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EX-5.1 - Cell-nique Corp | v181486_ex5-1.htm |
EX-23.1 - Cell-nique Corp | v181486_ex23-1.htm |
Registration
No. 333-161413
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1/A
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
AMENDMENT
NO. 7
Cell-nique
Corporation
(Exact
name of small business issuer in its charter)
Delaware
|
2086
|
27-0693687
|
(State or jurisdiction of
incorporation or organization)
|
(Primary Standard Industrial
Classification Code Number)
|
(I.R.S. Employer
Identification Number)
|
12 Old Stage Coach Road,
Weston, CT 06883,
888-417-9343
(Address
and telephone number of principal executive offices)
12 Old Stage Coach Road,
Weston, CT 06883
(Address
of principal place of business or intended principal place of
business)
Dan Ratner, 12 Old Stage
Coach Road, Weston, CT 06883, 888-417-9343
(Name,
Address and telephone number of agent for service)
COPIES
TO:
Miles
Garnett, Esq., 66 Wayne Avenue, Atlantic Beach, NY
11509 (516) 371-4598
Approximate
date of proposed sale to the public: As soon
as practicable after the effective date of this Registration
Statement.
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, check the following
box:
þ
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. o
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. o
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. o
If delivery of the prospectus is
expected to be made pursuant to Rule 434, check the following box. o ________________
Large
accelerated filer ¨ Accelerated
filer ¨
Non-acclerated
filer ¨ Smaller
reporting company þ
CALCULATION
OF REGISTRATION FEE
Common Stock
|
15,000,000 | $ | 5.00 | $ | 75,000,000 | $ | 5,347.50 | (a) | ||||||||
Title of each Share
|
Proposed maximum
|
Proposed
|
Maximum
|
Amount of
|
||||||||||||
class of securities
|
amount to be
|
offering price
|
aggregate offering
|
registration fee
|
||||||||||||
to be registered
|
registered
|
per Share
|
price
|
Note : Specific details
relating to the fee calculation shall be furnished in notes to the table,
including references to provisions of Rule 457 (§230.457 of this chapter) relied
upon, if the basis of the calculation is not otherwise evident from the
information presented in the table. If the filing fee is calculated pursuant to
Rule 457(o) under the Securities Act, only the title of the class of securities
to be registered, the proposed maximum aggregate offering price for that class
of securities and the amount of registration fee need to appear in the
Calculation of Registration Fee table. Any difference between the dollar amount
of securities registered for such offerings and the dollar amount of securities
sold may be carried forward on a future registration statement pursuant to Rule
429 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.
(a)
Previously paid $1,674,
this amendment added $3,208.50 for additional registered shares herein
Preliminary
PROSPECTUS
Cell-nique
Corporation
15,000,000
Shares of Common Stock
This is
our initial public offering of common stock. The initial public offering price
is $5.00 per share. No public market currently exists for our common stock. We
are selling 15,000,000 shares of common stock which have $.00001 par value per
share. This represents 75% of the total outstanding shares based on the maximum
amount of the offering. The Company manufacturers Cell-nique, a Super Green
Drink, made of 31 Organic Super Foods. Prior to this offering there has been no
public market for the shares. The initial public offering price of the shares
has been arbitrarily determined by us and does not bear any relationship to such
established valuation criteria as assets, book value or prospective earnings. We
are a Delaware corporation.
We will
sell the shares ourselves. We do not plan to use underwriters or pay any
commissions. We will be selling our shares in a direct participation offering
and no one has agreed to buy any of our shares. The Offering will expire on
December 31, 2011, unless extended by the Company in its sole discretion for 60
days on or before December 31, 2011.
THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The
offering price for the common stock has been arbitrarily determined by us. The
maximum subscription is 15,000,000 shares. Prior to this offering, there has
been no public market for the shares and there can be no assurance that a
regular trading market will develop for the shares after this offering or that,
if developed, any such market will be sustained. See "Risk Factors" and "The
Offering."
Our
officers and directors may purchase the shares sold in the offering under the
same terms and conditions as the public investors. Such purchases, if made, will
be for investment purposes only and not for redistribution.
NO
MIMUMIM AMOUNT OF SECURITIES IS REQUIRED TO BE SOLD IN THE OFFERING, AND NO
ASSUANCE CAN BE PROVIDED AS TO THE AMOUNT OF SECURITIES THAT WILL BE SOLD, IF
ANY.
The
securities offered hereby are highly speculative and involve a high degree of
risk. See the caption "Risk Factors" commencing on page 10.
PER
SHARE
|
TOTAL
MINIMUM
|
MAXIMUM
|
|||||||
Public
offering price
|
$
|
5.00
|
None
|
$
|
75,000,000
|
||||
Underwriting
discounts and commissions
|
None
|
None
|
None
|
||||||
Proceeds,
before expenses, to us2
|
$
|
5.00
|
None
|
$
|
75,000,000
|
(1) We
plan to offer and sale the shares directly to investors and have not retained
any underwriters, brokers or placement agents in connection with this offering.
However, we reserve the right to use brokers or placement agents and could pay
commissions equal to as much as 10 percent of the gross proceeds and 3%
non-accountable expenses.
(2)
Before deduction of offering expenses estimated to be $75,000 for the
maximum.
The
Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
The
date of this Prospectus
is ,
2010
2
Table
of Contents
Summary
|
4
|
|
Risk
Factors
|
9
|
|
Use
of Proceeds
|
22
|
|
Plan
of Distribution
|
23
|
|
Capitalization
|
24
|
|
Dilution
|
24
|
|
Business
|
26
|
|
Management
Discussion of Analysis of Condition and Results of
Operations
|
32
|
|
Ownership
of Common Stock
|
40
|
|
Principal
Shareholders
|
40
|
|
Management
|
41
|
|
Certain
Transactions
|
43
|
|
Description
of Securities
|
44
|
|
Shares
Eligible for Future Sale
|
45
|
|
Available
Information
|
46
|
|
Dividend
Policy
|
47
|
|
Stock
Transfer Agent
|
47
|
|
Experts
|
47
|
|
Legal
Matters
|
47
|
|
Index
to Financial Statements
|
F-1
|
3
Summary
This
summary highlights selected information from elsewhere in this prospectus. It is
not complete and may not contain all of the information that is important to
you. To understand this offering fully, you should read the entire prospectus
carefully, including the risk factors and financial statements and the related
notes to those statements included in this prospectus.
The
Company
|
Cell-nique
began operations as an unincorporated division of Physicians Capital
Corporation in 2006 and subsequently incorporated as a stand alone entity
in Delaware on August 7, 2008 by our founder, Physicians Capital
Corporation which is 100% controlled by Dan and Donna Ratner and all
assets transfer and recapitalized on December 31, 2008 at historical cost
commencing operations as Cell-nique Corporation January 1,
2009.
Our
principal executive offices are leased at 12 Old Stage Coach Road, Weston,
CT 06883 and our telephone number is 888-417-9343.
Cell-nique
- Super Green Drink, was created to capture a unique void in the
market demand for natural and organic food, beverages for ready to
drink vegetable drinks, total natural food market defined by Natural Food
Merchandiser Magazine September 2009 issues as a $68 Billion.
|
|
The Company is
engaged primarily in the business of developing, manufacturing, marketing
and sales of natural and organic beverages. The Company
currently offers nine Cell-nique Organic Super Green Drinks (Apple,
Topical, Pomegranate, Citrus Vanilla, Japanese Roasted (Kukicha) Tea,
Lemon Ginger, Berry Grape, Root Beer and Dark Chocolate). We
estimate retail sales of Cell-nique has been approximately $3 million in
aggregate since company inception in
2006.
|
||
We
began production and distribution in 2006 and have limited operating
history. No representation is made or implied that we will be able to
carry on our activities profitably. Our growth is dependent initially upon
sufficient proceeds being realized by us from this offering, of which
there is no assurance. Proceeds of this offering may be insufficient to
enable us to grow into potentially profitable operations. The likelihood
of our success must be considered in light of the expenses, difficulties
and delays frequently encountered in connection with the formation of any
young business.
|
||
As
of December 31, 2008 and 2009, Cell-nique Corporation generated revenue of
$524,485, and $486,859 with Gross Margin of 45% and 52% and Net Income of
($505,644), and ($530,616) respectively with limited financial resources.
We may not be able to continue as a going concern. We have two officers,
two directors and two employees.
|
||
The
Offering
|
The
Company is offering a maximum 15,000,000 shares of Common Stock, $.00001
par value at an offering price of $5.00 per Share. The full subscription
price will be payable at the time of subscription and accordingly, funds
received from subscribers in this Offering will be released to the Company
when subscriptions are received and accepted.
|
4
The
Offering will expire on December 31, 2011, unless extended by the Company
in its sole discretion for 60 days on or before December 31, 2011 See "The
Offering - Structure and Timing of the Offering."
|
||
We
intend to use the net proceeds of this offering to market the services the
company currently offers and initiate new business development and
relationships including mergers and acquisitions of other natural and
organic food, beverages and supplements brands and companies. We shall
seek to employ qualified, but as yet unidentified, individuals to manage
such business. No assurance can be given that the net proceeds of the
maximum number of shares offered in this offering or any lesser net amount
will be sufficient to accomplish our goals. In the event that
substantially less than the net proceeds from the maximum offering are
raised, our plans may be materially and adversely affected in that we may
find it even more difficult, if not impossible, to realize our goals See
"Risk Factors", "Use of Proceeds" and "Proposed
Business."
|
||
If
proceeds from this offering are insufficient, we may be required to seek
additional capital. No assurance can be given that we will be able to
obtain such additional capital, or even if available, that such additional
capital will be available on terms acceptable to us.
|
||
Business
|
We
manufacture, distribute and manage the Cell-nique ®
brand which is an organic vegetable-based ready-to-drink "Super Green
Drink", formulated with 31 organic super foods. The product is USDA
certified organic. It is free of preservatives, artificial flavors and
coloring.
|
|
We
sell our products in natural food stores, specialty gourmet, supermarket
chains, retail stores, yoga studios and gyms, doctor’s offices and direct
on the internet. We primarily sell our products through a network of
natural, gourmet and independent food and beverage distributors, as well
as directly to consumers.
|
||
The
natural and organic food, beverage and supplement industry is
approximately $68 Billion in annual sales, yet it is fragmented and
inefficient with many small businesses with annual sales of less than $5
million. We see the opportunity to acquire and merge other natural and
organic brands under Cell-nique Corporation to reduce the duplication of
sales staff and back-office operations.
|
||
Competition
|
The
natural and organic food industry has many competing brands and consumers
have many options. There are a number of healthy, "green drinks" in the
marketplace (all others are fruit juice smoothie based and high calorie
from fructose sugars). Cell-nique maintains a unique standing in the
marketplace due to being the only organic ready-to-drink "Super Green
Drink" that is vegetable based.
|
|
Current
Financial Resources
|
We
have limited operating history. For the current fiscal year, we
anticipate incurring a loss as a result of operations, organizational
expenses, expenses associated with registration under the Securities
Exchange Act of 1934, and other
expenses.
|
5
Dependence
on
|
||
Additional
Financing
|
The
rate of growth of the Company is somewhat dependent upon the successful
completion of this Offering to expand its proposed plan of operation, and
the Company may need additional financing to fund its corporate
activities. Such financing may come from a variety of sources, including
additional equity or debt offerings. No assurance can be given
that any future financing, either equity or debt, will be available or, if
available, that it can be obtained on terms acceptable to the Company. If
such financing is required but is not available, the Company may be forced
to significantly restrict, curtail or abandon its activities. This would
have an adverse effect on the Company's business and financial condition.
There can also be no assurance that the Company will survive as a viable
commercial enterprise even if such additional financing is
obtained. The issuance of any additional equity after the
consummation of this Offering will dilute the ownership interests of the
shareholders who purchase Shares in this Offering. See "Proposed
Additional Transactions" and "Risk Factors - Dilution."
|
|
We
rely on our existing working capital lines with Physicians Capital
Corporation to meet our minimum cash needs at the present operating level,
including the costs of compliance with the continuing reporting
requirements of the Securities Exchange Act of 1934, as amended, for a
period of approximately one year. We believe substantial growth would be
limited if additional funding is not obtained.
|
||
No
commitments to provide additional funds have been made by management or
other stockholders. Accordingly, there can be no assurance that any
additional funds will be available to us to allow it to cover our
expenses.
|
||
Irrespective
of whether our cash assets prove to be inadequate to meet our operational
needs, we might seek to compensate providers of services by issuances of
stock in lieu of cash.
|
||
Risk
Profile
|
An
investment in the Shares involves significant risks and is suitable only
for persons of substantial financial means who have no need for liquidity
from such investment. See "Risk Factors".
|
|
In
addition to the other information in this prospectus, the following risk
factors should be carefully considered in evaluating the Company and its
business before purchasing the Shares offered herein. An investment in the
Shares offered herein is speculative in nature and involves a high degree
of risk. No investment in the Shares should be made by any person who is
not in a position to lose the entire amount of the
investment.
|
||
Management
|
The
Company’s CEO is Dan Ratner, who has been our Co-Founder, President and
Chairman of the board of directors since our operational formation in
2006. Mr. Ratner has served as our Chairman, President, Chief
Executive Officer and Chief Financial Officer since our incorporation in
2008. Mr. Ratner has been responsible for our products,
including the original product recipes, the proprietary manufacturing
process and packaging, as well as defining the merger and acquisition
strategies. Mr. Ratner received a double major B.S. in Accounting and
Finance in 1985 from University of Arizona,
Tucson.
|
6
Donna
Ratner is our Co-Founder, who has been our Vice-Chairman and
Chief Marketing Officer since October 2007 and manages the Companies
marketing efforts.
|
||
Authorized and Outstanding
|
||
Shares Stock
|
Common Stock
|
Preferred Stock
|
|||||||
Authorized:
|
49,000,000
|
1,000,000
|
||||||
$.00001 par value
|
$2.00 stated value
|
|||||||
Outstanding:
|
||||||||
Prior
to Offering:
|
5,000,000
|
0
|
||||||
After
50% of Offering is sold
|
12,500,000
|
0
|
||||||
After
Maximum Offering is sold
|
20,000,000
|
0
|
Plan
of Distribution
|
This
is a direct participation, and with no commitment by anyone to purchase
any shares. None of the officers and directors (a) is subject to a
statutory disqualification (as defined in Sec. 3(a)(35), (b) is paid
commissions or other remuneration for securities transactions, or (c) is
an associated person of a broker or dealer. The shares will be offered and
sold on a "best efforts" basis by our principal executive officers and
directors. All proceeds from subscriptions to purchase shares will be
handled by the Company. A maximum of 15,000,000 shares are offered.
Cell-nique
has not entered into any agreement with another party to offer and sell
its securities.
The
Offering will expire on December 31, 2011, unless extended by the Company
in its sole discretion for 60 days on or before December 31,
2011.
|
|
Use
of Proceeds
|
We
have estimated that offering expense will not exceed $75,000. We will use
the first dollars raised to offset actual offering expenses. Thereafter,
we intend to apply substantially all of the net proceeds of this offering
to operate the Company, repayment of debt, as well as for merger and
acquisitions. See "Use of Proceeds," "Proposed Business" and "Certain
Transactions."
|
|
Risk
Factors
|
The
shares offered hereby involve a high degree of risk and immediate
substantial dilution and should not be purchased by investors who cannot
afford the loss of their entire investment. Such risks include, among
others: our short period of existence and limited resources; and the
discretionary use of proceeds. See "Risk Factors," "Dilution" and "Use of
Proceeds."
|
7
Material
Persons
|
Our
officers, directors and major shareholders are the only persons who have
been instrumental in arranging our capitalization to date. Neither of our
officers or directors are acting as nominee for any persons or is
otherwise under the control of any person or persons. There are no
agreements, agreements in principle, or understandings with regard to
compensation to be paid by us to any of our officers or
directors.
|
|
It
is anticipated we may make sales of shares to officers and directors and
that such persons may purchase the shares offered hereby. Such purchases
shall be made for investment purposes only and in a manner consistent with
a public offering of our shares. Thus the officers and directors could
purchase up to 100% of the offering amount. Such purchases will increase
the equity interests already owned by the officers and
directors.
|
||
Investors
should carefully review the financial statements which are an integral
part of this prospectus.
|
||
Dealers
participating in this offering are required to deliver a copy of the final
prospectus to any person who is expected to receive a confirmation of the
sale at least 48 hours prior to the mailing of the
confirmation.
|
8
Risk
Factors
An
investment in our common stock is very risky. Our financial condition
is unsound. You should not invest in our common stock unless you can
afford to lose your entire investment. You should carefully consider
the risk factors described below, together with all other information in this
prospectus, before making an investment decision. If an active market
is ever established for our common stock, the trading price of our common stock
could decline due to any of these risks, and you could lose all or part of your
investment. You also should refer to the other information set forth
in this prospectus, including our financial statements and the related
notes.
RISKS
RELATED TO THE OFFERING
Completion
of this offering is not subject to us raising a minimum offering amount and
therefore proceeds may be insufficient to meet our objectives, thereby
increasing the risk to investors in this offering.
Completion
of this offering is not subject to us raising a minimum offering
amount. As such, proceeds from this offering may not be sufficient to
meet the objectives we state in this prospectus, other corporate milestones that
we may set, or to avoid a “going concern” modification in future reports of our
auditors as to uncertainty with respect to our ability to continue as a going
concern. Investors should not rely on the success of this offering to
address our need for funding. During the next 12 months and until this offering
is approximately 25% subscribed, management expects to maintain our current
conservative operating expense levels which may limit growth, but help sustain
the business operations. If we fail to raise capital by the end of December 31
2011, we would expect to have to significantly decrease operating expenses,
which will curtail the growth of our business.
None
of our officers, directors or significant stockholders are obligated to
participate in this Offering.
Physicians
Capital Corporation, controlled by Dan Ratner, our President, Chief Executive
Officer and Chairman of the Board and Donna Ratner, Chief Marketing Officer and
Vice Chairman beneficially owns approximately 100% of our common stock prior to
the Offering. None of our officers, directors or significant stockholders are
obligated to participate in this offering. As a result, the offering
may be undersubscribed and proceeds may not be sufficient to meet the objectives
we state in this prospectus.
You
could be committed to buying shares of common stock above the prevailing market
price.
Once you
exercise your basic rights, you may not revoke such exercise even if you later
learn information that you consider to be unfavorable. The market
price of our shares of common stock may decline prior to the expiration of
this offering or a subscribing holder may not be able to sell shares of common
stock purchased in this offering at a price equal to or greater than the
subscription price.
If
we terminate this offering for any reason, we will have no obligation other than
to return subscription monies promptly.
We may
decide, in our discretion and for any reason, to cancel or terminate this
offering at any time prior to the expiration date. If this offering
is terminated, we will have no obligation except to return promptly, without
interest or deduction, the subscription monies deposited with the subscription
agent.
9
The
subscription price determined for this offering is not an indication of the
value of our common stock.
The
subscription price for the shares in this offering was set by our board of
directors and does not necessarily bear any relationship to the book value of
our assets, results of operations, cash flows, losses, financial condition or
any other established criteria for value. You should not consider the
subscription price as an indication of the value of our common
stock. After the date of this prospectus, our common stock may trade
at prices above or below the subscription price.
If
you do not act on a timely basis and follow subscription instructions your funds
may be rejected.
If you
desire to purchase common stock in this offering, you must act on a timely basis
to ensure that all required forms and payments are actually received by the
subscription agent prior to 5:00 p.m., New York City time, on the expiration
date, unless extended. We will not be responsible if your custodian bank,
trustee or other nominee fails to ensure that all required forms and payments
are actually received by the subscription agent prior to 5:00 p.m., New York
City time, on the expiration date, as may be extended.
If you
fail to complete and sign the required subscription forms, send an incorrect
payment amount, or otherwise fail to follow the subscription procedures that
apply to your exercise in this offering, the subscription agent may, depending
on the circumstances, reject your subscription or accept it only to the extent
of the payment received. Neither we nor the subscription agent
undertakes to contact you concerning an incomplete or incorrect subscription
form or payment, nor are we under any obligation to correct such forms or
payment. We have the sole discretion to determine whether a
subscription exercise properly follows the subscription
procedures.
10
If
you make payment of the subscription price by uncertified check, your check may
not clear in sufficient time to enable you to purchase shares in this
offering.
Any
uncertified check used to pay for shares to be issued must clear prior to the
expiration date of this rights offering, and the clearing process may require
five or more business days. If you choose to exercise your subscription rights,
in whole or in part, and to pay for shares by uncertified check and your check
has not cleared prior to the expiration date of this rights offering, you will
not have satisfied the conditions to exercise your subscription rights and will
not receive the shares you wish to purchase.
RISKS
RELATING TO OUR BUSINESS
We
have a history of operating losses, which negatively impacts our liquidity, our
ability to operate our business and our public stock price.
As of
December 31, 2009, we had an accumulated deficit of $530,616. For the
years ended December 31, 2009 and 2008, we incurred losses from operations
of $530,616 and $505,644, respectively.
As of
December 31, 2009, we had outstanding borrowings of $1,451,786 under our secured
open-ended line of credit agreement with Physicians Capital Corporation. We had
approximately $7,624 of available cash and cash equivalents and approximately
$75,507 in normal inventory levels as of December 31, 2009. If we
fail to raise additional capital by the end of December 2011, we would expect to
have to decrease operating expenses to sustainable operating levels which will
curtail the growth of our business. It is contemplated that use of proceeds are
to repay debt and if proceeds from the offering are insufficient to repay all
the debt when due, either the due date will be automatically extended for
additional 12 months and/or partial repayment of approximately 10% - 25% is also
acceptable to Management and Note Holder.
Operating
losses negatively impact liquidity and our stock price. In light of
our continuing losses, we need to raise funds from outside sources, which may
not be available to us on satisfactory terms, if at all. Moreover, if
we continue to suffer losses from operations, the proceeds from our financings
(including this offering) may be insufficient to support our ability to expand
our business operations as rapidly as we would deem necessary at any time,
unless we are able to obtain additional financing. If adequate funds
are not available or are not available on acceptable terms, we may not be able
to pursue our business objectives and would be required to reduce our level of
operations, including reducing infrastructure, promotions, personnel and other
operating expenses. These events could adversely affect our business,
results of operations and financial condition.
We
have generated insufficient revenues to date, and we may never generate
sufficient revenues to achieve profitability.
