Attached files
file | filename |
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EX-3.1 - Cell-nique Corp | v164412_ex3-1.htm |
EX-3.3 - Cell-nique Corp | v164412_ex3-3.htm |
EX-5.1 - Cell-nique Corp | v164412_ex5-1.htm |
EX-3.2 - Cell-nique Corp | v164412_ex3-2.htm |
EX-23.3 - Cell-nique Corp | v164412_ex23-3.htm |
EX-23.1 - Cell-nique Corp | v164412_ex23-1.htm |
EX-10.1 - Cell-nique Corp | v164412_ex10-1.htm |
Registration
No. 333-161413
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1/A
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
AMENDMENT NO.
2
Cell-nique
Corporation
(Exact
name of small business issuer in its charter)
Delaware
|
2086
|
27-0693687
|
(State or jurisdiction of
incorporation or organization)
|
(Primary Standard Industrial
Classification Code Number)
|
(I.R.S. Employer
Identification Number)
|
12 Old Stage Coach Road, Weston, CT
06883, 888-417-9343
(Address
and telephone number of principal executive offices)
12 Old Stage Coach Road,
Weston, CT 06883
(Address
of principal place of business or intended principal place of
business)
Dan Ratner, 12 Old Stage
Coach Road, Weston, CT 06883, 888-417-9343
(Name,
Address and telephone number of agent for service)
COPIES
TO:
Miles
Garnett, Esq., 66 Wayne Avenue, Atlantic Beach, NY
11509 (516) 371-4598
Approximate
date of proposed sale to the public: As soon
as practicable after the effective date of this Registration
Statement.
If any of
the securities being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act, check the
following
box: þ
If this form is filed to register
additional securities for an offering pursuant to Rule 462(b) under the
Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. o
If this form is a post-effective
amendment filed pursuant to Rule 462(c) under the Securities Act, check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. o
If this form is a post-effective
amendment filed pursuant to Rule 462(d) under the Securities Act, check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same
offering. o
If delivery of the prospectus is
expected to be made pursuant to Rule 434, check the following box. o
________________
Large
accelerated filer o
|
Accelerated
filer o
|
|
|
Non-acclerated
filer
o
|
Smaller
reporting company þ
|
CALCULATION
OF REGISTRATION FEE
Common
Stock
|
6,000,000
|
$5.00
|
$30,000,000
|
$1,674
|
Title
of each Share
|
Proposed
maximum
|
Proposed
|
Maximum
|
Amount
of
|
class
of securities
|
amount
to be
|
offering
price
|
aggregate
offering
|
registration
fee
|
to
be registered
|
registered
|
per
Share
|
price
|
Note: Specific details
relating to the fee calculation shall be furnished in notes to the table,
including references to provisions of Rule 457 (§230.457 of this chapter) relied
upon, if the basis of the calculation is not otherwise evident from the
information presented in the table. If the filing fee is calculated pursuant to
Rule 457(o) under the Securities Act, only the title of the class of securities
to be registered, the proposed maximum aggregate offering price for that class
of securities and the amount of registration fee need to appear in the
Calculation of Registration Fee table. Any difference between the dollar amount
of securities registered for such offerings and the dollar amount of securities
sold may be carried forward on a future registration statement pursuant to Rule
429 under the Securities Act.
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Preliminary
PROSPECTUS
Cell-nique
Corporation
6,000,000 Shares of Common
Stock
This is
our initial public offering of common stock. The initial public offering price
is $5.00 per share. No public market currently exists for our common stock. We
are selling 6,000,000 shares of common stock which have $.00001 par value per
share. This represents 30% of the total outstanding shares based on the maximum
amount of the offering. The Company manufacturers Cell-nique, a Super Green
Drink, made of 31 Organic Super Foods. Prior to this offering there has been no
public market for the shares. The initial public offering price of the shares
has been arbitrarily determined by us and does not bear any relationship to such
established valuation criteria as assets, book value or prospective earnings. We
are a Delaware corporation.
We will
sell the shares ourselves. We do not plan to use underwriters or pay any
commissions. We will be selling our shares in a direct participation offering
and no one has agreed to buy any of our shares. The Offering will expire on
December 31, 2010, unless extended by the Company in its sole discretion for 60
days on or before December 31, 2010.
THE
SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The
offering price for the common stock has been arbitrarily determined by us. The
maximum subscription is 6,000,000 shares. Prior to this offering, there has been
no public market for the shares and there can be no assurance that a regular
trading market will develop for the shares after this offering or that, if
developed, any such market will be sustained. We anticipate that trading of the
shares will be conducted through what is customarily known as the
National Quotation Bureau's Over-The-Counter Electronic Bulletin Board (the
"Bulletin Board"). Any market for the shares which may result will likely be
less well developed than if the shares were traded on NASDAQ or on an exchange.
See "Risk Factors" and "The Offering."
Our
officers and directors may purchase the shares sold in the offering under the
same terms and conditions as the public investors. Such purchases, if made, will
be for investment purposes only and not for redistribution.
NO
MIMUMIM AMOUNT OF SECURITIES IS REQUIRED TO BE SOLD IN THE OFFERING, AND NO
ASSUANCE CAN BE PROVIDED AS TO THE AMOUNT OF SECURITIES THAT WILL BE SOLD, IF
ANY.
The
securities offered hereby are highly speculative and involve a high degree of
risk. See the caption "Risk Factors" commencing on page 10.
PER
SHARE |
TOTAL
MINIMUM
|
MAXIMUM
|
|||||||
Public
offering price
|
$ | 5.00 |
None
|
$ | 30,000,000 | ||||
Underwriting
discounts and commissions
|
None
|
None
|
None
|
||||||
Proceeds,
before expenses, to us2
|
$ | 5.00 |
None
|
$ | 30,000,000 |
(1) We
plan to offer and sale the shares directly to investors and have not retained
any underwriters, brokers or placement agents in connection with this offering.
However, we reserve the right to use brokers or placement agents and could pay
commissions equal to as much as 10 percent of the gross proceeds and 3%
non-accountable expenses.
(2)
Before deduction of offering expenses estimated to be $75,000 for the
maximum.
The
Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
——————
The
date of this Prospectus
is ,
2009
2
Table
of Contents
Summary
|
4
|
|
Risk
Factors
|
9
|
|
Use
of Proceeds
|
22
|
|
Plan
of Distribution
|
23
|
|
Capitalization
|
24
|
|
Dilution
|
24
|
|
Business
|
26
|
|
Management
Discussion of Analysis of Condition and Results of
Operations
|
32
|
|
Ownership
of Common Stock
|
40
|
|
Principal
Shareholders
|
40
|
|
Management
|
41
|
|
Certain
Transactions
|
43
|
|
Description
of Securities
|
44
|
|
Shares
Eligible for Future Sale
|
45
|
|
Available
Information
|
46
|
|
Dividend
Policy
|
47
|
|
Stock
Transfer Agent
|
47
|
|
Experts
|
47
|
|
Legal
Matters
|
47
|
|
Index
to Financial Statements
|
F-1
|
3
Summary
This
summary highlights selected information from elsewhere in this prospectus. It is
not complete and may not contain all of the information that is important to
you. To understand this offering fully, you should read the entire prospectus
carefully, including the risk factors and financial statements and the related
notes to those statements included in this prospectus.
The
Company
|
Our
corporate name is Cell-nique Corporation. We were originally formed in
2005 and subsequently incorporated in Delaware on August 7, 2008 by our
founder, Physicians Capital Corporation which is 100% controlled by Dan
and Donna Ratner. Cell-nique - Super Green Drink, was created
to capitalize on the market demand for natural and organic food,
beverages and
supplements, defined by Natural Food Merchandiser Magazine June 2009
issues as a $68 Billion market.
|
|
Our
principal executive offices are located at 12 Old Stage Coach Road,
Weston, CT 06883 and our telephone number is
888-417-9343.
|
||
Cell-nique
Corporation was conceptualized in 2005, began operations in 2006 as an
unincorporated division of Physicians Capital Corp using a d/b/a and was
incorporated in 2008 Company, recapitalized its books from inception as a
separate corporation. At this time, Physicians Capital
Corporation is the sole shareholder. The Company is engaged primarily
in the business of developing, manufacturing, marketing and sales of
natural and organic beverages. The Company currently offers
nine Cell-nique Organic Super Green Drinks (Apple, Topical, Pomegranate,
Citrus Vanilla, Japanese Roasted (Kukicha) Tea, Lemon Ginger, Berry Grape,
Root Beer and Dark Chocolate).
|
||
We
began production and distribution in 2006 and have limited operating
history. No representation is made or implied that we will be able to
carry on our activities profitably. Our growth is dependent initially upon
sufficient proceeds being realized by us from this offering, of which
there is no assurance. Proceeds of this offering may be insufficient to
enable us to grow into potentially profitable operations. The likelihood
of our success must be considered in light of the expenses, difficulties
and delays frequently encountered in connection with the formation of any
young business.
|
||
As
of December 31, 2007, 2008 and June 30th,
2009, Cell-nique Corporation generated revenue of 260,211, 524,485, and
255,458 with Gross Margin of 43%, 43%, and 49% and Net Income of
(344,498), (538,837), and (186,854) respectively with limited financial
resources. We may not be able to continue as a going concern. We have two
officers, two directors and two employees.
|
||
The
Offering
|
The
Company is offering a maximum 6,000,000 shares of Common Stock, $.00001
par value at an offering price of $5.00 per Share. The full subscription
price will be payable at the time of subscription and accordingly, funds
received from subscribers in this Offering will be released to the Company
when subscriptions are received and
accepted.
|
4
The
Offering will expire on December 31, 2010, unless extended by the Company
in its sole discretion for 60 days on or before December 31, 2010 See "The
Offering - Structure and Timing of the
Offering."
|
||
We
intend to use the net proceeds of this offering to market the services the
company currently offers and initiate new business development and
relationships including mergers and acquisitions of other natural and
organic food, beverages and supplements brands and companies. We shall
seek to employ qualified, but as yet unidentified, individuals to manage
such business. No assurance can be given that the net proceeds of the
maximum number of shares offered in this offering or any lesser net amount
will be sufficient to accomplish our goals. In the event that
substantially less than the net proceeds from the maximum offering are
raised, our plans may be materially and adversely affected in that we may
find it even more difficult, if not impossible, to realize our goals See
"Risk Factors", "Use of Proceeds" and "Proposed
Business."
|
||
If
proceeds from this offering are insufficient, we may be required to seek
additional capital. No assurance can be given that we will be able to
obtain such additional capital, or even if available, that such additional
capital will be available on terms acceptable to us.
|
||
Business
|
We
manufacture, distribute and manage the
Cell-nique ®
brand which is an organic vegetable-based ready-to-drink "Super Green
Drink", formulated with 31 organic super foods. The product is USDA
certified organic. It is free of preservatives, artificial flavors and
coloring.
|
|
We
sell our products in natural food stores, specialty gourmet, supermarket
chains, retail stores, yoga studios and gyms, doctor’s offices and
direct on the internet. We primarily sell our products through a
network of natural, gourmet and independent food and beverage
distributors, as well as directly to consumers.
|
||
The
natural and organic food, beverage and supplement industry is
approximately $68 Billion in annual sales, yet it is fragmented and
inefficient with many small business with annual sales of less than $5
million. We see the opportunity to acquire and merge other natural and
organic brands under Cell-nique Corporation to reduce the duplication of
sales staff and back-office operations.
|
||
Competition
|
The
natural and organic food industry has many competing brands and consumers
have many options. There are a number of healthy, "green drinks" in the
marketplace (all others are fruit juice smoothie based and high calorie
from fructose sugars). Cell-nique maintains a unique standing in the
marketplace due to being the only organic ready-to-drink "Super Green
Drink" that is vegetable based.
|
|
Current
Financial Resources
|
We
have limited operating history. For the current fiscal year, we anticipate
incurring a loss as a result of operations, organizational expenses,
expenses associated with registration under the Securities Exchange Act of
1934, and other
expenses.
|
5
Dependence
on
|
||
Additional
Financing
|
The
rate of growth of the Company is somewhat dependent upon the successful
completion of this Offering to expand its proposed plan of
operation, and the Company may need additional financing to fund its
corporate activities. Such financing may come from a variety of sources,
including additional equity or debt offerings. No assurance can
be given that any future financing, either equity or debt, will be
available or, if available, that it can be obtained on terms acceptable to
the Company. If such financing is required but is not available, the
Company may be forced to significantly restrict, curtail or abandon its
activities. This would have an adverse effect on the Company's business
and financial condition. There can also be no assurance that the Company
will survive as a viable commercial enterprise even if such additional
financing is obtained. The issuance of any additional equity
after the consummation of this Offering will dilute the ownership
interests of the shareholders who purchase Shares in this Offering. See
"Proposed Additional Transactions" and "Risk Factors -
Dilution."
|
|
We
believe that our existing working capital lines with Physicians Capital
Corporation will be sufficient to meet our minimum cash needs at the
present operating level, including the costs of compliance with the
continuing reporting requirements of the Securities Exchange Act of 1934,
as amended, for a period of approximately one year. We believe substantial
growth would be limited if additional funding is not
obtained.
|
||
No
commitments to provide additional funds have been made by management or
other stockholders. Accordingly, there can be no assurance that any
additional funds will be available to us to allow it to cover our
expenses.
|
||
Irrespective
of whether our cash assets prove to be inadequate to meet our operational
needs, we might seek to compensate providers of services by issuances of
stock in lieu of cash.
|
||
Risk
Profile
|
An
investment in the Shares involves significant risks and is suitable only
for persons of substantial financial means who have no need for liquidity
from such investment. See "Risk Factors".
|
|
In
addition to the other information in this prospectus, the following risk
factors should be carefully considered in evaluating the Company and its
business before purchasing the Shares offered herein. An investment in the
Shares offered herein is speculative in nature and involves a high degree
of risk. No investment in the Shares should be made by any person who is
not in a position to lose the entire amount of the
investment.
|
||
Management
|
The
Company’s CEO is Dan Ratner, who has been our Co-Founder, President
and Chairman of the board of directors since our conception in 2005 and
operational formation in 2006. Mr. Ratner has served as our
Chairman, President, Chief Executive Officer and Chief Financial Officer
since our incorporation in 2008. Mr. Ratner has been
responsible for our products, including the original product recipes, the
proprietary manufacturing process and packaging, as well as defining the
merger and acquisition strategies. Mr. Ratner received a double major B.S.
in Accounting and Finance in 1985 from University of Arizona,
Tucson.
|
6
Donna
Ratner is our
Co-Founder, who has been our Vice-Chairman and Chief Marketing
Officer since October 2007 and manages the Companies marketing
efforts.
|
||
Authorized and Outstanding
|
||
Shares Stock
|
Common Stock
|
Preferred Stock
|
|||||||
Authorized:
|
49,000,000 | 1,000,000 | ||||||
$.00001
par value
|
$2.00
stated value
|
|||||||
Outstanding:
|
||||||||
Prior
to Offering:
|
14,000,000 | 0 | ||||||
After
50% of Offering is sold
|
17,000,000 | 0 | ||||||
After
Maximum Offering is sold
|
20,000,000 | 0 |
Plan
of Distribution
|
This
is a direct participation, and with no commitment by anyone to purchase
any shares. None of the officers and directors (a) is subject to a
statutory disqualification (as defined in Sec. 3(a)(35), (b) is paid
commissions or other remuneration for securities transactions, or (c) is
an associated person of a broker or dealer. The shares will be offered and
sold on a "best efforts" basis by our principal executive officers and
directors. We will amend the registration statement of which this
Prospectus is a part following its effectiveness to identify a selected
broker-dealer at such time as such broker-dealer sells shares offered in
this offering. All proceeds from subscriptions to purchase shares will be
transmitted by us and any participating dealer to the escrow account by
noon of the next business day after receipt. The shares are offered by us
on a "best efforts" 6,000,000 Share maximum, basis.
If
Cell-nique has not entered into any agreement with another party to offer
and sell its securities.
The
Offering will expire on December 31, 2010, unless extended by the Company
in its sole discretion for 60 days on or before December 31,
2010.
|
|
Use
of Proceeds
|
We
have stated that an allowance of $75,000 has been made to cover any
offering expense. Assuming that the entire offering will be
sold, then up to $75,000 of amounts raise will be used to pay the
expenses of the offering. We intend to apply substantially all of the net
proceeds of this offering to operate the Company as well as for merger and
acquisitions. See "Use of Proceeds," "Proposed Business" and "Certain
Transactions."
|
|
Risk
Factors
|
The
shares offered hereby involve a high degree of risk and immediate
substantial dilution and should not be purchased by investors who cannot
afford the loss of their entire investment. Such risks include, among
others: our short period of existence and limited resources; and the
discretionary use of proceeds. See "Risk Factors," "Dilution" and "Use of
Proceeds."
|
7
Material
Persons
|
Our
officers, directors and major shareholders are the only persons who have
been instrumental in arranging our capitalization to date. Neither of our
officers or directors are acting as nominee for any persons or is
otherwise under the control of any person or persons. There are no
agreements, agreements in principle, or understandings with regard to
compensation to be paid by us to any of our officers or
directors.
|
|
It
is anticipated we may make sales of shares to officers and directors and
that such persons may purchase the shares offered hereby. Such purchases
shall be made for investment purposes only and in a manner consistent with
a public offering of our shares. Thus the officers and directors
could purchase up to 100% of the offering amount. Such purchases
will increase the equity interests already owned by the officers and
directors.
|
||
Investors
should carefully review the financial statements which are an integral
part of this prospectus.
|
||
Dealers
participating in this offering are required to deliver a copy of the final
prospectus to any person who is expected to receive a confirmation of the
sale at least 48 hours prior to the mailing of the
confirmation.
|
8
Risk
Factors
An
investment in our common stock is very risky. Our financial condition
is unsound. You should not invest in our common stock unless you can
afford to lose your entire investment. You should carefully consider
the risk factors described below, together with all other information in this
prospectus, before making an investment decision. If an active market
is ever established for our common stock, the trading price of our common stock
could decline due to any of these risks, and you could lose all or part of your
investment. You also should refer to the other information set forth
in this prospectus, including our financial statements and the related
notes.
RISKS
RELATED TO THE RIGHTS OFFERING
Completion
of this offering is not subject to us raising a minimum offering amount and
therefore proceeds may be insufficient to meet our objectives, thereby
increasing the risk to investors in this offering.
Completion
of this offering is not subject to us raising a minimum offering
amount. As such, proceeds from this offering may not be
sufficient to meet the objectives we state in this prospectus, other corporate
milestones that we may set, or to avoid a “going concern” modification in future
reports of our auditors as to uncertainty with respect to our ability to
continue as a going concern. Investors should not rely on the success
of this offering to address our need for funding. If we fail to raise capital by
the end of December 31, 2010, we would expect to have to
significantly decrease operating expenses, which will curtail the growth of our
business.
None
of our officers, directors or significant stockholders are obligated to
participate in this Offering and, as a result, the Offering may be
undersubscribed.
Physicians
Capital Corporation, controlled by Dan Ratner, our President, Chief Executive
Officer and Chairman of the Board and Donna Ratner, Chief Marketing Officer and
Vice Chairman beneficially owns approximately 100% of our common stock. As a
group, our officers and directors beneficially own approximately 100% of our
common stock. None of our officers, directors or significant stockholders are
obligated to participate in this offering. None of our officers or
directors may exercise their basic or over-subscription rights to purchase any
shares issued in connection with this offering. As a result, the offering may be
undersubscribed and proceeds may not be sufficient to meet the objectives we
state in this prospectus or other corporate milestones that we may set, or to
avoid a “going concern” modification in future reports of our auditors as to
uncertainty with respect to our ability to continue as a going
concern.
You
could be committed to buying shares of common stock above the prevailing market
price.
Once you
exercise your basic and any over-subscription rights, you may not revoke such
exercise even if you later learn information that you consider to be unfavorable
to the exercise of your rights. The market price of our shares of
common stock may decline prior to the expiration of this offering or a
subscribing rights holder may not be able to sell shares of common stock
purchased in this offering at a price equal to or greater than the subscription
price.
If
we terminate this offering for any reason, we will have no obligation other than
to return subscription monies promptly.
We may
decide, in our discretion and for any reason, to cancel or terminate this
offering at any time prior to the expiration date. If this offering
is terminated, we will have no obligation except to return promptly, without
interest or deduction, the subscription monies deposited with the subscription
agent.
9
The
subscription price determined for this offering is not an indication of the
value of our common stock.
The
subscription price for the shares in this offering was set by our board of
directors and does not necessarily bear any relationship to the book value of
our assets, results of operations, cash flows, losses, financial condition or
any other established criteria for value. You should not consider the
subscription price as an indication of the value of our common
stock. After the date of this prospectus, our common stock may trade
at prices above or below the subscription price.
We
will have broad discretion in the use of the net proceeds from this offering and
may not use the proceeds effectively.
Although
we plan to use the proceeds of this offering primarily for production of
inventory, marketing, working capital, as well as mergers and acquisitions, we
will not be restricted to such use and will have broad discretion in determining
how the proceeds of this offering will be used. Our discretion is not
substantially limited by the uses set forth in this prospectus in the section
entitled “Use of Proceeds.” While our board of directors believes the
flexibility in application of the net proceeds is prudent, the broad discretion
it affords entails increased risks to the investors in this
offering. Investors in this offering have no current basis to
evaluate the possible merits or risks of any application of the net proceeds of
this offering. Our stockholders may not agree with the manner in
which we choose to allocate and spend the net proceeds.
If
you do not act on a timely basis and follow subscription instructions, your
exercise of rights may be rejected.
Holders
of shares of common stock who desire to purchase shares of our common stock in
this offering must act on a timely basis to ensure that all required forms and
payments are actually received by the subscription agent prior to 5:00 p.m., New
York City time, on the expiration date, unless extended. We will not
be responsible if your broker, dealer, custodian bank, trustee or other nominee
fails to ensure that all required forms and payments are actually received by
the subscription agent prior to 5:00 p.m., New York City time, on the expiration
date, as may be extended.
If you
fail to complete and sign the required subscription forms, send an incorrect
payment amount, or otherwise fail to follow the subscription procedures that
apply to your exercise in this offering, the subscription agent may, depending
on the circumstances, reject your subscription or accept it only to the extent
of the payment received. Neither we nor the subscription agent
undertakes to contact you concerning an incomplete or incorrect subscription
form or payment, nor are we under any obligation to correct such forms or
payment. We have the sole discretion to determine whether a
subscription exercise properly follows the subscription procedures.
10
If
you make payment of the subscription price by uncertified check, your check may
not clear in sufficient time to enable you to purchase shares in this rights
offering.
Any
uncertified check used to pay for shares to be issued in this rights offering
must clear prior to the expiration date of this rights offering, and the
clearing process may require five or more business days. If you choose to
exercise your subscription rights, in whole or in part, and to pay for shares by
uncertified check and your check has not cleared prior to the expiration date of
this rights offering, you will not have satisfied the conditions to exercise
your subscription rights and will not receive the shares you wish to
purchase.
RISKS
RELATING TO OUR BUSINESS
We
have a history of operating losses, which negatively impacts our liquidity, our
ability to operate our business and our public stock price.
As of
June 30, 2009, we had an accumulated deficit of $1,104,460. For the
years ended December 31, 2008 and 2007, we incurred losses from operations
of $344,498 and $538,837, respectively. We also incurred losses from
operations of $186,854 and $191,117 during the six months ended June 30, 2009,
and 2008, respectively.
As of
June 30, 2009, we had outstanding borrowings of $1,281,075 under our secured
open-ended line of credit agreement with Physicians Capital Corporation. We had
approximately $0 of available cash and cash equivalents and approximately
$103,365 in normal inventory levels as of June 30, 2009. If we fail
to raise additional capital by the end of December 2010, we would
expect to have to decrease operating expenses to sustainable operating
levels which will curtail the growth of our business.
