In January 2009, one of our
shareholders lent us $11,000 to pay the legal and accounting costs of preparing
this annual report, and of preparing a post-effective amendment to the
registration statement that we filed on Form SB-2 that become effective in
January 2008, which we hope to file in the near future.
9.
If we are unable to obtain funding, our business operations will be harmed. Even
if we do obtain funding, our then existing stockholders’ position in our Company
may be substantially diluted.
We must
find a partner to manufacture, advertise and distribute our footwear. In order
to expand our distribution beyond Israel, we will also need to obtain additional
funding. Even if we do find a partner to manufacture, advertise and distribute
our footwear, there can be no assurance that partner will have the capacity to
produce our products at a cost effective price. If any partner cannot produce
our products at a cost effective price, it will adversely affect our ability to
sell and market our products, which will mean that we will need to find another
partner who has that capacity. Additionally, finding a partner to manufacture,
advertise and distribute our shoes may be a lengthy and costly process, and at
present we do not have sufficient means of financing that
search.
It is
possible that additional capital will be required to effectively support our
operations and to otherwise implement our overall business strategy. The
inability to raise the required capital will restrict our ability to grow and
may impair our ability to continue to conduct business operations. If we are
unable to obtain necessary financing, we will likely be required to curtail our
development plans which could cause the Company to become dormant. We currently
do not have any arrangements or agreements to raise additional capital. Any
additional equity financing may involve substantial dilution to our then
existing stockholders.
10.
There may be customs duties and tariffs on the export of shoes from one country
to another country.
Virtually
all of our footwear will be manufactured outside of the United States, and a
substantial portion of our products will be sold outside of the United States.
Accordingly, we will be subject to the risks generally associated with global
trade and doing business abroad, which include foreign laws and regulations,
varying consumer preferences across geographic regions, political unrest,
disruptions or delays in cross-border shipments and changes in economic
conditions in countries in which we manufacture or sell products. In addition,
disease outbreaks, terrorist acts and military conflict have increased the risks
of doing business abroad. These factors, among others, could affect our ability
to manufacture products or procure materials, our ability to import products,
our ability to sell products in international markets, and our cost of doing
business. If any of these or other factors make the conduct of business in a
particular country undesirable or impractical, our business could be adversely
affected. In addition, many of our imported products will be subject to duties,
tariffs or quotas that affect the cost and quantity of various types of goods
imported into the United States and other countries. Any country in which our
products are produced or sold may eliminate, adjust or impose new quotas,
duties, tariffs, safeguard measures, anti-dumping duties, cargo restrictions to
prevent terrorism, restrictions on the transfer of currency, or other charges or
restrictions, any of which could have an adverse effect on our results of
operations and financial condition.
11.
We may not be able to raise sufficient capital or generate adequate revenues to
meet our obligations and fund our operating expenses.
We have
not had any revenues since our inception. Failure to raise adequate capital and
generate adequate sales revenues to meet our obligations and develop and sustain
our operations could result in our having to curtail or cease operations.
Additionally, even if we do raise sufficient capital and generate revenues to
support our operating expenses, there can be no assurances that the revenues
will be sufficient to enable us to develop our business to a level where it will
generate profits and cash flows from operations sufficient to sustain us. These
matters raise substantial doubt about our ability to continue as a going
concern. Our registered independent auditors currently included an explanatory
paragraph in their report on our consolidated financial statements regarding
concerns about our ability to continue as a going concern. Accordingly, our
failure to generate sufficient revenues or to generate adequate capital could
result in the failure of our business and the loss of your entire
investment.
12.
Because we do not have an audit or compensation committee, stockholders will
have to rely on our Directors, who are not independent, to perform these
functions.
We do not
have an audit or compensation committee comprised of independent Directors.
Indeed, we do not have any audit or compensation committee. These functions are
performed by our two Directors, who are also our officers. Thus, there is a
potential conflict of interest in that our Directors have the authority to
determine issues concerning management compensation and audit issues that may
affect management decisions.
13.
We may be subject to tort claims for product liability for which we may not be
adequately insured.