We may
not generate sufficient revenues from product sales in the future to achieve
profitable operations. If we are not able to achieve profitable
operations at some point in the future, we eventually may have insufficient
working capital to maintain our operations as we presently intend to conduct
them or to fund our expansion and marketing and product development
plans. In addition, a lack of revenue generation would likely lead to
increased losses in the future as we seek to expand our manufacturing
capabilities and fund our marketing plans and product
development. This lack of sufficient revenues, among other things,
has had and will continue to have an adverse effect on our working capital,
total assets and stockholders’ equity. If we are unable to achieve
profitability, the market value of our common stock will decline and there would
be a material adverse effect on our financial condition.
11
Additional
financing to expand our business may be unavailable to us.
Some or
all of the elements of our expansion plan may have to be curtailed or delayed
unless we are able to find alternative external sources of working
capital. We would need to raise additional funds to respond to
business contingencies, which may include the need to:
|
o
|
fund
more rapid expansion,
|
|
o
|
fund
additional marketing expenditures,
|
|
o
|
enhance
our operating infrastructure,
|
|
o
|
respond
to competitive pressures, and
|
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acquire
other businesses or engage in other strategic
initiatives.
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If we
need to raise additional financing to support our operations, we cannot assure
you that additional financing will be available on terms favorable to us, or at
all. If adequate funds are not available or if they are not available
on acceptable terms, our ability to fund the growth of our operations, take
advantage of opportunities, develop products or services or otherwise respond to
competitive pressures, could be significantly limited.
We
may not be able to acquire new beverage, food or supplement products which are
important to our growth.
An
important part of our strategy is to increase our sales through the acquisition
of new beverage, food or supplement products. We cannot assure you
that we will be able to negotiate and acquire products, brands or businesses to
market and distribute future products that will enjoy market
acceptance. Our failure to acquire new products, brands, or
businesses that gain market acceptance could have an adverse impact on our
growth and materially adversely affect our financial condition. We
may have higher obsolescent product expense if acquired products fail to perform
as expected due to the need to write off excess inventory of the new products or
goodwill.
We
may not be able to develop new beverage or food products which are important to
our growth.
An
important part of our strategy is to increase our sales through the development
of new beverage or food products. We cannot assure you that we will
be able to continue to develop, market and distribute future products that will
enjoy market acceptance. Our failure to continue to develop new
products that gain market acceptance could have an adverse impact on our growth
and materially adversely affect our financial condition. We may have
higher obsolescent product expense if new products fail to perform as expected
due to the need to write off excess inventory of the new products.
Our
results of operations may be impacted in various ways by the introduction of new
products, even if they are accepted in the market, including the
following:
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Sales
of new products could adversely impact sales of existing
products,
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We
may incur higher cost of goods sold and selling, general and
administrative expenses in the periods when we introduce new products due
to increased costs associated with the introduction and marketing of new
products, most of which are expensed as incurred,
and
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When
we introduce new platforms and package sizes, we may experience increased
freight and logistics costs as our co-packers adjust their facilities for
the new products.
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The
functional natural beverage and food business is highly
competitive.
The
functional natural beverage and food industries are highly
competitive. Many of our competitors have substantially greater
financial, marketing, personnel and other resources than we
do. Competitors in the functional natural
food
industry include manufactures, bottlers and distributors of nationally
advertised and marketed products, as well as chain store and private label
natural foods. The principal methods of competition include brand
recognition, price and price promotion, retail space management, service to the
retail trade, new product introductions, packaging changes, distribution
methods, and advertising. We also compete for distributors, shelf
space and customers primarily with other natural food companies. As
additional competitors enter the field, our market share may fail to increase or
may decrease. As a small company with a history of losses, we may be
unable to respond to competitive pressures, which would have a material adverse
effect on our business.
The
growth of our revenues is dependent on acceptance of our products by mainstream
consumers.
We have
dedicated significant resources to introduce our products to the mainstream
consumer. As such, we have increased our sales force and executed
agreements with distributors who, in turn, distribute to mainstream consumers at
grocery stores, club stores and other retailers. If our products are
not accepted by the mainstream consumer, our business could suffer.
Our
failure to accurately estimate demand for our products could adversely affect
our business and financial results.
We may
not correctly estimate demand for our products. Our ability to
estimate demand for our products is imprecise, particularly with new products,
and may be less precise during periods of rapid growth, particularly in new
markets. If we materially underestimate demand for our products or
are unable to secure sufficient ingredients or raw materials including, but not
limited to, glass, labels, flavors or packing arrangements, we might not be able
to satisfy demand on a short-term basis. Moreover, an industry-wide
shortage of certain raw materials have been and could, from time to time in the
future, be experienced, which could interfere with and/or delay production of
certain of our products and could have a material adverse effect on our business
and financial results. We do not use hedging agreements or
alternative instruments to manage this risk.
The
loss of our largest customers would substantially reduce revenues.
Our
customers are material to our ability to generate revenue. If we are
unable to maintain good relationships with our existing customers, our business
could suffer. Unilateral decisions could be taken by our
distributors, and/or convenience chains, grocery chains, specialty chain stores,
club stores and other customers to discontinue carrying all or any of our
products that they are carrying at any time, which could cause our business to
suffer.
Whole
Foods Market, accounted for approximately 21% of our sales for the 12 months
December 31, 2009 and 15% of our sales in 2008. As a result of this
customer concentration, the loss of Whole Foods Market as a retailer would
substantially reduce our revenues unless and until we replaced that source of
revenue.
The
loss of our third-party distributors could impair our operations and
substantially reduce our financial results.
We depend
in large part on distributors to distribute our beverages and other
products. Most of our outside distributors are not bound by written
agreements with us and may discontinue their relationship with us on short
notice. Most distributors handle a number of competitive
products. In addition, our products are a small part of our
distributors’ businesses. As a result, such distributors may be more
inclined to discontinue their relationship with us than with
competitors.
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We
continually seek to expand distribution of our products by entering into
distribution arrangements with regional distributors or other direct store
delivery distributors having established sales, marketing and distribution
organizations. Many of our distributors are affiliated with and manufacture
and/or distribute other soda and non-carbonated brands and other juice beverage
products. In many cases, such products compete directly with our
products.
The
marketing efforts of our distributors are important for our ability to penetrate
our markets and generate revenue. If our brands prove to be less attractive to
our existing distributors and/or if we fail to attract additional distributors,
and/or our distributors do not market and promote our products above the
products of our competitors, our business, financial condition and results of
operations could be adversely affected.
United
Natural Foods, Inc. accounted for approximately 70% of our sales for the twelve
months ended December 31, 2009 and 57% of our sales in 2008
respectively. The loss of this distributor may adversely affect sales
in the short term and alternative distribution channels may not be found in
a timely manner. The loss of our third-party beverage distributors
could impair our operations and adversely affect our financial
performance.
Price
fluctuations in, and unavailability of, raw materials, packaging and freight
that we use could adversely affect us.
We do not
enter into hedging arrangements for raw materials. Although the
prices of raw materials that we use have not increased significantly in recent
years, our results of operations would be adversely affected if the price of
these raw materials were to rise and we were unable to pass these costs on to
our customers.
We depend
upon an uninterrupted supply of the ingredients for our products, a significant
portion of which we obtain overseas, principally from China, Pacific Islands,
and Brazil. Any decrease in the supply of these ingredients or
increase in the prices of these ingredients as a result of any adverse weather
conditions, pests, crop disease, interruptions of shipment or political
considerations, among other reasons, could substantially increase our costs and
adversely affect our financial performance.
We also
depend upon an uninterrupted supply of packaging materials, such as glass for
our bottles. We obtain our bottles domestically and
Mexico. Any decrease in supply of these materials or increase in the
prices of the materials, as a result of decreased supply or increased demand,
could substantially increase our costs and adversely affect our financial
performance.
We
also depend upon less than truck load (LTL) freight costs and are subject to
fluctuating fuel surcharges. However, as we increase production and
achieve economic scale, our less than truck load (LTL) delivery cost may
decrease as we ship more product in full truck loads.
The
loss of any of our co-packers or raw material ingredient suppliers could slow
sales and impair our operations and substantially reduce our financial
results.
We rely
on third parties production facilities, called co-packers in our industry, to
fill some of our beverages, to produce our glass bottles and to deliver raw
materials for our products. We do not have any agreements with our
co-packers or raw material suppliers. The lack of such agreement is normal for
food and beverage co-packing. Our line time is scheduled on an appointment
basis; even though the company many be able to use many different co-packers and
raw material suppliers across the world, we do focus our production to achieve
economic scale. There is no assurance that a co-packer will have line time when
we need it and we may have to wait for either line-time or raw materials to
arrive in time to run production which could cause inventory and sales
delays. If a co-packer or raw material supplier were to go out of
business or if there was a raw material shortage it could cause inventory and
sales delays.
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if any of those co-packers were
to refuse our co-packing or have difficulties in producing beverages for
us, our ability to produce our beverages would be adversely affected until
we were able to make alternative arrangements,
and
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Our business reputation would be
adversely affected if any of the co-packers were to produce inferior
quality products.
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We
compete in an industry that is brand-conscious, so brand name recognition and
acceptance of our products are critical to our ability to obtain market share
and generate revenue.
Our
business is substantially dependent upon awareness and market acceptance of our
products and brands by our targeted consumers. In addition, our
business depends on acceptance by our independent distributors of our brands as
beverage brands that have the potential to provide incremental sales growth
rather than reduce distributors’ existing beverage sales. It may be
too early in the product life cycle of our brands within the Functional
Beverage Industry to determine whether our products and brands will achieve
and maintain satisfactory levels of acceptance by independent distributors and
retail consumers. We believe that the viability of our product name
brands will also be substantially dependent upon acceptance of our product name
brands. Accordingly, any failure of our brands to maintain or
increase acceptance or market penetration would likely have a material adverse
affect on our revenues and financial results.
If
we are unable to maintain brand image and product quality, or if we encounter
other product issues such as product recalls, our business may
suffer.
Maintaining
a good reputation is critical to our success. If we fail to maintain high
standards for product quality, or if we fail to maintain high ethical, social
and environmental standards for all of our operations and activities, our
reputation could be jeopardized. In addition, we may be liable if the
consumption of any of our products causes injury or illness, and we may be
required to recall products if they become contaminated or are damaged or
mislabeled. A significant product liability or other product-related legal
judgment against us or a widespread recall of our products could have a material
adverse effect on our business and financial results.
If
we are unable to maintain unpaid endorsement, personal brand image or if we
encounter other issues such as athlete or celebrity impairment of reputation,
our business may suffer.
We have
unpaid endorsement from World Record cyclist Antony Galvin. We are
targeting unpaid new celebrity endorsement engagements with musicians, yoga
teachers, physical fitness gurus, professional sports athletes and Hollywood
celebrities for both unpaid and paid endorsement deals. Such endorsement may not
occur and if they occur may significantly impair upon the brands and products
image and significantly reduce on future sales if such athlete of celebrity
fails to perform or suffers from impairment of their reputation. This could have
a material adverse effect on our business and financial results.
Adverse weather conditions could
reduce the demand for our products.
Demand
for our products is influenced to some extent by the weather conditions in the
markets in which we operate. Unseasonably cool temperatures in these markets
could have a material adverse effect on our sales volume and financial
results.
15
We compete in an industry
characterized by rapid changes in consumer preferences and public perception, so
our ability to continue to market our existing products and develop new products
to satisfy our consumers’ changing preferences will determine our long-term
viability.
Our
future viability will depend, in part, upon our continued ability to develop and
introduce different and innovative food and beverages. In order to retain and
expand our market share, we must continue to develop and introduce different and
innovative beverages and be competitive in the areas of quality and health,
although there can be no assurance of our ability to do so. There is no
assurance that consumers will continue to purchase our products in the future.
Additionally, many of our products are considered premium products and to
maintain market share during recessionary periods, we may have to reduce profit
margins, which would adversely affect our results of operations. In addition,
there is increasing awareness and concern for the health consequences of
obesity. Product lifecycles for some beverage brands and/or products and/or
packages may be limited to a few years before consumers’ preferences change. The
beverages we currently market are in varying stages of their lifecycles and
there can be no assurance that such beverages will become or remain profitable
for us. The beverage industry is subject to changing consumer preferences and
shifts in consumer preferences may adversely affect us if we misjudge such
preferences. We may be unable to achieve volume growth through product and
packaging initiatives. We also may be unable to penetrate new markets. If our
revenues decline, our business, financial condition and results of operations
will be materially and adversely affected.
Our
quarterly operating results may fluctuate significantly because of the
seasonality of our business.
Our
highest revenues occur during the spring and summer, the second and third
quarters of each fiscal year. These seasonality issues may cause our
financial performance to fluctuate. In addition, beverage sales can
be adversely affected by sustained periods of bad weather. These
fluctuations in our business could have a material adverse effect on our
financial performance and public stock price.
Our business is subject to many
regulations and noncompliance is costly.
The
production, marketing and sale of our beverages, including contents, labels,
caps and containers, are subject to the rules and regulations of various
federal, provincial, state and local health agencies. If a regulatory
authority finds that a current or future product or production run is not in
compliance with any of these regulations, we may be fined, or production may be
stopped, thus adversely affecting our financial conditions and
operations. Similarly, any adverse publicity associated with any
noncompliance may damage our reputation and our ability to successfully market
our products. Furthermore, the rules and regulations are subject to
change from time to time and while we closely monitor developments in this area,
we have no way of anticipating whether changes in these rules and regulations
will impact our business adversely. Additional or revised regulatory
requirements, whether labeling, environmental, tax or otherwise, could have a
material adverse effect on our financial condition and results of
operations.
Our manufacturing process is
not patented.
None of
the manufacturing processes used in producing our products are subject to a
patent or similar intellectual property protection. Our only
protection against a third party using our recipes and processes is
confidentiality agreements with the companies that produce our beverages and
with our employees who have knowledge of such processes. If our
competitors develop substantially equivalent proprietary information or
otherwise obtain access to our knowledge, we will have greater difficulty in
competing with them for business, and our market share could
decline.
We
face risks associated with product liability claims and product
recalls.
Other
companies in the beverage industry have experienced product liability litigation
and product recalls arising primarily from defectively manufactured products or
packaging. We maintain product liability insurance insuring our
operations from any claims associated with product liability and we believe that
the amount of this insurance is sufficient to protect us. We do not
maintain product recall insurance. In the event we were to experience
additional product liability or product recall claim, our business operations
and financial condition could be materially and adversely
affected.
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Our intellectual property rights are
critical to our business, and the loss of such rights could materially,
adversely affect our business.
On
January 23, 2007 Cell-nique® was
granted a certificate of registration from the United States Patent and
Trademark Office Reg No. 3,201,855. This is our only intellectual property which
represents our Brand. To protect the rights it must be renewed before 1-23-13
and again 1-23-17, thereafter it must be renewed every 10 years. We regard the
protection of our trademark, trade dress and trade secrets as critical to our
company. We regard our Cell-nique® name as
critical to our success and attempt to protect such property with registered and
common law trademarks and copyrights, restrictions on disclosure and other
actions to prevent infringement. Product packages, mechanical designs
and artwork are important to our success and we would take action to protect
against imitation of our packaging and trade dress and to protect our trademark,
as necessary. We also rely on a combination of laws and contractual
restrictions, such as confidentiality agreements, to establish and protect our
proprietary rights, trade dress and trade secrets. However, laws and
contractual restrictions may not be sufficient to protect the exclusivity of our
intellectual property rights, trade dress or trade
secrets. Furthermore, enforcing our rights to our intellectual
property could involve the expenditure of significant management and financial
resources. Third parties may infringe or misappropriate our trademark
and similar proprietary rights. Moreover, if we are found to have
been deficient in policing our trademarks and proprietary rights, we may lose
our rights to such intellectual property. If we lose some or all of our
intellectual property rights, our business may be materially and adversely
affected.
Loss
of our management team, including Dan Ratner, Donna Ratner, it will be more
difficult for us to manage our operations and our operating performance could
suffer.
Our
business is dependent, to a large extent, upon the services of our management
team, including Dan Ratner, our founder, Chairman of the Board, President and
Chief Executive Officer and Donna Ratner, our Chief Marketing
Officer. We depend on our management team, but especially on the
Ratner’s creativity and leadership in running or supervising virtually all
aspects of our day-to-day operations. We do not have a written
employment agreement with the Ratners. In addition, we do not
maintain key person life insurance on any of our management team or the Ratners.
Therefore, in the event of the loss or unavailability of the Ratners or any
other member of the management team to us, there can be no assurance that we
would be able to locate in a timely manner or employ qualified personnel to
replace him. The loss of the services of any member of our management team or
our failure to attract and retain other key personnel over time would jeopardize
our ability to execute our business plan and could have a material adverse
effect on our business, results of operations and financial
condition.
We
need to manage our growth and implement and maintain procedures and controls
during a time of rapid expansion in our business.
The
cost of manufacturing and packaging our products was approximately 48% and 55%
of our aggregate revenues in 2009 and 2008, respectively. This gross
margin places pressure upon our cash flow and cash reserves when our sales
increase. If we are to expand our operations, such expansion would
place a significant strain on our management, operational and financial
resources. Such expansion would also require improvements in our
operational, accounting and information systems, procedures and
controls. If we fail to manage this anticipated expansion properly,
it could divert our limited management, cash, personnel, and other resources
from other responsibilities and could adversely affect our financial
performance.
Our
business may be negatively impacted by a slowing economy or by unfavorable
economic conditions or developments in the United States and/or in other
countries in which we operate.
A
general slowdown in the economy in the United States or unfavorable economic
conditions or other developments may result in decreased consumer demand,
business disruption, supply constraints, foreign currency devaluation, inflation
or deflation. The current slowdown in the economy or unstable
economic conditions in the United States or in the countries in which we operate
could have an adverse impact on our business results or financial condition. Our
foreign sales accounted for less than 0% of our sales for the years ended
December 31, 2009 and 2008, respectively.
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We
have operated without independent directors in the past.
We have
not had two independent directors through a large portion of our
history. As a result, certain material agreements between related
parties of our company have not been negotiated with the oversight of
independent directors and were entered into at the absolute discretion of the
majority stockholder, Physicians Capital Corporation. Although we
believe that these agreements were entered into upon terms no less favorable
than would have been obtained in an arm’s length transaction, these agreements
were not subject to independent review and consideration and could therefore be
deemed not to have been undertaken on an arm’s length basis. Please
see the “Certain Relationships and Related Transactions” section for specific
details of these transactions.
We
have a limited operating history; and we may never achieve or sustain
profitability.
At
December 31, 2009, we had a deficit shareholder’s equity of $1,276,222 and a
working capital deficit of $1,347,081. We were incorporated on August 7,
2008. We had commenced the commercial sale of Cell-nique in 2006 and
have retail sales of approximately $3 million to date since 2006. We
have limited track record upon which you can evaluate an investment in our
shares. We have an operating history upon which evaluation of our
proposed business can be based. Our ability to achieve profitable
operations is dependent upon a number of factors, including our ability to
become a successful market entrant, our ability to effectively manufacture,
market and distribute our drinks in commercial quantities, our ability to expand
our product base in the future, and our ability to successfully market and sell
our products. Furthermore revenues, expenses and cash flow cannot be predicted
with certainty. Our expenses will be variable based on market
conditions.
We will
rely on an interim working capital line from Physicians capital Corporation to
fund operating deficits. We anticipate, based on our present plan and
assumptions, that at a nominal amount (5% Offering sold) of this offering will
satisfy our cash requirements for at least 12 calendar
months. However, the shares that are being offered by us under this
prospectus are being offered on a best efforts basis, so we may not be able to
sell any particular number of shares in this offering and the net proceeds from
any shares sold may not be sufficient to allow us to accomplish our business
objectives.
Further,
if we are unable to raise any significant funds in this offering, we will likely
be required to seek additional capital from other sources in the future through
additional equity or debt financing or credit facilities. Any
additional equity financing that we obtain will likely involve substantial
dilution of our shareholders, and any debt financing would increase the cost of
our debt service requirements. It will be difficult for us to obtain
additional capital in the future on acceptable terms or at all. To
date, we have made attempts to identify possible sources for funding but have no
commitments for any future funding. The type, timing and terms of
such funding, will be determined by prevailing conditions in the financial
markets and our financial condition, among other factors. If we
cannot obtain the financing we need we may have to significantly curtail or
reduce our operations.
RISKS
RELATING TO OUR BUSINESS
We
may experience significant product recalls, which would damage our brand,
increase our costs and impair our ability to achieve profitability.
We have
no meaningful data regarding the product performance or spoilage of our product
or any basis on which we can estimate warranty costs. If we are
subject to significant warranty service requirements or product recalls,
potential customers may determine that our drinks are not viable and may choose
not to purchase them. Further, significant warranty service
requirements will result in increased costs to us as a result of the costs of
replacement of our products and the costs associated with researching and
developing solutions to issues raised by warranty claims. Any
significant warranty service requirements or product recalls would increase our
costs materially and reduce the value of our brand
significantly.
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Our
operations may become subject to significant governmental regulations in the
future.
We are in
the business of manufacturing drinks which contain food. There can be
no assurance the regulations concerning the distribution of the foods that we
use will not change in the future. Additionally, in the future and
for undetermined reasons need to use other components that have not been
approved for use
MARKET
RISKS
No
market exists for the trading of our securities and no market may ever
develop. Accordingly, you may not have any means of trading the
shares you acquire in this offering.
A market
does not presently exist for our securities and no assurance can be given that a
market will ever develop. Consequently, you may not be able to
liquidate your investment in our securities for an emergency or at any time, and
the securities will not be readily acceptable as collateral for loans. Although
we may endeavor to establish a trading market for our securities in the future,
no assurance can be given as to the timing of this event or whether the market,
if established, will be sufficiently liquid to enable an investor to liquidate
his investment in us.
RISKS
RELATING TO OUR SECURITIES
There has been no public trading
market for our securities and any future market for our securities, may continue
to be limited, and be sporadic and highly volatile.
There is
currently a no public market for our common stock. An active market
for our shares may not be established or maintained in the
future. Holders of our common stock may, therefore, have difficulty
selling their shares, should they decide to do so. In
addition, if developed, such markets may not continue and any shares
purchased may be sold incurring a loss. Any such market price of our
shares may not necessarily bear any relationship to our book value, assets, past
operating results, financial condition or any other established criteria of
value, and may not be indicative of the market price for the shares in the
future.
In
addition, the market price of our common stock may be volatile, which could
cause the value of our common stock to decline. Securities markets experience
significant price and volume fluctuations. This market volatility, as
well as general economic conditions, could cause the market price of our common
stock to fluctuate substantially. Many factors that are beyond our
control may significantly affect the market price of our
shares. These factors include:
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price and volume fluctuations in
the stock markets,
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changes in our revenues and
earnings or other variations in operating
results,
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any shortfall in revenue or
increase in losses from levels expected by us or securities
analysts,
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changes in regulatory policies or
law,
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operating performance of
companies comparable to us,
and
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general economic trends and other
external factors.
