marker and there is no assurance that we
will be able to do so. There is no assurance that our stock will be quoted on
the OTC Bulletin Board or that a market maker will file an application for a
quotation on our behalf in order to make a market for our common
stock.
There is
currently no market for our stock and we cannot give any assurance that the
shares offered will have a market value, or that they can be resold at the
offered price if and when an active secondary market might develop. A public
market for our stock may not be sustained, even if developed.
The
selling shareholders may sell some or all of their common stock in one or more
transactions, including block transactions:
|
–
|
The
selling shareholders will sell their shares at $0.008 per share until the
shares are quoted on the OTC Bulletin Board, and thereafter at prevailing
market prices or privately negotiated
prices.
|
|
–
|
The
shares may also be sold in compliance with the Securities and Exchange
Commission's Rule 144.
|
|
–
|
The
selling shareholders may also sell their shares directly to market makers
acting as principals or brokers or dealers, who may act as agent or
acquire the common stock as a
principal.
|
12
Any
broker or dealer participating in such transactions as agent may receive a
commission from the selling shareholders, or, if they act as agent for the
purchaser of such common stock, from such purchaser. The selling
shareholders will likely pay the usual and customary brokerage fees for such
services. Brokers or dealers may agree with the selling
shareholders to sell a specified number of
shares at a stipulated price per
share and, to
the extent such broker or dealer is unable to
do so acting as agent for the selling shareholders, to purchase, as principal,
any unsold shares at the price required to fulfil the
respective broker's or dealer's commitment to the selling
shareholders. Brokers or dealers who acquire shares as principals may thereafter
resell such shares from time to time in transactions in a market or on an
exchange, in negotiated transactions or otherwise, at market prices prevailing
at the time of sale or at negotiated prices, and in connection with such
re-sales may pay or receive commissions to or from the purchasers of such
shares. These transactions may involve cross and block transactions
that may involve sales to and through other brokers or dealers. If
applicable, the selling shareholders may distribute shares to one or more of
their partners who are unaffiliated with us. Such partners may, in turn,
distribute such shares as described above. We can provide no assurance that all
or any of the common stock offered will be sold by the selling
shareholders.
The
selling shareholders must comply with the requirements of the Securities Act and
the Securities Exchange Act in the offer and sale of the common
stock. In particular, during such times as the selling shareholders
may be deemed to be engaged in a distribution of the common stock, and therefore
be considered to be an underwriter, they
must comply with applicable law and
may, among other things:
1. Not
engage in any stabilization activities in connection with our common
stock;
2.
Furnish each broker or dealer through which common stock may be
offered, such copies of
this prospectus, as amended from time to time,
as may be required by such broker or dealer; and
3. Not
bid for or purchase any of our securities or attempt to induce any person to
purchase any of our securities other than as permitted under the Securities
Exchange Act.
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).
The
penny stock rules require a broker-dealer, prior to a transaction in a penny
stock not otherwise exempt from those rules, 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;
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·
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contains
a description of the broker's or dealer's duties to the customer and the
rights and remedies available to the customer with respect to a violation
of such duties;
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·
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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;
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·
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contains
a toll-free telephone number for inquiries on disciplinary
actions;
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defines
significant terms in the disclosure document or in the conduct of trading
penny stocks; and
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·
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contains
such other information and is in such form (including language, type,
size, and format) as the Commission shall require by rule or
regulation;
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The
broker-dealer also must provide, prior to effecting any transaction in a penny
stock, the customer:
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with
bid and offer quotations for the penny
stock;
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–
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the
compensation of the broker-dealer and its salesperson in the
transaction;
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the
number of shares to which such bid and ask prices apply, or other
comparable information relating
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to
the depth and liquidity of the market for such stock;
and
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monthly
account statements showing the market value of each penny stock held in
the customer's account.
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13
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 those
securities.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Disclosure
Regarding Forward Looking Statements
This
registration statement contains forward-looking statements. In some cases, you
can identify these statements by forward-looking words such as “may,” “might,”
“will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,”
“predicts,” “intends,” “potential” and similar expressions. All of the
forward-looking statements contained in this registration statement are based on
estimates and assumptions made by our management. These estimates and
assumptions reflect our best judgment based on currently known market and other
factors. Although we believe such estimates and assumptions are reasonable, they
are inherently uncertain and involve risks and uncertainties. In addition,
management’s assumptions about future events may prove to be inaccurate. We
caution you that the forward-looking statements contained in this registration
statement are not guarantees of future performance and we cannot assure you that
such statements will be realized. In all likelihood, actual results will differ
from those contemplated by such forward-looking statements as a result of a
variety of factors, including those factors discussed in “Risk Factors”. We will
update these forward-looking statements only as required by law. However, we do
not undertake any other responsibility to update any forward-looking
statements.
Management’s
Discussion and Analysis of Results of Financial Condition and Results of
Operations (“MD&A”) should be read in conjunction with the financial
statements included herein.
BUSINESS
MODEL
We
were formed on December 18, 2007. Our plan is to build a diverse portfolio of
organic, health and wellness grocery products manufactured by small and mid size
North American manufacturers and sell them to the European market through a
network of local and national distributors. Our product lines and
brands will include: organic products, functional/fortified products, foods for
specific intolerances, dietary needs food products.
Our goal
is to uniquely position ourselves as a supplier of North American, “Made in USA”
niche grocery products consisting of:
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All
natural and organic products-certified organic, natural
foods
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Functional
foods - products which have health-promoting properties over and beyond
their nutritional value. Examples of such foods are foods containing
antioxidants, dietary fibre, prebiotics and probiotics, lipids and
soy.
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–
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Food
intolerance products such as gluten free/wheat/yeast-free
products
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Dietary
needs products - low-fat, low-calorie, low-sodium, high-protein,
high-fibre
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–
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Specialty/gourmet
products with accent on “Made in USA”
brands.
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We
intend to build a network of distributors and brokers who already operate on
their respective local market by entering into distributor/broker
agreements. We will negotiate our fees and mark-ups on a case by case
basis with local distributors who have already built working relationships with
local grocery chains and independent operators as well as distributors
specializing in the food service channel.
14
PLAN OF
OPERATIONS
Short term goal ( twelve
months)
The two
key elements of our short term plan are to create our initial portfolio of
products we want to sell to the European market and test sales performance of
these products. Our plan of operation for the next twelve months will focus on
these key elements and on establishing our company’s structure and logistics. We
plan to achieve the targeted goals by completing the following stages of our
plan of operations:
Phase I – Creating Product
Portfolio
We
plan to create a portfolio of grocery products by sourcing them through industry
trade shows, directly contacting North American manufacturers, searching through
food industry publications, ads and referrals. Once we have established the
portfolio of products we will be planning to introduce to the European Market,
we will ship samples of each product to our UK-based partner Segomo Limited for
testing on the local market. We will then evaluate the consumer response to the
new products and will refine our portfolio based on this evaluation. We may add
or delete some of the products from our portfolio in the future. We plan to
complete the Phase I of our plan within six months from the date of this
Prospectus.
Phase II – Obtaining
Necessary Licenses and Complying with EU Regulations
All of
our non-U.S. based operations will be subject to local and national
regulations, some of which are similar to those applicable to our U.S.
operations. For example, in the EU, requirements apply to labelling,
packaging, food content, pricing, marketing and advertising and related areas.
Our partner Segomo Limited, as an importer, will oversee the area of compliance
with customs and import regulations and advise our company on steps to be taken
in order to comply with all applicable rules and regulations. If it will be
necessary we will seek professional advice from EU based firms specializing in
international trade.
The
European Union is a supranational union of 27 European Member States. It was
established under that name in 1992 by the Treaty on European Union (also known
as the Maastricht Treaty). A key activity of the EU is the establishment and
administration of a common single market, consisting of a customs union, a
common trade policy, the single currency, a common agricultural policy, and a
common fisheries policy.
The
customs union is a free trade zone with a common external tariff: as the EU is a
group of Member States forming a customs union, it has introduced such a tariff
system. The same customs duties, quotas, preferences or other non-tariff
barriers to trade apply to all goods entering the area, regardless of which
Member State within the area they are entering.
Pursuant
to its exclusive competence, the Community has developed a broad array of
legislative instruments (regulations and trade agreements) in the trade
sphere.
The
European Community Common Customs Tariff (CCT)
The most
visible element of EU trade policy is the Common Customs Tariff. Here, products
imported into the EU are distinguished at the 8-digit level of the Combined
Nomenclature (CN) which lists the duty rates applicable to each product. The
customs authorities in all 27 Member States are obliged to impose the CCT on
imports. Member States charge a common tariff on goods from outside the EU.
Thereafter, those goods can circulate freely within the rest of the EU without
any liability to pay further customs duties when they move from one Member State
to another. However, the goods might be subject to other local charges in a
Member State such as excise duty and VAT.
In
addition to tariffs, the EU has traditionally made significant use of various
non-tariff measures to restrict imports (although WTO rules have enforced a
stricter discipline in their use, and some have already been phased out).
Non-tariff barriers include quantitative restrictions but they also include
regulatory barriers. Specific examples of the former include import quotas,
voluntary export restraints and licensing, while examples of the latter include
prohibitions for health and safety reasons. Anti-dumping, anti-subsidy and
safeguard measures are another important form of trade instruments that lead to
restrictions on trade and generally affect the whole Community.
15
Import
Quotas
The
Import Quotas system allows the import of limited amounts of goods at a rate of
duty lower than would otherwise apply. Quotas apply to certain goods from
particular countries - so they are very specific. The amount can be expressed in
units of quantity, value, volume, or weight and the period during which the
quota is available can be limited. The duties covered can be customs duty,
agricultural levies or other charges related to the Common Agricultural
Policy.
A quota
is put in place by the EU. Once an individual quota has been used up, then no
further imports at the reduced rate of duty under that quota can be made.
Imports at the full rate of duty (or agricultural levy) can still take place.
Quotas are given a Tariff Quota Order Number (TQON), 6 digits in
length.
In
addition to paying Common Customs Tariff on our portfolio products we may be
involved in Import Quotas. The “TQ” shown in the first column of the Tariff
following the commodity code provides clarification as to whether a quota is
applicable. If TQ is shown, we will need to check the additional information
given at the back of the specific Tariff Chapter for that commodity code. If our
products are listed we will bid for a share of the Quota. When a quota is open,
anyone within the EC can request a share. This is usually done at the time of
import when the TQON is declared on the import declaration. We will not know
immediately if our claim has been successful - all the 'claims' received
throughout the EC are collated and apportioned by the European
Commission.
As the
EC control quotas, it is quite feasible for a quota not to open on the date
shown, or for a quota to become available before its details appear in the
Tariff. When quota levels are low, the European Commission will issue a notice
of Quota Critical.
Further “claims” to the TQON have to be backed by a security taken against the
import for the full rate of duty - in case no allocation is allowed. We can put
in a claim after our import has taken place - however if the quota has closed in
the meantime, our back-dated claim will not be successful.
UK
Charter Standards are to repay any duty overpaid (or held as security pending
the outcome of importer claim to a quota), within 30 working days. This is not
always possible as it is dependant upon the Commission processing all the quota
claims and issuing the results.