Operating
losses negatively impact liquidity and our stock price. In light of
our continuing losses, we need to raise funds from outside sources, which may
not be available to us on satisfactory terms, if at all. Moreover, if
we continue to suffer losses from operations, the proceeds from our financings
(including this offering) may be insufficient to support our ability to expand
our business operations as rapidly as we would deem necessary at any time,
unless we are able to obtain additional financing. If adequate funds
are not available or are not available on acceptable terms, we may not be able
to pursue our business objectives and would be required to reduce our level of
operations, including reducing infrastructure, promotions, personnel and other
operating expenses. These events could adversely affect our business,
results of operations and financial condition.
We
have generated insufficient revenues to date, and we may never generate
sufficient revenues to achieve profitability.
We may
not generate sufficient revenues from product sales in the future to achieve
profitable operations. If we are not able to achieve profitable
operations at some point in the future, we eventually may have insufficient
working capital to maintain our operations as we presently intend to conduct
them or to fund our expansion and marketing and product development
plans. In addition, a lack of revenue generation would likely lead to
increased losses in the future as we seek to expand our manufacturing
capabilities and fund our marketing plans and product
development. This lack of sufficient revenues, among other things,
has had and will continue to have an adverse effect on our working capital,
total assets and stockholders’ equity. If we are unable to achieve
profitability, the market value of our common stock will decline and there would
be a material adverse effect on our financial condition.
11
Additional
financing to expand our business may be unavailable to us.
Some or
all of the elements of our expansion plan may have to be curtailed or delayed
unless we are able to find alternative external sources of working
capital. We would need to raise additional funds to respond to
business contingencies, which may include the need to:
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fund
more rapid expansion,
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|
fund
additional marketing expenditures,
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|
enhance
our operating infrastructure,
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respond
to competitive pressures, and
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acquire
other businesses or engage in other strategic
initiatives.
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If we
need to raise additional financing to support our operations, we cannot assure
you that additional financing will be available on terms favorable to us, or at
all. If adequate funds are not available or if they are not available
on acceptable terms, our ability to fund the growth of our operations, take
advantage of opportunities, develop products or services or otherwise respond to
competitive pressures, could be significantly limited.
We
may not be able to acquire new beverage, food or supplement products which are
important to our growth.
An
important part of our strategy is to increase our sales through the acquisition
of new beverage, food or supplement products. We cannot assure you
that we will be able to negotiate and acquire products, brands or businesses to
market and distribute future products that will enjoy market
acceptance. Our failure to acquire new products, brands, or
businesses that gain market acceptance could have an adverse impact on our
growth and materially adversely affect our financial condition. We
may have higher obsolescent product expense if acquired products fail to perform
as expected due to the need to write off excess inventory of the new products or
goodwill.
We
may not be able to develop new beverage or food products which are important to
our growth.
An
important part of our strategy is to increase our sales through the development
of new beverage or food products. We cannot assure you that we will
be able to continue to develop, market and distribute future products that will
enjoy market acceptance. Our failure to continue to develop new
products that gain market acceptance could have an adverse impact on our growth
and materially adversely affect our financial condition. We may have
higher obsolescent product expense if new products fail to perform as expected
due to the need to write off excess inventory of the new products.
Our
results of operations may be impacted in various ways by the introduction of new
products, even if they are accepted in the market, including the
following:
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Sales
of new products could adversely impact sales of existing
products,
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We
may incur higher cost of goods sold and selling, general and
administrative expenses in the periods when we introduce new products due
to increased costs associated with the introduction and marketing of new
products, most of which are expensed as incurred,
and
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12
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When
we introduce new platforms and package sizes, we may experience increased
freight and logistics costs as our co-packers adjust their facilities for
the new products.
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The
functional natural beverage and food business is highly
competitive.
The
functional natural beverage
and food industries are highly competitive. Many of our competitors
have substantially greater financial, marketing, personnel and other resources
than we do. Competitors in the functional natural food industry
include manufactures, bottlers and distributors of nationally advertised and
marketed products, as well as chain store and private label natural
foods. The principal methods of competition include brand
recognition, price and price promotion, retail space management, service to the
retail trade, new product introductions, packaging changes, distribution
methods, and advertising. We also compete for distributors, shelf
space and customers primarily with other natural food companies. As
additional competitors enter the field, our market share may fail to increase or
may decrease. As a small company with a history of losses, we may be
unable to respond to competitive pressures, which would have a material adverse
effect on our business.
The
growth of our revenues is dependent on acceptance of our products by mainstream
consumers.
We have
dedicated significant resources to introduce our products to the mainstream
consumer. As such, we have increased our sales force and executed
agreements with distributors who, in turn, distribute to mainstream consumers at
grocery stores, club stores and other retailers. If our products are
not accepted by the mainstream consumer, our business could suffer.
Our
failure to accurately estimate demand for our products could adversely affect
our business and financial results.
We may
not correctly estimate demand for our products. Our ability to
estimate demand for our products is imprecise, particularly with new products,
and may be less precise during periods of rapid growth, particularly in new
markets. If we materially underestimate demand for our products or
are unable to secure sufficient ingredients or raw materials including, but not
limited to, glass, labels, flavors or packing arrangements, we might not be able
to satisfy demand on a short-term basis. Moreover, industry-wide
shortages of certain juice concentrates and sweeteners have been and could, from
time to time in the future, be experienced, which could interfere with and/or
delay production of certain of our products and could have a material adverse
effect on our business and financial results. We do not use hedging
agreements or alternative instruments to manage this risk.
The
loss of our largest customers would substantially reduce revenues.
Our
customers are material to our ability to generate revenue. If we are
unable to maintain good relationships with our existing customers, our business
could suffer. Unilateral decisions could be taken by our
distributors, and/or convenience chains, grocery chains, specialty chain stores,
club stores and other customers to discontinue carrying all or any of our
products that they are carrying at any time, which could cause our business to
suffer.
Whole
Foods Market, accounted for approximately 15% of our sales for the six months
ended June 30, 2009 and 1% and 0% of our sales in each of 2008 and
2007. As a result of this customer concentration, the loss of Whole
Foods Market as a retailer would substantially reduce our revenues unless and
until we replaced that source of revenue.
The
loss of our third-party distributors could impair our operations and
substantially reduce our financial results.
We depend
in large part on distributors to distribute our beverages and other
products. Most of our outside distributors are not bound by written
agreements with us and may discontinue their relationship with us on short
notice. Most distributors handle a number of competitive
products. In addition, our products are a small part of our
distributors’ businesses. As a result, such distributors may be more
inclined to discontinue their relationship with us than with
competitors.
13
We
continually seek to expand distribution of our products by entering into
distribution arrangements with regional distributors or other direct
store delivery distributors having established sales, marketing and distribution
organizations. Many of our distributors are affiliated with and
manufacture and/or distribute other soda and non-carbonated brands and other
juice beverage products. In many cases, such products compete
directly with our products.
The
marketing efforts of our distributors are important for our ability to penetrate
our markets and generate revenue. If our brands prove to be less
attractive to our existing distributors and/or if we fail to attract additional
distributors, and/or our distributors do not market and promote our products
above the products of our competitors, our business, financial condition and
results of operations could be adversely affected.
United
Natural Foods, Inc. accounted for approximately 42% of our sales for the six
months ended June 30, 2009 and 45% and 24% of our sales in 2008 and 2007
respectively. The loss of this distributor may adversely affect sales
in the short term and alternative distribution channels may not be found in
a timely manner. The loss of our third-party beverage distributors
could impair our operations and adversely affect our financial
performance.
Price
fluctuations in, and unavailability of, raw materials, packaging and freight
that we use could adversely affect us.
We do not
enter into hedging arrangements for raw materials. Although the
prices of raw materials that we use have not increased significantly in recent
years, our results of operations would be adversely affected if the price of
these raw materials were to rise and we were unable to pass these costs on to
our customers.
We depend
upon an uninterrupted supply of the ingredients for our products, a significant
portion of which we obtain overseas, principally from China, Pacific Islands,
and Brazil. Any decrease in the supply of these ingredients or
increase in the prices of these ingredients as a result of any adverse weather
conditions, pests, crop disease, interruptions of shipment or political
considerations, among other reasons, could substantially increase our costs and
adversely affect our financial performance.
We also
depend upon an uninterrupted supply of packaging materials, such as glass for
our bottles. We obtain our bottles domestically and
Mexico. Any decrease in supply of these materials or increase in the
prices of the materials, as a result of decreased supply or increased demand,
could substantially increase our costs and adversely affect our financial
performance.
We also
depend upon less than truck load (LTL) freight costs and are subject to
fluctuating fuel surcharges. However, as we increase production and
achieve economic scale, our less than truck load (LTL) delivery cost may
decrease as we ship more product in full truck loads.
The
loss of any of our co-packers or raw material ingredient suppliers could slow
sales and impair our operations and substantially reduce our financial
results.
We
rely on third parties production facilities, called co-packers in our industry,
to fill some of our beverages, to produce our glass bottles and to deliver raw
materials for our products. We do not have any agreements with our
co-packers or raw material suppliers. The lack of such agreement is normal for
food and beverage co-packing. Our line time is scheduled on an appointment
basis; even though the company many be able to use many different co-packers and
raw material suppliers across the world, we do focus our production to achieve
economic scale. There is no assurance that a co-packer will have line time when
we need it and we may have to wait for either line-time or raw materials to
arrive in time to run production which could cause inventory and sales
delays. If a co-packer or raw material supplier were to go out of
business or if there was a raw material shortage it could cause inventory and
sales delays.
14
|
if
any of those co-packers were to terminate our co-packing arrangement or
have difficulties in producing beverages for us, our ability to produce
our beverages would be adversely affected until we were able to make
alternative arrangements, and
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Our
business reputation would be adversely affected if any of the co-packers
were to produce inferior quality
products.
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We
compete in an industry that is brand-conscious, so brand name recognition and
acceptance of our products are critical to our ability to obtain market share
and generate revenue.
Our
business is substantially dependent upon awareness and market acceptance of our
products and brands by our targeted consumers. In addition, our
business depends on acceptance by our independent distributors of our brands as
beverage brands that have the potential to provide incremental sales growth
rather than reduce distributors’ existing beverage sales. It may be
too early in the product life cycle of our brands within the Functional
Beverage Industry to determine whether our products and brands will achieve
and maintain satisfactory levels of acceptance by independent distributors and
retail consumers. We believe that the viability of our product name
brands will also be substantially dependent upon acceptance of our product name
brands. Accordingly, any failure of our brands to maintain or
increase acceptance or market penetration would likely have a material adverse
affect on our revenues and financial results.
If
we are unable to maintain brand image and product quality, or if we encounter
other product issues such as product recalls, our business may
suffer.
Maintaining
a good reputation is critical to our success. If we fail to maintain high
standards for product quality, or if we fail to maintain high ethical, social
and environmental standards for all of our operations and activities, our
reputation could be jeopardized. In addition, we may be liable if the
consumption of any of our products causes injury or illness, and we may be
required to recall products if they become contaminated or are damaged or
mislabeled. A significant product liability or other product-related legal
judgment against us or a widespread recall of our products could have a material
adverse effect on our business and financial results.
If
we are unable to maintain unpaid endorsement, personal brand image or if we
encounter other issues such as athlete or celebrity impairment of reputation,
our business may suffer.
We have
unpaid endorsement from World Record cyclist Antony Galvin. We are
targeting unpaid new celebrity endorsement engagements with musicians, yoga
teachers, physical fitness gurus, professional sports athletes and Hollywood
celebrities for both unpaid and paid endorsement deals. Such endorsement may not
occur and if they occur may significantly impair upon the brands and products
image and significantly reduce on future sales if such athlete of celebrity
fails to perform or suffers from impairment of their reputation. This could have
a material adverse effect on our business and financial results.
Adverse weather conditions
could reduce the demand for our products.
Demand
for our products is influenced to some extent by the weather conditions in the
markets in which we operate. Unseasonably cool temperatures in these markets
could have a material adverse effect on our sales volume and financial
results.
We compete in an industry
characterized by rapid changes in consumer preferences and public perception, so
our ability to continue to market our existing products and develop new products
to satisfy our consumers’ changing preferences will determine our long-term
viability.
15
Our
future viability will depend, in part, upon our continued ability to develop and
introduce different and innovative food and beverages. In order to
retain and expand our market share, we must continue to develop and introduce
different and innovative beverages and be competitive in the areas of quality
and health, although there can be no assurance of our ability to do
so. There is no assurance that consumers will continue to purchase
our products in the future. Additionally, many of our products are
considered premium products and to maintain market share during recessionary
periods, we may have to reduce profit margins, which would adversely affect our
results of operations. In addition, there is increasing awareness and
concern for the health consequences of obesity. Product lifecycles for some
beverage brands and/or products and/or packages may be limited to a few years
before consumers’ preferences change. The beverages we currently
market are in varying stages of their lifecycles and there can be no assurance
that such beverages will become or remain profitable for us. The
beverage industry is subject to changing consumer preferences and shifts in
consumer preferences may adversely affect us if we misjudge such
preferences. We may be unable to achieve volume growth through
product and packaging initiatives. We also may be unable to penetrate
new markets. If our revenues decline, our business, financial
condition and results of operations will be materially and adversely
affected.
Our
quarterly operating results may fluctuate significantly because of the
seasonality of our business.
Our
highest revenues occur during the spring and summer, the second and third
quarters of each fiscal year. These seasonality issues may cause our
financial performance to fluctuate. In addition, beverage sales can
be adversely affected by sustained periods of bad weather. These
fluctuations in our business could have a material adverse effect on our
financial performance and public stock price.
Our business is subject to many
regulations and noncompliance is costly.
The
production, marketing and sale of our beverages, including contents, labels,
caps and containers, are subject to the rules and regulations of various
federal, provincial, state and local health agencies. If a regulatory
authority finds that a current or future product or production run is not in
compliance with any of these regulations, we may be fined, or production may be
stopped, thus adversely affecting our financial conditions and
operations. Similarly, any adverse publicity associated with any
noncompliance may damage our reputation and our ability to successfully market
our products. Furthermore, the rules and regulations are subject to
change from time to time and while we closely monitor developments in this area,
we have no way of anticipating whether changes in these rules and regulations
will impact our business adversely. Additional or revised regulatory
requirements, whether labeling, environmental, tax or otherwise, could have a
material adverse effect on our financial condition and results of
operations.
Our manufacturing process is not
patented.
None of
the manufacturing processes used in producing our products are subject to a
patent or similar intellectual property protection. Our only
protection against a third party using our recipes and processes is
confidentiality agreements with the companies that produce our beverages and
with our employees who have knowledge of such processes. If our
competitors develop substantially equivalent proprietary information or
otherwise obtain access to our knowledge, we will have greater difficulty in
competing with them for business, and our market share could
decline.
We
face risks associated with product liability claims and product
recalls.
Other
companies in the beverage industry have experienced product liability litigation
and product recalls arising primarily from defectively manufactured products or
packaging. We maintain product liability insurance insuring our
operations from any claims associated with product liability and we believe that
the amount of this insurance is sufficient to protect us. We do not
maintain product recall insurance. In the event we were to experience
additional product liability or product recall claim, our business operations
and financial condition could be materially and adversely affected.
16
Our intellectual property rights are
critical to our business, and the loss of such rights could materially,
adversely affect our business.
We regard
the protection of our trademarks, trade dress and trade secrets as critical to
our company. We have registered our trademarks in the United States
that are very important to our business. We regard our trademarks,
copyrights and similar intellectual property as critical to our success and
attempt to protect such property with registered and common law trademarks and
copyrights, restrictions on disclosure and other actions to prevent
infringement. Product packages, mechanical designs and artwork are
important to our success and we would take action to protect against imitation
of our packaging and trade dress and to protect our trademarks and copyrights,
as necessary. We also rely on a combination of laws and contractual
restrictions, such as confidentiality agreements, to establish and protect our
proprietary rights, trade dress and trade secrets. However, laws and
contractual restrictions may not be sufficient to protect the exclusivity of our
intellectual property rights, trade dress or trade
secrets. Furthermore, enforcing our rights to our intellectual
property could involve the expenditure of significant management and financial
resources. Third parties may infringe or misappropriate our
trademarks and similar proprietary rights. Moreover, if we are found
to have been deficient in policing our trademarks and proprietary rights, we may
lose our rights to such intellectual property. If we lose some or all of our
intellectual property rights, our business may be materially and adversely
affected.
If
we are not able to retain the full time services of our management team,
including Dan Ratner, Donna Ratner, it will be more difficult for us to manage
our operations and our operating performance could suffer.
Our
business is dependent, to a large extent, upon the services of our management
team, including Dan Ratner, our founder, Chairman of the Board, President and
Chief Executive Officer and Donna Ratner, our Chief Marketing
Officer. We depend on our management team, but especially on the
Ratner’s creativity and leadership in running or supervising virtually all
aspects of our day-to-day operations. We do not have a written
employment agreement with the Ratners. In addition, we do not
maintain key person life insurance on any of our management team or the
Ratners. Therefore, in the event of the loss or unavailability of the
Ratners or any other member of the management team to us, there can be no
assurance that we would be able to locate in a timely manner or employ qualified
personnel to replace him. The loss of the services of any member of our
management team or our failure to attract and retain other key personnel over
time would jeopardize our ability to execute our business plan and could have a
material adverse effect on our business, results of operations and financial
condition.
We
need to manage our growth and implement and maintain procedures and controls
during a time of rapid expansion in our business.
The cost
of manufacturing and packaging our products was approximately 43% and 43% of our
aggregate revenues in 2008 and 2007, respectively, and 43% of our aggregate
revenues for the six months ended June 30, 2009. This gross margin
places pressure upon our cash flow and cash reserves when our sales
increase. If we are to expand our operations, such expansion would
place a significant strain on our management, operational and financial
resources. Such expansion would also require improvements in our
operational, accounting and information systems, procedures and
controls. If we fail to manage this anticipated expansion properly,
it could divert our limited management, cash, personnel, and other resources
from other responsibilities and could adversely affect our financial
performance.
Our
business may be negatively impacted by a slowing economy or by unfavorable
economic conditions or developments in the United States and/or in other
countries in which we operate.
A general
slowdown in the economy in the United States or unfavorable economic conditions
or other developments may result in decreased consumer demand, business
disruption, supply constraints, foreign currency devaluation, inflation or
deflation. The current slowdown in the economy or unstable economic
conditions in the United States or in the countries in which we operate could
have an adverse impact on our business results or financial condition. Our
foreign sales (except for Canada) accounted for less than 0% of our sales for
the years ended December 31, 2008 and 2007, respectively.
17
We
have operated without independent directors in the past.
We have
not had two independent directors through a large portion of our
history. As a result, certain material agreements between related
parties of our company have not been negotiated with the oversight of
independent directors and were entered into at the absolute discretion of the
majority stockholder, Physicians Capital Corporation. Although we
believe that these agreements were entered into upon terms no less favorable
than would have been obtained in an arm’s length transaction, these agreements
were not subject to independent review and consideration and could therefore be
deemed not to have been undertaken on an arm’s length basis. Please
see the “Certain Relationships and Related Transactions” section for specific
details of these transactions.
We
have a limited operating history; and we may never achieve or sustain
profitability.
At June
30, 2009, we had a deficit shareholder’s equity of $1,104,460 and a working
capital deficit of $1,186,792. We were incorporated on August 7,
2008. We had commenced the commercial sale of Cell-nique in 2006 and
have retail sales of approximately $2.6 million to date since
2006. We have limited track record upon which you can evaluate an
investment in our shares. We have an operating history upon which
evaluation of our proposed business can be based. Our ability to
achieve profitable operations is dependent upon a number of factors, including
our ability to become a successful market entrant, our ability to effectively
manufacture, market and distribute our drinks in commercial quantities, our
ability to expand our product base in the future, and our ability to
successfully market and sell our products. Furthermore revenues, expenses and
cash flow cannot be predicted with certainty. Our expenses will be
variable based on market conditions.
We
will rely on an interim working capital line from Physicians capital Corporation
to fund operating deficits. We anticipate, based on our present plan
and assumptions, that at a nominal amount (5% Offering sold) of this offering
will satisfy our cash requirements for at least 12 calendar
months. However, the shares that are being offered by us under this
prospectus are being offered on a best efforts basis, so we may not be able to
sell any particular number of shares in this offering and the net proceeds from
any shares sold may not be sufficient to allow us to accomplish our business
objectives.
Further,
if we are unable to raise any significant funds in this offering, we will likely
be required to seek additional capital from other sources in the future through
additional equity or debt financing or credit facilities. Any
additional equity financing that we obtain will likely involve substantial
dilution of our shareholders, and any debt financing would increase the cost of
our debt service requirements. It will be difficult for us to obtain
additional capital in the future on acceptable terms or at all. To
date, we have made attempts to identify possible sources for funding but have no
commitments for any future funding. The type, timing and terms of
such funding, will be determined by prevailing conditions in the financial
markets and our financial condition, among other factors. If we
cannot obtain the financing we need we may have to significantly curtail or
reduce our operations.
RISKS
RELATING TO OUR BUSINESS
We
may experience significant product recalls, which would damage our brand,
increase our costs and impair our ability to achieve profitability.
We have
no meaningful data regarding the product performance
or apoilage of our product or any basis on which we can estimate
warranty costs. If we are subject to significant warranty service
requirements or product recalls, potential customers may determine that our
drinks are not viable and may choose not to purchase them. Further,
significant warranty service requirements will result in increased costs to us
as a result of the costs of replacement of our products and the costs associated
with researching and developing solutions to issues raised by warranty
claims. Any significant warranty service requirements or product
recalls would increase our costs materially and reduce the value of our brand
significantly.
18
Our
operations may become subject to significant governmental regulations in the
future.
We are in
the business of manufacturing drinks which contain food. There can be
no assurance the regulations concerning the distribution of the foods that we
use will not change in the future. Additionally, in the future and
for undetermined reasons need to use other components that have not been
approved for use
MARKET
RISKS
No
market exists for the trading of our securities and no market may ever
develop. Accordingly, you may not have any means of trading the
shares you acquire in this offering.
A market
does not presently exist for our securities and no assurance can be given that a
market will ever develop. Consequently, you may not be able to
liquidate your investment in our securities for an emergency or at any time, and
the securities will not be readily acceptable as collateral for loans. Although
we may endeavor to establish a trading market for our securities in the future,
no assurance can be given as to the timing of this event or whether the market,
if established, will be sufficiently liquid to enable an investor to liquidate
his investment in us.
RISKS
RELATING TO OUR SECURITIES
There has been no public trading
market for our securities and the market for our securities, may continue to be
limited, and be sporadic and highly volatile.
There is
currently a no public market for our common stock. An active market
for our shares may not be established or maintained in the
future. Holders of our common stock may, therefore, have difficulty
selling their shares, should they decide to do so. In
addition, if developed, such markets may not continue and any shares
purchased may be sold incurring a loss. Any such market price of our
shares may not necessarily bear any relationship to our book value, assets, past
operating results, financial condition or any other established criteria of
value, and may not be indicative of the market price for the shares in the
future.
In
addition, the market price of our common stock may be volatile, which could
cause the value of our common stock to decline. Securities markets experience
significant price and volume fluctuations. This market volatility, as
well as general economic conditions, could cause the market price of our common
stock to fluctuate substantially. Many factors that are beyond our
control may significantly affect the market price of our
shares. These factors include:
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price
and volume fluctuations in the stock
markets,
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changes
in our revenues and earnings or other variations in operating
results,
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any
shortfall in revenue or increase in losses from levels expected by us or
securities analysts,
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changes
in regulatory policies or law,
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operating
performance of companies comparable to us,
and
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general
economic trends and other external
factors.
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19
Even if
an active market for our common stock is established in the future ,
stockholders may have to sell their shares at prices substantially lower than
the price they paid for it or might otherwise receive than if a broad public
market existed.
Future
financings could adversely affect common stock ownership interest and rights in
comparison with those of other security holders.
Our board
of directors has the power to issue additional shares of common or preferred
stock without stockholder approval. If additional funds are raised
through the issuance of equity or convertible debt securities, the percentage
ownership of our existing stockholders will be reduced, and these newly issued
securities may have rights, preferences or privileges senior to those of
existing stockholders.
If we
issue any additional common stock or securities convertible into common stock,
such issuance will reduce the proportionate ownership and voting power of each
other stockholder. In addition, such stock issuances might result in a reduction
of the book value of our common stock.
