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EX-5 - Oiltek, Inc.ex5.htm
EX-23.1 - Oiltek, Inc.ex23-1.htm
EX-10.13 - Oiltek, Inc.ex10-13.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM S-1/A
Amendment No. 7  

 
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 OILTEK, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)
3533
 (Primary Standard Industrial Classification Code Number)
20-5631257
(I.R.S. Employer Identification Number)
 
7808 Creekridge Circle
Suite 105
Minneapolis, Minnesota 55439
Telephone: 952-746-9652
(Address and telephone number of principal executive offices)
  
Frederick M. Mintz, Esq.
488 Madison Avenue
Suite 1100
New York, New York 10022
Telephone: 212-486-2500
 (Name, address and telephone number of agent for service)
  
Approximate date of commencement of proposed sale to the public by the selling stockholders: From time to time after the effective date of this Registration Statement as determined by market conditions.
 
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. x

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. r
 
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. r
 
 
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. r

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b2 of the Exchange Act.
 
Large accelerated filer   r
 
Accelerated filer                      r
 
Non-accelerated filer     r
 
Smaller reporting company   x
 
 
CALCULATION OF REGISTRATION FEE
 
Title of each class of securities to be registered
 
Amount of shares to
be registered
 
Proposed
offering price per Share (1)
   
Proposed aggregate offering
   
Amount of registration fee
 
Common Stock, $.001 par value per Share
     
2,725,000
   
$
0.20
   
$
545,000
   
$
$16.73
 
______________
1 Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(a) of the Securities Act of 1933. This registration statement shall also cover any additional shares of common stock which become issuable by reason of any stock split, stock dividend, anti-dilution provisions or similar transaction effected without the receipt of consideration which results in an increase in the number of the outstanding shares of common stock of the registrant.
 
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON 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 DATES AS THE COMMISSION, ACTING UNDER SAID SECTION 8(a), MAY DETERMINE.

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS.  ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
 
OILTEK, INC.
 
PART I
 
 Page
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14
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25
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PART II
   
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  38
  F-1
 

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 18, 2010
 
Oiltek, Inc.
2,725,000 Shares
Common Stock

This Prospectus relates to 2,725,000 shares of our common stock, par value $.001 per share (“Common Stock”), which may be offered for sale or otherwise transferred from time to time by the selling stockholders. We are not selling any of our shares pursuant to this Prospectus.  
 
If the selling stockholders offer to sell their shares of Common Stock it will be at a price of $0.20 per share, or an aggregate of $545,000 if all the shares are sold, subject to the terms of this prospectus, until our shares are quoted on any of the NASDAQ Capital Market, the OTC Bulletin Board or other quotation services or exchanges, and thereafter at prevailing market prices or privately negotiated prices on the over the counter market.
 
The securities subject to this Prospectus are being registered to permit public secondary trading of the securities offered by the selling stockholders named in this Prospectus.  We will not receive any of the proceeds from the sale of the securities by the selling stockholders.

The selling stockholders may, but are not obligated to, offer all or part of their shares of Common Stock for resale from time to time through public or private transactions, at either prevailing market prices or at privately negotiated prices.  See "Plan of Distribution" on Page 12 of this Prospectus.

There is currently no public market for our Common Stock.
 
Absent additional financing or funding, which we may not be able to obtain, we currently lack sufficient liquidity and working capital to meet our operational requirements.
 
INVESTING IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK.  YOU SHOULD PURCHASE OUR SECURITIES ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT.  SEE "RISK FACTORS" BEGINNING AT PAGE 5.
 
The date of this Prospectus is                                         .

The information contained in this Prospectus is not complete and is subject to change.  The selling stockholders are not permitted to sell securities until the registration statement, of which this Prospectus is a part, filed with the Securities and Exchange Commission is effective.  This Prospectus is not an offer to sell these securities, nor is it a solicitation of an offer to buy these securities in any state where the offer or sale is not permitted.
 
You should rely only upon the information contained in this Prospectus.  We have not, and the selling stockholders have not, authorized anyone to provide you with information that is different from that contained in this Prospectus.  The selling stockholders are offering to sell shares of Common Stock and seeking offers to buy shares of Common Stock only in jurisdictions where offers and sales are permitted.  The information in this Prospectus is accurate only as of the date of this Prospectus, regardless of the time of delivery of this Prospectus or of any sale of our Common Stock.
 
 
PART I

PROSPECTUS SUMMARY

SUMMARY INFORMATION AND RISK FACTORS.
 
The following summary contains basic information about our company and this offering.  It does not contain all the information that is important to you in making an investment decision.  You should read this Prospectus summary together with the entire Prospectus, including the more detailed information in our financial statements and accompanying notes appearing elsewhere in this Prospectus.  Unless otherwise indicated, all information contained in this Prospectus is based upon information as of June 30, 2010 .


Oiltek, Inc. (“we”, “us”, “our”, or the “Company”) was incorporated under the laws of the State of Delaware on August 7, 2006.

Avalon Oil & Gas, Inc. (“Avalon”) holds 77.97% of our Common Stock, which it was authorized to be issued as of September 28, 2006, in consideration of its future entrance into a license agreement with us, together with consideration of $50,000, which was paid in September, 2007.  Avalon has acquired licenses with respect to the U.S. patents titled “Detection of Leaks in Pipelines” and “System and Method for the Mitigation of Paraffin Wax Deposition from Crude Oil by Using Ultrasonic Waves”, the Canadian and International patent applications titled “System and Method for the Mitigation of Paraffin Wax Deposition from Crude Oil by Using Ultrasonic Waves” and the U.S. patent application titled “Well Casing Based-Geophysical Sensor Apparatus” and any patent granted based upon those applications, through the three transactions for such five licenses which are discussed in greater detail beginning on page 15.
 
Avalon entered into a license agreement with us in consideration of our agreement to issue 10,000,000 shares of our common stock, representing 77.97% of our issued and outstanding shares of common stock to Avalon. Pursuant to the license agreement between Avalon and Oiltek, we have licensed from Avalon the rights to make, use, offer for sale, and sell products utilizing the claims contained within the patents and patent applications described in the preceding paragraph and any patent granted based upon those applications, and to sublicense any of those rights, and we are required to pay Avalon a royalty equal to the sum of (A) 6% of the sales of products by us or our sublicensees which utilize the patent rights licensed from Avalon, and (B) 6% of any other revenues we receive, including, but not limited to, sublicense fees.

Pursuant to an Amendment to the License Agreement between Avalon and Oiltek dated as of October 14, 2010, the termination date of the license agreement has been extended from May 31, 2012 to May 31, 2017, and may be extended for up to two additional 3-year terms in our sole and absolute discretion; provided, however, that the patent titled “Detection of Leaks in Pipelines” expires on October 9, 2012 and will be in the public domain thereafter.
 
We intend to engage in research and development work involving the technologies from the patent rights licensed from Avalon in order to develop commercially viable products based upon those technologies, and ultimately to license the rights to manufacture and sell the products and license the technologies which we develop through our research.  The initial technologies we are developing are for (1) the use of ultrasonic waves to prevent or break down paraffin wax buildups on oil production equipment during the oil production process, (2) the use of a large number of sensors installed along and outside of oil well casings in order to detect information about the underlying oil deposit and the oil production process, and (3) a system for detecting leaks in underground gas pipelines which would be accurate, inexpensive, able to be used continuously over a long period of time, and which would be able to withstand significant wear resulting from use in difficult environments.

 
During the term of the license agreement between Avalon and Oiltek, Avalon does not retain any rights to the patent rights we licensed from it.  However, after the license agreement expires, those rights revert to Avalon.  Avalon will retain the rights to make, use, offer for sale, and sell products utilizing the claims contained within the U.S. patent titled “Detection of Leaks in Pipelines” until its expiration on October 9, 2012, the U.S. patent titled “System and Method for the Mitigation of Paraffin Wax Deposition from Crude Oil by Using Ultrasonic Waves” until its expiration on March 11, 2025, any patent granted based upon the Canadian and International patent applications titled “System and Method for the Mitigation of Paraffin Wax Deposition from Crude Oil by Using Ultrasonic Waves” until its expiration on March 11, 2025, and any patent granted based upon the U.S. patent application titled “Well Casing Based-Geophysical Sensor Apparatus” until its expiration on September 27, 2025, and to sublicense any of those rights, and will also receive such rights with respect to any improvements we make to any of those technologies.  Avalon will not have any obligation to our sublicensees, and may sell products based upon those patent rights, sublicense technologies based upon those patent rights, and sublicense the rights to manufacture and sell products based upon those patent rights to our sublicensees and customers.
 
Jill Allison currently serves as our President and as a Director.  Kent Rodriguez currently serves as our Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer and as a Director.  Douglas Barton currently serves as our Chairman, as our Secretary, and as a Director.

We have not been involved in any bankruptcy, receivership or similar proceeding.  We have not been involved in any material reclassification, merger consolidation, or purchase or sale of any assets.
 

Securities Being Registered
We are registering shares of Common Stock on behalf of twelve (12) selling stockholders offering up to 2,725,000 shares of Common Stock.  The aggregate amount of shares we are registering for the selling stockholders is 21.24% of the issued and outstanding shares of our Common Stock and 1.4% of the total authorized shares of our Common Stock.  See “Selling Security Holders.”
   
Plan of Distribution
Up to 2,725,000 shares of Common Stock may be offered and sold by the selling stockholders independently or through agents or brokers, which may involve block transactions on the over-the-counter market or on other quotation services or exchanges on which the shares are then quoted or listed, pursuant to the rules of the applicable exchanges or in the over-the-counter market, or otherwise, at market prices or at fixed prices; or by any other legally available means.
   
Offering Price
If the selling stockholders offer to sell their shares of Common Stock it will be at a price of $0.20 per share, subject to the terms of this prospectus, until our shares are quoted on an exchange and thereafter at prevailing market prices or privately negotiated prices on the over the counter market.
   
Use of Proceeds
We will not receive any cash or other proceeds from the selling security holders’ sales of their respective shares.
   
Securities Outstanding
We are authorized to issue up to an aggregate of 198,000,000 shares of Common Stock and 2,000,000 shares of preferred stock of which 12,825,000 common shares were issued and outstanding as of June 30, 2010.  No preferred shares have been issued.
   
Risk Factors
An investment in our shares is highly speculative and purchasers may suffer a rapid and substantial loss per common share compared to the purchase price.  We may need additional funding in order to make our operations commercially viable.  No individual should invest in our common shares who cannot afford to risk the loss of his or her entire investment.  See “Risk Factors” on this Page 5 of this Prospectus.
 
 

An investment in our Common Stock involves a high degree of risk.  If any of the following risks actually occur, our business, financial condition and operations will be materially affected.

Accordingly, prospective investors should consider carefully the following risk factors, in addition to the other information with respect to our business contained in this Prospectus, before purchasing the Shares pursuant to this Prospectus.

Our business is difficult to evaluate because we have no operating history.

As we have no operating history or revenue and only minimal assets, we may not be able to continue as a going concern.  We have no operating history nor any revenues or earnings from operations since our inception.  We have no current ongoing operations.  We have no significant assets other than our licenses, which are described on Page 15.  For the foreseeable future, it is likely that we will incur operating expenses without corresponding revenues.  We are likely to have a continually increasing net operating loss for the foreseeable future. We estimate that we would need approximately $200,000 for each technology, as well as a joint venture partner to work with us to develop and market the technology.  However, we may not be able to develop a technology based upon the patent rights we have licensed.  Further, even if we developed such a technology, we may not be able to develop commercially viable products based upon that technology, and if we developed such product, we may not be able to enter into a licensing, distribution or subdistribution agreement for that product.  Finally, even if we did develop products and enter into licensing, distribution or subdistribution agreements for those products, we may still not attain profitability.
 
There is uncertainty as to our ability to continue as a going concern.
 
Our financial statements for the period ended June 30, 2010, which are included in our Financial Statements which are attached to and made a part of this Prospectus and this Registration Statement, as well as the report of our independent public accounting firm on our financial statements, questions our ability to operate as a going concern.  This conclusion is based upon our limited cash holdings and the uncertainty with respect to our ability to secure additional financing if needed for continued operations.   We will need to raise additional capital through the issuance of additional shares or through debt.  There is no existing commitment to provide additional capital. We may not be able to receive additional financing.
 
We believe that we currently have sufficient liquidity and capital resources to meet our working capital needs for the next six months based upon funding from Avalon.  However, as discussed below, Avalon is also experiencing financial difficulties and may not in a position to provide us with the necessary funding.  If we are unable to obtain additional financing and Avalon is unable to provide us with funding, it is highly unlikely that we can continue to operate.
 
We are reliant upon funding from a company currently experiencing financial difficulties to continue our operations.
 
In view of the fact that we have no operating history or revenue, only minimal assets and the uncertainty with respect to our ability to secure additional financing, we are reliant upon our majority stockholder, Avalon, to provide us with the funding which we require to continue our operations.  As disclosed in Avalon’s Quarterly Report on Form 10-Q with respect to the quarter ended June 30, 2010, filed with the United States Securities and Exchange Commission (the “SEC”) on August 16, 2010, Avalon has been experiencing financial difficulties of its own and had a working capital deficiency of $1,490,922 and only $8,264 in cash as of June 30, 2010.  Accordingly, Avalon may not be able to provide us with the funding we require to continue as a going concern.  If we are unable to obtain additional financing and Avalon is unable to provide us with funding, it is highly unlikely that we can continue to operate.
 
Competition could substantially impair our business and our operating results.

Competition in the oil and gas industry is intense.  We are engaging in a business similar to several other major corporations, such as Baker Hughes, Smith International, Inc., Halliburton Company, Schlumberger, Ltd., Weatherford International, Ltd., Flotek Industries, Inc., and Core Laboratories N.V.  Most of our competitors’ financial and technical resources, name recognition, market access, commercial and governmental connections, and research and development capabilities far exceed ours.  Due to our limited size and resources, it is doubtful we will be in direct competition with these companies; however, it will be difficult for our technology and products to gain market access, and if we did develop a successful technology or product, one or more of these companies may develop a similar or superior technology or product within a short time.

 
Our technologies may not be successful.

We have not yet been able to develop our patented technologies into marketable products.    If we do not successfully develop our technologies, we will not be able to enhance those technologies in the future, or develop other technologies.

We need additional financing to develop our products and to meet our capital requirements.

We will need additional financing to meet our capital requirements.  We currently have no arrangements to obtain additional financing and we will be dependent upon sources such as:

·  
future earnings,

·  
funds from private sources such as, loans and additional private placements, and

·  
funds from public offerings.

In view of our lack of an operating history, our ability to obtain additional funds is limited.  Additional financing may only be available, if at all, upon terms which may not be commercially advantageous.  If adequate funds are not available from operations or additional sources of financing, our business will be materially adversely affected.

We may experience significant fluctuations in our operating results.

Our revenues and operating results may fluctuate due to a combination of factors, including, but not limited to, the extent that our technologies have gained acceptance and market share in their relevant markets, the cost involved in research and development of the products developed utilizing our technologies and variations in the abundance and accessibility of natural oil and gas resources.  Consequently, it is highly uncertain what our operating results will be in the near future.  Our revenues and operating results may also fluctuate based upon the number and extent of potential financing activities.  Thus, we may not be able to reach profitability on a quarterly or annual basis.

We may be subject to the Securities and Exchange Commission's "penny stock" rules if our Common Stock sells below $5.00 per share, and accordingly broker-dealers may be unwilling to trade our Common Stock.

If, after our stock begins to trade, the trading price of our Common Stock is below $5.00 per share, trading in our securities may be subject to the requirements of the Securities and Exchange Commission's rules with respect to securities trading below $5.00, which are referred to as "penny stocks".  These rules require the delivery prior to any transaction of a disclosure schedule explaining the penny stock market and all associated risks and impose various sales practice requirements on broker-dealers who sell "penny stocks" to persons other than established customers and accredited investors, which are generally defined as institutions or an investor individually or with their spouse, who has a net worth exceeding $1,000,000 or annual income, individually exceeding $200,000 or, with their spouse, exceeding $300,000.  For these types of transactions the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to the sale.  In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer.  The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our Common Stock, which could severely limit its market price and liquidity.

In addition, we will be subject to an SEC rule (Rule 15c2-11) (the so-called penny stock rules) that imposes various requirements on broker-dealers who sell securities governed by the rule to persons other than established customers and accredited investors. The requirement that broker-dealers comply with this rule could deter broker-dealers from recommending or selling our Common Stock, thus further adversely affecting the liquidity and share price of our Common Stock, as well as our ability to raise additional capital.
 
 
We do not currently pay any dividends on our Common Stock and may never pay any dividends, and accordingly you may not receive current income even if the Company has revenues.

We do not currently, and may never, have sufficient earnings to pay any dividends with respect to the Common Stock.  Moreover, even if we have sufficient earnings, we are not obligated to declare dividends with respect to the Common Stock.  The future declaration of any cash or stock dividends will be in the sole and absolute discretion of the Board of Directors, and will depend upon our earnings, capital requirements, financial position, general economic conditions and other pertinent factors.  It is also possible that the terms of any future debt financing may restrict the payment of dividends.  We presently intend to retain earnings, if any, for the development and expansion of our business.

Our Directors have the right to authorize the issuance of Preferred Stock, which if issued could adversely affect the rights of holders of our Common Stock.

Our directors, without further action by our stockholders , have the authority to issue shares of Preferred Stock from time to time in one or more series, and to fix the number of shares, the relative rights, conversion rights, voting rights, terms of redemption, liquidation preferences and any other preferences, special rights and qualifications of any such series.  Any issuance of Preferred Stock could adversely affect the rights of holders of Common Stock and the value of such Common Stock.

Our directors and officers will have substantial influence over our operations and control substantially all of our business matters.  All three directors and officers will only participate in our management on a part-time basis.
 
Our management currently consists of three persons, who are our officers and are also directors, and who are the only persons responsible for conducting our day-to-day operations.  We do not benefit from the multiple judgments which a greater number of directors or officers may provide, and we rely completely upon the judgment of such three people in making business decisions.   The two employees dedicating the most time to the business, Kent Rodriguez and Jill Allison, will still only be participating in our management on a part-time basis, and do not intend to devote their full time and attention to our business.

We may be subject to risks associated with doing business in foreign countries, which may materially affect our ability to do business in these foreign countries.

We have an exclusive worldwide license to make, use, offer for sale, and sell products utilizing the claims within the U.S. patent and Canadian and International patent applications titled “System and Method for the Mitigation of Paraffin Wax Deposition from Crude Oil by Using Ultrasonic Waves” and any patent granted based upon such applications, or to sublicense any of those rights.  Accordingly, we expect that a substantial part of our revenues may be derived from sales of products and licenses outside of the United States and that our business, financial condition, results of operations and prospects may be subject, to a significant extent, to economic, political and legal developments in the foreign countries in which we operate.  In addition to language barriers, different presentations of financial information, different business practices, and other cultural differences and barriers which may make it difficult to evaluate business decisions or transactions, ongoing business risks result, depending upon which foreign countries we are doing business in, from the international political situation, uncertain legal systems and applications of law, inexperienced judiciaries, prejudice against foreigners, corrupt practices, lack of predictability of the imposition or enforcement of rules, uncertain economic policies and potential political and economic instability which may be exacerbated in certain foreign countries.  We may not be able to enforce business contracts or protect our intellectual property rights in foreign countries.

We may be subject to risks beyond our control with respect to doing business in foreign countries.

Our business is materially affected by conditions in the global financial markets and economic conditions throughout the world that are outside our control, such as interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws (including laws relating to taxation), trade barriers, commodity prices, currency exchange rates and controls and national and international political circumstances (including wars, terrorist acts or security operations).  Our results may be adversely affected by changes in governmental policies with respect to anti-inflationary measures, currency conversion and remittance abroad, and rates and measures of taxation, among other things.

Although we do not currently operate in foreign countries, we plan to in the future.  Specifically, we initially anticipate conducting operations in Canada and Columbia.  Doing business in foreign countries we will subject us to additional risks, including, but  not limited to,  currency  fluctuations,  regulatory problems, punitive tariffs, unstable local tax policies, trade embargoes, expropriation, inexperienced judiciaries, changes in the imposition or enforcement of informal rules, corporate and personal liability for violations of local laws, possible difficulties in collecting accounts receivable, increased costs of doing business in countries with limited infrastructure, risks related to shipment of raw materials and  finished  goods  across  national  borders and cultural and language  differences.  We also may face competition from local companies which have longer operating histories, greater name recognition, and broader customer relationships and industry alliances in their local markets, and it may be difficult to operate profitably in some markets as a result of such competition.  Foreign  economies differ from the United States economy in growth of gross national  product, rate of inflation, market development,  rate of savings, and capital investment, resource  self-sufficiency  and  balance  of  payments  positions,  and in other respects.
 