Our claim
could be:
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§
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allowed in full – so the
whole of our consignment benefits from a lower rate of
duty;
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§
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partially allowed – so
only a set amount of our consignment can benefit from a lower duty rate;
or
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§
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refused - so our whole
consignment will have duty at the higher
rate.
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If our
claim will not be successful we will incur additional costs, which may adversely
affect our profitability and may force us to consider replacing the existing
portfolio products with products which do not have the Import Quotas, partially
reduce or completely curtail our overseas operations.
Import
Licences
The
majority of goods can be imported into the United Kingdom, and therefore into
the EU, without the need to apply for an import licence. Currently Import
Licensing Branch (“ILB”) issues import licences for a small number
of goods, such as, certain textiles from Belarus, North Korea and
Uzbekistan, iron & steel, firearms and ammunition, anti-personnel mines and
torture equipment. ILB publicises its restrictions by issuing Notices to
Importers.
We
believe that we are not required to obtain the import licence with our future
portfolio of products. Nevertheless we will obtain professional advise on the
import licence requirements once we finalize our product portfolio.
Import
Regulations in the Food and Drink Sector
Many
products in the food and drink sector, imported from outside the
EU, require a Common Agricultural Policy (CAP) licence.
The import of food and drink from
third countries (outside the EU) is highly regulated to ensure that health rules
in place within the EU are met by imports. Areas
include:
16
·
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live animals and animal
products
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plants
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fruit and
vegetables
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organic
produce
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Other
controls apply to the import of food and drink. Imported consignments
transported in wooden packaging may also need a phytosanitary certificate. As
well as the specific requirements that apply to some products, all food which is
intended for human consumption must meet the general food safety requirements of
European Union (EU) law. Under EC Regulation 178/2002 these requirements are
that food must not be unsafe, i.e.:
·
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injurious
to health
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·
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unfit
for human consumption
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Apart
from the general provisions of EC Regulation 178/2002, the specific legislation
applying to imported food will depend on whether the food is of animal origin or
not:
· food containing animal
products includes meat, meat pies, salami, poultry, fish, eggs, milk,
dairy products, honey.
· food that has no animal
content includes fruit, vegetables, cereals, certain bakery products,
herbs, spices, mineral water, fruit juices.
We will
obtain professional advise on the CAP licence requirements once we finalize our
product portfolio. We will be continuously working on the compliance with EU
regulations and requirements as long as we continue our overseas
operations.
Phase III –Organizing
Logistics
Once
we finalize our product portfolio and determine import requirements into the UK
and EU we plan to find and establish our relationship with a freight forwarding
company. We will be looking for an established international freight forwarding
operator which has its own division in the USA. Our search will concentrate on
the shipper’s ability to provide the following services:
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Speedy customs clearance at
point of entry.
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Low freight rates and U.K.
handling charges at
destination.
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Seamless door to door service
from pick up at shipment point through to delivery to U.K. client's
premises.
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Accurate customs entry work,
avoiding prohibitive duty
rates.
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Consultancy on all customs
related matters ie. import licensing regulations, quota requirements, duty
drawback, transhipments
etc.
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In
addition we will be looking for a shipper who has its own dedicated sea-freight
inbound full container load (FCL) and groupage services (LCL), or air-freight
consolidation services. Due to the start-up nature of our business we do not
expect to ship our products in full container load during the next twelve months
of our operations. We will be utilizing the option of shipping our products
through a company who ships “less than container” loads on favorable
terms.
Phase IV – Finalizing
Workforce
We plan
to hire additional personnel, based on the activity level of our operations and
product delivery requirements. In addition, to achieve our plans for future
growth we will need to recruit, hire, train and retain other highly qualified
sales and managerial personnel.
17
Competition
for qualified employees is intense, and if we cannot attract, retain and
motivate these additional employees their absence could have a materially
adverse effect on our business, financial condition or results of operations.
All future hiring will be subject to financing and sufficient cash flow from
operations.
Long term goal ( five
years)
There are
three key elements of our long term plan:
a)
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Expansion
of our portfolio of products by diversifying our offerings with innovative
new product line extensions, complementary products, and other gourmet
food and beverage items.
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b)
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Introduction
of new product categories including non food items such as natural and
organic remedies, personal care products,
etc.
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c)
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Expansion
of sales territories by increasing number of distributors and developing
new distribution channels.
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RESULTS OF
OPERATIONS
From
Inception on December 18, 2007, to July 31, 2009
During
the period from our inception on December 18, 2007 to July 31, 2009, we hired
consultants in areas of bookkeeping and accounting. We also retained an attorney
in relation to this Registration Statement, and an auditor to audit our
financial statements. Subsequent to July 31, 2009, we entered into a Brokerage
Agreement with Segomo Limited, (“Segomo”, Broker), a food broker specializing in
product distribution, marketing and advertising in several
European countries, whereby we appointed and granted a non-exclusive
and non-assignable right to re-sell the products supplied by Ecochild. Our gross
revenue from sales of organic teas in North America for the period from
inception to July 31, 2009 was $9,850. These sales were not attributed to the
Brokerage Agreement with Segomo Limited, which was signed on September 1, 2009.
Our cumulative loss since inception is $7,953. Our operating expenses
from December 18, 2007 to July 31, 2009 totalling $14,503 consists of accounting
and audit fees of $1,000; general and administrative expenses of 2,124;
management fees of $1,000; organization costs of $775; office rent of $1,913,
and travel expenses of $4,191.
We have
reserved the domain name www.ecochildstore.com in anticipation of future
expansion to include other brands in our brand development portfolio. From
inception on December 18, 2007 to July 31, 2009, we have sold 6,000,000 shares
of common stock at $0.001 per share to our directors for $6,000. In addition we
have sold 3,625,000 shares of common stock at $0.008 per share for total
proceeds of $29,000 during the same period.
LIQUIDITY AND CAPITAL
RESOURCES
As of
July 31, 2009, our total current assets were $37,312 comprising of cash of
$34,312 and prepaid expenses of $3,000. At July 31, 2009, our total liabilities
were $10,615 for a total working capital of $26,697. We expect to incur
substantial losses over the next two years.
Historically,
we have funded our operations through financing activities consisting primarily
of private placements of equity securities with existing shareholders and
outside investors and revenue from sales. During the period from inception to
July 31, 2009, proceeds of $35,000 were received from the sale of securities in
connection with various private placements.
Due to
the “start up” nature of our business, we expect to incur losses as it expands.
To date, our cash flow requirements have been primarily met by debt and
equity financings. Management believes that we will have sufficient cash
flow to meet our capital requirements for at least the next twelve months.
Management expects to keep operating costs to a minimum until cash is available
through financing or operating activities. Management plans to continue to seek
other sources of financing on favorable terms; however, there are no assurances
that any such financing can be obtained on favorable terms, if at all.
If we are unable to generate profits or unable to obtain additional
funds for our working capital needs, we may need to cease or curtail operations.
Furthermore, there is no assurance the net proceeds from any successful
financing arrangement will be sufficient to cover cash requirements during the
initial stages of the Company’s operations.
18
Off-Balance Sheet
Items
We
currently do not have any off-balance sheet items.
Critical Accounting
Policies
Our
discussion and analysis or plan of operations is based upon our financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these
financial statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an on-going basis, we
evaluate our estimates, including those related to income taxes and
contingencies. We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under
different assumptions or conditions.
Management
believes the following critical accounting policies reflect its more significant
estimates and assumptions used in the preparation of its financial
statements.
Revenue
Recognition
The
Company is in the development stage and has yet to realize material revenues
from operations. Once Ecochild has commenced full operations, it will
recognize revenue when the sale and/or distribution of food products is
complete, risk of loss and title to the food products have transferred to the
customer, there is persuasive evidence of an agreement, acceptance has been
approved by its customer, the fee is fixed or determinable based on the
completion of stated terms and conditions, and collection of any related
receivable is probable. Net sales will be comprised of gross revenues
less expected returns, trade discounts, and customer allowances that will
include costs associated with off-invoice markdowns and other price reductions,
as well as trade promotions and coupons. These incentive costs will
be recognized at the later of the date on which the Company recognized the
related revenue or the date on which the Company offers the
incentive.
Loss per Common
Share
Basic
loss per share is computed by dividing the net loss attributable to the common
stockholders by the weighted average number of shares of common stock
outstanding during the periods. Diluted loss per share is computed
similar to basic loss per share except that the denominator is increased to
include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common
shares were dilutive. There were no dilutive financial instruments
issued or outstanding for the nine months ended July 31, 2009, and year ended
October 31, 2008.
Income
Taxes
The
Company accounts for income taxes pursuant to SFAS No. 109, “Accounting for Income Taxes”
(“SFAS No. 109”). Under SFAS No. 109, deferred tax assets and
liabilities are determined based on temporary differences between the bases of
certain assets and liabilities for income tax and financial reporting
purposes. The deferred tax assets and liabilities are classified
according to the financial statement classification of the assets and
liabilities generating the differences.
The
Company maintains a valuation allowance with respect to deferred tax
assets. Ecochild establishes a valuation allowance based upon the
potential likelihood of realizing the deferred tax asset and taking into
consideration the Company’s financial position and results of operations for the
current period. Future realization of the deferred tax benefit
depends on the existence of sufficient taxable income within the carryforward
period under the Federal tax laws.
Changes
in circumstances, such as the Company generating taxable income, could cause a
change in judgment about the realizability of the related deferred tax
asset. Any change in the valuation allowance will be included in
income in the year of the change in estimate.
19
At
October 31, 2008 the Company had a net operating loss carryforward of
approximately $2,200 which begins to expire in 2029. The deferred tax asset of
approximately $440 created by the net operating loss has been offset by a 100%
valuation allowance. The change in the valuation allowance in 2008 was
$440.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
We have
had no disagreements on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures with any of our
accountants for the year ended October 31, 2008, and for the period ended July
31, 2009.
DESCRIPTION
OF OUR BUSINESS AND PROPERTIES
You
should rely only on the information contained in this prospectus or any
supplement hereto. We have not authorized anyone to provide you with different
information. If anyone provides you with different information you should not
rely on it. We are not making an offer to sell the shares in any jurisdiction
where the offer is not permitted. You should not assume that the information
contained in this prospectus is accurate as of any date other than the date on
the front cover of this prospectus regardless of the date of delivery of this
prospectus or any supplement hereto, or the sale of the shares. Our
business, financial condition, results of operations and prospects may have
changed since that date.
Background
We were
incorporated pursuant to the laws of Nevada on December 18, 2007, for the
purpose of sale, and marketing of specialty food products produced and developed
by North American companies to foreign markets.
On
September 1, 2009, we have entered into a Brokerage Agreement with Segomo
Limited, a food broker specializing in product distribution, marketing and
advertising in European countries, whereby we appointed and granted Segomo
Limited a non-exclusive and non-assignable right to re-sell the products
supplied by Ecochild. Our management, with assistance of its business contacts
in Europe, has selected Segomo Limited, a UK-based company, based on the
following criteria:
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Specialization
and experience of the brokerage
firm;
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Geographical
location;
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The
country’s infrastructure and
communications;
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–
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The
country’s banking system; and
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The
country’s official language.