Because
Physicians Capital Corporation controls a large portion of our stock, they can
control the outcome, or greatly influence the outcome, of all matters on which
stockholders vote.
Dan
Ratner, our President, Chief Executive Officer, and Chairman of the Board and
Donna Ratner, Vice-Chairman and Chief Marketing Officer beneficially owns
approximately 100% of our common stock. Therefore, the Ratners
will be able to control the outcome, or greatly influence the outcome, on all
matters requiring stockholder approval, including the election of directors,
amendment of our certificate of incorporation, and any merger, consolidation or
sale of all or substantially all of our assets or other transactions resulting
in a change of control of our company. In addition, as our Chairman and Chief
Executive Officer, Dan Ratners has and will continue to have
significant influence over our strategy, technology and other
matters. The Ratners’s interests may not always coincide with the
interests of other holders of our common stock.
A
substantial number of our shares are available for sale in the public market and
sales of those shares could adversely affect our stock price.
Sales of
a substantial number of shares of common stock into the public market, or the
perception that such sales could occur, could substantially reduce our stock
price in the public market for our common stock, and could impair our ability to
obtain capital through a subsequent financing of our securities. We
have 14,000,000 shares of common stock outstanding as of the date of this
prospectus. Of the shares of our common stock currently outstanding,
14,000,000 shares are “restricted securities” under the Securities
Act. Some of these “restricted securities” will be subject to
restrictions on the timing, manner, and volume of sales of such
shares.
In
addition, we have not issued and there are no outstanding
options and /or warrants that may be exercised into shares of
common stock.
Our
certificate of incorporation and by-laws contain provisions that may discourage,
delay or prevent a change in our management team that stockholders may consider
favorable.
Our
certificate of incorporation, our bylaws and Delaware law contain provisions
that may have the effect of preserving our current management, such
as:
|
authorizing
the issuance of “blank check” preferred stock without any need for action
by stockholders; and
|
|
permitting
stockholder action by written
consent.
|
20
These
provisions could allow our board of directors to affect your rights as a
stockholder since our board of directors can make it more difficult for common
stockholders to replace members of the board. Because our board of
directors is responsible for appointing the members of our management team,
these provisions could in turn affect any attempt to replace our current
management team.
The
application of the "penny stock" rules could adversely affect the market for our
stock.
The
Securities and Exchange Act of 1934 requires additional disclosure relating to
the market for "penny stocks." A penny stock is generally defined to be any
equity security not listed on NASDAQ or a national securities exchange that has
a market price of less than $5.00 per share, subject to certain exceptions.
Among these exceptions are shares issued by companies that have:
net
tangible assets of at least $2 million, if the issuer has been in
continuous operation for three years;
net
tangible assets of at least $5 million, if the issuer has been in
continuous operation for less than three years; or
average
annual revenue of at least $6 million for each of the last three
years.
for our
shares, and of any sales commissions or other compensation payable to
any broker or dealer, or any other related person, involved in the
transaction;
send
monthly statements to buyers disclosing updated price information for any penny
stocks held in their accounts, and these monthly statements must include
specified information on the limited market for penny stocks. We do not
currently meet the requirements of these exceptions and, therefore, our shares
would be deemed penny stocks for purposes of the Exchange Act if and at any time
while our common stock trades below $5.00 per share. In such case, trading in
our shares would be regulated pursuant to Rules 15-g-1 through 15-g-6 and 15-g-9
of the Exchange Act. Under these rules, brokers or dealers recommending our
shares to prospective buyers would be required, unless an exemption is
available, to:
deliver a
lengthy disclosure statement in a form designated by the SEC relating to the
penny stock market to any potential buyers, and obtain a written acknowledgement
from each buyer that such disclosure statement has been received by the buyer
prior to any transaction involving our shares;
provide
detailed written disclosure to buyers of current price quotations.
In
addition, if we are subject to the penny stock rules, all brokers or dealers
involved in a transaction in which our shares are sold to any buyer, other than
an established customer or "accredited investor," must make a special written
determination that our shares would be a suitable investment for the buyer, and
the brokers or dealers must receive the buyer's written agreement to purchase
our shares, as well as the buyer's written acknowledgement that the suitability
determination made by the broker or dealer accurately reflects the buyer's
financial situation, investment experience and investment objectives, prior to
completing any transaction in our shares.
These
Exchange Act rules may limit the ability or willingness of brokers and other
market participants to make a market in our shares and may limit the ability of
our shareholders to sell in the secondary market, through brokers,
dealers or otherwise. We also understand that many brokerage firms will
discourage their customers from trading in shares falling within the "penny
stock" definition due to the added regulatory and disclosure burdens imposed by
these Exchange Act rules.
The SEC
from time to time may propose and implement even more stringent regulatory or
disclosure requirements on shares not listed on NASDAQ or on a national
securities exchange. The adoption of the proposed changes that may be made in
the future could have an adverse effect on the trading market for our
shares.
21
Use
of Proceeds
In the
table below, we have detailed the minimum amount of capital required for us to
operate our business as currently planned. The table also shows how
we will use the proceeds of the offering.
Amount of Net Proceeds
|
||||||||||||
at 5%(1)
|
at 50%(1)
|
at 100%(1)
|
||||||||||
Company
Proceeds from the Offering
|
$ | 1,500,000 | $ | 15,000,000 | $ | 30,000,000 | ||||||
Less:
Offering Expenses
|
$ | 75,000 | $ | 75,000 | $ | 75,000 | ||||||
Net
Proceeds from Offering
|
$ | 1,425,000 | $ | 14,925,000 | $ | 29,925,000 | ||||||
Use
of Net Proceeds:
|
||||||||||||
Repayment
of Related Party Debt (2)
|
$ | 1,281,075 | $ | 1,281,075 | $ | 1,281,075 | ||||||
General
Working Capital (3)
|
$ | 143,925 | $ | 13,643,925 | $ | 28,643,925 | ||||||
Total
Use of Net Proceeds
|
$ | 1,425,000 | $ | 14,925,000 | $ | 29,925,000 |
(1) We
intend to utilize the proceeds from this offering in the priority set forth in
this column whether or not such gross proceeds or a lesser amount are raised. No
assurances are given that we will sell any shares. We have stated that an
allowance of $75,000 has been made to cover any offering
expense.
(2) We
intend to utilize the proceeds from this offering for Repayment of Related Party
Debt to Physicians Corporation.
(3) The
working capital (i.e., monies to be used, including but not limited to due
diligence, travel and related out-of-pocket expenses, and consulting fees, if
any. Working capital also will be used to pay other costs of our operations,
including legal fees and costs incurred in filing periodic reports under the
federal securities laws. Our current management team does not have any
agreements to pay themselves for services in any capacity and there are not any
outstanding amounts due other than the related party working capital loan
through Physicians Capital Corporation. It is contemplated that
Management will be engaged in employment contracts in the future, but no
negotiations have taken place and there are no amounts contemplated at this
time, Management will hire and negotiate with other third parties to expand the
management team, board of directors and consultants in the future, such
negotiated amounts will fall under General Working Capital (3). Management
is not aware of any circumstances under which such policy may be
changed.
The net
proceeds of this offering may be used, in management's discretion, to make loans
(other than to officers and other affiliates); no restrictions exist, other than
as set forth above, as to whom loans may be made. Further, no criteria have as
yet been established for determining whether or not to make loans, whether any
such loans will be secured or limitations as to amount. Outstanding loans may be
repaid in part.
We have
not and do not presently intend to impose any limits or other restrictions on
the amount or circumstances under which any of such transactions may occur,
except that none of our officers, directors or their affiliates shall receive
any personal financial gain from the proceeds of this offering except for
repayment of related party debt, reimbursement of out-of-pocket offering
expenses. No assurance can be given that any of such potential conflicts of
interest will be resolved in our favor or will otherwise not cause us to lose
potential opportunities.
None of
the proceeds raised hereby will be used to make any loans to our promoters,
management or their affiliates or associates of any of our shareholders.
Further, we may not borrow funds and use the proceeds therefrom to make payments
to our promoters, management or their affiliates or associates other than stated
herein.
22
The
following identifies the Use of Proceeds which will enable the Company to expand
operations. Proceeds from a fully subscribed offering will allow for
substantial growth capital of production, marketing and sales. Management
does not anticipate the need for additional funds as sales revenue are expected
to generate a positive cash flow that may also offset the total use of
funds:
The
nature of businesses to be targeted for merger and acquisitions as budgeted
below will be in functional food and beverage including but not limited to
natural and organic food and beverages brands/companies, supplement or vitamin
and/or ingredient suppliers, manufacturing or processing companies. The
strategic objective of the Company is to roll-up like minded brands and
companies with similar sales channel and operational requirements to achieve
high efficiency and productivity from sales and back-office
operations. At the present time, there are no merger and acquisition
negotiations.
1.
Staffing - Executive, sales, and office labor as well as taxes and
benefits.
|
$ | 1,000,000 | |||
2.
Working Capital - This will be used to meet operating
expenses.
|
$ | 1,000,000 | |||
3. Advertising,
Marketing and Public Relations- Magazine, media advertising, shows,
events, brochures and videos.
|
$ | 2,000,000 | |||
4. Costs
of Goods/Inventory - The Company’s produces inventory in advance of
orders.
|
$ | 1,000,000 | |||
5.
Acquisitions and Mergers – Purchase of Brands and Companies the fit the
strategic objectives of the Company
|
$ | 23,643,925 |
The
following identifies the Use of Proceeds which will enable the Company to expand
operations. Proceeds from a 50% subscribed offering will allow for substantial
growth capital of production, marketing and sales. Management does not
anticipate the need for additional funds as sales revenue are expected to
generate a positive cash flow that may also offset the total use of
funds:
1.
Staffing - Executive, sales, and office labor as well as taxes and
benefits.
|
$
|
1,000,000
|
|||
2.
Working Capital - This will be used to meet operating
expenses.
|
$
|
1,000,000
|
|||
3. Advertising,
Marketing and Public Relations- Magazine, media advertising, shows,
events, brochures and videos.
|
$
|
2,000,000
|
|||
4. Costs
of Goods/Inventory - The Company’s produces inventory in advance of
orders.
|
$
|
1,000,000
|
|||
5.
Acquisitions and Mergers – Purchase of Brands and Companies the fit the
strategic objectives of the Company
|
$
|
8,643,925
|
The
following identifies the Use of Proceeds which will enable the Company to expand
operations. Proceeds from a 5% subscribed offering will allow for substantial
growth capital of production, marketing and sales. Management does not
anticipate the need for additional funds as sales revenue are expected to
generate a positive cash flow that may also offset the total use of
funds:
1.
Staffing - Executive, sales, and office labor as well as taxes and
benefits.
|
$
|
0
|
|||
2.
Working Capital - This will be used to meet operating
expenses.
|
$
|
143,925
|
|||
3. Advertising,
Marketing and Public Relations- Magazine, media advertising, shows,
events, brochures and videos.
|
$
|
0
|
|||
4. Costs
of Goods/Inventory - The Company’s produces inventory in advance of
orders.
|
$
|
0
|
|||
5.
Acquisitions and Mergers – Purchase of Brands and Companies the fit the
strategic objectives of the Company
|
$
|
0
|
Plan
of Distribution
This is a
direct participation with no commitment by anyone to purchase any shares. The
shares will be offered and sold on a "best efforts" basis by our principal
executive officers and directors at $5.00 per share until all shares are sold or
until the offering is terminated on December 31, 2010 or extended for up to
60 days thereafter, at the sole discretion of management. There is no minimum
amount that must be raised to make the offering
effective.
Authorized and
Outstanding
Shares of
Stock
Common Stock
|
Preferred Stock
|
|||||||
Authorized:
|
49,000,000 | 1,000,000 | ||||||
$.00001
par value
|
$2.00
stated value
|
|||||||
Outstanding:
|
||||||||
Prior
to Offering:
|
14,000,000 | 0 | ||||||
After
50% of Offering is sold
|
17,000,000 | 0 | ||||||
After
Maximum Offering is sold
|
20,000,000 | 0 |
23
Capitalization
This
table represents our capitalization as of June 30, 2009 as adjusted to give
effect to this offering. The following table excluded the loan from
Physicians Capital Corporation, quantifying such loan.
Shares
|
||||
Actual
|
||||
Stockholders
Equity
|
||||
Preferred
Stock, $1.80 stated value at date of issuance, $2.00 current stated
value
|
||||
Authorized
– 1,000,000 shares
|
||||
Issued
and Outstanding - No shares
|
||||
Common
Stock, $.00001 par value
|
||||
Authorized
- 49,000,000 shares
|
||||
Issued
and Outstanding –
|
||||
Actual
14,000,000 shares
|
140
|
|||
Paid
in Capital from Offering
|
||||
Additional
Paid in Capital
|
249,860
|
|||
Retained
Deficit
|
$
|
(1,354,460
|
)
|
|
Total Stockholders’
Equity
|
$
|
(1,104,460
|
) |
Dilution
We were
initially capitalized by the sale of common stock to our founders and working
capital loans from our founders. The following table sets forth the difference
between our founders, subsequent stock distributions and purchasers of the
shares in this offering with respect to the number of shares purchased from us,
the total consideration paid and the average price per share paid.
Purchasers
of our common stock in this offering will experience immediate and substantial
dilution in the net tangible book value of their common stock from the initial
public offering price.
The
table below assumes that 5% amount of shares offered hereby are
sold.
Shares Issued
|
Total Consideration
|
Average
Price
|
||||||||||||||||||
Number
|
Percent
|
Amount
|
Percent
|
Per Share
|
||||||||||||||||
Insiders
|
14,000,000 | 98 | % | $ | 170 | .1 | % | $ | .00001 | |||||||||||
New
Investors
|
300,000 | 2 | % | $ | 1,500,000 | 100 | % | $ | 5.00 | |||||||||||
Total
|
14,300,000 | 100 | % | $ | 1,500,170 | 100 | % | $ | .10 |
The table
below assumes that 50% amount of shares offered hereby are sold.
Shares Issued
|
Total Consideration
|
Average
Price
|
||||||||||||||||||
Number
|
Percent
|
Amount
|
Percent
|
Per Share
|
||||||||||||||||
Insiders
|
14,000,000 | 82 | % | $ | 170 | .1 | % | $ | .00001 | |||||||||||
New
Investors
|
3,000,000 | 18 | % | $ | 15,000,000 | 100 | % | $ | 5.00 | |||||||||||
Total
|
17,000,000 | 100 | % | $ | 15,000,170 | 100 | % | $ | 0.88 |
24
The table
below assumes the maximum amount of the shares offered hereby are
sold.
Shares Issued
|
Total Consideration
|
Average
Price
|
||||||||||||||||||
Number
|
Percent
|
Amount
|
Percent
|
Per Share
|
||||||||||||||||
Insiders
|
14,000,000 | 70 | % | $ | 200 | .1 | % | $ | .00001 | |||||||||||
New
Investors
|
6,000,000 | 30 | % | $ | 30,000,000 | 100 | % | $ | 5.00 | |||||||||||
Total
|
20,000,000 | 100 | % | $ | 30,000,200 | 100 | % | $ | 1.5 |
As of
June 30, 2009, the net tangible book value of our common stock was $(1,104,460)
or ($.00001) per share based on the 14,000,000 shares outstanding. It should
also be noted that our net tangible book value is $(1,104,460) since $0 is
attributable to our preferred stock and $0 is attributed to our intangible
patent. "Net tangible book value of common stock" per share represents the
amount of total tangible assets less total liabilities, divided by the number of
shares. After giving effect to the sale by us of 6,000,000 shares, which is the
maximum offered in this private placement memorandum, at an offering price of
$5.00 per share and after deducting estimated expenses, our pro-forma net
tangible book value of common stock as of that date would $ 28,819,670 or
$1.50 per share, based on the 20,000,000 shares outstanding at that time.
This represents an immediate dilution (i.e. the difference between the offering
price per share of common stock and the net tangible book value per share of
common stock after the offering) of $(3.56) per share to the new
investors who purchase shares in the offering ("New Investors"), as illustrated
in the following table (amounts are expressed on a per share
basis):
(1)
Calculations concerning dilution are based on an assumption of the offering
being fully subscribed.
The
following table represents the dilution per share based on the percentage sold
of the total amount of shares being offered.
Shares
|
Shares
|
Shares
|
||||||||||
5% sold
|
50% sold
|
100% sold
|
||||||||||
Offering
price
|
$ | 5.00 | $ | 5.00 | $ | 5.00 | ||||||
Net
tangible book value before offering
|
(.08 | ) | (.08 | ) | (.08 | ) | ||||||
Increase
attributable to the offering
|
0.113 | 0.89 | 1.58 | |||||||||
Net
tangible book value after giving effect to the
offering
|
0.104 | 0.88 | 1.44 | |||||||||
Per
share Dilution to new investors
|
$ | 4.89 | $ | 4.19 | $ | 3.56 | ||||||
Percent
Dilution per share
|
98 | % | 84 | % | 71 | % |
We do not
intend to pay any cash dividends with respect to our common stock in the
foreseeable future. We intend to retain any earnings for use in the operation of
our business. Our Board of Directors will determine dividend policy in the
future based upon, among other things, our results of operations, financial
condition, contractual restrictions and other factors deemed relevant at the
time. We intend to retain appropriate levels of our earnings, if any, to support
our business activities.
25
Business
Cell-nique
Corporation was conceptualized in 2005, began operations in 2006 as an
unincorporated division of Physicians Capital Corp and was incorporated in 2008
at which time the unincorporated division was recapitalized from inception into
the Company. At this time, Physicians Capital Corporation is the sole
shareholder and Dan and Donna Ratner are sole
shareholders. Cell-nique Corporation business office is located in
Weston, CT and the Company has rented warehouse space in Shelton, CT and Los
Angeles, CA. We develop, market, distribute and manage unique
food and beverage brands and products that are positioned as “better for you”
beverages and are targeted to the growing category of
“organic/natural/functional” beverage consumers. We own the US patient
registered trademark rights to the Cell-nique ®
brand, a new functional beverage that is certified organic containing 31 whole
superfoods with the following natural properties of nourishing, cleansing,
anti-oxidizing and alkaline-forming characteristics that are found in most all
natural vegetable, fruit juices and herbs that combine to make our product. We
began sales of Cell-nique in
2006.
We sell
our products in natural food stores, specialty gourmet, supermarket chains,
retail stores, yoga studios and gyms, doctor’s offices and directly on the
internet . We primarily sell our products through a network of natural,
gourmet and independent food and beverage distributors, as well as directly to
consumers.
The
natural and organic food, beverage and supplement industry is approximately $68
Billion in annual sales, yet it is fragmented and inefficient with many small
businesess with annual sales of less than $5 million.
We see
the opportunity to acquire and merge other natural and organic brands under
Cell-nique Corporation to reduce the duplication of sales staff and back-office
operations.
The
organic/natural/functional beverage category combines non-carbonated,
ready-to-drink iced teas, lemonades, juice cocktails, single-serve juices and
fruit beverages, ready-to-drink dairy and coffee drinks, energy drinks, sports
drinks, and single-serve still water (flavored, unflavored and enhanced). The
alternative beverage category is the fastest growing segment of the beverage
marketplace. Further, according to a 2009 publication of Natural Food
Merchandiser June 2009 issue, sales of organic, natural and functional products
reached approximately $68 Billion in the United States in 2008.
Category-sales
increases were led by beverages offering health benefits and we believe that
consumers have altered a shift in priorities from pure weight management to
total health management - a shift that is reflected in slower growth of “lo-cal”
and “light” products and increased growth in functional beverages. Of growth
products the most successful products were those with a health or functional
characteristic, such as energy and sport drinks for their performance-enhancing
benefits, or ready-to-drink tea for its antioxidant claims. The market was
estimated at $68 billion in 2008, and management projects sales of $75 billion
by 2011. Based on our direct and indirect knowledge of the beverage and
functional beverage industry, we predict:
·
|
Future
category growth will likely be among functional products offering specific
health benefits - for example, green superfoods and superjuices,
alkalinizing, health and antioxidant products;
and
|
·
|
With
increased availability and greater consumer demand, functional beverages
are at the beginning of a major growth wave in the United States as they
are strong in Asia, Europe and
Middle-East.
|
Functional
beverages are beverages that include ingredients designed to provide specific
benefits to the consumer. The sector typically includes juices, smoothies, teas,
soy-based and hemp-based drinks, energy drinks, enhanced waters and sports
drinks. “Better for you” beverages are a sub-sector of the functional
beverage industry which includes drinks designed to provide specific health
benefits to consumers.
Products
Our
proprietary brand is directed to consumers who prefer organic/natural/functional
beverage products to traditional carbonated soft drinks such as Coca-Cola®,
Pepsi® and 7-Up®. The new age functional beverage category is attractive to us
because it is a growth segment of the beverage market and we believe that
consumers will pay higher prices for these products than carbonated soft
drinks.
26
Our nine
products are named Cell-nique®, an
organic/natural/functional beverage that contains a high level of nutrition,
anti-oxidants, as well as natural cleansing and alkalinizing support from thirty
one (31) different vegetables, fruits and herb sources that are combined to make
this product. The 31 superfoods combined in our unique formula are the organic
juices that are naturally flavored and sweetened with organic
agave.
We
are currently developing new flavors and packaging concepts and different
formulas that support and promote cellular health, fitness and body care. We are
constantly evaluating new product offerings, and line extensions as well as
evaluating potential markets, products, brands and businesses to acquire. At
this time, we are not engaged to acquire any products, brands or
businesses.
Sales,
Marketing and Distribution
Our sales
and marketing strategy is to focus our efforts on developing brand awareness and
trial through sampling both in stores and at events. We employ a “PUSH” - “PULL”
promotional and advertising strategy (as more particularly described below) to
build brand awareness, generate trial/sampling purchases and gain distribution
of Cell-nique®. Our
three stage “go-to-market” approach first educates the consumer about the
product through a combination of advertising and public relations initiatives,
then makes the product readily available with direct and three-tier
distribution, and finally implement programs to motivate consumers to buy Cell-nique®
.
“PUSH,”
or “getting the product on the shelf,” provides the programs necessary to gain
distribution and secure product placement on retailer’s limited shelves space.
It consists of customer marketing funds designed to support the customers’ best
promotional and consumption-building vehicles, as well as employee incentive and
training programs, while providing materials that clearly communicate Cell-nique’s key brand
benefit: “A Farmer’s Market in Every Bottle” “The 1st Organic
Supergreen Drink, Have you Fed your Cells Today?” and “Green-a-licious.” These
materials consist of a variety of “communication messages,” including those
listed above, as well as shelf and cooler signs, window banners, floor displays
with and logo apparel.
“PULL,”
or getting the product “off-the-shelf” and into the hands of happy consumers,
answers the biggest question posed by buyers: “What are you doing to drive
consumers into my store to purchase your product?” Pull programs are designed to
entice and educate consumers, while motivating them to sell or purchase our
product. Various Pull programs include advertising directed towards the
consumer, instant redeemable or mail-in coupons, mail-in money back rebates,
retailer loyalty programs, co-branding with complementary products, and
education and promotional sampling events. We will employ all of the above to
support these programs that reach our targeted audience.
The
following are a sample of marketing approaches and tactics we use to build our
Cell-nique®
brand:
·
|
Media
advertisements placed with the advice of media buying
professionals;
|
·
|
Improved
and enhanced website and e-mail
communication;
|
·
|
In-store
sales promotions and education/demo
sampling;
|
·
|
Targeted
sponsorship of brand-building
events;
|
·
|
Endorsements
from athletes and participation in athletic event
promotions;
|
·
|
Trade
show marketing; and
|
27
Each of
these approaches is capital intensive, and additional capital will be needed to
continue these efforts.
Distribution
and Sales Channels
We
currently have a national network of mainstream, natural and specialty food
distributors and brokers in the United States. We sell directly to our
distributors, who in turn sell to retail stores. We also use our own sales group
and independent sales representatives to promote our products for our
distributors and direct sales to our retail customers. We have our own national
direct sales distribution channel, in addition to smaller local
distributors.
