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EX-31.2 - CFO 302 CERTIFICATE - Cell-nique Corpexh31-2.htm
EX-31.1 - CEO 302 CERTIFICATE - Cell-nique Corpexh31-1.htm
EX-32.1 - CEO 906 CERTIFICATE - Cell-nique Corpexh32-1.htm
EX-32.2 - CFO 906 CERTIFICATE - Cell-nique Corpexh32-2.htm
EXCEL - IDEA: XBRL DOCUMENT - Cell-nique CorpFinancial_Report.xls
EX-99.1 - UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR CHERRYBROOK KITCHEN, LLC - Cell-nique Corpexh99-1.htm
EX-99.2 - UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CELL-NIQUE AND CHERRYBROOK KITCHEN - Cell-nique Corpexh99-2.htm


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


FORM 10-Q


(Mark One)

x

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2011

¨

Transition Report pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

for the transition period from ____________ to ____________

Commission file number: 333-161413

Cell-nique Corporation
(Exact name of registrant as specified in its charter)

 Delaware

  27-0693687

 (State of incorporation)

  (I.R.S. Employer Identification No.)

12 Old Stage Coach Road, Weston, CT  06883
(Address and telephone number of principal executive offices)

888-417-9343
(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x  No   ¨

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 definitions of "accelerated filer," "large accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated filer ¨

Accelerated filer                     ¨

Non-accelerated filer    ¨

Smaller reporting company   x

Indicate by check mark whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨  No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: There were a total of 10,830,410 shares of Common Stock outstanding as of August 5, 2011.



Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 2 of Part I of this report include forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by forward-looking statements.

In some cases, you can identify forward-looking statements by terminology such as "may," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "proposed," "intended," or "continue" or the negative of these terms or other comparable terminology. You should read statements that contain these words carefully, because they discuss our expectations about our future operating results or our future financial condition or state other "forward-looking" information. There may be events in the future that we are not able to accurately predict or control. Before you invest in our securities, you should be aware that the occurrence of any of the events described in this Quarterly Report could substantially harm our business, results of operations and financial condition, and that upon the occurrence of any of these events, the trading price of our securities could decline and you could lose all or part of your investment. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, growth rates, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this Quarterly Report to conform these statements to actual results.

 

 

 

 

 

 

 

2


TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

 

 

 

Item 1.  Financial Statements

 

 

 

Condensed Balance Sheets - June 30, 2011 (unaudited) and December 31, 2010

 

 

 

Condensed Statements of Operations for the three and six month periods ended June 30, 2011 and 2010 (unaudited)

 

 

 

Condensed Statements of Cash Flows for the six month periods ended June 30, 2011 and 2010 (unaudited)

 

 

 

Notes to Condensed Financial Statements (unaudited)

 

 

 

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

 

 

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

 

 

 

Item 4. Controls and Procedures

 

 

 

PART II - OTHER INFORMATION

 

 

 

Item 1.  Legal Proceedings

 

 

 

Item 1A.  Risk Factors

 

 

 

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

 

 

 

Item 3.  Defaults Upon Senior Securities

 

 

 

Item 4.  Removed and Reserved

 

 

 

Item 5.  Other Information

 

 

 

Item 6.  Exhibits

 

3


Part I - FINANCIAL INFORMATION

Item 1. Financial Statements

Cell-nique Corporation
CONDENSED BALANCE SHEETS

    Unaudited   Audited
         June 30,        December 31,
    2011   2010
Assets        
Current assets        
     Cash $ 49,060  $ 44,293 
     Accounts receivable   235,231    36,594 
     Inventory   218,553    78,118 
          Total current assets   502,844    159,005 
         
Machinery and equipment, net   93,903    47,914 
Tradenames   1,683,329    94,064 
         
          Total assets $ 2,280,076  $ 300,983 
         
Liabilities and stockholders' equity        
Current liabilities        
     Accounts payable and accrued expenses $ 379,494  $ 139,499 
          Total current liabilities   379,494    139,499 
         
Long Term Liabilities        
     Commerce Bank   190,000   
     Note Payable - Silverwood   150,000   
     Note payable - Cherrybrook Kitchen Shareholder   562,694   
     Notes payable - PCC Shareholder   183,125    122,347 
    1,085,819    122,347 
Stockholders' equity        
Preferred stock, Series A, par value $0.00001, 1,000,000 shares authorized;        
     245,000 and 240,000 shares issued and outstanding, respectively    
         
