SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X . ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009
. TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-53246
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
417 Exeter Road
London, ON N6E 2Z3 Canada
(Address of principal executive offices) (Zip Code)
(Registrants telephone number, including area code)
Securities registered under Section 12(b) of the Act:
Common Stock, par value $.0001 per share
Securities registered under Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes . No X .
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes . No X .
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X .. No ..
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.. .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer
.. (Do not check if a smaller reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes . No X .
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed third fiscal quarter. As of September 30, 2009 the number of outstanding shares of the registrant's common stock held by non-affiliates (excluding shares held by directors, officers and others holding more than 5% of the outstanding shares of the class) was 61,593,891. However, since the common stock was not then listed or traded on any stock exchange or quoted through any nationally recognized quotation service, such as the OTC Bulletin Board, it is impracticable to ascertain the aggregate market value of those shares as of that date.
The number of shares of the registrants Common Stock, $0.0001 par value per share, outstanding as of March 16, 2010 was 61,633,891.
TABLE OF CONTENTS
Unresolved Staff Comments
Submission of Matters to a Vote of Security Holders.
Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Selected Financial Data
Managements Discussion and Analysis of Financial Condition and Results of Operations.
Financial Statements and Supplementary Data.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Controls and Procedures.
Directors, Executive Officers and Corporate Governance.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Certain Relationships and Related Transactions, and Director Independence.
Principal Accountant Fees and Services.
Exhibits, Financial Statement Schedules
Special Note Regarding Forward Looking Information
This report contains forward-looking statements that reflect management's current views and expectations with respect to our business, strategies, future results and events, and financial performance. All statements made in this report other than statements of historical fact, including statements that address operating performance, events or developments that management expects or anticipates will or may occur in the future, including statements related to future reserves, cash flows, revenues, profitability, adequacy of funds from operations, statements expressing general optimism about future operating results and non-historical information, are forward-looking statements. In particular, the words "believe," "expect," "intend," "anticipate," "estimate," "plan," "may," "will," variations of such words and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that the statement is not forward-looking. Readers should not place undue reliance on forward-looking statements which are based on management's current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors that could cause or contribute to such differences include those discussed in this report, particularly under the caption "Risk Factors." Except as required under the federal securities laws, we do not undertake any obligation to update the forward-looking statements in this report.
Item 1. Business
Safe Cell Tab, Inc. was organized in British Columbia during 1996. The Safe Cell Tab is a small, thin, oval shaped device designed specifically to help protect users of cell phones, cordless phones, laptops, microwaves and any other hand held devices from the potentially harmful and damaging effects of electromagnetic radiation or EMFs, which are emitted from these electrical devices.
The Safe Cell Tab was co-designed with and patented by Milae Electronics of South Korea. Safe Cell Tab Inc. has the exclusive distribution rights on the product line. The company has received several independent laboratory reports testing the Safe Cell Tab product. The tests conducted were performed to US ASTM standards (American Society for Testing and Materials).
We were organized to serve as a vehicle for the re-organization and spin-off of the Safe Cell Tab, Inc. business and exist as its successor in interest. Our products principally include the Safe Cell Tab product lines. Following the spin-off, our assets, liabilities, business and employees will consist of those currently primarily related to the Safe Cell Tab business and operations. We will continue to be the exclusive master distributor of our product lines. We will also endeavor to re-establish and further develop our Professional Athletes Testimonial Program in our incumbent markets as well as developing new markets and initiatives.
We currently generate our revenues primarily through the sale of our Safe Cell Tab product lines, without the use of our Professional Athletes Testimonial Program. Our strategy is to complete the spin-off which will allow us to pursue the re-establishment of the Professional Athletes Testimonial Program as the principle marketing initiative for our Safe Cell Tab product lines and to create a value added proposition for wholesalers of like products with developed distribution networks. In order to execute our strategy, we will continue to rely on our core strengths, including our managements relationships with professional athletes, our Professional Athletes Testimonial Program, our diverse and attractive markets, and our product innovation.
We describe in this report the Safe Cell Tab operations contributed to us in connection with the spin-off as if it were our businesses for all historical periods described. References in this document to our historical assets, liabilities, products, business, employees or activities generally refer to the historical assets, liabilities, products, businesses, employees or activities of the contributed businesses as they were conducted as part of China Ivy and its subsidiaries before the spin-off.
Our Corporate History
The Company was incorporated on May 9, 1996 under in the Province of British Columbia, Canada with authorized 10,000 common shares with a par value of $1.00. On September 30, 2008 the Company changed its domicile to the state of Nevada and changed its authorized capital stock to 300,000,000 shares common stock and 100,000,000 shares preferred stock with a par value of $.0001. The Company made several name changes resulting in its present name. The terms of the preferred shares have been determined. On August 21, 2008 the Company completed a forward stock split from 8,680 outstanding common shares to 61,633,891 common shares. The post split outstanding shares have been shown from inception.
We currently have no employees and 10 distributors in the US, Canada and India. Our strategy is to continue to connect our product line offerings, customers and our Professional Athlete Testimonial Program. In order to execute our strategy, we will continue to rely on our core strengths, including our market position in our incumbent markets, our locally based sales initiatives, our Professional Athlete Testimonial Program, our diverse and attractive markets, and our product innovations.
Although we were not a party to the bankruptcy proceeding of our former parent, the perception of these bankruptcy proceedings negatively affected our ability to advance our marketing and sales campaign involving the Professional Athletics Testimonial Program. Upon the completion of the spin-off transactions, as an independent public company, we plan to resume the Professional Athletics Testimonial Program marketing campaign in internet, retail, wholesale and distribution markets. We plan to package the Professional Athletics Testimonial Program as a value added marketing recognition program and develop new distribution opportunities with existing distributor channels of similar product offerings concurrently we plan to pursue their business initiatives outside of the Safe cell Tab product lines to diversify our revenue options.
Our 12 month operating budget and the resulting financial resources required moving forward as a stand alone public company, includes the pursuit of these mandates.
Our business is not significantly impacted by seasonality.
Our operations and our owned and leased properties are subject to many laws and regulations relating to the protection of the environment and human health and safety including those governing air emissions, waste disposal, and the cleanup of contamination. While we believe we are in material compliance with these requirements, we could incur significant fines, penalties, costs or liabilities related to damage claims or remediation obligations in the event we violate these requirements or the permits required for our operations. In addition, because these laws may become more stringent and our processes may change, the amount and timing of future expenditures to achieve or maintain compliance may vary substantially from those currently anticipated.
Some environmental laws may impose liability for the investigation and cleanup of environmental contamination on current or former property owners or occupants, regardless of knowledge or the legality of the disposal practices at the time they occurred. Although we are not currently aware of any material obligations at properties we now or previously owned, leased, or operated or at sites we sent our waste for disposal, we may be required to conduct remedial activities in the future which may be material to our business and we also may be subject to claims for property damage, personal injury, natural resource damages or other issues as a result of these matters.
