Attached files
file | filename |
---|---|
EX-32.1 - Cell-nique Corp | v204285_ex32-1.htm |
EX-31.2 - Cell-nique Corp | v204285_ex31-2.htm |
EX-32.2 - Cell-nique Corp | v204285_ex32-2.htm |
EX-31.1 - Cell-nique Corp | v204285_ex31-1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x QUARTERLY REPORT
UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the
quarterly period ended September 30, 2010
¨ TRANSITION REPORT
UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the
transition period from _______ to _______
Commission
file number
Commission
file number: 333-161413
Cell-nique
Corporation
(Exact
name of registrant as specified in its charter)
Delaware
|
27-0693687
|
(State
of incorporation)
|
(I.R.S.
Employer Identification No.)
|
12
Old Stage Coach Road, Weston, CT 06883
(Address
and telephone number of principal executive offices)
888-417-9343
(Registrant's
telephone number, including area code)
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ¨ No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
Large
Accelerated filer ¨
|
Accelerated
filer
¨
|
Non-accelerated
filer ¨
|
Smaller
reporting company x
|
Indicate
by check mark whether the issuer is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes ¨ No x
Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: There were a total of 5,015,000 shares
of Common Stock outstanding as of November 13, 2010.
Special
Note Regarding Forward-Looking Statements
This
Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in Item 2 of Part I of this
report include forward-looking statements. These statements involve known and
unknown risks, uncertainties and other factors that may cause our actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance, or
achievements expressed or implied by forward-looking statements.
In
some cases, you can identify forward-looking statements by terminology such as
"may," "should," "expects," "plans," "anticipates," "believes," "estimates,"
"predicts," "potential," "proposed," "intended," or "continue" or the negative
of these terms or other comparable terminology. You should read statements that
contain these words carefully, because they discuss our expectations about our
future operating results or our future financial condition or state other
"forward-looking" information. There may be events in the future that we are not
able to accurately predict or control. Before you invest in our securities, you
should be aware that the occurrence of any of the events described in this
Quarterly Report could substantially harm our business, results of operations
and financial condition, and that upon the occurrence of any of these events,
the trading price of our securities could decline and you could lose all or part
of your investment. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
growth rates, levels of activity, performance or achievements. We are under no
duty to update any of the forward-looking statements after the date of this
Quarterly Report to conform these statements to actual results.
2
TABLE
OF CONTENTS
PART
I - FINANCIAL INFORMATION
|
|
Item
1. Condensed Financial Statements
|
|
Condensed
Balance Sheets – September 30, 2010 (unaudited) and December 31,
2009
|
4
|
Condensed
Statements of Operations for the nine month periods ended September 30,
2010 and 2009 (unaudited)
|
5
|
Condensed
Statement of Changes in Stockholders’ Equity for the nine month period
ended September 30, 2010 (unaudited)
|
6
|
Condensed
Statements of Cash Flows for the nine month periods ended September 30,
2010 and 2009 (unaudited)
|
7
|
Notes
to Condensed Financial Statements (unaudited)
|
8
|
Item
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
|
11
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
14
|
Item
4T.Controls and Procedures
|
15
|
PART
II - OTHER INFORMATION
|
|
Item
1. Legal Proceedings
|
15
|
Item
1A. Risk Factors
|
15
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
15
|
Item
3. Defaults Upon Senior Securities
|
15
|
Item
4. Removed and Reserved
|
15
|
Item
5. Other Information
|
15
|
Item
6. Exhibits
|
15
|
3
Part
I – FINANCIAL INFORMATION
Item
1. Financial Statements
Cell-nique
Corporation
CONDENSED BALANCE
SHEETS
Unaudited
|
Audited
|
|||||||
Sept 30,
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
Assets
|
||||||||
Current
assets
|
||||||||
Cash
|
$ | 21,340 | $ | 7,624 | ||||
Accounts
receivable
|
13,359 | 38,201 | ||||||
Inventory
|
87,459 | 75,507 | ||||||
Total
current assets
|
122,158 | 121,332 | ||||||
Machinery and equipment,
net
|
53,750 | 70,859 | ||||||
Total
assets
|
175,908 | 192,191 | ||||||
Liabilities and stockholders'
equity
|
||||||||