Common stock, par value $0.00001, 49,000,000 shares authorized;        
     10,030,410 and 8,630,410 shares issued and outstanding, respectively   100    68 
Additional paid-in capital   1,687,885    887,915 
Accumulated deficit   (873,224)   (848,848)
          Total stockholders' equity   814,763    39,137 
         
         
          Total liabilities and stockholders' equity $ 2,280,076  $ 300,983 

The accompanying notes are an integral part of these condensed financial statements

4


CELL-NIQUE CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2011 and 2010
(Unaudited)

    Unaudited      Unaudited 
    Three months ended June 30,     Six months ended June 30,
    2011   2010     2011   2010
                   
Sales, net $ 379,428  $ 164,613    $ 486,167  $ 292,194 
                   
Cost of sales   192,830    84,578      234,084    151,573 
                   
Gross profit   186,598    80,035      252,083    140,621 
                   
Expenses                  
Selling    88,391    58,396      133,928    118,805 
General and administrative    67,608    81,266      108,986    152,732 
Research and development   467    335      1,036    965 
Depreciation and amortization   15,167    5,736      23,255    11,372 
                   
Total expenses   171,633    145,733      267,205    283,874 
                   
Loss from operations   14,965    (65,698)     (15,122)   (143,253)
                   
Interest expense   1,628    28,222      9,254    55,176 
                   
Income tax   -     -       -     -  
                   
Net income (loss) $ 13,337  $ (93,920)   $ (24,376) $ (198,429)
                   
Net income (loss) per common share  $ 0.00  $ (0.02)   $ (0.00) $ (0.04)
                   
Weighted average shares outstanding   10,030,410    5,015,000      10,030,410    5,015,000 

The accompanying notes are an integral part of these condensed financial statements

5


CELL-NIQUE CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2011 and 2010
(Unaudited)

    Unaudited
    Six months ended June 30,
    2011   2010
Cash flows from operating activities        
Net loss $ (24,376) $ (198,429)
         
Adjustments to reconcile net income/(loss) to         
     net cash used in operating activities:        
     Depreciation and amortization   23,255    11,373 
     Interest added to shareholder loan   6,676    51,712 
     Changes in assets and liabilities:        
     Accounts receivable   (198,662)   (27,139)
     Inventory   (140,409)   17,171 
     Accounts payable and accrued expenses   389,996    35,330 
Net cash (used in)/provided by        
     operating activities   56,480    (109,982)
         
Cash flow from investing activities        
     Acquisition of Business   (1,600,509)  
     Acquisition of machinery and equipment   (58,000)  
Net cash (used in) investing activities   (1,658,509)  
         
Cash flow from financing activities        
     Commerce Bank   190,000   
     Additional loans from CBK shareholder   562,694   
     Additional loans from PCC shareholder   54,102    51,235 
     Additional paid-in capital   800,000    86,000 
Net cash provided by financing activities   1,606,796    137,235 
         
Cash and cash equivalents:        
Net increase   4,767    27,253 
Balance at beginning of period   44,293    7,624 
Balance at end of period $ 49,060  $ 34,877 
         
         
Supplemental cash flow information:        
     Cash paid for income taxes   -     -  
     Cash paid for interest $ 2,579  $ 1,966 
         
Non-cash financing activities:        
Expenses contributed by shareholder $ -   $ 43,000 
Interest added to shareholder loan   6,676    51,712 

The accompanying notes are an integral part of these condensed financial statements

6


CELL-NIQUE CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS
Six Months Ended June 30, 2011 and 2010 (UNAUDITED)

1. 

Basis of Presentation

The accompanying interim condensed financial statements are unaudited, but in the opinion of management of Cell-nique Corporation (the "Company"), contain all adjustments, which include normal recurring adjustments necessary to present fairly the financial position at June 30, 2011 and the results of operations and cash flows for the six months ended June 30, 2011 and 2010. The balance sheet as of December 31, 2010 is derived from the Company's audited financial statements.

Certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although management of the Company believes that the disclosures contained in these condensed financial statements are adequate to make the information presented herein not misleading. For further information, refer to the financial statements and the notes thereto included in the Company's annual report Form 10K, as filed with the Securities and Exchange Commission on April 15, 2011.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expense during the reporting period. Actual results could differ from those estimates.

The results of operations for the six months ended June 30, 2011 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2011.

Recently Issued Accounting Pronouncements Not Yet Effective

In December 2010, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2010-28, "Intangibles-Goodwill and Other (Topic 350), When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (a consensus of the FASB Emerging Issues Task Force)," which provides updated authoritative guidance related to performing Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. The qualitative factors that an entity should consider when evaluating whether it is more likely than not that a goodwill impairment exists are consistent with the existing guidance for determining whether an impairment exists between annual tests. This update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2010, with no early adoption, which for the Company is our fiscal year beginning July 1, 2011. We do not expect this standard to have a material impact on our consolidated financial statements.