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Even if
an active market for our common stock is established in the future, stockholders
may have to sell their shares at prices substantially lower than the price they
paid for it or might otherwise receive than if a broad public market
existed.
Future
financings could adversely affect common stock ownership interest and rights in
comparison with those of other security holders.
Our board
of directors has the power to issue additional shares of common or preferred
stock without stockholder approval. If additional funds are raised
through the issuance of equity or convertible debt securities, the percentage
ownership of our existing stockholders will be reduced, and these newly issued
securities may have rights, preferences or privileges senior to those of
existing stockholders.
If we
issue any additional common stock or securities convertible into common stock,
such issuance will reduce the proportionate ownership and voting power of each
other stockholder. In addition, such stock issuances might result in a reduction
of the book value of our common stock.
Because
Physicians Capital Corporation controls a large portion of our stock, they can
control the outcome, or greatly influence the outcome, of all matters on which
stockholders vote.
Dan
Ratner, our President, Chief Executive Officer, and Chairman of the Board and
Donna Ratner, Vice-Chairman and Chief Marketing Officer beneficially owns
approximately 100% of our common stock. Therefore, the Ratners will
be able to control the outcome, or greatly influence the outcome, on all matters
requiring stockholder approval, including the election of directors, amendment
of our certificate of incorporation, and any merger, consolidation or sale of
all or substantially all of our assets or other transactions resulting in a
change of control of our company. In addition, as our Chairman and Chief
Executive Officer, Dan Ratners has and will continue to have significant
influence over our strategy, technology and other matters. The
Ratners’s interests may not always coincide with the interests of other holders
of our common stock.
Our
certificate of incorporation and by-laws contain provisions that may discourage,
delay or prevent a change in our management team that stockholders may consider
favorable.
Our
certificate of incorporation, our bylaws and Delaware law contain provisions
that may have the effect of preserving our current management, such
as:
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authorizing
the issuance of “blank check” preferred stock without any need for action
by stockholders; and
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permitting
stockholder action by written
consent.
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These
provisions could allow our board of directors to affect your rights as a
stockholder since our board of directors can make it more difficult for common
stockholders to replace members of the board. Because our board of
directors is responsible for appointing the members of our management team,
these provisions could in turn affect any attempt to replace our current
management team.
The
application of the "penny stock" rules could adversely affect the market for our
stock.
The
Securities and Exchange Act of 1934 requires additional disclosure relating to
the market for "penny stocks." A penny stock is generally defined to be any
equity security not listed on NASDAQ or a national securities exchange that has
a market price of less than $5.00 per share, subject to certain exceptions.
Among these exceptions are shares issued by companies that have:
net
tangible assets of at least $2 million, if the issuer has been in
continuous operation for three years;
net
tangible assets of at least $5 million, if the issuer has been in
continuous operation for less than three years; or
average
annual revenue of at least $6 million for each of the last three
years.
for our
shares, and of any sales commissions or other compensation payable to
any broker or dealer, or any other related person, involved in the
transaction;
send
monthly statements to buyers disclosing updated price information for any penny
stocks held in their accounts, and these monthly statements must include
specified information on the limited market for penny stocks. We do not
currently meet the requirements of these exceptions and, therefore, our shares
would be deemed penny stocks for purposes of the Exchange Act if and at any time
while our common stock trades below $5.00 per share. In such case, trading in
our shares would be regulated pursuant to Rules 15-g-1 through 15-g-6 and 15-g-9
of the Exchange Act. Under these rules, brokers or dealers recommending our
shares to prospective buyers would be required, unless an exemption is
available, to:
deliver a
lengthy disclosure statement in a form designated by the SEC relating to the
penny stock market to any potential buyers, and obtain a written acknowledgement
from each buyer that such disclosure statement has been received by the buyer
prior to any transaction involving our shares;
provide
detailed written disclosure to buyers of current price quotations.
In
addition, if we are subject to the penny stock rules, all brokers or dealers
involved in a transaction in which our shares are sold to any buyer, other than
an established customer or "accredited investor," must make a special written
determination that our shares would be a suitable investment for the buyer, and
the brokers or dealers must receive the buyer's written agreement to purchase
our shares, as well as the buyer's written acknowledgement that the suitability
determination made by the broker or dealer accurately reflects the buyer's
financial situation, investment experience and investment objectives, prior to
completing any transaction in our shares.
These
Exchange Act rules may limit the ability or willingness of brokers and other
market participants to make a market in our shares and may limit the ability of
our shareholders to sell in the secondary market, through brokers,
dealers or otherwise. We also understand that many brokerage firms will
discourage their customers from trading in shares falling within the "penny
stock" definition due to the added regulatory and disclosure burdens imposed by
these Exchange Act rules.
The SEC
from time to time may propose and implement even more stringent regulatory or
disclosure requirements on shares not listed on NASDAQ or on a national
securities exchange. The adoption of the proposed changes that may be made in
the future could have an adverse effect on the trading market for our
shares.
21
Use
of Proceeds
In the
table below, we have detailed the minimum amount of capital required for us to
operate our business as currently planned. The table also shows how
we will use the proceeds of the offering.
Amount of Net Proceeds
|
||||||||||||
at 5%(1)
|
at 50%(1)
|
at 100%(1)
|
||||||||||
Company
Proceeds from the Offering
|
$ | 3,750,000 | $ | 37,500,000 | $ | 75,000,000 | ||||||
Less:
Offering Expenses (1)
|
$ | 75,000 | $ | 75,000 | $ | 75,000 | ||||||
Net
Proceeds from Offering
|
$ | 3,675,000 | $ | 37,425,000 | $ | 74,925,000 | ||||||
Use
of Net Proceeds:
|
||||||||||||
Repayment
of Related Party Debt (2)
|
$ | 600,000 | $ | 1,451,786 | $ | 1,451,786 | ||||||
General
Working Capital (3)
|
$ | 3,075,000 | $ | 35,973,214 | $ | 73,473,214 | ||||||
Total
Use of Net Proceeds
|
$ | 3,675,000 | $ | 37,425,000 | $ | 74,925,000 |
(1) We
intend to utilize the proceeds from this offering in the priority set forth in
this column whether or not such gross proceeds or a lesser amount are raised. No
assurances are given that we will sell any shares. We have estimated that
offering expenses will not exceed $75,000 and we will be applying first dollars
raised to such expense.
(2) We
intend to utilize the proceeds from this offering for Repayment of Related Party
Debt to Physicians Corporation. At December 31, 2009, the aggregate outstanding
principal balance of the Physicians Capital loan was $1,451,786 including an
aggregate accrued unpaid interest of $216,103. Cell-nique is in good standing
under the terms of the note agreement due on December 31, 2011. The principal
terms of the note between Physicians Capital Corporation and Cell-nique
Corporation are 8% interest annually based on the average outstanding balance
for the quarter and accrue until maturity. It is contemplated that use of
proceeds are to repay debt and if proceeds from the offering are insufficient to
repay all the debt when due, either the due date will be automatically extended
for additional 12 months and/or a partial repayment of approximately 10% - 25%
would be acceptable to Management and Note Holder.
(3)
The working capital (i.e., monies to be used, including but not limited to due
diligence, travel and related out-of-pocket expenses, and consulting fees, if
any. Working capital also will be used to pay other costs of our operations,
including legal fees and costs incurred in filing periodic reports under the
federal securities laws. Our current management team does not have any
employment agreements and all services rendered are capitalized as non-cash
compensation expense and contributed to additional paid-in capital. There are
not any outstanding amounts due other than the related party working capital
loan through Physicians Capital Corporation. It is contemplated that
Management will be engaged in employment contracts in the future, but no
negotiations have taken place, Management will hire and negotiate with other
third parties to expand the management team, board of directors and consultants
in the future, such negotiated amounts will fall under General Working Capital
(3). Management is not aware of any circumstances under which such policy may be
changed.
We
have imposed a restriction that none of our officers or directors shall receive
any personal financial gain from the cash proceeds of this offering except for
repayment of related party debt, reimbursement of out-of-pocket offering
expenses and any future compensation agreements for services rendered. No
assurance can be given that any of such potential conflicts of interest will be
resolved in our favor or will otherwise not cause us to lose potential
opportunities.
None of
the proceeds raised hereby will be used to make any loans to our promoters,
management or their affiliates or associates of any of our shareholders.
Further, we may not borrow funds and use the proceeds therefrom to make payments
to our promoters, management or their affiliates or associates other than stated
herein.
22
The
following identifies the Use of Proceeds which will enable the Company to expand
operations. Proceeds from a fully subscribed offering will allow for substantial
growth capital of production, marketing and sales. Management does not
anticipate the need for additional funds as sales revenue are expected to
generate a positive cash flow that may also offset the total use of
funds:
The
nature of businesses to be targeted for merger and acquisitions as budgeted
below will be in functional food and beverage including but not limited to
natural and organic food and beverages brands/companies, supplement or vitamin
and/or ingredient suppliers, manufacturing or processing companies. The
strategic objective of the Company is to roll-up like minded brands and
companies with similar sales channel and operational requirements to achieve
high efficiency and productivity from sales and back-office
operations. At the present time, there are no merger and acquisition
negotiations.
1.
Staffing - Executive, sales, and office labor as well as taxes and
benefits.
|
$
|
6,000,000
|
||
2.
Working Capital - This will be used to meet operating
expenses.
|
$
|
6,000,000
|
||
3. Advertising,
Marketing and Public Relations- Magazine, media advertising, shows,
events, brochures and videos.
|
$
|
6,000,000
|
||
4. Costs
of Goods/Inventory - The Company’s produces inventory in advance of
orders.
|
$
|
2,000,000
|
||
5.
Acquisitions and Mergers – Purchase of Brands and Companies the fit the
strategic objectives of the Company
|
$
|
53,473,214
|
The
following identifies the Use of Proceeds which will enable the Company to expand
operations. Proceeds from a 50% subscribed offering will allow for moderate
growth capital of production, marketing and sales. Management may seek
additional funds as sales revenue may not generate a positive cash
flow:
1.
Staffing - Executive, sales, and office labor as well as taxes and
benefits.
|
$
|
3,000,000
|
||
2.
Working Capital - This will be used to meet operating
expenses.
|
$
|
3,000,000
|
||
3. Advertising,
Marketing and Public Relations- Magazine, media advertising, shows,
events, brochures and videos.
|
$
|
3,000,000
|
||
4. Costs
of Goods/Inventory - The Company’s produces inventory in advance of
orders.
|
$
|
1,000,000
|
||
5.
Acquisitions and Mergers – Purchase of Brands and Companies the fit the
strategic objectives of the Company
|
$
|
25,973,214
|
The
following identifies the Use of Proceeds which will enable the Company to expand
operations. Proceeds from a 5% subscribed offering will allow for only nominal
capital for production, marketing and sales. Management will continue to seek
additional funds. It is contemplated that use of proceeds are to repay debt and
if proceeds from the offering are nominal or insufficient to repay all the debt
when due, either the due date will be automatically extended for additional 12
months and/or partial repayment is also acceptable to Management and Note Holder
allowing for more working capital. The below assumes approximately $600,000 of
debt repayment:
1.
Staffing - Executive, sales, and office labor as well as taxes and
benefits.
|
$
|
500,000
|
||
2.
Working Capital - This will be used to meet operating
expenses.
|
$
|
500,000
|
||
3. Advertising,
Marketing and Public Relations- Magazine, media advertising, shows,
events, brochures and videos.
|
$
|
500,000
|
||
4. Costs
of Goods/Inventory - The Company’s produces inventory in advance of
orders.
|
$
|
500,000
|
||
5.
Acquisitions and Mergers – Purchase of Brands and Companies the fit the
strategic objectives of the Company
|
$
|
1,075,000
|
Plan
of Distribution
This is a
direct participation with no commitment by anyone to purchase any shares. The
shares will be offered and sold on a "best efforts" basis by our principal
executive officers and directors at $5.00 per share until all shares are sold or
until the offering is terminated on December 31, 2011 or extended for up to 60
days thereafter, at the sole discretion of management. There is no minimum
amount that must be raised to make the offering effective.
Authorized and
Outstanding
Shares of
Stock
Common Stock
|
Preferred Stock
|
|||||||
Authorized:
|
49,000,000
|
1,000,000
|
||||||
$.00001
par value
|
$2.00 stated value
|
|||||||
Outstanding:
|
||||||||
Prior
to Offering:
|
5,000,000
|
0
|
||||||
After
50% of Offering is sold
|
12,500,000
|
0
|
||||||
After
Maximum Offering is sold
|
20,000,000
|
0
|
23
Capitalization
This
table represents our capitalization as of December 31, 2009 as adjusted to give
effect to this offering.
Shares
|
||||
Actual
|
||||
Stockholders
Equity
|
||||
Preferred
Stock, $1.80 stated value at date of issuance, $2.00 current stated
value
|
||||
Authorized
– 1,000,000 shares
|
||||
Issued
and Outstanding - No shares
|
||||
Common
Stock, $.00001 par value
|
||||
Authorized
- 49,000,000 shares
|
||||
Issued
and Outstanding –
|
||||
Actual
5,000,000 shares
|
|
50
|
||
|
||||
Additional
Paid in Capital
|
|
(745,656
|
)
|
|
Accumulated deficit
|
$
|
(530,616
|
)
|
|
Total Stockholders’
Equity
|
$
|
(1,276,222
|
)
|
The
above capitalization table excludes Notes Payable to Related Parties: The
Physicians Capital loan was $1,451,786 including an aggregate accrued unpaid
interest of $216,103. Cell-nique is in good standing under the terms of the note
agreement due on December 31, 2011. The principal terms of the note between
Physicians Capital Corporation and Cell-nique Corporation are 8% interest
annually based on the average outstanding balance for the quarter and accrue
until maturity.
Dilution
We were
initially capitalized by the sale of common stock to our founders and working
capital loans from our founders. The following table sets forth the difference
between our founders, subsequent stock distributions and purchasers of the
shares in this offering with respect to the number of shares purchased from us,
the total consideration paid and the average price per share paid.
Purchasers
of our common stock in this offering will experience immediate and substantial
dilution in the net tangible book value of their common stock from the initial
public offering price.
The table
below assumes that 5% amount of shares offered hereby are sold.
Shares Issued
|
Total Consideration
|
Average
Price
|
||||||||||||||||||
Number
|
Percent
|
Amount
|
Percent
|
Per Share
|
||||||||||||||||
|
|
|
||||||||||||||||||
Insiders
|
5,000,000 | 87 | % | $ | 50 | .00001 | % | $ | .00001 | |||||||||||
New
Investors
|
750,000 | 13 | % | $ | 3,750,000 | 99.99 | % | $ | 5.00 | |||||||||||
Total
|
5,750,000 | 100 | % | $ | 3,750,050 | 100 | % | $ | 5.00 |
The table
below assumes that 50% amount of shares offered hereby are sold.
Shares Issued
|
Total Consideration
|
Average
Price
|
||||||||||||||||||
Number
|
Percent
|
Amount
|
Percent
|
Per Share
|
||||||||||||||||
|
|
|
||||||||||||||||||
Insiders
|
5,000,000 | 40 | % | $ | 50 | .00001 | % | $ | .00001 | |||||||||||
New
Investors
|
7,500,000 | 60 | % | $ | 37,500,000 | 99.99 | % | $ | 5.00 | |||||||||||
Total
|
12,500,000 | 100 | % | $ | 37,500,050 | 100 | % | $ | 5.00 |
24
The table
below assumes the maximum amount of the shares offered hereby are
sold.
Shares Issued
|
Total Consideration
|
Average
Price
|
||||||||||||||||||
Number
|
Percent
|
Amount
|
Percent
|
Per Share
|
||||||||||||||||
Insiders
|
5,000,000
|
25
|
%
|
$
|
50
|
.00001
|
%
|
$
|
.00001
|
|||||||||||
New
Investors
|
15,000,000
|
75
|
%
|
$
|
75,000,000
|
99.99
|
%
|
$
|
5.00
|
|||||||||||
Total
|
20,000,000
|
100
|
%
|
$
|
75,000,050
|
100
|
%
|
$
|
5.00
|
As of
December 31, 2009, the net tangible book value of our common stock was
$(1,276,222) or ($.26) per share based on the 5,000,000 shares outstanding. It
should also be noted that our net tangible book value is $(1,276,222) since $0
is attributable to our preferred stock and $0 is attributed to our intangible
patent. "Net tangible book value of common stock" per share represents the
amount of total tangible assets less total liabilities, divided by the number of
shares. After giving effect to the sale by us of 15,000,000 shares, which is the
maximum offered in this registration, at an offering price of $5.00 per share
and after deducting estimated expenses, our pro-forma net tangible book value of
common stock as of that date would $73,648,778 or $3.68 per share, based on the
20,000,000 shares outstanding at that time. This represents an immediate
dilution (i.e. the difference between the offering price per share of common
stock and the net tangible book value per share of common stock after the
offering) of $(1.32) per share to the new investors who purchase shares in the
offering ("New Investors"), as illustrated in the following table (amounts are
expressed on a per share basis):
(1)
Calculations concerning dilution are based on an assumption of the offering
being fully subscribed.
The
following table represents the dilution per share based on the percentage sold
of the total amount of shares being offered.
Shares
|
Shares
|
Shares
|
||||||||||
5% sold
|
50% sold
|
100% sold
|
||||||||||
Offering
price
|
$ | 5.00 | $ | 5.00 | $ | 5.00 | ||||||
Net
tangible book value before offering
|
(.26 | ) | (.26 | ) | (.26 | ) | ||||||
Increase
attributable to the offering
|
0.64 | 2.99 | 3.75 | |||||||||
Net
tangible book value after giving effect to the
offering
|
0.42 | 2.90 | 3.68 | |||||||||
Per
share Dilution to new investors
|
$ | 4.58 | $ | 2.11 | $ | 1.32 | ||||||
Percent
Dilution per share
|
92 | % | 42 | % | 26 | % |
We do not
intend to pay any cash dividends with respect to our common stock in the
foreseeable future. We intend to retain any earnings for use in the operation of
our business. Our Board of Directors will determine dividend policy in the
future based upon, among other things, our results of operations, financial
condition, contractual restrictions and other factors deemed relevant at the
time. We intend to retain appropriate levels of our earnings, if any, to support
our business activities.
25
Business
Cell-nique
began operations in 2006 as an unincorporated division of Physicians Capital
Corp. Cell-nique Corporation was incorporated in August 2008 and on December 31,
2008 the assets were transferred at historical cost from the unincorporated
division to the Company and the accumulated deficit of the prior operation since
inception was recapitalized as additional paid in capital and accumulating
deficit was reset to zero. At this time, Physicians Capital
Corporation is the sole shareholder and Dan and Donna Ratner its sole
shareholders. Cell-nique Corporation business office is located in
Weston, CT and the Company has rented warehouse space in Shelton, CT and Los
Angeles, CA. We develop, market, distribute and manage unique food
and beverage brands and products that are positioned as “better for you”
beverages and are targeted to the growing category of
“organic/natural/functional” beverage consumers. We own the US patient
registered trademark rights to the Cell-nique ®
brand, a new functional beverage that is certified organic containing 31 whole
superfoods with the following natural properties of nourishing, cleansing,
anti-oxidizing and alkaline-forming characteristics that are found in most all
natural vegetable, fruit juices and herbs that combine to make our product. We
began sales of Cell-nique in
2006.
We sell
our products in natural food stores, specialty gourmet, supermarket chains,
retail stores, yoga studios and gyms, doctor’s offices and directly on the
internet. We primarily sell our products through a network of natural, gourmet
and independent food and beverage distributors, as well as directly to
consumers.
The
natural and organic food, beverage and supplement industry is approximately $68
Billion in annual sales, yet it is fragmented and inefficient with many small
businesses with annual sales of less than $5 million.
We see
the opportunity to acquire and merge other natural and organic brands under
Cell-nique Corporation to reduce the duplication of sales staff and back-office
operations.
The
organic/natural/functional beverage category combines non-carbonated,
ready-to-drink iced teas, lemonades, juice cocktails, single-serve juices and
fruit beverages, ready-to-drink dairy and coffee drinks, energy drinks, sports
drinks, and single-serve still water (flavored, unflavored and enhanced). The
alternative beverage category is the fastest growing segment of the beverage
marketplace. Further, according to a 2009 publication of Natural Food
Merchandiser September 2009 issue, sales of organic, natural and functional
products reached approximately $68 Billion in the United States in
2008.
Category-sales
increases were led by beverages offering health benefits and we believe that
consumers have altered a shift in priorities from pure weight management to
total health management - a shift that is reflected in slower growth of “lo-cal”
and “light” products and increased growth in functional beverages. Of growth
products the most successful products were those with a health or functional
characteristic, such as energy and sport drinks for their performance-enhancing
benefits, or ready-to-drink tea for its antioxidant claims. The market was
estimated at $68 billion in 2008, and management projects sales of $75 billion
by 2013. Based on our direct and indirect knowledge of the beverage and
functional beverage industry, we predict:
|
·
|
Future category growth will
likely be among functional products offering specific health benefits -
for example, green superfoods and superjuices, alkalinizing, health and
antioxidant products; and
|
|
·
|
With increased availability and
greater consumer demand, functional beverages are at the beginning of a
major growth wave in the United States as they are strong in Asia, Europe
and Middle-East.
|
Functional
beverages are beverages that include ingredients designed to provide specific
benefits to the consumer. The sector typically includes juices, smoothies, teas,
soy-based and hemp-based drinks, energy drinks, enhanced waters and sports
drinks. “Better for you” beverages are a sub-sector of the functional
beverage industry which includes drinks designed to provide specific health
benefits to consumers.
Products
Our
proprietary brand is directed to consumers who prefer organic/natural/functional
beverage products to traditional carbonated soft drinks such as Coca-Cola®,
Pepsi® and 7-Up®. The new age functional beverage category is attractive to us
because it is a growth segment of the beverage market and we believe that
consumers will pay higher prices for these products than carbonated soft
drinks.
26
Our nine
products are named Cell-nique ®
, an
organic/natural/functional beverage that contains a high level of nutrition,
anti-oxidants, as well as natural cleansing and alkalinizing support from thirty
one (31) different vegetables, fruits and herb sources that are combined to make
this product. The 31 superfoods combined in our unique formula are the organic
juices that are naturally flavored and sweetened with organic
agave.
We
are currently developing new flavors and packaging concepts and different
formulas that support and promote cellular health, fitness and body care. We are
constantly evaluating new product offerings, and line extensions as well as
evaluating potential markets, products, brands and businesses to acquire. At
this time, we are not engaged to acquire any products, brands or
businesses.