Current
liabilities
|
||||||||
Accounts payable and accrued
expenses
|
66,236 | 16,627 | ||||||
Notes payable -
Shareholder
|
106,408 | 1,451,786 | ||||||
Total
current liabilities
|
172,643 | 1,468,413 | ||||||
Stockholders'
equity
|
||||||||
Common stock 49,000,000 shares
authorized,
|
||||||||
5,015,000 issued and
outstanding, par value $.00001
|
50 | 50 | ||||||
Additional paid-in
capital
|
840,344 | (745,656 | ) | |||||
Accumulated
deficit
|
(837,129 | ) | (530,616 | ) | ||||
Total
stockholders' equity
|
3,265 | (1,276,222 | ) | |||||
Total
liabilities and stockholders' equity
|
$ | 175,908 | $ | 192,191 |
The
accompanying notes are an integral part of these condensed financial
statements
4
CELL-NIQUE
CORPORATION
CONDENSED
STATEMENTS OF OPERATIONS
For
the Nine Months Ended September 30, 2010 and 2009
(Unaudited)
Unaudited
|
Unaudited
|
|||||||||||||||
Three
months ended Sept 30,
|
For
the nine months ended Sept 30
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Sales,
net
|
$ | 85,498 | $ | 99,655 | $ | 375,033 | $ | 336,856 | ||||||||
Cost
of sales
|
31,311 | 48,473 | 177,748 | 162,097 | ||||||||||||
Gross
profit
|
54,187 | 51,182 | 197,285 | 174,759 | ||||||||||||
Expenses
|
||||||||||||||||
Selling
|
48,615 | 78,069 | 185,067 | 277,962 | ||||||||||||
General
and administrative
|
46,627 | 75,438 | 199,390 | 219,888 | ||||||||||||
Research
and development
|
1,224 | 4,113 | 2,188 | 8,463 | ||||||||||||
Depreciation
|
5,736 | 5,736 | 17,109 | 16,756 | ||||||||||||
Total
expenses
|
102,202 | 163,356 | 403,754 | 523,069 | ||||||||||||
Loss
from operations
|
(48,015 | ) | (112,174 | ) | (206,469 | ) | (348,310 | ) | ||||||||
Interest
expense
|
34,943 | 23,609 | 90,118 | 67,948 | ||||||||||||
Income
tax
|
0 | 0 | 0 | 0 | ||||||||||||
Net
loss
|
$ | (82,958 | ) | $ | (135,783 | ) | $ | (296,587 | ) | $ | (416,258 | ) | ||||
Net
loss per common share
|
(0.02 | ) | $ | (0.03 | ) | $ | (0.06 | ) | $ | (0.08 | ) | |||||
Weighted
average shares outstanding
|
5,015,000 | 5,000,000 | 5,015,000 | 5,000,000 |
The
accompanying notes are an integral part of these condensed financial
statements
5
CELL-NIQUE
CORPORATION
CONDENSED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
For
the Nine Months ended September 30, 2010
(unaudited)
Additional
|
||||||||||||||||||||
Common
Stock
|
paid-in
|
Accumulated
|
||||||||||||||||||
Shares
|
Amount
|
capital
|
Deficit
|
Total
|
||||||||||||||||
Balance December 31,
2006
|
5,000,000 | $ | 50 | $ | 249,950 | $ | (295,125 | ) | $ | (45,125 | ) | |||||||||
Net loss for the year ended
December 31, 2007
|
(630,837 | ) | (630,837 | ) | ||||||||||||||||
Non Cash Compensation and
Expenses
|
92,000 | 92,000 | ||||||||||||||||||
Balance December 31,
2007
|
5,000,000 | 50 | 341,950 | (925,962 | ) | (583,962 | ) | |||||||||||||
Net loss for the year ended
December 31, 2008
|
(505,644 | ) | (505,644 | ) | ||||||||||||||||
Non Cash Compensation and
Expenses
|
172,000 | 172,000 | ||||||||||||||||||
Balance, December 31,
2008
|
5,000,000 | 50 | 513,950 | (1,431,606 | ) | (917,606 | ) | |||||||||||||
Recapitalization of Accumulated
deficit January 1, 2009
|
(1,431,606 | ) | 1,431,606 | -- | ||||||||||||||||
Net loss for the year ended
December 31, 2009
|
(530,616 | ) | (530,616 | ) | ||||||||||||||||
Non Cash Compensation and
Expenses
|
172,000 | 172,000 | ||||||||||||||||||
Balance, December 31,
2009
|
5,000,000 | 50 | (745,656 | ) | (530,616 | ) | (1,276,222 | ) | ||||||||||||
Net loss for the three months
ended March 31, 2010
|
(129,635 | ) | (129,635 | ) | ||||||||||||||||
Non Cash Compensation and
Expenses
|
43,000 | 43,000 | ||||||||||||||||||
Balance, March 31,
2010
|
5,000,000 | 50 | (702,656 | ) | (660,251 | ) | (1,362,857 | ) | ||||||||||||
Net loss for the three months
ended June 30, 2010
|
(93,920 | ) | (93,920 | ) | ||||||||||||||||
Non Cash Compensation and
Expenses
|
43,000 | 43,000 | ||||||||||||||||||
Balance, June 30,
2010
|
5,015,000 | $ | 50 | $ | (659,656 | ) | $ | (754,171 | ) | $ | (1,413,777 | ) | ||||||||
Net loss for the three months
ended September 30, 2010
|
(82,958 | ) | (82,958 | ) | ||||||||||||||||
Shareholder Loan Recapitalized to
Equity
|
1,500,000 | 1,500,000 | ||||||||||||||||||
Non Cash Compensation and
Expenses
|
0 | 0 | ||||||||||||||||||
Balance, September 30,
2010
|
5,015,000 | $ | 50 | $ | 840,344 | $ | (837,129 | ) | $ | 3,265 |
The
accompanying notes are an integral part of these condensed financial
statements
6
CELL-NIQUE
CORPORATION
CONDENSED
STATEMENTS OF CASH FLOWS
For
the Nine Months Ended September 30, 2010 and 2009
(Unaudited)
Unaudited
|
||||||||
For the nine months ended Sept
30
|
||||||||
2010