Our
business relies on selling footwear to individuals who suffer from back, knee
and hip pain. Those persons may have a higher risk of injury than ordinary
consumers. Therefore, we may confront product liability claims in excess of what
we can afford to pay or even defend, which could have a material adverse effect
upon our financial condition and results of operations.
Since we
are a development stage company, we do yet have liability insurance and we
cannot be certain that we will be able to obtain adequate liability insurance
for our business at a cost that we can afford. Additionally, claims against us,
regardless of their merit or eventual outcome, may also have a material adverse
effect upon our ability to attract and retain business, and may cause us to
incur material expenses and significant management time for their
defense.
14.
If the costs of our raw materials increase, our profits are likely to
decline.
As noted
above, we must find a partner to manufacture, advertise and distribute our
footwear. If the cost of raw materials to that partner increases, those
additional costs are likely to be passed on to us. If we are not able to
increase the prices for our products to offset those costs, our profits from the
sale of our products are likely to decline.
15.
Our international operations involve inherent risks which could result in harm
to our business.
Virtually
all of our footwear will be manufactured outside of the United States. Our
management is located outside the United States and initially, we anticipate our
sales coming from outside the United States.
In the
future, we intend to sell our products in the United States and Europe.
Accordingly, we will be subject to the risks generally associated with global
trade and doing business abroad, which include foreign laws and regulations,
varying consumer preferences across geographic regions, political unrest,
disruptions or delays in cross-border shipments and changes in economic
conditions in countries in which we manufacture or sell products. In addition,
disease outbreaks, terrorist acts and military conflict have increased the risks
of doing business abroad. These factors, among others, could affect our ability
to manufacture products or procure materials, our ability to import products,
our ability to sell products in international markets, and our cost of doing
business. If any of these or other factors make the conduct of business in a
particular country undesirable or impractical, our business could be adversely
affected. In particular, once we commence operations, and assuming that we
effect our current plans, we will be subject to risks as a result of our planned
operations in Israel. See “Risk Factors Related to Operations in Israel”
beginning on Page 16.
16.
Currency exchange rate fluctuations could result in higher costs and decreased
margins.
We
anticipate that a majority of our products will be sold outside of the United
States. As a result, we will conduct transactions in various currencies, which
will increase our exposure to fluctuations in foreign currency exchange rates
relative to the U.S. dollar. We anticipate that our international revenues and
expenses generally will be derived from sales and operations in foreign
currencies, and these revenues and expenses could be affected by currency
fluctuations, including amounts recorded in foreign currencies and translated
into U.S. dollars for consolidated financial reporting. Currency exchange rate
fluctuations could also disrupt the business of any independent manufacturers
that produce our products by making their purchases of raw materials more
expensive and more difficult to finance. Foreign currency fluctuations could
have an adverse effect on our results of operations and financial
condition.
We do not
plan to engage in any hedging activities.
17.
Our intellectual property is only protected by patent applications that have
only been filed in the United States and in Israel.
Because
we do not have the funding to apply for protection elsewhere, our technology is
only protected by patent applications filed in the United States and in Israel
at the present time. Therefore, our technology may not be adequately protected
in other countries.
Because
we have filed patent applications but have not been granted actual patents,
there is a risk that we will not be granted patents, or that we will be granted
patents but the rights that are granted to us will not be broad enough to
protect our technology.
Additionally,
Israeli patent law provides that anyone who was using a patented invention in
Israel in good faith at the time that a patent application is filed, or who was
making good faith preparations to do so, has the right to continue using that
patented invention in his business without charge, even if the patent is issued.
The right may not be transferred except as part of the transfer of the business
in which the patent is used. The Company is not aware of anyone else who is
using the technology that it purchased under the Licensing
Agreement.
18.
Our success depends on third
party distribution channels.
We intend
to sell our footwear through a series of retailers and distributors. Our future
revenue growth will depend in large part on sales of our products through these
relationships. We may not be successful in developing these distribution
relationships. Retail stores and distributors may compete with us. In addition,
these distributors may not dedicate sufficient resources or give sufficient
priority to selling our products. Our failure to develop distribution channels,
the loss of a distribution relationship, or a decline in the efforts of a
material reseller or distributor could prevent us from generating sufficient
revenues to become profitable.
