1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
Nature of Business
Ceres Ventures, Inc. (“Ceres
Ventures”, “the Company”), together with
its wholly owned subsidiaries, BluFlow Technologies, Inc.
(“BluFlow”) and Nascent Water Technologies Inc.
(“Nascent”), is focused on the research, development,
and eventual commercialization of emerging next-generation clean
technologies for the remediation of polluted water, soil, and air
in an environmentally friendly and cost effective manner.
Ceres Ventures, formerly known as PhytoMedical Technologies, Inc.,
was incorporated in the State of Nevada on July 25, 2001 under the
name Enterprise Technologies, Inc. BluFlow was incorporated on
October 14, 2010 under the laws of the State of Delaware. Nascent
was incorporated on October 10, 2010 under the laws of the State of
BluFlow Reverse Split
On June 10, 2010, BluFlow implemented a one-for-ten reverse share
split. The par value and total number of authorized shares were
unaffected by the reverse stock split. All share and per share
amounts in these financial statements and notes thereto have been
retrospectively adjusted to all periods presented to give effect to
the reverse stock split.
Ceres Ventures Name Change and Reverse Split
On November 21, 2011, PhytoMedical
Technologies, Inc. changed its name to Ceres Ventures, Inc. and
implemented a one-for-fifty reverse share consolidation. The
par value and total number of authorized shares were unaffected by
the reverse stock split. All shares and per share amounts in these
financial statements and notes thereto have been retrospectively
adjusted to all periods presented to give effect to the reverse
stock split. The Reverse Split was declared effective by the
Financial Industry Regulatory Authority (“FINRA”) on
December 12, 2011.
On December 29, 2011, Ceres Ventures, a public shell company, and
BluFlow entered into an agreement and plan of merger (the
“Merger Agreement”) pursuant to which BluFlow became a
wholly-owned subsidiary of Ceres Ventures as more fully described
in Note 2. The Merger is being accounted for as a reverse-merger
and recapitalization and BluFlow is considered the acquirer for
accounting purposes and Ceres Ventures the acquired company. The
business of BluFlow became the business of Ceres Ventures.
Significant Accounting Policies
Basis of Presentation
These consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States of America (“GAAP”) and pursuant to the
rules and regulations of the Securities and Exchange Commission
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries after
elimination of all material intercompany accounts, transactions,
and profits. The consolidated financial
statements include the accounts of Ceres Ventures as of the date of
the reverse merger, and its wholly owned subsidiaries, BluFlow and
The Company is a development stage
company, and does not currently have any commercial products
and there is no assurance that it will successfully be able to
design, develop, manufacture, or sell any commercial products in
the future. The Company has not
generated any revenue since inception. The Company has an
accumulated deficit of $622,456 as of December 31, 2011, and does
not have positive cash flows from operating activities.
As of December 31, 2011, the Company had
cash of $113,937.
The Company will remain engaged in research and product development
activities at least through December 31, 2012. Based upon its
current and near term anticipated level of operations and
expenditures, the Company believes that, absent any modification or
expansion of its existing research, development and testing
activities, cash on hand should be sufficient to enable it to
continue operations through June 30, 2012.
Currently, the Company is seeking
additional financing but has no commitments to obtain any such
financing, and there can be no assurance that financing will be
available in amounts or on terms acceptable to the Company, if at
all. If adequate funds are not available on reasonable terms or at
all, it would result in a material adverse effect on the
Company’s business, operating results, financial condition
and prospects. In particular, the Company may be required to delay,
reduce the scope of or terminate its research programs, sell rights
to its BluFlow™ Treatment Systems, BluFlow™
Nanoparticles or BluFlow™ AUT.
In view of these conditions, the ability of the Company to continue
as a going concern is in substantial doubt and dependent upon
achieving a profitable level of operations and on the ability of
the Company to obtain necessary financing to fund ongoing
operations. These consolidated financial statements do not give
effect to any adjustments which will be necessary should the
Company be unable to continue as a going concern and therefore be
required to realize its assets and discharge its liabilities in
other than the normal course of business and at amounts different
from those reflected in the accompanying consolidated financial
On December 29, 2011, Ceres Ventures entered into an agreement and
plan of merger with its newly organized wholly-owned subsidiary,
Ceres Ventures Acquisition Corp. (“CVA”), a Delaware
corporation, and BluFlow. Pursuant to the merger agreement CVA
merged with and into BluFlow, with BluFlow remaining as the
surviving corporation and a wholly-owned subsidiary of the Company
(the “Reverse Merger”). The former stockholders of
BluFlow received shares of the Company that constituted a majority
of the outstanding shares.
The Reverse Merger has been accounted for as a reverse acquisition
under which BluFlow was considered the acquirer of Ceres Ventures.
As such, the financial statements of BluFlow are treated as the
historical financial statements of the combined company, with the
results of Ceres Ventures being included from December 29,
As a result of the Reverse Merger with Ceres Ventures, historical
common stock amounts and additional paid in capital have been
retroactively adjusted. See Note 2 for additional discussion of the
Reverse Merger and the conversion ratio.
Development Stage Company
The Company is a development stage company. The Company is still
devoting substantially all of its efforts on establishing the
business and its planned principal operations have not commenced.
All losses accumulated since inception have been considered as part
of the Company’s development stage activities.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements as well as the reported amount of revenues and expenses
during the reporting period.