Sales,
Marketing and Distribution
Our
sales and marketing strategy is to focus our efforts on developing brand
awareness and trial through sampling both in stores and at events. We employ a
“PUSH” - “PULL” promotional and advertising strategy (as more particularly
described below) to build brand awareness, generate trial/sampling purchases and
gain distribution of Cell-nique ®
. Our three stage “go-to-market” approach first educates the consumer
about the product through a combination of advertising and public relations
initiatives, then makes the product readily available with direct and three-tier
distribution, and finally implement programs to motivate consumers to buy Cell-nique ®.
“PUSH,”
or “getting the product on the shelf,” provides the programs necessary to gain
distribution and secure product placement on retailer’s limited shelves space.
It consists of customer marketing funds designed to support the customers’ best
promotional and consumption-building vehicles, as well as employee incentive and
training programs, while providing materials that clearly communicate Cell-nique ’s key brand
benefit: “A Farmer’s Market in Every Bottle” “The 1st Organic
Supergreen Drink, Have you Fed your Cells Today?” and “Green-a-licious.” These
materials consist of a variety of “communication messages,” including those
listed above, as well as shelf and cooler signs, window banners, floor displays
with and logo apparel.
“PULL,”
or getting the product “off-the-shelf” and into the hands of happy consumers,
answers the biggest question posed by buyers: “What are you doing to drive
consumers into my store to purchase your product?” Pull programs are designed to
entice and educate consumers, while motivating them to sell or purchase our
product. Various Pull programs include advertising directed towards the
consumer, instant redeemable or mail-in coupons, mail-in money back rebates,
retailer loyalty programs, co-branding with complementary products, and
education and promotional sampling events. We will employ all of the above to
support these programs that reach our targeted audience.
The
following are a sample of marketing approaches and tactics we use to build our
Cell-nique ®
brand:
|
·
|
Media advertisements placed with
the advice of media buying
professionals;
|
|
·
|
Improved and enhanced website and
e-mail communication;
|
|
·
|
In-store sales promotions and
education/demo sampling;
|
|
·
|
Targeted sponsorship of
brand-building events;
|
|
·
|
Endorsements from athletes and
participation in athletic event
promotions;
|
|
·
|
Trade show marketing;
and
|
27
Each of
these approaches is capital intensive, and additional capital will be needed to
continue these efforts.
Distribution
and Sales Channels
We
currently have a national network of mainstream, natural and specialty food
distributors and brokers in the United States. We sell directly to our
distributors, who in turn sell to retail stores. We also use our own sales group
and independent sales representatives to promote our products for our
distributors and direct sales to our retail customers. We have our own national
direct sales distribution channel, in addition to smaller local
distributors.
One of
the main goals of our sales and marketing efforts is to increase the number of
sales people and distributors focused on growing our brands. Where a market does
not support or lend itself to direct distribution, we intend to enlist local
mainstream beverage distributors to carry our products. Our increased efforts in
marketing also will require us to hire additional sales representatives and
other marketing expenses. We plan to use a portion of the proceeds of the public
offering toward hiring the additional sales people needed to support both the
expansion of our existing direct distribution and to grow sales through
mainstream distributors. We will be dependent upon obtaining the proceeds from
the public offering to implement our marketing expansion plans.
Our sales
force markets existing products, coordinate promotions and introduce new items.
We also offer our products and promotional merchandise directly to
consumers via the Internet through our website, www.cell-nique.com
. We plan to improve
and expand direct sales and education efforts through the website with a revised
offering later this year.
Marketing
to Distributors
We market
to distributors using a number of marketing strategies, including direct
solicitation, telemarketing, trade advertising and trade show exhibition. These
distributors include natural food, gourmet food, and mainstream distributors.
Our distributors sell our products directly to natural food, gourmet food and
mainstream supermarkets for sale to the public. We maintain direct contact with
the distributors through our in-house sales managers. In limited markets, where
use of our direct sales force is not cost-effective, we utilize food brokers and
outside representatives.
Marketing
to Retail Stores
We market
to retail stores by utilizing trade shows, trade advertising, telemarketing,
direct mail pieces and direct contact with the store. Our sales managers and
representatives visit these retail stores to sell directly in many regions.
Sales to retail stores are coordinated through our distribution network and our
regional warehouses.
Direct
Sales and Distribution
In
September 2006, we started Direct Sales and Distribution (DSD) to stores in
Northeast, using a direct hired sales team and our delivery trucks. Our in-house
sales manager works directly with our new route drivers and with distributors in
the Northeast market area from Maine to Philadelphia. A DSD system allows us to
have greater control over our marketing efforts, as we become less dependent on
distributors who have relationships with our competitors. In 2007, we added
Southern California to our DSD, We hope to expand our DSD network to areas
outside of Northeast and Southern California as our resources will
allow.
DSD
sales represented approximately $86,414 and $75,942 in 2009 and 2008,
respectively. These new direct-distribution accounts also include retail
locations, including health clubs, gyms, yoga studios, physician and integrative
medical offices, corporate and educational institutions, and “mom and pop”
convenience stores.
28
Marketing
to Consumers
Advertising . We utilize
several marketing strategies to market directly to consumers. Advertising in
targeted consumer magazines such as “Fit Yoga” and “Delicious” magazine,
in-store discounts on the products, in-store product demonstration, local and
regional sampling, coupon advertising, consumer trade shows, event sponsoring
and our website www.cell-nique.com are
current consumer-direct marketing campaigns.
Special Events and Concert
Series. We utilize special events and concerts to market directly to
consumers. In 2008, we purchased a promotional bus that has toured the country
from Connecticut to California. We have attended many musical events and have
exposed Cell-nique to over 50,000 persons per year.
Proprietary Coolers. The
placement of in-store branded refrigerated coolers by our competitors has proven
to have a significant positive effect on their sales. We are currently testing
our own Cell-nique branded coolers in a number of locations.
Sports
and Celebrity Endorsement
As
part of our marketing and communications campaign to promote Cell-nique ®,
we have unpaid endorsement from World Record cyclist Antony
Galvin.
We are
targeting unpaid new celebrity endorsement engagements with musicians, yoga
teachers, physical fitness gurus, professional sports athletes and Hollywood
celebrities for endorsement deals in the future. Such celebrities will be the
focus of Cell-nique
®
advertising campaigns and will conduct public appearances. In addition, our
celebrity endorsers will support the Cell-nique ®
brand at events and programs that we currently sponsor.
Seasonality
Sales
of ready-to-drink beverages traditionally are somewhat seasonal, with the second
and third calendar quarters accounting for the highest sales volumes. Cell-nique
is targeted as a daily lifestyle functional beverage and tends to have a
stronger 1st and
4th
quarter then our industry. The volume of sales in the beverage business may be
affected by weather conditions. Sales of our beverage products may become
increasingly subject to seasonal fluctuations. Quarterly fluctuations may also
be affected by other factors, including the introduction of new products, the
opening of new markets where temperature fluctuations are more pronounced, the
addition of new bottlers and distributors, changes in the mix of sales of our
finished products and changes in and/or increased advertising, marketing and
promotional expenses.
Research
and Development
The new
age functional beverage category growth is largely sustained by the constant
addition of new products, brands and brand extensions. An integral part of our
strategy is to develop and introduce innovative products and packages. The
development time from inception of the concept through product development and
testing to the manufacture and sale of the finished product is several months.
Not all new ideas survive consumer research. Our research, development,
manufacture, and distribution of Cell-nique ®
and other beverage products have thus far been limited by our capital
resources.
We are
currently engaged in several research and development activities and plan for
strategic acquisitions for expanding our line of products and further
determining the implications of mixing Cell-nique ®
superfood formula with other components such as teas, non-dairy beverages and
supplements.
Research
and development expenditures are expensed as incurred. Development activities
generally relate to creating new products, improving or creating variations of
existing products by mixing the formulas with other components such as teas,
non-dairy beverages and supplements. Research and development
expenditures were $1,236 and $16,824 for the years ending 2009 and
2008.
29
Manufacturing
Process
The
principal raw materials used are glass bottles which are commonly and readily
available in the market place worldwide, as well as vegetables, fruit juice
concentrates and herbs which are commonly and readily available in the market
place worldwide, the costs and availability of which are subject to
fluctuations. Due to the energy price fluctuations that continue to affect the
glass industry over the past few years, the prices of glass bottles continue to
increase. The prices of raw material ingredients continued to increase in 2007 –
2008 and have been stable for 2009. These increased costs, together with other
increased costs, primarily energy, gas and freight, resulted in increases in
certain product costs that are ongoing and are expected to continue to exert
pressure on our gross margins in the foreseeable future. We purchase
raw materials from multiple suppliers and don’t foresee any supply
constraints.
We rely
on third-party manufacturers to produce our products, using our proprietary
formula and flavor ingredients. Chemists continually observe the
product-manufacture and production-run and test the finished beverage product
and the package integrity. We obtain the raw materials for the manufacture of
our products from several sources and arrange for the direct delivery of these
raw materials to the third-party manufacturer. We normally pre-pay for the
manufacture and packaging materials. We own the finished inventory that is
shipped to warehouses upon completion.
We use
several suppliers of all necessary raw materials within the United States and
also available worldwide. In addition, there are numerous
co-packers/bottlers/manufacturers in the United States that can manufacture our
products for us. We do not have any written agreements or commitments with our
material suppliers, co-packers or manufacturers, and we do not anticipate having
contracts with any entities or persons committing such suppliers to provide the
materials required for the production of our products or committing such
manufacturers to provide manufacturing services to us or committing us to
purchase any materials or manufacturing services from any specific entities.
Principal supplies change from time to time based on price and available, the
following list include but are not limited to Organics by Nature, Vitro
Packaging, Starwest Botanicals, Pines International and CLD
Printing.
Distributors
For
the year ending December 31, 2009, natural food distributors such as, United
Natural Foods, Tree of Life, Natures Best, and Select Nutrition, accounted for
approximately 82% of our revenues, with the 18% balance a result of direct
sales marketing efforts. We continue to diversify sales and sales
channels. We remain dependent, however, on all of our distributors, and the loss
of any of our major distributors would have a material adverse effect on our
operating results.
We
have no agreements with most of our distributors, and we believe the lack of
agreements with United, Tree of Life/Kehe, Natures Best, Select Nutrition are
normal to our business and the natural food industry. These distributors have
non-exclusive rights to sell Cell-nique ®
and directly compete with each other for customers and distribution throughout
the country.
Competition
The
beverage industry is highly competitive. The principal areas of competition are
pricing, packaging, development of new products and flavors, and marketing
campaigns. Our product competes with a wide range of drinks produced by a
relatively large number of manufacturers, most of which have substantially
greater financial, marketing, and distribution resources than we
do.
Important
factors affecting our ability to compete successfully include:
|
·
|
the taste and flavor of our
products;
|
|
·
|
trade and consumer
promotions;
|
|
·
|
rapid and effective development
of new, unique, cutting-edge
products;
|
|
·
|
attractive and different
packaging;
|
|
·
|
branded product advertising;
and
|
30
|
·
|
pricing.
|
We also
compete for distributors who will concentrate on marketing our products over
those of our competitors, provide stable and reliable distribution, and secure
adequate shelf-space in retail outlets. Competitive pressures in the
alternative, energy, and functional beverage categories could cause our products
to be unable to gain market share and we could experience price erosion, which
could have a material adverse affect on our business and results.
We
compete not only for consumer acceptance, but also for maximum marketing efforts
by multi-brand licensed bottlers, brokers and distributors, many of which have a
principal affiliation with competing companies and brands. Our product competes
with all liquid refreshments and with products of much larger and substantially
better-financed competitors, including the products of numerous nationally and
internationally known producers such as The Coca-Cola Company, PepsiCo, Inc.,
Cadbury Schweppes plc, Red Bull Gmbh, Kraft Foods, Inc., Nestle Beverage
Company, Tree Top, Inc., and Ocean Spray Cranberries, Inc. We also compete with
companies that are smaller or primarily local in operation. Our products also
compete with private label brands such as those carried by grocery store chains,
convenience store chains and club stores.
To date,
our significant competition includes the following companies:
|
·
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Bossa Nova Beverage
Group;
|
|
·
|
Fuze Beverage,
LLC;
|
|
·
|
POM Wonderful,
LLC;
|
|
·
|
Sambazon,
Inc.
|
|
·
|
Naked
Juice;
|
|
·
|
Odwalla;
|
|
·
|
Bolthouse
Farms;
|
|
·
|
V8 Juice;
and
|
|
·
|
GT Kambucha
Tea
|
Fuze
Beverage, LLC produces a product line named “ Vitalize,” which are
non-carbonated beverages that contain anti-oxidants and electrolytes. POM
Wonderful, LLC produces a line of “POM Wonderful Pomegranate
Juices,” which contains naturally occurring polyphenol antioxidants,
Sambazon, Inc.’s “ Organic
Açai Juice with supergreens” contains açai berries and blue agave syrup,
Naked, Odwalla, Bolthouse Farms offer superfood/supergreen smoothie drinks, GT
Kambucha offers a Supergreen SKU and V8 may be the oldest and best known
vegetable drink offers Fusion, Splash and original formula.
Cell-nique
is differentiated from the competition in several ways:
|
·
|
Cell-nique is vegetable-based
not fruit-based resulting in lower
calories and natural sugars.
|
|
·
|
Cell-nique uses 31 organic
superfoods which is more than competitors and competitors are not
organic.
|
31
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements and the
related notes appearing elsewhere in this prospectus. This discussion and
analysis may contain forward-looking statements based on assumptions about our
future business. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including but not limited to those set forth under “Risk Factors” and elsewhere
in this prospectus.
Historical
Development
In
2006, Dan Ratner, our founder and Chief Executive Officer, began development of
Cell-nique, his first beverage creation. After 12 months of market and product
development, the product was introduced to the health food store market in the
Northeast in spring of 2006. By 2007, we expanded and diversified sales through
east coast natural food distributors from Maine to Florida and moved our
production to a larger facility in New Orleans, LA. By September
2008, we had expanded and diversified sales of our products nationwide through
natural food distributors from coast to coast and moved our production to a
larger facility in Milwaukee, WI; we have researched and determined that
additional production facilities are available in Florida, New Jersey and
California if demand increases. Since inception, Cell-nique’s
supergreen drink has sold approximately 600,000 bottles which represent nearly
$3 million in retails sales.
Overview
We
develop, manufacture, market and sell organic beverages. “Functional Beverages”
is a category that may includes natural soda, vegetable and fruit juices and
nutritional drinks, ready-to-drink teas, sports drinks and enhanced water. We
currently manufacture, market and sell nine unique flavors:
Cell-nique Super Green
Drink
|
·
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Apple
|
|
·
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Topical
|
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·
|
Pomegranate
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·
|
Citrus
Vanilla
|
|
·
|
Japanese Roasted (Kukicha)
Tea
|
|
·
|
Lemon
Ginger
|
|
·
|
Berry
Grape
|
|
·
|
Root
Beer
|
|
·
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Dark
Chocolate
|
We sell
most of our products in specialty gourmet and natural food stores, supermarket
chains, retail stores and restaurants in the United States. We primarily sell
our products through a network of natural, gourmet and independent distributors.
We also maintain an organization of in-house sales managers who work mainly in
the stores serviced by our natural, gourmet and mainstream distributors and with
our distributors. We work with regional independent sales representatives who
maintain store and distributor relationships in a specified territory. In the
nationwide, we have our own direct sales and distribution system.
The
following table shows a breakdown of net sales with respect to our distribution
channels for the periods set forth in the table:
32
Direct Sales
|
% of
total
sales
|
Natural Food
Distributors
|
% of
total
sales
|
Total
Sales
|
Total
Cases
|
$ Avg
Case
|
||||||||||||||||||||||
2009*
|
$ | 86,414 | 18 | % | $ | 400,445 | 82 | % | $ | 486,859 | 18,013 | $ | 27.03 | |||||||||||||||
2008
|
$ | 75,942 | 14 | % | $ | 448,543 | 86 | % | $ | 524,485 | 19,469 | $ | 26.94 | |||||||||||||||
2007
|
$ | 178,543 | 73 | % | $ | 81,500 | 27 | % | $ | 260,043 | 10,190 | $ | 25.52 | |||||||||||||||
2006
|
$ | 65,065 | 100 | % | $ | - | 0 | % | $ | 65,065 | 1,813 | $ | 35.89 | |||||||||||||||
Total
|
$ | 405,964 | 930,488 | $ | 1,336,452 | 49,485 | $ | 27.01 |
* as
of December 31, 2009
Historically,
we have focused our marketing efforts on natural and gourmet food stores. In
2008, we expanded our marketing efforts to include more mainstream markets.
These efforts included selling our products directly to:
|
·
|
large retail accounts, such as
Whole Foods Markets, Wegmans, Woodmans, Coburns/Cashways, Walgreens, as
well as expanding into natural food sections (store within a store) in
major mass market grocery
stores
|
|
·
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13,000 natural food stores
nationwide.
|
We
believe that the increase in net sales over this period comes from three
factors:
|
·
|
successes in our direct
distribution strategy,
|
|
·
|
increases in our core of national
distribution to natural and gourmet food stores and mainstream supermarket
chains ,
and
|
|
·
|
increases in our direct sales to
large retailers.
|
Almost as
important as increasing our net sales are increasing our gross margins. We
continue to work to reduce costs related to production of our products. However,
we have encountered difficulties in increasing our gross margins due to certain
factors, including:
|
·
|
inefficiencies commensurate with
a start-up period for 2006 and 2007 due to small batch runs at contracted
production facility, and
|
|
·
|
higher freight, glass and
production expenses due to the increase in the cost of fuel and
ingredients prices.
|
Intellectual
Property
On
January 23, 2007 Cell-nique® was
granted a certificate of registration from the United States Patent and
Trademark Office Reg No. 3,201,855. This is our only intellectual property which
represents our Brand. To protect the rights it must be renewed before 1-23-13
and again 1-23-17, thereafter it must be renewed every 10 years. We regard the
protection of our trademark, trade dress and trade secrets as critical to our
company. We regard our Cell-nique® name as
critical to our success and attempt to protect such property with registered and
common law trademarks and copyrights, restrictions on disclosure and other
actions to prevent infringement. Product packages, mechanical designs
and artwork are important to our success and we would take action to protect
against imitation of our packaging and trade dress and to protect our trademark,
as necessary. We also rely on a combination of laws and contractual
restrictions, such as confidentiality agreements, to establish and protect our
proprietary rights, trade dress and trade secrets. However, laws and
contractual restrictions may not be sufficient to protect the exclusivity of our
intellectual property rights, trade dress or trade
secrets. Furthermore, enforcing our rights to our intellectual
property could involve the expenditure of significant management and financial
resources. Third parties may infringe or misappropriate our trademark
and similar proprietary rights. Moreover, if we are found to have
been deficient in policing our trademarks and proprietary rights, we may lose
our rights to such intellectual property. If we lose some or all of our
intellectual property rights, our business may be materially and adversely
affected.
33
Regulation
The
United States Department of Agriculture (USDA) and Food and Drug Administration
(FDA) issues rules and regulations for the food and beverage industry,
including, but not limited to, the labeling and formulary ingredients of
beverage products. We are also subject to various state and local statutes and
regulations applicable to the production, transportation, sale, safety,
advertising, and labeling of our product. Compliance with these provisions has
not had, and we do not expect such compliance to have, any material adverse
effect upon our capital expenditures, net income, or competitive position.
Regulatory guidelines, however, are constantly changing, and there can be no
assurance that our product and our third-party manufacturers will be able to
comply with ongoing government regulations. Non-compliance with regulation may
result in fines, restriction of sales and/or product recalls. The Company is in
good standing with USDA and FDA.
There are
no governmental approvals necessary to manufacture and sell our food or
beverages. The Company, our co-packers and some raw material suppliers must
follow USDA’s National Organic Program (NOP) which develops, implements, and
administers national production, handling, and labeling standards for organic
agricultural products. The NOP also accredits the certifying agents (foreign and
domestic) who inspect organic production and handling operations to certify that
they meet USDA standards. Cell-nique is inspected by Oregon Tilth and
is in full compliance with USDA NOP regulations.
The
production, marketing and sale of our beverages, including contents, labels,
caps and containers, are subject to the rules and regulations of various
federal, provincial, state and local health agencies. If a regulatory
authority finds that a current or future product or production run is not in
compliance with any of these regulations, we may be fined, or production may be
stopped, thus adversely affecting our financial conditions and
operations. Similarly, any adverse publicity associated with any
noncompliance may damage our reputation and our ability to successfully market
our products. Furthermore, the rules and regulations are subject to
change from time to time and while we closely monitor developments in this area,
we have no way of anticipating whether changes in these rules and regulations
will impact our business adversely. Additional or revised regulatory
requirements, whether labeling, environmental, tax or otherwise, could have a
material adverse effect on our financial condition and results of
operations.
Employees
As of
December 31, 2009, we had 2 full-time employees which spend approximately
40 hours per week respectively and who have contributed their salary back to the
company as additional paid in capital. These employees/officers have no formal
employment contract, but the company foresees that upon raising nominal capital
and the company has adequate cash on hand to meet its monthly expenses that the
employee/officers will no longer contribute their compensation to the company
and begin to receive cash compensation for services rendered.
In
addition, the company has 2 part-time that draw hourly compensation and do not
have employment agreements and anyone may be terminated at will.
The
balance of our 75+ workforces are not our employees, but outsourced using
independent brokerage contracts and other independent contractor agreements to
support nationwide operations for sales, merchandising and demo
events.
Our
independent broker network is approximately 60 individuals that are engaged to
represent the brand by selling it into stores in a given territory for a
compensation of 5% of net sales payable monthly. All broker agreements may be
terminated for any reason with either a 30 or 60 days notice depending upon
notice period agreement. The brokers represent multiple non-related brands and
are on a best efforts basis, there is no accountability for their time, quota or
productivity measurements for their performance. This independent brokerage
network drives approximately 95% of our sales.
Our
merchandisers and demo event representatives is approximately 15 individuals
that are engaged on an as needed basis and they offer such services to multiple
brands from time-to-time. We typically pay an hourly rate of $15 - $25 / hour
for special events that last 3 – 12 hours. Over the past year we have used these
event representatives for approximately 150+ events.
All such
agents meet the IRS and various state employment regulations definition of
independent contractor and either work for themselves or other such company
which provides said services which include marketing, merchandising and sales
support for the Company. The terms of such agreements are subject to the
Companies are either cancellation on 30-60 days notice or engaged for limited
time periods.