Our Internet address is www.cellteck.net. Please note that information contained on our web site is not incorporated by reference into this report. Our Internet address is included in this report as an inactive textual reference only. We plan to make available free of charge most of our future SEC filings through our Internet web site as soon as reasonably practicable after we file them with the SEC. You will be able to access our future SEC filings via a hyperlink on our web site to the SECs web site.
Competitors for Safe Cell Tab products are:
- distributors and re-sellers of cell phones and accessories;
- online retailers of cell phones;
- independent online retailers specializing in cellular phone accessories and alternative health products;
- mail-order and catalog retailers of cellular phone accessories, some of which have already developed online retail outlets;
- direct sales organizations;
- electronic stores specializing in communications and computer equipment;
- merchants and mass market retail chains; and
Many of the Company's potential competitors have longer operating histories, larger customer or user bases, greater brand recognition and significantly greater financial, marketing and other resources than Cellteck currently has. In addition, an online retailer may be acquired by, receive investments from, or enter into other commercial relationships with, larger, well-established and well-financed companies as use of the internet and other electronic services increases. Competitors have and may continue to adopt aggressive pricing or inventory availability policies and devote substantially more resources to website and systems development than the Company does. Increased competition may result in reduced operating margins and loss of market share.
The Company believes that the principal competitive factors in its market are:
1. the ability to attract and retain customers;
2. the breadth of product selection;
3. the product pricing;
4. the ability to customize products and labeling;
5. the quality and responsiveness of customer service.
The Company believes that it can compete favorably on these factors. However, the Company will have no control over how successful its competitors are in addressing these factors. In addition, with little difficulty, the Company's online competitors can duplicate many of the products or services offered on the Company's website. The Company believes that its competitors also face several challenges in succeeding:
1. Lack of convenience and personalized service. Traditional retailers have limited store hours and locations. Traditional retailers are also unable to provide consumers with product advice tailored to their particular situation.
2. Limited product assortment. The capital and real estate intensive nature of store-based retailers limit the product selection that can be economically offered in each store location.
3. Lack of Customer Loyalty. Although the larger traditional retailers often attract customers, many of these customers are only one-time users. People are often attracted to the name brands, but find the products too expensive. It is understood that these are quality products and have value, but the multilevel structure of marketing often employed by large retailers mandate high prices.
We believe that we possess the following strengths that will enable us to continue to compete successfully in our perspective markets:
Professional Athlete Testimonial Program. In connection with the spin-off, we expect to re-establish and further develop our Professional Athlete Testimonial Program. We will continue to establish this brand on our product lines in our incumbent and current independent markets. We believe that by establishing this brand, we will further develop the benefits of its recognition. In addition, we will invest in brand awareness campaigns that introduce our new brand and reinforce the benefits we offer our customers. Our Professional Athlete Testimonial Program includes National Hockey League (NHL) Hall of Fame inductees, current NHL all-star players, current senior NHL management and active players from the Canadian Football League (CFL). All participants have been long time Safe Cell Tab product users and each provides their testimonial without compensation of any kind.
Patents, Trademarks and Licenses
Following the spin-off, we will not own any patents, patent applications, service marks and trademarks in the United States and other countries that we do not already have legal rights to.
At December 31, 2009, we have no employees.
Location of Our Business
Our facilities are located at 417 Exeter Road, London, Ontario.
Item 1A: Risk Factors
You should carefully consider the risks described below, together with all of the other information included in thisreport, in evaluating our company and our common stock. If any of the risks described below actually occurs, our business, financial results, financial condition and stock price could be materially adversely affected.
Risk Factors Relating to the Spin-Off
Our historical financial information may not be indicative of our future results as an independent company.
The historical financial information we have included in this information statement may not reflect what our results of operations, financial position and cash flows would have been had we been an independent company during the periods presented or be indicative of what our results of operations, financial position and cash flows may be in the future when we are an independent company. This is primarily a result of the following three factors:
our historical financial information reflects allocations for services historically provided by China Ivy, and we expect these allocations to be different from the costs we will incur for these services in the future as a smaller independent company, including with respect to services we expect will be provided by China Ivy during the transition period. We expect that, in some instances, the costs incurred for these services as a smaller independent company will be higher than the share of total China Ivy expenses allocated to us historically; our historical financial information may not reflect the debt and related interest expense that we will incur as part of the spin-off, including debt we will incur in order to secure an operating line of credit; and
the historical financial information does not reflect the increased costs associated with being an independent company, including changes that we expect in our cost structure, personnel needs, financing and operations of the contributed business as a result of the spin-off from China Ivy and from reduced economies of scale.
As an independent company we may incur increased costs after the spin-off or as a result of the spin-off that may cause our profitability to decline.
Historically, our business has been principally reported as one of China Ivys business units, and China Ivy has performed some corporate functions for our operations, including managing investor relations, treasury services, select accounting functions, finance and tax administration, legal, regulatory, and corporate branding functions. Following the spin-off, China Ivy will no longer provide support to us with respect to certain of these functions. We will need to replicate certain facilities, systems, infrastructure and personnel to which we will no longer have access after our spin-off from China Ivy. We will incur capital and other costs associated with developing and implementing our own support functions in these areas.
In addition, there may be an adverse operational impact on our business as a result of the significant time of our management and other employees and internal resources that will need to be dedicated to building these capabilities during the first few years following the spin-off that otherwise would be available for other business initiatives and opportunities. When we begin to operate these functions independently, if we have not developed adequate systems and business functions, or obtained them from other providers, we may not be able to operate our company effectively and our profitability may decline.
In addition, we have historically benefited from China Ivys size and purchasing power in procuring goods and services. Following the spin-off, as an independent company, we may be unable to obtain goods and services at prices and on terms as favorable as those obtained before the spin-off, which could decrease our overall profitability.
If we are not successful in achieving brand recognition for our new brand, our competitive position will be weakened and we may lose market share.
We will incur substantial costs associated with launching and marketing our brand. However, we cannot assure you that we will be successful in achieving brand recognition for our brand.
Following the spin-off, we will have substantial indebtedness, which could have a negative impact on our financing options and liquidity position.
In connection with the spin-off, we will assume the debt and liabilities associated with the Safe Cell Tab Inc. business and operations. As a result, following the spin-off, we will have approximately $190,000 of total debt outstanding. As soon as practicable following the spin-off, we will enter into an agreement with management and others providing us with approximately $150,000 operating line of credit and we will issue preferred shares in exchange for the approximately total debt of the Company.
Our overall leverage and the terms of our financing arrangements could:
limit our ability to obtain additional financing in the future for working capital, capital expenditures and acquisitions;
limit our ability to refinance our indebtedness on terms acceptable to us or at all;
limit our ability to adapt to changing market conditions;
restrict us from making strategic acquisitions or cause us to make non-strategic divestitures;
require us to dedicate a significant portion of our cash flow from operations to paying the principal of and interest on our indebtedness, thereby limiting the availability of our cash flow to fund future capital
expenditures, working capital and other corporate purposes;
limit our flexibility in planning for, or reacting to, changes in our business and the telecommunications industry;
place us at a competitive disadvantage compared with competitors that have less debt;
make it more difficult for us to pay our anticipated cash dividends; and
make us more vulnerable to economic downturns and limit our ability to withstand competitive pressures.