In December 2010, the FASB issued ASU No. 2010-29, "Disclosure of Supplementary Pro Forma Information for Business Combinations." The amendments in this standard specify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. This standard also expands the supplemental pro forma disclosures under ASC 805 to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The amendments in this ASU are effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010, with early adoption permitted. This standard is therefore effective for the Company for acquisitions made after the beginning of fiscal 2012. We do not expect the pro forma disclosure requirements under this standard to have a material impact on our consolidated financial statements.

Income (Loss) per Common Share

Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to common stock holders by the weighted average number of shares of common stock outstanding during the year. Diluted earnings (loss) per share is computed by dividing the net income (loss) applicable to common stock holders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation when their effect is anti-dilutive.

For the six months ended June 30, 2011 and 2010 the calculations of basic and diluted loss per share are the same because potential no dilutive securities would have an anti-dilutive effect.

7


Concentrations

The Company's cash balances on deposit with banks are guaranteed by the Federal Deposit Insurance Corporation up to $250,000. The Company may be exposed to risk for the amounts of funds held in one bank in excess of the insurance limit. In assessing the risk, the Company's policy is to maintain cash balances with high quality financial institutions. The Company had cash balances in excess of the guarantee during the six months ended June 30, 2011.

During the six months ended June 30, 2011 and 2010, the Company had three customers, which accounted for approximately 41%, 24% and 17% of sales in 2011, and 72% and 6% of sales in 2010, respectively. As of June 30, 2011 and December 31, 2010, the Company had approximately $192,889 (82%) and $22,708 (64%), respectively, of accounts receivable from these customers.

Fair Value of Financial Instruments

The Company uses various inputs in determining the fair value of its investments and measures these assets on a recurring basis. Financial assets recorded at fair value in the consolidated balance sheets are categorized by the level of objectivity associated with the inputs used to measure their fair value. Authoritative guidance provided by the FASB defines the following levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these financial assets:

Level 1 — Quoted prices in active markets for identical assets or liabilities.
Level 2 — Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
Level 3 — Unobservable inputs based on the Company's assumptions.

The Company has no fair value items required to be disclosed.

2.

Acquisitions

The Company uses the purchase method of accounting for qualifying business combinations. Under the purchase method of accounting, the assets and liabilities of the acquired companies are recorded at their estimated fair values at the date of acquisition. The excess of cost over their fair values is recognized as goodwill. Identified intangible assets, other than goodwill, are amortized over their estimated useful lives. Goodwill is not amortized for financial reporting purposes. Consideration for acquisitions includes cash paid and the value of any stock issued, less any asset acquired at fair market value and debt assumed.

On May 31, 2011, the Company completed the acquisition of substantially all of the assets and the assumption of certain liabilities of Cherrybrook Kitchen, LLC ("Cherrybrook") including its natural allergy free / gluten free baking mixes and ready to eat products. As consideration for the acquisition, the Company issued Cherrybrook an aggregate of 3,000,000 shares of its common stock and 5,000 shares of its Series A preferred stock. Fair value of the stock was based on a valuation estimate provided by a third party based on the non-trading equity value of the Company on a minority basis assuming the acquisition of Cherrybrook taking into account the lack of liquidity resulted a fair market value of $.20 per share. The issuance of the Company's common stock was effected in reliance upon as S-1 registration statement provided under the Securities Act of 1933, as amended, which became effective on April 27, 2010. The transaction broadens our product portfolio by adding the Cherrybrook brand. The following table presents the purchase price for the acquisition:

 

Purchase Price

 

Consideration

Equity consideration

$    800,000

Cash consideration

1,197,781

Total purchase price consideration

$ 1,997,781

Estimate recognized amounts of identifiable assets acquired and liabilities assumed*

Cash

$     56,381

Accounts Receivable

145,722

Inventory

137,170

Equipment

58,000

Identifiable intangible assets

1,600,508

Financial liabilities

(1,197,781)

Total identifiable net assets

$ 800,000

8


Identified intangible assets acquired during are summarized as follows:

Description

Value

Life

Store Customers in Place

$ 390,000

15 Years

Distributor Customers in Place

$ 275,000

15 Years

Tradename

$ 935,508

15 Years

* The purchase price allocation has not been finalized and is subject to change upon recording of actual transaction costs, finalization of working capital adjustments, and completion of appraisals of tangle and intangible assets. The purchase price allocation will be finalized when all necessary information is obtained which is expected to occur within one year of the consummation of the transaction

Unaudited Pro-forma Condensed Consolidated operating results as if the acquisition had been made as of January 1, 2010 ending December 31, 2010 and balance sheet on closing date May 31, 2011 are included in exhibit 99.2 herein.