The
company has many options to execute its sale and marketing operations which
include hiring staff as employees or outsourcing staff field staff to
independent contractors. The Company does not see a limitation of qualified
workers or independent contractors to operate its business. None of
our employees are covered by a collective bargaining agreement, nor are they
represented by a labor union. We have not experienced any work stoppages, and we
consider relations with our employees to be good.
34
Financial
Condition and Results of Operations
Results
of Operations
Year
ended December 31, 2009 Compared to year ended December 31,
2008
Sales
of $524,485 for the year ended December 31, 2008 represented a decrease of 7% or
$37,626, as compared to 2009 sales of $489,859. The decrease in
revenues was primarily due to originating new distribution, the first order,
often called front-end loading of warehouses, can result in a one-time
sell-in. While 2008 sales were slightly higher, sales for 2009 are more
meaningful since no new first time warehouses were sold-in, therefore all
sales were reoccurring inventory turn-over sales to stores. In addition, 2009
saw slightly higher average price per case which increased in 2009 to $27.03, as
compared to $26.94 in 2008, due to management offering less off-invoice
discounts from gross invoice prices.
Cost
of Goods Sold
Cost
of goods sold consists primarily of the costs of our ingredients, packaging,
production, storage and freight. We were able to improve cost of
goods sold margin in 2009 to 48% from 55% in 2008. Actual cost of goods sold
decreased to $233,498 during the year ended December 31, 2009 from $289,011
in 2008. Our costs of sales on a per-unit basis are approximately 7%
lower in the 2009, over the same prior year period, due to better buying power,
lower commodity prices on certain ingredients and reduced freight and storage
fees. We anticipate cost of goods sold to remain relatively stable in
the coming months.
Gross
Profit
Our
gross profit increased to $253,361 in the year ended December 31, 2009, from
$235,474 in 2008, an increase of $17,887 or 108%. The gross
profit as a percentage of sales also increased to 52% in 2009, from 45% in
2008.
Selling
and marketing expenses
Selling
and marketing expenses consist primarily of direct charges for staff
compensation costs, advertising, sales promotion, marketing and, consumer
marketing, events and trade shows. Selling and marketing costs increased to
$360,239 in the year ended December 31, 2009 from $309,515 in 2008, a net
increase of $50,724 or 116%. The increase is from implementing
promotional pricing program with larger accounts, and increasing sales
representation and related costs of selling through natural food
stores.
Our
strategic direction in sales is to focus on our product placements in an
estimated 13,000 natural food stores nationwide. We have found that our most
effective sales efforts are to natural food stores and growing our direct
internet sales.
General
and Administrative Expenses
General
and administrative expense consists primarily of the cost of executive,
administrative, and finance personnel, as well as professional fees. General and
administrative expenses decreased during the year ended December 31, 2009 which
was $306,604 from $323,689 in the same period of 2008, a net decrease of $17,085
was related to a one-time write-off of bad closures; otherwise the G&A would
have been nearly flat for the two periods. We kept tight control over general
and administrative expenses in 2009 which actually decreased slightly for the
period which was offset by slightly larger professional costs related to
preparing this offering and related audit and legal work.
Loss
from Operations
Our loss
from operations increased to $690,572 in the year ended December 31, 2009 from
$667,515 in the same period of 2008. The increase in selling expenses and
depreciation expense was off-set by lower research and development investment in
2009.
Interest
Expense
Interest
expense increased to $93,405 in the year ended December 31, 2009, compared to
interest expense of $73,603 in the same period of 2008. The increase
is due to the increased borrowing under a working capital
facility.
Liquidity
and Capital Resources
As of
December 31, 2009, we had shareholders equity of ($1,276,222) and we had a
working capital of ($1,347,081) compared to shareholders equity of ($1,431,606)
and a working capital of ($1,001,906) at December 31, 2008. Cash and cash
equivalents were $7,624 as of December 31, 2009, as compared to $0 at December
31, 2008. This decrease in our working capital was primarily attributable to
reduction in net inventory position and an increase of the outstanding balance
of our line of credit which funded operating losses for 2009. Based
on availability under our line of credit with Physicians Capital Corp, we
estimate that the Company would be able to draw approximately $150,000 -
$250,000 during the next 12 months, assuming sales remain static and the
offering is insufficient to meet cash needs.
35
We
believe that the Company has a number of options for gaining the necessary
working capital in 2010 needed to fund our seasonality, product launches and
other growth plans. Our primary capital source will be cash flow from
operations. We are also investigating improved working capital loans
that more fully value our inventory and accounts receivable assets as
collateral. We may raise funds through a combination of equity and
debt. We believe that the Company may be able to cut additional costs
if our sales goals do not materialize, and that our costs can be managed to
produce break-even operations. Historically, we have financed our
operations primarily through a line of credit and cash generated from
operations.
Net
cash used in operations during first year ending December 31, 2009 was
$194,439 compared with $159,731 used in operations during the same period in
2008. An increase in cash used in operations during 2009 was
primarily a result of increased sales expenses and operating loses, offset by a
decrease in inventory and increase in accounts payable.
Net
cash used in investing activities of $9,052 during 2009 compared with $26,933
during 2008 was primarily the result of capital equipment
purchases.
Net
cash provided by financing activities of $211,115 during 2009 compared with
$197,518 during 2008 was primarily due to proceeds from working capital
loans.
Our
operating losses have negatively impacted our liquidity and we are continuing to
work on decreasing operating losses, while focusing on increasing net sales. We
can continue to draw on our line of credit with Physicians
Capital. We believe that we can raise money through this equity
offering to generate working and strategic capital to grow the
business.
We may
not generate sufficient revenues from product sales in the future to achieve
profitable operations. If we are not able to achieve profitable operations at
some point in the future, we eventually may have insufficient working capital to
maintain our operations as we presently intend to conduct them or to fund our
expansion and marketing and product development plans. In addition, our losses
may increase in the future as we expand our manufacturing capabilities and fund
our marketing plans and product development. These losses, among other things,
have had and will continue to have an adverse effect on our working capital,
total assets and stockholders’ equity. If we are unable to achieve
profitability, the market value of our common stock will decline and there would
be a material adverse effect on our financial condition.
If we
continue to suffer losses from operations, the proceeds from our public offering
and private placement may be insufficient to support our ability to expand our
business operations as rapidly as we would deem necessary at any time, unless we
are able to obtain additional financing. There can be no assurance that we will
be able to obtain such financing on acceptable terms, or at all. If adequate
funds are not available or are not available on acceptable terms, we may not be
able to pursue our business objectives and would be required to reduce our level
of operations, including reducing infrastructure, promotions, personnel and
other operating expenses. These events could adversely affect our business,
results of operations and financial condition. We cannot assure you that
additional financing will be available on terms favorable to us, or at all. If
adequate funds are not available or if they are not available on acceptable
terms, our ability to fund the growth of our operations, take advantage of
opportunities, develop products or services or otherwise respond to competitive
pressures, could be significantly limited.
“Best Efforts” –
Maximum Sales and No Minimum Sales
We plan
to conduct our offering as a “best efforts” basis since there has been no formal
commitment for any amount of capital either through individual subscribers or
NASD Broker-Dealers.
If the
Company should raise the maximum net proceeds from the offering in the amount of
$74,925,000 it will be able to expand the Company and acquire other brands and
companies. There is no minimum sale for this offering and all efforts
to raise capital are on a best efforts basis. If the Company does not
raise capital it will have to limit its operations to gross operating
margins.
Cash
Requirements
It is the
Company’s intent to raise net proceeds of $74,925,000 from this public offering
for strategic growth. The following summarizes anticipated cash requirements to
achieve such strategic goals. Should we not raise the net proceeds from this
offering we would have to limit our growth and expenditure to our gross
operating margins.
Need for Additional
Personnel
It is
anticipated that with the investment of proceeds from this Offering, the number
of employees may increase, even with our outsourcing many tasks. If funds are
not available then management will operate at expenditure relative to our gross
operating margins.
36
Going
Concern
Our
accountant’s report contains a going concern paragraph meaning that to date we
have limited operational history. Our objective is to remain a going
concern, and as previously mentioned, we have no plans to cease operations,
declare bankruptcy or liquidate any of the Company’s assets and may have extra
funds available as debt financing.
As
shown in the accompanying financial statements, which include all adjustments
which in the opinion of management are necessary in order to make the financial
statements not misleading, the Company has incurred cumulative net operating
losses of $1,962,222 through December 31, 2009 since inception, has a
stockholders’ deficit, negative working capital, and is considered a company
with limited operating history. Management’s plans include the raising of
capital through the equity markets to fund future operations and the generating
of revenue through its business. Failure to raise adequate capital and generate
adequate sales revenues could result in the Company having to curtail or cease
operations. Additionally, even if the Company does raise sufficient
capital to support its operating expenses and generate adequate revenues, there
can be no assurances that the revenue will be sufficient to enable it to develop
business to a level where it will generate profits and cash flows from
operations. Our auditors have concluded in their accountant’s report that these
matters raise substantial doubt about the Company’s ability to continue as a
going concern. However, the accompanying financial statements have
been prepared on a going concern basis, which contemplates the realization of
assets and satisfaction of liabilities in the normal course of
business. These financial statements do not include any adjustments
relating to the recovery of the recorded assets or the classification of the
liabilities that might be necessary should the Company be unable to continue as
a going concern.
Loans
Payable
Previous
loans are and have been due to related parties.
Results of
Operations
We have
engaged in limited operations since 2006.
For the
current fiscal year, we anticipate incurring a loss as a result of
organizational expenses, expenses associated with registration under the
Securities Exchange Act of 1934, and expenses associated with locating and
evaluating acquisition candidates. We anticipate that until a business
combination is completed with an acquisition candidate, we will not generate
revenues other than interest income, and may continue to operate at a loss after
completing a business combination, depending upon the performance of the
acquired business.
Substantially
all of our working capital needs subsequent to this offering will be
attributable to the identification of a suitable target, and thereafter to
effectuate a business combination with such target. Such working capital needs
are expected to be satisfied from the net proceeds of this offering. Although no
assurances can be made, we believe we can satisfy our cash requirements until a
business combination is consummated with 10% of the net proceeds derived hereby.
Because of the possible indefinite period of time to consummate a business
combination and the nature and cost of our expenses related to our search for
and analysis of a target, there can be no assurances that our cash requirements
until a business combination is consummated will be satisfied with 10% of the
net proceeds of this offering. Prior to the conclusion of this offering we
currently anticipate our expenses to be limited to accounting fees, legal fees,
telephone, mailing, filing fees, escrow agent fees and transfer agent fees. See
"Risk Factors."
37
We do not
foresee that we would enter into a merger or acquisition transaction with any
business with which its officers or directors are currently affiliated. Should
we determine in the future, contrary to the foregoing expectations, that a
transaction with an affiliate would be in our best interests and our
stockholders, we are in general permitted by law to enter into such a
transaction if:
(1) The
material facts as to the relationship or interest of the affiliate and as to the
contract or transaction are disclosed or are known to the Board of Directors,
and the Board in good faith authorizes the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even
though the disinterested directors constitute less than a quorum;
or
(2) The
material facts as to the relationship or interest of the affiliate and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(3) The
contract or transaction is fair as to us as of the time it is authorized,
approved or ratified, by the Board of Directors or the
stockholders.
Need for Additional
Financing
We
believe that our existing working capital lines will allow us to continue
operations at the present operating expense levels, including the costs of
compliance with the continuing reporting requirements of the Securities Exchange
Act of 1934, as amended, for a period of approximately one year. Accordingly, in
the event we are able to complete a business combination during this period, we
anticipate that our existing capital will be sufficient to allow us to
accomplish the goal of completing a business combination. There is no assurance,
however, that the available funds will ultimately prove to be adequate to allow
us to complete a business combination, and once a business combination is
completed, our needs for additional financing are likely to increase
substantially.
No
commitments to provide additional funds have been made by management or other
stockholders other than the Physicians Capital Corporation loan. There is no
stated maximum limit on loan with Physicians Capital Corporation and Cell-nique
Corporation may draw as needed until maturity to meet its cash
requirements.
Irrespective
of whether our cash assets prove to be inadequate to meet our operational needs,
we might seek to compensate providers of services by issuances of stock in lieu
of cash.
Critical Accounting
Policies
The
preparation of the financial statements requires the use of estimates and
assumptions. These affect the classification and valuation of assets,
liabilities, income, expenses and contingent liabilities. Estimates and
assumptions mainly relate to the useful life of noncurrent assets, the
discounted cash flows used in impairment testing and the establishment of
provisions for litigation, pensions and other benefits, taxes, environmental
protection, inventory valuations, sales allowances, product liability and
guarantees. Estimates are based on historical experience and other assumptions
that are considered reasonable under the circumstances. Actual values may vary
from the estimates. The estimates and the assumptions are continually
reviewed.
To
enhance the information content of the estimates, certain provisions that could
have a material effect on the financial position and results of operations are
selected and tested for their sensitivity to changes in the underlying
parameters. To reflect uncertainty about the likelihood of the assumed events
actually occurring, the impact of a 5 percent change in the probability of
occurrence is examined in each case. Analysis has not shown other provisions to
be materially sensitive.
38
Critical
accounting and valuation policies and methods are those that are both most
important to the portrayal of the Company’s financial position, results of
operations and cash flows, and that require the application of difficult,
subjective and complex judgments, often as a result of the need to make
estimates about the effects of matters that are inherently uncertain and may
change in subsequent periods. The critical accounting policies that we disclose
will not necessarily result in material changes to our financial statements in
any given period but rather contain a potential for material change. While not
all of the significant accounting policies require difficult, subjective or
complex judgments, the Company considers that the following accounting policies
should be considered critical accounting policies.
Intangible assets and
property, plant and equipment
At
December 31, 2009 the Company had intangible assets with a net carrying amount
of $0 and property, plant and equipment with a net carrying amount of $70,859.
At December 31, 2008 the Company had intangible assets with a net carrying
amount of $0 and property, plant and equipment with a net carrying amount of
$84,300. Intangible assets with finite useful lives and property, plant and
equipment are amortized over their estimated useful lives. The estimated useful
lives are based on estimates of the period during which the assets will generate
revenue.
Intangible
assets with finite useful lives and property, plant and equipment are tested for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may no longer be recoverable. Goodwill and
intangible assets with indefinite useful lives must be tested annually for
impairment. In compliance with SFAS No. 142 (Goodwill and Other Intangible
Assets), impairment losses are measured by comparing the carrying amounts to the
fair value for intangible assets and to implied fair value for goodwill. Where
it is not possible to estimate the impairment loss for an individual asset, the
loss is assessed on the basis of the discounted cash flow for the
cash-generating unit to which the asset belongs. Estimating the discounted
future cash flows involves significant assumptions, especially regarding future
sales prices, sales volumes and costs. The discounting process is also based on
assumptions and estimations relating to business-specific costs of capital,
which in turn are based on country risks, credit risks as well as additional
risks resulting from the volatility of the respective line of business. The
present value of future cash flows measures an asset’s value based on our
continuing use of the asset and its retirement at the end of its useful
life.
Stock based
compensation
The
Company has adopted Statement of Financial Accounting Standards (“SFAS”) No.
123R related to accounting for stock-based compensation. As a result, stock
options are measured based on the grant-date fair value of the
award.
Forward-looking
Information
Certain
statements in this document are forward-looking in nature and relate to trends
and events that may affect our future financial position and operating results.
The words “expect” “anticipate” and similar words or expressions are to identify
forward-looking statements. These statements speak only as of the date of the
document; those statements are based on current expectations, are inherently
uncertain and should be viewed with caution. Actual results may differ
materially from the forward-looking statements as a result of many factors,
including changes in economic conditions and other unanticipated events and
conditions. It is not possible to foresee or to identify all such factors. We
make no commitment to update any forward-looking statement or to disclose any
facts, events or circumstances after the date of this document that may affect
the accuracy of any forward-looking statement.
39
Financial Planning and
Historical Information
The
Issuer has not registered any of its shares to date.
Ownership
of Common Stock
The
Company’s authorized capitalization is currently comprised of 49,000,000 shares
of $.00001 par value per share Common stock and 1,000,000 of $2.00 stated value
per share Preferred stock. Of these, 20,000,000 shares of Common will
be outstanding following the completion of this Offering. Assuming that the
maximum number offered hereunder of 15,000,000 Common Shares are sold, insiders
will own 25% of the Company’s issued and outstanding common stock. See
“Management” and “Risk Factors – Control by Management.”
In
addition, shares of authorized Common stock will be reserved for employee
benefit plans and directors stock option plans. The details of eligibility and
operation of these plans will be established by the Board of Directors at a
later date.
Upon
completion of the corporate reorganization, the distribution of the Company
Common and Preferred stock will be as follows. See * below,
Shares
|
||||||||
Owner
|
Common Stock
|
Percent
|
||||||
Insiders:
|
||||||||
(Physicians
Capital Corp. which 100% controlled by Dan and Donna
Ratner)
|
5,000,000
|
25 | % | |||||
New
Stock Sale to Investors
|
15,000,000 | 75 | % | |||||
Total
Shares Outstanding
|
20,000,000 | 100 | % | |||||
Preferred
Stock
|
None
|
Principal
Shareholders
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding beneficial ownership of
our common stock as of September 30, 2009, by (i) each person (including any
“group” as that term is used in Section 13(d)(3) of the Securities Act of 1934
(the “Exchange Act”) who is known by us to own beneficially 5% or more of the
common stock, (ii) each director of the Company, and (iii) all directors and
executive officers as a group. Unless otherwise indicated, all persons listed
below have sole voting power and investment power with respect to such shares.
The total number of common shares authorized is 49,000,000 shares, each of which
is $.00001 per share par value. On Jan 18, 2010, the board of directors
authorized a 2.8 to 1 reverse stock split of outstanding common shares and
financials are presented based on the effective outstanding shares. No shares
have been issued to parties owning less then 5% of the outstanding shares
5,000,000 shares have been issued and are outstanding as
follows:
Except as
otherwise indicated below, the persons named in the table have sole voting and
investment power with respect to all shares of common stock held by
them. Unless otherwise indicated, the principal address of each
listed executive officer and director is 12 Old Stage Coach Rd, Weston, CT
06883.
Name of Beneficial Owner
|
Number of Shares
Beneficially Owned
|
Percentage
of Shares
Beneficially
Owned (1)
|
||||||
Directors
and Named Executive Officers
|
||||||||
Dan
Ratner (2)
|
5,000,000
|
100
|
||||||
Donna
Ratner (2)
|
5,000,000
|
100
|
||||||
Directors
and executive officers as a group (2 persons)
|
5,000,000
|
100
|
||||||
5% or greater
stockholders
|
5,000,000
|
100
|
(1)
|
Beneficial ownership is
determined in accordance with the rules of the SEC. Shares of
common stock subject to options or warrants currently exercisable or
exercisable within 60 days of the date of this prospectus are
deemed outstanding for computing the percentage ownership of the
stockholder holding the options or warrants but are not deemed outstanding
for computing the percentage ownership of any other
stockholder. Unless otherwise indicated in the footnotes to
this table, we believe stockholders named in the table have sole voting
and sole investment power with respect to the shares set forth opposite
such stockholder’s name. Percentage of ownership is based on
approximately 5,000,000 shares of common stock outstanding as of the date
of this prospectus.
|
(2)
|
Physicians Capital Corp is the
holder of common stock which is 100% controlled by Dan Ratner and Donna
Ratner which are husband and wife and board members. The same
number of shares of common stock is shown for each of them, as they may
each be deemed to be the beneficial owner of all of such
shares.
|
40
Principal
Shareholders Showing Both Classes of Stock Common and Preferred
Note:
Percent Owned is total Controlling Interest in Company of both Classes
together
Shares Beneficially
|
Shares Beneficially
|
|||||||||||||||
Owned Prior to Offering
|
Owned After
to Offering
|
|||||||||||||||
Number
|
Percent
|
Number
|
Percent
|
|||||||||||||
Physicians
Capital Corp.
(100%
controlled by
Dan
and Donna Ratner, Directors)
|
|
|||||||||||||||
Common
|
5,000,000
|
100
|
%
|
5,000,000
|
25
|
%
|
||||||||||
Pref.
|
None
|
0
|
%
|
None
|
0
|
%
|
||||||||||
100
|
%
|
25
|
%
|
|||||||||||||
Total
Shares Outstanding
|
||||||||||||||||
Common
|
5,000,000
|
100
|
%
|
5,000,000
|
25
|
%
|
||||||||||
Pref.
|
None
|
0
|
%
|
None
|
0
|
%
|
||||||||||
100
|
%
|
25
|
%
|
Directors
and officers as a group – 5,000,000 shares
Controlled
through their ownership of Physicians Capital Corporation: Dan Ratner,
President/CEO and Donna Ratner, Chief Marketing Officer.
Management
There
are currently 2 occupied seats on the Board of Directors. The following table
sets forth information with respect to the directors and executive
officers.
Name
|
Position
|
Age
|
|||
Dan
Ratner
|
Chief
Executive Officer, Chief Financial Officer and Chairman of the
Board
|
47
|
|||
Donna
Ratner
|
Chief
Marketing Officer and Vice Chairman and Secretary,
Director
|
50
|
Dan Ratner, founded our
company in 2006. Mr. Ratner has served as our Chairman, Chief Executive Officer
and Chief Financial Officer since inception. Mr. Ratner has been responsible for
our design and products, including the original product recipes, the proprietary
manufacturing process and the packaging and marketing strategies. Prior to
Founding Physicians Capital Corp in 1996, Mr. Ratner had worked as Vice
President at Advanced Health, GE Capital and Linc Group/ABN-AMRO Bank, and
Senior Consultant at Price Waterhouse. Mr. Ratner received a double
major B.S. in Accounting and Finance in 1985 from University of Arizona,
Tucson.
Donna Ratner has been our
Executive Director of Marketing since October 2007. Ms. Ratner worked
as Marketing Manger at CBS Sports and MTV networks in the national marketing
department. Ms Ratner marketed and brokered Shenandoah Natural Beef to natural
food stores including Whole Foods Market.
Other
than the relationship of Dan Ratner and Donna Ratner, none of our directors or
executive officers are related to one another.
41
There are
no written employment agreements with any of our officers or key employees,
including Dan Ratner or Donna Ratner. We do not have any agreements which
provide for severance upon termination of employment, whether in context of a
change of control or not.
Executive
Advisory Board
We will
establish an informal executive advisory board, appointed by Dan Ratner and
Donna Ratner. The role of the executive advisory board is to be available to
assist our management with general business and strategic planning advice upon
request from time-to time. Accordingly, the executive advisory board members
intend to devote themselves part-time to our affairs.