Our financing arrangements will subject us to various restrictions that could limit our operating flexibility.
We expect that our financing arrangements will contain restrictions, covenants and events of default that, among other things, will require us to satisfy certain financial tests and maintain certain financial ratios and restrict our ability to incur additional indebtedness and to refinance our existing indebtedness. The terms of these financing arrangements and any future indebtedness may impose various restrictions and covenants on us that could limit our ability to pay dividends, respond to market conditions, provide for capital investment needs or take advantage of business opportunities by limiting the amount of additional borrowings we may incur. These restrictions may include compliance with, or maintenance of, certain financial tests and ratios, including minimum interest coverage ratio and maximum leverage ratio, and may limit or prohibit our ability to, among other things:
incur additional debt and issue preferred stock;
redeem and/or prepay certain debt;
pay dividends on our stock or repurchase stock;
make certain investments;
engage in specified sales of assets;
enter into transactions with affiliates;
enter new lines of business;
engage in consolidation, mergers and acquisitions;
make certain capital expenditures; and
pay dividends and make other distributions.
These restrictions on our ability to operate our business could seriously harm our business by, among other things, limiting our ability to take advantage of financing, merger and acquisition and other corporate opportunities.
Various risks, uncertainties and events beyond our control could affect our ability to comply with these covenants and maintain these financial tests and ratios. Failure to comply with any of the covenants in our existing or future financing arrangements would result in a default under those arrangements and under other arrangements containing cross-default provisions. A default would permit lenders to accelerate the maturity for the debt under these agreements and to foreclose upon any collateral securing the debt and to terminate any commitments to lend. Under these circumstances, we might have insufficient funds or other resources to satisfy all our obligations, including our obligations under the notes. In addition, the limitations imposed by any financing arrangements on our ability to incur additional debt and to take other actions might significantly impair our ability to obtain other financing.
Our designated executive team may have limited experience working together to lead an independent company.
While the persons expected to be our executive officers have significant industry experience and significant experience managing business units, they may have limited experience working together as managers of an independent, stand-alone company. Our success will depend, in part, on the ability of our executives to work effectively as a team in this new environment.
Risk Factors Relating to Our Business
We are dependent on one supplier for the main ingredient used in our product, and we do not currently have any other source for that ingredient.
We rely on one key supplier for the main ingredient used in our product. Although we currently have a license agreement with that supplier, we cannot guaranty that the said supplier will continue to supply us with the main ingredient used in our product. In the event that we cannot buy the ingredient from that supplier, we will need to develop a relationship with another supplier. Our failure to develop another relationship with a different supplier will significantly affect our ability to generate significant revenues.
If we are unable to successfully execute our growth strategy, our business and future results of operations may suffer.
Our growth strategy includes increasing the number of clients that we serve, selectively expanding the geographic reach of our products and broadening the scope of our products offerings. In connection with our growth strategy, we will be required to increase our sales and marketing efforts. Our growth strategy exposes us to a number of risks, including the following:
geographic expansion requires start-up costs, and often requires lower rates to generate initial business. In addition, geographic expansion may disrupt our patterns to and from and within the expanded area and may expose us to areas where we are less familiar with customer rates, operating issues and the competitive environment;
growth may strain our management, capital resources and customer service;
hiring new employees may increase training costs and may result in temporary inefficiencies as the employees learn their jobs; and
expanding our products offerings may require us to enter into new markets and compete with additional competitors.
We cannot guaranty that we will overcome the risks associated with our growth. If we fail to overcome such risks, we may not realize additional revenue or profitability from our efforts and we may incur additional expenses.
We depend on the efforts and abilities of our management to continue operations.
Our management is our only representatives with experience relevant to the business. In addition, the demand on their time will increase because of our status as a public company. The interruption of the services of our management could significantly hinder our operations, profits and future development, if suitable replacements are not promptly obtained. We do not currently have any executive compensation agreements. We cannot guaranty that our management will remain with us.
We face widespread competition from other industry related product offerings that may reduce our market share and harm our financial performance.
Competition from other industry related product lines may affect our ability to attract and retain distributors and to decrease sales rates. We may not be able to compete effectively with these companies for product sales or acquisitions in the future.
If we fail to anticipate or respond adequately to changes in technology and user preferences, our competitive position in this market could be materially adversely affected.
Advances in technology have brought and will likely continue to bring new participants, new products and new channels to the industry. The Internet has emerged as an attractive medium for retail product sales and its use, including as a means to transact commerce through wireless devices, has resulted in new technologies being developed and services provided that compete with our traditional distribution models, products and services. As a result of these factors, our growth and future financial performance may depend on our ability to develop and market new products and services to take advantage of and create new distribution channels, while enhancing existing products, services and distribution channels, to incorporate the latest technological advances and accommodate changing user preferences, including the use of the Internet. We may not be able to adapt our business successfully to these changes in technology.
Additional regulation regarding information technology could lead to increased costs.
As the Internet industry develops, specific laws relating to the provision of Internet services and the use of Internet and Internet-related applications may become relevant. Regulation of the Internet and Internet-related services is itself still developing both formally by, for instance, statutory regulation, and also less formally by, for instance, industry self regulation. If our regulatory environment becomes more restrictive, including by increased Internet regulation, our profitability could decrease.
Loss of key personnel or our inability to attract and retain highly qualified individuals could materially adversely affect our business.
We depend on the continued services of key personnel, including our experienced senior management team. The loss of key personnel could have a material adverse effect on our business. Our separation from China Ivy could also adversely affect our ability to attract and retain key personnel. Our ability to achieve our operating goals depends to a significant extent on our ability to identify, hire, train and retain qualified individuals.
The loss of important intellectual property rights could adversely affect our prospects and results of operations.
Some intellectual property rights and other testimonial property rights are key to our business. We rely upon a combination of copyright and trademark laws as well as contractual arrangements to establish and protect our intellectual property rights. We may be required from time to time to bring lawsuits against third parties to protect our intellectual property rights. Similarly, from time to time, we may be party to proceedings by third parties challenging our rights. We cannot be sure that any lawsuits or other actions brought by us will be successful or that we will not be found to infringe the intellectual property rights of third parties. As the Internet grows, it may prove more onerous to protect from domain name infringement or to prevent others from using Internet domain names that associate their business with ours. Although we are not aware of any material infringements that are significant to our business, any lawsuits, regardless of their outcome, could result in substantial costs and diversion of resources and could have a material adverse effect on our business, financial condition or results of operations. Furthermore, the loss of important intellectual property rights, including testimonial property rights, could have a material adverse effect upon our business, financial condition and results of operations.
Environmental compliance costs and liabilities could adversely affect our operating results, including our cash available for operations.
Our operations, as well as the properties that we own and lease for our business, are subject to stringent laws and regulations relating to environmental protection. Our failure to comply with applicable environmental laws, regulations or permit requirements, or the imposition of liability related to waste disposal or other matters arising under these laws, could result in civil or criminal fines, penalties or enforcement actions, third-party claims for property damage and personal injury or requirements to clean up property or other remedial actions. Some of these laws provide for strict liability, which can render a party liable for environmental or natural resource damage without regard to negligence or fault on the part of the party.