One of
the main goals of our sales and marketing efforts is to increase the number of
sales people and distributors focused on growing our brands. Where a market does
not support or lend itself to direct distribution, we intend to enlist local
mainstream beverage distributors to carry our products. Our increased efforts in
marketing also will require us to hire additional sales representatives and
other marketing expenses. We plan to use a portion of the proceeds of the public
offering toward hiring the additional sales people needed to support both the
expansion of our existing direct distribution and to grow sales through
mainstream distributors. We will be dependent upon obtaining the proceeds from
the public offering to implement our marketing expansion plans.
Our sales
force markets existing products, coordinate promotions and introduce new items.
We also offer our products and promotional merchandise directly to
consumers via the Internet through our website, www.cell-nique.com. We plan to improve and
expand direct sales and education efforts through the website with a revised
offering later this year.
Marketing
to Distributors
We market
to distributors using a number of marketing strategies, including direct
solicitation, telemarketing, trade advertising and trade show exhibition. These
distributors include natural food, gourmet food, and mainstream distributors.
Our distributors sell our products directly to natural food, gourmet food and
mainstream supermarkets for sale to the public. We maintain direct contact with
the distributors through our in-house sales managers. In limited markets, where
use of our direct sales force is not cost-effective, we utilize food brokers and
outside representatives.
Marketing
to Retail Stores
We market
to retail stores by utilizing trade shows, trade advertising, telemarketing,
direct mail pieces and direct contact with the store. Our sales managers and
representatives visit these retail stores to sell directly in many regions.
Sales to retail stores are coordinated through our distribution network and our
regional warehouses.
Direct
Sales and Distribution
In June
2006, we started Direct Sales and Distribution (DSD) to stores in Northeast,
using a direct hired sales team and our delivery trucks. Our in-house sales
manager works directly with our new route drivers and with distributors in the
Northeast market area from Maine to Philadelphia. A DSD system allows us to have
greater control over our marketing efforts, as we become less dependent on
distributors who have relationships with our competitors. In 2007, we added
Southern California to our DSD, We hope to expand our DSD network to areas
outside of Northeast and Southern California as our resources will
allow.
DSD sales
represented approximately $75,942, $178,543 and $65,065 in 2008, 2007 and 2006,
respectively. These new direct-distribution accounts also include retail
locations, including health clubs, gyms, yoga studios, physician and integrative
medical offices, corporate and educational institutions, and “mom and pop”
convenience stores.
28
Marketing
to Consumers
Advertising. We utilize
several marketing strategies to market directly to consumers. Advertising in
targeted consumer magazines such as “Fit Yoga” and “Delicious” magazine,
in-store discounts on the products, in-store product demonstration, local and
regional sampling, coupon advertising, consumer trade shows, event sponsoring
and our website www.cell-nique.com are
current consumer-direct marketing campaigns.
Special Events and Concert
Series. We utilize special events and concerts to market directly to
consumers. In 2008, we purchased a promotional bus that has toured the country
from Connecticut to California. We have attended many musical events and have
exposed Cell-nique to over 50,000 persons per year.
Proprietary Coolers. The
placement of in-store branded refrigerated coolers by our competitors has proven
to have a significant positive effect on their sales. We are currently testing
our own Cell-nique branded coolers in a number of locations.
Sports
and Celebrity Endorsement
As part
of our marketing and communications campaign to promote Cell-nique ®,
we have unpaid endorsement from World Record cyclist Antony Galvin.
We are
targeting unpaid new celebrity endorsement engagements with musicians, yoga
teachers, physical fitness gurus, professional sports athletes and Hollywood
celebrities for endorsement deals in the future. Such celebrities will be the
focus of Cell-nique®
advertising campaigns and will conduct public appearances. In addition, our
celebrity endorsers will support the Cell-nique®
brand at events and programs that we currently sponsor.
Seasonality
Sales of
ready-to-drink beverages traditionally are somewhat seasonal, with the second
and third calendar quarters accounting for the highest sales volumes. Cell-nique
is targeted as a daily lifestyle functional beverage and tends to have a
stronger 1st and
4th
quarter then our industry. The volume of sales in the beverage business may be
affected by weather conditions. Sales of our beverage products may become
increasingly subject to seasonal fluctuations. Quarterly fluctuations may also
be affected by other factors, including the introduction of new products, the
opening of new markets where temperature fluctuations are more pronounced, the
addition of new bottlers and distributors, changes in the mix of sales of our
finished products and changes in and/or increased advertising, marketing and
promotional expenses.
Research
and Development
The new
age functional beverage category growth is largely sustained by the constant
addition of new products, brands and brand extensions. An integral part of our
strategy is to develop and introduce innovative products and packages. The
development time from inception of the concept through product development and
testing to the manufacture and sale of the finished product is several months.
Not all new ideas survive consumer research. Our research, development,
manufacture, and distribution of Cell-nique®
and other beverage products have thus far been limited by our capital
resources.
We are
currently engaged in several research and development activities and plan for
strategic acquisitions for expanding our line of products and further
determining the implications of mixing Cell-nique®
superfood formula with other components such as teas, non-dairy beverages and
supplements.
Research
and development expenditures are expensed as incurred. Development activities
generally relate to creating new products, improving or creating variations of
existing products by mixing the formulas with other components such as teas,
non-dairy beverages and supplements. Research and development
expenditures were $4,350 and $9,094 for the six months ended June 30, 2009 and
2008.
29
Manufacturing
Process
The
principal raw materials used are glass bottles which are commonly and readily
available in the market place worldwide, as well as vegetables, fruit juice
concentrates and herbs which are commonly and readily available in the market
place worldwide, the costs and availability of which are subject to
fluctuations. Due to the energy price fluctuations that continue to affect the
glass industry over the past few years, the prices of glass bottles continue to
increase. The prices of raw material ingredients continued to increase in 2007 -
2008. These increased costs, together with other increased costs, primarily
energy, gas and freight, resulted in increases in certain product costs that are
ongoing and are expected to continue to exert pressure on our gross margins in
the foreseeable future. We purchase raw materials from multiple
suppliers and don’t foresee any supply constraints.
We rely
on third-party manufacturers to produce our products, using our proprietary
formula and flavor ingredients. Chemists continually observe the
product-manufacture and production-run and test the finished beverage product
and the package integrity. We obtain the raw materials for the manufacture of
our products from several sources and arrange for the direct delivery of these
raw materials to the third-party manufacturer. We normally pre-pay for the
manufacture and packaging materials. We own the finished inventory that is
shipped to warehouses upon completion.
We use
several suppliers of all necessary raw materials within the United States and
also available worldwide . In addition, there are numerous
co-packers/bottlers/ manufacturers in the United States that can
manufacture our products for us. We do not have any written agreements
or commitments with our material suppliers , co-packers or
manufacturers, and we do not anticipate having contracts with any entities or
persons committing such suppliers to provide the materials required for the
production of our products or committing such manufacturers to provide
manufacturing services to us or committing us to purchase any materials or
manufacturing services from any specific entities.
Distributors
For the
six months ended June 30, 2009, natural food distributors such as, United
Natural Foods, Tree of Life, Natures Best, and Select Nutrition, accounted for
approximately 88% of our revenues, with the 12% balance a result of direct
sales marketing efforts. We continue to diversify sales and sales
channels. We remain dependent, however, on all of our distributors, and the loss
of any of our major distributors would have a material adverse effect on our
operating results.
We
have no agreements with most of our distributors, and we believe the lack of
agreements with United, Tree of Life, Natures Best, Select Nutrition are normal
to our business and the natural food industry. These distributors have
non-exclusive rights to sell Cell-nique ®
and directly compete with each other for customers and distribution throughout
the country.
Competition
The
beverage industry is highly competitive. The principal areas of competition are
pricing, packaging, development of new products and flavors, and marketing
campaigns. Our product competes with a wide range of drinks produced by a
relatively large number of manufacturers, most of which have substantially
greater financial, marketing, and distribution resources than we
do.
Important
factors affecting our ability to compete successfully include:
·
|
the
taste and flavor of our products;
|
·
|
trade
and consumer promotions;
|
·
|
rapid
and effective development of new, unique, cutting-edge
products;
|
·
|
attractive
and different packaging;
|
·
|
branded
product advertising; and
|
30
·
|
pricing.
|
We also
compete for distributors who will concentrate on marketing our products over
those of our competitors, provide stable and reliable distribution, and secure
adequate shelf-space in retail outlets. Competitive pressures in the
alternative, energy, and functional beverage categories could cause our products
to be unable to gain market share and we could experience price erosion, which
could have a material adverse affect on our business and results.
We
compete not only for consumer acceptance, but also for maximum marketing efforts
by multi-brand licensed bottlers, brokers and distributors, many of which have a
principal affiliation with competing companies and brands. Our product competes
with all liquid refreshments and with products of much larger and substantially
better-financed competitors, including the products of numerous nationally and
internationally known producers such as The Coca-Cola Company, PepsiCo, Inc.,
Cadbury Schweppes plc, Red Bull Gmbh, Kraft Foods, Inc., Nestle Beverage
Company, Tree Top, Inc., and Ocean Spray Cranberries, Inc. We also compete with
companies that are smaller or primarily local in operation. Our products also
compete with private label brands such as those carried by grocery store chains,
convenience store chains and club stores.
To date,
our significant competition includes the following companies:
·
|
Bossa
Nova Beverage Group;
|
·
|
Fuze
Beverage, LLC;
|
·
|
POM
Wonderful, LLC;
|
·
|
Sambazon,
Inc.
|
·
|
Naked
Juice;
|
·
|
Odwalla;
|
·
|
Bolthouse
Farms;
|
·
|
V8
Juice; and
|
·
|
GT
Kambucha Tea
|
Fuze
Beverage, LLC produces a product line named “Vitalize,” which are
non-carbonated beverages that contain anti-oxidants and electrolytes. POM
Wonderful, LLC produces a line of “POM Wonderful Pomegranate
Juices,” which contains naturally occurring polyphenol antioxidants,
Sambazon, Inc.’s “ Organic
Açai Juice with supergreens” contains açai berries and blue agave syrup,
Naked, Odwalla, Bolthouse Farms offer superfood/supergreen smoothie drinks, GT
Kambucha offers a Supergreen SKU and V8 may be the oldest and best known
vegetable drink offers Fusion, Splash and original formula.
Cell-nique
is differentiated from the competition in several ways:
·
|
Cell-nique
is vegetable-based not
fruit-based resulting in lower calories and natural
sugars.
|
·
|
Cell-nique
uses 31 organic superfoods which is more than competitors and competitors
are not organic.
|
31
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements and the
related notes appearing elsewhere in this prospectus. This discussion and
analysis may contain forward-looking statements based on assumptions about our
future business. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including but not limited to those set forth under “Risk Factors” and elsewhere
in this prospectus.
Historical
Development
In 2005,
Dan Ratner, our founder and Chief Executive Officer, began development of
Cell-nique, his first beverage creation. After 12 months of market and product
development, the product was introduced to the health food store market in the
Northeast in spring of 2006. By 2007, we expanded and diversified sales through
east coast natural food distributors from Maine to Florida and moved our
production to a larger facility in New Orleans, LA. By June 2008, we
had expanded and diversified sales of our products nationwide through natural
food distributors from coast to coast and moved our production to a larger
facility in Milwaukee, WI. Since inception, Cell-nique’s supergreen
drink has sold in excess of 524,000 bottles which represent approximately
$2,600,000 in retails sales.
Overview
We
develop, manufacture, market and sell organic beverages. “Functional Beverages”
is a category that may includes natural soda, vegetable and fruit juices and
nutritional drinks, ready-to-drink teas, sports drinks and enhanced water. We
currently manufacture, market and sell nine unique flavors:
Cell-nique Super Green
Drink
|
·
|
Apple
|
|
·
|
Topical
|
|
·
|
Pomegranate
|
|
·
|
Citrus
Vanilla
|
|
·
|
Japanese
Roasted (Kukicha) Tea
|
|
·
|
Lemon
Ginger
|
|
·
|
Berry
Grape
|
|
·
|
Root
Beer
|
|
·
|
Dark
Chocolate
|
We sell
most of our products in specialty gourmet and natural food stores, supermarket
chains, retail stores and restaurants in the United States. We primarily sell
our products through a network of natural, gourmet and independent distributors.
We also maintain an organization of in-house sales managers who work mainly in
the stores serviced by our natural, gourmet and mainstream distributors and with
our distributors. We work with regional independent sales representatives who
maintain store and distributor relationships in a specified territory. In the
nationwide, we have our own direct sales and distribution system.
The
following table shows a breakdown of net sales with respect to our distribution
channels for the periods set forth in the table:
32
Direct Sales
|
% of
total
sales
|
Natural Food
Distributors
|
% of
total
sales
|
Total
Sales
|
Total
Cases
|
|||||||||||||||||||
2009*
|
$ | 31,064 | 12 | % | $ | 224,394 | 88 | % | $ | 255,458 | 8,792 | |||||||||||||
2008
|
$ | 75,942 | 17 | % | $ | 371,995 | 83 | % | $ | 524,485 | 19,469 | |||||||||||||
2007
|
$ | 178,543 | 73 | % | $ | 81,500 | 27 | % | $ | 260,043 | 10,190 | |||||||||||||
2006
|
$ | 65,065 | 100 | % | $ | - | 0 | % | $ | 65,065 | 1,813 | |||||||||||||
Total
|
$ | 350,614 | $ | 677,889 | $ | 1,105,051 | 40,264 |
* as of
June 30, 2009
Historically,
we have focused our marketing efforts on natural and gourmet food stores. In
2008, we expanded our marketing efforts to include more mainstream markets.
These efforts included selling our products directly to:
·
|
large
retail accounts, such as Whole Foods Markets, Wegmans, Fiesta Markets,
Walgreens, as well as expanding into natural food sections (store within a
store) in major mass market grocery
stores
|
·
|
13,000
Independent natural food stores
nationwide.
|
We
believe that the increase in net sales over this period comes from three
factors:
·
|
successes
in our direct distribution
strategy,
|
·
|
increases
in our core of national distribution to natural and gourmet food stores
and mainstream supermarket chains,
and
|
·
|
increases
in our direct sales to large
retailers.
|
Almost as
important as increasing our net sales are increasing our gross margins. We
continue to work to reduce costs related to production of our products. However,
we have encountered difficulties in increasing our gross margins due to certain
factors, including:
·
|
inefficiencies
commensurate with a start-up period for 2006 and 2007 due to small batch
runs at contracted production facility,
and
|
·
|
higher
freight, glass and production expenses due to the increase in the cost of
fuel and ingredients prices.
|
Intellectual
Property
Trademarks,
trade dress and trade secrets as critical to our company. We have
registered our trademarks in the United States that are very important to our
business. We regard our trademarks, copyrights and similar
intellectual property as critical to our success and attempt to protect such
property with registered and common law trademarks and copyrights, restrictions
on disclosure and other actions to prevent infringement. Product
packages, mechanical designs and artwork are important to our success and we
would take action to protect against imitation of our packaging and trade dress
and to protect our trademarks and copyrights, as necessary. We also
rely on a combination of laws and contractual restrictions, such as
confidentiality agreements, to establish and protect our proprietary rights,
trade dress and trade secrets. However, laws and contractual
restrictions may not be sufficient to protect the exclusivity of our
intellectual property rights, trade dress or trade
secrets. Furthermore, enforcing our rights to our intellectual
property could involve the expenditure of significant management and financial
resources. Third parties may infringe or misappropriate our
trademarks and similar proprietary rights. Moreover, if we are found
to have been deficient in policing our trademarks and proprietary rights, we may
lose our rights to such intellectual property. If we lose some or all of our
intellectual property rights, our business may be materially and adversely
affected.
33
Regulation
The
United States Department of Agriculture (USDA) and Food and Drug Administration
(FDA) issues rules and regulations for the food and beverage industry,
including, but not limited to, the labeling and formulary ingredients of
beverage products. We are also subject to various state and local statutes and
regulations applicable to the production, transportation, sale, safety,
advertising, and labeling of our product. Compliance with these provisions has
not had, and we do not expect such compliance to have, any material adverse
effect upon our capital expenditures, net income, or competitive position.
Regulatory guidelines, however, are constantly changing, and there can be no
assurance that our product and our third-party manufacturers will be able to
comply with ongoing government regulations.
There are
no governmental approvals necessary to manufacture and sell our food or
beverages. The Company, our co-packers and some raw material suppliers must
follow USDA’s National Organic Program (NOP) which develops, implements, and
administers national production, handling, and labeling standards for organic
agricultural products. The NOP also accredits the certifying agents (foreign and
domestic) who inspect organic production and handling operations to certify that
they meet USDA standards. Cell-nique is inspected by Oregon Tilth and
is in full compliance with NOP regulations.
Employees
As of
March 31, 2009, we had 2 full-time employees who presently draw no salary
and 2 FTE that draw hourly compensation. The balance of our 75+ workforces is
outsourced using brokerage contracts and other independent contractor agreements
to support nationwide operations. Such agents meet the IRS and various state
employment regulations definition of independent contractor and either work for
themselves or other such company which provides said services which include
marketing, merchandising and sales support for the Company. The terms of such
agreements are subject to the Companies cancellation on 30 days notice. The
company has many options to execute its sale and marketing operations which
include hiring staff as employees or outsourcing staff field staff to
independent contractors. The Company does not see a limitation of qualified
workers or independent contractors to operate its business. None
of our employees are covered by a collective bargaining agreement, nor are they
represented by a labor union. We have not experienced any work stoppages, and we
consider relations with our employees to be good.
Financial
Condition and Results of Operations
Results
of Operations
Three
months ended June 30, 2009 Compared to Three months ended June 30,
2008
Sales
of $183,168 for the three months ended June 30, 2009 represented an increase of
1%, as compared to the prior year same period amount of $181,378. The
increase in revenues is primarily due to expanded sales
efforts.
Cost
of Goods Sold
Cost
of goods sold consists primarily of the costs of our ingredients, packaging,
production and freight. Cost of goods sold decreased by 24% to
$83,614 during the three months ended June 30, 2009 from $109,719 in
2008. Our costs of sales on a per-unit basis are
approximately 24% lower in the 2009 three month period, over the same prior
year period, due to lower commodity prices on certain ingredients and freight
fees. We are also currently negotiating significant reductions
in glass costs, and anticipate further reductions in our cost of goods
sold.
Gross
Profit
Our
gross profit increased to $99,554 in the three months ended June 30, 2009, from
$71,659 in 2008, an increase of $27,895 or
39%. The gross profit as a percentage of sales increased to 54% in
2009, from 40% in 2008. This gross profit margin increased is
primarily due to the effective cost of good sold savings described
above.
Selling
and marketing expenses
Selling
and marketing expenses consist primarily of direct charges for staff
compensation costs, advertising, sales promotion, marketing and trade shows.
Selling and marketing costs decreased to $94,771 in the three months ended June
30, 2009 from $108,362 in 2008, a net decrease of $11,591 or 11%. The
decrease is primarily due to decreases in compensation and travel costs,
decreases in advertising promotion and trade shows.
Our
strategic direction in sales is to focus on our product placements in an
estimated 10,500 natural food stores nationwide. We have found that our most
effective sales efforts are to natural food
stores.
34
General
and Administrative Expenses
General
and administrative expense consists primarily of the cost of executive,
administrative, and finance personnel, as well as professional fees. General and
administrative expenses increased to $50,567 during the three months ended June
30, 2009 from $35,586 in the same period of 2008, a net increase of $14,981 or
42%. The increase in 2009 is primarily due to an increase in accounting and
legal cost related to the SEC offering.
Loss
from Operations
Our
loss from operations decreased to $56,295 in the three months ended June 30,
2009 from $83,014 in the same period of 2008.
Interest
Expense
Interest
expense increased to $23,083 in the three months ended June 30, 2009, compared
to interest expense of $17,852 in the same period of 2008. The
increase is due to the increased borrowing under a working capital
facility.
Six
months ended June 30, 2009 Compared to Six months ended June 30,
2008
Sales
of 255,458 for the six months ended June 30, 2009 represented a decrease
of 11% or $34,606, as compared to the 2008 same period amount of
$290,064. The decrease in revenues is primarily due to a one time new
warehouse loading in 2008.
Cost
of Goods Sold
Cost
of goods sold consists primarily of the costs of our ingredients, packaging,
production and freight. Cost of goods sold decreased by 27% to
$129,209 during the six months ended June 30, 2009 from $177,070 in
2008. Our costs of sales on a per-unit basis are approximately 27%
lower in the 2009 six month period, over the same prior year period, due to
lower commodity prices on certain ingredients and reduced freight
fees. We are also currently negotiating for significant reductions in
glass costs, and anticipate further reductions in our cost of goods
sold.
Gross
Profit
Our
gross profit increased to $126,249 in the six months ended June 30, 2009, from
$112,994 in 2008, an increase of $13,255 or 12%. The gross profit as
a percentage of sales increased to 49% in 2009, from 39% in
2008. This gross profit margin increase is primarily due to reduced
costs of goods sold.
Selling
and marketing expenses
Selling
and marketing expenses consist primarily of direct charges for staff
compensation costs, advertising, sales promotion, marketing and trade shows.
Selling and marketing costs decreased to $181,948 in the six months ended June
30, 2009 from $182,785 in 2008, a net decrease of $837 or less than
1%.
Our
strategic direction in sales is to focus on our product placements in an
estimated 10,500 natural food stores nationwide. We have found that our most
effective sales efforts are to natural food stores.
General
and Administrative Expenses
General
and administrative expense consists primarily of the cost of executive,
administrative, and finance personnel, as well as professional fees. General and
administrative expenses increased to $71,445 during the six months ended June
30, 2009 from $70,079 in the same period of 2008, a net increase of $1,366 or
2%. The increase in 2009 is primarily due to a decrease in professional fees
expense.
Loss
from Operations
Our
loss from operations decreased to $142,514 in the six months ended June 30, 2009
from $156,950 in the same period of 2008.
Interest
Expense
Interest
expense increased to $44,340 in the six months ended June 30, 2009, compared to
interest expense of $34,167 in the same period of 2008. The increase
is due to the increased borrowing under a working capital
facility.
35
Liquidity
and Capital Resources
As of
June 30, 2009, we had shareholders equity of ($1,104,460) and we had working
capital of $94,283, compared to shareholders equity of ($917,606) and working
capital of $147,608 at December 31, 2008. Cash and cash equivalents were $0 as
of June 30, 2009, as compared to $0 at December 31, 2008. This decrease in our
working capital and cash position was primarily attributable to the proceeds
from the sale of our inventory, net of the repayment of accounts
receivable. We fund our working capital cash position on June 30,
2009, based on availability under our line of credit with Physicians Capital
Corp.
We
believe that the Company has a number of options for gaining the necessary
working capital in 2009 needed to fund our seasonality, product launches and
other growth plans. Our primary capital source will be cash flow from
operations. We are also investigating improved working capital loans
that more fully value our assets for collateral. We may raise funds
through a combination of equity and debt. We believe that the
Company can become leaner if our sales goals do not materialize, and that our
costs can be managed to produce profitable operations. Historically,
we have financed our operations primarily through a line of credit and cash
generated from operations.
Net
cash used in operations during 2009 was $122,509 compared with $172,984 used in
operations during the same period in 2008. Cash used in
operations during 2009 was primarily due to an increase in accounts receivable
and loss form operations, offset by an increase in inventory and accounts
payable.
Net
cash used in investing activities of $9,052 during 2009 compared with $13,908
during 2008 is primarily the result of equipment purchases.
Net
cash provided by financing activities of $131,561 during 2009 was primarily due
to proceeds from the working capital loans.
Our
operating losses have negatively impacted our liquidity and we are continuing to
work on decreasing operating losses, while focusing on increasing net sales. We
are currently borrowing near the maximum on our line of credit. We
believe that we can raise money through the equity markets.
We may
not generate sufficient revenues from product sales in the future to achieve
profitable operations. If we are not able to achieve profitable operations at
some point in the future, we eventually may have insufficient working capital to
maintain our operations as we presently intend to conduct them or to fund our
expansion and marketing and product development plans. In addition, our
losses may increase in the future as we expand our manufacturing capabilities
and fund our marketing plans and product development. These losses, among other
things, have had and will continue to have an adverse effect on our working
capital, total assets and stockholders’ equity. If we are unable to achieve
profitability, the market value of our common stock will decline and there would
be a material adverse effect on our financial condition.