 
When doing business in foreign countries, we may be subject to uncertainties with respect to those countries’ legal system and application of laws, which may impact our ability to enforce our agreements and may expose us to regulatory restrictions, penalties, and/or lawsuits in those foreign jurisdictions.

Legal systems in many foreign countries are new, unclear, and continually evolving.  There can be no certainty as to the application of laws and regulations in particular instances.  Many foreign countries do not have a comprehensive system of laws, and the existing regional and local laws are often in conflict and subject to inconsistent interpretation, implementation and enforcement.  New laws and changes to existing laws may occur quickly and sometimes unpredictably.  These factors limit our ability to enforce agreements with our current and future customers and vendors.  Furthermore, it may expose us to lawsuits by our customers and vendors in which we may not be adequately able to protect ourselves.

When doing business in certain foreign countries, we may be unable to fully comply with local and regional laws which may and may expose us to regulatory restrictions, penalties, and/or lawsuits in those foreign jurisdictions.

When doing business in certain foreign countries, we may be required to comply with informal laws and trade practices imposed by local and regional government administrators.  Local taxes and other charges may be levied depending upon the local needs for tax revenues, and may not be predictable or evenly applied.  These local and regional taxes/charges and governmentally imposed business practices may affect our cost of doing business and may require us to constantly modify our business methods to both comply with these local rules and to lessen the financial impact and operational interference of such policies.  In addition, it is extremely burdensome for businesses operating in foreign countries to comply with some of the local and regional laws and regulations.  Our failure to maintain compliance with the local laws may result in hefty fines and fees which may have a substantial impact upon our cash flow, cause a substantial decrease in our revenues, and may affect our ability to continue operation.

Various administrative agencies in foreign countries have informal rule enforcement which we may not be able to comply with.

We  may not be able to operate within changing administratively imposed business practices and otherwise to comply with the informal enforcement rules of the various administrative agencies in the countries where we will operate.  If local or regional governments or administrators in foreign countries impose new practices or levies which we cannot effectively respond to, or if administrators suddenly commence enforcing those rules that they have not previously enforced, our operations and financial condition could be materially and adversely impacted.  Our ability to appeal many of the local and regionally imposed laws and regulations may be limited, and we may not be able to seek adequate redress for laws which materially damage our business and affect our ability to continue operation.

Many foreign judiciaries are relatively inexperienced in enforcing the laws which exist, which may expose us to costly litigation and uncertain outcomes.

If we are involved in litigation in a foreign country, we may not be able to properly evaluate the possible outcome.  This may expose us to costly litigation.  Furthermore, we may be exposed to potential inequitable judicial results.  Either of those scenarios may have a material adverse effect upon our business or financial condition.

Currency fluctuations, while not presently ascertainable, may adversely affect our earnings.

Fluctuations in exchange rates, primarily those involving the U.S. dollar, may affect our costs and operating margins, which in turn could affect our revenues.  In addition, these fluctuations could result in exchange losses and increased costs.

The oil and gas industry is highly volatile, which may jeopardize our operations.

Many of the technologies which we plan to develop would be marketed in industry sectors that experience significant fluctuations in demand based upon economic conditions, energy prices, consumer demand and other factors beyond our control. Our prospects are materially dependent upon the levels of activity in oil and natural gas development, production, processing and transportation. Oil companies make decisions with respect to their levels of drilling and exploration based upon both current prices and projected future prices.   In a period of high oil prices which are projected to remain high, oil companies generally increase their exploration budgets, and use more expensive means of producing oil from existing fields, of which many marginal fields would not be economical to develop if the prices of oil were lower.  In a period of low prices which are projected to remain low, oil companies generally produce limited quantities of oil from the fields where the cost of production is lowest, and cut back exploration and production from marginal fields.  Similar trends are true in the natural gas industry.  In recent years, oil and natural gas prices, and therefore the levels of drilling and exploration activity, have been extremely volatile. Any prolonged substantial reduction in oil and natural gas prices would depress the levels of exploration and development activity and result in a corresponding decline in the demand for the products which we plan to develop. A significant prolonged decline in oil and natural gas prices would have a material adverse effect on our business, results of operations and financial condition.
 
 
The technologies which we plan to develop are likely to be used in activities which involve a high risk of litigation.

Many of the products which we plan to develop would be used in activities which pose a high risk to workers, the environment, and surrounding communities.  Therefore, we could be subject to litigation for personal injuries, loss of life, damage or destruction of property, or environmental damage which result from activities involving the products which we develop.  Any such litigation could materially adversely affect our financial condition and results of operation, and even if we were successful in such litigation, the costs would be very significant relative to the scale of our operations.  Any damages incurred by or caused by the users or licensees of our products may result in litigation against us, regardless of whether we were actually at fault.

Our success depends upon key members of our management, the loss of any one or more of whom could disrupt our business operations.

We depend to a large extent on the services of our executive officers. The loss of services of Jill Allison or Kent Rodriguez could disrupt our operations.

Conflicts of interest may arise from our counsel Mintz & Fraade, P.C.’s representation of Avalon Oil & Gas Inc., and Mintz & Fraade, P.C. may not resolve those conflicts in our interest.
 
Our counsel, Mintz & Fraade, P.C., represents Avalon, which is the licensor of the patent rights which constitute our business, and is also our controlling stockholder .  If a conflict of interest arose from Mintz & Fraade, P.C.’s representation of Avalon, Mintz & Fraade, P.C. may not give our interests equal or greater priority to Avalon’s interests.  
 
Conflicts of interest may arise from members of management selling stock pursuant to this offering.
 
If members of our management sell all or a substantial amount of their shares pursuant to this offering, they would not have a significant financial interest in the Company.  When management has a significant personal financial interest in a company, they are more likely to remain with the company for the long-term, and are more likely to resolve conflicts of interest in favor of the company.  If members of our management sell all or a substantial amount of their shares pursuant to this offering, they may not seek to remain employed with the Company if other options were available to them, or may not be as likely to resolve conflicts of interest in favor of the Company.  In addition, the Company will pay the expenses of registering the shares of management who are included in the selling stockholders, but will receive none of the proceeds.
 
Conflicts of interest may arise from the fact that our directors, Jill Allison, Kent Rodriguez and Douglas Barton, also serve as directors of Avalon Oil & Gas, Inc., our licensor and controlling stockholder.
 
Jill Allison, Kent Rodriguez and Douglas Barton serve as our directors and also as three of the directors of Avalon, which owns a majority of our shares.  Through Jill Allison, Kent Rodriguez and Douglas Barton’s control of Avalon’s Board and ability to vote Avalon’s shares in our company, they would be able to obtain a majority in any vote of our stockholders as well as in any vote of our Board of Directors.  As a result, they would be able to approve corporate actions requiring a stockholder vote regardless of how the remainder of our stockholders votes.  If there is a conflict of interest between Avalon and our minority stockholders, Jill Allison, Kent Rodriguez and Douglas Barton may not resolve such conflict in the interests of our company as a whole rather than in Avalon’s interests and their interests as significant stockholders of Avalon.
 
Avalon has announced in a press release that it plans to distribute its shares of our company to its stockholders by means of a stock dividend.  If Avalon distributes its shares of our company to its stockholders, our directors and officers would no longer have effective control of our company, and could potentially be replaced. Avalon intends to bear the costs of the distribution.
 
Avalon currently owns a majority of our shares, and our directors, Jill Allison, Kent Rodriguez and Douglas Barton, are also Avalon’s three directors, and so control Avalon’s Board and its ability to vote its controlling interest in our company.  Pursuant to a press release dated August 12, 2009, Avalon announced its intention to distribute those of our shares which it owns to its shareholders sometime after this registration statement is effective.  As of the date hereof, Avalon’s Board of Directors has not determined when Avalon shall distribute those shares to its stockholders. If Avalon distributes those shares to its stockholders, our directors would no longer have control of any vote of our stockholders, and could be replaced by a stockholder vote.  Any new directors who would be elected or the officers which those new directors would appoint may not be able to perform the functions of our management at an equal or higher level than our current management team.

 
Our license agreement will only last for a maximum of 11 years after May 31, 2012.  The patent titled “Detection of Leaks in Pipelines” expires October 9, 2012, after which the technology covered by the patent will be in the public domain, and the loss of this patent may materially affect our financial results.
 
Once the license agreement expires, the patent rights which we licensed would revert to Avalon, the licensor of those patent rights, which would be free to make, use, offer for sale, and sell products utilizing the claims contained within those patent rights, and to license those patent rights to other parties, including, but not limited to, our sublicensees and customers, and would also receive such rights with respect to any improvements we make to any of the technologies involved in those patent rights.  We may build up a substantial business resulting from the licensing of the rights to manufacture and sell products or the license of technologies, and then lose all of our business once those licenses expire.

The patent titled “Detection of Leaks in Pipelines” expires October 9, 2012, and would be in the public domain thereafter.  After that date, even if the license agreement is still in effect, we would be unable to derive any revenues from licensing the technologies in that patent, and other parties would be able to utilize such technologies without paying us any royalties.
 
Three of the five licenses to technologies which are the subject of our license agreement with Avalon are licenses to patent rights which are currently only in the application stage; if patents are not granted to those technologies, we would not be able to enforce our rights to those technologies, and our business may be materially adversely affected.

Three of the five licenses to technologies which are the subject of our license agreement with Avalon are licenses to patent rights which are currently only in the application stage.   The patents may never be granted based upon those patent applications, or if granted, they may be successfully challenged.  If one or more of those applications are not granted, we would not be able to enforce our rights to those technologies, and our business may be materially adversely affected.
 
From time to time, other companies and individuals may assert exclusive patent, copyright, trademark and other intellectual property rights to technologies or marks that are important to the oil and gas industries or our business.  We will evaluate each such claim relating to our products and, if appropriate, seek a license to use the protected technology. We may not be able to obtain licenses for intellectual property of third parties on commercially reasonable terms, if at all. In addition, we could be at a disadvantage if our competitors obtain licenses for protected technologies with more favorable terms than we do. If we are unable to license protected technology used in our products, we could be prohibited from marketing those products or may have to market products without desirable features. We could also incur substantial costs to redesign our products or to defend any legal action taken against us. If our products should be found to infringe protected technology, we could be enjoined from further infringement and required to pay damages to the infringed party. Any of the foregoing could have a material adverse effect on the results of our operations and our financial position.
 
Our Common Stock is not currently, and may never be, listed or quoted upon NASDAQ, the OTC Bulletin Board or one of the other national securities exchanges or markets, or that if so listed or quoted, that it would thereafter increase in value.
 
Our Common Stock is not currently, and may never be, listed or quoted upon any of the several NASDAQ markets, or one of the other national securities exchanges or markets. Unless our Common Stock is listed upon any of the several NASDAQ markets, or one of the other national securities exchanges or markets, accurate quotations as to the market value of our securities may not be possible.  Sellers of our securities are likely to have more difficulty disposing of their securities than sellers of securities which are listed upon any of the several NASDAQ markets, or one of the other national securities exchanges or markets.
 
Although we intend for our Common Stock to trade on public markets, including, but not limited to, the OTC Bulletin Board, we may not be successful in having our Common Stock listed or quoted on such a public market, or that if so listed or quoted, that our Common Stock would thereafter increase in value.
 
 
Even if a public market does develop, the volume of trading in our Common Stock will presumably be limited and likely dominated by a few individuals. The limited volume, if any, will make the price of our Common Stock subject to manipulation by one or more stockholders and will significantly limit the number of shares that one can purchase or sell in a short period of time. An investor may find it difficult to dispose of shares of our Common Stock or obtain a fair price for our Common Stock in the market.
 
We currently have notes payable which will become due on December 31, 2010
 
We currently have no cash or cash equivalents, we have notes payable including accrued interest as of June 30, 2010 in the aggregate amount of $93,550, which are due on December 31, 2010.  We have no operating history nor any revenues or earnings from operations since our inception.  For the foreseeable future, it is likely that we will incur operating expenses without corresponding revenue.   We currently anticipate that Avalon will fund us with any monies needed, however, as discussed above, Avalon has been experiencing financial difficulties and may not be able to fund us with the monies we require.  Even if Avalon is able to provide funding to us, we still may not be able to meet these obligations under our current cash conditions.
 
FORWARD LOOKING STATEMENTS

Management considers statements in this Management’s Discussion and Analysis of Financial Condition section which discuss future expectations and plans to be “forward-looking statements” as such term is defined by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended; provided, however, that the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, are not available to us in view of the fact that our stock is considered to be “penny stock”.  When used in this prospectus, the words “estimate,” “project,” “believe,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements.  These statements reflect our current views with respect to future events and are subject to risks and uncertainties which may cause our actual results to differ materially from those contemplated in our forward-looking statements.  We caution you not to place undue reliance upon such forward-looking statements, as our results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, the following: (i) our lack of an operating history, (ii) competition, (iii) our need for additional financing to develop our products and meet our capital requirements, (iv) the risks of doing business in foreign countries, and (v) the fact that many of the technologies we have licensed are currently only in the application stage of the patent process.  Any such statements are representative only as of the date of this prospectus.  We do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances subsequent to the date of this prospectus or to reflect the occurrence of unanticipated events, except for such updates to this prospectus and the registration statement of which it is a part as are required by federal securities laws and such periodic reports as are required pursuant to the Securities Exchange Act of 1934, as amended. In order to have investors better understand our technologies, we have attempted to simplify the technical terminology and explanations.
  

This Prospectus relates to shares of our Common Stock which may be offered and sold from time to time by the selling stockholders.  We will not receive any cash or other proceeds from the selling stockholders’ sales of their respective shares.
 
DETERMINATION OF OFFERING PRICE
 
The selling stockholders will sell at a price of  $0.20 a share until our shares are quoted on an exchange and thereafter at prevailing market prices or privately negotiated prices on the over the counter market.   Such price has been arbitrarily determined. The prices at which the selling stockholders offer their shares of Common Stock may not necessarily bear any relationship to assets, book value, earnings history or other historical factors.
 
DILUTION

No additional shares are being offered to the public pursuant to this Prospectus.  This Prospectus is a registration of outstanding shares, and so will not result in the dilution of existing stockholders .

 

We have prepared this Prospectus to allow the selling stockholders or their pledgees, donees, transferees or other successors in interest, to sell up to 2,725,000 shares of our Common Stock.  All 2,725,000 shares of Common Stock have already been issued by Oiltek, Inc. and are being offered by the selling stockholders for their own accounts.  We may from time to time supplement or amend this Prospectus, as required to provide information with respect to the selling stockholders.  In view of the fact that our shares are not currently publicly traded, our management has no knowledge, and does not believe, that any of our stockholders has an existing short position on our Common Stock.

The following table sets forth certain information with respect to ownership of Oiltek, Inc. Common Stock by the selling stockholders as of June 30, 2010, including their names, and the number of shares of Common Stock owned by them and offered pursuant to this Prospectus.   The selling stockholders listed in the table do not necessarily intend to sell any of their shares.  Except for the shares owned by Avalon Oil & Gas, Inc. which holds 77.97% of our Common Stock and the 100,000 shares issued to E. Howard King in March, 2010, we are registering all of our outstanding shares of Common Stock, provided, however, we are not registering any shares which may be issued to holders of our convertible debt upon conversion of such debt.  The selling stockholders have not expressed the intention of immediately selling their shares.  Therefore, no estimate can be given as to the number of shares of Common Stock which will be sold pursuant to this Prospectus or the number of shares that will be owned by the selling stockholders upon termination of the offering made hereby.  We will file a supplement to this Prospectus to name successors to any named selling stockholders who will be able to use this Prospectus to resell the securities registered hereby.
 
   
BENEFICIAL HOLDINGS
   
COMMON SHARES
 
NAME OF SELLING SECURITY HOLDER
 
BEFORE THE OFFERING
   
OFFERED HEREBY
 
Jill Allison (**)
   
1,500,000
     
1,500,000
 
                 
Kent Rodriguez (*)
   
500,000
     
500,000
 
                 
Douglas Barton (**)
   
500,000
     
500,000
 
                 
Avalon Productions Ltd. (***)(1)
   
25,000
     
25,000
 
                 
Kathleen T. Docter
   
25,000
     
25,000
 
                 
John C. Feltl
   
25,000
     
25,000
 
                 
John Kuehne
   
25,000
     
25,000
 
                 
Valerie S. Kuehne
   
25,000
     
25,000
 
                 
Kuehne Developments Ltd.(2)
   
25,000
     
25,000
 
                 
Frank Quinby
   
25,000
     
25,000
 
                 
George Sutton
   
25,000
     
25,000
 
                 
Venture Communications, Inc. (3)
   
25,000
     
25,000
 
 
 
* - Officer, Director and controlling stockholder of Avalon Oil & Gas, Inc.

** - Director of Avalon Oil & Gas, Inc.

*** - Unrelated to Avalon Oil & Gas, Inc., our licensor and controlling stockholder.

(1) – Controlled by Frank Quimby, who is also a selling stockholder in an individual capacity

(2) – Controlled by John Kuehne, who is also a selling stockholder in an individual capacity

(3) – Controlled by Douglas Barton, who is also a Director, and is also a selling stockholder in an individual capacity

There have been no prior securities transactions between us and the selling stockholders, any affiliate of the selling stockholders, or any person with whom any selling stockholder has a contractual relationship with respect to the transaction to purchase shares of our common stock.  There are no arrangements between us and the selling stockholders, any affiliates of the selling stockholders, or any person with whom any selling stockholders has a contractual relationship with.  There was no underwriter.   All securities other than those owned by Jill Allison, Kent Rodriguez and Douglas Barton were sold for cash, which was used to fund this offering and as working capital and were sold in October, 2006, at which time we sold 225,000 shares of common stock, at a price of $0.20 per share.
 
PLAN OF DISTRIBUTION

We are registering a total of 2,725,000 shares of our Common Stock which are being offered by the selling stockholders.  As used in this Prospectus, "selling stockholders" includes the pledgees, donees, transferees or others who may later hold the selling stockholders' interests in the Common Stock. We will pay the costs and fees of registering the common shares, but the selling stockholders will pay any brokerage commissions, discounts or other expenses relating to the sale of the Common Stock.  We will not receive any proceeds from the sale of the shares by the selling stockholders.

The selling stockholders and any of their pledgees, assignees and successors- in-interest may, from time to time, sell any or all of their shares of Common Stock on any stock exchange, market, or trading facility on which the shares are traded or in private transactions. Such sales may be at fixed or negotiated prices.  The selling stockholders may use any one or more of the following methods when selling shares:

o  
Ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

o  
Block trades in which the broker-dealer will attempt to sell the shares as an agent but may position and resell a portion of the block as principal to facilitate the transaction;

o  
Purchases by a broker-dealer as principal and resale by the broker-dealer for its own account;

o  
An exchange distribution in accordance with the rules of the applicable exchange;

o  
Privately negotiated transactions;

o  
Broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;

o  
A combination of any such methods of sale; and

o  
Any other method permitted pursuant to applicable law.

 
The selling stockholders may also sell shares pursuant to Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”), if available, rather than pursuant to this Prospectus.  Broker-dealers engaged by the selling stockholders may arrange for other brokers-dealers to participate in sales.  Broker-dealers may receive commissions or discounts from the selling stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated.  The selling stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.

The selling stockholders may from time to time pledge or grant a security interest in some or all of the shares of Common Stock or warrants owned by them and, if they  default in the performance of their secured obligations, the pledges, or secured parties may offer and sell the shares of Common Stock from time to time under this Prospectus, or under an amendment to this Prospectus under Rule 424(b)(3) or other  applicable provision of the Securities Act, amending the list of selling stockholders to include the pledgee, transferee, or other successors in interest as selling stockholders pursuant to this Prospectus.
 
DESCRIPTION OF SECURITIES

The following description of certain matters relating to our securities is a summary and is qualified in its entirety by the provisions of our Certificate of Incorporation and Bylaws, copies of which are being filed as exhibits to this Form S-1.