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Segomo
Limited is a food broker specializing in sales and distribution of specialty
food items to local markets. Our management believes that we will achieve our
goal of testing the market with assistance of Segomo. Segomo
Limited is located in the United Kingdom (UK), which is part of the
European Union. The largest island, Great Britain, is linked to France by the
Channel Tunnel. This location provides more options for freight forwarding
operations by the sea or by air. London Heathrow Airport is one of the largest
and busiest airports in Europe. It has developed cargo shipping facilities and
serves as an entry point not only for the UK, but also for the
EU. The UK is a major European centre for international business and
commerce with English as its official language. It will facilitate our overseas
operations.
The
material terms of the agreement are as follows:
Minimum
payment. A
guaranteed minimum payment of $300.00 a month is to be made during the first
year of this agreement. At the end of said 12 months, broker shall not be paid
this minimum payment.
Compensation. Ecochild will pay a commission of
5%. All commissions shall be calculated on Gross Invoice Sales, less
cash and promotional discounts and shall be payable on or about the
15th of the month following the month
invoice payments are received. Marketing support programs such as
Free Fills, Demo’s, Ads, Trade Shows should not be taken from
commission. VCR’s (Vendor Credit Recaps) including spoils, damage and
reclamation will only be deducted at 5% of the total from commission
payments.
20
Term. Either party may terminate
this agreement by giving the other party 60 days of payment after termination -
from forward planning. If we decide to terminate the agreement on a certain date
we will be liable for the payment of the commission of 5% which will be
calculated on the projected sales for the next 60 days from the date of
termination. Termination notice must be in writing of
termination.
INDUSTRY
OVERVIEW
European
Market
Our
management believes that the European market for organic and natural food &
drink is one of the largest and most developed in the world. Modern day organic
farming originates from the continent and consumer demand for organic foods is
established.
The
European market is characterised by a large number of producers and
distributors, creating a highly competitive landscape. Indeed, stiff competition
has led to a number of high-profile market exits in recent years. As consumers
becoming increasingly sophisticated in their consumer behaviour towards organic
foods, companies are focusing on supply chain management to ensure traceability
from farm to fork. Continuous supply is also a major concern with a number of
European companies investing in developing countries to lock-in supply of
organic products.
In our management’s
opinion the European market for healthy, organic and specialty foods growth
continues to be driven by sales of larger pack sizes for sharing, but also by
consumer uptake of healthier products. Factors such as no trans fats, low fat,
low calorie, low cholesterol, low sugar, wholegrain, low sodium, and vitamins
and minerals have all increased in importance, as much publicity and debate are
focused on the link between `junk' foods and obesity, with its associated health
risks.
The UK
market continues to show some interest from consumers as more organic and
natural products appear
on
supermarket shelves. A number of catering and food service companies in the UK
are also offering organic foods.
The
company’s management believes that the Italian, German and French markets are
the next most important in Europe. Other important markets are in Switzerland,
Austria, Sweden and the Netherlands. There is a small market for organic foods
in central and Eastern Europe (CEE). Demand for organic products is growing in
countries such as the Czech Republic and Hungary, especially in the country’s
capitals.
Since
Western Europe, in company’s management opinion, accounts for most revenues in
the European organic food industry, Ecochild will mostly focus on this
region.
Sales
Channels
We plan
to introduce our products through one of the three main sales channels described
below, in particular, through specialty retailers. The company’s management
believes that we may be successful with introduction of North American brands
not readily available in these specialized stores. Once we establish ourselves
in the specialty retailer market, we plan to expand our distribution through
mass retailers.
There is
no guarantee that Ecochild will be successful in penetrating the EU market with
its portfolio of products, or that it will be able to successfully expand its
operations through any of the three main sales channels described
below.
21
Sales channels in specialty
food categories
Specialty
retailers
Specialty
retailers generally compete with larger mass supermarkets and offer a larger
assortment of organic, functional and other specialty
foods. Specialty retailers are educating consumers about regionally
produced organic products and are sometimes offering home delivery services and
a more personal shopping experience.
There are a number of specialty
retailers in Europe. Southern European countries tend to have more dedicated
organic food retailers than northern European countries. For example, in the UK
, where we plan to introduce our products, Fresh &
Wild is the leading
chain of organic food shops. This chain was acquired by Austin-based Whole Foods
Market. All Fresh & Wild stores are based in southern England. Planet
Organic is the second leading British chain with several
stores.
Other European countries have their
own specialty food retailers and wholesalers.
Mainstream
retailers representing supermarkets and big chain stores.
Mainstream
retailers are becoming more proactive in offering organic products in Europe as
consumers can find a wider assortment in this product category now.
Examples
of mainstream retailers offering organic and other specialty foods
are:
Tesco,
the second largest retailer in Europe, has market share for organic food sales
in the UK. Sainsbury's is another leading retailer in terms of organic and
specialty food. Waitrose is a smaller retailer that offers assortment of organic
and specialty foods. Carrefour is one of the largest retailers of organic foods
in France and organic products are found in many of its hypermarkets. Auchan is
the second largest French retailer of organic products. Tegut is another
conventional supermarket that is marketing organic foods in Europe. Rewe and
Edeka are the largest food retailers in Germany offering an assortment of
specialty foods.
Specialty Foods
Categories
We plan
to identify the products which will be included in our portfolio from the
following specialty food categories:
Organic food
products
Organic
foods are made according to certain production standards. Under organic
production, the use of conventional non-organic pesticides, insecticides and
herbicides is greatly restricted and saved as a last resort. However, contrary
to popular belief, certain non-organic fertilizers are still used. In most
countries, organic produce may not be genetically modified. It has been
suggested that the application of nanotechnology to food and agriculture is a
further technology that needs to be excluded from certified organic food. The
Soil Association (UK) has been the first organic certifier to implement a
nano-exclusion.
Organic
food production is a heavily regulated industry. Currently, the European Union,
the United States, Canada, Japan and many other countries require producers to
obtain special certification in order to market food as "organic" within their
borders. Most certifications allow some chemicals and pesticides to be used, so
consumers should be aware of the standards for qualifying as "organic" in their
respective locales.
Processed
organic food usually contains only organic ingredients. If non-organic
ingredients are present, at least a certain percentage of the food's total plant
and animal ingredients must be organic and any non-organically produced
ingredients are subject to various agricultural requirements. Foods claiming to
be organic must be free of artificial food additives, and are often processed
with fewer artificial methods, materials and conditions, such as chemical
ripening, food irradiation, and genetically modified ingredients.
Early
consumers interested in organic food would look for non-chemically treated,
fresh or minimally processed food. For supermarket consumers, food production is
not easily observable, and product labelling, like "certified organic", is
relied on. Government regulations and third-party inspectors are looked to for
assurance. A "certified organic" label is usually the only way for consumers to
know that a processed product is "organic".
22
Functional food
products
Functional
foods - products which have health-promoting properties over and beyond their
nutritional value - have
become a
significant food industry sector. Functional foods principally comprise fibre-,
mineral- or vitamin-fortified breakfast cereals, probiotic yoghurts and yoghurt
drinks, and cholesterol-lowering margarines and spreads. In recent years, use of
the functional active ingredients in these foods has been extended, with
cholesterol-lowering stanols and polysterols, and vitamins, being added to
various products. The total functional foods market is still small.
Functional
foods and drinks are targeted at various health-related conditions associated
with old age; and the company’s management believes that the market may benefit
from the ageing population. It may also benefit from the ongoing interest, not
only among older persons but also among younger generations, in healthier
eating.
In our
management’s opinion this interest continues to be supported by the concerns
over the obesity among adults and children. This situation is likely to continue
to make health the major consideration of food and drink manufacturers, and the
subject of the majority of their new product development work. Functional foods
increasingly target concerns such as heart health, digestive health, energy
levels, etc.
Food products for specific
intolerances
Increased
diagnosis of food sensitivities has given rise to this new market for food
intolerance - or 'free-from'- products, although growth in sales has been held
back by factors such as high prices, restricted distribution and lack of
competition in some markets. We believe that innovation will drive this market
forward, however, by the launch of new products with improved taste and texture,
thus the market will represent a potentially lucrative one for manufacturers,
retailers and service providers alike.
Gluten-free
foods and beverages as including all commonly understood products falling within
this broad category, such as foods and beverages completely free of ingredients
derived from gluten-containing cereals: wheat (including kamut and spelt),
barley, rye, oats and triticale, as well as the use of gluten as a food additive
in the form of a flavoring, stabilizing or thickening agent; recommended amongst
other things in the treatment of celiac disease and wheat allergy, irrespective
of product packaging, formulation, size, or form.
Dietary needs food
products
The
relation of diet to health is
one of many factors that influence food purchase decisions and,
thus, the stimulus for developing new food products. The extent to which
existing food products may be modified
or new foods developed to meet dietary goals is subject to
technologic and regulatory constraints. A commitment to ethical and
responsible marketing strategies is essential to the evolution of
food products for special dietary needs. Despite these complex restraints,
many food products with altered nutrient or ingredient composition
are currently available to consumers. Consumers are becoming aware of
the role of nutrition and specific food components in a healthful lifestyle.
Food manufacturers are responding to this growing trend by offering more choices
– low-fat, low-calorie, low-sodium, high-protein, high-fibre – to fit a wide
range of dietary needs, preferences and tastes.
Low sodium
foods
Concerns
have grown that consumption levels of salt are well above those needed for
nutritional purposes and that this can lead to adverse effects on health, in
particular cardiovascular disease. Consumers are looking to reduce their salt
intake, making salt reduction a priority for food
manufacturers.
23
High fibre
foods
The
health benefits of fibre, the ‘forgotten nutrient’, playing important role in
the food industry and the whole-grain trend. This will explore grain-processing
technologies to modify the texture of whole-grain bread, in an attempt to make
whole-grain products more accepted among consumers.
Low calorie
foods
Low-calorie
foods are typically identified as foods that contain less than 100 calories per
serving. The Food and Drug Administration (“FDA”) regulates the food
labelling processes in the United States, and states that in order for foods to
be labelled as "low calorie," the food must not contain more than 40 calories
for a given reference amount, except for sugar substitutes.
Eating a
variety of low-calorie foods throughout the day can offset hunger and make it
easier to stick with a low-calorie diet plan. Eating these foods as snacks, or
as part of a meal each day, can improve overall health and in some cases,
support weight loss efforts.
Competitors
The
largest number of organic and specialty food and beverage companies are in
Europe. There are thousands of companies involved in organic, functional and
other specialty food production and distribution in Europe.
Many
conventional food companies are involved in organic foods. Indeed,
many sectors of the organic food industry are dominated by non-organic food
companies. Most conventional food companies have come into the organic food
industry by starting production lines of organic products. Some have entered by
acquiring dedicated organic food companies. Such as Green & Black’s the
leading organic chocolate brand in Europe, being bought by Cadbury Schweppes;
Premier Foods acquired Cauldron Foods, a leading British organic vegetarian
foods company.
There
is large number of local European distributors, who are well established on
local highly competitive market. Many of North American distributors
already successfully operate on European market as well, such as Tree of Life
and others.