Executive
Compensation
No
officer or director has received any cash compensation. Until the Company
acquires additional capital, it is not intended that any officer or director
will receive cash compensation from the Company. See "Certain
Relationships and Related Transactions." The Company has no stock option,
retirement, pension, or profit-sharing programs for the benefit of directors,
officers or other employees, but the Board of Directors may recommend adoption
of one or more such programs in the future. At this time there is no executive
compensation agreements and plans for executive compensation have not been
contemplated or formalized. Based on a successful Offering such agreements will
be contemplated and disclosed accordingly.
The
following table summarizes all compensation for interim period and fiscal years
2009, 2008 and 2007 received by our principal executive officer, principal
financial officer and the three most highly compensated executive officers who
earned more than $100,000 in fiscal year 2008, our “Named Executive
Officers”.
Name and
Principal
Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
($)(1)
|
Non-
Equity
Incentive
Plan
Compensation
|
Non-
Qualified
Deferred
Compensation
Earnings
|
All Other
Compensation
|
Total
|
|||||||||||||||||||||||||
Dan Ratner , Chief
Executive Officer, Chief Financial Officer
(1)
|
2009
|
$ | 160,000 | - | - | - | - | - | $ | 160,000 | ||||||||||||||||||||||||
(1)
|
2008
|
$ | 160,000 | - | - | - | - | - | $ | 160,000 | ||||||||||||||||||||||||
(1)
|
2007
|
$ | 80,000 | - | - | - | - | - | $ | 80,000 |
(1) Management
elected to contribute all compensation earned to the company as equity capital.
All amounts are non-cash compensation expensed and capitalized as additional
paid-in capital.
Other
Transactions
All
transactions between our company and its officers. directors and 5% or more
shareholders will be on terms no less favorable to the Company than that which
could be obtained from independent third parties.
Directors'
Compensation
Members
of the executive advisory board will receive payment for their services, travel
and other expenses incurred in connection with attendance at each
meeting.
Indemnification
of Officers and Directors
At
present we have not entered into individual indemnity agreements with our
officers or directors. However, our by-laws contain a provision which requires
us to indemnify any director or officer or former director or officer against
actual expenses incurred in defending any legal action where they are a party by
reason of being or having been a director or officer. However we are not
required to indemnify any such person who is found to be liable for negligence
or misconduct in their performance of their duty.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, 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 of 1933, as amended, 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 a
director, officer or controlling person in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, we will, unless in the
opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933, as amended, and we will be governed by the final adjudication of
such case.
42
Our
amended certificate of incorporation provides that, to the fullest extent
permitted by Delaware law, as it may be amended from time to time, none of our
directors will be personally liable to 'us or our stockholders for monetary
damages resulting from a breach of fiduciary duty as a director.
Our
amended certificate of incorporation also provides discretionary indemnification
for the benefit of our directors, officers, and employees, to the fullest extent
permitted by Delaware law, as it may be amended from time to time.
Pursuant
to our amended bylaws, we are required to indemnify our directors, officers,
employees and agents, and we have the discretion to advance his or her related
expenses, to the fullest extent permitted by law.
Directors
and Officers Insurance
We
are exploring the possibility of obtaining directors and officers ("D & O")
liability insurance. We have obtained several premium quotations but have not
entered into any contract with any insurance company to provide said coverages
as of the date of this offering. There is no assurance that we will be able to
obtain such insurance.
Keyman
Life Insurance
No
Keyman insurance has been purchased to date, upon successful raising funds from
the offering, life insurance on key personnel is expected to be purchased after
the effective date of this offering in amounts up to $2 million, 50% payable to
the Company and 50% payable to family beneficiaries. We are planning to purchase
such insurance towards the cross purchase of shares from the estate of an
officer or director and to provide us with the capital to replace the executive
loss (executive search for successor, etc.). The costs of such insurance is not
expected to be material.
Conflicts
of Interest
Our
officers will devote substantially full-time (40 hours per week) to the affairs
of the Company. There will be occasions when the time requirements of our
business may conflict with the demands of the officers' other business and
investment activities. Such conflicts may require that we attempt to employ
additional personnel. There is no assurance that the services of such persons
will be available or that they can be obtained upon terms favorable to
us.
Certain
Transactions
We shall
not make any loans to any officers or directors following this offering.
Further, we shall not borrow funds for the purpose of making payments to our
officers, directors, promoters, management or their affiliates or
associates.
None of
our officers, directors, or affiliates has or proposes to have any direct or
indirect material interest in any asset proposed to be acquired by us through
security holdings, contracts, options, or otherwise. Although this situation
could arise.
We have
adopted a policy under which any consulting or finder's fee that may be paid to
a third party for consulting services to assist management in evaluating a
prospective business opportunity would be paid in stock or in cash. Any such
issuance of stock would be made on an ad hoc basis. Accordingly, we are unable
to predict whether or in what amount such a stock issuance might be
made.
It is not
currently anticipated that any salary, consulting fee, or finder's fee shall be
paid to any of our directors or executive officers, or to any other affiliate of
the Company except as described under "Executive Compensation"
above.
43
Cell-nique
Corporation has a loan payable to Physicians Capital Corporation, which was the
parent company of Cell-nique since inception. Dan and Donna Ratner own and
control Physicians Capital Corporation and are majority shareholder of
Cell-nique Corporation. At Director , 2009, the aggregate
outstanding principal balance of the Physicians Capital loan was $1,451,786
including an aggregate accrued unpaid interest of $216,103. Cell-nique is in
good standing under the terms of the note agreement due on December 31, 2011.
The principal terms of the note between Physicians Capital Corporation and
Cell-nique Corporation are 8% interest annually based on the average outstanding
balance for the quarter and accrue until maturity. There is no stated maximum
limit on loan with Physicians Capital Corporation and Cell-nique Corporation may
draw as needed until maturity. It is contemplated that use of proceeds are to
repay debt and if proceeds from the offering are insufficient to repay all the
debt when due, either the due date will be automatically extended for additional
12 months and/or partial repayment or approximately 10% - 25% is also acceptable
to Management and Note Holder.
Description
of Securities
All
material provisions of our capital stock are summarized in this prospectus.
However the following description is not complete and is subject to applicable
Delaware law and to the provisions of our articles of incorporation and bylaws.
We have filed copies of these documents as exhibits to the registration
statement related to this prospectus.
Common
Stock
We are
authorized to issue 49,000,000 shares, at a par value of $.00001 per share. As
of the date of this prospectus, there are 5,000,000 shares outstanding. After
giving effect to the offering, the issued and outstanding capital common stock
of the Company will consist of 20,000,000 shares. This assumes that 15,000,000,
which is the maximum number of shares offered hereunder, are sold through our
self underwriting
You have
the voting rights for your shares. You and all other holders of
common stock are entitled to one vote for each share held of record on all
matters to be voted on by stockholders. You have no cumulative voting rights
with respect to the election of directors, with the result that the holders of
more than 50% of the shares voting for the election of directors can elect all
of the directors then up for election.
You have
dividend rights for your shares. You and all other holders of common
stock are entitled to receive dividends and other distributions when, as and if
declared by the Board of Directors out of funds legally available, based upon
the percentage of our common stock you own. We will not pay dividends. You
should not expect to receive any dividends on shares in the near future. This
investment may be inappropriate for you if you need dividend income from an
investment in shares.
You have
rights if we are liquidated. Upon our liquidation, dissolution or
winding up of affairs, you and all other holders of our common stock will be
entitled to share in the distribution of all assets remaining after payment of
all debts, liabilities and expenses, and after provision has been made for each
class of stock, if any, having preference over our common stock. Holders of
common stock, as such, have no conversion, preemptive or other subscription
rights, and there are no redemption provisions applicable to the common stock.
All of the outstanding common stock are, and the common stock offered hereby,
when issued in exchange for the consideration paid as set forth in this
Prospectus, will be, fully paid and nonassessable. Our directors, at their
discretion, may borrow funds without your prior approval, which potentially
further reduces the liquidation value of your shares.
You have
no right to acquire shares of stock based upon the percentage of our common
stock you own when we sell more shares of our stock to other
people. This is because we do not provide our stockholders with
preemptive rights to subscribe for or to purchase any additional shares offered
by us in the future. The absence of these rights could, upon our sale of
additional shares, result in a dilution of our percentage ownership that you
hold.
44
Preferred
Stock
We are
authorized to issue up to 1,000,000 shares of $2.00 stated value Preferred
Stock. Under our Articles of Incorporation, the Board of Directors has the
power, without further action by the holders of the common stock or preferred
stock, to designate the relative rights and preferences of the preferred stock,
and to issue the preferred stock in one or more series as designated by the
Board of Directors. The designation of rights and preferences could
include preferences as to liquidation, redemption and conversion rights, voting
rights, dividends or other preferences, any of which may be dilutive of the
interest of the holders of the common stock or the preferred stock of any other
series. The issuance of preferred stock may have the effect of
delaying or preventing a change in control without further shareholder action
and may adversely affect the rights and powers, including voting rights, of the
holders of common stock. In certain circumstances, the issuance of
preferred stock could depress the market price of the common
stock. The Board of Directors effects a designation of each series of
preferred stock by filing with the Delaware Department of State a Certificate of
Amendment defining the rights and preferences of each such
series. Documents so filed are matters of public record and may be
examined in accordance with procedures of the Department of State, or copies
thereof may be obtained from us upon request.
No
Preferred Stock share have been designated or issued or outstanding at this
time.
Shares
Eligible for Future Sale
Upon
completion of this offering, we will have 20,000,000 common shares issued and
outstanding assuming all the 15,000,000 maximum number of shares offered herein
are sold through our self underwriting. The common stock sold in this offering
will be freely transferable without restrictions or further registration under
the Securities Act, except for any of our shares purchased by an "affiliate" (as
that term is defined under the Act) who will be subject to the resale
limitations of Rule 144 promulgated under the Act.
There
will be approximately 5,000,000 shares outstanding that are "restricted
securities" as that term is defined in Rule 144 promulgated under the Securities
Act.
The
common stock owned by insiders, officers and directors are deemed "restricted
securities" as that term is defined under the Securities Act and in the future
may be sold under Rule 144, which provides, in essence, to: (i) shorten the
holding period for the resale of restricted securities of reporting companies
from one year to nine months; (ii) substantially simplify Rule 144 compliance
for non-affiliates by allowing non-affiliates of reporting companies to freely
resell restricted securities after satisfying a six-month holding period
(subject only to the Rule 144(c) public information requirement until the
securities have been held for one year) and by allowing non-affiliates of
non-reporting companies to freely resell restricted securities after satisfying
a 12-month holding period; (iii) for affiliates' sales, revise the manner of
sale requirements for equity securities, eliminate such requirements for debt
securities and relax the volume limitations for debt securities; (iv) for
affiliates' sales, raise the thresholds that trigger Form 144 filing
requirements from 500 shares or $10,000 to 5,000 shares or $50,000; (v) simplify
and streamline the preliminary note to and other parts of Rule 144 and (vi)
codify certain SEC staff interpretations relating to Rule 144.
Other
than shortening the holding period for reporting companies’ securities and
increasing the Form 144 threshold, the amendments do not relax the other
Rule 144 requirements as they affect “affiliates” of an issuer, so private
equity and other funds who own more than 10 percent of the issuer, have a seat
on the board or otherwise control the issuer will remain subject to the more
stringent Rule 144 requirements.
Additionally,
common stock underlying employee stock options granted, to the extent vested and
exercised, may be resold beginning on the ninety-first day after the Effective
Date of a Prospectus, or Offering Memorandum pursuant to Rule 701 promulgated
under the Securities Act.
As of the
date hereof and upon completion of the offering, none of our common stock (other
than those which are qualified by the SEC in connection with this offering) are
available for sale under Rule 144. Future sales under Rule 144 may have an
adverse effect on the market price of the Common stock. Our officers, directors
and certain of our security holders have agreed not to sell, transfer or
otherwise dispose of their common stock or any securities convertible into
common stock for a period of 12 months from the date hereof.
45
Under
Rule 701 of the Securities Act, persons who purchase shares upon exercise of
options granted prior to the date of this Prospectus are entitled to sell such
common stock after the 90th day following the date of this Prospectus in
reliance on Rule 144, without having to comply with the holding period
requirements of Rule 144 and, in the case of non-affiliates, without having to
comply with the public information, volume limitation or notice provisions of
Rule 144. Affiliates are subject to all Rule 144 restrictions after this 90-day
period, but without a holding period.
There has
been no public market for our common stock. With a relatively minimal public
float and without a professional underwriter, there is little or no likelihood
that an active and liquid public trading market, as that term is commonly
understood, will develop, or if developed that it will be sustained, and
accordingly, an investment in our common stock should be considered highly
illiquid. Although we believe a public market will be established in the future,
there can be no assurance that a public market for the common stock will
develop. If a public market for our common stock does develop at a future time,
sales by shareholders of substantial amounts of our common stock in the public
market could adversely affect the prevailing market price and could impair our
future ability to raise capital through the sale of our equity
securities.
Available
Information
We have
filed with the Securities and Exchange Commission (the "Commission") a
Registration Statement on Form S-1 relating to the common stock offered hereby.
This prospectus, which is part of the Registration Statement, does not contain
all of the information included in the Registration Statement and the exhibits
and schedules thereto. For further information with respect to us, the common
stock offered hereby, reference is made to the Registration Statement, including
the exhibits and schedules thereto. Statements contained in this Prospectus
concerning the provisions or contents of any contract, agreement or any other
document referred to herein are not necessarily complete. With respect to each
such contract, agreement or document filed as an exhibit to the Registration
Statement, reference is made to such exhibit for a more complete description of
the matters involved.
The
Registration Statement, including the exhibits and schedules thereto, may be
inspected and copied at prescribed rates at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, DC 20549.
The Commission also maintains a web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission, including the Company. The address of such
site is <http://www.sec.gov>.
We intend
to furnish to our shareowners annual reports containing audited consolidated
financial statements certified by independent public accountants for each fiscal
year and quarterly reports containing unaudited consolidated financial
statements for the first three quarters of each fiscal year.
We will
provide without charge to each person who receives a Prospectus, upon written or
oral request of such person, a copy of any of the information that was
incorporated by reference in the Prospectus (not including Exhibits to the
information that is incorporated by reference unless the Exhibits are themselves
specifically incorporated by reference). Any such request shall be directed to
the President of Cell-nique Corporation., Mr. Dan Ratner, 12 Old Stage Coach
Road, Weston CT 06883; Tel.# (203) 856-8550.
Within
five days of our receipt of a subscription agreement accompanied by a check for
the purchase price, we will send by first class mail a written confirmation to
notify the subscriber of the extent, if any, to which such subscription has been
accepted. We reserve the right to reject orders for the purchase of shares in
whole or in part. Upon acceptance of each subscriber, we will promptly provide
our stock transfer agent the information to issue shares.
You can
also call or write us at any time with any questions you may have. We would be
pleased to speak with you about any aspect of this offering.
46
Special
Note Regarding Forward-Looking Statements
This
prospectus contains forward-looking statements that reflect our views about
future events and financial performance. Our actual results, performance or
achievements could differ materially from those expressed or implied in these
forward-looking statements for various reasons, including those in the "risk
factors" section beginning on page 5. Therefore, you should not place undue
reliance upon these forward-looking statements.
Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance,
or achievements.
Dividend
Policy
We have
never declared or paid cash dividends on our common stock and anticipate that
all future earnings will be retained for development of our business. The
payment of any future dividends will be at the discretion of our Board of
Directors and will depend upon, among other things, future earnings, capital
requirements, our financial conditions and general business
conditions.
Stock
Transfer Agent
Our
transfer agent and registrar of the Common Stock is 1st Global
Stock Transfer, L.L.C., 7361 Praire Falcon Road, Suite 1110, Las Vegas, NV
89128
Experts
Our
financial statements of Cell-nique Corporation. as of and for the years ended
December 31, 2009, December 31, 2008 and December 31, 2007 have been
audited by Gruber & Company, LLC, 121 Civic Center Drive, Ste 225, Lake
Saint Louis, MO 63367, Phone: 636-561-5639, Fax: 636-561-0735,
independent auditors, as set forth in their report included herein and
incorporated herein by reference. Such financial statements have been included
in reliance upon such report given upon their authority as experts in accounting
and auditing.
Legal
Matters
There is
no past, pending or, to our knowledge, threatened litigation or administrative
action which has or is expected by our management to have a material effect upon
our business, financial condition or operations, including any litigation or
action involving our officers, directors, or other key personnel.
The Law
Offices of Miles Garnett, Esq., 66 Wayne Avenue, Atlantic Beach, N.Y.11509, Tel.
# (516) 371-4598, will pass upon certain legal matters relating to the
Offering.
The
Company has employed the law firm of Miles Garnett, Esq. for providing legal
services in connection with registration of the Company's shares.
There is
no underwriter for this offering. therefore, offerees will not have the benefit
of an underwriter's due diligence efforts which would typically include the
underwriter to be involved in the preparation of disclosure and the pricing of
the common stock offered hereby among other matters. As we have never engaged in
the public sale of our common stock. we have no experience in the underwriting
of any such offering. Accordingly, there is no prior experience from which
investors may judge our ability to consummate this offering. In addition, the
common stock is being offered on a "best efforts" basis. Accordingly, there can
be no assurances as to the number of shares that may be sold or the amount of
capital that may be raised pursuant to this offering.
47
F-1 | |||
Balance
Sheets (Audited December 31, 2009 and December 31,
2008)
|
F-2 | ||
Statement
of Operations (Audited December 31, 2009 and December 31, 2008
)
|
F-3 | ||
Statements
of Cash Flows (Audited December 31, 2009 and December 31, 2008
)
|
F-4 | ||
Statement
of Stockholders' Deficit (Audited December 31, 2009 and December 31,
2008 )
|
F-5 | ||
Notes
to Financial Statements (Audited December 31, 2009 and December 31, 2008
)
|
F-6 |
48
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors
Cell-Nique
Corporation
We
have audited the accompanying balance sheets of Cell-Nique Corporation, as of
December 31, 2009 and 2008 and the related statements of operations,
stockholders' deficit and cash flows for each of the two
year periods then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cell-Nique Corporation as of
December 31, 2009 and 2008 and the related statements of operations,
stockholders' deficit and cash flows for each of the two year periods then
ended 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 losses from operations and has a deficit
working capital and a deficit in retained earning that raises 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.
/s/
Gruber & Company, LLC
|
|
Gruber
& Company, LLC
|
|
Lake
Saint Louis, Missouri
|
|
April
19, 2010
|
F-1
Cell-Nique
Balance
Sheets
Audited
|
Audited
|
|||||||
December
31,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Assets
|
||||||||
Current
assets
|
||||||||
Cash
|
$ | 7,624 | $ | 0 | ||||
Accounts
receivable
|
38,201 | 18,116 | ||||||
Inventory
|
75,507 | 138,440 | ||||||
Total
current assets
|
121,332 | 156,556 | ||||||
Machinery
and equipment, net
|
70,859 | 84,300 | ||||||
Total
assets
|
192,191 | 240,856 | ||||||
Liabilities
and stockholders' equity
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable and accrued expenses
|
16,627 | 8,948 | ||||||
Notes
payable – Shareholder
|
1,451,786 | 1,149,514 | ||||||
Total
current liabilities
|
1,468,413 | 1,158,462 | ||||||
Stockholders'
equity
|
||||||||
Common
stock 49,000,000 shares authorized, 5,000,000 issued and outstanding, par value
$.00001
|
50 | 50 | ||||||
Additional
paid-in capital
|
(745,656 | ) | 513,950 | |||||
Accumulated
deficit
|
(530,616 | ) | (1,431,606 | ) | ||||
Total
stockholders' equity
|
(1,276,222 | ) | (917,606 | ) | ||||
Total
liabilities and stockholders' equity
|
$ | 192,191 | $ | 240,856 |
See
accompanying notes to financial statements
F-2
Cell-Nique
Statement
of Operations
Audited
|
||||||||
For
the years ended
|
||||||||
December
31,
|
||||||||
2009
|
2008
|
|||||||
Sales,
net
|
$ | 486,859 | $ | 524,485 | ||||
Cost
of sales
|
233,498 | 289,011 | ||||||
Gross
profit
|
253,361 | 235,474 | ||||||
Expenses
|
||||||||
Selling
|
360,239 | 309,515 | ||||||
General
and administrative
|
306,604 | 323,689 | ||||||
Research
and development
|
1,236 | 17,486 | ||||||
Depreciation
|
22,493 | 16,825 | ||||||
Total
expenses
|
690,572 | 667,515 | ||||||
Loss
from operations
|
(437,211 | ) | (432,041 | ) | ||||
Interest
expense
|
93,405 | 73,603 | ||||||
(530,616 | ) | (505,644 | ) | |||||
Extraordinary
Expense
|
||||||||
Income
tax
|
-- | |||||||
Net
loss
|
$ | (530,616 | ) | $ | (505,644 | ) | ||
Net
loss per common share
|
$ | (0.11 | ) | $ | (0.10 | ) | ||
Weighted
average shares outstanding
|
5,000,000 | 5,000,000 |
See
accompanying notes to financial statements
F-3
Cell-Nique
Statements
of Cash Flows
Audited
(restated)
|
||||||||
For
the years ended
|
||||||||
December 31,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
loss
|
$ | (530,616 | ) | $ | (505,644 | ) | ||
Adjustments
to reconcile net income/(loss) to net cash used in operating
activities:
|
||||||||
Depreciation
|
22,493 | 16,824 | ||||||
Officers
compensation contribution
|
160,000 | 160,000 | ||||||
Rent
expense contribution
|
12,000 | 12,000 | ||||||
Interest
added to shareholder loan
|
91,157 | 73,603 | ||||||
Changes
in assets and liabilities:
|
||||||||
Accounts
receivable
|
(20,085 | ) | 33,681 | |||||
Inventory
|
62,933 | 63,212 | ||||||
Accounts
payable and accrued expenses
|
7,679 | (13,407 | ) | |||||
Net
cash (used in)/provided by operating
activities
|
(194,439 | ) | (159,731 | ) | ||||
Cash
flow from investing activities
|
||||||||
Acquisition
of machinery and equipment
|
(9,052 | ) | (26,933 | ) | ||||
Net
cash (used in) investing activities
|
(9,052 | ) | (26,933 | ) | ||||
Cash
flow from financing activities
|
||||||||
Additional
loans from shareholder
|
211,115 | 197,518 | ||||||
Net
cash provided by financing activities
|
211,115 | 197,518 | ||||||
Cash
and cash equivalents:
|
||||||||
Net
(decrease) increase
|
7,624 | — | ||||||
Balance
at beginning of period
|
— | — | ||||||
Balance
at end of period
|
7,624 | — | ||||||
Supplemental
cash flow information:
|
||||||||
Cash
paid for income taxes
|
— | — | ||||||
Cash
paid for interest
|
$ | 2,248 | $ | 5,353 | ||||
Non-cash
financing activities:
|
||||||||
Expenses
contributed by shareholder
|
$ | 172,000 | $ | 172,000 | ||||
Interest
added to shareholder loan
|
91,151 | 73,603 |
See
accompanying notes to financial statements
F-4
Cell-Nique
Statement
of Stockholders' Deficit
Additional
|
||||||||||||||||||||
Common Stock
|
paid-in
|
Accumulated
|
||||||||||||||||||
Shares
|
Amount
|
capital
|
Deficit
|
Total
|
||||||||||||||||
Balance
December 31, 2006
|
5,000,000 | $ | 50 | $ | 249,950 | $ | (295,125 | ) | $ | (45,125 | ) | |||||||||
Net
loss for the year ended December 31, 2007
|
(630,837 | ) | (630,837 | ) | ||||||||||||||||
Non
Cash Compensation and Expenses
|
92,000 | 92,000 | ||||||||||||||||||
Balance
December 31, 2007
|
5,000,000 | 50 | 341,950 | (925,962 | ) | (583,962 | ) | |||||||||||||
Net
loss for the year ended December 31, 2008
|
(505,644 | ) | (505,644 | ) | ||||||||||||||||
Non
Cash Compensation and Expenses
|
172,000 | 172,000 | ||||||||||||||||||
Balance,
December 31, 2008
|
5,000,000 | 50 | 513,950 | (1,431,606 | ) | (917,606 | ) | |||||||||||||
Recapitalization
of Accumulated deficit Janurary 1, 2009
|
(1,431,606 | ) | 1,431,606 | — | ||||||||||||||||
Net
loss for the year ended December 31, 2009
|
(530,616 | ) | (530,616 | ) | ||||||||||||||||
Non
Cash Compensation and Expenses
|
172,000 | 172,000 | ||||||||||||||||||
Balance,
December 31, 2009
|
5,000,000 | 50 | (745,656 | ) | (530,616 | ) | (1,276,222 | ) |
See
accompany notes to financial statements
F-5
Notes
to Financial Statements
December
31, 2009
Note 1 – Operations and
Summary of Significant Accounting Policies
Operations
Cell-nique
Corporation (the Company”) was organized under the laws of the state of Delaware
on August 7, 2008. Prior to incorporation, the Company was operated
as a wholly-owned unincorporated division of Physicians Capital
Corporation. On December 31, 2008, Physicians Capital Corporation
transfer all the assets and liabilities to Cell-nique Corporation. The transfer
was treated as a recapitalization for accounting purposes and transferred at
historical cost. The operations of the surviving entity reported in future
financial reports will be those of Cell-nique Corporation. The
retained deficit of unincorporated Cell-nique through December 31, 2008 will be
combined with Cell-nique Corporation capital accounts and carried forward as the
capital of Cell-nique Corporation, the surviving entity. The new shares in
Cell-nique Corporation were issued at par value for a total of $140, which is
treated as a reclassification from additional paid in capital to common
stock. No goodwill was recognized in connection with this
recapitalization. Physician Capital Corporation is the sole
shareholder and is 100% controlled by Dan and Donna Ratner. Cell-nique
Corporation is currently a C Corporation.