19.
We will rely on third party
manufacturing.
We intend
to outsource the manufacturing of our footwear. These manufacturers may not be
available to manufacture our products in a timely and cost effective manner. We
may not be able to locate manufacturers for our footwear on commercially
reasonable terms. If we cannot locate a manufacturing facility that will
manufacture our products on commercially reasonable terms, we will not be able
to deliver our products to our customers in a timely manner on a cost-effective
basis. A delay in providing our customers with our products and services would
harm our business.
Risk
Factors Relating to Our Common Shares
20.
We may issue additional common shares in the future, which would reduce our
current investors’ percentage of ownership and which may dilute our share
value.
Our
Certificate of Incorporation authorizes the issuance of 100,000,000 shares of
common stock, of which 13,705,000 shares are issued and outstanding. The future
issuance of additional shares of common stock, which we are currently authorized
to issue, may result in substantial dilution in the percentage of our common
stock held by our then existing stockholders. We may value any common stock
issued in the future on an arbitrary basis. The issuance of common stock for
future services or acquisitions or other corporate actions may have the effect
of diluting the value of the shares held by our investors, and might have an
adverse effect on any trading market for our common stock.
21.
NASD sales practice requirements may limit a stockholder’s ability to buy and
sell our stock.
In
addition to the “penny stock” rules described below, the NASD has adopted rules
that require that in recommending an investment to a customer, a broker-dealer
must have reasonable grounds for believing that the investment is suitable for
that customer. Prior to recommending speculative low priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to
obtain information about the customer’s financial status, tax status, investment
objectives and other information. Under interpretations of these rules, the NASD
believes that there is a high probability that speculative low priced securities
will not be suitable for at least some customers. The NASD requirements make it
more difficult for broker-dealers to recommend that their customers buy our
common stock, which may have the effect of reducing the level of trading
activity in our common stock. As a result, fewer broker-dealers may be willing
to make a market in our common stock, reducing a stockholder’s ability to resell
shares of our common stock.
22.
Our common shares will be subject to the “Penny Stock” Rules of the SEC and the
trading market in our securities will be limited, which will make transactions
in our stock cumbersome, which may reduce the value of an investment in our
stock.
The
Securities and Exchange Commission has adopted Rule 15g-9, which establishes the
definition of a “penny stock,” for the purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules
require:
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that
a broker or dealer approve a person’s account for transactions in penny
stocks; and
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that
the broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to
be purchased.
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In order
to approve a person’s account for transactions in penny stocks, the broker or
dealer must:
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obtain
financial information and investment experience objectives of the person;
and
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make
a reasonable determination that the transactions in penny stocks are
suitable for that person and that the person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks.
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The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the Commission relating to the penny stock
market, which, in highlight form:
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sets
forth the basis on which the broker or dealer made the suitability
determination; and
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confirms
that the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
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Generally,
brokers may be less willing to execute transactions in securities subject to the
“penny stock” rules. This may make it more difficult for investors to dispose of
our common shares thus causing a decline in the market value of our
stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.
23.
There is no current trading market for our securities, and if a trading market
does not develop, purchasers of our securities may have difficulty selling their
shares.
There is
currently no established public trading market for our securities and an active
trading market in our securities may not develop or, if developed, may not be
sustained. Our securities have been admitted to and are quoted on the NASD
Bulletin Board under the symbol OTC BB CTKE, but an active public trading market
has not developed. If no such market develops, purchasers of the shares may have
difficulty selling their common stock should they desire to do so.
24.
The price of our common stock was arbitrarily determined by us and may not
reflect the actual market price for the securities.
The
offering price of our common stock was determined by us arbitrarily. The price
is not based on our financial condition and prospects, market prices of similar
securities of comparable publicly traded companies, certain financial and
operating information of companies engaged in similar activities to ours, or
general conditions of the securities market. The price may not be indicative of
the market price, if any, for the common stock in the trading market. The market
price of our securities may decline below the offering price. The stock market
has experienced extreme price and volume fluctuations. In the past, securities
class action litigation has often been instituted against various companies
following periods of volatility in the market price of their securities. If
instituted against us, regardless of the outcome, such litigation would result
in substantial costs and a diversion of management’s attention and resources,
which would increase our operating expenses and affect our financial condition
and business operations.