|
2009
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
loss
|
$ | (296,587 | ) | $ | (416,258 | ) | ||
Adjustments
to reconcile net income/(loss) to Net cash used in operating
activities:
|
||||||||
Officers
compensation contribution
|
80,000 | 120,000 | ||||||
Rent
expense contribution
|
6,000 | 9,000 | ||||||
Interest
added to shareholder loan
|
90,118 | 67,089 | ||||||
Changes
in assets and liabilities:
|
||||||||
Accounts
receivable
|
14,915 | 10,809 | ||||||
Inventory
|
(11,951 | ) | 19,909 | |||||
Accounts
payable and accrued expenses
|
49,609 | (8,948 | ) | |||||
Net
cash (used in)/provided by operating activities
|
(67,896 | ) | (198,399 | ) | ||||
Cash
flow from investing activities
|
||||||||
Depreciation
|
17,109 | 16,757 | ||||||
Acquisition
of machinery and equipment
|
0 | (9,052 | ) | |||||
Net
cash (used in) investing activities
|
17,109 | 7,705 | ||||||
Cash
flow from financing activities
|
||||||||
Additional
loans from shareholder
|
(1,345,379 | ) | 252,117 | |||||
Additional
Paid in Capital
|
1,586,000 | 129,000 | ||||||
Net
cash provided by financing activities
|
240,621 | 381,117 | ||||||
Cash
and cash equivalents:
|
||||||||
Net
(decrease) increase
|
13,716 | (528 | ) | |||||
Balance
at beginning of period
|
7,624 | |||||||
Balance
at end of period
|
21,340 | (528 | ) | |||||
Non-cash
financing activities:
|
||||||||
Expenses
contributed by shareholder
|
$ | 86,000 | $ | 129,000 | ||||
Interest
added to shareholder loan
|
90,118 | 67,089 | ||||||
176,118 | 196,089 |
The
accompanying notes are an integral part of these condensed financial
statements
7
CELL-NIQUE
CORPORATION
NOTES
TO CONDENSED FINANCIAL STATEMENTS
Nine
Months Ended September 30, 2010 and 2009 (UNAUDITED)
1. Basis
of Presentation
The
accompanying interim condensed financial statements are unaudited, but in the
opinion of management of Cell-nique Corporation (the "Company"), contain all
adjustments, which include normal recurring adjustments necessary to present
fairly the financial position at September 30, 2010 and the results of
operations and cash flows for the nine months ended September 30, 2010 and 2009.
The balance sheet as of December 31, 2009 is derived from the Company’s audited
financial statements.
Certain
information and footnote disclosures normally included in financial statements
that have been prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission, although management of the Company
believes that the disclosures contained in these condensed financial statements
are adequate to make the information presented herein not misleading. For
further information, refer to the financial statements and the notes thereto
included in the Company’s S/1, as filed with the Securities and Exchange
Commission on April 29, 2010.
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities, disclosures of contingent
assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expense during the reporting period. Actual results
could differ from those estimates.
The
results of operations for the nine months ended September 30, 2010 are not
necessarily indicative of the results of operations to be expected for the full
fiscal year ending December 31, 2010.
Income
(Loss) per Common Share
Basic
earnings (loss) per share is computed by dividing the net income (loss)
applicable to common stock holders by the weighted average number of
shares of common stock outstanding during the year. Diluted earnings
(loss) per share is computed by dividing the net income (loss) applicable to
common stock holders by the weighted average number of common shares
outstanding plus the number of additional common shares that would have been
outstanding if all dilutive potential common shares had been issued, using the
treasury stock method. Potential common shares are excluded from the computation
when their effect is anti-dilutive.
For the
nine months ended September 30, 2010 and 2009 the calculations of basic and
diluted loss per share are the same because potential no dilutive securities
would have an anti-dilutive effect.
Recent
Accounting Pronouncements
In
October 2009, the FASB issued authoritative guidance on revenue recognition that
will become effective in fiscal years beginning on or after June 15, 2010, with
earlier adoption permitted. Under the new guidance on arrangements that include
software elements, tangible products that have software components that are
essential to the functionality of the tangible product will no longer be within
the scope of the software revenue recognition guidance, and software-enabled
products will now be subject to other relevant revenue recognition guidance.