If we
continue to suffer losses from operations, the proceeds from our public offering
and private placement may be insufficient to support our ability to expand our
business operations as rapidly as we would deem necessary at any time, unless we
are able to obtain additional financing. There can be no assurance that we
will be able to obtain such financing on acceptable terms, or at all. If
adequate funds are not available or are not available on acceptable terms, we
may not be able to pursue our business objectives and would be required to
reduce our level of operations, including reducing infrastructure, promotions,
personnel and other operating expenses. These events could adversely affect our
business, results of operations and financial condition. We cannot assure you
that additional financing will be available on terms favorable to us, or at all.
If adequate funds are not available or if they are not available on acceptable
terms, our ability to fund the growth of our operations, take advantage of
opportunities, develop products or services or otherwise respond to competitive
pressures, could be significantly limited.
“Best Efforts” –
Maximum Sales and No Minimum Sales
We
plan to conduct our offering as a “best efforts” basis since there has been no
formal commitment for any amount of capital either through individual
subscribers or NASD Broker-Dealers.
If the
Company should raise the maximum net proceeds from the offering in the amount of
$29,925,000 it will be able to expand the Company and acquire other brands and
companies. There is no minimum sale for this offering and all efforts
to raise capital are on a best efforts basis. If the Company does not
raise capital it will have to limit its operations to gross operating
margins.
36
Cash
Requirements
It is
the Company’s intent to raise net proceeds of $29,925,000 from this public
offering for strategic growth. The following summarizes anticipated cash
requirements to achieve such strategic goals. Should we not raise the net
proceeds from this offering we would have to limit our growth and expenditure to
our gross operating margins.
Need for Additional
Personnel
It is
anticipated that with the investment of proceeds from this Offering, the number
of employees may increase, even with our outsourcing many tasks. If funds are
not available then management will operate at expenditure relative to our gross
operating margins.
Going
Concern
Our
accountant’s report contains a going concern paragraph meaning that to date we
have limited operational history. Our objective is to remain a going
concern, and as previously mentioned, we have no plans to cease operations,
declare bankruptcy or liquidate any of the Company’s assets and may have extra
funds available as debt financing.
As shown
in the accompanying financial statements, which include all adjustments which in
the opinion of management are necessary in order to make the financial
statements not misleading, the Company has incurred cumulative net operating
losses of $1,354,460 through June 30, 2009 since inception, has a stockholders’
deficit, negative working capital, and is considered a company with limited
operating history. Management’s plans include the raising of capital through the
equity markets to fund future operations and the generating of revenue through
its business. Failure to raise adequate capital and generate adequate sales
revenues could result in the Company having to curtail or cease
operations. Additionally, even if the Company does raise sufficient
capital to support its operating expenses and generate adequate revenues, there
can be no assurances that the revenue will be sufficient to enable it to develop
business to a level where it will generate profits and cash flows from
operations. Our auditors have concluded in their accountant’s report that these
matters raise substantial doubt about the Company’s ability to continue as a
going concern. However, the accompanying financial statements have
been prepared on a going concern basis, which contemplates the realization of
assets and satisfaction of liabilities in the normal course of
business. These financial statements do not include any adjustments
relating to the recovery of the recorded assets or the classification of the
liabilities that might be necessary should the Company be unable to continue as
a going concern.
Loans
Payable
Previous
loans are and have been due to related parties.
Results of
Operations
We have
engaged in limited operations since 2006.
For the
current fiscal year, we anticipate incurring a loss as a result of
organizational expenses, expenses associated with registration under the
Securities Exchange Act of 1934, and expenses associated with locating and
evaluating acquisition candidates. We anticipate that until a business
combination is completed with an acquisition candidate, we will not generate
revenues other than interest income, and may continue to operate at a loss after
completing a business combination, depending upon the performance of the
acquired business.
Substantially
all of our working capital needs subsequent to this offering will be
attributable to the identification of a suitable target, and thereafter to
effectuate a business combination with such target. Such working capital needs
are expected to be satisfied from the net proceeds of this offering. Although no
assurances can be made, we believe we can satisfy our cash requirements until a
business combination is consummated with 10% of the net proceeds derived hereby.
Because of the possible indefinite period of time to consummate a business
combination and the nature and cost of our expenses related to our search for
and analysis of a target, there can be no assurances that our cash requirements
until a business combination is consummated will be satisfied with 10% of the
net proceeds of this offering. Prior to the conclusion of this offering we
currently anticipate our expenses to be limited to accounting fees, legal fees,
telephone, mailing, filing fees, escrow agent fees and transfer agent fees. See
"Risk Factors."
37
We do not
foresee that we would enter into a merger or acquisition transaction with any
business with which its officers or directors are currently affiliated. Should
we determine in the future, contrary to the foregoing expectations, that a
transaction with an affiliate would be in our best interests and our
stockholders, we are in general permitted by law to enter into such a
transaction if:
(1) The
material facts as to the relationship or interest of the affiliate and as to the
contract or transaction are disclosed or are known to the Board of Directors,
and the Board in good faith authorizes the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even
though the disinterested directors constitute less than a quorum;
or
(2) The
material facts as to the relationship or interest of the affiliate and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(3) The
contract or transaction is fair as to us as of the time it is authorized,
approved or ratified, by the Board of Directors or the
stockholders.
Need for Additional
Financing
We
believe that our existing working capital lines will allow us to continue
operations at the present operating expense levels, including the costs of
compliance with the continuing reporting requirements of the Securities Exchange
Act of 1934, as amended, for a period of approximately one year. Accordingly, in
the event we are able to complete a business combination during this period, we
anticipate that our existing capital will be sufficient to allow us to
accomplish the goal of completing a business combination. There is no assurance,
however, that the available funds will ultimately prove to be adequate to allow
us to complete a business combination, and once a business combination is
completed, our needs for additional financing are likely to increase
substantially.
No
commitments to provide additional funds have been made by management or other
stockholders. Accordingly, there can be no assurance that any additional funds
will be available to us to allow it to cover our expenses.
Irrespective
of whether our cash assets prove to be inadequate to meet our operational needs,
we might seek to compensate providers of services by issuances of stock in lieu
of cash.
Critical Accounting
Policies
The
preparation of the financial statements requires the use of estimates and
assumptions. These affect the classification and valuation of assets,
liabilities, income, expenses and contingent liabilities. Estimates and
assumptions mainly relate to the useful life of noncurrent assets, the
discounted cash flows used in impairment testing and the establishment of
provisions for litigation, pensions and other benefits, taxes, environmental
protection, inventory valuations, sales allowances, product liability and
guarantees. Estimates are based on historical experience and other assumptions
that are considered reasonable under the circumstances. Actual values may vary
from the estimates. The estimates and the assumptions are continually
reviewed.
To
enhance the information content of the estimates, certain provisions that could
have a material effect on the financial position and results of operations are
selected and tested for their sensitivity to changes in the underlying
parameters. To reflect uncertainty about the likelihood of the assumed events
actually occurring, the impact of a 5 percent change in the probability of
occurrence is examined in each case. Analysis has not shown other provisions to
be materially sensitive.
38
Critical
accounting and valuation policies and methods are those that are both most
important to the portrayal of the Company’s financial position, results of
operations and cash flows, and that require the application of difficult,
subjective and complex judgments, often as a result of the need to make
estimates about the effects of matters that are inherently uncertain and may
change in subsequent periods. The critical accounting policies that we disclose
will not necessarily result in material changes to our financial statements in
any given period but rather contain a potential for material change. While not
all of the significant accounting policies require difficult, subjective or
complex judgments, the Company considers that the following accounting policies
should be considered critical accounting policies.
Intangible assets and
property, plant and equipment
At June
30, 2009 the Company had intangible assets with a net carrying amount of $0 and
property, plant and equipment with a net carrying amount of $82,332. Intangible
assets with finite useful lives and property, plant and equipment are amortized
over their estimated useful lives. The estimated useful lives are based on
estimates of the period during which the assets will generate
revenue.
Intangible
assets with finite useful lives and property, plant and equipment are tested for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may no longer be recoverable. Goodwill and
intangible assets with indefinite useful lives must be tested annually for
impairment. In compliance with SFAS No. 142 (Goodwill and Other Intangible
Assets), impairment losses are measured by comparing the carrying amounts to the
fair value for intangible assets and to implied fair value for goodwill. Where
it is not possible to estimate the impairment loss for an individual asset, the
loss is assessed on the basis of the discounted cash flow for the
cash-generating unit to which the asset belongs. Estimating the discounted
future cash flows involves significant assumptions, especially regarding future
sales prices, sales volumes and costs. The discounting process is also based on
assumptions and estimations relating to business-specific costs of capital,
which in turn are based on country risks, credit risks as well as additional
risks resulting from the volatility of the respective line of business. The
present value of future cash flows measures an asset’s value based on our
continuing use of the asset and its retirement at the end of its useful
life.
Stock based
compensation
The
Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
123R related to accounting for stock-based compensation. As a result, stock
options are measured based on the grant-date fair value of the
award.
Forward-looking
Information
Certain
statements in this document are forward-looking in nature and relate to trends
and events that may affect our future financial position and operating results.
The words "expect" "anticipate" and similar words or expressions are to identify
forward-looking statements. These statements speak only as of the date of the
document; those statements are based on current expectations, are inherently
uncertain and should be viewed with caution. Actual results may differ
materially from the forward-looking statements as a result of many factors,
including changes in economic conditions and other unanticipated events and
conditions. It is not possible to foresee or to identify all such factors. We
make no commitment to update any forward-looking statement or to disclose any
facts, events or circumstances after the date of this document that may affect
the accuracy of any forward-looking statement.
39
Financial Planning and
Historical Information
The
Issuer has not registered any of its shares to date.
Ownership
of Common Stock
The Company’s authorized capitalization
is currently comprised of 50,000,000 shares of $.00001 par value per share
Common stock and 1,000,000 of $2.00 stated value per share Preferred
stock. Of these, 14,000,000 shares of Common will be
outstanding following the completion of this Offering. Assuming that the maximum
number offered hereunder of 6,000,000 Common Shares are sold, insiders will own
70% of the Company's issued and outstanding common stock. See "Management" and
"Risk Factors - Control by Management."
In addition, shares of authorized
Common stock will be reserved for employee benefit plans and directors stock
option plans. The details of eligibility and operation of these plans will be
established by the Board of Directors at a later date.
Upon completion of the corporate
reorganization, the distribution of the Company Common and Preferred stock will
be as follows. See * below,
|
Shares
|
|
||||||
Owner
|
Common Stock:
|
Percent | ||||||
Insiders
|
14,000,000 | 70 | % | |||||
New Stock Sale to Investors
|
6,000,000 | 30 | % | |||||
Total
Shares Outstanding
|
20,000,000 | 100 | % | |||||
Preferred
Stock
|
None
|
Principal
Shareholders
The following table sets forth
certain information regarding beneficial ownership of our common stock as of
June 30, 2009, by (i) each person (including any "group" as that term is used in
Section 13(d)(3) of the Securities Act of 1934 (the "Exchange Act") who is known
by us to own beneficially 5% or more of the common stock, (ii) each director of
the Company, and (iii) all directors and executive officers as a group. Unless
otherwise indicated, all persons listed below have sole voting power and
investment power with respect to such shares. The total number of common shares
authorized is 50,000,000 shares, each of which is $.00001 per share par value.
No shares have been issued to parties owning less then 5% of the outstanding
shares. 14,000,000 shares have been issued and are outstanding as
follows:
40
Principal
Shareholders Showing Both Classes of Stock Common and Preferred
Note:
Percent Owned is total Controlling Interest in Company of both Classes
together
Shares Beneficially
|
Shares Beneficially
|
|||||||||||||||
Owned Prior to Offering
|
Owned Prior to Offering
|
|||||||||||||||
Number
|
Percent
|
Number
|
Percent
|
|||||||||||||
Physicians
Capital Corp.
|
||||||||||||||||
Common
|
14,000,000 | 100 | % | 14,000,000 | 70 | % | ||||||||||
Pref.
|
None
|
0 | % |
None
|
0 | % | ||||||||||
100 | % | 70 | % | |||||||||||||
Total
Shares Outstanding
|
||||||||||||||||
Common
|
14,000,000 | 100 | % | 14,000,000 | 70 | % | ||||||||||
Pref.
|
None
|
0 | % |
None
|
0 | % | ||||||||||
100 | % | 100 | % |
Directors
and officers as a group – 14,000,000 shares
Controlled
through their ownership of Physicians Capital Corporation: Dan Ratner,
President/CEO and Donna Ratner, Chief Marketing Officer.
Management
There
are currently 2 occupied seats on the Board of Directors. The following table
sets forth information with respect to the directors and executive
officers.
Name
|
Position
|
Age
|
|||
Dan
Ratner
|
Chief
Executive Officer, Chief Financial Officer and Chairman of the
Board
|
46
|
|||
Donna
Ratner
|
Chief
Marketing Officer and Vice Chairman and Secretary
|
49
|
|||
|
Dan Ratner, founded our
company in 2006. Mr. Ratner has served as our Chairman, Chief Executive Officer
and Chief Financial Officer since our incorporation in 2006. Mr. Ratner has been
responsible for our design and products, including the original product recipes,
the proprietary manufacturing process and the packaging and marketing
strategies. Prior to Founding Physicians Capital Corp in 1996, Mr. Ratner had
worked as Vice President at Advanced Health, GE Capital and Linc Group/ABN-AMRO
Bank, and Senior Consultant at Price Waterhouse. Mr. Ratner received
a double major B.S. in Accounting and Finance in 1985 from University of
Arizona, Tucson.
Donna Ratner has been our
Executive Director of Marketing since October 2007. Ms. Ratner worked
as Marketing Manger at CBS Sports and MTV networks in the national marketing
department. Ms Ratner marketed and brokered Shenandoah Natural Beef to natural
food stores including Whole Foods Market.
Other
than the relationship of Dan Ratner and Donna Ratner, none of our directors or
executive officers are related to one another.
41
There are
no written employment agreements with any of our officers or key employees,
including Dan Ratner or Donna Ratner. We do not have any agreements which
provide for severance upon termination of employment, whether in context of a
change of control or not.
Executive
Advisory Board
We will establish an informal
executive advisory board, appointed by Dan Ratner and Donna Ratner. The role of
the executive advisory board is to be available to assist our management with
general business and strategic planning advice upon request from time-to time.
Accordingly , the executive advisory board members intend to devote
themselves part-time to our affairs.
Executive
Compensation
No
officer or director has received any compensation. Until the Company acquires
additional capital, it is not intended that any officer or director will receive
compensation from the Company. See "Certain Relationships and
Related Transactions." The Company has no stock option, retirement, pension, or
profit-sharing programs for the benefit of directors, officers or other
employees, but the Board of Directors may recommend adoption of one or more such
programs in the future. At this time there is no executive compensation
agreements and plans for executive compensation have not been contemplated or
formalized. Based on a successful Offering such agreements will be contemplated
and disclosed accordingly.
The Company has employed the law firm
of Miles Garnett, Esq. for providing legal services in connection with
registration of the Company's shares.
Other
Transactions
All transactions between our company
and its officers. directors and 5% or more shareholders will be on terms no less
favorable to the Company than that which could be obtained from independent
third parties.
Directors'
Compensation
Members of the executive advisory
board will receive payment for their services, travel and other expenses
incurred in connection with attendance at each meeting.
Indemnification
of Officers and Directors
At present we have not entered into
individual indemnity agreements with our officers or directors. However, our
by-laws contain a provision which requires us to indemnify any director or
officer or former director or officer against actual expenses incurred in
defending any legal action where they are a party by reason of being or having
been a director or officer. However we are not required to indemnify any such
person who is found to be liable for negligence or misconduct in their
performance of their duty.
Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to our directors,
officers and controlling persons pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by us of expenses incurred or paid by a director, officer or
controlling person in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with
the securities being registered, we will, unless in the opinion of our counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933, as amended,
and we will be governed by the final adjudication of such case.
42
Our
amended certificate of incorporation provides that, to the fullest extent
permitted by Delaware law, as it may be amended from time to time, none of our
directors will be personally liable to 'us or our stockholders for monetary
damages resulting from a breach of fiduciary duty as a director.
Our
amended certificate of incorporation also provides discretionary indemnification
for the benefit of our directors, officers, and employees, to the fullest extent
permitted by Delaware law, as it may be amended from time to time.
Pursuant
to our amended bylaws, we are required to indemnify our directors, officers,
employees and agents, and we have the discretion to advance his or her related
expenses, to the fullest extent permitted by law.
Directors
and Officers Insurance
We are exploring the possibility of
obtaining directors and officers ("D & O") liability insurance. We have
obtained several premium quotations but have not entered into any contract with
any insurance company to provide said coverages as of the date of this offering.
There is no assurance that we will be able to obtain such
insurance.
Keyman
Life Insurance
No Keyman insurance has been
purchased to date, upon successful raising funds from the offering, life
insurance on key personnel is expected to be purchased after the effective date
of this offering in amounts up to $2 million, 50% payable to the Company and 50%
payable to family beneficiaries. We are planning to purchase such insurance
towards the cross purchase of shares from the estate of an officer or director
and to provide us with the capital to replace the executive loss (executive
search for successor, etc.). The costs of such insurance is not expected to be
material.
Conflicts
of Interest
None of our officers will devote more
than a portion of their time to the affairs of the Company. There will be
occasions when the time requirements of our business conflict with the demands
of the officers' other business and investment activities. Such conflicts may
require that we attempt to employ additional personnel. There is no assurance
that the services of such persons will be available or that they can be obtained
upon terms favorable to us.
Certain
Transactions
We shall not make any loans to any
officers or directors following this offering. Further, we shall not borrow
funds for the purpose of making payments to our officers, directors, promoters,
management or their affiliates or associates.
None of our officers, directors, or
affiliates has or proposes to have any direct or indirect material interest in
any asset proposed to be acquired by us through security holdings, contracts,
options, or otherwise. Although this situation could arise.
We have adopted a policy under which
any consulting or finder's fee that may be paid to a third party for consulting
services to assist management in evaluating a prospective business opportunity
would be paid in stock or in cash. Any such issuance of stock would be made on
an ad hoc basis. Accordingly, we are unable to predict whether or in what amount
such a stock issuance might be made.
It is not currently anticipated that
any salary, consulting fee, or finder's fee shall be paid to any of our
directors or executive officers, or to any other affiliate of the Company except
as described under "Executive Compensation" above.
43
We
maintain a nominal office at the residence of our company’s president, for which
the company pays $1 per year rent, and for which we anticipate paying same rent
in the future. We anticipate that our office will be moved, but cannot predict
future office or facility arrangements with our officers, directors or
affiliates and amounts the Company will to pay rent for such
offices.
Cell-nique
Corporation has a loan payable to Physicians Capital Corporation, which was the
parent company of Cell-nique since inception. Dan and Donna Ratner own and
control Physicians Capital Corporation and are majority shareholder of
Cell-nique Corporation. At June 30, 2009, the aggregate outstanding
principal balance of the Physicians Capital loan was $1,281,075 including an
aggregate accrued unpaid interest of $168,730. Cell-nique is in good standing
under the terms of the note agreement due on December 31, 2010. The principal
terms of the note between Physicians Capital Corporation and Cell-nique
Corporation are 8% interest annually based on the average outstanding balance
for the quarter and accrue until maturity.
Description
of Securities
All material provisions of our
capital stock are summarized in this prospectus. However the following
description is not complete and is subject to applicable Delaware law and to the
provisions of our articles of incorporation and bylaws. We have filed copies of
these documents as exhibits to the registration statement related to this
prospectus.
Common
Stock
We are authorized to issue 49,000,000
shares, at a par value of $.00001 per share. As of the date of this prospectus,
there are 14,000,000 shares outstanding. After giving effect to the offering,
the issued and outstanding capital common stock of the Company will consist of
20,000,000 shares. This assumes that 6,000,000, which is the maximum number of
shares offered hereunder, are sold through our self underwriting
You have the voting rights for your
shares. You and all other holders of common stock are entitled to one
vote for each share held of record on all matters to be voted on by
stockholders. You have no cumulative voting rights with respect to the election
of directors, with the result that the holders of more than 50% of the shares
voting for the election of directors can elect all of the directors then up for
election.
You have dividend rights for your
shares. You and all other holders of common stock are entitled to
receive dividends and other distributions when, as and if declared by the Board
of Directors out of funds legally available, based upon the percentage of our
common stock you own. We will not pay dividends. You should not expect to
receive any dividends on shares in the near future. This investment may be
inappropriate for you if you need dividend income from an investment in
shares.
You have rights if we are
liquidated. Upon our liquidation, dissolution or winding up of
affairs, you and all other holders of our common stock will be entitled to share
in the distribution of all assets remaining after payment of all debts,
liabilities and expenses, and after provision has been made for each class of
stock, if any, having preference over our common stock. Holders of common stock,
as such, have no conversion, preemptive or other subscription rights, and there
are no redemption provisions applicable to the common stock. All of the
outstanding common stock are, and the common stock offered hereby, when issued
in exchange for the consideration paid as set forth in this Prospectus, will be,
fully paid and nonassessable. Our directors, at their discretion, may borrow
funds without your prior approval, which potentially further reduces the
liquidation value of your shares.
You have no right to acquire shares
of stock based upon the percentage of our common stock you own when we sell more
shares of our stock to other people. This is because we do not
provide our stockholders with preemptive rights to subscribe for or to purchase
any additional shares offered by us in the future. The absence of these rights
could, upon our sale of additional shares, result in a dilution of our
percentage ownership that you hold.
44
Preferred
Stock
We are authorized to issue up to
1,000,000 shares of $2.00 stated value Preferred Stock. Under our Articles of
Incorporation, the Board of Directors has the power, without further action by
the holders of the common stock or preferred stock, to designate the relative
rights and preferences of the preferred stock, and to issue the preferred stock
in one or more series as designated by the Board of Directors. The
designation of rights and preferences could include preferences as to
liquidation, redemption and conversion rights, voting rights, dividends or other
preferences, any of which may be dilutive of the interest of the holders of the
common stock or the preferred stock of any other series. The issuance
of preferred stock may have the effect of delaying or preventing a change in
control without further shareholder action and may adversely affect the rights
and powers, including voting rights, of the holders of common
stock. In certain circumstances, the issuance of preferred stock
could depress the market price of the common stock. The Board of
Directors effects a designation of each series of preferred stock by filing with
the Delaware Department of State a Certificate of Amendment defining the rights
and preferences of each such series. Documents so filed are matters
of public record and may be examined in accordance with procedures of the
Department of State, or copies thereof may be obtained from us upon
request.
No
Preferred Stock share have been designated or issued or outstanding at
this
time.
Shares
Eligible for Future Sale
Upon completion of this offering, we
will have 20,000,000 common shares issued and outstanding assuming all the
6,000,000 maximum number of shares offered herein are sold through our self
underwriting. The common stock sold in this offering will be freely transferable
without restrictions or further registration under the Securities Act, except
for any of our shares purchased by an "affiliate" (as that term is defined under
the Act) who will be subject to the resale limitations of Rule 144 promulgated
under the Act.
There will be approximately 14,000,000
shares outstanding that are "restricted securities" as that term is defined in
Rule 144 promulgated under the Securities Act.
The common stock owned by insiders,
officers and directors are deemed "restricted securities" as that term is
defined under the Securities Act and in the future may be sold under Rule 144,
which provides, in essence, to: (i) shorten the holding period for the resale of
restricted securities of reporting companies from one year to six months; (ii)
substantially simplify Rule 144 compliance for non-affiliates by allowing
non-affiliates of reporting companies to freely resell restricted securities
after satisfying a six-month holding period (subject only to the Rule 144(c)
public information requirement until the securities have been held for one year)
and by allowing non-affiliates of non-reporting companies to freely resell
restricted securities after satisfying a 12-month holding period; (iii) for
affiliates' sales, revise the manner of sale requirements for equity securities,
eliminate such requirements for debt securities and relax the volume limitations
for debt securities; (iv) for affiliates' sales, raise the thresholds that
trigger Form 144 filing requirements from 500 shares or $10,000 to 5,000 shares
or $50,000; (v) simplify and streamline the preliminary note to and other parts
of Rule 144 and (vi) codify certain SEC staff interpretations relating to Rule
144.