25.
Future sales by our stockholders could cause the stock price to
decline.
No
predictions can be made of the effect, if any, that market sales of shares of
common stock or the availability of such shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of significant amounts
of our common stock could adversely affect the prevailing market price of the
common stock, as well as impair our ability to raise capital through the
issuance of additional equity securities.
26.
State securities laws may limit secondary trading, which may restrict the states
in which and conditions under which you can sell your common stock.
Secondary
trading in our common stock will not be possible in any state until the common
stock is qualified for sale under the applicable securities laws of that state
or there is confirmation that an exemption, such as listing in certain
recognized securities manuals, is available for secondary trading in that state.
If we fail to register or qualify, or to obtain or verify an exemption for the
secondary trading of the common stock in any particular state, the common stock
could not be offered or sold to, or purchased by, a resident of that state. In
the event that a significant number of states refuse to permit secondary trading
in our common stock, the liquidity for the common stock could be significantly
impacted thus causing you to realize a loss on your investment.
27.
The requirements of being a public company may strain our resources and distract
our management.
As a
public company, we will be subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended, or the Exchange Act, and the
Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act. These requirements may
place a strain on our systems and resources. The Exchange Act requires that we
file annual, quarterly and current reports with respect to our business and
financial condition. The Sarbanes-Oxley Act requires that we maintain effective
disclosure controls and procedures and internal controls for financial
reporting. We will be required to document and test our internal control
procedures in order to satisfy the requirements of Section 404 of the
Sarbanes-Oxley Act, which requires annual management assessments of the
effectiveness of our internal controls over financial reporting and a report by
our independent registered public accountants addressing these assessments.
During the course of our testing, we may identify deficiencies which we may not
be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley
Act for compliance with the requirements of Section 404. In addition, if we fail
to achieve and maintain the adequacy of our internal controls, as such standards
are modified, supplemented or amended from time to time, we may not be able to
ensure that we can conclude on an ongoing basis that we have effective internal
controls over financial reporting in accordance with Section 404 of the
Sarbanes-Oxley Act.
In order
to maintain and improve the effectiveness of our disclosure controls and
procedures and internal control over financial reporting, significant resources
and management oversight will be required. This may divert management’s
attention from other business concerns, which could have a material adverse
effect on our business, financial condition, results of operations and cash
flows. In addition, we may need to hire additional accounting and financial
staff with appropriate public company experience and technical accounting
knowledge, and we cannot assure you that we will be able to do so in a timely
fashion.
In January 2009, one of our shareholders lent us $11,000 to pay
the legal and accounting costs of preparing this annual report, and of
preparing a post-effective amendment to the registration statement we filed on
Form SB-2 that became effective in January 2008, which we hope to file in
the near future.
28.
Because we do not intend to pay any cash dividends on our common stock, our
stockholders will not be able to receive a return on their shares unless they
sell them.
We intend
to retain any future earnings to finance the development and expansion of our
business. We do not anticipate paying any cash dividends on our common stock in
the foreseeable future. Unless we pay dividends, our stockholders will not be
able to receive a return on their shares unless the value of such shares
appreciates and they sell them. There is no assurance that stockholders will be
able to sell shares when desired.
Risk
Factors Relating to Operations in Israel
29.
Conditions in Israel affect our operations and may limit our ability to produce
and sell our products.
Our only
significant asset, our technology, is owned by Cherry Tankers Ltd., the Israeli
Subsidiary. Additionally, in order to take advantage of certain tax benefits
that are provided under Israeli law, we may agree that the Subsidiary will
manufacture our products in Israel, which would make us dependent on that
country’s economy. Our two Directors and officers also reside in Israel. Because
our Directors are located in Israel, our intellectual property is located in
Israel and our manufacturing operations may take place in Israel, our operations
may be directly influenced by the political, economic and military conditions
affecting Israel.