Additionally, the FASB issued authoritative guidance on revenue arrangements
with multiple deliverables that are outside the scope of the software revenue
recognition guidance. Under the new guidance, when vendor specific objective
evidence or third party evidence for deliverables in an arrangement cannot be
determined, a best estimate of the selling price is required to separate
deliverables and allocate arrangement consideration using the relative selling
price method. The new guidance includes new disclosure requirements on how the
application of the relative selling price method affects the timing and amount
of revenue recognition. We believe the adoption of this new
guidance will not have a material impact on our financial
statements.
In
January 2010, the FASB issued guidance on improving disclosures about fair value
measurements to add new disclosure requirements for significant transfers in and
out of Level 1 and 2 measurements and to provide a gross presentation of the
activities within the Level 3 roll forward. The guidance also
clarifies existing fair value disclosures about the level of disaggregation and
about inputs and valuation techniques used to measure fair value. The
disclosure requirements are effective for interim and annual reporting periods
beginning after December 15, 2009, except for the requirement to present
the Level 3 roll forward on a gross basis, which is effective for fiscal years
beginning after December 15, 2010. The adoption of this guidance was
limited to the form and content of disclosures, and will not have a material
impact on our consolidated results of operations and financial
condition.
8
Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the Securities Exchange Commission (the
"SEC") did not or are not believed by management to have a material impact on
the Company's present or future consolidated financial
statements.
Concentrations
The
Company’s cash balances on deposit with banks are guaranteed by the Federal
Deposit Insurance Corporation up to $250,000. The Company may be exposed to risk
for the amounts of funds held in one bank in excess of the insurance limit. In
assessing the risk, the Company’s policy is to maintain cash balances with high
quality financial institutions. The Company had cash balances in excess of the
guarantee during the nine months ended September 30, 2010.
During
the nine months ended September 30, 2010 and 2009, the Company had two
customers, which accounted for approximately 80% and 15% of sales in 2010, and
52% and 11% of sales in 2009, respectively. No other customers accounted for
more than 10% of sales in either year.
Fair
Value of Financial Instruments
The
Company uses various inputs in determining the fair value of its investments and
measures these assets on a recurring basis. Financial assets recorded at fair
value in the consolidated balance sheets are categorized by the level of
objectivity associated with the inputs used to measure their fair value.
Authoritative guidance provided by the FASB defines the following levels
directly related to the amount of subjectivity associated with the inputs to
fair valuation of these financial assets:
Level
1—Quoted prices in active markets for identical assets or
liabilities.
Level
2—Inputs, other than the quoted prices in active markets, that are observable
either directly or indirectly.
Level
3—Unobservable inputs based on the Company's assumptions.
The
Company has no fair value items required to be disclosed.
2. Inventory
Inventory
consists of the following as of:
September 30,
2010
|
December 31,
2009
|
|||||||
Raw
Materials and packaging
|
$
|
72,786
|
$
|
35,167
|
||||
Finished
Goods
|
14,673
|
40,340
|
||||||
$
|
87,459
|
$
|
75,507
|
3. Fixed Assets
Fixed
assets are comprised of the following as of:
September
30,
2010
|
December 31,
2009
|
|||||||
Machinery
and equipment
|
114,726
|
114,726
|
||||||
Accumulated
depreciation
|
(60,976
|
)
|
(43,867
|
)
|
||||
$
|
53,750
|
$
|
70,859
|
4. Line
of Credit
The
Company has a line of credit with Physicians Capital Corporation, which is owned
by Dan Ratner and Donna Ratner, the Company’s co-founders and sole shareholders.
As of December 31, 2009 and September 30, 2010, the outstanding principal
balance of the line of credit was $1,451,786 and $106,408, including accrued
interest of $216,103 and $0 respectively. Interest accrued for the year periods
ended December 31, 2009 and September 30, 2010 was $91,157 and $0 respectively.
Interest is accrued monthly on the average outstanding balance for the quarter
pro-rated at the rate of 8% annually. The line of credit is in good standing and
is due December 31, 2010. It is contemplated that use of proceeds are to repay
debt and if proceeds from the offering are insufficient to repay all the debt
when due, either the due date will be automatically extended for additional 12
months and/or partial repayment is also acceptable to Management and Note
Holder.
5. Stock
Based Compensation
Stock
Options
As of
September 30, 2010, no options have been issued.
9
6. Related
Party Transactions
The
Company has a line of credit with Physicians Capital Corporation, which is owned
by Dan Ratner and Donna Ratner, the Company’s co-founders and sole shareholders.
As of December 31, 2009 and September 30, 2010, the outstanding principal
balance of the line of credit was $1,451,786 and $106,408, including accrued
interest of $216,103 and $0 respectively. Interest accrued for the year periods
ended December 31, 2009 and September 30, 2010 was $91,157 and $0 respectively.
Interest is accrued monthly on the average outstanding balance for the quarter
pro-rated at the rate of 8% annually. The line of credit is in good standing and
is due December 31, 2010. It is contemplated that use of proceeds are to repay
debt and if proceeds from the offering are insufficient to repay all the debt
when due, either the due date will be automatically extended for additional 12
months and/or partial repayment is also acceptable to Management and Note
Holder.