Our authorized capital stock consists of 200,000,000 shares, of which 198,000,000 shares are Common Stock, par value of $.001 per share, and 2,000,000 shares are preferred stock, par value of $.10 per share, of which none have been designated or issued.   As of the date hereof, 12,825,000 shares of Common Stock are issued and outstanding.

Common Stock

All outstanding shares of Common Stock are of the same class and have equal rights and attributes.  The holders of Common Stock are entitled to one vote for each share which they hold on all matters to be voted upon by the stockholders.  The holders of Common Stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the Board of Directors in its sole and absolute discretion from funds legally available therefore.  In the event of a liquidation, dissolution or winding up of the company, the holders of Common Stock are entitled to share pro rata all assets remaining after payment in full of all liabilities, including, but not limited to, payment to the holders of preferred stock as required by the terms of such preferred stock.  All of the outstanding shares of Common Stock are fully paid and non-assessable.  The stockholders do not have cumulative or preemptive rights.  There are no conversion or redemption rights or sinking fund provisions with respect to the Common Stock.

Preferred Stock

The Board of Directors is authorized to provide for the issuance of shares of preferred stock in series and, by filing a certificate pursuant to the applicable law of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof without any further vote or action by the stockholders.  Any shares of preferred stock so issued would have priority over the Common Stock with respect to dividend or liquidation rights.  Any future issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of our Company without further action by the stockholders and may adversely affect the voting and other rights of the holders of Common Stock.  At present, we have no plans to either issue any additional preferred stock or adopt any series, preferences or other classification of preferred stock.

Under certain circumstances, the issuance of preferred stock could adversely affect the voting power of the holders of the Common Stock.  Although the Board of Directors is required to make any determination to issue such stock based upon its judgment as to the best interests of our stockholders, the Board of Directors could act in a manner which would discourage an acquisition attempt or other transaction which some, or a majority, of the stockholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over the then market price of such stock.  The Board of Directors does not at present intend to seek stockholder approval prior to any issuance of currently authorized stock, unless otherwise required by applicable law or stock exchange rules.  We presently have no plans to issue any preferred stock.

 
Options, Warrants and Convertible Notes

We have issued three Convertible Notes which can be converted into Common Stock by the Note holders.  The three Convertible Notes were issued as follows:
 
NAME OF NOTE HOLDER
 
AMOUNT OF CONVERTIBLE NOTE(S)
 
CONVERSION PRICE
 
SHARES ISSUABLE  UPON CONVERSION
Mud Creek Group, LLC
 
$5,000
 
$0.02 per share
 
250,000
Michael L. Ray (two notes)
 
$5,000 and $2,500
 
$0.01 per share
 
750,000
 
The shares which shall be issued by us if these convertible notes are converted into shares of our Common Stock are not being registered pursuant to this Registration Statement and Prospectus.
 
The Convertible Note due to the Mudd Creek Group, LLC was paid in full on September 30, 2010.

We have the intention to make payments to the holders of our convertible notes if they are called prior to conversion, however, we anticipate that our level of liquidity will diminish from the expenses of operating our business.  Although we intend to repay these obligations through the sale of our products and technologies, or through the issuance of our common stock for cash, if we are unable to develop technologies or products which have commercial potential and produce revenues, it is likely that we will deplete our capital quickly, and may not be able to continue as a going concern..  The value of the convertible notes is dependent upon the value of our Common Stock at the time of conversion.  If, for example, our Common Stock is publicly traded above the conversion price of $.02 or $.01, as the case may be, then the value of the convertible shall be the difference between the trading price and the conversion price, multiplied by the number of shares issuable upon conversion.
 
There are no options or warrants issued or outstanding.

There are no shares which have been sold pursuant to Rule 144 of the Securities Act.  Further, there are no common shares being, or proposed to be, publicly offered by us.

Stockholders

As of the date hereof, there are fourteen (14) holders of record of our Common Stock and two (2) holders of Convertible Notes which upon conversion into Common Stock will become stockholders.

The issued and outstanding shares of our Common Stock were issued in accordance with the exemptions from registration afforded by Section 4(2) of the Securities Act.

Dividends

We have not paid any cash dividends to date, and do not anticipate or contemplate paying dividends in the foreseeable future.  Dividends, if any, will be contingent upon our revenues and earnings, if any, and capital requirements and financial conditions.  It is the present intention of management to utilize all available funds for the development of our business.   The future declaration of any cash or stock dividends shall be in the sole and absolute discretion of the Board of Directors and shall depend upon the earnings, capital requirements, our financial position, general economic conditions and other pertinent factors.  It is also possible that the terms of any future debt financing may restrict the payment of dividends.

 
INTEREST OF NAMED EXPERTS AND COUNSEL

None.
 
INFORMATION WITH RESPECT TO REGISTRANT


Business of Issuer

We currently have no ongoing operations and have earned no revenues.

We intend to exploit the patent rights which we have licensed from Avalon Oil & Gas, Inc. (“Avalon”), to develop technologies to aid in the extraction of oil and natural gas, with the intention of developing commercial products based upon those technologies, and ultimately licensing those technologies or the rights to manufacture and sell those products.

Avalon, which holds 77.97% of our Common Stock, was issued its shares of Common Stock as of September 28, 2006 in consideration of its future entrance into a license agreement with us, together with consideration of $50,000, which was paid in September, 2007.  Avalon has acquired licenses with respect to the U.S. patents titled “Detection of Leaks in Pipelines” and “System and Method for the Mitigation of Paraffin Wax Deposition from Crude Oil by Using Ultrasonic Waves”, the Canadian and International patent applications titled “System and Method for the Mitigation of Paraffin Wax Deposition from Crude Oil by Using Ultrasonic Waves” and the U.S. patent application titled “Well Casing Based-Geophysical Sensor Apparatus” and any patent granted based upon those applications, through the following three transactions:
 
(A) Avalon’s July 12, 2006 acquisition of Ultrasonic Mitigation Technologies, Inc. (“UMTI”) for 16,250,000 unregistered shares of Avalon’s common stock.  UMTI held an exclusive worldwide license pursuant to a license agreement dated July 12, 2006 and expiring March 11, 2025 (unless earlier terminated as stated below) with respect to the US patent and Canadian and International patent applications titled “System and Method for the Mitigation of Paraffin Wax Deposition from Crude Oil by Using Ultrasonic Waves” (the “UMTI License Agreement”).  The terms of the UMTI License Agreement (i) allow the inventor to (a) continue to use the technology for educational and research purposes, and (b) publish and disseminate information about the technology, (ii) allow non-profit organizations to use the technology for educational and non-commercial research purposes within their own facilities, and (iii) require, at the request of the inventor, UMTI to sublicense the technology to a third party designated by the inventor, provided that such third party is in a field which is of no commercial interest to UMTI.  The UMTI License Agreement may be terminated if UMTI fails to perform or violates any term of such license agreement, and fails to cure such breach or default within 30 days after written notice of default, or may be terminated by UMTI at any time, for any reason, upon 90 days written notice.  UMTI paid the licensor a license issue fee of $60,000 and a research fee of $50,000 within 14 days after the execution of the UMTI License Agreement, and is required to pay the licensor an earned royalty of 5% of net sales and 25% of sublicense fees and sublicense revenues other than earned royalties from net sales, and while there is no minimum annual royalty in the first two years of the UMTI License Agreement, UMTI is required to pay the licensor total annual royalties of not less than $15,000 in the third year, $20,000 in the fourth year, and $25,000 in the fifth and each subsequent year.  Failure to meet the minimum annual royalty level is not a default.  UMTI is also obligated to pay out of pocket costs with respect to the preparation, filing, prosecution, and maintenance of the patent rights, to indemnify the licensor, to maintain required levels of insurance, to refrain from using the licensor’s name without express written consent, to protect the licensor’s confidential information, and to manufacture substantially in the United States any products to be sold in the United States market.  UMTI is required to use due diligence to develop, manufacture and sell licensed products or services, to obtain necessary governmental approvals to manufacture, use, and sell its licensed products or services, to market such products or services in the United States upon receiving such necessary governmental approvals, and to reasonably fill market demand for its products or services; if UMTI fails to perform any of those obligations, and fails to cure such failure within 30 days after receiving written notice of such failure, the licensor may change UMTI’s license to a non-exclusive license;

 
(B) Avalon’s November 8, 2006 acquisition of Intelli-Well Technologies, Inc. (“IWTI”) for 20,000,000 unregistered shares of Avalon’s common stock.  IWTI held a non-exclusive United States license pursuant to a license agreement dated October 27, 2006 and expiring September 27, 2025 (unless earlier terminated as stated below) with respect to the US patent application titled “Well Casing Based-Geophysical Sensor Apparatus” (the “IWTI License Agreement”); the U.S. Government also has the rights to use this technology throughout the world.  The terms of the IWTI License Agreement (i) allow the inventor to (a) continue to make, use and practice the technology for educational and research purposes, but not for commercial purposes and (b) publish technical data resulting from its research, and (ii) allow non-profit organizations to make, use and practice the technology for educational and research purposes, but not for commercial purposes.  The IWTI License Agreement may be terminated by the licensor if IWTI fails to perform any material term or covenant of such license agreement, and fails to cure such failure within 30 days after receipt of written notice of such failure, if IWTI fails to reach at least $500,000 in annual net sales by January 1, 2012, upon IWTI’s bankruptcy filing, upon 10 days notice by the licensor that IWTI has ceased to carry on its business, or upon IWTI’s failure to provide the licensor with timely progress reports, may be terminated by IWTI at any time upon 60 days written notice, and may be terminated by a party upon 30 days written notice if the other party is unable to fulfill its obligations other than payments for one year for reasons beyond its reasonable control.  IWTI paid the licensor a license issue fee of $25,000 and is required to pay the licensor an earned royalty of 4% of net sales of a component and 2% of net sales of an entire system, and while there is no minimum annual royalty in 2007 and 2008, IWTI is required to pay the licensor total annual royalties of not less than $5,000 in 2009, $10,000 in 2010, $15,000 in 2011, and $20,000 in 2012 and each subsequent year.  Failure to meet the minimum annual royalty level is not a default.  IWTI is also obligated to pay the expenses with respect to any patent interference litigation, patent appeals to the USPTO Board of Appeals, patent appeals to a Federal Court, patent re-examinations, patent reissues, trademark oppositions and/or cancellations of the patent rights, to indemnify the licensor, to maintain required levels of insurance, to refrain from using the licensor’s name without express written consent, to pay the licensor $25,000 if the IWTI License Agreement is assigned, and to manufacture substantially in the United States all licensed products; and

(C) Avalon’s March 28, 2007 acquisition of Leak Location Technologies, Inc. (“LLTI”) for 36,710,526 unregistered shares of Avalon’s common stock.  LLTI held an exclusive United States license pursuant to a license agreement dated March 27, 2007 and expiring upon the later of (i) October 9, 2012 or (ii) the last sale of a licensed product produced during the term of the license agreement (unless earlier terminated as stated below), with respect to the US patent titled “Detection of Leaks in Pipelines” (the “LLTI License Agreement”).  The terms of the LLTI License Agreement (i) allow the inventor to use the invention for educational and research purposes, (ii) allow other non-profit organizations to use the invention for educational and research purposes, and (iii) require LLTI to (a) allow the inventor to use any improvement developed by LLTI for educational and research purposes without paying a royalty to LLTI, and (b) allow other non-profit organizations to use such improvement for non-commercial research purposes without paying a royalty to LLTI.  The LLTI License Agreement may be terminated if either party fails to make any required payment within 15 days after written notification, fails to perform any obligation and fails to cure such failure within 30 days after receipt of written notice of such failure, or if LLTI files for bankruptcy, has a receiver appointed for its assets, makes an assignment for the benefit of its creditors, or if bankruptcy proceedings are instituted against it.  LLTI must meet the following milestones or be declared in breach: delivery of an initial commercialization plan to the licensor within 120 days after the date of the LLTI License Agreement, delivery of a product manufacturing plan to the licensor within 240 days after the delivery of the initial commercialization plan, delivery of written proof of a first product introduction to the licensor within 16 months after the date of the LLTI License Agreement, and delivery of written proof of a first commercial sale to the licensor within 18 months after the date of the LLTI License Agreement.  LLTI paid the licensor an initial license fee of $40,000 upon execution of the LLTI License Agreement, and is required to pay the licensor a milestone license fee of $10,000 upon first product introduction, a royalty of 4.5% of gross sales of licensed products, and while there is no minimum annual royalty in 2007 and 2008, LLTI is required to pay the licensor total annual royalties of not less than $5,000 in 2009, $10,000 in 2010, and $15,000 in 2011 and each subsequent year, and is required to pay the licensor 25% of sublicense revenue, and 40% of sublicense revenue if the sublicensee is referred to LLTI by the licensor.  Failure to meet the minimum annual royalty level is not a default.  LLTI is required to prosecute any patent or trademark infringements at its expense, to indemnify the licensor, to maintain required levels of insurance, to refrain from using the licensor’s name without express written consent, to manufacture licensed products substantially in the United States, and to protect the licensor’s confidential information.
 
The licenses set forth in paragraphs “(A)”, “(B)” and “(C)”, above, enable Avalon to make, use, offer for sale, and sell products utilizing the claims contained in the U.S. patents titled “Detection of Leaks in Pipelines” and “System and Method for the Mitigation of Paraffin Wax Deposition from Crude Oil by Using Ultrasonic Waves”, the Canadian and International patent applications titled “System and Method for the Mitigation of Paraffin Wax Deposition from Crude Oil by Using Ultrasonic Waves” and the U.S. patent application titled “Well Casing Based-Geophysical Sensor Apparatus” and any patent granted based upon those applications, and to sublicense any of those rights.  In addition to the restrictions stated in paragraphs “(A)”, “(B)” and “(C)” above, the UMTI, IWTI, and LLTI License Agreements exclude (1) know-how rights (rights to the inventor’s knowledge with respect to the technology other than the information set forth in the actual patent or patent application) and (2) rights to any improvements to those patents which their respective inventors develop at a later time.

 
Avalon entered into a license agreement with us in consideration of Avalon’s agreement to pay $50,000 to us in the future.  Pursuant to the license agreement we have licensed from Avalon the rights to make, use, offer for sale, and sell products utilizing the claims contained within the patents and patent applications described in the preceding paragraph and any patent granted based upon those applications, and to sublicense any of those rights, and we are required to pay Avalon a royalty equal to the sum of (A) 6% of the sales of products by us or our sublicensees which utilize the patent rights licensed from Avalon, and (B) 6% of any other revenues we receive, including, but not limited to, sublicense fees.
 
Pursuant to an Amendment to the License Agreement between Avalon and Oiltek dated as of October 14, 2010, the termination date of the license agreement has been extended from May 31, 2012 to May 31, 2017, and may be extended for up to two additional 3-year terms in our sole and absolute discretion; provided, however, that the patent titled “Detection of Leaks in Pipelines” expires on October 9, 2012 and will be in the public domain thereafter.
  
We intend to utilize the patent titled “System and Method for the Mitigation of Paraffin Wax Deposition From Crude Oil by Using Ultrasonic Waves” to develop products which use ultrasonic waves to prevent or break down paraffin wax buildups on oil production equipment during the oil production process (note that this patent has only been granted in the United States, and the Canadian and International patent applications with respect to this technology are still in the application stage.)  Varying ultrasonic transducers are positioned in production tubing walls as a means to inhibit wax from attaching to pipes.  The ultrasonic wave technology helps prevent the wax from forming, and also breaks down bonds within wax deposits which have formed, thereby increasing flow rates and production efficiency.

We intend to utilize the patent application titled “Well Casing Based-Geophysical Sensor Apparatus, System and Method” to design products which use a large number of sensors installed along and outside of oil well casings in order to detect information about the underlying oil deposit and the oil production process.  The types of sensors that can be installed include seismic sensors, devices that use scanning technology to form three-dimensional images of an oil reservoir (a process known as “tomography”), and temperature sensors known as “thermocouples” which are effective over a huge range of temperatures.

We intend to utilize the patent titled “Detection of Leaks in Pipelines” to develop a system for detecting leaks in underground gas pipelines which would be accurate, inexpensive, able to be used continuously over a long period of time, and which would be able to withstand significant wear resulting from use in difficult environments.

We intend to work intensively on attracting, developing and growing our business through working with members of the oil and gas industry and developing relationships and partnership to market our products and technology.  We intend to begin this process through trade show participation, seminars and meetings to provide our potential customers with information with respect to our products and technologies. We intend to commercialize our technologies both in the United States and in foreign markets.   In particular, Avalon, which owns 77.97% of our Common Stock, owns interest in several oil and gas producing properties in Colombia and Canada.  Accordingly we intend to market our technologies in oil and gas producing properties in Colombia and Canada, both owned by Avalon and other companies.
 
Our management has been advised that Avalon may distribute its interest in us to its shareholders.  We do not anticipate that our business will be materially affected if Avalon distributes our shares of Common Stock which Avalon owns to Avalon’s stockholders.  Kent Rodriguez, the CEO of Avalon and one of our Directors, owns preferred stock of Avalon which will allow him to convert such shares into 40% of Avalon’s common stock.  Accordingly, if Avalon distributes our shares of Common Stock, Mr. Rodriguez would also have the right to hold 40% of the issued and outstanding shares of our Common Stock at such time.  In view of the fact that Mr. Rodriguez will receive 40% of all of the shares of the Company distributed to Avalon shareholders, combined with the fact that at this time our three Board members, collectively, own a majority of the Company’s issued and outstanding stock, it is likely that our Board of Directors will collectively own a large percentage of the Company’s issued and outstanding stock after such distribution of the Company’s stock to Avalon shareholders.  As a result, there is a strong likelihood that there will be continuity in our officers and directors upon such a distribution.  Notwithstanding the foregoing, there can be no assurance that any new directors who may be elected or the officers which those new directors would appoint would be able to perform the functions of our management at an equal or higher level than our current management team.  We are not currently aware of when Avalon intends to implement the distribution of our shares.
 
 
License Agreement
 
Our license agreement with Avalon Oil & Gas, Inc. which holds 77.97% of our Common Stock, has been amended pursuant to an amendment between Avalon and us dated October 14, 2010, to extend the termination date of the license agreement from May 31, 2012 to May 31, 2017, and may be extended by us for up to two additional three year terms in our sole and absolute discretion; provided, however, that the patent titled “Detection of Leaks in Pipelines” expires October 9, 2012.  The license grants us rights to make, use, offer for sale, and sell products utilizing the claims contained in the U.S. patents titled “Detection of Leaks in Pipelines” and “System and Method for the Mitigation of Paraffin Wax Deposition From Crude Oil by Using Ultrasonic Waves”, the Canadian and International patent applications titled “System and Method for the Mitigation of Paraffin Wax Deposition From Crude Oil by Using Ultrasonic Waves”, and the U.S. patent application titled “Well Casing Based-Geophysical Sensor Apparatus, System and Method”, and any patents which are granted based upon those patent applications, and to sublicense any of those rights, as follows:

Exclusive worldwide rights with respect to the U.S. patent and Canadian and International patent applications titled “System and Method for the Mitigation of Paraffin Wax Deposition From Crude Oil by Using Ultrasonic Waves”, and any patent issuing from those patent applications;

Non-exclusive United States rights (the U.S. Government also has the rights to use this technology throughout the world) with respect to the patent application titled “Well Casing Based-Geophysical Sensor Apparatus, System and Method”, and any patent issuing from that patent application; and

Exclusive United States rights with respect to the patent titled “Detection of Leaks in Pipelines”, subject to the terms and conditions of the UMTI, IWTI, and LLTI License Agreements, and we are required to pay Avalon a royalty of the sum of (A) 6% of any sales of products by us or our sublicensees which utilize the patent rights licensed from Avalon, and (B) 6% of all other revenues we receive, including, but not limited to, sublicense fees.
 