In addition, new environmental laws and regulations, new interpretations of existing laws and regulations, increased governmental enforcement or other developments could require us to make additional unforeseen expenditures. Many of these laws and regulations are becoming increasingly stringent, and the cost of compliance with these requirements can be expected to increase over time. To the extent that the costs associated with meeting any of these requirements are substantial and not adequately provided for, there could be a material adverse effect on our business, financial condition and results of operations.
Our exposure to legal proceedings could have a material adverse effect on our operating results or financial condition.
We can expect to be involved with various lawsuits and other claims typical for a business of our size. In addition, from time to time, we may receive communications from government or regulatory agencies concerning investigations or allegations of noncompliance with laws or regulations in jurisdictions in which we operate. We do not expect that the ultimate resolution of pending regulatory and legal matters in future periods will have a material effect on our financial condition. However, any potential judgments, fines or penalties relating to these matters may have a material effect on our results of operations in the period in which they are recognized.
Our reliance on technology could have a material adverse effect on our business.
Some of our business activities rely to a significant degree on the efficient and uninterrupted operation of our computer and communications systems and those of third parties. Any failure of current or, in the future, new systems could impair our collection, processing or storage of data and the day-to-day management of our business. This could have a material adverse effect on our business, financial condition and results of operations.
Our computer and communications systems are vulnerable to damage or interruption from a variety of sources. Despite precautions taken by us, a natural disaster or other unanticipated problems that lead to the corruption or loss of data at our facilities could have a material adverse effect on our business, financial condition and results of operations.
Our in-ability to expand our Professional Athletes Testimonial Program could have a material adverse effect on our business.
The re-establishment of our Professional Athletes Testimonial Program is significant to our business. Contemporaneous with this mandate, management may pursue other business initiatives to expand our revenue options into non-dependent markets.
Risk Factors Relating to Ownership of Our Common Stock
Our officers, directors and principal shareholders own a majority of our outstanding shares of common stock, allowing these shareholders control matters requiring approval of our shareholders.
Our officers, director and principal shareholders beneficially own a majority of our outstanding shares of common stock. Such concentrated control of the company may negatively affect the price of our common stock. Our officers, directors and principal shareholders can control matters requiring approval by our security holders, including the election of directors.
Shares of our common stock may continue to be subject to price volatility and illiquidity because our shares may continue to be thinly traded and may never become eligible for trading on a national securities exchange.
While we may at some point be able to meet the requirements necessary for our common stock to be listed on a national securities exchange, we cannot assure you that we will ever achieve a listing of our common stock on a national securities exchange. Our shares are currently only eligible for quotation on the Over-The-Counter Bulletin Board, which is not an exchange. Initial listing on a national securities exchange is subject to a variety of requirements, including minimum trading price and minimum public float requirements, and could also be affected by the general skepticism of such markets concerning companies that are the result of mergers with inactive publicly-held companies. There are also continuing eligibility requirements for companies listed on public trading markets. If we are unable to satisfy the initial or continuing eligibility requirements of any such market, then our stock may not be listed or could be delisted. This could result in a lower trading price for our common stock and may limit your ability to sell your shares, any of which could result in you losing some or all of your investments.
The market valuation of our business may fluctuate due to factors beyond our control and the value of your investment may fluctuate correspondingly.
The market valuation of emerging growth companies, such as us, frequently fluctuate due to factors unrelated to the past or present operating performance of such companies. Our market valuation may fluctuate significantly in response to a number of factors, many of which are beyond our control, including:
changes in securities analysts estimates of our financial performance, although there are currently no analysts covering our stock;
fluctuations in stock market prices and volumes, particularly among securities of emerging growth companies;
changes in market valuations of similar companies;
announcements by us or our competitors of significant contracts, new technologies, acquisitions, commercial relationships, joint ventures or capital commitments;
variations in our quarterly operating results;
fluctuations in related commodities prices; and
additions or departures of key personnel.
As a result, the value of your investment in us may fluctuate.
Our common stock may be subject to penny stock regulations which may make it difficult for investors to sell their stock.
The Securities and Exchange Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, deliver a standardized risk disclosure document prepared by the Commission, which specifies information about penny stocks and the nature and significance of risks of the penny stock market. The broker-dealer also must provide the customer with bid and offer quotations for the penny stock, the compensation of the broker-dealer and salesperson in the transaction, and monthly account statements indicating the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for a stock that becomes subject to the penny stock rules. If our common stock becomes subject to the penny stock rules, holders of our shares may have difficulty selling those shares.
Our capital raising may adversely affect holders of our common stock through the issuance of more senior securities or through dilution.
In addition to the new financing arrangements we expect to enter following the spin-off, we may need to incur additional debt or issue securities in order to fund working capital needs, capital expenditures and product development requirements or to make acquisitions and other investments. Due to limitations with respect to issuances of equity securities in relation to these agreements, we may seek to raise additional capital in the form of debt, which could increase our leverage and reduce our credit ratings. Further, any debt securities or preferred stock we issue will have liquidation rights, preferences and privileges senior to those of holders of our common stock. Among other reasons, if we were to raise funds through the issuance of common stock, we might lower the per share amount of any dividends that we issue.
Our financing arrangements will contain significant limitations on our ability to pay dividends on shares of our common stock.
Our financing arrangements will contain significant restrictions on our ability to pay dividends on shares of our common stock based on our meeting certain performance measures and complying with other conditions. Our ability to comply with these performance measures may be affected by events beyond our control, including prevailing economic, financial and industry conditions. A breach of any of the covenants, ratios or tests contained in our financing arrangements could result in a default under the financing arrangements. Any events of default or breach of certain provisions in our financing arrangements could prohibit us from paying any dividends to you.
There is no assurance that we will declare dividends or have the available cash to make dividend payments.
Although we will have a policy of paying dividends on our common stock, there can be no assurance that funds will be available for this purpose in the future. The declaration and payment of dividends will be subject to the sole discretion of our board of directors, will not be cumulative, and will depend upon our profitability, financial condition, capital needs, future prospects, and other factors deemed relevant by our board of directors, and will be restricted by the terms of our financing arrangements.
Anti-takeover provisions of our articles of incorporation and bylaws, the terms of our spin-off from China Ivy and subsequent financing arrangements and certain provisions of Nevada law could delay or prevent a change of control that you may favor.
Some provisions to be included in our articles of incorporation and bylaws may discourage, delay or prevent a merger or other change of control that stockholders may consider favorable or may impede the ability of the holders of our common stock to change our management. Provisions in our articles of incorporation and bylaws, among other things, will:
limit the right of stockholders to call special meetings of stockholders;
regulate how stockholders may present proposals or nominate directors for election at annual meetings of stockholders;
require unanimous written consent of stockholders to take any action without a meeting; and
authorize our board of directors to issue preferred stock in one or more series, without stockholder approval.