Other
than shortening the holding period for reporting companies’ securities and
increasing the Form 144 threshold, the amendments do not relax the
other Rule 144 requirements as they affect “affiliates” of an issuer, so private
equity and other funds who own more than 10 percent of the issuer, have a seat
on the board or
otherwise control the issuer will remain subject to the more stringent Rule 144
requirements. Additionally,
common stock underlying employee stock options granted, to the extent vested and
exercised, may be resold beginning on the ninety-first day after the Effective
Date of a Prospectus, or Offering Memorandum pursuant to Rule 701 promulgated
under the Securities Act.
As of the date hereof and upon
completion of the offering, none of our common stock (other than those which are
qualified by the SEC in connection with this offering) are available for sale
under Rule 144. Future sales under Rule 144 may have an adverse effect on the
market price of the Common stock. Our officers, directors and certain of our
security holders have agreed not to sell, transfer or otherwise dispose of their
common stock or any securities convertible into common stock for a period of 12
months from the date hereof.
45
Under Rule 701 of the Securities Act,
persons who purchase shares upon exercise of options granted prior to the date
of this Prospectus are entitled to sell such common stock after the 90th day
following the date of this Prospectus in reliance on Rule 144, without having to
comply with the holding period requirements of Rule 144 and, in the case of
non-affiliates, without having to comply with the public information, volume
limitation or notice provisions of Rule 144. Affiliates are subject to all Rule
144 restrictions after this 90-day period, but without a holding
period.
There has been no public market for our
common stock. With a relatively minimal public float and without a professional
underwriter, there is little or no likelihood that an active and liquid public
trading market, as that term is commonly understood, will develop, or if
developed that it will be sustained, and accordingly, an investment in our
common stock should be considered highly illiquid. Although we believe a public
market will be established in the future, there can be no assurance that a
public market for the common stock will develop. If a public market for our
common stock does develop at a future time, sales by shareholders of substantial
amounts of our common stock in the public market could adversely affect the
prevailing market price and could impair our future ability to raise capital
through the sale of our equity securities.
Available
Information
We have filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement on Form S-1
relating to the common stock offered hereby. This prospectus, which is part of
the Registration Statement, does not contain all of the information included in
the Registration Statement and the exhibits and schedules thereto. For further
information with respect to us, the common stock offered hereby, reference is
made to the Registration Statement, including the exhibits and schedules
thereto. Statements contained in this Prospectus concerning the provisions or
contents of any contract, agreement or any other document referred to herein are
not necessarily complete. With respect to each such contract, agreement or
document filed as an exhibit to the Registration Statement, reference is made to
such exhibit for a more complete description of the matters
involved.
The Registration Statement, including
the exhibits and schedules thereto, may be inspected and copied at prescribed
rates at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, DC 20549. The Commission also maintains a web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission,
including the Company. The address of such site is
<http://www.sec.gov>.
We intend to furnish to our shareowners
annual reports containing audited consolidated financial statements certified by
independent public accountants for each fiscal year and quarterly reports
containing unaudited consolidated financial statements for the first three
quarters of each fiscal year.
We
will provide without charge to each person who receives a Prospectus, upon
written or oral request of such person, a copy of any of the information that
was incorporated by reference in the Prospectus (not including Exhibits to the
information that is incorporated by reference unless the Exhibits are themselves
specifically incorporated by reference). Any such request shall be directed to
the President of Cell-nique Corporation., Mr. Dan Ratner, 12 Old Stage Coach
Road, Weston CT 06883; Tel.# (203) 856-8550.
Within five days of our receipt of a
subscription agreement accompanied by a check for the purchase price, we will
send by first class mail a written confirmation to notify the subscriber of the
extent, if any, to which such subscription has been accepted. We reserve the
right to reject orders for the purchase of shares in whole or in part. Upon
acceptance of each subscriber, we will promptly provide our stock transfer agent
the information to issue shares.
You can also call or write us at any
time with any questions you may have. We would be pleased to speak with you
about any aspect of this offering.
46
Special
Note Regarding Forward-Looking Statements
This prospectus contains
forward-looking statements that reflect our views about future events and
financial performance. Our actual results, performance or achievements could
differ materially from those expressed or implied in these forward-looking
statements for various reasons, including those in the "risk factors" section
beginning on page 5. Therefore, you should not place undue reliance upon these
forward-looking statements.
Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance, or
achievements.
Dividend
Policy
We have never declared or paid cash
dividends on our common stock and anticipate that all future earnings will be
retained for development of our business. The payment of any future dividends
will be at the discretion of our Board of Directors and will depend upon, among
other things, future earnings, capital requirements, our financial conditions
and general business conditions.
Stock
Transfer Agent
Our transfer agent and registrar of the
Common Stock is 1st Global
Stock Transfer, L.L.C., 7361 Praire Falcon Road, Suite 1110, Las Vegas, NV
89128
Experts
Our
financial statements of Cell-nique Corporation. as of and for the years ended
December 31, 2008 and December 31, 2007 have been audited by Gruber &
Company, LLC, 121 Civic Center Drive, Ste 225, Lake Saint Louis,
MO 63367, Phone: 636-561-5639, Fax: 636-561-0735, independent
auditors, as set forth in their report included herein and incorporated herein
by reference. Such financial statements have been included in reliance upon such
report given upon their authority as experts in accounting and
auditing.
Our balance sheet of as of the six
months ended June 30, 2009 (an interim period) and the six months ended June 30,
2009 and the related statement of operations, stockholders’ equity, and cash
flows for the six month period then ended, have been reviewed by independent
registered public accounting firm Gruber & Company CPA, PLLC in accordance
with Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. All information included in
these financial statements is the representation of the management of the
Company
Legal
Matters
There is no past, pending or, to our
knowledge, threatened litigation or administrative action which has or is
expected by our management to have a material effect upon our business,
financial condition or operations, including any litigation or action involving
our officers, directors, or other key personnel.
The Law Offices of Miles Garnett, Esq.,
66 Wayne Avenue, Atlantic Beach, N.Y.11509, Tel. #(516)
371-4598, will pass upon certain legal matters relating to the
Offering.
There is no underwriter for this
offering. therefore, offerees will not have the benefit of an underwriter's due
diligence efforts which would typically include the underwriter to be involved
in the preparation of disclosure and the pricing of the common stock offered
hereby among other matters. As we have never engaged in the public sale of our
common stock. we have no experience in the underwriting of any such offering.
Accordingly. there is no prior experience from which investors may judge our
ability to consummate this offering. In addition, the common stock is being
offered on a "best efforts" basis. Accordingly, there can be no assurances as to
the number of shares that may be sold or the amount of capital that may be
raised pursuant to this offering.
47
Report
of Independent Registered Public Accounting Firm
|
F-1
|
Balance
Sheets (Unaudited June 30, 2009)
|
F-2
|
Statement
of Operations (Unaudited June 30, 2009)
|
F-3
|
Statements
of Cash Flows (Unaudited June 30, 2009)
|
F-4
|
Statement
of Stockholders' Deficit (Unaudited June 30, 2009)
|
F-5
|
Notes
to Financial Statements (Unaudited June 30, 2009)
|
F-6
|
Balance
Sheets (Audited December 31, 2008)
|
F-14
|
Statement
of Operations (Audited December 31, 2008)
|
F-15
|
Statements
of Cash Flows (Audited December 31, 2008)
|
F-16
|
Statement
of Stockholders' Deficit (Audited December 31, 2008)
|
F-17
|
Notes
to Financial Statements (Audited December 31, 2008)
|
F-18
|
48
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors
Cell-Nique
Corporation
We have
audited the accompanying balance sheets of Cell-Nique Corporation, as of
December 31, 2008 and 2007 and the related statements of operations,
stockholders' deficit and cash flows for each of the two
year periods then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cell-Nique Corporation as of
December 31, 2008 and 2007 and the related statements of operations,
stockholders' deficit and cash flows for each of the two year periods then
ended in conformity with accounting principles generally accepted in
the United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements the Company has suffered losses from operations and has
a deficit working capital and a deficit in retained earning that
raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/
Gruber & Company, LLC
Gruber
& Company, LLC
|
Lake
Saint Louis, Missouri
|
November
2 , 2009
|
F-1
Cell-Nique
Balance
Sheets
(Unaudited)
|
||||||||
June 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
Assets
|
||||||||
Current
assets
|
||||||||
Accounts
receivable
|
$ | 23,661 | $ | 18,116 | ||||
Inventory
|
103,365 | 138,440 | ||||||
Total
current assets
|
127,026 | 156,556 | ||||||
Machinery
and equipment, net
|
82,332 | 84,300 | ||||||
Total
assets
|
209,358 | 240,856 | ||||||
Liabilities
and stockholders' equity
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable and accrued expenses
|
32,743 | 8,948 | ||||||
Notes
payable - Shareholder
|
1,281,075 | 1,149,514 | ||||||
Total
current liabilities
|
1,313,818 | 1,158,462 | ||||||
Stockholders'
equity
|
||||||||
Common
stock 14,000,000 shares authorized, issued and outstanding, par value
$.00001
|
140 | 140 | ||||||
Additional
paid-in capital
|
249,860 | 249,860 | ||||||
Retained
deficit
|
(1,354,460 | ) | (1,167,606 | ) | ||||
Total
stockholders' equity
|
(1,104,460 | ) | (917,606 | ) | ||||
Total
liabilities and stockholders' equity
|
$ | 209,358 | $ | 240,856 |
See
accompanying notes to financial statements
F-2
Cell-Nique
Statement
of Operations
(Unaudited)
For the three months ended
|
For the three months ended
|
For the six months ended
|
||||||||||||||||||||||
March 31,
|
June 30,
|
June 30,
|
||||||||||||||||||||||
2009
|
2008
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||||||||
Sales,
net
|
$ | 72,290 | $ | 108,686 | $ | 183,168 | $ | 181,378 | $ | 255,458 | $ | 290,064 | ||||||||||||
Cost
of sales
|
45,595 | 67,351 | 83,614 | 109,719 | 129,209 | 177,070 | ||||||||||||||||||
Gross
profit
|
26,695 | 41,335 | 99,554 | 71,659 | 126,249 | 112,994 | ||||||||||||||||||
Expenses
|
||||||||||||||||||||||||
Selling
|
85,177 | 74,423 | 96,771 | 108,362 | 181,948 | 182,785 | ||||||||||||||||||
General
and administrative
|
20,878 | 34,493 | 50,567 | 35,586 | 71,445 | 70,079 | ||||||||||||||||||
Research
and development
|
1,575 | 2,418 | 2,775 | 6,676 | 4,350 | 9,094 | ||||||||||||||||||
Depreciation
|
5,284 | 3,937 | 5,736 | 4,049 | 11,020 | 7,986 | ||||||||||||||||||
Total
expenses
|
112,914 | 115,271 | 155,849 | 154,673 | 268,763 | 269,944 | ||||||||||||||||||
Loss
from operations
|
(86,219 | ) | (73,936 | ) | (56,295 | ) | (83,014 | ) | (142,514 | ) | (156,950 | ) | ||||||||||||
Interest
Expense
|
(21,257 | ) | (16,315 | ) | (23,083 | ) | (17,852 | ) | (44,340 | ) | (34,167 | ) | ||||||||||||
Income
tax
|
0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Net
loss
|
$ | (107,476 | ) | $ | (90,251 | ) | $ | (79,378 | ) | $ | (100,866 | ) | $ | (186,854 | ) | $ | (191,117 | ) | ||||||
Net
loss per common share
|
$ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||||
Weighted
average shares outstanding
|
14,000,000 | 14,000,000 | 14,000,000 | 14,000,000 | 14,000,000 | 14,000,000 |
See
accompanying notes to financial statements
F-3
Cell-Nique
Statements
of Cash Flows
(Unaudited)
For the six months ended
|
||||||||
June 30,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
loss
|
$ |
(186,854
|
) | $ | (191,117 | ) | ||
Adjustments
to reconcile net income/(loss) to net cash used in operating
activities:
|
||||||||
Depreciation
|
11,020 | 7,986 | ||||||
Changes
in assets and liabilities:
|
||||||||
Accounts
receivable
|
(5,545 | ) | (25,603 | ) | ||||
Inventory
|
35,075 | 47,954 | ||||||
Accounts
payable and accrued expenses
|
23,795 | (12,204 | ) | |||||
Net
cash (used in)/provided by operating activities
|
(122,509 | ) | (172,984 | ) | ||||
Cash
flow from investing activities
|
||||||||
Acquisition
of machinery and equipment
|
(9,052 | ) | (13,908 | ) | ||||
Net
cash (used in) investing activities
|
(9,052 | ) | (13,908 | ) | ||||
Cash
flow from financing activities
|
||||||||
Additional
loans from shareholder
|
131,561 | 186,892 | ||||||
Net
cash provided by financing activities
|
131,561 | 186,892 | ||||||
Cash
and cash equivalents:
|
||||||||
Net
(decrease) increase
|
— | — | ||||||
Balance
at beginning of period
|
— | — | ||||||
Balance
at end of period
|
— | — | ||||||
Supplemental
cash flow information:
|
||||||||
Cash
paid for income taxes
|
— | — | ||||||
Cash
paid for interest
|
See
accompanying notes to financial statements
F-4
Cell-Nique
Statement
of Stockholders' Deficit
(Unaudited)
Additional
|
||||||||||||||||||||
Common Stock
|
paid-in
|
Retained
|
||||||||||||||||||
Shares
|
Amount
|
capital
|
Deficit
|
Total
|
||||||||||||||||
Balance
December 31, 2006
|
14,000,000 | $ | 140 | $ | 249,860 | $ | (284,271 | ) | $ | (34,271 | ) | |||||||||
Net
loss for the year ended December 31, 2007
|
(538,837 | ) | (538,837 | ) | ||||||||||||||||
Balance
December 31, 2007
|
14,000,000 | 140 | 249,860 | (823,108 | ) | (573,108 | ) | |||||||||||||
Net
loss for the year ended December 31, 2008
|
(344,498 | ) | (344,498 | ) | ||||||||||||||||
Balance,
December 31, 2008
|
14,000,000 | 140 | 249,860 | (1,167,606 | ) | (917,606 | ) | |||||||||||||
Net
loss for the three months ended March 31, 2009
|
(107,476 | ) | (107,476 | ) | ||||||||||||||||
Balance,
March 31, 2009
|
14,000,000 | 140 | 249,860 | (1,275,082 | ) | (1,025,082 | ) | |||||||||||||
Net
loss for the three months ended June 30, 2009
|
(79,378 | ) | (79,378 | ) | ||||||||||||||||
Balance,
June 30, 2009
|
14,000,000 | $ | 140 | $ | 249,860 | $ | (1,354,460 | ) | $ | (1,104,460 | ) |
See
accompany notes to financial statements
F-5
Cell-nique
Corporation
Notes
to Financial Statements
June
30, 2009
Note 1 – Operations and
Summary of Significant Accounting Policies
Operations
Cell-nique
Corporation (the Company”) was organized under the laws of the state of Delaware
on August 7, 2008. Prior to incorporation, the Company was
operated as a wholly-owned unincorporated division of Physicians Capital
Corporation. Upon incorporation, Cell-nique Corporation recapitalized
the unincorporated division from inception as a separate entity with Physician
Capital Corporation as its sole shareholder. The Company’s operations were
accounted for as a separate entity since inception and recapitalized into the
incorporation Company. Founders Stock was issued to Physicians
Capital Corporation. Cell-nique Corporation is currently a Subchapter
S Corporation and will terminate the S Corp status upon sale of this
Offering.
The
Company’s beginning was in 2005 when its’ founder and Chief Executive officer
began development of his first beverage creation. The Company is
engaged primarily in the business of developing, manufacturing,
marketing and sales of organic beverages. The Company
currently offers nine Cell-nique Organic Supergreen Drinks (Apple,
Topical, Pomegranate, Citrus Vanilla, Japanese Roasted (Kukicha) Tea, Lemon
Ginger, Berry Grape, Root Beer and Dark Chocolate).
The
Company owns the US patent registered trademark rights to the Cell-nique®
brand. The Company sells most of its products in specialty gourmet
and natural food stores, supermarket chains, retail stores, and restaurants in
the United States.
Basis of
Presentation
The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of
America.
Going
Concern
The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. The Company incurred
net losses for the six months ended June 30, 2009 and for the years
ended December 31, 2008 and 2007 of$ 186,854, $344,498 and $538,837
respectively, has a deficit working capital of $1,186,792 and a retained deficit
of $1,354,460 at June 30, 2009. These conditions raise substantial doubt as to
the Company’s ability to continue as a going concern. These financial statements
do not include any adjustments that might result from the outcome of this
uncertainty. These financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts, or amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. The Company’s
management will continue to advance funds until the Company can raise equity
financing to support its operations and growth.
Cash and Cash
Equivalents
Cash and
cash equivalents include cash in unrestricted deposit accounts and short-term
cash investments that have an initial maturity of 90 days or less.
Use of
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-6
Cell-nique
Corporation
Notes
to Financial Statements
June
30, 2009
Research and
development
Research
and development expenditures are expensed as incurred. Development activities
generally relate to creating new products, improving or creating variations of
existing products by mixing the formulas with other components such as teas,
non-dairy beverages and supplements. Research and development
expenditures were $4,350 and $9,094 for the six months ended June 30, 2009 and
2008.
Regulatory
bodies
The
Company is regulated by the United States Department of Agriculture (USDA) and
the Food and Drug Administration (FDA). The Company is also subject
to various state and local statutes and regulations applicable to the
production, transportation, sale, safety advertising and labeling of the
Company’s products. The Company does not anticipate that compliance
with the regulatory provisions will have any material adverse effect upon its
capital expenditures, net income, financial position or competitive
position
Accounts
receivable
The
Company evaluates the collectability of its trade accounts receivable based on a
number of factors. In circumstances where the Company becomes aware
of a specific customer’s inability to meet its financial obligations to the
Company, a specific reserve for bad debts is estimated and recorded, which
reduces the recognized receivable to the estimated amount the Company believes
will ultimately be collected. In addition to specific customer
identification of potential bad debts, bad debt charges are recorded based on
the Company’s historical losses and an overall assessment of past due trade
accounts receivable outstanding.
The
allowance for doubtful accounts and returns and discounts is established through
a provision for returns and discounts charged against
sales. Receivables are charged off against the allowance when
payments are received or products returned. The Company has
determined that an allowance for doubtful accounts is not necessary as of June
30, 2009 and December 31, 2008.
Equipment and Related
Depreciation
Equipment
is stated at cost. Depreciation expense is calculated using
accelerated and straight-line methods over the estimated useful lives of the
assets as follows:
Useful Life
|
|
Automotive
equipment
|
5
Years
|
Office
equipment and computers
|
5
Years
|
Long-Lived
Assets
The
Company has adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets” (“SFAS 144”), which addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets and supersedes SFAS No. 121, “Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and the
accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations
for a Disposal of a Segment of a Business.” The Company periodically
evaluates the carrying value of long-lived assets to be held and used in
accordance with SFAS 144. Under SFAS 144 impairment losses are to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets’ carrying amounts. In that event, a loss is recognized
based on the amount by which the carrying amount exceeds the fair market value
of the long-lived assets. Loss on long-lived assets to be disposed of is
determined in a similar manner, except that fair market values are reduced for
the cost of disposal. Based on its review, The Company believes that, as of June
30, 2009 and December 31, 2008 there were no significant impairments of its
long-lived assets.
F-7
Cell-nique
Corporation
Notes
to Financial Statements
June
30, 2009
Concentration of Credit
Risk
Financial
instruments that potentially subject the Company to concentrations of credit
risk are cash, and accounts receivables arising from their normal business
activities. The Company’s cash balances on deposits with banks are guaranteed by
the Federal Deposit Insurance Corporation up to $250,000 at June 30,
2009. The Company may be exposed to risk for the amounts of funds
held in bank accounts
in excess of the insurance limit. In assessing the risk, the
Company’s policy is to maintain cash balances with high quality financial
institutions. As of June 30, 2009 and December 31, 2008 the Company
had no cash balances.
During
the six months ended June 30, 2009, the Company had three customers who
accounted for approximately 55%, 14% and 12% of its sales respectively and
during the six months ended June 30, 2008 the same customers accounted for 25%,
3% and 4% of its sales respectively. As of June 30, 2009, 2008 the
Company had accounts receivable due from these three customers totaling $23,299
(98%) of its total accounts receivable and at June 30, 2008 the Company had
accounts receivable due from these three customers totaling $72,855 (96%) of its
total accounts receivable.
The
Company currently relies on a single contract packer for the majority of its
production and bottling of beverage products. The Company has
different packers available for their production of
products. Although there are other packers, a change in packers may
cause a delay in the production process, which could ultimately affect operating
results.
Fair Value of
Financial
Instruments
On
January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements. SFAS
No. 157 defines fair value, establishes a three-level valuation hierarchy for
disclosures of fair value measurement and enhances disclosures requirements for
fair value measures. The adoption of SFAS 157 did not have a material impact on
the Company’s fair value measurements. SFAS 157 defines fair value as
the price that would be received to sell an asset or paid to transfer a
liability in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants at the
measurement date. The carrying amounts reported in the balance sheets
for receivables and current liabilities each qualify as financial instruments
and are a reasonable estimate of fair value because of the short period of time
between the origination of such instruments and their expected realization and
their current market rate of interest. The three levels are defined as
follow:
o Level 1
inputs to the valuation methodology are quoted prices (unadjusted) for identical
assets or liabilities in active markets. The Company's Level 1 assets include
cash equivalents, primarily institutional money market funds, whose carrying
value represents fair value because of their short-term maturities of the
investments held by these funds.
F-8
Cell-nique
Corporation
Notes
to Financial Statements
June
30, 2009
o Level 2
inputs to the valuation methodology include quoted prices for similar assets and
liabilities in active markets, and inputs that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the
financial instrument. The Company's Level 2 liabilities consist of two
liabilities arising from the issuance of a convertible debenture in 2006 and in
accordance with EITF 00-19: a warrant liability for detachable warrants, as well
as an accrued derivative liability for the beneficial conversion feature. These
liabilities are remeasured on a quarterly basis. Fair value is determined using
the Black-Scholes valuation model based on observable market inputs, such as
share price data and a discount rate consistent with that of a government-issued
security of a similar maturity.
o Level 3
inputs to the valuation methodology are unobservable and significant to the fair
value measurement.
SFAS 157
requires the use of observable market data if such data is available without
undue cost and effort.
Cost of
Sales
The
Company classifies shipping and handling costs of the sale of its products as a
component of cost of sales. For the six months ended June 30, 2009
and 2008, shipping and handling costs were $18,381 and $28,416
respectively. In addition the Company classifies lab costs and
warehousing costs as costs of sales. Certain of these costs become a
component of the inventory cost and are expensed to costs of sales when the
product to which the cost has been allocated is sold.
Advertising
Advertising
costs are expensed as incurred and are included in selling
expenses. Total advertising expenses were $12,228 and $23,245 for the
six months ended June 30, 2009 and 2008 respectively.
Income
Taxes
The
Company has elected to be taxed as an S Corporation under the provisions
of the Internal Revenue Code. As a result, income and losses of the
Company are passed through to its stockholder for federal and state income tax
purposes. Accordingly, no provision is made for federal or state
income taxes or benefits pertaining to its net operating
loss.
Earnings (Loss) Per
Share
The
Company reports earnings (loss) per share in accordance with SFAS No. 128,
“Earnings per Share.” Basic earnings (loss) per share is computed by
dividing income (loss) available to common shareholders by the weighted average
number of common shares available. Diluted earnings (loss) per share
is computed similar to basic earnings (loss) per share except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if the potential common shares had been issued and
if the additional common shares were dilutive. Diluted earnings
(loss) per share has
not been presented since no options to purchase common stock are outstanding at
June 30, 2009 or 2008.