3.

Inventory

Inventory consists of the following as of:

 

 

June 30,

 

 

December 31,

 

 

 

2011

 

 

2010

 

Raw Materials and packaging

 

$

68,007

 

 

$

19,589

 

Finished Goods

 

 

150,546

 

 

 

58,529

 

 

 

$

218,533

 

 

$

78,118

 

 

4.

Fixed Assets

Fixed assets are comprised of the following as of:

 

 

June 30,

 

 

December 31,

 

 

 

2011

 

 

2010

 

Machinery and equipment

 

$

172,726

 

 

$

114,726

 

Accumulated depreciation

 

 

(78,823

)

 

 

(66,812

)

 

 

$

93,903

 

 

$

47,914

 

 

5.

Line of Credit

The Company entered into a Asset Based Loan Agreement with Commerce Bank & Trust Company (the "Loan Agreement") on May 31,2011, subject to closing the Cherrybrook acquisition. The Loan Agreement provides for a $200,000 secured revolving facility secured by accounts receivable and inventory. The borrowing was used to repay all amounts outstanding under the Cherrybrook's prior loan agreement; future borrowings may be used to provide working capital, finance capital expenditures and permitted acquisitions and refinance certain existing indebtedness. The obligations under the Loan Agreement are guaranteed by all existing and future assets of the Company, subject to certain exceptions. The Loan Agreement will terminate and all amounts outstanding will be due and payable on May 31, 2013. The Loan Agreement provides that loans will bear interest at rates based on the Wall Street Journal Prime Rate, plus 1.00% per annum, current rate is 4.75%.

As consideration for acquisition of Cherrybrook, the Company issued a promissory 24 month term note to Cherrybrook in the amount of $562,694 for the repayment of certain Cherrybrook debt obligations outstanding but not directly assumed. The current balance of the note is $508,694. The note has variable interest rate to match the underlining Cherrybrook obligations currently at 4.3% and the note matures May, 31 2013.

The Company has a line of credit with Physicians Capital Corporation, which is owned by Dan Ratner (President, Chief Executive Officer and Director of the Company) and Donna Ratner (Secretary and Director of the Company), the Company's co-founders and majority shareholders. As of December 31, 2010 and June 30, 2011, the outstanding principal balance of the line of credit was $122,347 and $174,328, including accrued interest of $2,120 and $8,796 respectively. Interest accrued for the year periods ended December 31, 2010 and June 30, 2011 was $81,733 and $6,676 respectively. Interest is accrued monthly on the average outstanding balance for the quarter pro-rated at the rate of 8% annually. The line of credit is in good standing and is due December 31, 2012.

9


6.

Stockholders Equity

Preferred Stock

On May 31, 2011, the Company issued 5,000 shares of unregistered Series A Preferred to Cherrybrook Kitchen, LLC as consideration for the acquisition of assets. (See Note 2 above for a more detailed description.)

Common Stock

On May 31, 2011, the Company issued 3,000,000 share of unregistered common stock subject to 144 restrictions to Cherrybrook Kitchen, LLC as consideration for the acquisition of assets.

During the three months ended June 30, 2011, the Company issued 200,000 shares of registered common stock for raw materials purchased and in the future the amount collected from the sale of stock will offset outstanding accounts payable to determine final application of payment and disposition at future market price. Do to uncertainty, we booked the issuance of common stock at par value and will make final adjusting entries in the future period final when offset occurs.

7.

Stock Based Compensation

Stock Options: As of June 30, 2011, no options have been issued.

8.

Related Party Transactions

The Company has a line of credit with Physicians Capital Corporation, which is owned by Dan Ratner (President, Chief Executive Officer and Director of the Company) and Donna Ratner (Secretary and Director of the Company), the Company's co-founders and majority shareholders. As of December 31, 2010 and June 30, 2011, the outstanding principal balance of the line of credit was $122,347 and $174,328, including accrued interest of $2,120 and $8,796 respectively. Interest accrued for the year periods ended December 31, 2010 and June 30, 2011 was $81,733 and $6,676 respectively. Interest is accrued monthly on the average outstanding balance for the quarter pro-rated at the rate of 8% annually. The line of credit is in good standing and is due December 31, 2012.