The
Company’s beginning was in 2006 when its’ founder and Chief Executive officer
began development of his first beverage creation. The Company is
engaged primarily in the business of developing, manufacturing,
marketing and sales of organic beverages. The Company currently
offers nine Cell-nique Organic Supergreen Drinks (Apple, Topical,
Pomegranate, Citrus Vanilla, Japanese Roasted (Kukicha) Tea, Lemon Ginger, Berry
Grape, Root Beer and Dark Chocolate).
The
Company owns the US patent registered trademark rights to the Cell-nique ®
brand. The Company sells most of its products in specialty gourmet
and natural food stores, supermarket chains, retail stores, and restaurants in
the United States.
Basis of
Presentation
The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of
America.
Going
Concern
The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. The Company incurred
net losses for the years ended December 31, 2009, 2008 and 2007 of $530,616,
$505,644 and $630,837 respectively, has a deficit working capital of $1,347,081
and a retained deficit of $530,616 at December 31, 2009. These conditions raise
substantial doubt as to the Company’s ability to continue as a going concern.
These financial statements do not include any adjustments that might result from
the outcome of this uncertainty. These financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts, or amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern. The
Company’s management will continue to advance funds until the Company can raise
equity financing to support its operations and growth.
Cash and Cash
Equivalents
Cash and
cash equivalents include cash in unrestricted deposit accounts and short-term
cash investments that have an initial maturity of 90 days or less.
Use of
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Research and
development
Research
and development expenditures are expensed as incurred. Development activities
generally relate to creating new products, improving or creating variations of
existing products by mixing the formulas with other components such as teas,
non-dairy beverages and supplements. Research and development
expenditures were $1,236 and $17,486 for the year ended December 31, 2009 and
2008.
F-6
Regulatory
bodies
The
Company is regulated by the United States Department of Agriculture (USDA) and
the Food and Drug Administration (FDA). The Company is also subject
to various state and local statutes and regulations applicable to the
production, transportation, sale, safety advertising and labeling of the
Company’s products. The Company does not anticipate that compliance
with the regulatory provisions will have any material adverse effect upon its
capital expenditures, net income, financial position or competitive
position
Accounts
receivable
The
Company evaluates the collectability of its trade accounts receivable based on a
number of factors. In circumstances where the Company becomes aware
of a specific customer’s inability to meet its financial obligations to the
Company, a specific reserve for bad debts is estimated and recorded, which
reduces the recognized receivable to the estimated amount the Company believes
will ultimately be collected. In addition to specific customer
identification of potential bad debts, bad debt charges are recorded based on
the Company’s historical losses and an overall assessment of past due trade
accounts receivable outstanding.
The
allowance for doubtful accounts and returns and discounts is established through
a provision for returns and discounts charged against
sales. Receivables are charged off against the allowance when
payments are received or products returned. The Company has
determined that an allowance for doubtful accounts is not necessary as of
December 31, 2009 and December 31, 2008.
Equipment and Related
Depreciation
Equipment
is stated at cost. Depreciation expense is calculated using
accelerated and straight-line methods over the estimated useful lives of the
assets as follows:
Useful Life
|
|
Automotive
equipment
|
5
Years
|
Office
equipment and computers
|
5
Years
|
Long-Lived
Assets
The
Company has adopted ASC Topic 360-10-10 formerly Statement of Financial
Accounting Standards No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets” ( “SFAS 144” ), which addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets and supersedes SFAS No. 121, “Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and the
accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations
for a Disposal of a Segment of a Business.” The Company periodically
evaluates the carrying value of long-lived assets to be held and used in
accordance with SFAS 144. Under SFAS 144 impairment losses are to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets’ carrying amounts. In that event, a loss is recognized
based on the amount by which the carrying amount exceeds the fair market value
of the long-lived assets. Loss on long-lived assets to be disposed of is
determined in a similar manner, except that fair market values are reduced for
the cost of disposal. Based on its review, The Company believes that, as of
December 31, 2009 and December 31, 2008 there were no significant impairments of
its long-lived assets.
Concentration of Credit
Risk
Financial
instruments that potentially subject the Company to concentrations of credit
risk are cash, and accounts receivables arising from their normal business
activities. The Company’s cash balances on deposits with banks are guaranteed by
the Federal Deposit Insurance Corporation up to $250,000 at December 31,
2009. The Company may be exposed to risk for the amounts of funds held in
bank accounts in excess of the insurance limit. In assessing the
risk, the Company’s policy is to maintain cash balances with high quality
financial institutions. As of December 31, 2009 and December 31, 2008
the Company had $7,624 cash balances and zero respectively.
During
the Year ended December 31, 2009, the Company had three customers who accounted
for approximately 70%, 14% and 6% of its sales respectively and during the year
ended December 31, 2008 the same customers accounted for 57%, 13% and 7% of its
sales respectively. As of December 31, 2009, the Company had accounts
receivable due from these three customers totaling $36,041(94%) of its total
accounts receivable and at December 31, 2008 the Company had accounts receivable
due from these three customers totaling $15,959 (88%) of its total accounts
receivable.
The
Company currently relies on a single contract packer for the majority of its
production and bottling of beverage products. The Company has
different packers available for their production of
products. Although there are other packers, a change in packers may
cause a delay in the production process, which could ultimately affect operating
results.
F-7
Fair Value of
Financial Instruments
On
January 1, 2008, the Company adopted ASC Topic 820-10 formerly SFAS No. 157,
Fair Value Measurements. SFAS No. 157 defines fair value, establishes a
three-level valuation hierarchy for disclosures of fair value measurement and
enhances disclosures requirements for fair value measures. The adoption of SFAS
157 did not have a material impact on the Company’s fair value
measurements. SFAS 157 defines fair value as the price that would be
received to sell an asset or paid to transfer a liability in the principal or
most advantageous market for the asset or liability in an orderly transaction
between market participants at the measurement date. The carrying
amounts reported in the balance sheets for receivables and current liabilities
each qualify as financial instruments and are a reasonable estimate of fair
value because of the short period of time between the origination of such
instruments and their expected realization and their current market rate of
interest. The three levels are defined as follow:
|
·
|
Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active markets. The Company's Level 1
assets include cash equivalents, primarily institutional money market
funds, whose carrying value represents fair value because of their
short-term maturities of the investments held by these
funds.
|
|
·
|
Level
2 inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial instrument. The Company's
Level 2 liabilities consist of two liabilities arising from the issuance
of a convertible debenture in 2006 and in accordance with EITF 00-19: a
warrant liability for detachable warrants, as well as an accrued
derivative liability for the beneficial conversion feature. These
liabilities are remeasured on a quarterly basis. Fair value is determined
using the Black-Scholes valuation model based on observable market inputs,
such as share price data and a discount rate consistent with that of a
government-issued security of a similar
maturity.
|
|
·
|
Level
3 inputs to the valuation methodology are unobservable and significant to
the fair value measurement.
|
SFAS
157 requires the use of observable market data if such data is available without
undue cost and effort.
Cost of
Sales
The
Company classifies shipping and handling costs of the sale of its products as a
component of cost of sales. For the year ended December 31, 2009 and
2008, shipping and handling costs were $53,284 and $77,062
respectively. In addition the Company classifies lab costs and
warehousing costs as costs of sales. Certain of these costs become a
component of the inventory cost and are expensed to costs of sales when the
product to which the cost has been allocated is sold.
Advertising
Advertising
costs are expensed as incurred and are included in selling
expenses. Total advertising expenses were $51,626 and $65,678 for the
year ended December 31, 2009 and 2008 respectively.
Income
Taxes
The
Company accounts for income taxes in accordance with ASC Topic 740 formerly SFAS
No. 109, “Accounting for Income Taxes.” Deferred taxes are provided on the
liability method whereby deferred tax assets are recognized for deductible
temporary differences, and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of
enactment.
Earnings (Loss) Per
Share
The
Company reports earnings (loss) per share in accordance with ASC Topic 260
formerly SFAS No. 128, “Earnings per Share.” Basic earnings (loss)
per share is computed by dividing income (loss) available to common shareholders
by the weighted average number of common shares available. Diluted
earnings (loss) per share is computed similar to basic earnings (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. Diluted earnings (loss) per share has not been presented
since no options to purchase common stock are outstanding at December 31, 2009
or 2008.
Revenue
Recognition
The
Company recognizes revenue in accordance with the provisions of the Securities
and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104,
Revenue Recognition. Revenues from the sale of the Company’s products
are recognized when persuasive evidence of an arrangement exists, delivery has
occurred (or services have been rendered), the price is fixed or determinable,
and collectability is reasonably assured. A product is not shipped without an
order from the customer and credit acceptance procedures performed and
approved. The Company generally ships products F.O.B. shipping
point.
F-8
All
sales are final, however the Company does allow, although it is not obligated
to, returns under certain circumstances. For customer relations
purposes, the Company may allow returns for outdated and spoiled
product. The returned items must be accompanied by a pre-approved
return authorization form. In addition, items may be returned due to
manufacturer defect or product recall. The allowance for returned
items is regularly reviewed and adjusted by management based on historical
trends. As of December 31, 2009 and 2008 management has determined
that no allowance for returned items is required.
The
Company accounts for certain sales incentives, including promotional discounts
ranging from 10% - 15% off invoice, and the 1% prompt payment discount as a
reduction of gross sales in accordance with Emerging issues Task Force Issue
01-9 “Accounting for Consideration Given by a Vendor to a Customer or Reseller
of the Vendor’s Products.”
Segment
Reporting
The
Company follows guidance issued by ASC Topic 280 formerly Statement of Financial
Accounting Standards No. 131, (SFAS 131), “Disclosures about Segments of an
Enterprise and Related Information.” SFAS 131 requires certain
disclosures regarding is operating segments, as defined by SFAS
131. Management has determined that the Company operates in only one
segment and evaluates its revenues and expenses accordingly and that the
disclosure of segment information is not required.
Stock Based
Compensation
The
Company adopted ASC Topic 718 formerly Statement of Financial Accounting
Standards No. 123R (SFAS 123R), “Accounting for Stock-Based Compensation”. SFAS
123R establishes the use of the fair value based method of accounting for
stock-based compensation arrangements under which compensation cost is
determined using the fair value of stock-based compensation determined as of the
date of grant and is recognized over the periods in which the related services
are rendered. For stock based compensation the Company recognizes an expense in
accordance with SFAS No. 123R and values the equity securities based on the fair
value of the security on the date of grant. Stock option awards are valued using
the Black-Scholes option-pricing model.
The
Company accounts for stock issued to non-employees in accordance with EITF No.
96-18, “Accounting for Equity instruments that are Issued to other Than
Employees for Acquiring, or in Conjunction with Selling Goods or Services and
EITF 00-18 “Accounting Recognition for Certain Transactions Involving Equity
Instruments Granted to Other Than Employees” where the value of the stock
compensation is based upon the measurement date as determined at either (a) the
date at which a performance commitment is reached, or (b) at the date at which
the necessary performance to earn the equity instruments is
complete.
As
there is no trading history and the Company securities are not offered to the
public, the Company has determined that the fair value of its stock is the price
paid when it raises funds. For the year ended December 31, 2009
and 2008, the Company has not issued stock for compensation.
Recent Accounting
Pronouncements
In
June 2009, the Financial Accounting Standards Board (“FASB”) issued the
Accounting Standards Codification (“ASC”) (formerly issued as Statement of
Financial Accounting Standards (“SFAS”) No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles — a
replacement of FASB SFAS No. 162), as the single source of authoritative
nongovernmental U.S. GAAP launched on July 1, 2009. The ASC does not
change current U.S. GAAP, but is intended to simplify user access to all
authoritative U.S. GAAP by providing all the authoritative literature related to
a particular topic in one place. All existing accounting standard documents will
be superseded and all other accounting literature not included in the ASC will
be considered no authoritative. The ASC is effective for interim and annual
periods ending after September 15, 2009. The ASC is for disclosure only and will
not impact our financial condition or results of operations. The
Company has adopted this pronouncement effective as of September 30, 2009. The
adoption of this ASC had no impact on our financial reporting
process.
On
January 1, 2009, the Company adopted ASC Subtopic 815-10 (formerly SFAS No. 161,
Disclosures about Derivative Instruments and Hedging Activities — an amendment
of FASB Statement No. 133), which provides revised guidance for enhanced
disclosures about how and why an entity uses derivative instruments, how
derivative instruments and the related hedged items are accounted for under ASC
Topic 815, and how derivative instruments and the related hedged items affect an
entity’s financial position, financial performance and cash
flows. Since the Company currently does not have any derivative
instruments, there are no additional disclosures required.
On
January 1, 2009, the company adopted guidance issued by the FASB on business
combinations ASC 805 including that the purchase method be used for all business
combinations and for an acquirer to be identified for each business combination.
This standard defines the acquirer as the entity that obtains control of one or
more businesses in the business combination and establishes the acquisition date
as the date that the acquirer achieves control instead of the date that the
consideration is transferred. In a business combination, including business
combinations achieved in stages (step acquisition), the acquirer is required to
recognize the assets acquired, liabilities assumed, and any noncontrolling
interest in the acquiree at the acquisition date, measured at their fair values
as of that date, with limited exceptions. It also requires the recognition of
assets acquired and liabilities assumed arising from certain contractual
contingencies as of the acquisition date, measured at their acquisition-date
fair values. Additionally, it requires acquisition-related costs to be expensed
in the period in which the costs are incurred and the services are received
instead of including such costs as part of the acquisition price. The adoption
has not had a material impact on the company’s financial
statements.
F-9
In
April 2009, the FASB issued ASC 820 “Determining Fair Values When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly." This FSP provides guidance on
(1) estimating the fair value of an asset or liability when the volume and level
of activity for the asset or liability have significantly declined and (2)
identifying transactions that are not orderly. The FSP also amends certain
disclosure provisions of SFAS No. 157 to require, among other things,
disclosures in interim periods of the inputs and valuation techniques used to
measure fair value. This pronouncement is effective prospectively beginning
April 1, 2009. The Company is evaluating the impact that the adoption of this
standard will have on the Company's results of operations and financial
condition.
In
April 2009, the FASB issued ASC 820 and ASC 320-10-65 "Recognition and
Presentation of Other-Than-Temporary Impairments". This ASC modifies the
requirements for recognizing other-than-temporarily impaired debt securities and
changes the existing impairment model for such securities. The ASC also requires
additional disclosures for both annual and interim periods with respect to both
debt and equity securities. Under the ASC, impairment of debt securities will be
considered other-than-temporary if an entity (1) intends to sell the security,
(2) more likely than not will be required to sell the security before recovering
its cost, or (3) does not expect to recover the security's entire amortized cost
basis (even if the entity does not intend to sell). The ASC further indicates
that, depending on which of the above factor(s) causes the impairment to be
considered other-than-temporary, (1) the entire shortfall of the security's fair
value versus its amortized cost basis or (2) only the credit loss portion would
be recognized in earnings while the remaining shortfall (if any) would be
recorded in other comprehensive income. ASC 820 requires entities to initially
apply the provisions of the standard to previously other-than-temporarily
impaired debt securities existing as of the date of initial adoption by making a
cumulative-effect adjustment to the opening balance of retained earnings in the
period of adoption. The cumulative-effect adjustment potentially reclassifies
the noncredit portion of a previously other-than-temporarily impaired debt
security held as of the date of initial adoption from retained earnings to
accumulated other comprehensive income. This pronouncement is effective April 1,
2009. The Company has adopted this pronouncement for the quarter ended June 30,
2009; however, since the Company has no such investments in debt or equity
securities, there was no impact on the Company’s financial position or results
of operations as a result of the adoption.
In
April 2009, the FASB issued ASC 825, "Interim Disclosures about Fair Value of
Financial Instruments." This ASC essentially expands the disclosure about fair
value of financial instruments that were previously required only annually to
also be required for interim period reporting. In addition, the ASC requires
certain additional disclosures regarding the methods and significant assumptions
used to estimate the fair value of financial instruments.
In May
2009, the FASB issued, "Subsequent Events ASC 855-10-05, which provides guidance
to establish general standards of accounting for and disclosures of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. ASC 855-10-05 also requires entities to disclose the
date through which subsequent events were evaluated as well as the rationale for
why that date was selected. ASC 855-10-05 is effective for interim and annual
periods ending after June 15, 2009, and accordingly, the Company adopted this
pronouncement during the second quarter of 2009. ASC 855-10-05 requires that
public entities evaluate subsequent events through the date that the financial
statements are issued. The Company has looked at subsequent events through
February 10, 2010 and has included all subsequent events in Note 13 - Subsequent
Events.
In
June 2009, the FASB issued, "Accounting For Transfers of Financial Assets — An
Amendment Of FASB Statement ASC860, which requires entities to provide more
information regarding sales of securitized financial assets and similar
transactions, particularly if the entity has continuing exposure to the risks
related to transferred financial assets. ASC 860 eliminates the concept of a
"qualifying special-purpose entity", changes the requirements for derecognizing
financial assets and requires additional disclosures. ASC 860 is effective for
fiscal years beginning after November 15, 2009. The Company has not completed
its assessment of the impact ASC860 will have on its financial condition,
results of operations or cash flows.
In
June 2009, the FASB issued "Amendments to FASB Interpretation No. 46 (RASC
810-10, which modifies how a company determines when an entity that is
insufficiently capitalized or is not controlled through voting (or similar
rights) should be consolidated. ASC 810-10 clarifies that the determination of
whether a company is required to consolidate an entity is based on, among other
things, an entity's purpose and design and a company's ability to direct the
activities of the entity that most significantly impact the entity's economic
performance. ASC 810-10 requires an ongoing reassessment of whether a company is
the primary beneficiary of a variable interest entity. SFAS 167 also requires
additional disclosures about a company's involvement in variable interest
entities and any significant changes in risk exposure due to that involvement.
ASC 810-10 is effective for fiscal years beginning after November 15, 2009. The
Company has not completed its assessment of the impact ASC 810-10 will have on
its financial condition, results of operations or cash flows.
In
February 2010, FASB issued ASU 2010-9 Subsequent Events (Topic 855)
Amendments to Certain Recognition and Disclosure Requirements ("ASU
2010-9"). ASU 2010-9 amends disclosure requirements within Subtopic 855-10. An
entity that is an SEC filer is not required to disclose the date through which
subsequent events have been evaluated. This change alleviates potential
conflicts between Subtopic 855-10 and the SEC's requirements. ASU 2010-9 is
effective for interim and annual periods ending after June 15, 2010. The
Company does not expect the adoption of ASU 2010-09 to have a material impact on
its consolidated results of operations or financial
position.
F-10
In
January 2010, FASB issued ASU 2010-6 Improving Disclosures about Fair
Measurements ("ASU 2010-6"). ASU 2010-6 provides amendments to
subtopic 820-10 that require separate disclosure of significant transfers in and
out of Level 1 and Level 2 fair value measurements and the
presentation of separate information regarding purchases, sales, issuances and
settlements for Level 3 fair value measurements. Additionally, ASU 2010-6
provides amendments to subtopic 820-10 that clarify existing disclosures about
the level of disaggregation and inputs and valuation techniques. ASU 2010-6 is
effective for financial statements issued for interim and annual periods ending
after December 15, 2010. The Company does not expect the adoption of ASU
2010-06 to have a material impact on its consolidated results of operations or
financial position.