Patents

We currently own the rights to make, use, offer for sale, and sell products utilizing the claims contained within two patents, three patent applications, and any patents granted based upon those patent applications, which rights we licensed from Avalon Oil & Gas, Inc.  The patent and patent applications are as follows:
 
o
 
International Patent Application 2004/024309A2, filed September 12, 2003, titled “System and Method for the Mitigation of Paraffin Wax Deposition From Crude Oil by Using Ultrasonic Waves,” Inventor: Brian Francis Towler, PhD

o
 
United States, Patent No. 7,264,056, filed 3/11/2005, granted 9/4/2007, “System and Method for the Mitigation of Paraffin Wax Deposition from Crude Oil by Using Ultrasonic Waves,” Inventor: Brian Francis Towler, PhD

o
 
Nationalized PCT Canada, Application No. 2,498,742 filed 3/11/2005, “System and Method for the Mitigation of Paraffin Wax Deposition from Crude Oil by Using Ultrasonic Waves,” Inventor: Brian Francis Towler, PhD

o
 
United States, Application No. 11/237054 filed 9/27/2005, “Well Casing Based-Geophysical Sensor Apparatus, System and Method” Inventor William Daily.

o
 
United States, Patent No. 5,416,724 filed 10/9/1992, granted 5/16/1995, expires 10/22/2012 “Detection of Leaks in Pipelines” Inventor Michael Savic.

We do not currently own the rights to any other intellectual property.  Although we anticipate acquiring rights to additional patents in the future, there can be no assurance that we will be able to acquire the rights to suitable technologies at a reasonable cost.
 
We are in the preliminary stages of our development and have not yet entered into any agreements to sell or distribute products.  We have not yet established any milestones to enter into any agreements to sell or distribute our products.
 
Our license agreement will only last for a maximum of 11 years after May 31, 2012.  The patent titled “Detection of Leaks in Pipelines” expires October 9, 2012, after which the technology covered by the patent will be in the public domain.
 
Competition

The oil and gas industry is intensely competitive. We face competition from several other companies, including major multinational corporations which have financial and technical resources, name recognition, market access, commercial and governmental connections, and research and development capabilities which far exceed ours.  Our success is dependent upon our ability to develop technologies related to the oil and gas industry, creating commercially viable products, and to successfully market the same.  It may be difficult for our technology and products to gain market access, and if we did develop a successful technology or product, one or more of our competitors may develop a similar or superior technology or product within a short time.

Anticipated Expenditures

We anticipate that, at least until such time as this Registration Statement becomes effective or until such time as we are able to commercially exploit one or more of our technologies, our expenses shall be limited to legal fees, accounting fees, and fees to make filings with the SEC.  At this time, our management cannot make a reasonable estimate of how much we will spend during the next twelve months other than through speculation.  However, in order to meet our needs during this time period, we will need additional financing.  We currently have no arrangements to obtain additional financing and we will be dependent upon sources such as future earnings, funds from private sources such as, loans and additional private placements, and funds from public offerings.

In view of our lack of an operating history, our ability to obtain additional funds is limited.  Additional financing may only be available, if at all, upon terms which may not be commercially advantageous.  If adequate funds are not available from operations or additional sources of financing, our business will be materially adversely affected

Employees
 
We presently have no other employees apart from our management.  Jill Allison and Kent Rodriguez are employed by us on a part-time basis.  Jill Allison devotes approximately 20 hours per week to our business, and was subject to an employment agreement which expired on October 31, 2009.  This agreement with Ms. Allison was entered into on November 1, 2006.  Although Jill Allison is no longer subject to the employment agreement, she has continued to provide the same services to us as she did prior to the expiration of the employment agreement.  Doug Barton, a Director and Chairman, devotes approximately 1 hour per week to our business, and Kent Rodriguez devotes approximately 5 hours per week to our business.   Certain of our officers and directors are also engaged in the business activities of Avalon Oil & Gas, Inc., our majority stockholder; they anticipate that they will devote such time to our business as is required.  Our Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer and one of our Directors, Kent Rodriguez, is currently the President, Chief Executive Officer, Chief Financial Officer, and a Director of Avalon Oil & Gas, Inc.  Our Chairman, Secretary and one of our Directors, Doug Barton, is currently a Director of Avalon Oil & Gas, Inc.  Our President, Jill Allison, is currently the Vice President of Avalon Oil & Gas.  We expect no significant change in the number of our employees.
 
Reports to security holders

(1) Prior to the filing of this Prospectus, we were not required to deliver an annual report to our security holders.   We expect to deliver such a report to our security holders in the future as required by the Securities and Exchange Act of 1934, as amended (the “Exchange Act”).

(2) We will file reports with the SEC.  We expect to be a reporting company and we will comply with the requirements of the Exchange Act.  We intend to become a reporting company and we will comply with the requirements of the Exchange Act.
 
(3) The public may read and copy any materials which we file with the SEC at the SEC's Public Reference Room at 100 F. Street N.E., Washington, D.C.  20549.  The public may obtain information regarding the Public Reference Room by calling the SEC at 1-800-SEC-0330.  Additionally, the SEC maintains an Internet site which contains reports, proxy and information statements, and other information regarding issuers which file electronically with the SEC, which can be found at http://www.sec.gov.
 
 
DESCRIPTION OF PROPERTY

We currently use office space which is rented by our affiliate and majority stockholder , Avalon Oil & Gas, Inc., with an address at 7808 Creekridge Circle, Suite 105, Minneapolis, Minnesota 55439.  Avalon does not charge us rent for this space.  We presently have no agreements to acquire any properties, and have no policy with respect to investments or interests in real estate, real estate mortgages or securities of, or interests in, entities primarily engaged in real estate activities.

We do not presently believe that we will need to maintain any additional office space in order to carry out our plan of operations described herein.

If, in the future, we develop products which we manufacture or cause to be manufactured on our behalf, we may need to rent warehouse space to store those products before they are distributed.


There are not presently any material pending legal proceedings to which we are a party or as to which any of our property is subject, and no such proceedings are known to be threatened or contemplated against us.

MARKET PRICE AND DIVIDENDS OF COMMON EQUITY

There is no trading market for our Common Stock at present, and there has not been any trading market for our Common Stock in the past. There can be no assurance that a trading market will ever develop or, if such a market does develop, that it will continue.

We have never paid dividends on our Common Stock, and there can be no assurance that we will have sufficient earnings to pay any dividends with respect to the Common Stock.  Moreover, even if we have sufficient earnings, we are not obligated to declare dividends with respect to the Common Stock. The future declaration of any cash or stock dividends will be in the sole and absolute discretion of the Board of Directors and will depend upon our earnings, capital requirements, financial position, general economic conditions and other pertinent factors.  It is also possible that the terms of any future debt financing may restrict the payment of dividends.  We presently intend to retain earnings, if any, for the development and expansion of its business.

 
You should read the following selected financial data together with our financial statements and the related notes appearing at the end of this prospectus and the “Management’s Discussion and Analysis of Financial Condition” section of this prospectus.  We have derived the statements of operations data from our financial statements included in this prospectus.  Our historical results for any prior period are not necessarily indicative of results to be expected in any future period, and our results for any interim period are not necessarily indicative of results for a full fiscal year.
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
AND FROM INCEPTION (AUGUST 7, 2006) TO JUNE 30, 2010
(UNAUDITED)
 
   
For the Three
   
For the Three
   
For the Six
   
For the Six
   
From inception
 
   
Months Ended
   
Months Ended
   
Months Ended
   
Months Ended
   
(August 7, 2006)
 
   
June 30,
   
June 30,
   
June 30,
   
June 30,
   
to June 30,
 
   
2010
   
2009
   
2010
   
2009
   
2010
 
Revenue
 
$
     
$
-
         
$
-
   
$
   
                                     
Operating expenses:
                                   
                                     
   Selling, general and administrative expenses
   
6,263
     
42,177
     
10,515
     
99,570
     
435,804
 
                                         
   Amortization expense
   
10,646
     
55,205
     
21,292
     
110,410
     
473,578
 
                                         
   Impairment expense
   
-
     
-
     
-
     
-
     
534,711
 
                                         
   Total operating expenses
   
16,909
     
97,382
     
31,807
     
209,980
     
1,444,093
 
                                         
Operating loss
   
(16,909
)
   
(97,382
)
   
(31,807
)
   
(209,980
)
   
(1,444,093
)
                                         
Other expense:
                                       
                                         
   Interest (income) expense, net
   
2,270
     
2,705
     
4,841
     
5,044
     
34,394
 
                                         
   Total other (income) expense
   
2,270
     
2,705
     
4,841
     
5,044
     
34,394
 
                                         
   Loss before income taxes
   
(19,179
)
   
(100,087
)
   
(36,648
)
   
(215,024
)
   
(1,478,487
)
                                         
   Provision for income taxes
   
-
     
-
     
-
     
-
     
-
 
                                         
Net loss
 
$
(19,179
)
 
$
(100,087
)
 
$
(36,648
)
 
$
(215,024
)
 
$
(1,478,487
)
                                         
Net loss per share - basic and diluted
 
$
(0.00
)
 
(0.01
)
 
(0.00
)
 
(0.02
)
       
                                         
Weighted average shares outstanding - basic
   
13,325,000
     
13,225,000
     
13,287,431
     
13,225,000
         
 
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
JUNE 30, 2010 AND DECEMBER 31, 2009
(UNAUDITED)
 
   
June 30,
   
December 31,
 
   
2010
   
2009
 
Assets
           
Current assets
           
             
   Cash and cash equivalents
  $ 40     $ -  
                 
   Total current assets
    40       -  
                 
   Intangible assets
    255,515       276,807  
                 
Total assets
  $ 255,555     $ 276,807  
                 
Liabilities and Stockholders' Deficit
               
Current liabilities
               
   Cash overdraft
  $ -     $ 31  
   Accounts payable and accrued liabilities
    228,378       222,555  
   Accrued interest-related parties
    18,310       8,906  
   convertible notes payable
    12,500       12,500  
   notes payable - related party
    81,050       100,350  
   Total Current liabilities
    340,238       344,342  
Commitments and Contingencies
    -       -  
                 
Stockholders' deficit
               
   Preferred stock, $0.10 par value; 2,000,000 shares authorized; no shares issued
               
    and outstanding June 30, 2010 and December 31, 2009at
    -       -  
   Common stock, $0.001 par value; 198,000,000 shares authorized; 12,825,000 and 13,225,000 shares
               
   issued and outstanding at June 30, 2010 and December 31, 2009
    12,825       13,225  
   Additional paid-in capital
    1,380,979       1,361,079  
   Accumulated deficit
    (1,478,487 )     (1,441,839 )
   Total stockholder's deficit
    (84,683 )     (67,535 )
                 
Total liabilities and stockholders' equity
  $ 255,555     $ 276,807  
 
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 
The following discussion and analysis should be read in conjunction with our consolidated financial statements and the notes related thereto.
 
Forward-Looking Statements
 
Management considers statements in this Management’s Discussion and Analysis of Financial Condition section which discuss future expectations and plans to be “forward-looking statements” as such term is defined by Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended; provided, however, that the safe harbor provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, are not available to us in view of the fact that our stock is considered to be “penny stock”.  When used in this prospectus, the words “estimate,” “project,” “believe,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements.  These statements reflect our current views with respect to future events and are subject to risks and uncertainties which may cause our actual results to differ materially from those contemplated in our forward-looking statements.  We caution you not to place undue reliance upon such forward-looking statements, as our results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, the following: (i) our lack of an operating history, (ii) competition, (iii) our need for additional financing to develop our products and meet our capital requirements, (iv) the risks of doing business in foreign countries, and (v) the fact that many of the technologies we have licensed are currently only in the application stage of the patent process.  Any such statements are representative only as of the date of this prospectus.  We do not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances subsequent to the date of this prospectus or to reflect the occurrence of unanticipated events, except for such updates to this prospectus and the registration statement of which it is a part as are required by federal securities laws and such periodic reports as are required pursuant to the Securities Exchange Act of 1934, as amended. In order to have investors better understand our technologies, we have attempted to simplify the technical terminology and explanations.
 
Liquidity and Capital Resources
 
We anticipate that our level of liquidity will diminish from the expenses of operating our business, and from research and development operations, unless and until we develop technologies or products which are marketable and produce revenues.   We believe that we currently have sufficient liquidity and capital resources to meet our working capital needs for the next six months based upon funding from Avalon. When and if we are able to develop technologies or products, our liquidity will depend upon our ability to directly manufacture or sell, or license the rights to manufacture and sell, the products and license the technologies which we develop through our research.  If we are unable to develop technologies or products which have commercial potential and produce revenues, it is likely that we will deplete our capital quickly, and may not be able to continue as a going concern.
 
We intend to pay for costs and expenses in connection with this offering from private investment and loans   Management believes that we will be able to obtain these private investments after this registration statement is effective.  We intend to raise equity for working capital by obtaining private loans or entering into a joint venture agreement.  If we are unable to obtain loans or enter into a joint venture agreement for working capital, then Avalon intends to provide the necessary funds.  Any loans from Avalon shall be repayable to Avalon in 12 months with interest at the prime rate.
 
Initially, we intend to complete the development of our Leak Location Technology. We believe that the cost of this development, together with the initial marketing activities, shall be approximately $250,000.  We further believe that the timeframe for developing the technology and beginning to market it will be within 12 months.  Depending upon market conditions, we will then prioritize the development and marketing of our other technologies, such as the Ultrasonic Mitigation Technology and the Intelli-Well Technology.
 
Results of Operations
 
Avalon Oil & Gas, our majority stockholder and the licensor of the patents and patent applications which we intend to utilize in our development of products and technologies, received stock which currently represents 77.97% of our issued and outstanding shares in consideration of its future entrance into a license agreement with us, together with consideration of $50,000.
 
 
We entered into a license agreement with Avalon, pursuant to which we received licenses with respect to three technologies which are the subject of two patents and three patent applications.  Avalon made a payment to us of $50,000 in September, 2007 in consideration of our entering into the license agreement.  We intend to exploit the patent rights which we have licensed from Avalon to develop technologies to aid in the exploration and production of oil and natural gas, with the intention of developing commercial products based upon those technologies, and ultimately licensing those technologies or the rights to manufacture and sell those products.
 
We believe that the following trends are likely to have a favorable material impact on our net sales or revenues or income from continuing operations: (A) oil prices, which had recently risen then declined substantially may again rise in this volatile market, will likely result in increased spending on oil exploration and oil production worldwide, resulting in increased potential demand for the products and technologies which we may develop, (B) demand for oil, which has recently decreased, is likely to rise again given historical trends.  A rise in the demand for oil is likely to increase spending on oil exploration and oil production worldwide, resulting in increased potential demand for the products and technologies which we may develop, (C) recent oil prices, although substantially below the high levels of 2008, are still historically high, which is likely to encourage oil companies and producers to seek more efficient drilling technology, which we may develop, and (D) an increased ability by oil companies to find oil in difficult environments, which is likely to increase the potential demand for sophisticated technologies which are usable in such environments, resulting in increased potential demand for the products and technologies which we may develop.

We believe that the following trends are likely to have an unfavorable material impact upon our net sales or revenues or income from continuing operations: (A) concerns with respect to climate change caused by fossil fuel use, which are likely to result in many governments taking action to reduce the use of fossil fuels, which may result in a decrease in spending on oil exploration and oil production worldwide, resulting in a decreased potential demand for the products and technologies which we may develop, (B) the trend towards government-run oil companies excluding foreign multinationals from oil production opportunities in those countries, resulting in decreased access by American oil companies to oil exploration and oil production opportunities in many such countries, resulting in a decreased potential demand for the products and technologies which we may develop and (C) government policies promoting alternate fuels and alternative energy sources, which are likely to decrease oil demand worldwide, which may result in a decrease in spending on oil exploration and oil production, resulting in a decreased potential demand for the products and technologies which we may develop.

During the term of our existence, we have not had any net sales or revenues or income from continuing operations, and therefore inflation has not had an impact on any of those variables.
 
Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

   
Payments due by period
Contractual obligations
 
Total
 
Less than 1 year
 
1-3 years
 
3-5 years
 
More than 5 years
Long-Term Debt Obligations
 
$
93,550
 
-
$
 93,550
 
-
 
-
Other Long-Term Liabilities Reflected on the Registrant's Balance Sheet under GAAP
 
$
-
 
-
$
-
 
-
 
-
Total
 
$
93,550
 
-
$
93,550
 
-
 
-

Interim Periods
 
From January 1, 2008 through June 30, 2010, our cash reserves have decreased from $11,696 to $40.  We had spent our cash reserves primarily in connection with: (a) the organization of our Company, (b) our acquisition of the technology licenses and (c) legal and accounting fees with respect to the preparation of this Registration Statement.  We do not yet have any revenue, because we have not yet developed any marketable products or marketable technologies based upon the patent rights which we have licensed.

 
CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There are not and have not been any disagreements between us and our accountants on any matter of accounting principles since our formation, and there are no disagreements between us and our accountants on accounting or financial disclosure matters.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We may be exposed to market risks associated with interest rates, commodity prices and foreign exchange rates.

PROMOTERS AND CONTROL PERSONS

Directors and Executive Officers

Our directors and executive officers and additional information concerning them are as follows:
 
NAME
 
AGE
 
POSITIONS AND OFFICES HELD
Jill Allison
 
47
 
President and Director
Kent Rodriguez
 
53
 
Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer and Director
Doug Barton
 
68
 
Chairman, Secretary and Director
 
There are no agreements or understandings for the officers and directors to resign at the request of another person, and the above-named officers and directors are not acting on behalf of, nor will act at the direction of, any other person.

 
Work Experience

Jill Allison, President and Director.  Ms. Allison has served as the President of the Company since its inception, and as a Director of the Company since October 22, 2007.  Ms. Allison has over 20 years of diversified management experience in business development and technology commercialization. Mr. Allison is also the Vice-President and a Director of Avalon Oil & Gas, Inc., commencing in 2006, where she manages market development, strategic planning, financial administration, and investor communications for Avalon.  From 2003 until joining Avalon, Ms. Allison managed a technology strategy consulting practice with focus in the market convergence of physical and IT security industries. Her venture development background includes market leadership positions with Monsanto, Iridian Technologies, Pinkertons and Cylink Corporation. She holds a B.A. in Economics from Gustavus Adolphus College; a Master's in International Management (MIM) in Marketing from the American Graduate School of International Management (Thunderbird), Glendale, AZ; and an MBA in Strategic and Entrepreneurial Management from the Wharton School of the University of Pennsylvania, where she focused on strategic alliances and management of technology. Ms. Allison’s previous experiences in market and business development and technology commercialization led to the conclusion that Ms. Allison is qualified to serve as a Director of the Company, in view of the fact that the Company is currently in its development stage and stands to benefit from Ms. Allison’s previous experiences developing the business other companies.
 
Kent Rodriguez, Chief Executive Officer, Principal  Financial Officer,  Principal Accounting Officer, and Director.  Mr. Rodriguez has served as the Chief Executive Officer, Principal Financial Officer, Principal Accounting Officer and as a Director of the Company since its inception.  Mr. Rodriguez has also served as a Director of Avalon Oil & Gas, Inc. since May 2005.  From 1985 to 1995, Mr. Rodriguez was employed by the First National Bank of Elmore, Elmore, Minnesota, as vice president, senior loan officer, and ultimately as president and chairman.  From 1995 to 2005 he served as the Managing Partner of Weyer Capital Partners, a Minneapolis-based venture capital corporation.  He is currently the President, Chief Executive Officer and Chief Financial Officer of Avalon Oil & Gas, Inc.  He holds a B.A. degree in Geology from Carleton College and an Executive MBA from the Harvard Business School. Mr. Rodriguez’ background in geology, coupled with his business experience led to the conclusion that Mr. Rodriguez is qualified to serve as a Director of the Company in view of the Company’s focus upon developing and marketing technologies  related to the extraction of oil and gas.
 
Doug Barton, Chairman, Secretary and Director.  Mr. Barton has served as Chairman and Secretary and as a Director of the Company since its inception.  Mr. Barton has also served as a Director of Avalon Oil & Gas, Inc. since May 2005. From 1987 to the present, he has been the President and sole owner of Venture Communications, Inc., (formerly known as Douglas Communications, Inc.) a private promotion, development, and marketing consulting firm. He holds a B.S. degree in Economics/History from the University of Minnesota. Mr. Barton’s previous experience with Venture Communications, Inc., of which  he has been the President for the past 23 years, led to the conclusion that Mr. Barton is qualified to serve as a Director of the Company in view of the fact that the Company is currently in its development stage and stands to benefit from Mr. Barton’s 23 years of experience consulting with other companies to develop their businesses.

Our management has not been involved in any legal proceedings as described in Item 401(f) of Regulation S-K.
 