The Company uses shared office space owned by Dan Ratner and Donna Ratner, which is accounted for at fair market value in the Company's financial statements. Our financial statements reflect stand-alone office space expense, if the Company went out and rented stand-alone space, management estimates the rental could be valued at $6,000 and $0 respectively, for the year ending December 31, 2010, six months ending June 30, 2011. The Company did not remunerate Dan Ratner and Donna Ratner for the use of the office space in the form of cash payments for the stand-alone fair value of the office space, however, non-cash office space consideration was expensed and the officers contributed non-cash consideration to additional paid-in capital.

Our financial statements reflect non-cash officer's compensation expense which the officers contributed to the Company as additional paid-in capital since the officers have elected to forgo their compensation valued at $80,000 and $0 respectively, for their positions for the year ending December 31, 2010, and six months ending June 30, 2011. The Company does not remunerate the officers in the form of other method of compensation for the fair value of the services rendered.

9.

Subsequent Events

The Company has evaluated subsequent events through and from the June 30, 2011 financial statements which were issued on August 11, 2011. No events have occurred prior to August 11, 2011 that requires disclosure or recognition in these financial statements.

10


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this report. This discussion and analysis may contain forward-looking statements based on assumptions about our future business.

Results of Operations

The following table sets forth key statistics for the three and six months ended June 30, 2011 and 2010, respectively.

    Unaudited   Percentage   Unaudited   Percentage
    Three months ended June 30,   Change   Six months ended June 30,   Change
  2011   2010   11 vs. 10   2011   2010   11 vs. 10
                         
Sales, net $ 379,428 $ 164,613   57% $ 486,167 $ 292,194   40%
Cost of sales   192,830   84,578   56%   234,084   151,573   35%
Gross profit   186,598   80,035   57%   252,083   140,621   44%
    49%   49%       52%   48%    
Expenses                        
     Selling   88,391   58,396   34%   133,928   118,805   11%
     General and administrative   67,608   81,266   -20%   108,986   152,732   -40%
     Research and development   467   335   28%   1,036   965   7%
     Depreciation and Amortization   15,167   5,736   62%   23,255   11,372   51%
Total expenses   171,633   145,733   15%   267,205   283,874   -6%
Loss from operations   14,965   (65,698)   539%   (15,122)   (143,253)   -847%
Interest expense   1,628   28,222   -1634%   9,254   55,176   -496%
Net Income (Loss) $ 13,337 $ (93,920)   804% $ (24,376) $ (198,429)   -714%
Net Income (Loss) per common share $ 0.00 $ (0.02)   1508% $ (0.00) $ (0.04)   -1528%
Weighted average shares outstanding   10,030,410   5,015,000   50%   10,030,410   5,015,000   50%

Net Sales

Three months ended June 30, 2011 Compared to Three months ended June 30, 2010

Sales of $379,428 and $164,613 for the three months ended June 30, 2011 and June 30, 2010 respectively represented an increase of 57% or $214,815. The increase in revenues is primarily due to an acquisition of Cherrybrook in the second quarter of 2011. We see same store sales growth of our products steady in the second quarter as compared to the same period in 2010.

Six months ended June 30, 2011 Compared to Six months ended June 30, 2010

Sales of $486,167 and $292,194 for the six months ended June 30, 2011 and June 30, 2010 respectively represented a decrease of 40% or $193,973. The increase in revenues is primarily due to an acquisition of Cherrybrook in the second quarter of 2011. We see same store sales growth of our products steady in the second quarter as compared to the same period in 2010.

Cost of Goods Sold

Three months ended June 30, 2011 Compared to Three months ended June 30, 2010

Cost of goods sold consists primarily of the costs of our ingredients, packaging, production and freight. Our cost of goods sold of $192,830 for the three months ended June 30, 2011 represents an increase of 56% or $108,252, as compared to the prior year cost of goods sold during same period in the amount of $84,578 which is a direct result of the Cherrybrook acquisition. Cost of goods sold, on a per unit basis, remained at approximately the same levels as in 2011 in the 48% - 51% range which take into account slight variations in certain raw material and freight cost of ingredient costs. Overall, we have not experienced significant increases in raw material and packaging costs in 2011, while we are continuing to negotiate reductions and find lower-cost sources wherever possible. The high quality of our natural ingredients is of primary concern, as we constantly seek good sources. We are seeing a short term increase cost of goods sold from the new acquisition, but expect it to normalize throughout the year.

11


Six months ended June 30, 2011 Compared to Six months ended June 30, 2010

Cost of goods sold consists primarily of the costs of our ingredients, packaging, production and freight. Our cost of goods sold of $234,084 for the six months ended June 30, 2011 represents an increase of 35% or 82,511, as compared to the prior year cost of goods sold during same period amount of in the $151,573. Cost of goods sold, on a per unit basis, remained at approximately the same levels as in 2011 in the 48% - 51% range which take into account slight variations in certain raw material and freight cost of ingredient costs.