Revenue
Recognition
The
Company recognizes revenue in accordance with the provisions of the Securities
and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104,
Revenue Recognition. Revenues from the sale of the Company’s products
are recognized when persuasive evidence of an arrangement exists, delivery has
occurred (or services have been rendered), the price is fixed or determinable,
and collectability is reasonably assured. A product is not shipped without an
order from the customer and credit acceptance procedures performed and
approved. The Company generally ships products F.O.B. shipping
point.
F-9
Cell-nique
Corporation
Notes
to Financial Statements
June
30, 2009
All sales
are final, however the Company does allow, although it is not obligated to,
returns under certain circumstances. For customer relations purposes,
the Company may allow returns for outdated and spoiled product. The
returned items must be accompanied by a pre-approved return authorization
form. In addition, items may be returned due to manufacturer defect
or product recall. The allowance for returned items is regularly
reviewed and adjusted by management based on historical trends. As of
June 30,
2009 and 2008 management has determined that no allowance for returned items is
required.
The
Company accounts for certain sales incentives, including promotional discounts
ranging from 10% - 15% off invoice, and the 1% prompt payment discount as a
reduction of gross sales in accordance with Emerging issues Task Force Issue
01-9 “Accounting for Consideration Given by a Vendor to a Customer or Reseller
of the Vendor’s Products.”
Segment
Reporting
The
Company follows guidance issued by Statement of Financial Accounting Standards
No. 131, (SFAS 131), “Disclosures about Segments of an Enterprise and Related
Information.” SFAS 131 requires certain disclosures regarding is
operating segments, as defined by SFAS 131. Management has determined
that the Company operates in only one segment and evaluates its revenues and
expenses accordingly and that the disclosure of segment information
is not required.
Stock Based
Compensation
The
Company adopted Statement of Financial Accounting Standards No. 123R (SFAS
123R), “Accounting for Stock-Based Compensation”. SFAS 123R
establishes the use of the fair value based method of accounting for stock-based
compensation arrangements under which compensation cost is determined using the
fair value of stock-based compensation determined as of the date of grant and is
recognized over the periods in which the related services are
rendered. For stock based compensation the Company recognizes an
expense in accordance with SFAS No. 123R and values the equity securities based
on the fair value of the security on the date of grant. Stock option
awards are valued using the Black-Scholes option-pricing model.
The
Company accounts for stock issued to non-employees in accordance with EITF No.
96-18, “Accounting for Equity instruments that are Issued to other Than
Employees for Acquiring, or in Conjunction with Selling Goods or Services and
EITF 00-18 “Accounting Recognition for Certain Transactions Involving Equity
Instruments Granted to Other Than Employees” where the value of the stock
compensation is based upon the measurement date as determined at either (a) the
date at which a performance commitment is reached, or (b) at the date at which
the necessary performance to earn the equity instruments is
complete.
As there
is no trading history and the Company securities are not offered to the public,
the Company has determined that the fair value of its stock is the price paid
when it raises funds. For the six months ended June 30, 2009
and 2008, the Company has not issued stock for compensation.
Recent Accounting
Pronouncements
In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements", which is an amendment of Accounting Research
Bulletin ("ARB") No. 51. This statement clarifies that a noncontrolling interest
in a subsidiary is an ownership interest in the consolidated entity that should
be reported as equity in the consolidated financial statements. This statement
changes the way the consolidated income statement is presented, thus requiring
consolidated net income to be reported at amounts that include the amounts
attributable to both parent and the noncontrolling interest. This statement is
effective for the fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. Based on current conditions, the
Company does not expect the adoption of SFAS 160 to have a significant impact on
its results of operations or financial position.
F-10
Cell-nique
Corporation
Notes
to Financial Statements
June
30, 2009
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
Combinations." This statement replaces FASB Statement No. 141, "Business
Combinations." This statement retains the fundamental requirements in SFAS 141
that the acquisition method of accounting (which SFAS 141 called the purchase
method) be used for all business combinations and for an acquirer to be
identified for each business combination. This statement defines the acquirer as
the entity that obtains control of one or more businesses in the business
combination and establishes the acquisition date as the date that the acquirer
achieves control. This statement requires an acquirer to recognize the assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the statement. This statement applies
prospectively to 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, 2008. The Company does not expect the adoption of SFAS 160 to have
a significant impact on its results of operations or financial
position.
In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments
and Hedging Activities an amendment of FASB Statement No. 133." SFAS 161 changes
the disclosure requirements for derivative instruments and hedging activities.
Entities are required to provide enhanced disclosures about (a) how and why an
entity uses derivative instruments, (b) how derivative instruments and related
hedged items are accounted for under SFAS 133 and its related interpretations,
and (c) how derivative instruments and related hedged items affect an entity's
financial position, financial performance, and cash flows. Based on current
conditions, the Company does not expect the adoption of SFAS 161 to have a
significant impact on its results of operations or financial
position.
In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles." SFAS 162 identifies the sources of accounting principles
and the framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles (GAAP) in the United
States (the GAAP hierarchy). SFAS 162 will not have an impact on the Company's
financial statements.
In May
2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee
Insurance Contracts, an interpretation of FASB Statement No. 60." The scope of
SFAS 163 is limited to financial guarantee insurance (and reinsurance)
contracts, as described in this Statement, issued by enterprises included within
the scope of Statement 60. Accordingly, SFAS 163 does not apply to financial
guarantee contracts issued by enterprises excluded from the scope of Statement
60 or to some insurance contracts that seem similar to financial guarantee
insurance contracts issued by insurance enterprises (such as mortgage guaranty
insurance or credit insurance on trade receivables). SFAS 163 also does not
apply to financial guarantee insurance contracts that are derivative instruments
included within the scope of FASB Statement No. 133, "Accounting
for Derivative Instruments and Hedging Activities." SFAS 163 will not have
an impact on the Company's financial statements.
In
April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair
Values When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly.” This FSP provides guidance on (1) estimating the fair value
of an asset or liability when the volume and level of activity for the asset or
liability have significantly declined and (2) identifying transactions that
are not orderly. The FSP also amends certain disclosure provisions of SFAS
No. 157 to require, among other things, disclosures in interim periods of
the inputs and valuation techniques used to measure fair value. This
pronouncement is effective prospectively beginning April 1, 2009. The
Company has determined that the impact of this standard will not have a material
impact on the Company’s results of operations or financial
condition.
F-11
Cell-nique
Corporation
Notes
to Financial Statements
June
30, 2009
In
April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2,
“Recognition and Presentation of Other-Than-Temporary Impairments” (FSP 115-2).
This FSP modifies the requirements for recognizing other-than-temporarily
impaired debt securities and changes the existing impairment model for such
securities. The FSP also requires additional disclosures for both annual and
interim periods with respect to both debt and equity securities. Under the FSP,
impairment of debt securities will be considered other-than-temporary if an
entity (1) intends to sell the security, (2) more likely than not will
be required to sell the security before recovering its cost, or (3) does
not expect to recover the security’s entire amortized cost basis (even if the
entity does not intend to sell). The FSP further indicates that, depending on
which of the above factor(s) causes the impairment to be considered
other-than-temporary, (1) the entire shortfall of the security’s fair value
versus its amortized cost basis or (2) only the credit loss portion would
be recognized in earnings while the remaining shortfall (if any) would be
recorded in other comprehensive income. FSP 115-2 requires entities to initially
apply the provisions of the standard to previously other-than-temporarily
impaired debt securities existing as of the date of initial adoption by making a
cumulative-effect adjustment to the opening balance of retained earnings in the
period of adoption. The cumulative-effect adjustment potentially reclassifies
the noncredit portion of a previously other-than-temporarily
impaired debt security held as of the date of initial adoption from retained
earnings to accumulated other comprehensive income. This pronouncement is
effective April 1, 2009. The Company has determined that this
standard will not have a material impact on the Company’s results of operations
or financial condition.
In
April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments.” This FSP essentially
expands the disclosure about fair value of financial instruments that were
previously required only annually to also be required for interim period
reporting. In addition, the FSP requires certain additional disclosures
regarding the methods and significant assumptions used to estimate the fair
value of financial instruments. These additional disclosures will be required
beginning with the quarter ending June 30, 2009. The Company adopted this
standard on June 30, 2009.
Note 2 –
Inventory
Inventory
is valued at the lower of cost, determined on a first-in, first-out basis, or
market, and consists of the following:
June 30.
|
||||||||
2009
|
2008
|
|||||||
Finished
products
|
$ | 44,663 | $ | 29,164 | ||||
Raw
materials
|
58,702 | 0 | ||||||
$ | 103,365 | $ | 29,164 |
Note 3 – Machinery and
Equipment
Machinery
consists of the following:
December 31,
|
||||||||
2008
|
2007
|
|||||||
Machinery
and equipment
|
$ | 114,727 | $ | 96,837 | ||||
Less
– Accumulated depreciation
|
32,395 | 12,537 | ||||||
$ | 82,332 | $ | 84,300 |
Depreciation
expense was $11,020 and $7,986 for the six months ended June 30, 2009 and 2008
respectively.
F-12
Cell-nique
Corporation
Notes
to Financial Statements
June
30, 2009
Note 4 – Stockholders’
Equity
The
Company’s Certificate of Incorporation filed with the State of Delaware on
August 27, 2008 authorized the Company to issue 1,000,000 shares of stock with a
par value of $.001 per share. As of June 19, 2009 the Company amended
its Certificate of Incorporation to authorize 50,000,000 shares of stock,
consisting of 49,000,000 common shares and 1,000,000 preferred shares with a par
value of $.00001 per share.
Note 5 – Stock
Options
As of
June 30, 2009, no options have been issued.
Note 6 – Income
Taxes
At June
30, 2009 the Company is an “S” Corporation for federal income tax
purposes. Therefore no income tax (benefit) is recorded in the
accompanying financial statements. It is managements’ intention that
upon the effective date of a future SEC registration statement filing, the date
of which is uncertain, that the Company will begin recording income taxes in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS
109).
Note 7 - Related
Party Transactions
The
Company has a line of credit with Physicians Capital Corporation, its parent
company which is owned by Dan Ratner and Donna Ratner, the Company’s co-founders
and sole shareholders. As of June 30, 2009 and December 31, 2008, the
outstanding principal balance of the line of credit was $1,281,075 and
$1,149,514, including accrued interest of $169,286 and $124,946
respectively. Interest accrued for the six month periods ended June
30, 2009 and 2008 was $44,340 and $34,167 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,
2010.
The
Company uses a nominal shared office space and pays $1 per year rent which is
accounted for at fair market value in the Company's financial statements. Our
financial statements do not 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, $12,000 and $12,000 respectively, for the 6th month
period ending June 30th, 2009, fiscal year ended December 31, 2008 and
2007. And the officers do not remunerate themselves in the form of
some other payments for the stand-alone fair value of the office space. Had the
office space rental been paid or accrued to the officers, the net loss for the
6th month period ending June 30th, 2009, fiscal year ended December 31, 2008 and
2007 would have increased by $6,000, $12,000 and $12,000
respectively.
Officers
Compensation Expense: Our financial statements do not reflect officers
compensation expense since the officers have elected to forgo their
compensations valued at $80,000, $157,500 and $157,500 respectively, for their
positions for the 6th month period ending June 30th, 2009, fiscal year ended
December 31, 2008 and 2007. And the officers do not remunerate
themselves in the form of some other payments for the fair value of the services
rendered. Had the compensation been paid or accrued to the officers, the net
loss for the 6th month period ending June 30th, 2009, fiscal year ended December
31, 2008 and 2007 would have increased by $80,000, $157,500 and $157,500
respectively.
Note 8 – Subsequent
Events
In 2009,
the FASB issued Statement 165, Subsequent Events, which
defines the period after the balance sheet date that subsequent events should be
evaluated and provides guidance in determining if the event should be reflected
in the current financial statements. Statement 165 also requires
disclosure regarding the date through which subsequent events have been
evaluated. The Company adopted the provisions of Statement 165 as of
June 30, 2009.
The
Company has evaluated subsequent events through the time the June 30, 2009
financial statements were issued on August 14, 2009. No events have
occurred subsequent to June 30, 2009 that require disclosure or recognition in
these financial statements.
F-13
Cell-Nique
Balance
Sheets
Audited
|
||||||||
December
31,
|
||||||||
2008
|
2007
|
|||||||
Assets
|
||||||||
Current
assets
|
||||||||
Accounts
receivable
|
$ | 18,116 | $ | 51,797 | ||||
Inventory
|
138,440 | 75,228 | ||||||
Total
current assets
|
156,556 | 127,025 | ||||||
Machinery and
equipment, net
|
84,300 | 74,190 | ||||||
Total
assets
|
240,856 | 201,215 | ||||||
Liabilities and stockholders'
equity
|
||||||||
Current
liabilities
|
||||||||
Accounts payable and
accrued expenses
|
8,948 | 22,354 | ||||||
Notes payable -
Shareholder
|
1,149,514 | 751,969 | ||||||
Total
current liabilities
|
1,158,462 | 774,323 | ||||||
Stockholders'
equity
|
||||||||
Common stock 14,000,000 shares
authorized, issued and outstanding
|
||||||||
par value
$.00001
|
140 | 140 | ||||||
Additional paid-in
capital
|
249,860 | 249,860 | ||||||
Retained
deficit
|
(1,167,606 | ) | (823,108 | ) | ||||
Total
stockholders' equity
|
(917,606 | ) | (573,108 | ) | ||||
Total
liabilities and stockholders' equity
|
$ | 240,856 | $ | 201,215 |
See
accompanying notes to consolidated financial statements
F-14
Cell-Nique
Statement
of Operations
Audited
|
||||||||
For the years
ended
|
||||||||
December
31,
|
||||||||
2008
|
2007
|
|||||||
Sales, net
|
$ | 524,485 | $ | 260,211 | ||||
Cost of
sales
|
299,891 | 148,533 | ||||||
Gross
profit
|
224,594 | 111,678 | ||||||
Expenses
|
||||||||
Selling
|
157,986 | 327,013 | ||||||
General and
administrative
|
303,193 | 243,700 | ||||||
Research and
development
|
17,486 | 31,586 | ||||||
Depreciation
|
16,824 | 4,551 | ||||||
Total
expenses
|
495,489 | 606,850 | ||||||
Loss from
operations
|
(270,895 | ) | (495,172 | ) | ||||
Interest
expense
|
73,603 | 43,665 | ||||||
(344,498 | ) | (538,837 | ) | |||||
Income tax
|
-- | -- | ||||||
Net loss
|
$ | (344,498 | ) | $ | (538,837 | ) | ||
Net loss per common
share
|
$ | (0.02 | ) | $ | (0.04 | ) | ||
Weighted average shares
outstanding
|
14,000,000 | 14,000,000 |
See
accompanying notes to consolidated financial statements
F-15
Cell-Nique
Statements
of Cash Flows
Audited
|
||||||||
For the years
ended
|
||||||||
December
31,
|
||||||||
2008
|
2007
|
|||||||
Cash flows from operating
activities
|
||||||||
Net loss
|
$ | (344,498 | ) | $ | (495,172 | ) | ||
Adjustments to reconcile net
income/(loss) to
|
||||||||
net cash used in
operating
activities:
|
||||||||
Depreciation
|
16,824 | 4,551 | ||||||
Changes in assets and
liabilities:
|
||||||||
Accounts
receivable
|
33,681 | (37,340 | ) | |||||
Inventory
|
63,212 | (43,986 | ) | |||||
Accounts payable and
accrued expenses
|
(13,407 | ) | 7,007 | |||||
Net cash (used in)/provided
by
|
||||||||
operating
activities
|
(244,188 | ) | (564,940 | ) | ||||
Cash flow from investing
activities
|
||||||||
Acquisition of
machinery and equipment
|
(26,933 | ) | (86,268 | ) | ||||
Net cash (used in) investing
activities
|
(26,933 | ) | (86,268 | ) | ||||
Cash flow from financing
activities
|
||||||||
Additional loans from
shareholder
|
271,121 | 651,208 | ||||||
Net cash provided by financing
activities
|
271,121 | 651,208 | ||||||
Cash and cash
equivalents:
|
||||||||
Net (decrease)
increase
|
-- | -- | ||||||
Balance at beginning of
period
|
-- | -- | ||||||
Balance at end of
period
|
-- | -- | ||||||
Supplemental cash flow
information:
|
||||||||
Cash paid for income
taxes
|
-- | -- | ||||||
Cash paid for
interest
|
$ | 5,353 | $ | 488 |
See
accompanying notes to consolidated financial statements
F-16
Cell-Nique
Statement of Stockholders'
Deficit
Audited
|
Additional
|
|||||||||||||||||||
Common
Stock
|
paid-in
|
Retained
|
||||||||||||||||||
Shares
|
Amount
|
capital
|
Deficit
|
Total
|
||||||||||||||||
Balance December 31,
2006
|
14,000,000 | $ | 140 | $ | 249,860 | $ | (284,271 | ) | $ | (34,271 | ) | |||||||||
Net loss for the year ended
December 31, 2007
|
(538,837 | ) | (538,837 | ) | ||||||||||||||||
Balance December 31,
2007
|
14,000,000 | 140 | 249,860 | (823,108 | ) | (573,108 | ) | |||||||||||||
Net loss for the year ended
December 31, 2008
|
(344,498 | ) | (344,498 | ) | ||||||||||||||||
Balance, December 31,
2008
|
14,000,000 | $ | 140 | $ | 249,860 | $ | (1,167,606 | ) | $ | (917,606 | ) |
See
accompanying notes to financial statements
F-17
Cell-nique
Corporation
Notes
to Financial Statements
December
31, 2008 and 2007
Note 1 – Operations and
Summary of Significant Accounting Policies
Operations
Cell-nique
Corporation (the Company”) was organized under the laws of the state of Delaware
on August 7, 2008. Prior to
incorporation, the Company was operated as a wholly-owned unincorporated
division of Physicians Capital Corporation. Upon incorporation,
Cell-nique Corporation recapitalized the unincorporated division from inception
as a separate entity with Physician Capital Corporation as its sole shareholder.
The Company’s operations were accounted for as a separate entity since inception
and recapitalized into the incorporation Company. Founders Stock was
issued to Physicians Capital Corporation. Cell-nique Corporation is
currently a Subchapter S Corporation and will terminate the S Corp status upon
sale of this Offering.
The
Company’s beginning was in 2005 when its’ founder and Chief Executive officer
began development of his first beverage creation. The Company is
engaged primarily in the business of developing, manufacturing,
marketing and sales of organic beverages. The Company
currently offers nine Cell-nique Organic Supergreen Drinks (Apple,
Topical, Pomegranate, Citrus Vanilla, Japanese Roasted (Kukicha) Tea, Lemon
Ginger, Berry Grape, Root Beer and Dark Chocolate).
The
Company owns the US patent registered trademark rights to the Cell-nique®
brand. The Company sells most of its products in specialty gourmet
and natural food stores, supermarket chains, retail stores, and restaurants in
the United States.
Basis of
Presentation
The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of
America.
Going
Concern
The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern. The Company incurred
net losses for the years ended December 31, 2008 and 2007 of $344,498 and
$538,837 respectively, has a deficit working capital of $1,001,906 and $647,298
and a retained deficit of $1,167,606 and $823,108. These conditions raise
substantial doubt as to the Company’s ability to continue as a going concern.
These financial statements do not include any adjustments that might result from
the outcome of this uncertainty. These financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts, or amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern. The
Company’s management will continue to advance funds until the Company can raise
equity financing to support its operations and growth.
Cash and Cash
Equivalents
Cash and
cash equivalents include cash in unrestricted deposit accounts and short-term
cash investments that have an initial maturity of 90 days or less.
Use of
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-18
Cell-nique
Corporation
Notes
to Financial Statements
December
31, 2008 and 2007
Research and
development
Research
and development expenditures are expensed as incurred. Development activities
generally relate to creating new products, improving or creating variations of
existing products by mixing the formulas with other components such as teas,
non-dairy beverages and supplements. Research and development
expenditures were $17,486 and $31,586 for the years ended December 31, 2008 and
2007.
Regulatory
bodies
The
Company is regulated by the United States Department of Agriculture (USDA) and
the Food and Drug Administration (FDA). The Company is also subject
to various state and local statutes and regulations applicable to the
production, transportation, sale, safety advertising and labeling of the
Company’s products. The Company does not anticipate that compliance
with the regulatory provisions will have any material adverse effect upon its
capital expenditures, net income, financial position or competitive
position
Accounts
receivable
The
Company evaluates the collectability of its trade accounts receivable based on a
number of factors. In circumstances where the Company becomes aware
of a specific customer’s inability to meet its financial obligations to the
Company, a specific reserve for bad debts is estimated and recorded, which
reduces the recognized receivable to the estimated amount the Company believes
will ultimately be collected. In addition to specific customer
identification of potential bad debts, bad debt charges are recorded based on
the Company’s historical losses and an overall assessment of past due trade
accounts receivable outstanding.
The
allowance for doubtful accounts and returns and discounts is established through
a provision for returns and discounts charged against
sales. Receivables are charged off against the allowance when
payments are received or products returned. The Company has
determined that an allowance for doubtful accounts is not necessary as of
December 31, 2008 and 2007.
Equipment and Related
Depreciation
Equipment
is stated at cost. Depreciation expense is calculated using
accelerated and straight-line methods over the estimated useful lives of the
assets as follows:
Useful Life
|
|
Automotive
equipment
|
5
Years
|
Office
equipment and computers
|
5
Years
|
Long-Lived
Assets
The
Company has adopted Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or
Disposal of Long-Lived Assets” (“SFAS 144”), which addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets and supersedes SFAS No. 121, “Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and the
accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations
for a Disposal of a Segment of a Business.” The Company periodically
evaluates the carrying value of long-lived assets to be held and used in
accordance with SFAS 144. Under SFAS 144 impairment losses are to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets’ carrying amounts. In that event, a loss is recognized
based on the amount by which the carrying amount exceeds the fair market value
of the long-lived assets. Loss on long-lived assets to be disposed of is
determined in a similar manner, except that fair market values are reduced for
the cost of disposal. Based on its review, The Company believes that, as of
December 31, 2008 and 2007 there were no significant impairments of its
long-lived assets.
F-19
Cell-nique
Corporation
Notes
to Financial Statements
December
31, 2008 and 2007
Concentration of Credit
Risk
Financial
instruments that potentially subject the Company to concentrations of credit
risk are cash, and accounts receivables arising from their normal business
activities. The Company’s cash balances on deposits with banks are guaranteed by
the Federal Deposit Insurance Corporation up to $250,000 at December 31,
2008. The Company may be exposed to risk for the amounts of funds
held in bank accounts
in excess of the insurance limit. In assessing the risk, the
Company’s policy is to maintain cash balances with high quality financial
institutions. As of December 31, 2008 and 2007 the Company had no
cash balances.
During
the year ended December 31, 2008, the Company had three customers who accounted
for approximately 55%, 14% and 12% of its sales respectively and during the year
ended December 31, 2007 the same customers accounted for 25%, 3% and 4% of its
sales respectively. As of December 31, 2008 the Company had accounts
receivable due from these three customers totaling $15,959 (88%) of its total
accounts receivable and at December 31, 2007 the Company had accounts receivable
due from these three customers totaling $50,385 (97%) of its total accounts
receivable.
The
Company currently relies on a single contract packer for the majority of its
production and bottling of beverage products. The Company has
different packers available for their production of
products. Although there are other packers, a change in packers may
cause a delay in the production process, which could ultimately affect operating
results.
Fair Value of Financial
Instruments
On
January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements. SFAS
No. 157 defines fair value, establishes a three-level valuation hierarchy for
disclosures of fair value measurement and enhances disclosures requirements for
fair value measures. The adoption of SFAS 157 did not have a material impact on
the Company’s fair value measurements. SFAS 157 defines fair value as
the price that would be received to sell an asset or paid to transfer a
liability in the principal or most advantageous market for the asset or
liability in an orderly transaction between market participants at the
measurement date. The carrying amounts reported in the balance sheets
for receivables and current liabilities each qualify as financial instruments
and are a reasonable estimate of fair value because of the short period of time
between the origination of such instruments and their expected realization and
their current market rate of interest. The three levels are defined as
follow:
o Level 1
inputs to the valuation methodology are quoted prices (unadjusted) for identical
assets or liabilities in active markets. The Company's Level 1 assets include
cash equivalents, primarily institutional money market funds, whose carrying
value represents fair value because of their short-term maturities of the
investments held by these funds.