Significant Employees 

There are no persons other than our officers and directors who are expected by us to make a significant contribution to our business.

Family Relationships 

There are no family relationships of any kind among our directors, executive officers, or persons nominated or chosen by us to become directors or executive officers.

Audit Committee Financial Expert

Our board of directors acts as the audit committee to our Board of Directors; there is no separate audit or other committees.  We have no qualified financial expert at this time because we have not been able to hire a qualified candidate.  Further, we believe that we have inadequate financial resources at this time to hire any such qualified expert.  We do intend, however, to hire a qualified expert in the future, when resources allow us to search for and employ an appropriate individual for this position.

Code of Ethics

We have adopted a Code of Ethics which is designed to ensure that our officers meet the highest standards of ethical conduct. The Code of Ethics requires that our officers comply with all laws and other legal requirements, conduct business in an honest and ethical manner and otherwise act with integrity and in our best interest.
 
 
Involvement with certain material legal proceedings during the past five years

(1)           None of our directors, officers, significant employees or consultants have been convicted in a criminal proceeding, exclusive of traffic violations, or are subject to any pending criminal proceeding.

(2)           No bankruptcy petitions have been filed by or against any business or property of any of our directors, officers, significant employees or consultants nor has any bankruptcy petition been filed against a partnership or business association where these persons were general partners or executive officers.

(3)           None of our directors, officers, significant employees or consultants have been permanently or temporarily enjoined, barred, suspended or otherwise limited from involvement in any type of business, securities or banking activities.

(4)           None of our directors, officers or significant employees have been convicted of violating a federal or state securities or commodities law.

EXECUTIVE COMPENSATION

Jill Allison, our President, and two others received non-cash compensation from us.  Jill Allison is entitled to receive compensation of $5,000 per month, although she has elected to receive only $3,000 a month. She stopped receiving cash compensation in July 2009, and no longer receives any cash compensation.  Additionally, during the period ended December 31, 2006, we issued to our President 1,500,000 shares of our stock for services valued at $ 1,500.00. Also, two current members of the board of directors received 500,000 shares each of our stock for services valued at $500.00 each.  In addition, a third director, Thad Kaplan received 500,000 shares for services valued at $500.00.  Thad Kaplan was removed as a director and these shares were cancelled as of June 30, 2010.
 
No retirement, pension, profit sharing, stock option or insurance programs or other similar programs for the benefit of directors, officers, or other employees have been adopted by us for the benefit of our employees.

Our officers and directors will not receive any finder's fee, either directly or indirectly, as a result of their efforts to implement our business plan as outlined herein.
 
SUMMARY COMPENSATION TABLE
 
Name and principal position
Year
 
Salary
($)
   
Bonus
($)
   
Stock Awards
($)
   
Option Awards
($)
   
Non-Equity Incentive Plan Compensation
($)
   
Nonqualified Deferred Compensation Earnings
 ($)
   
All Other Compensation
   
Total
($)
 
Jill Allison,
President*
 
2009
2008
2007
   
36,000
36,000
36,000
     
-
-
-
     
-
-
1,500
     
-
-
-
     
-
-
-
     
-
-
-
     
-
-
-
     
36,000
36,000
37,500
 
Kent Rodriguez,
CEO
 
2009
2008
2007
   
-
-
-
     
-
-
-
     
-
-
500
     
-
-
-
     
-
-
-
     
-
-
-
     
-
-
-
     
-
-
500
 
Douglas Barton, Secretary
 
 
2009
2008
2007
   
-
-
-
     
-
-
-
     
-
-
500
     
-
-
-
     
-
-
-
     
-
-
-
     
-
-
-
     
-
-
500
 

·  
On an annual basis.  Pursuant to Ms. Allison’s employment agreement, we have agreed to pay her $5,000 per month since November 1, 2006, but as of July 1, 2009 she has elected to earn only $3,000 per month. She is no longer receiving any cash compensation.
 
 
Outstanding Equity Awards at Fiscal Year End
 
None of our executive officers received any equity awards, including, options, restricted stock or other equity incentives during the fiscal year ended December 31, 2009.
 
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
 
OPTION AWARDS
   
STOCK AWARDS
 
Name
 
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
   
Number of
Securities
Underlying
Unexercised
Options
 (#)
Unexercisable
   
Equity
Incentive
 Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
   
Option
Exercise
 Price
 ($)
   
Option
Expiration
Date
   
Number
of
Shares
or Shares
of
Stock That
Have
Not
Vested
(#)
   
Market
Value
of
Shares
or
Shares
of
Stock
That
Have
Not
Vested
($)
   
Equity
Incentive
 Plan
Awards:
 Number
of
Unearned
 Shares,
Shares or
Other
Rights
That Have
 Not
Vested
(#)
   
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Shares or
Other
Rights
That
Have Not
 Vested
(#)
 
Jill Allison
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
Kent Rodriguez
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
Douglas Barton
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
 
Compensation of Directors
 
The board has not implemented a plan to award options to any directors. There is no contractual arrangement with our board of directors. We have no director's service contracts.
 
Director’s Compensation Table
 
 
Fees
                                   
 
Earned
                   
Nonqualified
             
 
Or
             
Non-Equity
   
Deferred
             
 
Paid in
 
Stock
   
Option
   
Incentive Plan
   
Compensation
   
All Other
       
 
Cash
 
Awards
   
Awards
   
Compensation
   
Earnings
   
Compensation
   
Total
 
Name
(US$)
 
(US$)
   
(US$)
   
(US$)
   
(US$)
   
(US$)
   
(US$)
 
(a)
(b)
 
(c)
   
(d)
   
(e)
   
(f)
   
(g)
   
(h)
 
Jill Allison
2009
 
$
-
   
$
-
   
$
-
   
$
-
   
$
36,000
   
$
36,000
 
 
2008
 
$
-
   
-
   
-
   
-
   
36,000
   
36,000
 
Kent Rodriquez
2009
 
-
   
-
   
$
-
   
-
   
$
-
   
-
 
 
2008
 
-
   
-
   
-
   
-
   
-
   
-
 
Douglas Barton
2009
 
$
-
   
$
-
   
$
-
   
-
   
$
-
   
$
-
 
 
2008
 
-
   
-
   
-
   
-
   
-
   
-
 
 
 
BENEFICIAL OWNERS AND MANAGEMENT

As of the date hereof, we have 12,825,000 shares of Common Stock issued and outstanding, and have issued notes which are convertible into 1,000,000 shares of our Common Stock.

The following table sets forth certain information regarding the beneficial ownership of our Common Stock by (i) each stockholder known to be the beneficial owner of more than 5% of our Common Stock; (ii) by each director and executive officer; and (iii) by all executive officers and directors as a group.  Each of the persons named in the table has sole voting and investment power with respect to the shares beneficially owned.   Also included are the shares held by all executive officers and directors as a group.

       
 AMOUNT OF
       
   
NAME AND ADDRESS OF
 
BENEFICIAL
   
PERCENT OF
 
TITLE OF CLASS
 
BENEFICIAL OWNER
 
OWNERSHIP
   
CLASS
 
Common
 
Avalon Oil & Gas, Inc.
   
10,000,000
     
77.97
%
Stock
 
7808 Creekridge Circle
               
 
 
Suite 105
               
   
Minneapolis, MN 55439
               
                     
Common
 
Jill Allison
   
1,500,000
     
11.70
%
Stock
 
7808 Creekridge Circle
               
   
Suite 105
               
   
Minneapolis, MN 55439
               
                     
Common
 
Kent Rodriguez
   
10,500,000
(1)
   
81.87
%
Stock
 
7808 Creekridge Circle
               
   
Suite 105
               
   
Minneapolis, MN 55439
               
                     
Common
 
Doug Barton
   
500,000
     
3.90
%
Stock
 
7808 Creekridge Circle
               
   
Suite 105
               
   
Minneapolis, MN 55439
               
                     
Common
 
All Executive Officers
   
12,500,000
(1)
   
97.47
%
Stock
 
and Directors as a Group
               
(Includes shares of Allison,
                   
Rodriguez and Barton)
                   

(1) – Includes shares held by Avalon Oil & Gas, of which Kent Rodriguez is the controlling shareholder.

There are no contracts or other arrangements which could result in a change of control.
 
 
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We currently utilize office space provided by Avalon Oil & Gas, Inc., for which we pay no rent.  Avalon Oil & Gas, Inc. has agreed to continue this arrangement for the foreseeable future.  See "Description of Property."

Conflicts of Interest

Our proposed business raises potential conflicts of interest between us and Mr. Kent Rodriguez, one of our Directors, our Principal Accounting Officer, our Chief Executive Officer and Principal Financial Officer.  Mr. Rodriguez is also the President, Chief Executive Officer and Chief Financial Officer of Avalon Oil & Gas, Inc., our majority stockholder , and devotes significant attention to his duties in those roles for Avalon Oil & Gas, Inc.  Mr. Rodriguez intends to devote time to our activities whenever his services as Chief Executive Officer, Principal Accounting Officer or Principal Financial Officer are required, and such additional time as he determines in his sole and absolute discretion.  However, should such a conflict arise, there can be no assurance that Mr. Rodriguez would not attend to other matters prior to ours.

No binding guidelines or procedures for resolving potential conflicts of interest have been adopted by us.  Accordingly, Mr. Rodriguez will be required to use his discretion in order to resolve conflicts in such a manner as he considers appropriate.  Failure by management to resolve conflicts of interest in our favor could result in management becoming liable to us.

Other than described above, there have been no transactions which are required to be disclosed pursuant to Item 404 of Regulation S-K.

CORPORATE GOVERNANCE

Director Independence

Using the definition of director independence set forth in NASDAQ Marketplace Rule 4200(a)(15):

Jill Allison                                  Not Independent.
Kent Rodriguez                         Not Independent.
Doug Barton                              Not Independent.

We did not hold any meetings of our Board of Directors during the last fiscal year, but took actions by written consent in lieu of meetings.  Our policy with respect to director attendance at the annual shareholder meeting is that directors are encouraged, but not required, to attend shareholder meetings.  We have not yet held any shareholder meetings.

Our Board of Directors acts as the Nominating Committee, Audit Committee, and Compensation Committee; there are no separate committees fulfilling those roles.

 
The Board of Directors believes that it would be a poor use of resources to organize separate committees for those functions, as our directors have a thorough knowledge of the Company’s business and affairs and are able to perform those functions effectively.

All directors participate in the nomination of directors.

All directors participate in the consideration of director and executive officer compensation.

We have no qualified financial expert at this time because we have not been able to hire a qualified candidate.  Further, we believe that we have inadequate financial resources at this time to hire any such qualified expert.  We do intend, however, in the future, when resources allow us to search for a qualified individual for this position.

Any stockholder may contact any board member by sending mail to the company’s address.

DISCLOSURE OF COMMISSION POSITION

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the registrant, the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable.
 
 
PART II

OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
Except for certain brokerage commissions and discounts which if incurred will be paid by the selling stockholders , we will pay all costs and expenses in connection with this offering, including, but not limited to, all expenses related to the costs of preparing, reproducing or printing this registration statement, legal expenses, and other expenses incurred in qualifying or registering the offering for sale under state laws as may be necessary, as well as the fees and expenses of our attorneys and accountants. It is anticipated that the total of all costs and expenses in connection with this offering will be approximately $103,000.00. This includes:
 
Attorney fees
 
$
75,000.00
 
CPA fees
   
25,000.00
 
Consultant fees
   
0.00
 
SEC filing fee
   
22.87
 
Transfer agent
   
700.00
 
Material fees (postage, copies)
   
2,500.00
 
Total
 
$
103,222.87
 
 
INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
Section 145 of the Delaware General Corporation Law contains provisions entitling our directors and officers to indemnification from judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys’ fees, as the result of an action or proceeding in which they may be involved by reason of being or having been one of our directors or officers (or, at our request, a director or officer of another corporation or other enterprise); provided the officers or directors acted in good faith.  We also may obtain an insurance policy which will cover officers and directors for any liability arising out of their actions in such capacity.

The foregoing do not and will not eliminate or limit the liability of a director for violating his duty of loyalty (which includes the obligation of our directors to refrain from self-dealing with respect to us, improperly competing with us or usurping company opportunities), failing to act in good faith, engaging in intentional misconduct or knowingly violating a law or participating in the payment of a dividend or a stock repurchase or redemption for himself.  The foregoing also do not and will not affect any director’s liability under federal securities laws or the availability of equitable remedies such as an injunction or rescission for breach of fiduciary duty.

RECENT SALES OF UNREGISTERED SECURITIES

The following sets forth information relating to all previous sales of our Common Stock, which sales were not registered pursuant to the Securities Act.

We issued to 1,500,000 shares to Jill Allison, 500,000 shares to Kent Rodriguez, 500,000 shares to Douglas Barton for an aggregate of 2,500,000 shares.  These shares were issued for services rendered to the Company.  Additionally, we issued 25,000 shares to Avalon Productions Ltd, 25,000 shares to Kathleen T. Doctor, 25,000 shares to John C Feltl, 25,000 shares to John Kuehne, 25,000 shares to Valerie S. Kuehne, 25,000 shares to Kuhne Developments Ltd, 25,000 shares to Frank Quinv, 25,000 shares to George Sutton, and 25,000 shares to Venture Communications, Inc., for an aggregate of 225,000 shares.  These additional 225,000 shares were sold on May 16, 2007 at a value of $0.10 per share.  All of these shares were issued pursuant to Rule 506 of Regulation D, which was promulgated pursuant to Section 4(2) of the Securities Act.
 
 
We issued 10,000,000 shares to Avalon in consideration of Avalon’s future entrance into a license agreement with us, together with consideration of $50,000, $25,000 of which was paid in September, 2007 and $25,000 of which was paid in November 2007.  These shares were issued pursuant  to Section 4(2) of the Securities Act.
 
During the period from October 1, 2006 through December 31, 2006, we sold an aggregate of 225,000 shares to 9 investors in exchange for an aggregate of $45,000 in cash pursuant to Regulation D, which was promulgated pursuant to Section 4(2) of the Securities Act.
 
During the period from November 1, 2006 through December 31, 2006, we also issued a convertible note in the amount of $5,000 with a conversion price of $0.02 per share, and two convertible notes in the amounts of $5,000 and $2,500, each with a conversion price of $0.01 per share.  All three of such notes were issued pursuant to Rule 506 of Regulation D, which was promulgated pursuant to Section 4(2) of the Securities Act. The $5,000 note with a convertible price of $0.02 per shares was paid in full on September 30, 2010.
 
In February, 2010 we sold 100,000 shares to E. Howard King at a price of $0.20 per share for an aggregate of $20,000 pursuant to Regulation D, promulgated pursuant to Section 4(2) of the Securities Act.
 
All purchasers represented in writing that they acquired the securities for their own accounts.  A legend was placed on the stock certificates stating that the securities have not been registered pursuant to the Securities Act and cannot be sold or otherwise transferred without an effective registration or an exemption therefrom.
 
We have not, nor has any person acting on our behalf, offered or sold the securities by means of any form of general solicitation or general advertising.  No services were performed by any purchaser as consideration for the share issued, provided, however, that shares were issued to our President, Jill Allison, in connection with her services as President, and to Kent Rodriguez and Douglas Barton, for their services as Directors.
 
We have never utilized an underwriter for an offering of our securities, and there were no underwriting discounts or commissions involved.

 
EXHIBITS SCHEDULE
 
The following exhibits are filed with this registration statement:
 
Exhibit
 
Description
3.1
 
Articles of Incorporation*
3.2
 
By-Laws*
5
 
10.1
 
License Agreement with Avalon Oil & Gas, Inc.*
10.2
 
Convertible Note with Michael L. Ray dated 11/28/2006**
10.3
 
Amendment to the Convertible Note with Michael L. Ray dated 1/30/2009**
10.4
 
Convertible Note with Michael L. Ray dated 11/28/2006**
10.5
 
Amendment to the Convertible Note with Michael L. Ray dated 9/10/2008**
10.6
 
Convertible Note with Mudd Creek Group, LLC dated 11/28/2006**
10.7
 
Amendment to the Convertible Note with Mudd Creek Group, LLC dated 9/10/2008**
10.8
 
Convertible Note with Avalon Oil & Gas dated 1/30/2009**
10.9
 
Amendment to the Convertible Note with Michael L. Ray   dated 9/10/2008**
10.10
 
Amendment to the Convertible Note with Mudd Creek Group, LLC   dated 9/10/2008**
10.11
 
Amendment to the Convertible Note with Avalon Oil & Gas, Inc.   dated 9/10/2008**
10.12
 
Employment Agreement with Jill Allison**
10.13  
23.1
 
 
 
 
 
Filed herewith
  * Incorporated by reference to exhibits of the same number filed with the registrant’s Amendment No. 3 to its Registration Statement on Form S-1 filed with the Securities and Exchange Commission on August 12, 2008(File No. 333-146864)
 
**
Incorporated by reference to exhibits of the same number filed with the registrant’s Amendment No. 4 to its Registration Statement on Form S-1 filed with the Securities and Exchange Commission on April 3, 2009 (File No. 333-146864))
 
 
 
UNDERTAKING
 
The undersigned Registrant hereby undertakes:
 
1.           To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to:
 
(a)  include any Prospectus required by Section 10(a)(3) of the Securities Act of 1933;
 
(b)  reflect in the Prospectus any facts or events which, individually or, together, represent a fundamental change in the information in the Prospectus. Notwithstanding the forgoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of Prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and
 
(c) include any additional or changed material information on the plan of distribution.
 
2.           For determining liability under the Securities Act, to treat each such post-effective amendment as a new registration statement of the securities offered, and the offering of such securities at that time to be the initial bona fide offering.
 
3.           To file a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.
 
4.           For determining liability of the undersigned small business issuer under the Securities Act to any purchaser in the initial distribution of the securities, that in a primary offering of securities of the undersigned small business issuer 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 small business issuer 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 small business issuer relating to the offering required to be filed pursuant to Rule 424;
 
 
ii.
Any free writing Prospectus relating to the offering prepared by or on behalf of the undersigned small business issuer or used or referred to by the undersigned small business issuer;
 
 
iii.
The portion of any other free writing Prospectus relating to the offering containing material information about the undersigned small business issuer or its securities provided by or on behalf of the undersigned small business issuer; and
 
 
iv.
Any other communication that is an offer in the offering made by the undersigned small business issuer to the purchaser.
 
 
5.           For the purpose of determining liability under the Securities Act to any purchaser each Prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than Prospectus filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or Prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or Prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or Prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
 
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the provisions above, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable.
 
In the event that a claim for indemnification against such liabilities, other than the payment by us of expenses incurred or paid by one of our directors, officers, or controlling persons in the successful defense of any action, suit or proceeding, is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act, and we will be governed by the final adjudication of such issue.
 

Signatures
 
In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and authorized this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minneapolis, State of Minnesota on  October 18, 2010.
 
Oiltek, Inc.
   