Office
Space: The Company uses shared office space owned by Dan Ratner and Donna
Ratner, the Company’s co-founders and sole shareholders which is accounted for
at fair market value in the Company's financial statements. Our financial
statements reflect stand-alone office space expense, if the Company went out and
rented stand-alone space, management estimates the rental could be valued at
$12,000 and $6,000 respectively, for the year ending December 31, 2009, nine
months ending September 30, 2010. The officers did not remunerate themselves in
the form of cash payments for the stand-alone fair value of the office space,
however, non-cash office space consideration was expensed and the officers
contributed non-cash consideration to additional paid-in capital.
Officers
Compensation Expense: Our financial statements reflect non-cash officers
compensation expense which the officers contributed it to the company as
additional paid-in capital since the officers have elected to forgo their
compensations valued at $160,000 and $80,000 respectively, for their positions
for the year ending December 31, 2009, nine months ending September 30,
2010. And the officers do not remunerate themselves in the form of
some other payments for the fair value of the services rendered.
7. Subsequent
Events
In 2009,
the FASB issued ASC Topic 855-10-05 formerly Statement 165, Subsequent Events, which
defines the period after the balance sheet date that subsequent events should be
evaluated and provides guidance in determining if the event should be reflected
in the current financial statements. Statement 165 also requires
disclosure regarding the date through which subsequent events have been
evaluated. The Company adopted the provisions of Statement 165 as of
December 31, 2009.
The
Company has evaluated subsequent events through the time the September 30, 2010
financial statements were issued on November 13, 2010. No events have
occurred subsequent to September 30, 2010 that requires disclosure or
recognition in these financial statements.
10
Item
2. Management’s Discussion and Analysis or Plan of Operation
The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements and the
related notes appearing elsewhere in this report. This discussion and analysis
may contain forward-looking statements based on assumptions about our future
business.
Overview
The
results for the quarter ended September 30, 2010 reflect our increasing
sales. The sales increases are largely a result of more in store
activities. We believe that the adverse economic period affecting the
grocery industry in 2009 is improving in 2010. Our sales revenues are
also favorably impacted by sales of new flavors in 2010, which were not a part
of 2009 revenues. As we enter our busier quarters, we believe that
revenues will continue to increase at accelerating rates throughout
2010.
Results
of Operations
Nine
months ended September 30, 2010 Compared to Nine months ended September 30,
2009
Sales of
$375,033 for the nine months ended September 30, 2010 represented an increase of
11% or $38,177, as compared to the prior year same period amount of
$336,856. The increase in revenues is primarily due to same store
sales growth of our brand products. The number of grocery stores
carrying our products is also increasing, but very hard to
quantify.
Cost
of Goods Sold
Cost of
goods sold consists primarily of the costs of our ingredients, packaging,
production and freight. Our cost of goods sold of $177,748 for the
nine months ended September 30, 2010 represents an increase of 10% or $15,651,
as compared to the prior year same period amount of $162,097. Cost of
goods sold, on a per unit basis, remained at approximately the same levels as in
2009 in the 47% - 53% range which take into account slight variations in certain
raw material and freight cost of ingredient costs have been offset by decreases
in glass and other costs. Overall, we have not experienced
significant increases in raw material and packaging costs in 2010, while we are
continuing to negotiate reductions and find lower-cost sources wherever
possible. The high quality of our natural ingredients is of primary
concern, as we constantly seek good sources.
Gross
Profit
Our gross
profit increased to $192,285 in the nine months ended September 30, 2010, from
$174,759 in 2009, an increase of $22,526 or 13%. The gross profit as
a percentage of sales increased to 53% in 2010, from 52% in
2009. This gross profit margin change is primarily due to slight
changes in raw material and freight prices in 2010 than in 2009.
Selling
and marketing expenses
Selling
and marketing expenses consist primarily of direct charges for staff
compensation costs, advertising, sales promotion, marketing and trade shows.
Selling and marketing costs decreased to $185,067 in the nine months ended
September 30, 2010 from $277,962 in 2009, a net decrease of $92,895 or
33%. The decrease is primarily due to decreases in promotional
discounts, advertising, brokerage compensation and travel costs and a decrease
in trade shows expenses.
The focus
of our sales efforts is to deepen our exiting same store sales in each market
and to carefully increase product placements in natural channel grocery
nationwide. The consumer trend is toward natural channel grocery
stores and mass market grocery is to offer more natural products. Our sales
force is leveraging our emerging position in natural food grocery stores
throughout the nation, to slowly establish new relationships with mainstream
grocery stores.
General
and Administrative Expenses
General
and administrative expense consists primarily of the cost of executive,
administrative, and finance personnel, as well as professional fees. General and
administrative expenses decreased to $199,390 during the nine months ended
September 30, 2010 from $219,888 in the same period of 2009, a net decrease of
$20,498 or 9%. The overall increase in 2010 is primarily due to changes in
professional fees expense and insurance costs.