In
January 2010, FASB issued ASU 2010-2 Accounting and Reporting for
Decreases in Ownership of a Subsidiary- a Scope Clarification ("ASU
2010-2"). ASU 2010-2 addresses implementation issues related to the changes in
ownership provisions in the Consolidation—Overall Subtopic (Subtopic 810-10) of
the FASB Accounting Standards
Codification, originally issued as FASB Statement No. 160, Noncontrolling Interests in
Consolidated Financial Statements. Subtopic 810-10 establishes the
accounting and reporting guidance for noncontrolling interests and changes in
ownership interests of a subsidiary. An entity is required to deconsolidate a
subsidiary when the entity ceases to have a controlling financial interest in
the subsidiary. Upon deconsolidation of a subsidiary, an entity recognizes a
gain or loss on the transaction and measures any retained investment in the
subsidiary at fair value. The gain or loss includes any gain or loss associated
with the difference between the fair value of the retained investment in the
subsidiary and its carrying amount at the date the subsidiary is deconsolidated.
In contrast, an entity is required to account for a decrease in ownership
interest of a subsidiary that does not result in a change of control of the
subsidiary as an equity transaction. ASU 2010-2 is effective for the
Company starting January 1, 2010. The Company does not expect the adoption of
ASU 2010-2 to have a material impact on the Company's consolidated results of
operations or financial position.
In
December 2009, FASB issued ASU 2009-17 Consolidations (Topic 810)
Improvements to Financial Reporting by Enterprises Involved with Variable
Interest Entities ("ASU 2009-17"). ASU 2009-17 amends the FASB ASC for
the issuance of FASB Statement No. 167, Amendments to FASB Interpretation
No. 46(R). The amendments in ASU 2009-17 replace the
quantitative-based risks and rewards calculation for determining which
enterprise, if any, has a controlling financial interest in a variable interest
entity with an approach focused on identifying which enterprise has the power to
direct the activities of a variable interest entity that most significantly
impact the entity's economic performance and (1) the obligation to absorb
losses of the entity or (2) the right to receive benefits from the entity.
ASU 2009-17 also requires additional disclosures about an enterprise's
involvement in variable interest entities. ASU 2009-17 is effective as of the
beginning of each reporting entity's first annual reporting period that begins
after November 15, 2009. The Company does not expect the adoption of ASU
2009-17 to have a material impact on its consolidated results of operations or
financial position.
In
December 2009, FASB issued ASU 2009-16 Transfers and Servicing (Topic 860)
Accounting for Transfers of Financial Assets ("ASU 2009-16"). ASU 2009-16
amends the FASB Accounting Standards Codification for the issuance of FASB
Statement No. 166, Accounting for Transfers of
Financial Assets—an amendment of FASB Statement No. 140. The
amendments in ASU 2009-16 improve financial reporting by eliminating the
exceptions for qualifying special-purpose entities from the consolidation
guidance and the exception that permitted sale accounting for certain mortgage
securitizations when a transferor has not surrendered control over the
transferred financial assets. In addition, the amendments require enhanced
disclosures about the risks that a transferor continues to be exposed to because
of its continuing involvement in transferred financial assets. ASU 2009-16 is
effective as of the beginning of each reporting entity's first annual reporting
period that begins after November 15, 2009. The Company does not
expect the adoption of ASU 2009-16 to have a material impact on its consolidated
results of operations or financial position.
In
August 2009, FASB issued ASU 2009-4 Accounting for Redeemable Equity
Instruments—an Amendment to Section 480-10-S99 ("ASU 2009-4"). ASU
2009-4 represents a Securities and Exchange Commission ("SEC") update to
Section 480-10-S99, Distinguishing Liabilities from
Equity. The adoption of guidance within ASU 2009-4 did not have an impact
on the Company's consolidated results of operations or financial
position.
FASB
ASC Topic 820, “Fair Value measurement and Disclosures”, an Accounting Standard
Update. In September 2009, the FASB issued this Update to amendments to Subtopic
82010, “Fair Value Measurements and Disclosures”. Overall, for the fair value
measurement of investments in certain entities that calculates net asset value
per share (or its equivalent). The amendments in this Update permit, as a
practical expedient, a reporting entity to measure the fair value of an
investment that is within the scope of the amendments in this Update on the
basis of the net asset value per share of the investment (or its equivalent) if
the net asset value of the investment (or its equivalent) is calculated in a
manner consistent with the measurement principles of Topic 946 as of the
reporting entity’s measurement date, including measurement of all or
substantially all of the underlying investments of the investee in accordance
with Topic 820. The amendments in this Update also require disclosures by major
category of investment about the attributes of investments within the scope of
the amendments in this Update, such as the nature of any restrictions on the
investor’s ability to redeem its investments at the measurement date, any
unfunded commitments (for example, a contractual commitment by the investor to
invest a specified amount of additional capital at a future date to fund
investments that will be made by the investee), and the investment strategies of
the investees.
The
major category of investment is required to be determined on the basis of the
nature and risks of the investment in a manner consistent with the guidance for
major security types in GAAP on investments in debt and equity securities in
paragraph 320-10-50-lB. The disclosures are required for all investments within
the scope of the amendments in this Update regardless of whether the fair value
of the investment is measured using the practical expedient.
The
amendments in this Update apply to all reporting entities that hold an
investment that is required or permitted to be measured or disclosed at fair
value on a recurring or non recurring basis and, as of the reporting entity’s
measurement date, if the investment meets certain criteria The amendments in
this Update are effective for the interim and annual periods ending after
December 15, 2009. The adoption of this standard had no effect on the
Company’s financial reporting.
F-11
Note 2 –
Inventory
Inventory
is valued at the lower of cost, determined on a first-in, first-out basis, or
market, and consists of the following:
December 31
|
||||||||
2009
|
2008
|
|||||||
Finished
products
|
$
|
35,167
|
105,039
|
|||||
Raw
materials
|
40,340
|
33,041
|
||||||
$
|
75,507
|
138,440
|
Note 3 – Machinery and
Equipment
Machinery
consists of the following:
December 31,
|
||||||||
2009
|
2008
|
|||||||
Machinery
and equipment
|
$
|
114,726
|
105,674
|
|||||
Less
– Accumulated depreciation
|
43,867
|
21,375
|
||||||
$
|
70,859
|
84,299
|
Depreciation
expense was $22,493 and $16,824 for the year ended December 31, 2009 and 2008
respectively.
Note 4 – Stockholders’
Equity
The
Company’s Certificate of Incorporation filed with the State of Delaware on
August 27, 2008 authorized the Company to issue 1,000,000 shares of stock with a
par value of $.001 per share. As of June 19, 2009 the Company amended
its Certificate of Incorporation to authorize 50,000,000 shares of stock,
consisting of 49,000,000 common shares and 1,000,000 preferred shares with a par
value of $.00001 per share.
Note 5 – Stock
Options
As of
December 31, 2009, no options have been issued.
Note 6 – Income
Taxes
At
December 31, 2009, the Company had available federal and state net operating
loss carryforwards to reduce future taxable income. The amount
available was approximately $530,616 for federal and state
purposes. The federal and state net operating loss carryforward
expires in 2029. Given
the Company’s history of net operating losses, management has determined that it
is more likely than not that the Company will not be able to realize the tax
benefit of the net operating loss carryforwards. Accordingly, the
Company has not recognized a deferred tax asset for this
benefit.
ASC
Topic 740 formerly Statement of Financial Accounting Standards No. 109 (SFAS
109) requires that the Company establish a valuation allowance when it is more
likely than not that all or a portion of deferred tax assets will not be
realized. Due to restrictions imposed by Internal Revenue Code
Section 382 regarding substantial changes in ownership of companies with net
operating loss carryforwards, the utilization of the Company’s net operating
loss carryforwards will likely be limited as a result of cumulative changes in
stock ownership. The Company has not recognized a deferred asset and,
as a result, the change in stock ownership will not result in any change to the
valuation allowances. Upon the attainment of taxable income by the
Company, management will assess the likelihood of realizing the tax benefit
associated with the use of the carryforwards and will recognize a deferred
tax asset at that time.
Significant
components of the Company’s deferred income tax assets are as follows as
of:
|
December 31, 2009
|
|||||||
Deferred
income tax asset:
|
0
|
|
||||||
Net
operating loss carry forward
|
$
|
530,616
|
|
|||||
Valuation
allowance
|
(530,616
|
)
|
||||||
Net
deferred income tax asset
|
—
|
|
F-12
Reconciliation
of the effective income tax rate to the U.S. statutory rate is as
follows:
|
December 31, 2009
|
|||||||
Federal
Statutory tax rate
|
(34 | )% | ||||||
State
tax, net of federal benefit
|
(5 | )% | ||||||
Change
in valuation
|
(39 | )% | ||||||
Allowance
|
39 | % |
The
Company has adopted Financial Accounting Standards Board Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes (“FIN 48”) — an interpretation of FASB
Statement No. 109, Accounting for Income Taxes. The
Interpretation addresses the determination of whether tax benefits claimed or
expected to be claimed on a tax return should be recorded in the financial
statements. Under FIN 48, we may recognize the tax benefit from an uncertain tax
position only if it is more likely than not that the tax position will be
sustained on examination by the taxing authorities, based on the technical
merits of the position. The tax benefits recognized in the financial statements
from such a position should be measured based on the largest benefit that has a
greater than fifty percent likelihood of being realized upon ultimate
settlement. FIN 48 also provides guidance on derecognition, classification,
interest and penalties on income taxes, accounting in interim periods and
requires increased disclosures. As of December 31, 2009, the Company does not
have a liability for unrecognized tax benefits.
The
Company files income tax returns in the U.S. federal jurisdiction and various
states. The Company is subject to U.S. federal or state income tax examinations
by tax authorities for five years after 2009. During the periods open to
examination, the Company has net operating loss and tax credit carry
forwards for U.S. federal and state tax purposes that have attributes from
closed periods. Since these NOL’s and tax credit carry forwards may
be utilized in future periods, they remain subject to
examination.
Note 7 - Related
Party Transactions
The
Company has a line of credit with Physicians Capital Corporation, which is owned
by Dan Ratner and Donna Ratner, the Company’s co-founders and sole
shareholders. As of December 31, 2009 and December 31, 2008, the
outstanding principal balance of the line of credit was $1,451,786 and
$1,149,514, including accrued interest of $216,103 and $124,946
respectively. Interest accrued for the year periods ended December
31, 2009 and 2008 was $91,157 and $73,603 respectively. Interest is accrued
monthly on the average outstanding balance for the quarter pro-rated at the rate
of 8% annually. The line of credit is in good standing and is due December 31,
2011. It is contemplated that use of proceeds are to repay debt and if proceeds
from the offering are insufficient to repay all the debt when due, either the
due date will be automatically extended for additional 12 months and/or partial
repayment is also acceptable to Management and Note Holder.
Office
Space: The Company uses shared office space owned by Dan Ratner and Donna
Ratner, the Company’s co-founders and sole shareholders which is accounted for
at fair market value in the Company's financial statements. Our financial
statements reflect stand-alone office space expense, if the Company went out and
rented stand-alone space, management estimates the rental could be valued at
$12,000, $12,000 and $12,000 respectively, for the year ending December 31,
2009, fiscal year ended December 31, 2008 and 2007. The officers did not
remunerate themselves in the form of cash payments for the stand-alone fair
value of the office space, however, non-cash office space consideration was
expensed and the officers contributed non-cash consideration to additional
paid-in capital.
Officers
Compensation Expense: Our financial statements reflect non-cash officers
compensation expense which the officers contributed it to the company as
additional paid-in capital since the officers have elected to forgo their
compensations valued at $160,000, $160,000 and $80,000 respectively, for their
positions for the year ending December 31, 2009, fiscal year ended December 31,
2008 and 2007. And the officers do not remunerate themselves in the
form of some other payments for the fair value of the services
rendered.
Note 8 – Subsequent
Events
In
2009, the FASB issued ASC Topic 855-10-05 formerly Statement 165, Subsequent Events, which
defines the period after the balance sheet date that subsequent events should be
evaluated and provides guidance in determining if the event should be reflected
in the current financial statements. Statement 165 also requires
disclosure regarding the date through which subsequent events have been
evaluated. The Company adopted the provisions of Statement 165 as of
December 31, 2009.
The
Company has evaluated subsequent events through the time the December 31, 2009
financial statements were issued on April 12, 2010. No events have
occurred subsequent to December 31, 2009 that requires disclosure or recognition
in these financial statements.
F-13
APPENDIX
For
Office Use Only:
SUBSCRIPTION
AGREEMENT
for
CELL-NIQUE
CORPORATION
Common
Stock ($5.00 per share)
Persons
interested in purchasing common stock of Cell-nique Corporation must complete
and return this Subscription Agreement along with their check or money order or
wire transfer to:
Cell-nique
Corporation
12 Old
Stage Coach Road
Weston
CT 06883, ("the Issuer") ("the Company")
Subject
only to acceptance hereof by the issuer, in its discretion, the undersigned
hereby subscribes for the number of common shares and at the aggregate
subscription price set forth below.
An
accepted copy of this Agreement will be returned to the Subscriber as a receipt,
and the physical stock certificates shall be delivered to each Investor within
thirty (30) days of the Close of this Offering.
Securities Offered -
The Company is offering 15,000,000 shares (par value $.00001 per share) at $5.00
per share. The minimum subscription is 1 share.
Subscription - In
connection with this subscription the undersigned hereby subscribes to the
number of common shares shown in the following table.
Number of Common Shares =
____________
Multiply by Price of Shares
x $5.00
per
Share
Aggregate Subscription Price
= $
___________
Wire,
Check or money order shall be made payable to Cell-nique
Corporation.
In
connection with this investment in the Company, I represent and warrant as
follows:
a) Prior
to tendering payment for the shares, I received a copy of and read your
prospectus dated ______________ ,
20__.
b) I
am a bona fide resident of the state of
________________________________.
c) The
Issuer and the other purchasers are relying on the truth and accuracy of the
declarations, representations and warranties herein made by the undersigned.
Accordingly, the foregoing representations and warranties and undertakings are
made by the undersigned with the intent that they may be relied upon in
determining his/her suitability as a purchaser. Investor agrees that such
representations and warranties shall survive the acceptance of Investor as a
purchaser, and Investor indemnifies and agrees to hold harmless, the Issuer and
each other purchaser from and against all damages, claims, expenses, losses or
actions resulting from the untruth of any of the warranties and representations
contained in this Subscription Agreement.
Please
register the shares which I am purchasing as follows:
Name:
_____________________________________
Date: ___________________
As
(check one)
o Individual
|
o Tenants in
Common
|
o
|
Existing Partnership
|
o Joint
Tenants
|
o
Corporation
|
o
|
Trust
|
o Minor with adult
custodian under the Uniform Gift to Minors Act
|
o
|
IRA
|
For
the person(s) who will be registered shareholder(s):
|
||
Signature
of Subscriber
|
Residence
Address
|
|
Name
of Subscriber (Printed)
|
City
or Town
|
|
Signature
of Co-Subscriber State
|
Zip
Code
|
|
Name
of Co-Subscriber (Printed)
|
Telephone
|
|
Subscriber
Tax I.D. or
|
Co-Subscriber
Tax I.D. or
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Social
Security Number
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Social
Security Number
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E-mail
Address (if available)
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ACCEPTED
BY: CELL-NIQUE CORPORATION.
By:
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Date:
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Officer
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No
dealer, salesperson or any other person is authorized to give any information or
to make any representations in connection with this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by us. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the securities offered
by this Prospectus, or an offer to sell or solicitation of an offer to buy any
securities by anyone in any jurisdiction in which such offer or solicitation is
not authorized or is unlawful. The delivery of this Prospectus shall not, under
any circumstances, create any implication that the information herein is correct
as of any time subsequent to the date of the Prospectus.
Until
December 31, 2011 all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
TABLE
OF CONTENTS
Summary
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4
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Risk
Factors
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9
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Use
of Proceeds
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22
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Plan
of Distribution
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23
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Capitalization
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24
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Dilution
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24
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Business
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26
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Management
Discussion of Analysis of Condition and Results of
Operations
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32
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Ownership
of Common Stock
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40
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Principal
Shareholders
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40
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Management
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41
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Certain
Transactions
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43
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Description
of Securities
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44
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Shares
Eligible for Future Sale
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45
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Available
Information
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46
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Dividend
Policy
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47
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Stock
Transfer Agent
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47
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Experts
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47
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Legal
Matters
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47
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Index
to Financial Statements
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F-1
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Cell-nique
Corporation
15,000,000
SHARES
COMMON STOCK
(par
value $.00001 per share)
Cell-nique
Corporation
________,
2010
Part
II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. Indemnification of Officers and
Directors
The
information required by this item is incorporated by reference to
"indemnification" in the prospectus herein.
At
present we have not entered into individual indemnity agreements with our
Officers or Directors. However, our By-Laws and Certificate of Incorporation
provide a blanket indemnification that we shall indemnify, to the fullest extent
under Delaware law, our directors and officers against certain liabilities
incurred with respect to their service in such capabilities. In addition, the
Certificate of Incorporation provides that the personal liability of our
directors and
officers and our stockholders for monetary damages will be
limited.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, 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 of 1933, as amended, 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 a
director, officer or controlling person in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, we will, unless in the
opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933, as amended, and we will be governed by the final adjudication of
such case.
ITEM 25. Other Expenses of issuance and
distribution
SEC
Registration Fee
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$
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5,347.50
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Legal
Fees and Expenses
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$
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25,000
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Printing
and Engraving Expenses
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$
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5,000
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Accountant's
Fees and Expenses
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$
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10,000
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Contingency
Funds
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$
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29,653
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Total
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$
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75,000
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The
foregoing expenses, except for the SEC fees, are estimated.
II-1
ITEM
26. Recent Sales of Unregistered Securities.
( a)
Unregistered Securities Sold since inception:
The
following sets forth information relating to all previous sales of common stock
by the Registrant which sales were not registered under the Securities Act of
1933.
None
No
advertising or general solicitation was employed in offering the shares. The
shares were offered for investment only and not for the purpose of resale or
distribution. All of the shares issued to the aforementioned persons bear
restrictive legends preventing
their
transfer except in accordance with the Securities Act and the regulations
promulgated thereunder.
ALL
COMMON STOCK ISSUANCES OTHER THAN FOR CASH
The
following sets forth information relating to all previous issuances of common
stock by the Registrant that are at least two years prior which sales were not
registered under the Securities Act of 1933.
The
following issuances of common stock listed below and totaling No shares were in
exchange for various business services performed from inception through December
31, 2009:
The
following issuances of common stock listed below and totaling 5,000,000 shares
were for founders shares from inception through December 31,
2009:
Physicians
Capital Corporation 5,000,000
The
following sets forth information relating to previous issuances of common stock
by the Registrant that are less than two years
prior which sales were not registered under the Securities Act of
1933.
The
above most recent issuances of common stock in exchange
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for
salary that are not at least two years prior...
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None
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The
previous list of all shares issued for other than a cash
sales
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that
are at least two years prior...
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None
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Cash
sales of the Company’s common stock...
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None
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Total
shares sold for cash and all other transactions total
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None
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II-2
ITEM 27. - EXHIBITS
Index to
Exhibits
SEC
REFERENCE NUMBER
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TITLE
OF DOCUMENT
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LOCATION
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3.1
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Articles
of Incorporation
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Filed
S-1 on 8-18-2009
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3.2
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Amendment
to Certificate of Incorporation
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Filed
S-1 on 8-18-2009
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3.3
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Bylaws
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Filed
S-1 on 8-18-2009
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5.1
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Legal
Opinion and Consent of Miles Garnett, Esq
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Filed
herewith
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10.1
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Cell-nique
Promissory Note
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Filed
S-1/a on 12-14-2009
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23.1
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Consent
of Accountants for Audited Statements
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Filed
herewith
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II-3
ITEM
28. Undertakings
The
undersigned registrant undertakes:
(1) To
file, during any period in which offer or sales are being made, a post-effective
amendment to this registration statement
To
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include
any prospectus required by section I O(a)(3) of the Securities Act of
1933;
S-K
512(a)(5)(ii) If the registrant is subject to Rule 430C
(§230.430C of this chapter), 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 (§230.430A of this chapter), 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.
S-K
512(a)(6) That, for the purpose of determining liability of the registrant
under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities:
The
undersigned registrant undertakes that in a primary offering of securities
of the undersigned registrant 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, the undersigned registrant
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 of the undersigned registrant
relating to the offering required to be filed pursuant to Rule 424
(§230.424 of this chapter);
(ii)
Any free writing prospectus relating to the offering prepared by or on
behalf of the undersigned registrant or used or referred to by the
undersigned registrant;
(iii)
The portion of any other free writing prospectus relating to the offering
containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
(iv)
Any other communication that is an offer in the offering made by the
undersigned registrant to the purchaser.
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To
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reflect
in the prospectus any facts or events arising after the effective date of
the Registration Statement (or the most recent post-effective amendment)
which, individually or in the aggregate, represent a fundamental change in
the information in the registration
statement;
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To
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include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to the information in the Registration
Statement.
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(2) That,
for the purpose of determining any liability under the Securities Act of 1933,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of securities at that time shall be deemed to be the initial
bona fide offering.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
Subject
to the terms and conditions of Section 15(d) of the Securities Exchange Act of
1934, the undersigned Registrant hereby undertakes to file with the Securities
and Exchange Commission any supplementary and periodic information, documents,
and reports as may be prescribed by any rule or regulation of the Commission
heretofore or hereafter duly adopted pursuant to authority conferred to that
section.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers, and controlling persons of the Registrant
pursuant to our certificate of incorporation or provisions of Delaware law, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission the indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. If a claim for
indemnification against liabilities (other than the payment by the Registrant)
of expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit, or proceeding is
asserted by a director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of our
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether the indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of the issue.
II-4
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, this registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form S-1/A and authorized this registration statement
to be signed on our behalf by the undersigned, in Weston, County of Fairfield,
State of Connecticut, on the dates noted below. In accordance with the
Securities Act of 1933 this registration was signed by the following persons in
the capacities and on the dates indicated.
(Registrant)
CELL-NIQUE
CORPORATION.
President
and Chairman of the Board of Directors and Principal Executive
Officer
/s/
Dan Ratner
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April 19,
2010
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and
as
Controller
& Principal Financial Officer
/s/
Dan Ratner
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April
19, 2010
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Vice
President and Director
/s/
Donna Ratner
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April
19, 2010
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Who must
sign: the small business issuer, its principal executive officer or officers,
its principal financial officer, its controller or principal accounting officer
and at least the majority of directors or persons performing similar
functions.
II-5