Gross Profit

Three months ended June 30, 2011 Compared to Three months ended June 30, 2010

Our gross profit increased to $186,598 in the three months ended June 30, 2011, from $84,035 during the same period in 2010, an increase of $106,563 or 57%. The gross profit as a percentage of sales is stable period over the period ranging from 49% in 2011 and 2010. We will see increases in weighted average cost of goods sold as a result of the Cherrybrook's product lines mix, but expect gross profit to normalize throughout the year back.

Six months ended June 30, 2011 Compared to Six months ended June 30, 2010

Our gross profit increased to $252,083 in the six months ended June 30, 2011, from $140,621 during the same period in 2010, an increase of $111,462 or 44%. The gross profit as a percentage of sales is up to 52% in the six months ended June 30, 2011 as compared to 48% in the same period of 2010. This gross profit margin change is primarily due to recent acquisition and historical costs of raw material and freight prices in 2010. We will see increases in weighted average cost of goods sold as a result of the Cherrybrook's product lines mix, but expect gross profit to normalize throughout the year back.

Selling and marketing expenses

Three months ended June 30, 2011 Compared to Three months ended June 30, 2010

Selling and marketing expenses consist primarily of direct charges for staff compensation costs, advertising, sales promotion, marketing and trade shows. Selling and marketing costs increased to $88,391 in the three months ended June 30, 2011 from $58,396 during the same period in 2010, a net increase of $29,995 or 34%. Increases in distributor and in-store promotions associated with the Cherrybrook acquisition.

Six months ended June 30, 2011 Compared to Six months ended June 30, 2010

Selling and marketing expenses consist primarily of direct charges for staff compensation costs, advertising, sales promotion, marketing and trade shows. Selling and marketing costs increased to $133,928 in the six months ended June 30, 2011 from $118,805 during the same period in 2010, a net increase of $15,123 or 11%. Increase in distributor and in-store promotions associated with the Cherrybrook acquisition.

The focus of our sales efforts is primarily on increasing product placement in significant grocery chains nationwide. The trend in grocery stores is to offer more natural products. Our sales force is leveraging our strong position in natural food grocery stores throughout the nation, to establish new relationships with mainstream grocery stores.

General and Administrative Expenses

Three months ended June 30, 2011 Compared to Three months ended June 30, 2010

General and administrative expense consists primarily of the cost of executive, administrative, and finance personnel, as well as professional fees. General and administrative expenses decreased to $67,608 during the three months ended June 30, 2011 from $81,266 in the same period of 2010, a net decrease of $(13,658) or (20%). The overall decrease in 2011 is primarily due to reductions in non-cash officer's compensation, non-cash office rent, cash professional fees expense, insurance costs and consolidation of operations.

Six months ended June 30, 2011 Compared to Six months ended June 30, 2010

General and administrative expense consists primarily of the cost of executive, administrative, and finance personnel, as well as professional fees. General and administrative expenses decreased to $108,986 during the six months ended June 30, 2011 from $152,732 in the same period of 2010, a net decrease of $(43,746) or (40%). The overall decrease in 2011 is primarily due to reductions in non-cash officer's compensation, non-cash office rent, cash professional fees expense, insurance costs and consolidation of operations.

With the Cherrybrook acquisition, we increase staffing levels. We believe that our existing executive and administrative staffing levels are sufficient to allow for moderate growth without the need to add personnel and related costs for the foreseeable future.

Profit (Loss) from Operations

Three months ended June 30, 2011 Compared to Three months ended June 30, 2010

Our profit from operations increased to $14,965 in the three months ended June 30, 2011 from a loss of $(65,698) in the same period of 2010. The increase is a direct result of decreased spending described above and consolidation of expenses related to Cherrybrook acquisition.

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Six months ended June 30, 2011 Compared to Six months ended June 30, 2010

Our loss from operations decreased to $(15,122) in the six months ended June 30, 2011 from $(143,253) in the same period of 2010. The increase is a direct result of decreased spending described above and consolidation of expenses related to Cherrybrook acquisition.

Interest Expense

Three months ended June 30, 2011 Compared to Three months ended June 30, 2010

Interest expense decreased to $1,628 in the three months ended June 30, 2011, compared to interest expense of $28,222 in the same period of 2010. The decrease is due to the reduction of long-term debt, as a result of our capitalizing shareholder Physicians Capital Corporation loans obligation into preferred equity; and reductions of borrowing under a line of credit agreement.