     
     
/s/ Jill Allison                                                            
   
By: Jill Allison, President
   
 
In accordance with the requirements of the Securities Act of 1933, this registration statement was signed by the following persons in the capacities and on the dates stated:
 
Signature
 
Title
 
Date
         
/s/ Kent Rodriguez                     
       
 Kent Rodriguez
 
Chief Executive Officer
Principal Financial Officer
Principal Accounting Officer
   
   
Director
 
October 18, 2010
/s/ Jill Allison                            
       
 Jill Allison
 
President,
   
   
Director
 
October 18, 2010
/s/ Doug Barton                       
       
 Doug Barton
 
Secretary
   
   
Director
 
October 18, 2010
 
Dealer Prospectus Delivery Obligation

Until                                   , all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a Prospectus. This is in addition to the dealers' obligation to deliver a Prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
 
 
   
     
 
F-2 
 
F-3 
 
F-4
 
F-5 – F-6
 
F-7 – F-18
 
F-19
  Balance Sheets as of December 31, 2009 and 2008 F-20
 
F-21
 
F-22
 
F-23
 
F-24 –F-34
 
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
 
   
June 30,
   
December 31,
 
   
2010
   
2009
 
Assets
 
(unaudited)
       
Current assets
           
             
   Cash and cash equivalents
  $ 40     $ -  
      Total current assets
    40       -  
                 
   Intangible assets
    255,515       276,807  
                 
Total assets
  $ 255,555     $ 276,807  
                 
Liabilities and Stockholders' Deficiency
               
Current liabilities
               
   Cash overdraft
  $ -     $ 31  
   Accounts payable and accrued liabilities
    228,378       217,500  
   Accrued interest-related parties
    18,310       13,961  
Convertible notes payable
    12,500       12,500  
Notes payable - related party
    81,050       100,350  
Total Current Liabilities
    340,238       344,342  
                 
Commitments and Contingencies
    -       -  
                 
Stockholders' deficiency
               
   Preferred stock, $0.10 par value; 2,000,000 shares authorized; no shares
               
     issued and outstanding at  June 30, 2010 and December 31, 2009
    -       -  
   Common stock, $0.001 par value; 198,000,000 shares authorized;12,825,000 and
               
     13,225,000 shares issued and outstanding at June 30, 2010 and December 31, 2009
    12,825       13,225  
   Additional paid-in capital
    1,380,979       1,361,079  
   Accumulated deficit
    (1,478,487 )     (1,441,839 )
      Total stockholder's deficiency
    (84,683 )     (67,535 )
                 
Total liabilities and stockholders' deficiency
  $ 255,555     $ 276,807  
 
See notes to financial statements.
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
(UNAUDITED)
 
   
For the Three
   
For the Three
   
For the Six
   
For the Six
   
From inception
 
   
Months Ended
   
Months Ended
   
Months Ended
   
Months Ended
   
(August 7, 2006)
 
   
June 30,
   
June 30,
   
June 30,
   
June 30,
   
to June 30,
 
   
2010
   
2009
   
2010
   
2009
   
2010
 
                               
Revenue
 
$
-
   
$
-
   
$
-
   
$
-
   
$
-
 
                                         
Operating expenses:
                                       
                                         
   Selling, general and administrative expenses
   
6,263
     
42,177
     
10,515
     
99,570
     
435,804
 
   Amortization expense
   
10,646
     
55,205
     
21,292
     
110,410
     
473,578
 
   Impairment expense
   
-
     
-
     
-
     
-
     
534,711
 
      Total operating expenses
   
16,909
     
97,382
     
31,807
     
209,980
     
1,444,093
 
                                         
Operating loss
   
(16,909
)
   
(97,382
)
   
(31,807
)
   
(209,980
)
   
(1,444,093
)
                                         
Other expense:
                                       
   Interest expense, net
   
2,270
     
2,705
     
4,841
     
5,044
     
34,394
 
                                         
      Total other expense
   
2,270
     
2,705
     
4,841
     
5,044
     
34,394
 
                                         
  Loss before income taxes
   
(19,197
)
   
(100,087
)
   
(36,648
)
   
(215,024
)
   
(1,478,487
)
                                         
   Provision for income taxes
   
-
     
-
     
-
     
-
     
-
 
                                         
Net loss
 
$
(19,179
)
 
$
(100,087
)
 
$
(36,648
)
 
$
(215,024
)
 
$
(1,478,487
)
                                         
Net loss per share - basic and diluted
 
$
(0.00
)
 
$
(0.01
)
 
$
(0.00
)
 
$
(0.02
)
       
                                         
                                         
Weighted average shares outstanding - basic
   
13,325,000
     
13,225,000
     
13,287,431
     
13,225,000
         
 
See notes to financial statements.
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
FROM INCEPTION (AUGUST 7, 2009) TO JUNE 30, 2010
 
   
Common Stock
         
Additional Paid-In
   
Accumulated
       
   
Shares
   
Amount
   
Capital
   
Deficit
   
Total
 
Shares issued to officer in August, 2006 at $0.001 per share
    1,500,000     $ 1,500     $ -     $ -     $ 1,500  
                                         
Shares issued to officer and director in August, 2006 at $0.001 per share
    500,000       500       -       -       500  
                                         
Shares issued to director in August, 2006 at $0.001 per share
    500,000       500       -       -       500  
                                         
Shares issued to director in August, 2006 at $0.001 per share
    500,000       500       -       -       500  
                                         
 Shares sold for cash at $0.20 per share in October, 2006
    225,000       225       44,775       -       45,000  
                                         
 Beneficial conversion feature of notes payable
    -       -       12,500       -       12,500  
                                         
 Net loss for the year ended December 31, 2006
     -        -        -       (25,970 )     (25,970 )
                                         
 Balance at December 31, 2006
    3,225,000       3,225       57,275       (25,970 )     34,530  
                                         
 Shares previously issued for technology license and $50,000 in August 2007
    10,000,000       10,000       1,303,804       -       1,313,804  
                                         
 Net loss for the year ended December 31, 2007
    -       -       -       (182,650 )     (182,650 )
                                         
 Balance at December 31, 2007
    13,225,000       13,225       1,361,079       (208,620 )     1,165,684  
                                         
 Net loss for the year ended December 31, 2008
    -       -       -       (390,740 )     (390,740 )
                                         
 Balance at December 31, 2008
    13,225,000       13,225       1,361,079       (599,360 )     774,944  
                                         
 Net loss for the twelve  months ended December 31, 2009
    -       -       -       (849,479 )     (842,479 )
                                         
 Balance at December 31, 2009
    13,225,000       13,225       1,361,079       (1,441,839 )     (67,535 )
                                         
Shares sold for cash at $0.20 per share in February, 2010
    100,000       100       19,900       -       20,000  
                                         
Net loss for the three months ended March 31, 2010
    -       -       -       (17,469 )     (17,469 )
                                         
Balance at March 31, 2010 (unaudited)
    13,325,000       13,325       1,380,979       (1,459,308 )     (65,004 )
                                         
Cancellation of shares issued to director
    (500,000 )     (500     -       -       (500
                                         
Net loss for the three months ended June 30, 2010
    -       -       -       (19,179 )     (19,179 )
                                         
Balance at June 30, 2010 (unaudited)
    12,825,000     $ 12,825     $ 1,380,979     $ (1,478,487 )   $ (84,683 )
 
See notes to financial statements.
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
(UNAUDITED)
 
               
From Inception
 
   
For the Six
   
For the Six
   
(August 7, 2006)
 
   
Months Ended
   
Months Ended
   
Through
 
   
June 30,
   
June 30,
   
June 30,
 
   
2010
   
2009
   
2010
 
Cash flows from operating activities:
                 
   Net loss
  $ (36,648 )   $ (215,024 )   $ (1,478,487 )
  Adjustments to reconcile net loss to net
                       
  cash used in operating activities:
                       
  Non-cash compensation paid in common stock
    (500     -       2,500  
  Amortization expense
    21,292       110,410       473,578  
  Impairment expense
    -       -       534,711  
 Amortization of discount on notes payable
    -       -       12,500  
  Changes in operating assets and liabilities:
                       
        Bank overdraft
    (31     (550 )     -  
        Accounts payable and accrued expenses
    15,227       83,663       246,688  
                         
   Net cash used in operating activities
    (660 )     (21,501 )     (208,510 )
                         
                         
Cash flows from financing activities:
                       
   Proceeds from notes payable
    200       22,850       113,050  
   Cash received for common stock previously issued
    -       -       50,000  
   Payments on notes payable
    (19,500 )     -       (19,500 )
   Common stock issued for cash
    20,000       -       65,000  
                         
   Net cash provided by financing activities
    700       22,850       208,550  
                         
Net increase in cash and cash equivalents
    40       1,349       40  
                         
Cash and cash equivalents at beginning of period
            -       -  
                         
Cash and cash equivalents at end of period
  $ 40     $ 1,349     $ 40  
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
(continued)
 
Supplemental disclosures of cash flow information:
                 
                   
Cash paid during the period for:
                 
                   
Interest
  $ -     $ -     $ -  
                         
Taxes
  $ -     $ -     $ -  
                         
Items not affecting cash:
                       
                         
Discount to notes payable related to beneficial conversion feature
  $ -     $ -     $ 12,500  
                         
10,000,000 shares of common stock issued for license
  $ -     $ -     $ 1,847,653  
                         
2,500,000 shares of common stock issued to officers and directors as compensation
  $ -     $ -     $ 2,500  
 
 
F-6


OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
 
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows.
 
General
 
Oiltek, Inc. (the "Company," “Oiltek”, "we," or "us") was incorporated under the laws of the State of Delaware on August 7, 2006. Oiltek is currently a development stage company under the provisions of Accounting Standards Codification (“ASC”) 825-10-50 (formerly referred to as  Statement of Financial Accounting Standards ("SFAS") No. 7). From its inception through the date of these financial statements, the Company has recognized no revenues and has incurred significant operating expenses. 77.9727% of the Company’s outstanding common stock is owned by Avalon Oil & Gas, Inc, (Note 2).
 
Nature of Business
 
Oiltek, Inc. is a development stage company formed for the purpose of developing and implementing marketing strategies for certain intellectual property, primarily patents and licensing agreements related to the oil industry.
 
Liquidity
 
As shown in the accompanying financial statements, the Company has incurred a net loss of $19,179 and $100,087 for the three months ended June 30, 2010, and 2009, and $36,648 and $215,024 for the six months ended June 20, 2010 and 2009; and $1,478,487 from inception through  June 30, 2010, respectively. The Company's has a net working capital deficiency of $340,198 at June 30, 2010.
Going Concern
 
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has incurred a net loss $19,179 and $100,087 for the three months ended June 30, 2010 and 2009, and $36,648 and $215,024 for the six months ended June 30, 2010 and 2009, and $1,478,487 from inception through June 30, 2010, respectively. These factors among others may indicate that the Company could be unable to continue as a going concern for a reasonable period of time unless further equity funds were raised for cash.
 
Management intends to intensify its effort to license or sell its technology to entities in the petroleum extraction industry, which it believes will be successful.  When licensing operations commence and cash flows improve, management believes that the Company can continue to operate. However, no assurance can be given that management’s actions will result in profitable operations or the resolution of its liquidity problems.
 
The accompanying financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
 
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 reported periods. Actual results could materially differ from those estimates.
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
 
Cash and Cash Equivalents
 
For the purposes of the statement of cash flows, cash equivalents include highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations.
 
Net Loss Per Common Share
 
The Company computes earnings per share under ASC 260-10-05. Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the year. Dilutive common stock equivalents consist of shares issuable upon conversion of convertible notes and the exercise of the Company's stock options and warrants (calculated using the treasury stock method). During 2010, common stock equivalents were not considered in the calculation of the weighted average number of common shares outstanding because they would be anti-dilutive, thereby decreasing the net loss per common share.
 
Concentrations of Credit Risk
 
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and related party receivables. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit. The Company periodically reviews its trade receivables in determining its allowance for doubtful accounts. There is no allowance for doubtful accounts established as of June 30, 2010.
 
Stock Based Compensation
 
From inception the Company adopted  ASC 718-10 utilizing the modified prospective approach.
 
Under the modified prospective approach,  ASC 718-10 applies to compensation cost for all share-based payments granted based on the grant-date fair value estimated in accordance with the provisions of ASC 718-10.  
 
Fair Value of Financial Instruments
 
The Company measures its financial assets and liabilities in accordance with accounting principles generally accepted in the United States of America. The estimated fair values approximate their carrying value because of the short-term maturity of these instruments or the stated interest rates are indicative of market interest rates.
 
Advertising
 
The Company’s policy is to charge the costs of advertising to expense as incurred. The Company has not incurred any advertising costs during the three and six months ended June 30, 2010 and 2009.
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
Income Taxes
 
The Company accounts for income taxes using the liability method. Under the liability method, deferred income taxes are determined based on differences between the financial reporting and the tax bases of assets and liabilities. They are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The Company is required to adjust its deferred tax liabilities in the period when tax rates or the provision of the income tax laws change. Valuation differences are established to reduce to the amounts expected to be realized. Due to the uncertainties as to the realization of deferred tax assets, an allowance has been provided regarding all deferred tax assets of the Company.
 
Long-lived assets
 
The Company accounts for its long-lived assets under the provision of ASC 360-10-05. The Company's long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should an impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. These intangibles future value will be strongly influenced by the changing value of oil based commodities.
 
NOTE 2 – LICENSING AGREEMENTS
 
In August 2007, the Company issued 10,000,000 shares of its common stock to its parent company Avalon Oil & Gas, Inc. “(Avalon”) as consideration for cash of $50,000 and Avalon’s agreement to license certain patents to the Company (the “Avalon Licensing Agreement”).  The Avalon Licensing Agreement was executed in August 2007.  The Company carried over the basis of these patents from Avalon’s balance sheet, and valued this licensing agreement at $255,515 and $276,807 (net) on its balance sheets at June 30, 2010 and December 31, 2009, respectively.  The  IWTI license had been written-off to a book value of $0 by Avalon and this valuation was carried over to the balance sheet of  the Company.
 
The Avalon Licensing Agreement consists of the right to develop the following two technologies: (A), the Ultrasonic Mitigation Technology (“UMTI”), (B) the Leak Location Technology (“LLTI)”.  During the twelve months ended December 31, 2009, the Company recorded an impairment in the value of the LLTI license in the amount of $534,711.  The following table reflects the net book values of these technologies on the Company’s balance sheets at June 30, 2010 and December 31,
2009:
 
June 30, 2010:        
Accumulated
   
Net Book
 
   
Cost
   
Amortization
   
Value
 
(A) UMTI
  $ 372,619     $ (117,104 )   $ 255,515  
(B) LLTI
    891,185       (891,185 )     -  
    $ 1,263,804     $ (1,008,289 )   $ 255,515  
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
 
December 31, 2009:        
Accumulated
         
Net Book
 
   
Cost
   
Amortization
   
Impairment
   
Value
 
(A) UMTI
  $ 372,619     $ (95,812 )   $ -     $ 276,807  
(B) LLTI
    891,185       (356,472 )     (534,713 )     -  
    $ 1,263,804     $ (452,284 )     (534,713 )   $ 276,807  
 
(A) On July 12, 2006, Avalon acquired Ultrasonic Mitigation Technologies, Inc. ("UMTI") for 16,250,000 unregistered shares of Avalon's common stock, which were valued at $695,500. UMTI held an exclusive worldwide license pursuant to a license agreement dated July 12, 2006 and expiring March 11, 2025, unless earlier terminated pursuant to the terms of such license agreement (the "UMTI License Agreement"), with respect to the technology titled "System and Method for the Mitigation of Paraffin Wax Deposition from Crude Oil by Using Ultrasonic Waves". The current legal status of this technology is that of a US patent, and a Canadian and International patent application. The terms of the UMTI License Agreement (i) allow the inventor to (a) continue to use the technology for educational and research purposes, and (b) publish and disseminate information about the technology, (ii) allow non-profit organizations to use the technology for educational and non-commercial research purposes within their own facilities, and (iii) require, at the request of the inventor, UMTI to sublicense the technology to a third party designated by the inventor, provided that such third party is in a field which is of no commercial interest to UMTI.
 
Avalon also paid a $30,350 in fees related to the acquisition of UMTI that has been added to the cost of the technology license.
 
The purchase price was allocated to the assets by Avalon as follows:
 
Cash
  $ 269,650  
Technology license
    425,850  
Total
  $ 695,500  
 
Oiltek continued the amortization policy of Avalon with regard to this patent, and is amortizing this patent on a straight-line basis over a 10 year estimated life; amortization was $10,646, for the three months ended June 30, 2010 and 2009, $21,292 for the six months ended June 30, 2010 and 2009, and $117,104 from inception to June 30, 2010, respectively.  At the date of the Avalon Licensing Agreement (August 17, 2007), this patent had a  net book value of $372,619 on the books of Avalon.
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
 
(B) On March 28, 2007, Avalon acquired Leak Location Technologies, Inc. ("LLTI") for 36,710,526 unregistered shares of the Avalon's common stock, which were valued at $1,090,303. LLTI held an exclusive United States license pursuant to a license agreement dated March 27, 2007 and expiring upon the later of (i) October 9, 2012 or (ii) the last sale of a licensed product produced during the term of the license agreement, unless earlier terminated pursuant to the terms of such license agreement (the "LLTI License Agreement") with respect to the technology titled "Detection of Leaks in Pipelines". The current legal status of this technology is that of a US patent. The terms of the LLTI License Agreement (i) allow the inventor to use the invention for educational and research purposes, (ii) allow other non-profit organizations to use the invention for educational and research purposes, and (iii) require LLTI to (a) allow the inventor to use any improvement developed by LLTI for educational and research purposes without paying a royalty to LLTI, and (b) allow other non-profit organizations to use such improvement for non-commercial research purposes without paying a royalty to LLTI.
 
The purchase price was allocated to the assets by Avalon as follows:
 
Cash
  $ 105,000  
Prepaid consulting
    5,000  
Technology license
    980,303  
Total
  $ 1,090,303  
 
The Company is amortizing this patent  over a 10 year estimated life; amortization was $178,236, for the years ended December 31, 2009 and 2008, and $356,472 from inception to December 31, 2009, respectively.  At the date of the Avalon Licensing Agreement (August 17, 2007), this patent had a  net book value of $891,185 on the books of Avalon. During the year ended December 31, 2009, the Company recorded an impairment in the value of the LLTI license in the amount of $534,713 and net book value of this license at December 31, 2009 is $0.
 
The Avalon Licensing Agreement provides the Company with rights to develop patent (A) above worldwide, and the rights to develop the patent (B) above in the United States only.
 
Subject to certain provisions, the term of the Avalon Licensing Agreement is five years and shall terminate on May 31, 2012; provided, however, that the term may be extended in the Company's sole and absolute discretion for up to two (2) additional three-year (3) periods; however, Avalon's rights and that the Patent titled "Detection of Leaks in Pipelines" expires on October 9, 2012 and cannot be renewed by the terms of the Avalon Licensing Agreement beyond that point. The Avalon Licensing Agreement was amended pursuant to an Amendment to the License Agreement between Avalon and Oiltek dated October 14, 2010, which extended the termination date of the Avalon Licensing Agreement from May 31, 2012 to May 31, 2017 and provides that the term may be further extended in the Company’s sole and absolute discretion for up to two (2) additional three-year (3) periods.
 
Oiltek will pay to Avalon royalties amounting to (i) six (6 %) percent of all Net Sales of the Products by the Company, its Sublicenses or its Affiliates; and (ii) a royalty which is equal to six (6 %) percent of all other revenues received by the Licensee, including, but not limited to, sublicense fees other than payments from Net Sales.
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
 
 
 
NOTE 3 - NOTES PAYABLE
 
The Company has the following notes payable outstanding as of June 30, 2010 and December 31, 2009.
 