PLAN
OF OPERATION
Short term goal
(twelve-month period)
The two
key elements of our short term plan are to create our initial portfolio of
products we want to sell to the foreign market and do a test market of these
products. Our plan of operation for the next twelve months will be focused on
four major areas: Operations; Marketing; Research and Development;
Financing.
Operations
|
1)
|
We
plan to create a portfolio of grocery products by sourcing them through
industry trade shows, directly contacting North American manufacturers,
searching through food industry publications, ads and referrals. We are
planning to start with two-three products in each of the following
categories:
|
|
-
|
Natural
and organic products (all-natural and heart healthy snack bars made with
real ingredients like fruits and nuts, high quality organic chocolates,
organic cereals, and energy
bars).
|
|
-
|
Gluten
free, wheat free, yeast free products (Gluten free cookies, crisps, baking
mixes, cereals, spice blends,
etc.)
|
|
-
|
Salt
free or low sodium dietary products (low sodium, low fat, low calorie
sauces, marinades, vinaigrettes, granolas, trial mixes,
etc.)
|
|
-
|
Specialty
gourmet products that carry uniquely American flavours (dry rubs and
seasoning blends, barbeque sauces, marinades,
etc.)
|
24
We plan
to select these products based on the following criteria:
|
a)
|
Popularity. The
company’s management believes that the most popular and successful brands
amongst consumers in North America will have better chances to be accepted
by the European consumer. We plan to identify these brands and choose
several items from product lines which are, in our opinion, most popular
in the North American market.
|
|
b)
|
Presence in EU. We plan
to check if the brands we have identified are already available in
European Market. We will concentrate our efforts on introduction of brands
which are not widely available or known amongst European
consumers.
|
|
c)
|
Market Saturation. Next
we plan to compare chosen products to similar items in the same categories
that are being sold in the European market. We believe that we may have
better chances with introduction of the products in a less crowded product
category.
|
|
d)
|
Profitability. The
products included in our portfolio should be profitable. The pricing will
be determined for each product based on the wholesale price, packaging,
shipping, listing fees, brokerage fees, etc. We plan to negotiate the
lowest possible wholesale price for our portfolio with product
manufacturers. In addition we plan to ship the products in most efficient
way in order to reduce shipping costs. The shipping costs depend on
various factors, e.g. volume, transportation, delivery time, carrier. We
plan to work out the logistics for each product once we finalize the
portfolio of products.
|
We do
not expect to reach profitability during the next twelve months and will rely on
equity and debt financing to support our operations. It is a long-term plan for
Ecochild to achieve profitable operations. There is no guarantee that we will be
successful in our pursuit of profitability. If we won’t be able to sustain
ourselves, we will have to cease our operations.
|
e)
|
EU Regulations
Compliance. We plan to review the products we identified with
regards to compliance with EU regulations. Our management believes that we
have to choose the products that are the most compliant with the EU
regulations for food importing or require the least resources to bring
these products up to the standards acceptable by the EU.
|
|
2)
|
We
will buy samples and small quantities of chosen products from vendors
throughout the United States and ship them to our broker Segomo Limited
for testing on the local market. Segomo Limited will utilize
their existing contacts to introduce the products to buyers at local
grocery chains as well as to food service
operators.
|
|
3)
|
Our
company will create a list of perspective products based on feedback we
will receive from our broker.
|
|
4)
|
We
will obtain all the necessary information about prospective products we
wish to include in our portfolio from the manufacturers for the purpose of
developing a sale support
system.
|
|
5)
|
Upon
receiving a purchase order from Segomo Limited, Ecochild will place a
trial order with chosen manufacturers or their distributors and fulfil it
by shipping purchased goods to Segomo
Limited.
|
|
6)
|
We
will evaluate the consumer response to the introduced new products by
working closely with Segomo Limited and deciding on whether to keep or
adjust our product lines. Then we will develop a more detailed
plan of operations including types of products and next order
volumes.
|
The
European market is well developed and there is no shortage of particular
products in any food category. We formed our business plan based on the average
consumer behaviour, not on the shortage of any particular product. In our
opinion, the consumer is always looking for new products to try in the same food
category. We believe that a new brand from
overseas, which has proven to be successful in its country of origin, has a
chance to be successful in foreign markets. We are not taking into consideration
the appeal of ethnic foods to various consumer groups. We will consider products
based on their popularity amongst consumers in general.
25
Marketing
We plan
to develop a strategic marketing plan by working together with Segomo Limited
for generating product awareness in the areas we plan to introduce our products
first. The marketing plan will cover the following:
|
1)
|
Active
promotional program including in-store demonstrations and trial tastings,
printing coupons and other promotional materials, educating buyers and
other potential distributors on the products we
carry.
|
|
2)
|
Public
and media relations program in key
markets.
|
|
3)
|
Sponsoring
events, chef’s competitions by supplying our products to increase consumer
awareness of brands that we
represent.
|
|
4)
|
Actively
promoting “Made in USA” brands by emphasizing quality and uniqueness of
our products.
|
Research and
development
We will
continuously educate ourselves on the market trends and consumer preferences by
attending industry Trade shows, participating in industry educational seminars,
and networking events.
Financing
As of the date of this registration
statement we have raised $35,000 from various private
placements. Management believes that we will have
sufficient cash flow to meet our capital requirements for at least the next
twelve months. Management expects to keep operating costs to a minimum until
cash is available through financing or operating activities. Management plans to
continue to seek other sources of financing on favorable terms; however, there
are no assurances that any such financing can be obtained on favorable terms, if
at all. If we are unable to generate profits or unable to obtain
additional funds for our working capital needs, we may need to cease or curtail
operations.
Currently
we do not have any employees. Our directors and officers oversee our company’s
operations. Our President Galina Birca has committed to devote approximately 25%
of her time to the company’s affairs, and our Chief Financial Officer Vladimir
Enachi has committed to devote approximately 20% of his time to the company’s
affairs. We plan to hire additional personnel, based on the activity level of
our operations and product delivery requirements. In addition, to achieve our
plans for future growth we will need to recruit, hire, train and retain other
highly qualified sales and managerial personnel.
Long term goal (five-year
period)
There are
three key elements of our long term plan:
-
|
Expand
our portfolio by diversifying our offerings with innovative new product
line extensions, complementary products, and other gourmet food and
beverage items.
|
-
|
Introduce
new product categories including non food items such as natural and
organic remedies, personal care
products, household cleaning natural or organic solutions
etc.
|
-
|
Expand
selling territories, increase number of distributors and uncover new
distribution channels.
|
Competition
The
Company's business is subject to significant competition. The food industry is
highly competitive and the European market is dominated by large multinational
companies including among others Nestle, Kraft Foods, Mars, and Dirol
Cadbury. There are also a number of local competitors especially in
the sauce and condiments product lines. Additionally, leading European grocery
chains developed and actively promoting their private label of organic and
functional foods. Multinational competitors have already established their brand
name recognition on local market; they have
significantly larger marketing personnel and cash resources than our Company. In
addition, large competitors from the North America continue to introduce
products into European market. Moreover, competition for shelf space in club and
grocery stores is intense and poses great difficulty for smaller food companies
and distributors.
26
Ecochild,
Inc. will try to offer distinctive products, which address specific consumer
needs. We will target specific group of consumers who have special
dietary needs and are looking for healthy organic and natural products. However
these efforts do not guarantee that our company will be competitive, since
existing large distributors have greater resources to adjust to current market
trends.
DESCRIPTION
OF PROPERTY
We do not
hold ownership or leasehold interest in any property.
DIRECTORS,
EXECUTIVE OFFICERS AND CONTROL PERSONS
Our
executive officers and directors and their respective ages as of the date of
this prospectus are as follows:
Executive
Officers and Directors:
Name
|
Age
|
Position
|
||
Galina
Birca
|
36
|
President,
Chief Executive Officer, and Director
|
||
Vladimir
Enachi
|
46
|
Chief
Financial Officer, Secretary, Treasurer and
Director
|
The
directors will serve as directors until our next annual shareholder meeting or
until a successor is elected who accepts the position. Directors are
elected for one-year terms. Officers hold their positions at the will
of the Board of Directors, absent any employment agreement. There are no
arrangements, agreements or understandings between non-management shareholders
and management under which non-management shareholders may directly or
indirectly participate in or influence the management of Ecochild's
affairs.
Galina Birca - President,
C.E.O.
Mrs.
Birca is our Company’s President and Chief Executive Officer and is directly
responsible for the day to day operations of our company. Mrs. Birca has gained
her knowledge and experience in the food distribution industry working as sale
representative for a food distribution company Agros Trading (July,
2003-September, 2008). From October 2008 to present, Mrs. Birca has worked as an
independent broker for food companies specializing in non perishable organic
grocery items.
Mrs.
Birca intends to devote approximately 25% of his business time to our
affairs.
Vladimir Enachi – Secretary,
C.F.O.
Mr.
Vladimir Enachi has served as a director and Chief Financial Officer of the
company since December 22, 2008. During the past five years Mr. Enachi was
involved in sales and distribution of beer and other alcoholic beverages in
Europe as an independent broker through Enachi & Partners. Mr. Enachi was
instrumental in development of new distribution channels through mega retail
chains and small independent retailers.
Mr.
Enachi intends to devote approximately 20% of his business time to our
affairs.
EXECUTIVE
COMPENSATION
There are
no formal written employment arrangements in place. We do not have any
agreements or understandings that would change the terms of compensation during
the course of the year. The table below shows what we have paid to our directors
since our inception on December 18, 2007 through July 31, 2009.
27
Summary
Compensation Table
Annual Compensation
|
Long Term Compensation
|
|||||||||||||||
Awards
|
Payouts
|
|||||||||||||||
Other
|
Restricted
|
Securities
|
All
|
|||||||||||||
Name and
|
Annual
|
Stock
|
Underlying
|
LTIP
|
Other
|
|||||||||||
Principal
|
Period
|
Salary
|
Bonus
|
Compensation
|
Awards
|
Options/
|
Payouts
|
Compensation
|
||||||||
Position
|
Ended
|
($)
|
($)
|
($)
|
($)
|
SARs (#)
|
($)
|
($)
|
||||||||
Galina
Birca
|
11/01/08
to
|
0
|
0
|
1,000 (1)
|
0
|
0
|
0
|
0
|
||||||||
President,
|
07/31/09
|
|||||||||||||||
Chief
Executive
|
||||||||||||||||
Officer
|
12/18/07
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
||||||||
(inception)
to
|
||||||||||||||||
10/31/08
|
||||||||||||||||
Vladimir
|
11/01/08
to
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
||||||||
Enachi
|
07/31/09
|
|||||||||||||||
Chief
Financial
|
12/18/07
|
|||||||||||||||
Officer,
Director
|
(inception)
to
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
||||||||
10/31/08
|
(1) The
company's president provides management services to the company as per unwritten
arrangement with the company. These services include: overseeing daily
operations; corresponding with customers, vendors, business partners,
professional firms and regulatory authorities; identifying potential products
for our portfolio; monitoring the company’s reporting and compliance activities.
Starting on April 1, 2009, the company recorded $250 per month for management
services. During the period ended July 31, 2009, the company incurred $1,000 in
management fees.