Finally, following the spin-off, we expect to be subject to a financing agreement, which may have an anti-takeover effect with respect to transactions not approved in advance by our board of directors, including discouraging takeover attempts and limitations on the replacement of the board of directors.
Item 1B: Unresolved Staff Comments
Item 2: Properties
We do not currently own property and rent office space at 417 Exeter Road, London, ON, N6E 2Z3
Item 3: Legal Proceedings
We are not presently a party to legal proceedings.
Item 4: Submission of Matters to Vote of Security Holders.
Item 5: Market For Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market price of and dividends Registrant's Common Equity and Related Stockholder Matters.
Issuer Purchases of Equity Securities.
Market for Our Common Stock
Our common stock is traded in the over-the-counter market (the OTC Bulletin Board). From October 30, 2008, the date we had our 15c2-11 approval to the present, our common stock has been quoted under the symbol "CLTK.OBB.
The prices set forth below reflect the quarterly high and low sale price information for shares of our common stock for the periods indicated. These quotations reflect inter-dealer prices, without retail markup, markdown or commission, and may not represent actual transactions.
Reports to Security Holders. We are a reporting company with the Securities and Exchange Commission, or SEC. The public may read and copy any materials filed with the Securities and Exchange Commission at the Security and Exchange Commissions Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may also obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the Securities and Exchange Commission. The address of that site is http://www.sec.gov.
Holders. As of March 16, 2010, there were approximately 26 record holders of the Company's common stock, not including shares held in "street name" in brokerage accounts which is estimated to represent approximately 1500 beneficial owners.
Dividend Policy. We have never declared or paid a cash dividend on our capital stock. We do not expect to pay cash dividends on our common stock in the foreseeable future. We currently intend to retain our earnings, if any, for use in our business. Any dividends declared in the future will be at the discretion of our board of directors and subject to any restrictions that may be imposed by our lenders.
No Equity Compensation Plan. We do not have any securities authorized for issuance under any equity compensation plan. We also do not have an equity compensation plan and do not plan to implement such a plan.
The following table provides information as of December 31, 2009 about our equity compensation plans and arrangements.
Equity Compensation Plan Information - December 31, 2009
available for future
plans of outstanding
Number of securities to
be issued upon exercise
warrants and rights
exercise price of equity
warrants and rights
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Purchases of Equity Securities by the Company and Affiliated Purchasers. During the fourth quarter of our fiscal year ended December 31, 2009, neither we nor any "affiliated purchaser" (as defined in Rule 10b-18(a)(3) under the Exchange Act) purchased any shares of our common stock, the only class of our equity securities registered pursuant to section 12 of the Exchange Act.
Penny Stock Regulation. Shares of our common stock will probably be subject to rules adopted the Securities and Exchange Commission that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in those securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, deliver a standardized risk disclosure document prepared by the Securities and Exchange Commission, which contains the following:
a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;
a description of the brokers or dealers duties to the customer and of the rights and remedies available to the customer with respect to violation to such duties or other requirements of securities laws;
a brief, clear, narrative description of a dealer market, including "bid" and "ask prices for penny stocks and the significance of the spread between the "bid" and "ask" price;
a toll-free telephone number for inquiries on disciplinary actions;
definitions of significant terms in the disclosure document or in the conduct of trading in penny stocks; and
such other information and is in such form (including language, type, size and format), as the Securities and Exchange Commission shall require by rule or regulation.
Prior to effecting any transaction in penny stock, the broker-dealer also must provide the customer the following:
the bid and offer quotations for the penny stock;
the compensation of the broker-dealer and its salesperson in the transaction;
the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and monthly account statements showing the market value of each penny stock held in the customers account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchasers written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for a stock that becomes subject to the penny stock rules. Holders of shares of our common stock may have difficulty selling those shares because our common stock will probably be subject to the penny stock rules.
Recent Sales of Unregistered Securities
There were no sales of our unregistered equity securities that occurred during 2009, as applicable.
Item 6: Selected Financial Data
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the Financial Statements of the Company and the related notes thereto, and other information included or incorporated by reference herein.
This following information specifies certain forward-looking statements of management of the company. Forward-looking statements are statements that estimate the happening of future events and are not based on historical fact. Forward-looking statements may be identified by the use of forward-looking terminology, such as may, shall, could, expect, estimate, anticipate, predict, probable, possible, should, continue, or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. We cannot guaranty that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.
Critical Accounting Policies and Estimates. Our Managements Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources.
These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2009.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER31, 2009 AND 2008
The following table presents the statement of operations for the year ended December 31, 2009 as compared to the comparable period of 2008. The following discussion is based on these results.
For the years Ended
COST OF SALES
Net income (loss)
Net revenue for the year ended December 31, 2009 totaled $21,018 compared to $16,810for December 31, 2008, an increase of $4,208, or approximately 25%. The increase was due to expanding our wholesale distribution network.
Operating expenses for the year ended December 31, 2009 totaled $16,826 or approximately 80% of net revenue, compared to $21,758 or approximately 104% of net revenue for the year ended December 31, 2008. The decrease in operating expenses of $4,932, or approximately 29%, due to relocating to Ontario and decrease in operating expenses.
Net Income (Loss)
Loss from operations for the year ended December 31, 2009 was $1,981, or approximately 9% of net revenue, as compared to Loss from operations of $7,241 or approximately 43% of net revenue for the year ended December 31, 2008, an increase in income from operations of $4208 or approximately 25%. The increase in income was due to an increase in our revenue and a decrease in our operating expenses as described above.
LIQUIDITY AND CAPITAL RESOURCES
We are funded primarily by cash from operations and advances from related parties. Cash has historically been generated from operations. Operations and liquidity needs are funded primarily through cash flows from operations and related parties
borrowings. Cash and cash equivalents were $36 at December 31, 2009 and current assets totaled $4,237 at December 31, 2009.(Cash and Inventory valued at cost). The Company's total current liabilities were $195,694 at December 31, 2009. Working capital at December 31, 2008 was $(198,083).
We expect the funds from operations will not provide us with sufficient capital to fund our continuing operations for the foreseeable future. Instead, we will be required to increase borrowings or raise funds through the offering of private placements, until such time cash flows from operations support current operations as well as servicing our debt. In addition, from time to time we borrow funds from management to cover current operational requirements.
Working Capital Arrangement
We entered into a financial arrangement with a related party, whereby we will have at our disposal a $150,000 line of credit for ongoing operational and general company expenses. We believe this operating line of credit will be sufficient to meet our financial needs for our first 12 month period.
OFF-BALANCE SHEET ARRANGEMENTS
We have never entered into any off-balance sheet financing arrangements and have never established any special purpose entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.
Working Capital Requirements
Historically operations, short term financing and the sale of our company stock have been sufficient to meet our cash needs. We believe that we will be able to generate revenues from sales. However, our actual working capital needs for the long and short term will depend upon numerous factors, including operating results, competition, and the availability of credit facilities, none of which can be predicted with certainty. Future expansion will be limited by the availability of financing products and raising capital.