30.
Enforcement of judgments.
Israeli
courts might not enforce judgments rendered outside of Israel. Our officers and
Directors reside outside of the United States, therefore, any judgment obtained
in the United States against such persons may not be enforced. Additionally,
individuals might not be able to bring civil actions under United States
securities laws if they file a lawsuit in Israel. We have been advised by our
Israeli counsel that, subject to certain limitations, Israeli courts may enforce
a final executory judgment of a United States court for liquidated amounts in
civil matters after a hearing in Israel, provided that certain conditions are
met. If a foreign judgment is enforced by an Israeli court, it will be payable
in Israeli currency.
31.
Security issues.
Since the
establishment of the State of Israel in 1948, a number of armed conflicts have
taken place between Israel and its Arab neighbors. Any major hostilities
involving Israel or the interruption or curtailment of trade between Israel and
its present trading partners could materially adversely affect our operations.
Despite the negotiations towards peace between Israel and certain of its Arab
neighbors (including those that took place in Annapolis, Maryland during the
last week of November 2007), the future of these peace efforts is
uncertain.
From
October 2000 until recently, there was a significant increase in violence,
primarily in the West Bank and the Gaza Strip, and negotiations between Israel
and Palestinian representatives have ceased for periods of time. In January
2006, Hamas, the Islamic Resistance Movement, won the majority of the seats in
the Parliament of the Palestinian Authority. The election of a majority of
Hamas-supported candidates in the Palestinian Parliament and the tension among
the different Palestinian factions may create additional unrest and uncertainty.
Hamas does not recognize Israel's right to exist as a state and Israel considers
Hamas to be a terrorist organization. In June 2007, Hamas gained control of the
Gaza Strip and has since used that territory to fire projectiles at Israel’s
western Negev region on a daily basis. Accordingly, there can be no assurance
that the recent relative calm and renewal of negotiations between Israel and
Palestinian representatives will endure.
On
December 27, 2008, the Israel Defense Forces began a major incursion into the
Gaza Strip, which they refer to as “Operation Cast Lead.” The incursion was
preceded by increased rocket fire from Gaza on Israel’s western Negev region,
extending as far as 25 miles away. The incursion ended inconclusively in January
18, 2009. There is still occasional rocket fire in southern Israel but it
is significantly less frequent than it was in November and December 2008. There
is no assurance this relative quiet will last.
During
the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a
Lebanese Islamist Shiite militia group and political party. This conflict
involved missile strikes against civilian targets in northern Israel, and
negatively affected business conditions in Israel. Any renewed hostilities or
other factors related to Israel could have a material adverse effect on us or on
our business and could adversely affect our share price.
32.
Military Service.
Generally,
all non-exempt male adult citizens and permanent residents of Israel under the
age of 45 (or older, for citizens with certain occupations), are obligated to
perform military reserve duty annually, and are subject to being called to
active duty at any time under emergency circumstances. While our Directors are
not currently obligated to perform military reserve duties, any Israeli-resident
employees that we may hire in the future may be called upon to perform reserve
duties for significant periods of time. The absence of those employees may in
turn cause us to experience operating difficulties. Additionally, a number of
countries continue to restrict or ban business with Israel or Israeli companies,
which may limit our ability to make sales into those countries.
33.
Exchange Rate Fluctuations.
Exchange
rate fluctuations between the U.S. dollar and the New Israeli Shekel (NIS) may
negatively affect our earnings. A substantial majority of our revenues and a
substantial portion of our expenses are denominated in U.S. dollars. However, as
our Company develops we anticipate that a significant portion of the expenses
associated with our Israeli operations, including personnel and
facilities-related expenses, will be incurred in NIS. Consequently, inflation in
Israel will have the effect of increasing the U.S. dollar cost of our operations
in Israel, unless it is offset on a timely basis by a devaluation of the NIS
relative to the U.S. dollar. We cannot predict any future trends in the rate of
inflation in Israel or the rate of valuation of the NIS against the U.S.
dollar.
34.
Tax Benefits.