The Company’s significant estimates and assumptions include
the fair value of financial instruments; the carrying value,
recoverability and impairment, if any, of long-lived assets,
including the values assigned to and the estimated useful lives of
intangible assets; income tax rate, income tax provision, deferred
tax assets and the valuation allowance of deferred tax assets; and
the assumption that the Company is a going concern. Those
significant accounting estimates or assumptions bear the risk of
change due to the fact that there are uncertainties attached to
those estimates or assumptions, and certain estimates or
assumptions are difficult to measure or value.
Management bases its estimates on experience and on various
assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources.
Management regularly reviews its estimates utilizing currently
available information, changes in facts and circumstances, their
experience and reasonable assumptions. After such reviews, and if
deemed appropriate, those estimates are adjusted accordingly.
Actual results could differ from these estimates.
The Company measures fair value as the price that would be received
to sell an asset or paid to transfer a liability (an exit price) in
an orderly transaction between market participants at the reporting
date. The Company utilizes a three-tier hierarchy, which
prioritizes the inputs used in the valuation methodologies in
measuring fair value:
Level 1. Valuations based on quoted prices in active markets for
identical assets or liabilities. The Company has no assets or
liabilities valued with Level 1 inputs.
Level 2. Valuations based on quoted prices for similar assets or
liabilities, quoted prices for identical assets or liabilities in
markets that are not active, or other inputs that are observable or
can be corroborated by observable data for substantially the full
term of the assets or liabilities. The Company has no assets or
liabilities valued with Level 2 inputs.
Level 3. Valuations based on inputs that are supported by little or
no market activity and that are significant to the fair value of
the assets or liabilities. The Company has no assets or liabilities
valued with Level 3 inputs.
Value of Financial Instruments
The carrying value of cash, accounts payable, accrued interest,
accrued payroll liabilities, and notes payable approximate their
fair value because of the short-term nature of these instruments
and their liquidity. Management is of the opinion that the Company
is not exposed to significant interest or credit risks arising from
these financial instruments.
The Company considers all highly liquid investments with maturities
of three months or less at the time of purchase to be cash
equivalents. As of December 31, 2011 and 2010, the Company had no
Intangible assets include license agreements and related patent
costs. The Company has entered into a license agreement whereby it
has been assigned the exclusive rights to certain licensed
materials used in its products. The Company capitalizes the rights
to the licensed materials and amortizes such costs over their
estimated useful life which is consistent with the life of the
patents underlying the license agreements.
As of December 31, 2011, the Company had $51,054 of intangible
assets on the Consolidated Balance Sheet representing the costs for
a license agreement and patent usage rights. These costs were not
subject to amortization as the patents are pending.
Impairment of Long-Lived Assets
Intangible assets are evaluated and
reviewed for impairment annually or more frequently
whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. The Company recognizes impairment of long-lived assets
in the event the carrying amount exceeds the fair value of
the assets. An impairment loss is recognized equal to the amount to
that excess. Such analyses necessarily
involve significant judgment.
The Company determined there was no impairment of long-lived assets
for the year ended December 31, 2011 and the period from October
14, 2010 (inception) to December 31, 2010.
Research and Development Costs
Research and development costs are charged to expense when
incurred. Research and development includes costs such as
contracted research and license agreement fees with no alternative
future use, supplies and materials, salaries and employee benefits,
equipment depreciation and allocation of various corporate costs,
and amortization of intangible assets.
The Company measures all employee stock-based compensation awards
using a fair value method on the date of grant and recognizes such
expense in its consolidated financial statements over the requisite
service period. The Company uses the Black-Scholes pricing model to
determine the fair value of stock-based compensation awards on the
date of grant. The Black-Scholes pricing model requires management
to make assumptions regarding option lives, expected volatility,
and risk free interest rates.
Loss Per Share
The computation of basic net income (loss) per common share is
based on the weighted average number of shares that were
outstanding during the year. The computation of diluted net income
(loss) per common share is based on the weighted average number of
shares used in the basic net income (loss) per share calculation
plus the number of common shares that would be issued assuming the
exercise of all potentially dilutive common shares outstanding
using the treasury stock method. See “Note 3. Loss Per
Share” for further discussion.
Income taxes are accounted for using an asset and liability
approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that
have been recognized in our financial statements or tax returns. A
valuation allowance is established to reduce deferred tax assets if
all, or some portion, of such assets will more than likely not be
realized. Should they occur, our policy is to classify interest and
penalties related to tax positions as interest expense. Since our
inception, no such interest or penalties have been incurred.
The Company recognizes income taxes on an accrual basis based on
tax positions taken or expected to be taken in our tax returns. A
tax position is defined as a position in a previously filed tax
return or a position expected to be taken in a future tax filing
that is reflected in measuring current or deferred income tax
assets and liabilities. Tax positions are recognized only when it
is more likely than not (i.e., likelihood of greater than 50%),
based on technical merits, that the position would be sustained
upon examination by taxing authorities. Tax positions that meet the
more likely than not threshold are measured using a
probability-weighted approach as the largest amount of tax benefit
that is greater than 50% likely of being realized upon
Recently Issued and Adopted Accounting Pronouncements
The Company reviews new accounting standards as issued. Although
some of these accounting standards issued or effective after the
end of the Company’s previous fiscal year may be applicable
to the Company, it has not identified any standards that it
believes merit further discussion. The Company believes that none
of the new standards will have a significant impact on its
consolidated financial statements.