Item 7A: Quantitative and Qualitative Disclosures about Market Risk
Item 8: Financial Statements and Supplementary Data
DECEMBER 31, 2008
TABLE OF CONTENTS
Report of Independent Registered Public Accounting Firm
Balance Sheet as of December 31, 2009 and 2008
Statements of Operations
for the years ended December 31, 2009 and 2008
Statements of Cash Flow
for the years ended December 31, 2009 and 2008
Statements of Stockholders' Equity
for the years ended December 31, 2009 and 2008
Notes to Financial Statements
MADSEN & ASSOCIATES. CPAs INC.
684 East Vine St. #3
Certified Public Accountants and Business Consultants
Murray, Utah 84107
Board of Directors
Vancouver, BC, Canada
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the accompanying balance sheets of CellTeck, Inc. For the years ended December 31, 2009 and 2008 and the related statements of operations, stockholders' equity, and cash flows for the years ended December 31, 2009 and 2008. 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 audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
The company is not required to have nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness for the companys internal control over financial reporting. Accordingly, we express no such opinion. 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 over all financial statement presentation. We believe that our audit provides 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 CellTeck, Inc. at December 31, 2009 and 2008, and the results of operations, and cash flows for the years ended December 31, 2009 and 2008 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. The Company does not have the necessary working capital to service its debt and for its planned activity, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in the notes to the financial statements. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Madsen & Associates, CPAs Inc.
March 24, 2010
December 31, 2009 and 2008
Inventory - for resale
Total Current Assets
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Accounts payable - related parties
Total Current Liabilities
100,000,000 shares authorized at $.0001 par value - none out
300,000,000 shares authorized at $.0001 par value;
61,633,890 shares issued and outstanding
Capital in excess of par value
Total Stockholders' Deficiency
The accompanying notes are an integral part of these financial statements
STATEMENT OF OPERATIONS
For the Years Ended December 31, 2009 and 2008
COST OF SALES
NET LOSS PER COMMON
Basic and diluted
AVERAGE OUTSTANDING SHARES (stated in 1,000's)
The accompanying notes are an integral part of these financial statements
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - (deficiency)
For the Period January 1, 2007 to December 31, 2009
Balance January 1, 2007
Net operating loss for the year ended December 31, 2007
Balance December 31, 2007
Net operating loss for the year ended December 31, 2008
Balance December 31, 2009
The accompanying notes are an integral part of these financial statements.
STATEMENT OF CASH FLOWS
For the Years Ended December 31, 2009 and 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)
Adjustments to reconcile net loss to
net cash provided by operating activities
Changes in accounts receivables
Changes in inventory
Changes in accounts payable
Net Changes in Cash from Operations
CASH FLOWS FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from related parties
Net Increase (Decrease) in Cash
Cash at Beginning of Period
Cash at End of Period
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 2009
The Company was incorporated on May 9, 1996 under in the Province of British Columbia, Canada with authorized 10,000 common shares with a par value of $1.00. the Company changed its domicile to the state of Nevada and changed its authorized capital stock to 300,000,000 shares common stock and 100,000,000 shares preferred stock with a par value of $.0001. The Company made several name changes resulting in its present name. The terms of the preferred shares have been determined. On August 21, 2008 the Company completed a forward stock split from 8,680 outstanding common shares to 61,633,891 common shares. The post split outstanding shares have been shown from inception.
The Company is in the business of pursuing the marketing and sales of the Safe Cell Tab. The Safe Cell Tab is a small, thin, oval shaped device specifically designed in response to EMFs emitted by cell phones, cordless phones, laptops, microwaves and any other hand held devices and the potentially harmful effects of electronic radiation which is emitted from these and other electronic devices.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company recognizes income and expenses based on the accrual method of accounting.
The Company has not adopted a policy regarding payment of dividends.
The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to reverse. An allowance against deferred tax assets is recorded, when it is more likely than not, that such tax benefits will not be realized.
On December 31, 2009 the Company had a net operating loss carry forward; however, the use of most of the income tax benefit from the loss carry forward will not be available for carry forward because the former parent Company has filed consolidated tax returns using its share of the loss. The remaining loss available for carry forward has not been determined.
Inventory is stated at the lower of cost or market using the first in first out method.
Basic and Diluted Net Income (Loss) Per Share
Basic net incomes (loss) per share amounts are computed based on the weighted average number of shares actually outstanding. Diluted net income (loss) per share amounts are computed using the weighted average number of common shares and common equivalent shares outstanding as if shares had been issued on the exercise of any common share rights unless the exercise becomes antidilutive and then only the basic per share amounts are shown in the report.
Foreign Currency Translation
Part of the transactions of the Company were completed in Canadian dollars and have been translated to US dollars as incurred, at the exchange rate in effect at the time, and therefore, no gains or losses are recognized from the translations. US dollars are considered to be the functional currency.
The carrying amounts of financial instruments are considered by management to be their estimated fair values due to their short term maturities.
NOTES TO FINANCIAL STATEMENTS
December 31, 2009
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing these financial statements.
Financial and Concentrations Risk
The Company does not have any concentration or related financial credit risk except for the accounts receivable, however, they are considered to be fully collectable.
The Company recognizes revenue in accordance with SEC Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements (SAB No. 101), as amended by SAB No. 101A and SAB No. 101B. SAB No. 101 requires that four basic criteria must be met before revenue can be recognized: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services rendered; (iii) the fee is fixed and determinable; and (iv) collectability is reasonably assured.
Determination of criteria (iii) and (iv) are based on managements judgments regarding the fixed nature of the fee charged for services rendered and products delivered and the collectability of those fees. Should changes in conditions cause management to determine these criteria are not met for certain future transactions, revenue recognized for any reporting period could be adversely affected. The Company has concluded that its revenue recognition policy is appropriate and in accordance with accounting principles generally accepted in the United States of America and SAB No. 101.
Revenues are exclusive for the sales of the Companys products; the Company does not sell services. Revenue is recognized at the time of shipping determined as F.O.B loading dock. Products prices are fixed and are determined at the time of shipping, inclusive of all volume or other available discounts. Returns policy includes accounting for returns drawn from a return pool that is adjusted quarterly as required under the GAAP estimated return criteria. Historically, the return of products has been non-material.
Advertising and Market Development
The company expenses advertising and market development costs as incurred.
Recent Accounting Pronouncements
Recent Issued Accounting Standards
In September 2006, the FASB issued SFAS 157, Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure about fair value measurements. This statement is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is encouraged. The adoption of SFAS 157 is not expected to have a material impact on the financial statements.
In February 2007, the FASB issued FAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115, (FAS 159) which permits entities to choose to measure many financial instruments and certain other items at fair value at specified election dates. A business entity is required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. This statement is expected to expand the use of fair value measurement. FAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.
NOTES TO FINANCIAL STATEMENTS
December 31, 2009
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Issued Accounting Standards (Continued)
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No 51 (SFAS 160). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, changes in a parents ownership of a noncontrolling interest, calculation and disclosure of the consolidated net income attributable to the parent and the noncontrolling interest, changes in a parents ownership interest while the parent retains its controlling financial interest and fair value measurement of any retained noncontrolling equity investment.