DESCRIPTION
OF SECURITIES
Common
Stock
The
authorized capital stock of Ecochild Inc. consists of 75,000,000 common shares,
$0.001 par value. Common Stock Holders of the common stock have no
preemptive rights to purchase additional shares of common stock or other
subscription rights. The common stock carries no conversion rights
and is not subject to redemption or to any sinking fund
provisions. All shares of common stock are entitled to share equally
in dividends from sources legally available, therefore, when, as and if declared
by the Board of Directors, and upon liquidation or dissolution of Ecochild,
whether voluntary or involuntary, to share equally in the assets of Ecochild
available for distribution to stockholders.
The
Board of Directors is authorized to issue additional shares of common stock not
to exceed the amount authorized by Ecochild’s Articles of
Incorporation, on such terms and conditions and for
such consideration as the Board may deem appropriate
without further stockholder action.
28
Voting
Rights
Each
holder of common stock is entitled to one vote per share on all matters on which
such stockholders are entitled to vote. Since the shares of common stock do not
have cumulative voting rights, the holders of more than fifty percent of the
shares voting for the election of directors can elect all the directors if they
choose to do so and, in such event, the holders of the remaining shares will not
be able to elect any person to the Board of Directors.
Dividend
Policy
Holders
of Ecochild's common stock are entitled to dividends if declared by the Board of
Directors out of funds legally available; therefore, Ecochild does not
anticipate the declaration or payment of any dividends in the foreseeable
future. We intend to retain earnings, if any, to finance the
development and expansion of our business.
Future
dividend policy will be subject to the discretion of the Board of Directors and
will be contingent upon future earnings, if any, Ecochild's financial
condition, capital requirements, general business conditions and other factors.
Therefore, there can be no assurance that any dividends of any kind will ever be
paid.
Options
We have
not issued and do not have outstanding any options to purchase shares of our
common stock.
Share Purchase
Warrants
We have
not issued and do not have outstanding any warrants to purchase shares of our
common stock.
Convertible
Securities
We have
not issued and do not have outstanding any securities convertible into shares of
our common stock or any rights convertible or exchangeable into shares of our
common stock.
MARKET
FOR COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS
Market
Information
Our
common stock is not traded on any exchange. We plan to eventually seek quotation
on the OTC Bulletin Board, once our Prospectus has been declared effective by
the Commission. We cannot guarantee that we will obtain a quotation. There is no
trading activity in our securities, and there can be no assurance that a regular
trading market for our common stock will ever be developed.
A market
maker sponsoring a company's securities is required to obtain a quotation of the
securities on any of the public trading markets, including the OTC Bulletin
Board. If we are unable to obtain a market maker for our securities, we will be
unable to develop a trading market for our common stock. We may be unable to
locate a market maker that will agree to sponsor our securities. Even if we do
locate a market maker, there is no assurance that our securities will be able to
meet the requirements for a quotation or that the securities will be accepted
for quotation on the OTC Bulletin Board.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT TRANSACTIONS WITH RELATED
PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS
The following table
sets forth the ownership, as of November
24, 2009, of our common stock by
each of our directors, and by
all executive officers and directors as a
group, and by each person known to us who is the beneficial owner of more than
5% of any class of our securities. As of November 24, 2009,
there were 9,625,000 common shares issued and outstanding. To the
best of our knowledge, all persons named have sole voting and investment power
with respect to the shares, except as otherwise noted.
29
Amount and
|
||||||
Nature of
|
||||||
Beneficial
|
Percent of
|
|||||
Title of Class
|
Name of Owner
|
Ownership
|
Class
|
|||
(1)
|
(%)
|
|||||
Common
|
Galina
Birca,
|
3,000,000
|
31.17
|
|||
President,
CEO
|
||||||
Common
|
Vladimir
Enachi
|
3,000,000
|
31.17
|
|||
Secretary, CFO,
Treasurer
|
||||||
and
Director
|
||||||
Common
|
All Officers
and
|
6,000,000
|
62.34
|
|||
Directors as a Group
that
|
||||||
consists of two
persons
|
(1) Includes
shares that could be obtained by the named individual within the next 60
days .
The
percent of class is based on 9,625,000 shares of common stock issued and
outstanding as of the date of this prospectus.
Certain Relationships and
Related Transactions
The
President of the Company provides management services to the Company. During the
period ended July 31, 2009, management fees of $1,000 were charged to
operations.
We
have not entered into any transactions with our officers, directors,
persons nominated for these positions, beneficial owners of 5% or
more of our common stock, or family members of these persons wherein the amount
involved in the transaction or a series of similar transactions exceeded
$60,000.
LEGAL
PROCEEDINGS
We are
not aware of any pending or threatened legal proceedings which involve
Ecochild.
Since
inception, none of the following occurred with respect to a present or former
director or executive officer of the Company: (1) any bankruptcy petition
filed by or against any business of which such person was a general partner or
executive officer either at the time of the bankruptcy or within two years prior
to that time; (2) any conviction in a criminal proceeding or being subject
to a pending criminal proceeding (excluding traffic violations and other minor
offenses); (3) being subject to any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of any competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or
otherwise limiting his/her involvement in any type of business, securities or
banking activities; and (4) being found by a court of competent
jurisdiction (in a civil action), the SEC or the commodities futures trading
commission to have violated a federal or state securities or commodities law,
and the judgment has not been reversed, suspended or vacated.
30
DISCLOSURE
OF COMMISSION POSITION OF INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Our
directors and officers are indemnified as provided by the Nevada Revised
Statutes and our Bylaws. We have been advised that in the opinion of
the Securities and Exchange Commission indemnification for liabilities arising
under the Securities Act 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 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
legal counsel the matter has
been settled by controlling precedent, submit
the question of whether such indemnification is
against public policy to court
of appropriate jurisdiction. We will then be governed by
the court's decision.
INTEREST
OF NAMED EXPERTS AND COUNSEL
No
expert or counsel named in this prospectus as having prepared or certified any
part of this prospectus or having given an opinion upon the validity
of the securities being registered or upon other legal
matters in connection with the registration or offering of the
common stock was employed on
a contingency basis, or had, or is to receive, in connection with the
offering, a substantial
interest, direct or indirect, in
the registrant or any of
its parents or subsidiaries. Nor was any such
person connected with the registrant or any of its parents or subsidiaries as a
promoter, managing or principal underwriter, voting trustee, director, officer,
or employee.
Synergen
Law Group, our legal counsel, has provided an opinion on the validity of our
common stock. We retained the counsel solely for the purpose of
providing this opinion and have not received any other legal services from this
firm.
The
financial statements included in this prospectus and the registration statement
have been audited and reviewed by an independent registered accounting firm
Ronald R. Chadwick, P.C., to the extent and for
the periods set forth in their
report appearing elsewhere in this document and in
the registration statement filed with the
SEC, and are included in
reliance upon such report given upon the authority of said
firm as experts in auditing and accounting.
ADDITIONAL
INFORMATION
We have
filed with the Commission a registration statement on Form S-1 under the 1933
Act with respect to the securities offered by this prospectus. This prospectus,
which forms a part of the registration statement, does not contain all the
information set forth in the registration statement, as permitted by the rules
and regulations of the Commission. For further information with respect to us
and the securities offered by this prospectus, reference is made to the
registration statement. Statements contained in this prospectus as to the
contents of any contract or other document that we have filed as an exhibit to
the registration statement are qualified in their entirety by reference to the
to the exhibits for a complete statement of their terms and conditions. The
registration statement and other information may be read and copied at the
Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C.
20549. The public may obtain information on the operation of the Public
Reference Room by calling the Commission at 1-800-SEC-0330. The Commission
maintains a web site at http://www.sec.gov that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the Commission.
Reports to Security
Holders
Upon
effectiveness of this Prospectus, we will be subject to the reporting and other
requirements of the Exchange Act and we intend to furnish our shareholders
annual reports containing financial statements audited by our independent
auditors and to make available quarterly reports containing unaudited financial
statements for each of the first three quarters of each year.
31
FINANCIAL
STATEMENTS
Index
to the Audited Financial Statements
|
|
Periods
ended October 31, 2008 and July 31, 2009 (Unaudited)
|
Page
|
Report
of Independent Registered Certified Public Accounting
Firm
|
F-2
|
Balance
Sheets
|
F-3
|
Statement
of Operations
|
F-4
|
Statement
of Cash Flows
|
F-5
|
Statement
of Stockholders’ Equity
|
F-6
|
Notes
to the Financial Statements
|
F-7
|
32
ECOCHILD
INC.
(A
Development Stage Company)
FINANCIAL
STATEMENTS
October
31, 2008
&
July 31, 2009 (Unaudited)
BALANCE
SHEET
STATEMENT
OF OPERATIONS
STATEMENT
OF CASH FLOWS
STATEMENT
OF STOCKHOLDERS’ EQUITY
NOTES
TO FINANCIAL STATEMENTS
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
Ecochild
Inc.
Charlestown,
Massachusetts
I have
audited the accompanying balance sheets of Ecochild Inc. (a development stage
company) as of October 31, 2008 and the related statements of operations,
stockholders' equity and cash flows for the period from December 18, 2007
(inception) through October 31, 2008. 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 financial statements referred to above present fairly, in all
material respects, the financial position of Ecochild Inc. as of October 31,
2008 and the results of its operations and its cash flows for the period from
December 18, 2007 (inception) through October 31, 2008 in conformity with
accounting principles generally accepted in the United States of
America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements the Company has suffered recurring losses from operations that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Aurora,
Colorado
|
/s/Ronald
R. Chadwick, P.C.
|
|
September
3, 2009
|
RONALD
R. CHADWICK, P.C.
|
F-2
ECOCHILD
INC.
(A
Development Stage Company)
BALANCE
SHEET
July 31,
|
October 31,
|
|||||||
2009
|
2008
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
|
$ | 34,312 | $ | 344 | ||||
Prepaid
expenses
|
3,000 | - | ||||||
Total
current assets
|
37,312 | 344 | ||||||
Security
deposit
|
350 | - | ||||||
Total
assets
|
$ | 37,662 | $ | 344 | ||||
LIABILITIES &
STOCKHOLDERS’EQUITY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable and accrued liabilities
|
$ | 9,615 | $ | 2,567 | ||||
Due
to related parties
|
1,000 | - | ||||||
Total
current liabilities
|
10,615 | 2,567 | ||||||
Capital
stock $0.001 par value;
|
||||||||
75,000,000
shares authorized;
|
||||||||
9,625,000
shares issued and outstanding
(October
31, 2008 – Nil)
|
9,625 | - | ||||||
Additional
paid in capital
|
25,375 | - | ||||||
Deficit
accumulated during the development stage
|
( 7,953 | ) | ( 2,223 | ) | ||||
Total
Stockholders’ Equity
|
27,047 | ( 2,223 | ) | |||||
Total
Liabilities and Stockholders’ Equity
|
$ | 37,662 | $ | 344 |
The
accompanying notes are an integral part of these financial
statements
F-3
ECOCHILD
INC.