Six months ended June 30, 2011 Compared to Six months ended June 30, 2010

Interest expense decreased to $9,255 in the six months ended June 30, 2011, compared to interest expense of $55,175 in the same period of 2010. The decrease is due to the reduction of long-term debt, as a result of our capitalizing shareholder Physicians Capital Corporation loans obligation into preferred equity; and reductions of borrowing under a line of credit agreement.

Net Income (Loss)

Three months ended June 30, 2011 Compared to Three months ended June 30, 2010

Our Net Income (Loss) increased to $13,337 in the three months ended June 30, 2010 from a loss of $(93,920) in the same period of 2010. The improvement is a direct result of increased sales, along with the cost reductions described above. Earnings per share also improved in the three months ended June 30, 2011 to a positive of $.001 per share from a loss of $(.02) per share in the same period of 2010.

Six months ended June 30, 2011 Compared to Six months ended June 30, 2010

Our Net Loss decreased to $(24,376) in the six months ended June 30, 2011 from a loss of $(198,429) in the same period of 2010. The improvement is a direct result of increased sales, along with the cost reductions described above. Earnings per share also improved in the six months ended June 30, 2011 from loss of $(.002) from a loss of $(.04) in the same period of 2009.

Liquidity and Capital Resources

As of June 30, 2011, we had stockholders equity of $814,763 and working capital of $123,350, compared to stockholders equity of ($1,388,651) and working capital of ($1,448,138) at June 30, 2010. Cash and cash equivalents were $49,060 as of June 30, 2011, as compared to $34,877 at June 30, 2010. This increase in our working capital was primarily a result of decreased borrowings which are classified as short term debt and recapitalized as preferred stock. In addition to our cash position on June 30, 2011, we had availability the ability to draw funds under both our lines of credit. Our change in cash and cash equivalents was primarily a result of the collection of accounts receivable.

We believe that the Company has sufficient working capital to support existing operations through 2011. Our primary capital source will be cash flow from operations in 2011. If our sales goals do not materialize as planned, we believe that the Company can become leaner and our costs can be managed to produce profitable operations. We have plan a equity and debt offerings in 2011 - 2012, which we hope to finance our operations growth primarily through private sales of common stock, preferred stock, convertible debt, a line of credit from a financial institution, and cash generated from operations.

Net cash provided (used in) operations during second quarter 2011 was $56,480 compared with $(109,982) used in operations during the same period in 2010. The increase in cash provided (used in) operations during second quarter 2011 was primarily due to the buildup of accounts payable and increased debt from the Cherrybrook acquisition.

Changes in net cash used in investing activities of $(1,658,509) during second quarter 2011 compared with $0 during 2010 was a result in the acquisition of assets and new operations.

Net cash provided by financing activities of $1,606,796 during second quarter of 2011 comparesd with $137,235 during the same period 2010 was primarily due to increase in proceeds of additional paid in capital proceeds from the purchase of assets and shareholder loans to fund operations.

We believe that our current cash position and current line of credit availability will be limited but meet our cash needs throughout 2011.

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Off Balance Sheet Arrangements

At June 30, 2011, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K that have had or are likely to have a material current or future effect on our financial statements.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States. The accounting principles we use require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and amounts of income and expenses during the reporting periods presented. We believe in the quality and reasonableness of our critical accounting policies; however, it is likely that materially different amounts would be reported under different conditions or using assumptions different from those that we have applied. The accounting policies that have been identified as critical to our business operations and understanding the results of our operations pertain to revenue recognition and sales incentives, valuation of accounts and chargebacks receivable, inventories, property, plant and equipment, accounting for acquisitions, stock based compensation, segments and goodwill and intangible assets. The application of each of these critical accounting policies and estimates was discussed in our Annual Report on Form 10-K for the year ended December 31, 2010.

Seasonality

We primarily market cold beverage products, and as a result, quarterly results of operations reflect seasonal trends resulting from increased demand for our cold products in the warmer months of the year. Quarterly fluctuations in our sales volume and operating results are due to a number of factors relating to our business, including the timing of trade promotions, advertising and consumer promotions and other factors, such as seasonality, inclement weather and unanticipated increases in labor, commodity, energy, insurance or other operating costs. The impact on sales volume and operating results due to the timing and extent of these factors can significantly impact our business. For these reasons, you should not rely on our quarterly operating results as indications of future performance.