SFAS 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. Management is determining the impact that the adoption of SFAS No. 160 will have on the Companys financial position, results of operations or cash flows.
In December 2007, the FASB issued SFAS 141R, Business Combinations (SFAS 141R), which replaces FASB SFAS 141, Business Combinations. This Statement retains the fundamental requirements in SFAS 141 that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R 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. SFAS 141R will require an entity to record separately from the business combination the direct costs, where previously these costs were included in the total allocated cost of the acquisition. SFAS 141R will require an entity to recognize the assets acquired, liabilities assumed, and any non-controlling interest in the acquired at the acquisition date, at their fair values as of that date. This compares to the cost allocation method previously required by SFAS No. 141. SFAS 141R will require an entity to recognize as an asset or liability at fair value for certain contingencies, either contractual or non-contractual, if certain criteria are met. Finally, SFAS 141R will require an entity to recognize contingent consideration at the date of acquisition, based on the fair value at that date. This Statement will be effective for business combinations completed on or after the first annual reporting period beginning on or after December 15, 2008. Early adoption of this standard is not permitted and the standards are to be applied prospectively only. Upon adoption of this standard, there would be no impact to the Companys results of operations and financial condition for acquisitions previously completed. The adoption of SFAS No. 141R is not expected to have a material effect on the Companys financial position, results of operations or cash flows.
In December 2007, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 110, Use of a Simplified Method in Developing Expected Term of Share Options (SAB 110). SAB 110 expresses the current view of the staff that it will accept a companys election to use the simplified method discussed in Staff Accounting Bulletin 107, Share Based Payment , (SAB 107), for estimating the expected term of plain vanilla share options regardless of whether the company has sufficient information to make more refined estimates. SAB 110 became effective for the Company on January 1, 2008. The adoption of SAB 110 is not expected to have a material impact on the Companys 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). SFAS 161 requires enhanced disclosures about an entitys derivative and hedging activities. These enhanced disclosures will discuss: how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations; and how derivative instruments and related hedged items affect an entitys financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company does not believe that SFAS 161 will have an impact on their results of operations or financial position.
In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. The Company was required to adopt FSP 142-3 on October 1, 2008. The guidance in FSP 142-3 for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after adoption, and the disclosure requirements shall be applied prospectively to all intangible assets recognized as of, and subsequent to, adoption. The Company does not believe FSP 142-3 will materially impact their financial position, results of operations or cash flows.
NOTES TO FINANCIAL STATEMENTS
December 31, 2009
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Issued Accounting Standards (Continued)
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS 162). SFAS 162 makes the hierarchy of generally accepted accounting principles explicitly and directly applicable to preparers of financial statements, a step that recognizes preparers responsibilities for selecting the accounting principles for their financial statements. The effective date for SFAS 162 is 60 days following the U.S. Securities and Exchange Commissions approval of the Public Company Accounting Oversight Boards related amendments to remove the GAAP hierarchy from auditing standards, where it has resided for some time. The adoption of SFAS 162 will not have an impact on the Companys results of operations or financial position.
In May 2008, the FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts an interpretation of SFAS No. 60 (SFAS 163). SFAS 163 prescribes accounting for insures of financial obligations, bringing consistency to recognizing and recording premiums and to loss recognition. SFAS 163 also requires expanded disclosures about financial guarantee insurance contracts. Except for some disclosures, SFAS 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008. The adoption of SFAS 163 will not have an impact on the Companys results of operations or financial position.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date and are not expected to have a material impact on the financial statements upon adoption.
The Company does not expect that the adoption of other recent accounting pronouncements will
have a material impact on its financial statements.
3. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES
Officers-directors and principal management have acquired 40,000 shares of the outstanding stock of the Company and have made demand, no interest, and loans to the Company of $ 181,426. represented as accounts payable. (see note 5)
4. GOING CONCERN
The Company does not have the necessary working capital to service its debt and for its planned activity, which raises substantial doubt about its ability to continue as a going concern.
Continuation of the Company as a going concern is dependent upon obtaining additional working capital and the management of the Company has developed a strategy, which it believes will accomplish this objective through additional loans from officers and others, if needed, and equity funding which will provide sufficient working capital necessary to conduct operations for the coming year. (see note 5)
5. SUBSEQUENT EVENTS
The Company was acquired by Claremont Technologies Corp as a wholly owned subsidiary on August 22, 2003 (as amended).
During November 2008 the former parent of the Company, transferred all of the stock of the Company to its shareholders, on a pro-rata basis, as a stock dividend. This report includes the financial statements of the Company only and has not been consolidated with its former parent.
During 2010 the Company may distribute, a yet to be determined, number of common and preferred shares of the Company as a payment of debt due to the related parties. The issuance of preferred shares, and the conversion of preferred shares to common shares, convertible to common shares, at the rate of 2 common for 1 share of preferred, is at the option of the holder.
As of March 15, 2010, the company has remaining approximately 120,000 of its 150,000 related parties operating line of credit established August 31, 2008, which management believes shall be sufficient to meet its operating and financial obligations for fiscal year 2010.
No other material reportable subsequent event has been determined from December 2009 thru this report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Item 9A. CONTROLS AND PROCEDURES
Management, including our President, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based upon that evaluation, the President concluded that the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports that we file and submit under the Exchange Act is (i) recorded, processed, summarized and reported as and when required and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely discussions regarding disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Managements Annual Report on Internal Control Over Financial Reporting.
Cellteck, Inc.s management is responsible for establishing and maintaining adequate control over financial reporting for Cellteck, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Under the supervision and with the participation of Celltecks management, including our principal executive and principal financial officers, Cellteck conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Tread way Commission (the COSO Framework). Based on this evaluation under the COSO Framework management concluded that its internal control over financial reporting was effective as of December 31, 2008.
This annual report does not include an attestation report of the companys registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the companys registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only managements report in this annual report.
There has not been any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
We do not expect that internal controls over financial reporting will prevent all errors or all instances of fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within its company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and any design may not succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitation of a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
ITEM 9B. OTHER INFORMATION
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
The following table sets forth the information of March 15, 2010 regarding the individuals who are expected to serve as our board of directors and executive officers following the spin-off.
President, Chief Executive Officer and Director
Gus Rahim is the owner and President of the Ontario Driving School of London Inc. since 1982 to present,, the owner and President of Payless Auto Leasing and Sales Inc since 1985 to present and was the owner and General Manger of Canadian Centre for Decision Driving (CCDD) from 2004 to 2007.
Mr. Rahim is also the founding member of the Truck Training Schools Association of Ontario in1993 and presently serves as its President. Additionally, Mr. Rahim in 2005 served as a board member of The Road Safety Association for one year. And active member of the Ontario Safety League and served as the President and Chairman of the Board of Claremont Technologies Corp from 2005 to 2006 a Company trading on the OTC: BB.