F-20
Cell-nique
Corporation
Notes
to Financial Statements
December
31, 2008 and 2007
o Level 2
inputs to the valuation methodology include quoted prices for similar assets and
liabilities in active markets, and inputs that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the
financial instrument. The Company's Level 2 liabilities consist of two
liabilities arising from the issuance of a convertible debenture in 2006 and in
accordance with EITF 00-19: a warrant liability for detachable warrants, as well
as an accrued derivative liability for the beneficial conversion feature. These
liabilities are remeasured on a quarterly basis. Fair value is determined using
the Black-Scholes valuation model based on observable market inputs, such as
share price data and a discount rate consistent with that of a government-issued
security of a similar maturity.
o Level 3
inputs to the valuation methodology are unobservable and significant to the fair
value measurement.
SFAS 157
requires the use of observable market data if such data is available without
undue cost and effort.
Cost of
Sales
The
Company classifies shipping and handling costs of the sale of its products as a
component of cost of sales. For the years ended December 31, 2008 and
2007, shipping and handling costs were $77,062 and $55,558
respectively. In addition the Company classifies lab costs and
warehousing costs as costs of sales. Certain of these costs become a
component of the inventory cost and are expensed to costs of sales when the
product to which the cost has been allocated is sold.
Advertising
Advertising
costs are expensed as incurred and are included in selling
expenses. Total advertising expenses were $65,678 and $85,087 for the
years ended December 31, 2008 and 2007 respectively.
Income
Taxes
In
2007 and 2008, the Company was a wholly-owned subsidiary of Physicians
Capital Corp., which has elected to be taxed as an S Corporation under the
provisions of the Internal Revenue Code. As a result, income and
losses of the Company are passed through to its stockholder for federal and
state income tax purposes. Accordingly, no provision is made for
federal or state income taxes or benefits pertaining to its net operating
loss.
Earnings (Loss) Per
Share
The
Company reports earnings (loss) per share in accordance with SFAS No. 128,
“Earnings per Share.” Basic earnings (loss) per share is computed by
dividing income (loss) available to common shareholders by the weighted average
number of common shares available. Diluted earnings (loss) per share
is computed similar to basic earnings (loss) per share except that the
denominator is increased to include the number of additional common shares that
would have been outstanding if the potential common shares had been issued and
if the additional common shares were dilutive. Diluted earnings
(loss) per share has
not been presented since no options to purchase common stock are outstanding at
December 31, 2008 or 2007.
Revenue
Recognition
The
Company recognizes revenue in accordance with the provisions of the Securities
and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104,
Revenue Recognition. Revenues from the sale of the Company’s products
are recognized when persuasive evidence of an arrangement exists, delivery has
occurred (or services have been rendered), the price is fixed or determinable,
and collectability is reasonably assured. A product is not shipped without an
order from the customer and credit acceptance procedures performed and
approved. The Company generally ships products F.O.B. shipping
point.
F-21
Cell-nique
Corporation
Notes
to Financial Statements
December
31, 2008 and 2007
All sales
are final, however the Company does allow, although it is not obligated to,
returns under certain circumstances. For customer relations purposes,
the Company may allow returns for outdated and spoiled product. The
returned items must be accompanied by a pre-approved return authorization
form. In addition, items may be returned due to manufacturer defect
or product recall. The allowance for returned items is regularly
reviewed and adjusted by management based on historical trends. As of
December
31, 2008 and 2007 management has determined that no allowance for returned items
is required.
The
Company accounts for certain sales incentives, including promotional discounts
ranging from 10% - 15% off invoice, and the 1% prompt payment discount as a
reduction of gross sales in accordance with Emerging issues Task Force Issue
01-9 “Accounting for Consideration Given by a Vendor to a Customer or Reseller
of the Vendor’s Products.”
Segment
Reporting
The
Company follows guidance issued by Statement of Financial Accounting Standards
No. 131, (SFAS 131), “Disclosures about Segments of an Enterprise and Related
Information.” SFAS 131 requires certain disclosures regarding is
operating segments, as defined by SFAS 131. Management has determined
that the Company operates in only one segment and evaluates its revenues and
expenses accordingly and that the disclosure of segment information
is not required.
Stock Based
Compensation
The
Company adopted Statement of Financial Accounting Standards No. 123R (SFAS
123R), “Accounting for Stock-Based Compensation”. SFAS 123R
establishes the use of the fair value based method of accounting for stock-based
compensation arrangements under which compensation cost is determined using the
fair value of stock-based compensation determined as of the date of grant and is
recognized over the periods in which the related services are
rendered. For stock based compensation the Company recognizes an
expense in accordance with SFAS No. 123R and values the equity securities based
on the fair value of the security on the date of grant. Stock option
awards are valued using the Black-Scholes option-pricing model.
The
Company accounts for stock issued to non-employees in accordance with EITF No.
96-18, “Accounting for Equity instruments that are Issued to other Than
Employees for Acquiring, or in Conjunction with Selling Goods or Services and
EITF 00-18 “Accounting Recognition for CertainTransactions Involving Equity
Instruments Granted to Other Than Employees” where the value of the stock
compensation is based upon the measurement date as determined at either (a) the
date at which a performance commitment is reached, or (b) at the date at which
the necessary performance to earn the equity instruments is
complete.
As there
is no trading history and the Company securities are not offered to the public,
the Company has determined that the fair value of its stock is the price paid
when it raises funds. For the years ended December 31, 2008 and
2007, the Company has not issued stock for compensation.
F-22
Cell-nique
Corporation
Notes
to Financial Statements
December
31, 2008 and 2007
Recent Accounting
Pronouncements
In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements", which is an amendment of Accounting Research
Bulletin ("ARB") No. 51. This statement clarifies that a noncontrolling interest
in a subsidiary is an ownership interest in the consolidated entity that should
be reported as equity in the consolidated financial statements. This statement
changes the way the consolidated income statement is presented, thus requiring
consolidated net income to be reported at amounts that include the amounts
attributable to both parent and the noncontrolling interest. This statement is
effective for the fiscal years, and interim periods within those fiscal years,
beginning on or after
December 15, 2008. Based on current conditions, the Company does not expect the
adoption of SFAS 160 to have a significant impact on its results of operations
or financial position.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
Combinations." This statement replaces FASB Statement No. 141, "Business
Combinations." This statement retains the fundamental requirements in SFAS 141
that the acquisition method of accounting (which SFAS 141 called the purchase
method) be used for all business combinations and for an acquirer to be
identified for each business combination. This statement defines the acquirer as
the entity that obtains control of one or more businesses in the business
combination and establishes the acquisition date as the date that the acquirer
achieves control. This statement requires an acquirer to recognize the assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the statement. This statement applies
prospectively to 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, 2008. The Company does not expect the adoption of SFAS 160 to have
a significant impact on its results of operations or financial
position.
In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments
and Hedging Activities an amendment of FASB Statement No. 133." SFAS 161 changes
the disclosure requirements for derivative instruments and hedging activities.
Entities are required to provide enhanced disclosures about (a) how and why an
entity uses derivative instruments, (b) how derivative instruments and related
hedged items are accounted for under SFAS 133 and its related
interpretations, and (c) how derivative instruments and related hedged
items affect an entity's financial position, financial performance, and cash
flows. Based on current conditions, the Company does not expect the adoption of
SFAS 161 to have a significant impact on its results of operations or
financial position.
In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles." SFAS 162 identifies the sources of accounting principles
and the framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles (GAAP) in the United
States (the GAAP hierarchy). SFAS 162 will not have an impact on the Company's
financial statements.
In May
2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee
Insurance Contracts, an interpretation of FASB Statement No. 60." The scope of
SFAS 163 is limited to financial guarantee insurance (and reinsurance)
contracts, as described in this Statement, issued by enterprises included within
the scope of Statement 60. Accordingly, SFAS 163 does not apply to financial
guarantee contracts issued by enterprises excluded from the scope of Statement
60 or to some insurance contracts that seem similar to financial guarantee
insurance contracts issued by insurance enterprises (such as mortgage guaranty
insurance or credit insurance on trade receivables). SFAS 163 also does not
apply to financial guarantee insurance contracts that are derivative instruments
included within the scope of FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 163 will not have an impact on the
Company's financial statements.
In
April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair
Values When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not
Orderly.” This FSP provides guidance on (1) estimating the fair value
of an asset or liability when the volume and level of activity for the asset or
liability have significantly declined and (2) identifying transactions that
are not orderly. The FSP also amends certain disclosure provisions of SFAS
No. 157 to require, among other things, disclosures in interim periods of
the inputs and valuation techniques used to measure fair value. This
pronouncement is effective prospectively beginning April 1, 2009. The
Company is currently evaluating the impact of this standard, but would not
expect it to have a material impact on the Company’s consolidated results of
operations or financial condition.
F-23
Cell-nique
Corporation
Notes
to Financial Statements
December
31, 2008 and 2007
In
April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2,
“Recognition and Presentation of Other-Than-Temporary Impairments” (FSP 115-2).
This FSP modifies the requirements for recognizing other-than-temporarily
impaired debt securities and changes the existing impairment model for such
securities. The FSP also requires additional disclosures for both annual and
interim periods with respect to both debt and equity securities. Under the FSP,
impairment of debt securities will be considered other-than-temporary if an
entity (1) intends to sell the security, (2) more likely than not will
be required to sell the security before recovering its cost, or (3) does
not expect to recover the security’s entire amortized cost basis (even if the
entity does not intend to sell). The FSP further indicates that, depending on
which of the above factor(s) causes the impairment to be considered
other-than-temporary, (1) the entire shortfall of the security’s fair value
versus its amortized cost basis or (2) only the credit loss portion would
be recognized in earnings while the remaining shortfall (if any) would be
recorded in other comprehensive income. FSP 115-2 requires entities to initially
apply the provisions of the standard to previously other-than-temporarily
impaired debt securities existing as of the date of initial adoption by making a
cumulative-effect adjustment to the opening balance of retained earnings in the
period of adoption. The cumulative-effect adjustment potentially reclassifies
the noncredit portion of a previously other-than-temporarily
impaired debt security held as of the date of initial adoption from retained
earnings to accumulated other comprehensive income. This pronouncement is
effective April 1, 2009. The Company does not believe this standard will
have a material impact on the Company’s consolidated results of operations or
financial condition.
In
April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments.” This FSP essentially
expands the disclosure about fair value of financial instruments that were
previously required only annually to also be required for interim period
reporting. In addition, the FSP requires certain additional disclosures
regarding the methods and significant assumptions used to estimate the fair
value of financial instruments. These additional disclosures will be required
beginning with the quarter ending June 30, 2009. The Company is currently
evaluating the requirements of these additional disclosures.
Note 2 –
Inventory
Inventory
is valued at the lower of cost, determined on a first-in, first-out basis, or
market, and consists of the following:
December 31,
|
||||||||
2008
|
2007
|
|||||||
Finished
products
|
$ | 105,039 | $ | 69,850 | ||||
Raw
materials
|
33,401 | 7,871 | ||||||
$ | 138,440 | $ | 75,228 |
Note 3 – Machinery and
Equipment
Machinery
consists of the following:
December 31,
|
||||||||
2008
|
2007
|
|||||||
Vehicles
|
$ | 96,783 | $ | 69,850 | ||||
Office
equipment and furniture
|
8,891 | 8,891 | ||||||
$ | 105,674 | $ | 78,741 | |||||
Less
– Accumulated depreciation
|
21,375 | 4,551 | ||||||
$ | 84,299 | $ | 74,190 |
F-24
Cell-nique
Corporation
Notes
to Financial Statements
December
31, 2008 and 2007
Depreciation
expense was $16,824 and $4,551 for the years ended December 31, 2008 and 2007
respectively.
Note 4 – Stockholders’
Equity
The
Company’s Certificate of Incorporation filed with the State of Delaware on
August 27, 2008 authorized the Company to issue 1,000,000 shares of stock with a
par value of $.001 per share. As of June 19, 2009 the Company amended
its Certificate of Incorporation to authorize 50,000,000 shares of stock,
consisting of 49,000,000 common shares and 1,000,000 preferred shares with a par
value of $.00001 per share.
Note 5 – Stock
Options
As of
December 31, 2008, no options have been issued.
Note 6 – Income
Taxes
At
December 31, 2008 the Company was an “S” Corporation for federal income
tax purposes. Therefore no income tax (benefit) is recorded in the
accompanying financial statements. It is managements’ intention that
upon the effective date of a future SEC registration statement filing, the date
of which is uncertain, that the Company will begin recording income taxes in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS
109).
Note 7 - Related
Party Transactions
The
Company has a line of credit with Physicians Capital Corporation, its parent
company which is owned by Dan Ratner and Donna Ratner, the Company’s co-founders
and sole shareholders. As of December 31, 2008 and 2007, the
outstanding principal balance of the line of credit was $1,149,514 and $751,969,
including accrued interest of $124,946 and $51,343
respectively. Interest accrued for the years ended December 31, 2008
and 2007 was $73,603 and $43,665 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,
2010.
The
Company uses a nominal shared office space and pays $1 per year rent which is
accounted for at fair market value in the Company's financial statements. Our
financial statements do not reflect stand-alone office space expense, if the
Company went out and rented stand-alone space, management estimates the rental
could be valued at $12,000 and $12,000 respectively, for the fiscal year ended
December 31, 2008 and 2007. And the officers do not remunerate
themselves in the form of some other payments for the stand-alone fair value of
the office space. Had the office space rental been paid or accrued to the
officers, the net loss for the fiscal year ended December 31, 2008 and 2007
would have increased by $12,000 and $12,000 respectively.
Officers
Compensation Expense: Our financial statements do not reflect officers
compensation expense since the officers have elected to forgo their
compensations valued at $157,500 and $157,500 respectively, for their positions
for the fiscal year ended December 31, 2008 and 2007. And the
officers do not remunerate themselves in the form of some other payments for the
fair value of the services rendered. Had the compensation been paid or accrued
to the officers, the net loss for the fiscal year ended December 31, 2008 and
2007 would have increased by $157,500 and $157,500
respectively.
F-25
APPENDIX
For
Office Use Only:
SUBSCRIPTION
AGREEMENT
for
CELL-NIQUE
CORPORATION
Common
Stock ($5.00 per share)
Persons
interested in purchasing common stock of Cell-nique Corporation. must complete
and return this Subscription Agreement along with their check or money order
to:
Cell-nique
Corporation
12 Old
Stage Coach Road
Weston CT 06883,
("the Issuer") ("the Company")
Subject
only to acceptance hereof by the issuer, in its discretion, the undersigned
hereby subscribes for the number of common shares and at the aggregate
subscription price set forth below.
An
accepted copy of this Agreement will be returned to the Subscriber as a receipt,
and the physical stock certificates shall be delivered to each Investor within
thirty (30) days of the Close of this Offering.
Securities Offered -
The Company is offering 6,000,000 shares (par value $.00001 per share) at $5.00
per share. The minimum subscription is 1,000 shares.
Subscription - In
connection with this subscription the undersigned hereby subscribes to the
number of common shares shown in the following table.
Number of Common Shares =
____________
Multiply by Price of
Shares x $5.00 per
Share
Aggregate Subscription
Price=
$___________
Check or
money order shall be made payable to Cell-nique
Corporation.
In
connection with this investment in the Company, I represent and warrant as
follows:
a) Prior
to tendering payment for the shares, I received a copy of and read your
prospectus dated ______________,
2009.
b) I
am a bona fide resident of the state of ________________________________.
c) The
Issuer and the other purchasers are relying on the truth and accuracy of the
declarations, representations and warranties herein made by the undersigned.
Accordingly, the foregoing representations and warranties and undertakings are
made by the undersigned with the intent that they may be relied upon in
determining his/her suitability as a purchaser. Investor agrees that such
representations and warranties shall survive the acceptance of Investor as a
purchaser, and Investor indemnifies and agrees to hold harmless, the Issuer and
each other purchaser from and against all damages, claims, expenses, losses or
actions resulting from the untruth of any of the warranties and representations
contained in this Subscription Agreement.
Please
register the shares which I am purchasing as follows:
Name:
_____________________________________
Date: ___________________
As (check
one)
o Individual o Tenants in
Common
o Existing
Partnership
o Joint
Tenants o Corporation
o Trust
o Minor with adult
custodian under the Uniform Gift to Minors
Act o IRA
For the
person(s) who will be registered shareholder(s):
Signature
of Subscriber
|
Residence
Address
|
|
|
|
|
Name
of Subscriber (Printed)
|
City
or Town
|
|
|
|
|
Signature
of Co-Subscriber State
|
Zip
Code
|
|
|
|
|
Name
of Co-Subscriber (Printed)
|
Telephone
|
|
|
|
|
Subscriber
Tax I.D. or
|
Co-Subscriber
Tax I.D. or
|
|
Social
Security Number
|
Social
Security Number
|
|
|
||
E-mail
Address (if available)
|
ACCEPTED
BY: CELL-NIQUE CORPORATION.
By:
|
Date:
|
||
Officer
|
No
dealer, salesperson or any other person is authorized to give any information or
to make any representations in connection with this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by us. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the securities offered
by this Prospectus, or an offer to sell or solicitation of an offer to buy any
securities by anyone in any jurisdiction in which such offer or solicitation is
not authorized or is unlawful. The delivery of this Prospectus shall not, under
any circumstances, create any implication that the information herein is correct
as of any time subsequent to the date of the Prospectus.
Until April 30, 2010
all dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
TABLE OF
CONTENTS
Summary
|
4
|
Risk
Factors
|
9
|
Use
of Proceeds
|
22
|
Plan
of Distribution
|
23
|
Capitalization
|
24
|
Dilution
|
24
|
Business
|
26
|
Management
Discussion of Analysis of Condition and Results of
Operations
|
32
|
Ownership
of Common Stock
|
38
|
Principal
Shareholders
|
38
|
Management
|
39
|
Certain
Transactions
|
41
|
Description
of Securities
|
42
|
Shares
Eligible for Future Sale
|
43
|
Available
Information
|
44
|
Dividend
Policy
|
45
|
Stock
Transfer Agent
|
45
|
Experts
|
45
|
Legal
Matters
|
45
|
Index
to Financial Statements
|
F-1
|
Cell-nique
Corporation
6,000,000
SHARES
COMMON STOCK
(par value $.00001 per
share)
Cell-nique
Corporation
12 Old
Stage Coach Road,Weston CT 06883
________,
2009
Part
II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. Indemnification of Officers and
Directors
The
information required by this item is incorporated by reference to
"indemnification" in the prospectus herein.
At
present we have not entered into individual indemnity agreements with our
Officers or Directors. However, our By-Laws and Certificate of Incorporation
provide a blanket indemnification that we shall indemnify, to the fullest extent
under Delaware law, our directors and officers against certain liabilities
incurred with respect to their service in such capabilities. In addition, the
Certificate of Incorporation provides that the personal liability of our
directors and officers and our
stockholders for monetary damages will be limited.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act of 1933, as amended, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by us of expenses incurred or paid by a
director, officer or controlling person in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, we will, unless in the
opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933, as amended, and we will be governed by the final adjudication of
such case.
ITEM 25. Other Expenses of issuance and
distribution
SEC
Registration Fee
|
$ | 1,674.00 | ||
Legal
Fees and Expenses
|
$ | 25,000.00 | ||
Printing
and Engraving Expenses
|
$ | 5,000.00 | ||
Accountant's
Fees and Expenses
|
$ | 10,000.00 | ||
Total
|
$ | 41,674.00 |
The
foregoing expenses, except for the SEC fees, are estimated.
II-1
ITEM
26. Recent Sales of Unregistered Securities.
(a) Unregistered Securities Sold
since inception:
The
following sets forth information relating to all previous sales of common stock
by the Registrant which sales were not registered under the Securities Act of
1933.
None
No
advertising or general solicitation was employed in offering the shares. The
shares were offered for investment only and not for the purpose of resale or
distribution. All of the shares issued to the aforementioned persons bear
restrictive legends preventing
their
transfer except in accordance with the Securities Act and the regulations
promulgated thereunder.
ALL
COMMON STOCK ISSUANCES OTHER THAN FOR CASH
The
following sets forth information relating to all previous issuances of common
stock by the Registrant that are at least two years prior which sales were not
registered under the Securities Act of 1933.
The
following issuances of common stock listed below and totaling No shares were in
exchange for various business services performed from inception through
6/30/2009:
The
following issuances of common stock listed below and totaling 20,000,000 shares
were for founders shares from inception through 6/30/2009:
Physicians
Capital Corporation 20,000,000
The following sets forth information
relating to previous issuances of common stock by the Registrant that are less than two years
prior which sales were not registered under the Securities Act of
1933.
The
above most recent issuances of common stock in exchange
|
|
for
salary that are not at least two years prior...
|
None
|
The
previous list of all shares issued for other than a cash
sales
|
|
that
are at least two years prior...
|
None
|
Cash
sales of the Company’s common stock...
|
None
|
Total
shares sold for cash and all other transactions total
|
None
|
II-2
ITEM
27. - EXHIBITS
Index to
Exhibits
TITLE
OF DOCUMENT
|
LOCATION
|
|||
3.1
|
Articles
of Incorporation
|
Filed
herewith
|
||
3.2
|
Amendment
to Certificate of Incorporation
|
Filed
herewith
|
||
3.3
|
Bylaws
|
Filed
herewith
|
||
5.1
|
Consent
of Miles Garnett, Esq
|
Filed
herewith
|
||
10.1
|
Cell-nique
Promissory Note
|
Filed
herewith
|
||
23.1
|
Consent
of Accountants for Audited Statements
|
Filed
herewith
|
||
23.2
|
Consent
of Accountants for Reviewed Statements Exhibit 15
|
Filed
herewith
|
||
23.3
|
Consent
of Accountants
|
Filed
herewith
|
II-3
ITEM
28. Undertakings
The
undersigned registrant undertakes:
(1) To
file, during any period in which offer or sales are being made, a post-effective
amendment to this registration statement
To
|
include
any prospectus required by section I O(a)(3) of the Securities Act of
1933;
|
To
|
reflect
in the prospectus any facts or events arising after the effective date of
the Registration Statement (or the most recent post-effective amendment)
which, individually or in the aggregate, represent a fundamental change in
the information in the registration
statement;
|
To
|
include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to the information in the Registration
Statement.
|
(2) That,
for the purpose of determining any liability under the Securities Act of 1933,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of securities at that time shall be deemed to be the initial
bona fide offering.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
Subject
to the terms and conditions of Section 15(d) of the Securities Exchange Act of
1934, the undersigned Registrant hereby undertakes to file with the Securities
and Exchange Commission any supplementary and periodic information, documents,
and reports as may be prescribed by any rule or regulation of the Commission
heretofore or hereafter duly adopted pursuant to authority conferred to that
section.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers, and controlling persons of the Registrant
pursuant to our certificate of incorporation or provisions of Delaware law, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission the indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. If a claim for
indemnification against liabilities (other than the payment by the Registrant)
of expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit, or proceeding is
asserted by a director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of our
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether the indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of the issue.
II-4
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, this registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form S-1 and authorized this registration statement to
be signed on our behalf by the undersigned, in Weston, County of Fairfield,
State of Connecticut, on the dates noted below.
(Registrant) CELL-NIQUE
CORPORATION.
President
and Chairman of the Board of Directors
/s/ Dan
Ratner November
2, 2009
and
as
Controller
& Principal Financial Officer
/s/ Dan
Ratner November
2, 2009
In
accordance with the Securities Act of 1933 this registration was signed by the
following persons in the capacities and on the dates indicated.
Vice
President and Director
/s/ Donna
Ratner November 2,
2009
Who must
sign: the small business issuer, its principal executive officer or officers,
its principal financial officer, its controller or principal accounting officer
and at least the majority of directors or persons performing similar
functions.
II-5