(A
Development Stage Company)
STATEMENT
OF OPERATIONS
Nine Months
|
December 18, 2007
|
December 18, 2007
|
||||||||||
Ended
|
(Inception) Through
|
(Inception) Through
|
||||||||||
July 31,
2009
|
October 31,
2008
|
July 31,
2009
|
||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||
Sales
|
$ | 9,850 | $ | - | $ | 9,850 | ||||||
Cost
of goods sold
|
6,800 | - | 6,800 | |||||||||
Gross
profit
|
3,050 | - | 3,050 | |||||||||
Expenses:
|
||||||||||||
Accounting
and audit fees
|
1,000 | - | 1,000 | |||||||||
General
and administrative
|
676 | 1,448 | 2,124 | |||||||||
Management
|
1,000 | - | 1,000 | |||||||||
Organization
costs
|
- | 775 | 775 | |||||||||
Rent
|
1,913 | - | 1,913 | |||||||||
Travel
|
4,191 | - | 4,191 | |||||||||
8,780 | 2,223 | 11,003 | ||||||||||
Income
(loss) before provision for income tax
|
( 5,730 | ) | ( 2,223 | ) | ( 7,953 | ) | ||||||
Provision
for income tax
|
- | - | - | |||||||||
Net
income (loss)
|
$ | ( 5,730 | ) | $ | ( 2,223 | ) | $ | ( 7,953 | ) | |||
Net
income (loss) per share
|
$ | ( 0.01 | ) | $ | ( 0.00 | ) | ||||||
Weighted
average number of common shares outstanding
|
3,776,099 | - |
The
accompanying notes are an integral part of these financial
statements
F-4
ECOCHILD
INC.
(A
Development Stage Company)
STATEMENT
OF CASH FLOWS
Nine Months
|
December 18, 2007
|
December 18, 2007
|
||||||||||
Ended
|
(Inception) Through
|
(Inception) Through
|
||||||||||
July 31,
2009
|
October 31,
2008
|
July 31,
2009
|
||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||
Cash
Flows From Operating Activities:
|
||||||||||||
Net
income (loss)
|
$ | (5,730 | ) | $ | (2,223 | ) | $ | (7,953 | ) | |||
Adjustment
to reconcile net income to net cash
|
||||||||||||
provided
by (used for) operating activities:
|
||||||||||||
Prepaid
expenses
|
( 3,000 | ) | - | ( 3,000 | ) | |||||||
Security
deposit
|
( 350 | ) | - | ( 350 | ) | |||||||
Accounts
payable and accrued liabilities
|
7,048 | 2,567 | 9,615 | |||||||||
Accounts
payable related parties
|
1,000 | - | 1,000 | |||||||||
Net
cash provided by (used for) operating activities
|
( 1,032 | ) | 344 | ( 688 | ) | |||||||
Cash
Flows From Financing Activities:
|
||||||||||||
Proceeds
from issuance of common stock
|
35,000 | - | 35,000 | |||||||||
Net
cash provided by (used for) financing activities
|
35,000 | - | 35,000 | |||||||||
Net
Increase (Decrease) In Cash
|
33,968 | - | 34,312 | |||||||||
Cash
At The Beginning Of The Period
|
344 | - | - | |||||||||
Cash
At The End Of The Period
|
$ | 34,312 | $ | 344 | $ | 34,312 | ||||||
Schedule Of Non-Cash Investing And Financing Activities
|
||||||||||||
None
|
||||||||||||
Supplemental
Disclosure
|
||||||||||||
Cash
paid for:
|
||||||||||||
Interest
|
$ | - | $ | - | $ | - | ||||||
Income
Taxes
|
$ | - | $ | - | $ | - |
The
accompanying notes are an integral part of these financial
statements
F-5
ECOCHILD
INC.
(A
Development Stage Company)
STATEMENT
OF STOCKHOLDERS’ EQUITY
Deficit
|
||||||||||||||||||||
Accumulated
|
||||||||||||||||||||
During the
|
||||||||||||||||||||
Common Shares
|
Paid In
|
Development
|
||||||||||||||||||
Number
|
Par Value
|
Capital
|
Stage
|
Total
|
||||||||||||||||
Balances,
December 18, 2007
|
- | $ | - | $ | - | $ | - | $ | - | |||||||||||
Net
gain (loss) for the period ended October 31, 2008
|
- | - | - | ( 2,223 | ) | ( 2,223 | ) | |||||||||||||
Balances,
October 31, 2008
|
- | - | - | ( 2,223 | ) | ( 2,223 | ) | |||||||||||||
Issued
for cash:
|
||||||||||||||||||||
Common
stock April, 2009 – at $0.001
|
6,000,000 | 6,000 | - | - | 6,000 | |||||||||||||||
Common
stock July, 2009 – at $0.008
|
3,625,000 | 3,625 | 25,375 | - | 29,000 | |||||||||||||||
Net
gain (loss) for the period ended July 31, 2009
|
- | - | - | ( 5,730 | ) | ( 5,730 | ) | |||||||||||||
Balances,
July 31, 2009 - Unaudited
|
9,625,000 | $ | 9,625 | $ | 25,375 | $ | (7,953 | ) | $ | 27,047 |
The
accompanying notes are an integral part of these financial
statements
F-6
ECOCHILD
INC.
(A
Development Stage Company)
NOTES TO
THE FINANCIAL STATEMENTS
October
31, 2008 and July 31, 2009 (Unaudited)
Note
1
|
Nature and Continuance
of Operations
|
Organization
Ecochild
Inc. (the “Company” or “Ecochild”) is a Nevada corporation in the development
stage and has minimal operations. The Company was incorporated under the laws of
the State of Nevada on December 18, 2007. The proposed business plan
of the Company is to sell and distribute organic food products.
Going
Concern
These
financial statements have been prepared on a going concern basis. The
Company had a working capital at October 31, 2008 of $2,193, and has an
accumulated deficit of $7,953 since inception. Its ability to
continue as a going concern is dependent upon the ability of the Company to
generate profitable operations in the future and/or to obtain the necessary
financing to meet its obligations and repay its liabilities arising from normal
business operations when they come due. The outcome of these matters
cannot be predicted with any certainty at this time. These factors raise
substantial doubt that the company will be able to continue as a going
concern. The Company to date has funded its initial operations
through the issuance of 9,625,000 shares of capital stock for the net proceeds
of $35,000 and revenue from sales of $9,850. Management plans to continue to
provide for its capital needs by the issuance of common stock and related party
advances. These financial statements do not include any adjustments
to the amounts and classification of assets and liabilities that may be
necessary should the Company be unable to continue as a going
concern.
Note
2
|
Summary of Significant
Accounting Policies
|
The
financial statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States of
America. Because a precise determination of many assets and
liabilities is dependent upon future events, the preparation of financial
statements for a period necessarily involves the use of estimates which have
been made using careful judgement. Actual results may vary from these
estimates.
The
financial statements have, in management’s opinion, been properly prepared
within reasonable limits of materiality and within the framework of the
significant accounting policies summarized below:
Development Stage
Company
The
Company complies with Financial Accounting Standard Board Statement (“FAS”) No.
7 and The Securities and Exchange Commission Act Guide 7 for its
characterization of the Company as development stage.
Cash and Cash
Equivalents
For
purposes of reporting within the statement of cash flows, the Company considers
all cash on hand, cash accounts not subject to withdrawal restrictions or
penalties, and all highly liquid debt instruments purchased with a maturity of
three months or less to be cash and cash equivalents.
F-7
ECOCHILD
INC.
(A
Development Stage Company)
NOTES TO
THE FINANCIAL STATEMENTS
October
31, 2008 and July 31, 2009 (Unaudited)
Revenue
Recognition
The
Company is in the development stage and has yet to realize material revenues
from operations. Once Ecochild has commenced full operations, it will
recognize revenue when the sale and/or distribution of food products is
complete, risk of loss and title to the food products have transferred to the
customer, there is persuasive evidence of an agreement, acceptance has been
approved by its customer, the fee is fixed or determinable based on the
completion of stated terms and conditions, and collection of any related
receivable is probable. Net sales will be comprised of gross revenues
less expected returns, trade discounts, and customer allowances that will
include costs associated with off-invoice markdowns and other price reductions,
as well as trade promotions and coupons. These incentive costs will
be recognized at the later of the date on which the Company recognized the
related revenue or the date on which the Company offers the
incentive.
Loss per Common
Share
Basic
loss per share is computed by dividing the net loss attributable to the common
stockholders by the weighted average number of shares of common stock
outstanding during the periods. Diluted loss per share is computed
similar to basic loss per share except that the denominator is increased to
include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common
shares were dilutive. There were no dilutive financial instruments
issued or outstanding for the nine months ended July 31, 2009, and year ended
October 31, 2008.
Income
Taxes
The
Company accounts for income taxes pursuant to SFAS No. 109, “Accounting for Income Taxes”
(“SFAS No. 109”). Under SFAS No. 109, deferred tax assets and
liabilities are determined based on temporary differences between the bases of
certain assets and liabilities for income tax and financial reporting
purposes. The deferred tax assets and liabilities are classified
according to the financial statement classification of the assets and
liabilities generating the differences.
The
Company maintains a valuation allowance with respect to deferred tax
assets. Ecochild establishes a valuation allowance based upon the
potential likelihood of realizing the deferred tax asset and taking into
consideration the Company’s financial position and results of operations for the
current period. Future realization of the deferred tax benefit
depends on the existence of sufficient taxable income within the carryforward
period under the Federal tax laws.
Changes
in circumstances, such as the Company generating taxable income, could cause a
change in judgment about the realizability of the related deferred tax
asset. Any change in the valuation allowance will be included in
income in the year of the change in estimate.
At
October 31, 2008 the Company had a net operating loss carryforward of
approximately $2,200 which begins to expire in 2029. The deferred tax asset of
approximately $440 created by the net operating loss has been offset by a 100%
valuation allowance. The change in the valuation allowance in 2008 was
$440.
F-8
ECOCHILD
INC.
(A
Development Stage Company)
NOTES TO
THE FINANCIAL STATEMENTS
October
31, 2008 and July 31, 2009 (Unaudited)
Fair Value of Financial
Instruments
The
Company estimates the fair value of financial instruments using the available
market information and valuation methods. Considerable judgment is
required in estimating fair value. Accordingly, the estimates of fair
value may not be indicative of the amounts Ecochild could realize in a current
market exchange. As of July 31, 2009 and October 31, 2008, the
carrying value of the Company’s financial instruments approximated fair value
due to the short-term nature and maturity of these instruments.
Deferred Offering
Costs
The
Company defers as other assets the direct incremental costs of raising capital
until such time as the offering is completed. At the time of the
completion of the offering, the costs are charged against the capital
raised. Should the offering be terminated, deferred offering costs
are charged to operations during the period in which the offering is
terminated.
Impairment of Long-lived
Assets
Capital
assets are reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment of
Disposal of Long-lived Assets,” which was adopted effective January 1,
2002. Under SFAS No. 144, these assets are tested for recoverability
whenever events or changes in circumstances indicate that their carrying amounts
may not be recoverable. An impairment charge is recognized for the amount, if
any, which the carrying value of the asset exceeds the fair value. For the
period ended July 31, 2009, and year ended October 31, 2008, no events or
circumstances occurred for which an evaluation of the recoverability of
long-lived assets was required.