Board of Directors Structure
Our bylaws provide that the number of members will be fixed by a majority vote of the board of directors. Our articles of incorporation and bylaws will provide that the board of directors will consist of one class, with our directors being elected each year at our annual meeting of stockholders. We will keep our board of directors informed about our business through discussions with management, materials we provide to them, visits to our offices and their participation in board of directors and board committee meetings.
Our board of directors is expected to adopt corporate governance guidelines that, along with the charters of our board committees and our code of business conduct for employees and board of directors, will provide the framework for the governance of our company.
Code of Ethics. We do not currently have a Code of Ethics that applies to all employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We plan to adopt a Code of Ethics.
Item 11. EXECUTIVE COMPENSATION
Directors of the Company are not compensated in cash for their services but are reimbursed for out-of-pocket expenses incurred in furtherance of our business.
We expect to establish a director compensation program comparable to that of companies of similar size and complexity. It is expected that a committee of our board of directors will recommend director compensation levels to the full board of directors, which will set the compensation based on those recommendations. We expect that a committee of our board of directors will review and report to the board of directors on the director compensation program on a regular basis and that the committee will likely retain an outside advisor to assist in its review and report on the program.
Summary Compensation Table
Long-term Compensation Awards
Name and Principal Position
President and Chief
Retirement Plans, Pension Plans and Savings Plan
We do not have a retirement, Pension or Savings Plan for management or employees at this time.
We have not entered into employment agreements at this time.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the number of shares of China Ivy common stock and the number of shares of our common stock that are held by our directors, our executive officers and each stockholder that we believe will be a beneficial owner of more than 5% of any class of our outstanding voting securities based on our estimates as of March 15, 2010.
Shares Beneficially Owned
Name and Address of Beneficial Owner
of China Ivy
Ming Long Industry Asia Company Limited
Executive Officers and Directors of Cellteck as a Group (3 persons)
Shares Beneficially Owned Post Re-Capitalization
Name and Address of Beneficial Owner
Stock Upon Conversion
Class Common Shares Upon Conversion
Al Rahim (1)
Daniel Steer (2)
Ken Pappas (3)
(1) Al Rahim is the brother of Cellteck director Gus Rahim
(2) Daniel Steer is a Cellteck director
(3) Ken Pappas is a distributor for Cellteck
As further described in the financial statements of the Company beginning in 2003, these debt holders hold debt in the aggregate of approximately $200,000. The debt holders are affiliated and non-affiliated parties with the Company and include Daniel Steer a Director, Ken Pappas, a distributor and Al Rahim, a brother of Gus Rahim, Director and President. The results of the debt re-structuring for an aggregate amount of approximately $200,000, may consist of the issuance of common and preferred shares as determined by the Company and agreed to by the debt holders.
The issuance of the common and preffered shares by the Company to the debt holders may result in a change in control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions with related persons, promoters and certain control persons
For the reasons disclosed in this Report, one of our former directors Daniel Steer was directly interested in the creation of our new class of Class A Shares. In addition, two other individuals, all of whom have been at certain periods are affiliated to our Corporation for the reasons explained below and elsewhere in this Report, were directly interested in the creation of our new class of Class A Shares. Except as disclosed in the section and elsewhere in the Information Statement, no associate or affiliate of any of the current directors, or any nominees for appointment to our Board of Directors, has any substantial interest, direct or indirect, by security holdings or otherwise in any matter to be acted upon.
The Board of Directors of the Company has the right to negotiate the terms of the debt conversion transaction and has agreed to the issuance of the Preferred Series A shares to be issued in the debt conversion transaction with the debt holders.
The shareholdings of our directors and officers are listed herein in the section entitled "Security Ownership of Certain Beneficial Owners. To our knowledge, no director has advised that he intends to oppose the increase in authorized capital as more particularly described herein.
Except in connection with the proposed debt conversion described herein, our Corporation currently has no arrangements or understandings for the issuance of additional shares of common or preferred stock, although opportunities for acquisitions in equity financings could arise at any time. If our Board of Directors deemed it to be in the best interests of our Corporation and the stockholders to issue additional shares of common and/or preferred stock in the future from authorized shares, the Board of Directors generally will not seek further authorization by both of the stockholders, unless such authorization is otherwise required by law or regulations.
Upon the closing of the spin-off, we expect to enter into an agreement with certain debt holders of the Company to issue preferred shares for debt, resulting in a change of control of the Company. Our Board of Directors authorized the creation of the Class A Shares in order to enable our Corporation to complete the debt conversion subsequent to the Spin-off transaction, in order to enhance our Corporations ability to improve our financial position and to attract future financing to develop and operate our proposed business. Our Board of Directors believes the debt conversion transaction, and the enhancement of our Corporations ability to finance the development and operation of our proposed business, to be in the best interests of our Corporation and our shareholders.
As further described in the financial statements of the Company beginning in 2003, these debt holders hold debt in the aggregate of approximately $200,000. The debt holders are affiliated and non-affiliated parties with the Company and include Daniel Steer a Director, Ken Pappas, a distributor and Al Rahim, a brother of Gus Rahim, Director and President. Daniel Steers and Ken Pappass debt relates to monies owing to each of them beginning in 2003 for out of pocket cash advances to Safe Cell Tab. The Al Rahim debt is the result of out of pocket cash advances to Safe Cell Tab for operating expenses. The debt described herein does not relate to fees for services but rather cash advances to the Company as described in the financial filings beginning in 2003. Also, the amount of cash advances is changing ongoing, categorized as current accounts payable.
Director Independence. Members of our Board of Directors are not independent as that term is defined by defined in Rule 4200(a)(15) of the Nasdaq Marketplace Rules.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Aggregate fees billed for fiscal year 2009 for professional services rendered by the principal accountant for the audit of our annual financial statements, review of quarterly statements and other services provided in connection with statutory or regulatory filings or engagements: $14,000.
Aggregate fees billed in fiscal year 2009 for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of our financial statements and are not reported under the Audit Fees caption above: $0.
Aggregate fees billed in fiscal year 2009 for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning: $0.
All Other Fees
Aggregate fees billed in fiscal year 2009 for products and services provided by the principal accountant, other than the services reported above: $0.
Cellteck, Inc. audit committees pre-approval policy is to retain the services of a professional accountant only once the threshold established by Rule 2-01 of Regulation S-X has been met.
The audit committees pre-approval procedure is to carefully establish that each of the tests delineated in paragraphs (b) and (c)(1)-(3) of Rule 2-01 of Regulation S-X are met.
Item 15. Exhibits
FORM OF DISTRIBUTION*
FORM OF MERGER AGREEMENT*
ARTICLES OF INCORPORATION*
Certification of Chief Executive Officer pursuant to Rule13a-14(a) under the Securities Exchange Act of 1934
Certification of Chief Financial Officer pursuant to Rule13a-14(a) under the Securities Exchange Act of 1934.
Certification of Chief Executive Officer pursuant to Section906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
Certification of Chief Financial Officer pursuant to Section906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).
*Incorporated by reference to the Form 10 registration statement filed July 14, 2008
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 23, 2010
By:/s/ Gus Rahim
President and Chief Executive Officer