      June 30, 2010       December 31, 2009  
Convertible note payable in the amount of $2,500  dated November 28, 2006.  The note bears interest at the rate of 8% per annum, and was initially due  on October 1, 2007.  The note is convertible by the  holder into common stock of the Company  at a conversion of $0.01 per share. A beneficial conversion feature in the amount of  $2,500  was recorded as a discount to the note, and was amortized   to interest expense during the initial period ended December 31,  2006.  Accrued interest is convertible by the holder into  common stock of the  Company at maturity of the note at a price of $0.01 per share.  In December 2008, this note was extended to December 31, 2010.
  $         2,500     $                                 2,500  
                 
Convertible note payable in the amount of $5,000  dated November 28, 2006.  The note bears interest at the rate of 8% per annum, and was initially due  on October 1, 2007. The note is convertible by the  holder into common stock of the Company  at a conversion of $0.01  per share. A beneficial conversion feature in the amount of  $5,000  was recorded as a discount to the note, and was amortized to interest expense during the initial period ended December 31,  2006.  Accrued interest is convertible by the holder into  common stock of the  Company at maturity of the note at a price of $0.01 per share.   In December 2008, this note was extended to December 31, 2010.
    5,000                                         5,000  
 
Convertible note payable in the amount of $5,000  dated November 28, 2006.  The note bears interest at the rate of 8% per annum, and was initially due on October 1, 2007. The note is convertible by the  holder into common stock of the Company at a conversion of $0.01 per share. A beneficial conversion feature in the amount of  $5,000  was recorded as a discount to the note, and was amortized to interest expense during the initial period ended December 31,  2006.  Accrued interest is convertible by the holder into common stock of the  Company at maturity of the note at a price of $0.02 per share.  In December 2008, this note was extended to December 31, 2010.  This note was paid in full on September 30, 2010.
    5,000                                         5,000  
                 
Note payable in the amount of $10,000, to a related party, dated December 26, 2007.  The note bears interest at the rate of 10% per annum, and was initially due on December 26, 2008.  In December 2008, this note was extended to December 31, 2010. During the six months ended June 30, 2010, the Company repaid the principal portion of this note in the amount of $10,000.
    -                         10,000  
                 
Note payable in the amount of $5,000, to a related party,  dated January 9, 2008.  The note bears interest at the rate of 10% per annum, and was initially due  on December 1, 2008.  In December 2008, this note was extended to December 31, 2010. During the six months ended June 030, 2010, the Company repaid the principal portion of this note in the amount of $5,000.
    -                         5,000  
                 
Note payable in the amount of $5,000, to a related party,  dated January 18, 2008.  The note bears interest at the rate of 10% per annum, and was initially due in full on January 18, 2009.  In December 2008, this note was extended to December 31, 2010. During the six months ended June 30, 2010, the Company made principal payments on this note in the amount of $4,500.
    500                         5,000  
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
 
Note payable in the amount of $5,000, to a related party,  dated February 27, 2008.  The note bears interest at the rate of 10% per annum, and was initially due on February 27, 2009.  In December 2008, this note was extended to December 31, 2010.
    5,000                 5,000  
                 
Note payable in the amount of $11,000, to a related party, dated March 11, 2008.  The note bears interest at the rate of 10% per annum, and was initially due on March 11, 2009.  In December 2008, this note was extended to December 31, 2010.
    11,000                 11,000  
                 
Note payable in the amount of $2,500, to a related party,  dated May 29, 2008.  The note bears interest at the rate of 10% per annum, and was initially due  on May 29, 2009.  In December 2008, this note was extended to December 31, 2010.
    2,500                 2,500  
                 
Note payable in the amount of $2,000, to a related party,  dated June 9, 2008.  The note bears interest at the rate of 10% per annum, and was initially due  on June 9, 2009.  In December 2008, this note was extended to December 31, 2010.
    2,000                 2,000  
                 
Note payable in the amount of $2,000, to a related party,  dated July14, 2008.  The note bears interest at the rate of 10% per annum, and was initially due  on July14, 2009. In December 2008, this note was extended to December  31, 2010.
    2,000                   2,000  
                 
Note payable in the amount of $5,000, to a related party,  dated July 31, 2008.  The note bears interest at the rate of 10% per annum, and was initially due in full on July 31, 2009.  In December 2008, this note was extended to December 31, 2010.
    5,000                   5,000  
                 
Note payable in the amount of $7,500, to a related party,  dated August 14, 2008.  The note bears interest at the rate of 10% per annum, and was initially due on August  14, 2009.  In December 2008, this note was extended to December 31, 2010.
    7,500                   7,500  
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
 
Note payable in the amount of $3,000, to a related party,  dated September 2, 2008.  The note bears interest at the rate of 10% per annum, and was initially due on September 2, 2009.  In December 2008, this note was extended to December 31, 2010.
    3,000                   3,000  
                 
Note payable in the amount of $2,000, to a related party, dated September 24, 2008.  The note bears interest at the rate of 10% per annum, and was initially due in full on September 24, 2009.  In December 2008, this note was extended to December 31, 2010.
    2,000                     2,000  
                 
Note payable in the amount of $2,000, to a related party, dated October 14, 2008.  The note bears interest at the rate of 10% per annum, and was initially due on October 14, 2009.  In December 2008, this note was extended to December 31, 2010.
    2,000                   2,000  
                 
Note payable in the amount of $1,000, to a related party, dated November 5, 2008.  The note bears interest at the rate of 10% per annum, and was initially due on November 5, 2009.  In December 2008, this note was extended to December 31, 2010.
        1,000                   1,000  
                 
Note payable in the amount of $1,000, to a related party,  dated November 12, 2008.  The note bears interest at the rate of 10% per annum, and was initially due in full on November 12, 2009.  In December 2008,  this note was extended to December 31, 2010.
    1,000                     1,000  
                 
Note payable in the amount of $5,000, to a related party,  dated December 2, 2008.  The note bears interest at the rate of 10% per annum, and was initially due on December 2, 2009. In December 2008, this note was extended to December  31, 2010.
    5,000                   5,000  
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
 
Note payable in the amount of $1,400, to a related party,  dated December 14, 2008.  The note bears interest at the rate of 10% per annum, and was initially due on December 14, 2009.  In December 2008, this note was extended to December 31, 2010.
    1,400                   1,400  
                 
Note payable in the amount of $5,000, to a related party,  dated December 24, 2008.  The note bears interest at the rate of 10% per annum, and was initially due on December 24, 2009.  In December 2008, this note was extended to December 31, 2010.
    5,000                   5,000  
                 
Note payable in the amount of $2,000, to a related party,  dated December 31, 2008.  The note bears interest at the rate of 10% per annum, and was initially due on September 2, 2009.  In December 2008, this note was extended to December 31, 2010.
    2,000                   2,000  
                 
Note payable in the amount of $2,000, to a related party, dated January 2,  2009.  The note bears interest at the rate of 10% per annum,  and is due in full on December 31, 2010.
      2,000                2,000  
                 
Note payable in the amount of $1,000, to a related party, dated January 13, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
        1,000               1,000  
                 
Note payable in the amount of $2,000, to a related party, dated January 29, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31,  2010.
    2,000               2,000  
                 
Note payable in the amount of $2,000 to a related party, dated February 12, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    2,000                2,000  
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
 
Note payable in the amount of $5,000, to a related party,  dated February 22, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    5,000              5,000  
                 
Note payable in the amount of $2,000, to a related party, dated March 23, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31,  2010.
    2,000               2,000  
                 
Note payable in the amount of $1,200 to a related party, dated April 13, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    1,200               1,200  
                 
Note payable in the amount of $1,500, to a related party, dated April 29, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    1,500               1,500  
                 
Note payable in the amount of $1,100, to a related party, dated May 18, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    1,100                1,100  
                 
Note payable in the amount of $100 to a related party, dated May 20, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    100               100  
                 
Note payable in the amount of $1,700, to a related party, dated June 2, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    1,700                1,700  
                 
Note payable in the amount of $1,600, to a related party, dated June 12, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    1,600                1,600  
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
 
Note payable in the amount of $1,600, to a related party, dated June 12, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    1,650                1,650  
                 
Note payable in the amount of $1,600, to a related party, dated June 12, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    100                100  
                 
Notes payable in the amount of $200, to a related party, dated January 5, 2010.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    200              -  
                 
Total notes payable
  $ 93,550     $ 112,850  
Long-term portion
    -       -  
Current portion
  $ 93,550     $ 112,850  
                 
Related party
  $ 81,050     $ 100,350  
Non-related party
    12,500       12,500  
Total
  $ 93,550     $ 112,850  
 
Interest in the amount of $2,270 ($2,021 of this amount to a related party) and $2,614 ($2,365 of this amount to a related party) was accrued on these notes during the three months  ended June 30, 2010 and 2009, respectively.  Interest in the amount of $4,845 ($4,349 of this amount to a related party) and $4,953 ($4,457 of this amount to a related party) was accrued on these notes during the six months  ended June 30, 2010 and 2009, respectively .
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
 
NOTE 4 – EQUITY
 
The Company has authorized 2,000,000 shares of Preferred stock with a par value of $0.10 per share. As of June 30, 2010, the Company has issued no shares of preferred stock.
 
The Company has authorized 198,000,000 shares of common stock with a par value $0.001 per share.
 
During 2006, the Company issued 1,500,000 shares of common stock with a fair value of $ 1,500 to the Company’s Chief Executive Officer for services.
 
During 2006, the Company issued 500,000 shares of common stock with a fair value of $500 to an officer and board member of the Company for services.
 
During 2006, the Company issued 500,000 shares of common stock with a fair value of $500 to an officer and board member of the Company for services.
 
During 2006, the Company issued 500,000 shares of common stock with a fair value of $500 to a board member of the Company for services.
 
During 2006, the Company sold 225,000 shares of common stock for $45,000 cash.
 
During 2007, the Company issued 10,000,000 shares of common stock for cash in the amount of $50,000 and a technology licensing agreement (see note 2). The Company valued the technology license at $1,313,804
 
During February 2010, the Company sold 100,000 shares of common stock for $20,000 cash.
 
During June 2010, the Company cancelled 500,000 shares of common stock with a fair value of $500, previously issued to Thad Kaplan, a former board member of the Company.
 
NOTE 5 – SUBSEQUENT EVENTS
The Company has evaluated events subsequent to June 30, 2010 and through the date these financial statements were issued and available to assess the need for potential recognition or disclosure in this report and discloses the following items:
 
On October 14, 2010, the Company entered into an Amendment to the Licensing Agreement between Avalon and the Company extending the termination date of the License Agreement between Avalon and the Company dated as of August 17, 2007 from May 31, 2012 to May 31, 2017.
 
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
To the Board of Directors of and Shareholders’ of
Oiltek, Inc.
 
 
We have audited the accompanying balance sheets of Oiltek, Inc., ("the Company") a development stage company, as of December 31, 2009 and 2008 and the related statements of operations, changes in stockholders' deficiency, and cash flows for each of the two years ended December 31, 2009 and 2008 and the period from inception (August 7, 2006) to December 31, 2009. 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 audit 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. 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 audit provide a reasonable basis for our opinion.
 
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2009 and 2008 and the results of its operations and its cash flows for each of the two years ended December 31, 2009 and 2008 and the period from inception (August 7, 2006) to December 31, 2009, 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, the Company has incurred significant losses from operations since its inception and has a working capital deficiency. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
 
/s/ Bernstein & Pinchuk LLP
 
New York, New York
October 8, 2010
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31,
 
   
2009
   
2008
 
Assets
           
Current assets
           
             
   Cash and cash equivalents
  $ -     $ -  
      Total current assets
    -       -  
                 
   Intangible assets
    276,807       987,779  
                 
Total assets
  $ 276,807     $ 987,779  
                 
Liabilities and Stockholders' (Deficiency) Equity
               
Current liabilities
               
   Cash overdraft
  $ 31     $ 550  
   Accounts payable and accrued liabilities
    217,500       117,935  
   Accrued interest-related parties
    13,961       4,450  
Convertible notes payable
    12,500       -  
Notes payable – related party       
   
100,350
      -  
Total current liabilities    
 344,342
       122,935  
                 
Long term potion of convertible notes payable
     -       12,500  
Long term portion of notes payable - related party
     -       77,400  
                 
Commitments and Contingencies
    -       -  
                 
Stockholders' deficit
               
   Preferred stock, $0.10 par value; 2,000,000 shares authorized; no shares
               
     issued and outstanding at  December 31, 2009 and 2008
    -       -  
   Common stock, $0.001 par value; 198,000,000 shares authorized; 13,225,000
               
     shares issued and outstanding at December 31, 2009 and 2008
    13,225       13,225  
   Additional paid-in capital
    1,361,079       1,361,079  
   Accumulated deficit
    (1,441,839 )     (599,360 )
      Total stockholder's (deficiency) equity
    (67,535 )     774,944  
                 
Total liabilities and stockholders' (deficiency) equity
  $ 276,807     $ 987,779  
 
See notes to financial statements.
 

OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
AND FROM INCEPTION (AUGUST 7, 2006) TO
DECEMBER 31, 2009
 
   
For the Year
   
For the Year
   
From inception
 
   
Ended
   
Ended
   
(August 7, 2006)
 
   
December 31,
   
December 31,
   
to December 31,
 
   
2009
   
2008
   
2009
 
   
 
         
 
 
Revenue
  $ -     $ -     $ -  
                         
Operating expenses:
                       
                         
   Selling, general and administrative expenses
    120,906       164,565       425,289  
   Amortization expense
    176,261       220,820       452,286  
   Impairment expense
    534,711       -       534,711  
      Total operating expenses
    831,878       385,385       1,412,286  
                         
Operating loss
    (831,878 )     (385,385 )     (1,412,286 )
                         
Other expense:
                       
   Interest (income) expense, net
    10,511       5,355       29,463  
                         
      Total other (income) expense
    10,511       5,355       29,463  
                         
  Loss before income taxes
    (842,479 )     (390,740 )     (1,441,839 )
                         
   Provision for income taxes
    -       -       -  
                         
Net loss
  $ (842,479 )   $ (390,740 )   $ (1,441,839 )
                         
Net loss per share - basic and diluted
  $ (0.06 )   $ (0.03 )        
                         
                         
Weighted average shares outstanding - basic
    13,225,000       13,225,000          
 
See notes to financial statements.
 
  
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS’ (DEFICIENCY) EQUITY
FROM INCEPTION (AUGUST 7, 2009) TO DECEMBER 31, 2009
 
   
Common Stock
   
Additional Paid-In
   
Accumulated
       
   
Shares
   
Amount
   
Capital
   
Deficit
   
Total
 
                               
Shares issued to officer in August, 2006 at $0.001 per share
    1,500,000     $ 1,500     $ -     $ -     $ 1,500  
                                         
Shares issued to officer and director in August, 2006 at $0.001 per share
    500,000       500       -       -       500  
                                         
Shares issued to director in August, 2006 at $0.001 per share
    500,000       500       -       -       500  
                                         
Shares issued to director in August, 2006 at $0.001 per share
    500,000       500       -       -       500  
                                         
 Shares sold for cash at $0.20 per share in October, 2006
    225,000       225       44,775       -       45,000  
                                         
 Beneficial conversion feature of notes payable
    -       -       12,500       -       12,500  
                                         
 Net loss for the year ended December 31, 2006
                            (25,970 )     (25,970 )
                                         
 Balance at December 31, 2006
    3,225,000       3,225       57,275       (25,970 )     34,530  
                                         
 Shares previously issued for technology license and $50,000 in August 2007
    10,000,000       10,000       1,303,804       -       1,313,804  
                                         
 Net loss for the year ended December 31, 2007
    -       -       -       (182,650 )     (182,650 )
                                         
 Balance at December 31, 2007
    13,225,000       13,225       1,361,079       (208,620 )     1,165,684  
                                         
 Net loss for the year ended December 31, 2008
    -       -       -       (390,740 )     (390,740 )
                                         
 Balance at December 31, 2008
    13,225,000       13,225       1,361,079       (599,360 )     774,944  
                                         
 Net loss for the year ended December 31, 2009
    -       -       -       (842,479 )     (842,479 )
                                         
 Balance at December 31, 2009
    13,225,000     $ 13,225     $ 1,361,079     $ (1,441,839 )   $ (67,535 )
See notes to financial statements.
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
 
               
From Inception
 
   
For the Year
   
For the Year
   
(August 7, 2006)
 
   
Ended
   
Ended
   
Through
 
   
December 31,
   
December 31,
   
December 31,
 
   
2009
   
2008
   
2009
 
Cash flows from operating activities:
                 
   Net loss
  $ (842,479 )   $ (390,740 )   $ (1,441,839 )
  Adjustments to reconcile net lost to net
                       
  cash used in operating activities:
                       
  Non-cash compensation paid in common stock
    -       -       3,000  
  Amortization expense
    176,261       220,820       452,286  
  Impairment expense
    534,711       -       534,711  
 Amortization of discount on notes payable
    -       -       12,500  
  Changes in operating assets and liabilities:
                       
        Bank overdraft
    (519 )     550       31  
        Accounts payable and accrued expenses
    109,076       90,274       231,461  
                         
   Net cash used in operating activities
    (22,950 )     (79,096 )     (207,850 )
                         
                         
Cash flows from financing activities:
                       
   Proceeds from notes payable
    22,950       67,400       112,850  
   Cash received for common stock previously issued
    -       -       50,000  
   Common stock issued for cash
    -       -       45,000  
                         
   Net cash provided by financing activities
    22,950       67,400       207,850  
                         
Net decrease in cash and cash equivalents
    -       (11,696 )     -  
                         
Cash and cash equivalents at beginning of period
    -       11,696       -  
                         
Cash and cash equivalents at end of period
  $ -     $ -     $ -  
 
See notes to financial statements.
 
 
 

 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
(continued)
 
Supplemental disclosures of cash flow information:
                 
                   
Cash paid during the period for:
                 
                   
Interest
  $ -     $ -     $ -  
                         
Taxes
  $ -     $ -     $ -  
                         
Discount to notes payable related to beneficial conversion feature
  $ -     $ -     $ 12,500  
                         
10,000,000 shares of common stock issued for license
  $ -     $       1,847,653  
                         
3,000,000 shares of common stock issued to officers and directors as compensation
  $ -     $ -     $ 3,000  

 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
 
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows.
 
General
 
Oiltek, Inc. (the "Company," “Oiltek”, "we," or "us") was incorporated under the laws of the State of Delaware on August 7, 2006. Oiltek is currently a development stage company under the provisions of Accounting Standards Codification (“ASC”) 825-10-50 (formerly referred to as Statement of Financial Accounting Standards ("SFAS") No. 7). From its inception through the date of these financial statements, the Company has recognized no revenues and has incurred significant operating expenses. As of December 31, 2009 75.6144% of the Company’s outstanding common stock is owned by Avalon Oil & Gas, Inc, (Note 2).
 
Nature of Business
 
Oiltek, Inc. is a development stage company formed for the purpose of developing and implementing marketing strategies for certain intellectual property, primarily patents and licensing agreements related to the oil industry.
 
Liquidity
 
As shown in the accompanying financial statements, the Company has incurred a net loss of $842,479, $390,740 and $1,441,839 for the years ended December 31, 2009, and 2008, and from inception through December 31, 2009, respectively. The Company's has a net working capital deficiency of $344,342 at December 31, 2009.
 
Going Concern
 
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has incurred a net loss $842,479, $390,740 and $1,441,839 for the years ended December 31, 2009 and 2008, and from inception through December 31, 2009, respectively. These factors among others may indicate that the Company could be unable to continue as a going concern for a reasonable period of time unless further equity funds were raised for cash.
 
Management intends to intensify its effort to license or sell its technology to entities in the petroleum extraction industry, which it believes will be successful. When licensing operations commence and cash flows improve, management believes that the Company can continue to operate. However, no assurance can be given that management’s actions will result in profitable operations or the resolution of its liquidity problems.
 
The accompanying financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.
 
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 reported periods.  Actual results could materially differ from those estimates.
 

OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
Cash and Cash Equivalents
 
For the purposes of the statement of cash flows, cash equivalents include highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations.
 
Net Loss Per Common Share
 
The Company computes earnings per share under ASC 260-10-05 (formerly referred to as Financial Accounting Standard No. 128, "Earnings Per Share" (SFAS 128)).  Net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the year. Dilutive common stock equivalents consist of shares issuable upon conversion of convertible notes and the exercise of the Company's stock options and warrants (calculated using the treasury stock method). During 2009, common stock equivalents were not considered in the calculation of the weighted average number of common shares outstanding because they would be anti-dilutive, thereby decreasing the net loss per common share.
 
Concentrations of Credit Risk
 
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and related party receivables. The Company places its cash and temporary cash investments with credit quality institutions. At times, such investments may be in excess of the FDIC insurance limit. The Company periodically reviews its trade receivables in determining its allowance for doubtful accounts. There is no allowance for doubtful accounts established as of December 31, 2009.
 
Stock Based Compensation
 
From inception the Company adopted ASC 718-10 (formerly referred to as SFAS No. 123 (revised), "Share-Based Payment" (SFAS 123(R))) utilizing the modified prospective approach.
 
Under the modified prospective approach, ASC 718-10 applies to compensation cost for all share-based payments granted based on the grant-date fair value estimated in accordance with the provisions of ASC 718-10.
 
Fair Value of Financial Instruments
 
The Company measures its financial assets and liabilities in accordance with accounting principles generally accepted in the United States of America. The estimated fair values approximate their carrying value because of the short-term maturity of these instruments or the stated interest rates are indicative of market interest rates.
 
Advertising
 
The Company’s policy is to charge the costs of advertising to expense as incurred. The Company has not incurred any advertising costs during the years ended December 31, 2009 and 2008.
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
 
Income Taxes
 
The Company accounts for income taxes using the liability method.  Under the liability method, deferred income taxes are determined based on differences between the financial reporting and the tax bases of assets and liabilities. They are measured using enacted tax rates and laws that are expected to be  in effect when the differences are expected to reverse. The Company is required to adjust its deferred tax liabilities in the period when tax rates or the provision of the income tax laws change. Valuation differences are established to reduce to the amounts expected to be realized. Due to the uncertainties as to the realization of deferred tax assets, an allowance has been provided regarding all deferred tax assets of the Company.
 