We
believe that our existing executive and administrative staffing levels are
sufficient to allow for moderate growth without the need to add personnel and
related costs for the foreseeable future.
11
Loss
from Operations
Our loss
from operations decreased to $206,469 in the nine months ended September 30,
2010 from $348,310 in the same period of 2009. The improvement is a
direct result of increased sales, along with the cost reductions described
above.
Interest
Expense
Interest
expense increased to $90,118 in the nine months ended September 30, 2010,
compared to interest expense of $67,948 in the same period of
2009. The increase is due to the increase in long-term debt, as a
result of our financing obligation; and increased borrowing under a line of
credit agreement.
Net
Income
Our Net
Income loss decreased to $296,587 in the nine months ended September 30, 2010
from $416,258 in the same period of 2009. The improvement is a direct
result of increased sales, along with the cost reductions described above.
Earnings per share also improved in the nine months ended September 30, 2010
from loss of $.06 from a loss of $.08 in the same period of
2009.
Liquidity
and Capital Resources
As of
September 30, 2010, we had stockholders equity of $3,265 and we had working
capital deficit of $50,486, compared to stockholders equity of $1,286,148 and
working capital of $1,347,081 at December 31, 2009. Cash and cash equivalents
were $21,340 as of September 30, 2010, as compared to $7,624 at December 31,
2009. The increase in our working capital of $1,296,596 was a result of
converting shareholder debt borrowing and accrued interest increasing borrowings
which are classified as short term debt to additional paid in
capital. In addition to our cash position on September 30, 2010, we
had availability the ability to draw funds under our line of
credit.
Our
increase in cash and cash equivalents to $21,340 at September 30, 2010 compared
to $7,624 at December 31, 2009 was primarily a result increased sales and
collections of accounts receivable.
We
believe that the Company has very limited working capital to support existing
operations through 2010. Our primary capital source will be cash flow from
operations as we gain profitability in 2010. If our sales goals do
not materialize as planned, we believe that the Company can become leaner and
our costs can be managed to produce profitable operations. We have a
common stock offering, which we hope to finance our operations growth primarily
through private sales of common stock, preferred stock, convertible debt, a line
of credit from a financial institution, and cash generated from
operations.
Net cash
used in operations during 2010 was $67,896 compared with $198,399 used in
operations during the same period in 2009. Cash used in
operations during 2010 was primarily due to the decrease in net loss in period
and to changes in accounts receivable, changes in inventory and prepaid raw
materials costs.
Net cash
used in investing activities of $0 during 2010 compared with $9,052 during 2009
is primarily the result of capitalized equipment purchases in 2009
years.
Net cash
provided by financing activities of $86,000 during 2010 was primarily due to
proceeds from the capitalization of non-cash compensation and rent and
conversion of shareholder debt to additional paid in
capital.
Our
operating losses have negatively impacted our liquidity and we are continuing to
work on decreasing operating losses, while focusing on increasing net sales. We
believe that our current cash position and line of credit availability will
be limited to meet our cash needs throughout 2010. We believe that we need to
raise money through the capital markets.
We may
not generate sufficient revenues from product sales in the future to achieve
profitable operations. If we are not able to achieve profitable operations at
some point in the future, we eventually may have insufficient working capital to
maintain our operations as we presently intend to conduct them or to fund our
expansion and marketing and product development plans. In addition, our losses
may increase in the future as we expand our manufacturing capabilities and fund
our marketing plans and product development. These losses, among other things,
have had and may continue to have an adverse effect on our working capital,
total assets and stockholders’ equity. If we are unable to achieve
profitability, the market value of our common stock would decline and there
would be a material adverse effect on our financial condition.
If we
continue to suffer losses from operations, our working capital may be
insufficient to support our ability to expand our business operations as rapidly
as we would deem necessary at any time, unless we are able to obtain additional
financing. There can be no assurance that we will be able to obtain such
financing on acceptable terms, or at all. If adequate funds are not available or
are not available on acceptable terms, we may not be able to pursue our business
objectives and would be required to reduce our level of operations, including
reducing infrastructure, promotions, personnel and other operating expenses.
These events could adversely affect our business, results of operations and
financial condition. If adequate funds are not available or if they
are not available on acceptable terms, our ability to fund the growth of our
operations, take advantage of opportunities, develop products or services or
otherwise respond to competitive pressures, could be significantly
limited.
12
Critical
Accounting Policies and Estimates
Our
financial statements are prepared in accordance with accounting principles
generally accepted in the United States of America, or GAAP. GAAP requires us to
make estimates and assumptions that affect the reported amounts in our financial
statements including various allowances and reserves for accounts receivable and
inventories, the estimated lives of long-lived assets and trademarks and
trademark licenses, as well as claims and contingencies arising out of
litigation or other transactions that occur in the normal course of business.