Advertising and
Promotion
The
Company expenses all advertising and promotion costs as incurred. The Company
did not incur advertising and promotion costs for the period ended July 31, 2009
and year ended October 31, 2008.
Common Stock Registration
Expenses
The
Company considers incremental costs and expenses related to the registration of
equity securities with the SEC, whether by contractual arrangement as of a
certain date or by demand, to be unrelated to original issuance
transactions. As such, subsequent registration costs and expenses are
reflected in the accompanying financial statements as general and administrative
expenses, and are expensed as incurred.
F-9
ECOCHILD
INC.
(A
Development Stage Company)
NOTES TO
THE FINANCIAL STATEMENTS
October
31, 2008 and July 31, 2009 (Unaudited)
Stock-based
Compensation
The
Company has not adopted a stock option plan and has not granted any stock
options. Accordingly no stock-based compensation has been recorded to
date.
Note
3
|
Capital
Stock
|
The total
number of common shares authorized that may be issued by the Company is
75,000,000 shares with a par value of one tenth of one cent ($0.001) per share
and no other class of shares is authorized.
During
the nine-month period ended July 31, 2009, the Company issued:
|
a)
|
6,000,000
shares of common stock at $0.001 per share to its directors for total
proceeds of $6,000; and
|
|
b)
|
3,625,000
shares of common stock at $0.008 per share for total proceeds of
$29,000.
|
To
July 31, 2009, the Company has not granted any stock options or recorded any
stock-based compensation.
Note
4
|
Related Party
Transactions
|
The
President of the Company provides management services to the Company. During the
nine months ended July 31, 2009, management services of $1,000 (October 31, 2008
- $Nil) were charged to operations. As at July 31, 2009 the Company owed $1,000
for management fees.
Note
5
|
Recent Accounting
Pronouncements
|
On
December 4, 2007, the FASB issued FASB Statement No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51” (“SFAS
No. 160”). SFAS No. 160 establishes new accounting and reporting
standards for the noncontrolling interest in a subsidiary and for the
deconsolidation of a subsidiary. Specifically, this statement
requires the recognition of a noncontrolling interest (minority interest) as
equity in the consolidated financial statements and separate from the parent’s
equity. The amount of net income attributable to the noncontrolling
interest will be included in consolidated net income on the face of the income
statement. SFAS No. 160 clarifies that changes in a parent’s
ownership interest in a subsidiary that do not result in deconsolidation are
equity transactions if the parent retains its controlling financial
interest. In addition, this statement requires that a parent
recognize a gain or loss in net income when a subsidiary is
deconsolidated. Such gain or loss will be measured using the fair
value of the noncontrolling equity investment on the deconsolidation
date. SFAS No. 160 also includes expanded disclosure requirements
regarding the interests of the parent and its noncontrolling
interest.
F-10
ECOCHILD
INC.
(A
Development Stage Company)
NOTES TO
THE FINANCIAL STATEMENTS
October
31, 2008 and July 31, 2009 (Unaudited)
SFAS
No. 160 is effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2008. Earlier adoption is
prohibited. The management of Ecochild does not expect the adoption
of this pronouncement to have a material impact on its financial
statements.
In
March 2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment of FASB Statement 133”
(“SFAS No. 161”). SFAS No. 161 enhances required disclosures
regarding derivatives and hedging activities, including enhanced disclosures
regarding how: (a) an entity uses derivative instruments; (b)
derivative instruments and related hedged items are accounted for under FASB No.
133, “Accounting for
Derivative Instruments and Hedging Activities”; and (c) derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. Specifically, SFAS No. 161
requires:
-
|
disclosure
of the objectives for using derivative instruments be disclosed in terms
of underlying risk and accounting
designation;
|
-
|
disclosure
of the fair values of derivative instruments and their gains and losses in
a tabular format;
|
-
|
disclosure
of information about credit-risk-related contingent features;
and
|
-
|
cross-reference
from the derivative footnote to other footnotes in which
derivative-related information is
disclosed.
|
SFAS
No. 161 is effective for fiscal years and interim periods beginning after
November 15, 2008. Earlier application is encouraged. The
management of Ecochild does not expect the adoption of this pronouncement to
have a material impact on its financial statements.
On May
9, 2008, the FASB issued FASB Statement No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS No. 162”). SFAS No. 162 is
intended to improve financial reporting by identifying a consistent framework,
or hierarchy, for selecting accounting principles to be used in preparing
financial statements that are presented in conformity with U.S. generally
accepted accounting principles (“GAAP”) for nongovernmental
entities.
Prior
to the issuance of SFAS No. 162, GAAP hierarchy was defined in the American
Institute of Certified Public Accountants (“AICPA”) Statement on Auditing
Standards (“SAS”) No. 69, “The
Meaning of Present Fairly in Conformity with Generally Accept Accounting
Principles.” SAS No. 69 has been criticized because it is
directed to the auditor rather than the entity. SFAS No. 162
addresses these issues by establishing that the GAAP hierarchy should be
directed to entities because it is the entity (not the auditor) that is
responsible for selecting accounting principles for financial statements that
are presented in conformity with GAAP.
The
sources of accounting principles that are generally accepted are categorized in
descending order as follows:
F-11
ECOCHILD
INC.
(A
Development Stage Company)
NOTES TO
THE FINANCIAL STATEMENTS
October
31, 2008 and July 31, 2009 (Unaudited)
|
a)
|
FASB
Statements of Financial Accounting Standards and Interpretations, FASB
Statement 133 Implementation Issues, FASB Staff Positions, and American
Institute of Certified Public Accountants (AICPA) Accounting Research
Bulletins and Accounting Principles Board Opinions that are not superseded
by actions of the FASB.
|
|
b)
|
FASB
Technical Bulletins and, if cleared by the FASB, AICPA Industry Audit and
Accounting Guides and Statements of
Position.
|
|
c)
|
AICPA
Accounting Standards Executive Committee Practice Bulletins that have been
cleared by the FASB, consensus positions of the FASB Emerging Issues Task
Force (EITF), and the Topics discussed in Appendix D of EITF Abstracts
(EITF D-Topics).
|
|
d)
|
Implementation
guides (Q&As) published by the FASB staff, AICPA Accounting
Interpretations, AICPA Industry Audit and Accounting Guides and Statements
of Position not cleared by the FASB, and practices that are widely
recognized and prevalent either generally or in the
industry.
|
SFAS
No. 162 is effective 60 days following the SEC’s approval of the Public Company
Accounting Oversight
Board amendment to its authoritative literature. It is only effective
for nongovernmental entities; therefore, the GAAP hierarchy will remain in SAS
69 for state and local governmental entities and federal governmental
entities. The management of Ecochild does not expect the adoption of
this pronouncement to have a material impact on its financial
statements.
On May
26, 2008, the FASB issued FASB Statement No. 163, “Accounting for Financial Guarantee
Insurance Contracts” (“SFAS No. 163”). SFAS No. 163 clarifies
how FASB Statement No. 60, “Accounting and Reporting by
Insurance Enterprises” (“SFAS No. 60”), applies to financial guarantee
insurance contracts issued by insurance enterprises, including the recognition
and measurement of premium revenue and claim liabilities. It also
requires expanded disclosures about financial guarantee insurance
contracts.
The
accounting and disclosure requirements of SFAS No. 163 are intended to improve
the comparability and quality of information provided to users of financial
statements by creating consistency. Diversity exists in practice in
accounting for financial guarantee insurance contracts by insurance enterprises
under SFAS No. 60, “Accounting
and Reporting by Insurance Enterprises.” That diversity
results in inconsistencies in the recognition and measurement of claim
liabilities because of differing views about when a loss has been incurred under
FASB Statement No. 5, “Accounting for Contingencies”
(“SFAS No. 5”). SFAS No. 163 requires that an insurance enterprise
recognize a claim liability prior to an event of default when there is evidence
that credit deterioration has occurred in an insured financial
obligation. It also requires disclosure about (a) the risk-management
activities used by an insurance enterprise to evaluate credit deterioration in
its insured financial obligations and (b) the insurance enterprise’s
surveillance or watch list.
F-12
ECOCHILD
INC.
(A
Development Stage Company)
NOTES TO
THE FINANCIAL STATEMENTS
October
31, 2008 and July 31, 2009 (Unaudited)
SFAS
No. 163 is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and all interim periods within those fiscal years,
except for disclosures about the insurance enterprise’s risk-management
activities. Disclosures about the insurance enterprise’s
risk-management activities are effective the first period beginning after
issuance of SFAS No. 163. Except for those disclosures, earlier
application is not permitted. Management of Ecochild does not expect
the adoption of this pronouncement to have material impact on its financial
statements.
On May
22, 2009, the FASB issued FASB Statement No. 164, “Not-for-Profit Entities: Mergers and
Acquisitions” (“SFAS No. 164”). Statement 164 is intended to
improve the relevance, representational faithfulness, and comparability of the
information that a not-for-profit entity provides in its financial reports about
a combination with one or more other not-for-profit entities, businesses, or
nonprofit activities. To accomplish that, this Statement establishes principles
and requirements for how a not-for-profit entity:
a.
|
Determines
whether a combination is a merger for an
acquisition.
|
b.
|
Applies
the carryover method in accounting for a
merger.
|
c.
|
Applies
the acquisition method in accounting for an acquisition, including
determining which of the combining entities the acquirer
is.
|
d.
|
Determines
what information to disclose to enable users of financial statements to
evaluate the nature and financial effects of a merger or an
acquisition.
|
This
Statement also improves the information a not-for-profit entity provides about
goodwill and other intangible assets after an acquisition by amending FASB
Statement No. 142, Goodwill
and Other Intangible Assets, to make it fully applicable to
not-for-profit entities.
Statement
164 is effective for mergers occurring on or after December 15, 2009, and
acquisitions for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15,
2009. Early application is prohibited. The management of
Ecochild does not expect the adoption of this pronouncement to have material
impact on its financial statements.
On May
28, 2009, the FASB issued FASB Statement No. 165, “Subsequent Events” (“SFAS No.
165”). Statement 165 establishes general standards of accounting for
and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. Specifically,
Statement 165 provides:
1. The
period after the balance sheet date during which management of a reporting
entity should evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements.
2. The
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial
statements.
3. The
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date.
In
accordance with this Statement, an entity should apply the requirements to
interim or annual financial periods ending after June 15, 2009. The
management of Ecochild does not expect the adoption of this pronouncement to
have material impact on its financial statements.
F-13
PROSPECTUS
Ecochild
Inc.
3,625,000
Shares of Common Stock
No person
is authorized to give any information or to make any representation other than
those contained in this prospectus, and if made such information or
representation must not be relied upon as having been given or authorized. This
prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any securities other than the securities offered by this prospectus or an
offer to sell or a solicitation of an offer to buy the securities in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction.
The
delivery of this prospectus shall not, under any circumstances, create any
implication that there have been no changes in the affairs of the company since
the date of this prospectus. However, in the event of a material change, this
prospectus will be amended or supplemented accordingly.
Until
___________, 2009, all dealers that effect transactions in these securities,
whether or not participating in the offering, may be required to deliver a
prospectus.