Inflation

Inflation may cause increased ingredient, fuel, labor and benefits costs. For more information regarding ingredient costs, see the Company's Annual Report on Form 10-K for the year ended December 31, 2010. To the extent permitted by competition, we seek to recover increased costs through a combination of price increases, new product innovation and by implementing process efficiencies and cost reductions.

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Note Regarding Forward Looking Information

Certain statements contained in this Quarterly Report constitute "forward-looking statements" within the meaning of Rule 3b-6 of the Securities Exchange Act of 1934. These forward-looking statements include the following: (i) our intentions for growth through acquisitions as well as internal expansion; (ii) our beliefs regarding the integration of our brands and the resulting impact thereof; (iii) our statements regarding the introduction of new products and the impact on our revenues and margins; (iv) our beliefs regarding the positioning of our business for the future; (v) our beliefs that we will continue to derive benefits from new products; (vi) our belief that our cash and cash equivalent investments have no significant exposure to interest rate risk; and (vii) our belief that our sources of liquidity are adequate to fund our anticipated operating and cash requirements for the next twelve months. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, levels of activity, performance or achievements of the Company, or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following:

our ability to achieve our guidance for sales and earnings per share in fiscal year 2011 given the economic environment in the U.S. and other markets that we sell products as well as economic and business conditions generally and their effect on our customers and consumers' product preferences, and our business, financial condition and results of operations;

our expectations for our business for fiscal year 2011 and its positioning for the future;

changes in estimates or judgments related to our impairment analysis of goodwill and other intangible assets;

our ability to realize sustainable growth generally and from investments in core brands, offering new products and our focus on cost containment, productivity, cash flow and margin enhancement in particular;

our ability to effectively integrate our acquisitions;

competition;

the success and cost of introducing new products as well as our ability to increase prices on existing products;

availability and retention of key personnel;

our reliance on third party distributors, manufacturers and suppliers;

our ability to maintain existing contracts and secure and integrate new customers;

our ability to respond to changes and trends in customer and consumer demand, preferences and consumption;

international sales and operations;

changes in our input costs, including ingredient, fuel and employee costs;

the effects on our results of operations from the impacts of foreign exchange;

changes in, or the failure to comply with, government regulations; and

other risks detailed from time-to-time in the Company's reports filed with the SEC, including the annual report on Form 10-K for the fiscal year ended December 31, 2010.

As a result of the foregoing and other factors, no assurance can be given as to the future results, levels of activity and achievements and neither the Company nor any person assumes responsibility for the accuracy and completeness of these statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

A smaller reporting company is not required to provide the information required by this Item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Securities and Exchange Act of 1934 Rules 13a-15(f) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2011.In designing and evaluating the disclosure controls and procedures, management recognizes that any controls system cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company are detected.

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Changes in Internal Control Over Financial Reporting

There have been no changes in the Company's internal control over financial reporting during the six months ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We are not subject to any legal proceedings, therefore no disclosure under this Item 1.

Item 1A. Risk Factors

A smaller reporting company is not required to provide the information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Preferred Stock

On May 31, 2011, the Company issued 5,000 shares of unregistered Series A Preferred to Cherrybrook Kitchen, LLC as consideration for the acquisition of assets. (See Note 2 above for a more detailed description.)

Common Stock

On May 31, 2011, the Company issued 3,000,000 share of unregistered common stock subject to 144 restrictions to Cherrybrook Kitchen, LLC as consideration for the acquisition of assets.

Item 3. Defaults Upon Senior Securities

None

Item 4. [REMOVED AND RESERVED]

Item 5. Other Information

None

Item 6. Exhibits

Exhibit No.

Description

31.1*

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2*

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32.1*

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

32.2*

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

99.1

Unaudited Condensed Consolidated Financial Statements for Cherrybrook Kitchen, LLC

99.2

Unaudited Pro Forma Condensed Consolidated Financial Statements Cell-nique and Cherrybrook Kitchen

101**

The following materials from the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Stockholders' Equity, (iv) the Condensed Consolidated Statements of Cash Flows and (v) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

* Filed herewith

** Users of this data are advised that pursuant to Rule 406T of Regulation S-T, this XBRL information is being furnished and not filed herewith for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and Sections 11 or 12 of the Securities Act of 1933, as amended, and is not to be incorporated by reference into any filing, or part of any registration statement or prospectus, of Cell-nique Corporation, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Cell-nique Corporation
(Registrant)

 

Date:   August 11, 2011

/s/ Dan Ratner

 

Dan Ratner

 

President and Chief Executive Officer

 

(Principal Executive Officer)

 

 

Date:   August 11, 2011

/s/ Dan Ratner

 

Dan Ratner
Chief Financial Officer
(Principal Financial Officer)

17