The following summarize our most significant accounting and reporting policies
and practices:
Revenue
Recognition. Revenue is recognized on the sale of a product
when the product is accepted by buyers, which is when the risk of loss transfers
to our customers, and collection of the receivable is reasonably
assured. A product is not shipped without an order from the customer
and credit acceptance procedures performed. The allowance for returns
is regularly reviewed and adjusted by management based on historical trends of
returned items. Amounts paid by customers for shipping and handling costs are
included in sales, if any. The Company reimburses its wholesalers and
retailers for promotional discounts, samples and certain advertising and
promotional activities used in the promotion of the Company’s products. The
accounting treatment for the reimbursements for off-invoice discounts to
wholesalers results in a reduction in the net revenue line item. Reimbursements
to wholesalers and retailers for certain samples, promotional placement,
advertising activities are included in selling and marketing
expenses.
Trademark License and
Trademarks. We own trademarks that we consider material to our
business. Three of our material trademarks are registered trademarks in the U.S.
Patent and Trademark Office: Cell-nique Super Green Drink®. Registrations for
trademarks in the United States will last indefinitely as long as we continue to
use and police the trademarks and renew filings with the applicable governmental
offices. We have not been challenged in our right to use any of our material
trademarks in the United States. We intend to obtain international registration
of certain trademarks in foreign jurisdictions.
We
account for these items in accordance with FASB guidance, we do not amortize
indefinite-lived trademark licenses and trademarks.
In
accordance with FASB guidance, we evaluate our non-amortizing trademark license
and trademarks quarterly for impairment. We measure impairment by the amount
that the carrying value exceeds the estimated fair value of the trademark
license and trademarks. The fair value is calculated by reviewing net sales of
the various beverages and applying industry multiples. Based on our quarterly
impairment analysis the estimated fair values of trademark license and
trademarks exceeded the carrying value and no impairments were identified during
the nine months ended September 30, 2010.
Long-Lived Assets. Our
management regularly reviews property, equipment and other long-lived assets,
including identifiable amortizing intangibles, for possible impairment. This
review occurs quarterly or more frequently if events or changes in circumstances
indicate the carrying amount of the asset may not be recoverable. If there is
indication of impairment of property and equipment or amortizable intangible
assets, then management prepares an estimate of future cash flows (undiscounted
and without interest charges) expected to result from the use of the asset and
its eventual disposition. If these cash flows are less than the carrying amount
of the asset, an impairment loss is recognized to write down the asset to its
estimated fair value. The fair value is estimated at the present value of the
future cash flows discounted at a rate commensurate with management’s estimates
of the business risks. Quarterly, or earlier, if there is indication of
impairment of identified intangible assets not subject to amortization,
management compares the estimated fair value with the carrying amount of the
asset. An impairment loss is recognized to write down the intangible asset to
its fair value if it is less than the carrying amount. Preparation of estimated
expected future cash flows is inherently subjective and is based on management’s
best estimate of assumptions concerning expected future conditions. No
impairments were identified during the nine months ended September 30,
2010.
Management
believes that the accounting estimate related to impairment of our long lived
assets, including our trademark license and trademarks, is a “critical
accounting estimate” because: (1) it is highly susceptible to change from
period to period because it requires management to estimate fair value, which is
based on assumptions about cash flows and discount rates; and (2) the
impact that recognizing an impairment would have on the assets reported on our
balance sheet, as well as net income, could be material. Management’s
assumptions about cash flows and discount rates require significant judgment
because actual revenues and expenses have fluctuated in the past and we expect
they will continue to do so.
In
estimating future revenues, we use internal budgets. Internal budgets are
developed based on recent revenue data for existing product lines and planned
timing of future introductions of new products and their impact on our future
cash flows.
Accounts Receivable. We
evaluate the collectability of our trade accounts receivable based on a number
of factors. In circumstances where we become aware of a specific customer’s
inability to meet its financial obligations to us, a specific reserve for bad
debts is estimated and recorded which reduces the recognized receivable to the
estimated amount our management believes will ultimately be collected. In
addition to specific customer identification of potential bad debts, bad debt
charges are recorded based on our historical losses and an overall assessment of
past due trade accounts receivable outstanding.
13
Inventories. Inventories
are stated at the lower of cost to purchase and/or manufacture the inventory or
the current estimated market value of the inventory. We regularly review our
inventory quantities on hand and record a provision for excess and obsolete
inventory based primarily on our estimated forecast of product demand and/or our
ability to sell the product(s) concerned and production requirements. Demand for
our products can fluctuate significantly. Factors that could affect demand for
our products include unanticipated changes in consumer preferences, general
market conditions or other factors, which may result in cancellations of advance
orders or a reduction in the rate of reorders placed by customers. Additionally,
our management’s estimates of future product demand may be inaccurate, which
could result in an understated or overstated provision required for excess and
obsolete inventory.