33
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION
The
estimated costs of this offering are as follows:
Securities
and Exchange Commission registration fee
|
$ | 1.62 | ||
Transfer
Agent Fees
|
$ | 800.00 | ||
Accounting
fees and expenses
|
$ | 4,500.00 | ||
Legal
fees and expenses
|
$ | 5,600.00 | ||
Edgar
filing fees
|
$ | 1,000.00 | ||
Total:
|
$ | 11,901.62 |
All
amounts are estimates other than the Commission's registration fee
IDEMNIFICATION
OF DIRECTORS AND OFFICERS
Our
officers and directors are indemnified as provided by the Nevada Revised
Statutes (“NRS”) and our bylaws.
Under the
NRS, director immunity from liability to a company or its shareholders for
monetary liabilities applies automatically unless it is specifically limited by
a company’s articles of incorporation that is not the case with our articles of
incorporation. Excepted from that immunity are:
|
(1)
|
a
willful failure to deal fairly with the company or its shareholders in
connection with a matter in which the director has a material conflict of
interest;
|
(2)
|
a
violation of criminal law (unless the director had reasonable cause to
believe that his or her conduct was lawful or no reasonable cause to
believe that his or her conduct was
unlawful);
|
(3)
|
a
transaction from which the director derived an improper personal profit;
and
|
(4)
|
willful
misconduct.
|
Our
bylaws provide that we will indemnify our directors and officers to the fullest
extent not prohibited by Nevada
law; provided, however, that we may modify
the extent of
such indemnification by individual contracts with
our
directors
and officers; and, provided, further, that we shall not be required to indemnify
any director or officer in connection with
any proceeding (or part thereof) initiated by such person
unless:
(1)
|
such
indemnification is expressly required to be made by
law;
|
(2)
|
the
proceeding was authorized by our Board of
Directors;
|
(3)
|
such
indemnification is provided by us, in our sole discretion, pursuant to the
powers vested us under Nevada law;
or
|
(4)
|
such
indemnification is required to be made pursuant to the
bylaws.
|
Our
bylaws provide that we will advance all expenses incurred to any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or
investigative, by reason of the
fact that he is or was our director or officer,
or is or was serving at our request as a director or executive officer of
another company, partnership, joint venture, trust or other enterprise, prior to
the final disposition of the
proceeding, promptly following request. This
advanced of expenses is to be made upon receipt
of an undertaking by or on behalf of such person to repay
said amounts should it be ultimately determined
that the person was
not entitled to
be indemnified under our bylaws or
otherwise.
II-1
Our
bylaws also provide that no advance shall be made by us to any officer in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, if a determination is reasonably
and promptly made: (a) by the board of directors by a majority vote
of a quorum consisting of directors who were not parties
to the proceeding; or (b) if such quorum is not obtainable, or,
even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a
written opinion, that the facts known to the
decision-making party at the
time such determination is
made demonstrate clearly and convincingly that such person acted in
bad faith or in a manner that such
person did not believe to be in or not opposed to our best interests. We are
paying all expenses of the offering listed above. No portion of these
expenses will be borne by the selling shareholders. The selling
shareholders, however, will pay any other expenses incurred in selling their
common stock, including any brokerage commissions or costs of
sale.
ISSUANCES
OF UNREGISTERED SECURITIES
We
completed an offering of 6,000,000 shares of our common stock at a price of
$0.001 per share to our directors Galina Birca (3,000,000) and Vladimir Enachi
(3,000,000), on April 21, 2009. The total amount received from this
offering was $6,000. We completed this offering pursuant to Regulation S of the
Securities Act.
We
completed an offering of 3,625,000 shares of common stock at a price of $0.008
per share to a total of 29 purchasers on July 31, 2009. The total
amount received from this offering was $29,000. We completed this offering
pursuant to Regulation S of the Securities Act. The purchasers in
this offering were as follows:
Name of Subscriber
|
Number of Shares
|
|||
Vera
Bulbas
|
125,000 | |||
Viorica
Barbaneagra
|
125,000 | |||
Maria
Bectoras
|
125,000 | |||
Maria
Burenta
|
125,000 | |||
Mihai
Cosciug
|
125,000 | |||
Diana
Donici
|
125,000 | |||
Lucia
Gaiduc
|
125,000 | |||
Silvia
Glodeanu
|
125,000 | |||
Nicolae
Lapteacru
|
125,000 | |||
Lilia
Livadaru
|
125,000 | |||
Raisa
Melnic
|
125,000 | |||
Evghenia
Morosanu
|
125,000 | |||
Raisa
Munteanu
|
125,000 | |||
Maria
Nanu
|
125,000 | |||
Maria
Negara
|
125,000 | |||
Natalia
Negura
|
125,000 | |||
Sofia
Novac
|
125,000 | |||
Vera
Pavel
|
125,000 | |||
Liliana
Plugaru
|
125,000 | |||
Raisa
Puscasu
|
125,000 | |||
Ivan
Rotari
|
125,000 | |||
Ana
Saitan
|
125,000 | |||
Tatiana
Samotchi
|
125,000 | |||
Larisa
Schirca
|
125,000 | |||
Alexandru
Soltoianu
|
125,000 | |||
Nina
Suceveanu
|
125,000 | |||
Lidia
Ticu
|
125,000 | |||
Elena
Tugui
|
125,000 | |||
Nadejda
Ungureanu
|
125,000 |
II-2
The offer
and sale of all Shares of our common stock listed above were affected in
reliance on the exemptions for sales of securities not involving a public
offering, as set forth in Regulation S promulgated under the Securities Act. The
Investor acknowledged the following: Subscriber is not a United States Person,
nor is the Subscriber acquiring the Shares directly or indirectly for the
account or benefit of a United States Person. None of the funds used by the
Subscriber to purchase the Units have been obtained from United States Persons.
For purposes of this Agreement, “United States Person” within the meaning of
U.S. tax laws, means a citizen or resident of the United States, any former U.S.
citizen subject to Section 877 of the Internal Revenue Code, any
corporation, or partnership organized or existing under the laws of the United
States of America or any state, jurisdiction, territory or possession thereof
and any estate or trust the income of which is subject to U.S. federal income
tax irrespective of its source, and within the meaning of U.S. securities laws,
as defined in Rule 902(o) of Regulation S, means:
(i) any
natural person resident in the United States; (ii) any partnership or
corporation organized or incorporated under the laws of the United States;
(iii) any estate of which any executor or administrator is a U.S. person;
(iv) any trust of which any trustee is a U.S. person; (v) any agency
or branch of a foreign entity located in the United States; (vi) any
non-discretionary account or similar account (other than an estate or trust)
held by a dealer or other fiduciary for the benefit or account of a U.S. person;
(vii) any discretionary account or similar account (other than an estate or
trust) held by a dealer or other fiduciary organized, incorporated, or (if an
individual) resident in the United States; and (viii) any partnership or
corporation if organized under the laws of any foreign jurisdiction, and formed
by a U.S. person principally for the purpose of investing in securities not
registered under the Securities Act, unless it is organized or incorporated, and
owned, by accredited investors (as defined in Rule 501(a)) who are not natural
persons, estates or trusts.
EXHIBITS
Exhibit
|
||
Number
|
Description
|
|
3.1
|
Articles
of Incorporation*
|
|
3.2
|
Bylaws*
|
|
4.2
|
Subscription
Agreement**
|
|
5.1
|
Legal
Opinion of Synergen Law Group with consent to use*
|
|
10.1
|
Brokerage
Agreement*
|
|
23.1
|
Consent
of Independent Registered Accounting
Firm
|
*
|
-
filed as an exhibit to our registration statement on Form S-1 filed on
September 16, 2009
|
**
|
- filed as an
exhibit to our registration statement on Form S-1/A filed on October 30,
2009
|
UNDERTAKINGS
The
undersigned registrant hereby undertakes:
1. To
file, during any period in which it offers or sells securities, a post-
effective amendment to this registration statement to:
(a)
|
include
any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
|
(b)
|
reflect
in the prospectus any facts or events which, individually or
together, represent a fundamental change
in the information set forth in this registration statement;
and notwithstanding the forgoing, any increase or decrease in
volume of securities offered (if the total dollar
value of securities offered would not
exceed that which
was registered) and any deviation from the low
or high end of the
estimated maximum offering range may
be reflected in the form of
prospectus filed with the commission pursuant to
Rule 424(b) if, in the aggregate, the changes in the volume and
price represent no more than a 20% change in the
maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table
in the effective registration Statement;
and
|
(c)
|
include
any additional or changed material information on the plan of
distribution.
|
II-3
2. That,
for the purpose of determining any liability under the Securities Act, 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.
4. That,
for determining our liability under the Securities Act to any purchaser in the
initial distribution of the securities, we undertake that in a primary offering
of our securities pursuant to this registration statement, regardless of the
underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means
of any of the following communications, we will be a seller to the purchaser and
will be considered to offer or sell such securities to such
purchaser:
(i)
|
any
preliminary prospectus or prospectus that we file relating to the offering
required to be filed pursuant to Rule 424 (Section 230.424 of
this chapter);
|
(ii)
|
any
free writing prospectus relating to
the offering prepared by or on our behalf or used or
referred to by us;
|
(iii)
|
the portion of
any other free writing
prospectus relating to the offering
containing material information about
us or our securities provided by or on behalf of us;
and
|
(iv)
|
any
other communication that is an offer in the offering
made by us to the purchaser.
|
Each
prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on Rule 430B
or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be
part of and included in the registration statement as of the date it is first
used after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such
document immediately prior to such date of first use.
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 defence 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 its 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 S-1 and authorized this Registration Statement
to be signed on our behalf by the undersigned, on November 24,
2009.
ECOCHILD
INC.
|
|||
By:
|
/s/ Galina
Birca
|
||
Galina
Birca
|
|||
President,
Chief Executive Officer (Principal Executive Officer) and
Director
|
|||
By:
|
/s/ Vladimir
Enachi
|
||
Vladimir
Enachi
|
|||
Secretary,
Chief Financial Officer (Principal Accounting Officer) and
Director
|
II-4
POWER
OF ATTORNEY
We,
the undersigned officers and Directors of Ecochild Inc., hereby
severally constitute and appoint Galina Birca and Vladimir Enachi, and each of
them (with full power to each of them to act alone), our true and lawful
attorneys-in-fact and agents, with full power of substitution, for us and in our
stead, in any and all capacities, to sign any and all amendments (including
pre-effective and post-effective amendments) to this Registration Statement and
all documents relating thereto, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the U.S. Securities and
Exchange Commission, granting to said attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
necessary or advisable to be done in and about the premises, as full to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all the said attorneys-in-fact and agents, or any of them, or their
substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
In
accordance with the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates stated.
SIGNATURES
|
TITLE
|
DATE
|
||
/s/
Galina Birca
|
President,
CEO and Director
|
November 24,
2009
|
||
Galina
Birca
|
||||
/s/Vladimir
Enachi
|
Treasurer,
CFO, Principal Accounting Officer, Principal Financial Officer and
Director
|
November 24,
2009
|
||
Vladimir
Enachi
|
II-5