Long-lived assets
 
The Company accounts for its long-lived assets under the provision of ASC 360-10-05 (formerly referred to as  Statements of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”). The Company's long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should an impairment in value be indicated, the carrying value of intangible assets will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. These intangibles future value will be strongly influenced by the changing value of oil based commodities.
 
NOTE 2 – LICENSING AGREEMENTS
 
In August 2007, the Company issued 10,000,000 shares of its common stock to its parent company Avalon Oil & Gas, Inc. “(Avalon”) as consideration for cash of $50,000 and Avalon’s agreement to license certain patents to the Company (the “Avalon Licensing Agreement”).  The Avalon Licensing Agreement was executed in August 2007.  The Company carried over the basis of these patents from Avalon’s balance sheet, and valued this licensing agreement at $276,807 and $987,779 (net) on its balance sheets at December 31, 2009 and 2008, respectively.  The  IWTI license had been written-off to a book value of $0 by Avalon and this valuation was carried over to the balance sheet of  the Company.
 
The Avalon Licensing Agreement consists of the right to develop the following three technologies: (A), the Ultrasonic Mitigation Technology (“UMTI”), (B) the Intelli-Well Technology (“IWTI”); and (C) the Leak Location Technology (“LLTI)”.  During the twelve months ended December 31, 2009, the Company recorded an impairment in the value of the LLTI license in the amount of $534,713.  The following table reflects the net book values of these technologies on the Company’s balance sheets at December 31, 2009 and December 31, 2008:
 
December 31, 2009:
 
         
Accumulated
         
Net Book
 
   
Cost
   
Amortization
   
Impairment
   
Value
 
(A) UMTI
  $ 372,619     $ (95,812 )   $ -     $ 276,807  
(B) IWTI
    -       -       -       -  
(C) LLTI
    891,185       (356,474 )     (534,711 )     -  
 
  $ 1,263,804     $ (452,286 )     (534,711 )   $ 276,807  
 
 
December 31, 2008:
 
         
Accumulated
   
Net Book
 
   
Cost
   
Amortization
   
Value
 
(A) UMTI
  $ 372,619     $ (53,230 )   $ 319,389  
(B) IWTI
    -       -       -  
(C) LLTI
    891,185       (222,795 )     668,390  
    $ 1,263,804     $ (276,025 )   $ 987,779  
 
(A) On July 12, 2006, Avalon acquired Ultrasonic Mitigation Technologies, Inc. ("UMTI") for 16,250,000 unregistered shares of Avalon's common stock, which were valued at $695,500. UMTI held an exclusive worldwide license pursuant to a license agreement dated July 12, 2006 and expiring March 11, 2025, unless earlier terminated pursuant to the terms of such license agreement (the "UMTI License Agreement"), with respect to the technology titled "System and Method for the Mitigation of Paraffin Wax Deposition from Crude Oil by Using Ultrasonic Waves". The current legal status of this technology is that of a US patent, and a Canadian and International patent application. The terms of the UMTI License Agreement (i) allow the inventor to (a) continue to use the technology for educational and research purposes, and (b) publish and disseminate information about the technology, (ii) allow non-profit organizations to use the technology for educational and non-commercial research purposes within their own facilities, and (iii) require, at the request of the inventor, UMTI to sublicense the technology to a third party designated by the inventor, provided that such third party is in a field which is of no commercial interest to UMTI.
 
Avalon also paid a $30,350 in fees related to the acquisition of UMTI that has been added to the cost of the technology license.
 
The purchase price was allocated to the assets by Avalon as follows:
 
Cash
 
$
269,650
 
Technology license
   
425,850
 
Total
 
$
695,500
 
 
Oiltek continued the amortization policy of Avalon with regard to this patent, and is amortizing this patent on a straight-line basis over a 10 year estimated life; amortization was $42,584, for the years ended December 31, 2009 and 2008, and $95,812 from inception to December 31, 2009, respectively.  At the date of the Avalon Licensing Agreement (August 17, 2007), this patent had a  net book value of $372,619 on the books of Avalon.
 
(B) On November 8, 2006, Avalon acquired Intelli-Well Technologies, Inc. ("IWTI") for 20,000,000 unregistered shares of Avalon's common stock, which were valued at $594,000. The Company also paid a $22,500 finders fee related to the acquisition of IWTI that has been added to the cost of the technology license. IWTI held a non-exclusive United States license pursuant to a license agreement dated October 27, 2006 and expiring September 27, 2025, unless earlier terminated pursuant to the terms of such license agreement (the "IWTI License Agreement"), with respect to the technology titled "Well Casing Based-Geophysical Sensor Apparatus"; the U.S. Government also has the rights to use this technology throughout the world. This current legal status of this technology currently is in that of a US patent application. The terms of the IWTI License Agreement (i) allow the inventor to (a) continue to make, use and practice the technology for educational and research purposes, but not for commercial purposes and (b) publish technical data resulting from his research, and (ii) allow non-profit organizations to make, use and practice the technology for educational and research purposes, but not for commercial purposes.
 
The purchase price was allocated to the assets by Avalon as follows:
 
Cash
 
$
225,000
 
Technology license
   
391,500
 
Total
 
$
616,500
 
 
During the three months ended March 31, 2007, this license was considered impaired by Avalon and written-off to a value of $0. There was no value assigned to this license by Oiltek when it was acquired on August 17, 2007 pursuant to the Avalon Licensing Agreement.
 
(C) On March 28, 2007, Avalon acquired Leak Location Technologies, Inc. ("LLTI") for 36,710,526 unregistered shares of the Avalon's common stock, which were valued at $1,090,303. LLTI held an exclusive United States license pursuant to a license agreement dated March 27, 2007 and expiring upon the later of (i) October 9, 2012 or (ii) the last sale of a licensed product produced during the term of the license agreement, unless earlier terminated pursuant to the terms of such license agreement (the "LLTI License Agreement") with respect to the technology titled "Detection of Leaks in Pipelines". The current legal status of this technology is that of a US patent. The terms of the LLTI License Agreement (i) allow the inventor to use the invention for educational and research purposes, (ii) allow other non-profit organizations to use the invention for educational and research purposes, and (iii) require LLTI to (a) allow the inventor to use any improvement developed by LLTI for educational and research purposes without paying a royalty to LLTI, and (b) allow other non-profit organizations to use such improvement for non-commercial research purposes without paying a royalty to LLTI.
 
The purchase price was allocated to the assets by Avalon as follows:
 
Cash
 
$
105,000
 
Prepaid consulting
   
5,000
 
Technology license
   
980,303
 
Total
 
$
1,090,303
 
 
The Company is amortizing this patent  over a 10 year estimated life; amortization was $178,236, for the years ended December 31, 2009 and 2008, and $356,472 from inception to December 31, 2009, respectively.  At the date of the Avalon Licensing Agreement (August 17, 2007), this patent had a net book value of $891,185 on the books of Avalon. During the year ended December 31, 2009, the Company recorded an impairment in the value of the LLTI license in the amount of $534,711 and net book value of this license at December 31, 2009 is $0.
 
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
 
(C) On March 28, 2007, Avalon acquired Leak Location Technologies, Inc. ("LLTI") for 36,710,526 unregistered shares of the Avalon's common stock, which were valued at $1,090,303. LLTI held an exclusive United States license pursuant to a license agreement dated March 27, 2007 and expiring upon the later of (i) October 9, 2012 or (ii) the last sale of a licensed product produced during the term of the license agreement, unless earlier terminated pursuant to the terms of such license agreement (the "LLTI License Agreement") with respect to the technology titled "Detection of Leaks in Pipelines". The current legal status of this technology is that of a US patent. The terms of the LLTI License Agreement (i) allow the inventor to use the invention for educational and research purposes, (ii) allow other non-profit organizations to use the invention for educational and research purposes, and (iii) require LLTI to (a) allow the inventor to use any improvement developed by LLTI for educational and research purposes without paying a royalty to LLTI, and (b) allow other non-profit organizations to use such improvement for non-commercial research purposes without paying a royalty to LLTI.
 
The purchase price was allocated to the assets by Avalon as follows:
 
Cash
 
$
105,000
 
Prepaid consulting
   
5,000
 
Technology license
   
980,303
 
Total
 
$
1,090,303
 
 
The Company is amortizing this patent  over a 10 year estimated life; amortization was $178,236, for the years ended December 31, 2009 and 2008, and $356,472 from inception to December 31, 2009, respectively.  At the date of the Avalon Licensing Agreement (August 17, 2007), this patent had a net book value of $891,185 on the books of Avalon. During the year ended December 31, 2009, the Company recorded an impairment in the value of the LLTI license in the amount of $534,711 and net book value of this license at December 31, 2009 is $0.
 
The Avalon Licensing Agreement provides the Company with rights to develop patent (A) above worldwide, and the rights to develop the patents (B) and (C) above in the United States only.
 
Subject to certain provisions, the term of the Avalon Licensing Agreement is five years and shall terminate on May 31, 2012; provided, however, that the term may be extended in the Company's sole and absolute discretion for up to two (2) additional three-year (3) periods; however, Avalon's rights and that the Patent titled "Detection of Leaks in Pipelines" expires on October 9, 2012 and cannot be renewed by the terms of the Avalon Licensing Agreement beyond that point. The Avalon Licensing Agreement was amended pursuant to an Amendment to the License Agreement between Avalon and Oiltek dated October 14, 2010, which extended the termination date of the Avalon Licensing Agreement from May 31, 2012 to May 31, 2017 and provides that the term may be further extended in the Company’s sole and absolute discretion for up to two (2) additional three-year (3) periods.
 
Oiltek will pay to Avalon royalties amounting to (i) six (6 %) percent of all Net Sales of the Products by the Company, its Sublicenses or its Affiliates; and (ii) a royalty which is equal to six (6 %) percent of all other revenues received by the Licensee, including, but not limited to, sublicense fees other than payments from Net Sales.
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
 
NOTE 3 - NOTES PAYABLE
 
The Company has the following notes payable outstanding as of December 31, 2009 and December 31, 2008.     
 
   
December 31, 2009 
   
December 31, 2008
 
Convertible note payable in the amount of $2,500 dated November 28, 2006. The note bears interest at the rate of 8% per annum, and was initially due on October 1, 2007. The note is convertible by the holder into common stock of the Company at a conversion of $0.01 per share. A beneficial conversion feature in the amount of $2,500 was recorded as a discount to the note, and was amortized to interest expense during the initial period ended December 31, 2006. Accrued interest is convertible by the holder into common stock of the Company at maturity of the note at a price of $0.01 per share. In December 2008, the maturity date of this note was extended to December 31, 2010.
 
$
2,500
   
$
                      2,500
 
                 
Convertible note payable in the amount of $5,000 dated November 28, 2006. The note bears interest at the rate of 8% per annum, and was initially due  on October 1, 2007. The note is convertible by the holder into common stock of the Company at a conversion of $0.01 per share. A beneficial conversion feature in the amount of $5,000 was recorded as a discount to the note, and was amortized to interest expense during the initial period ended December 31, 2006. Accrued interest is convertible by the holder into common stock of the Company at maturity of the note at a price of $0.01 per share. In December 2008, the maturity date of this note was extended to December 31, 2010.
   
5,000
     
                      5,000
 
 
Convertible note payable in the amount of $5,000 dated November 28, 2006.  The note bears interest at the rate of 8% per annum, and was initially due on October 1, 2007. The note is convertible by the  holder into common stock of the Company at a conversion of $0.01 per share. A beneficial conversion feature in the amount of  $5,000  was recorded as a discount to the note, and was amortized to interest expense during the initial period ended December 31,  2006.  Accrued interest is convertible by the holder into common stock of the  Company at maturity of the note at a price of $0.02 per share.  In December 2008, the maturity date of this note was extended to December 31, 2010. This convertible note was paid in full on September 30, 2010.
   
5,000
     
                      5,000
 
                 
Note payable in the amount of $10,000, to a related party, dated December 26, 2007.  The note bears interest at the rate of 10% per annum, and was initially due on December 26, 2008.  In December 2008, the maturity date of this note was extended to December 31, 2010.
   
10,000
     
     10,000
 
                 
Note payable in the amount of $5,000, to a related party, dated January 9, 2008. The note bears interest at the rate of 10% per annum, and was initially due on December 1, 2008.  In December 2008, the maturity date of this note was extended to December 31, 2010.
   
5,000
     
    5,000
 
                 
Note payable in the amount of $5,000, to a related party, dated January 18, 2008. The note bears interest at the rate of 10% per annum, and was initially due in full on January 18, 2009. In December 2008, the maturity date of this note was extended to December 31, 2010.
   
5,000
     
    5,000
 
                 
Note payable in the amount of $5,000, to a related party, dated February 27, 2008. The note bears interest at the rate of 10% per annum, and was initially due on February 27, 2009. In December 2008, the maturity date of this note was extended to December 31, 2010.
   
5,000
     
    5,000
 
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
 
   
December 31, 2009
   
December 31, 2008
 
Note payable in the amount of $11,000, to a related party, dated March 11, 2008. The note bears interest at the rate of 10% per annum, and was initially due on March 11, 2009. In December 2008, the maturity date of this note was extended to December 31, 2010.
    11,000       11,000  
                 
Note payable in the amount of $2,500, to a related party,  dated May 29, 2008. The note bears interest at the rate of 10% per annum, and was initially due  on May 29, 2009. In December 2008, the maturity date of this note was extended to December 31, 2010.
    2,500       2,500  
 
Note payable in the amount of $2,000, to a related party, dated June 9, 2008. The note bears interest at the rate of 10% per annum, and was initially due  on June 9, 2009. In December 2008, this note was extended to December 31, 2010.
   
2,000
     
2,000
 
                 
Note payable in the amount of $2,000, to a related party,  dated July14, 2008. The note bears interest at the rate of 10% per annum, and was initially due  on July14, 2009. In December 2008, the maturity date of this note was extended to December  31, 2010.
   
2,000
     
2,000
 
                 
Note payable in the amount of $5,000, to a related party,  dated July 31, 2008. The note bears interest at the rate of 10% per annum, and was initially due in full on July 31, 2009. In December 2008, the maturity date of this note was extended to December 31, 2010.
   
5,000
     
5,000
 
                 
Note payable in the amount of $7,500, to a related party,  dated August 14, 2008.  The note bears interest at the rate of 10% per annum, and was initially due on August  14, 2009.  In December 2008, the maturity date of this note was extended to December 31, 2010.
   
7,500
     
7,500
 
                 
Note payable in the amount of $3,000, to a related party,  dated September 2, 2008.  The note bears interest at the rate of 10% per annum, and was initially due on September 2, 2009.  In December 2008, the maturity date of this note was extended to December 31, 2010.
   
3,000
     
3,000
 
                 
1Note payable in the amount of $2,000, to a related party, dated September 24, 2008.  The note bears interest at the rate of 10% per annum, and was initially due in full on September 24, 2009.  In December 2008, the maturity date of this note was extended to December 31, 2010.
   
2,000
     
2,000
 
                 
Note payable in the amount of $2,000, to a related party, dated October 14, 2008.  The note bears interest at the rate of 10% per annum, and was initially due on October 14, 2009.  In December 2008, the maturity date of this note was extended to December 31, 2010.
   
2,000
     
2,000
 
                 
Note payable in the amount of $1,000, to a related party, dated November 5, 2008.  The note bears interest at the rate of 10% per annum, and was initially due on November 5, 2009.  In December 2008, the maturity date of this note was extended to December 31, 2010.
   
1,000
     
1,000
 
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
 
    December 31, 2009     December 31, 2008  
Note payable in the amount of $1,000, to a related party,  dated November 12, 2008.  The note bears interest at the rate of 10% per annum, and was initially due in full on November 12, 2009.  In December 2008, the maturity date of this note was extended to December 31, 2010.
    1,000       1,000  
                 
Note payable in the amount of $5,000, to a related party,  dated December 2, 2008.  The note bears interest at the rate of 10% per annum, and was initially due on December 2, 2009. In December 2008, the maturity date of this note was extended to December  31, 2010.
    5,000       5,000  
                 
Note payable in the amount of $1,400, to a related party,  dated December 14, 2008.  The note bears interest at the rate of 10% per annum, and was initially due on December 14, 2009.  In December 2008, the maturity date of this note was extended to December 31, 2010.
    1,400       1,400  
                 
Note payable in the amount of $5,000, to a related party,  dated December 24, 2008.  The note bears interest at the rate of 10% per annum, and was initially due on December 24, 2009.  In December 2008, the maturity date of this note was extended to December 31, 2010.
    5,000       5,000  
                 
Note payable in the amount of $2,000, to a related party,  dated December 31, 2008.  The note bears interest at the rate of 10% per annum, and was initially due on September 2, 2009.  In December 2008, the maturity date of this note was extended to December 31, 2010.
    2,000       2,000  
                 
Note payable in the amount of $2,000, to a related party, dated January 2,  2009.  The note bears interest at the rate of 10% per annum,  and is due in full on December 31, 2010.
    2,000       -  
                 
Note payable in the amount of $1,000, to a related party, dated January 13, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    2,000       -  
 
Note payable in the amount of $2,000, to a related party, dated January 29, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31,  2010.
    2,000                -  
                 
Note payable in the amount of $2,000 to a related party, dated February 12, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    2,000                -  
                 
Note payable in the amount of $5,000, to a related party,  dated February 22, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    5,000                -  
                 
Note payable in the amount of $2,000, to a related party, dated March 23, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31,  2010.
    2,000                -  
                 
Note payable in the amount of $1,200 to a related party, dated April 13, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    1,200                -  
 
 
OILTEK, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
 
Note payable in the amount of $1,500, to a related party, dated April 29, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    1,500                -  
                 
Note payable in the amount of $1,100, to a related party, dated May 18, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    1,100                -  
                 
Note payable in the amount of $100 to a related party, dated May 20, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    100                -  
                 
Note payable in the amount of $1,700, to a related party, dated June 2, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    1,700                -  
                 
Note payable in the amount of $1,600, to a related party, dated June 12, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    1,600                -  
                 
Note payable in the amount of $1,650, to a related party, dated June 12, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    1,650                -  
                 
Note payable in the amount of $100, to a related party, dated June 12, 2009.  The note bears interest at the rate of 10% per annum, and is due in full on December 31, 2010.
    100                -  
                 
Total notes payable
  $ 112,850     $ 89,900  
Long-term portion
    -       89,900  
Current portion
  $ 112,850     $ -  
                 
Related party
  $ 100,350     $ 77,400  
Non-related party
    12,500       12,500  
Total
  $ 112,850     $ 89,900  
 
Interest in the amount of $10,601 ($10,511 of this amount to a related party) and $5,355 ($4,450 of this amount to a related party) was accrued on these notes during the years ended December 31, 2009 and 2008, respectively.
 
 
NOTE 4 – EQUITY
 
The Company has authorized 2,000,000 shares of Preferred stock with a par value of $0.10 per share. As of December 31, 2009, the Company has issued no shares of preferred stock.

The Company has authorized 198,000,000 shares of common stock with a par value $0.001 per share.

During 2006, the Company issued 1,500,000 shares of common stock with a fair value of $ 1,500 to the Company’s Chief Executive Officer for services.

During 2006, the Company issued 500,000 shares of common stock with a fair value of $500 to an officer and board member of the Company for services.

During 2006, the Company issued 500,000 shares of common stock with a fair value of $500 to an officer and board member of the Company for services.

During 2006, the Company issued 500,000 shares of common stock with a fair value of $500 to a board member of the Company for services.
 
During 2006, the Company sold 225,000 shares of common stock for $45,000 cash.

During 2007, the Company issued 10,000,000 shares of common stock for cash in the amount of $50,000 and a technology licensing agreement (see note 2). The Company valued the technology license at $1,263,804.

NOTE 5 – SUBSEQUENT EVENTS

The Company has evaluated events subsequent to December 31, 2009 and through the date these financial statements were issued and available to assess the need for potential recognition or disclosure in this report and, discloses the following items:
 
On June 30, 2010, the Company cancelled 500,000 shares of common stock with a fair value of $500, previously issued to Thad Kaplan, a former board member of the Company.
 
On October 14, 2010, the Company entered into an Amendment to the Licensing Agreement between Avalon and the Company dated August 17, 2007. This Amendment to the Licensing Agreement extended  the termination date of the Licensing Agreement from May 31, 2012 to May 31, 2017.