Any
failure to obtain the tax benefits from the State of Israel that we anticipate
receiving could adversely affect our plans and prospects. Pursuant to the Law
for the Encouragement of Capital Investments, 1959, the Israeli government has
granted “Approved Enterprise” status to existing capital investment programs
under the Alternative Benefits Program. Consequently, if we meet the criteria to
become an Approved Enterprise, we would be eligible for certain tax benefits for
the first several years in which we generate taxable income. Currently, we have
not yet begun to generate taxable income for purposes of this law. Once we begin
to generate taxable income, our financial results could suffer if our tax
benefits are significantly reduced.
In order
to receive tax benefits, we must comply with a number of conditions and
criteria. If we fail to comply in whole or in part with these conditions and
criteria, the tax benefits that we receive could be partially or fully canceled
and we could be forced to refund the amount of the benefits we received,
adjusted for inflation and interest. Although we believe that we will operate in
compliance with the required conditions, we cannot assure you that this will
continue.
We cannot
assure you that we will, in the future, be eligible to receive additional tax
benefits under this law. Additionally, in the event that we increase our
activities outside the State of Israel, these activities generally will not be
eligible for inclusion in Israeli tax benefit programs. Accordingly, our
effective corporate tax rate could increase significantly in the
future.
35.
Our operations may be affected
by negative economic conditions in Israel.
Israel
has experienced periods of recession in economic activity in recent years,
resulting in low growth rates and growing unemployment. Our operations could be
adversely affected if the economic conditions in Israel were to deteriorate
again. In addition, due to significant economic measures proposed by the Israeli
government, there were several general strikes and work stoppages in each of the
most recent years, affecting all banks, airports and ports. These strikes had an
adverse effect on the Israeli economy and on business, and if they recur, they
could have an adverse effect on our ability to deliver products to our customers
and to receive raw materials from our suppliers in a timely manner. From time to
time, the Israeli trade unions threaten additional strikes or work-stoppages,
which may, if carried out, have a material adverse effect on the Israeli economy
and us.
Item 2. Description of
Property.
We use
the office space of one of our Directors at no charge on a month to month basis.
We have not paid any rent since incorporation, and we do not anticipate that we
will have to pay rent in the future out of the proceeds of any
financing.
Item
3. Legal Proceedings.
There are
no pending legal proceedings to which we are a party or in which any of our
Directors, officers or affiliates, any owner of record or beneficially of more
than 5% of any class of our voting securities, or security holder is a party
adverse to us or has a material interest adverse to ours. Our property is not
the subject of any pending legal proceedings.
Item
4. Submission of Matters to a Vote of Security Holders
We did
not submit any matters to a vote of security holders during the fourth quarter
of the year ended December 31, 2008.
PART
II
Item
5. Market for Common Equity and Related Stockholder Matters.
Market
for our common stock
There is
currently no market for our shares. We cannot give you any assurance that the
shares will ever have a market or that if a market for our shares ever develops,
that you will be able to sell your shares. In addition, even if a public market
for our shares develops, there is no assurance that a secondary public market
will be sustained.
The
shares are quoted on the OTC Bulletin Board under the symbol OTC BB CTKE, but no
active trading market has developed and we cannot assure you that an active
trading market will ever develop.
Dividend
Policy
We have
not declared or paid dividends on our common stock since our formation, and we
do not anticipate paying dividends in the foreseeable future. Declaration or
payment of dividends, if any, in the future, will be at the discretion of our
Board of Directors and will depend on our then current financial condition,
results of operations, capital requirements and other factors deemed relevant by
the Board of Directors. There are no contractual restrictions on our ability to
declare or pay dividends.
Record
Holders
As of
February 3, 2009, we had outstanding 13,705,000 shares of common stock, which
were held by 58 stockholders of record.
Securities
Authorized for Issuance Under Equity Compensation Plans
As of
December 31, 2008, none of our equity securities were authorized to be issued
under any compensation plans (including individual compensation
arrangements).
Recent
Sales of Unregistered Securities
On April
15, 2007, we issued 1,000,000 shares of our common stock to Sharone Perlstein,
our founder and sole director at that time, in consideration of their par
value.