Stock-Based Compensation. We
may periodically issue stock options and warrants to employees and non-employees
in non-capital raising transactions for services and for financing costs. We
adopted FASB guidance effective January 1, 2006, and are using the modified
prospective method in which compensation cost is recognized beginning with the
effective date (a) for all share-based payments granted after the effective date
and (b) for all awards granted to employees prior to the effective date that
remain unvested on the effective date. We account for stock option and warrant
grants issued and vesting to non-employees in accordance with accounting
guidance whereby the fair value of the stock compensation is based on the
measurement date as determined at either (a) the date at which a performance
commitment is reached, or (b) at the date at which the necessary performance to
earn the equity instrument is complete.
We
estimate the fair value of stock options using the Black-Scholes option-pricing
model, which was developed for use in estimating the fair value of options that
have no vesting restrictions and are fully transferable. This model requires the
input of subjective assumptions, including the expected price volatility of the
underlying stock and the expected life of stock options. Projected data related
to the expected volatility of stock options is based on the historical
volatility of the trading prices of the Company’s common stock and the expected
life of stock options is based upon the average term and vesting schedules of
the options. Changes in these subjective assumptions can materially affect the
fair value of the estimate, and therefore the existing valuation models do not
provide a precise measure of the fair value of our employee stock
options.
We
believe there have been no significant changes, during the six month period
ended September 30, 2010, to the items disclosed as critical accounting policies
and estimates in Management's Discussion and Analysis of Financial Condition and
Results of Operations in their offering on Form S-1 for the year ended December
31, 2009.
Recent
Accounting Pronouncements
In
October 2009, the FASB issued authoritative guidance on revenue recognition that
will become effective in fiscal years beginning on or after June 15, 2010, with
earlier adoption permitted. Under the new guidance on arrangements that include
software elements, tangible products that have software components that are
essential to the functionality of the tangible product will no longer be within
the scope of the software revenue recognition guidance, and software-enabled
products will now be subject to other relevant revenue recognition guidance.
Additionally, the FASB issued authoritative guidance on revenue arrangements
with multiple deliverables that are outside the scope of the software revenue
recognition guidance. Under the new guidance, when vendor specific objective
evidence or third party evidence for deliverables in an arrangement cannot be
determined, a best estimate of the selling price is required to separate
deliverables and allocate arrangement consideration using the relative selling
price method. The new guidance includes new disclosure requirements on how the
application of the relative selling price method affects the timing and amount
of revenue recognition. We believe the adoption of this new
guidance will not have a material impact on our financial
statements.
In
January 2010, the FASB issued guidance on improving disclosures about fair value
measurements to add new disclosure requirements for significant transfers in and
out of Level 1 and 2 measurements and to provide a gross presentation of the
activities within the Level 3 roll forward. The guidance also
clarifies existing fair value disclosures about the level of disaggregation and
about inputs and valuation techniques used to measure fair value. The
disclosure requirements are effective for interim and annual reporting periods
beginning after December 15, 2009, except for the requirement to present
the Level 3 roll forward on a gross basis, which is effective for fiscal years
beginning after December 15, 2010. The adoption of this guidance was
limited to the form and content of disclosures, and will not have a material
impact on our consolidated results of operations and financial
condition.
Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC did not or are not believed by
management to have a material impact on the Company's present or future
consolidated financial statements.
Item
3. Quantitative and Qualitative Disclosures About Market
Risk.
A smaller
reporting company is not required to provide the information required by this
Item.
14
Item
4T. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
Under the
supervision and with the participation of our management, including our Chief
Executive Officer and our Chief Financial Officer, we conducted an evaluation of
our disclosure controls and procedures, as such term is defined under Securities
and Exchange Act of 1934 Rules 13a-15(f). Based on this evaluation, our
Chief Executive Officer and our Chief Financial Officer concluded that the
Company’s disclosure controls and procedures were effective as of September 30,
2010.
Changes
in Internal Control Over Financial Reporting
There
have been no changes in the Company’s internal control over financial reporting
during the nine months ended September 30, 2010 that have materially affected,
or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.
PART
II – OTHER INFORMATION
Item
1. Legal Proceedings
We are
not subject to any legal proceedings, therefore no disclosure under this Item
1.
Item
1A. Risk Factors
A smaller
reporting company is not required to provide the information required by this
Item.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item
3. Defaults Upon Senior Securities
None
Item
4. [REMOVED AND RESERVED]
Item
5. Other Information
None
Item
6. Exhibits
Exhibit No.
|
Description
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.*
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.*
|
|
32.2
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.*
|
*filed herewith
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Cell-nique
Corporation
|
||
(Registrant)
|
||
Date: November
13, 2010
|
/s/ Dan Ratner
|
|
Dan
Ratner
|
||
President
and Chief Executive Officer
|
||
(Principal
Executive Officer)
|
||
Date: November
13, 2010
|
/s/ Dan Ratner
|
|
Dan
Ratner
|
||
Chief
Financial Officer
|
||
(Principal
Financial Officer)
|
15