On April
15, 2007, we issued 900,000 shares of our common stock to Dr. Reuven Gepstein,
our President, Chief Executive Officer and Director, in consideration of their
par value. The shares were issued in a transaction that was exempt from the
registration requirements of the Securities Act pursuant to Regulation S
promulgated by the Securities and Exchange Commission.
On April
15, 2007, we issued 3,777,000 shares of our common stock to four other
individuals in consideration of their par value. The shares were issued in a
transaction that was exempt from the registration requirements of the Securities
Act pursuant to Regulation S promulgated by the Securities and Exchange
Commission.
On June
18, 2007, we issued 962,500 shares of our common stock to Yael Alush, our
Secretary, Treasurer and Director, in consideration of their par value. The
shares were issued in a private transaction that was exempt from the
registration requirements of the Securities Act pursuant to Regulation S
promulgated by the Securities and Exchange Commission.
On June
18, 2007, we issued 3,940,500 shares of our common stock to six other
individuals in consideration of their par value. The shares were issued in a
transaction that was exempt from the registration requirements of the Securities
Act pursuant to Regulation S promulgated by the Securities and Exchange
Commission.
In July
2007 through October of 2007, we issued 2,000,000 shares of common stock to 44
investors in a private placement pursuant to the exemption from the registration
requirements of the Securities Act provided by Regulation S, the 2007 Private
Placement. The aggregate consideration paid for such shares was $50,000. All
investors in such private placement were non-US persons (as defined under SEC
Regulations). The Company provided all investors in the 2007 Private Placement
with a subscription agreement.
On
December 9, 2007, we raised $225,000 by selling 1,125,000 shares of our common
stock to two investors in a transaction that was exempt from registration
pursuant to the exemption from the registration requirements of the Securities
Act provided by Regulation S. Both investors in such private placement were
non-US persons (as defined under SEC Regulations) and were provided with
Subscription Agreements.
Purchases
of Our Equity Securities By Us or Our Affiliates
On August
7, 2008, our founder, Sharone Perlstein purchased 1,509,000 shares of our common
stock, par value $0.0001 per share, from Lavi Krasney in an off-market
transaction for an aggregate purchase price of $1,000. As a result of that
purchase, Lavi Krasney is no longer one of our shareholders.
Item
6. Selected Financial Data
Item
7. Managements's Discussion and Analysis or Plan of Operation
RESULTS OF OPERATIONS
For the years ended December 31, 2008 and December
31, 2007
We have not generated any revenues
since inception, including for the year ended December 31, 2008. Our operating
activities during these periods consisted primarily of developing our business
plan.
General and administrative
expenses were $218,903 for the year ended December 31, 2008, compared to $69,978
for the year ended December 31, 2007. The increase in general and administrative
expenses was due to an increase in our activity level. General and
administrative expenses primarily consist of consulting fees, professional fees
and filing fee expenses.
Our net loss for the year ended
December 31, 2008, was $218,903 or $0.02 per share, compared to $69,978 or $0.01
per share for the year ended December 31, 2007. The weighted average number of
shares outstanding was 13,705,000 at December 31, 2008, compared
to 9,742,827 at December 31, 2007.
LIQUIDITY AND CAPITAL
RESOURCES
As of December 31, 2008
As of December 31, 2008, our
current assets were $377 and our current liabilities were $13,200,
resulting in negative working capital of $12,823.
As of December 31, 2008, our total
liabilities were $13,200, compared to total liabilities of $38,029 as of
December 31, 2007, all consisting of current liabilities.
Stockholders’ equity decreased from of
$206,080 at December 31, 2007, to a deficit of $12,823 at December 31,
2008. This was the result of the net loss for the year ended December
31, 2008.
For the year ended December 31,
2008, net cash used in operating activities was $245,583, compared to net cash
used in operating activities of $31,949 for the year ended December 31, 2007.
Net cash used in operating activities for the year ended December 31, 2008 was
mainly the result of a net loss and payment of accrued liabilities.
For the year ended December 31,
2008, net cash used in investing activities was $0, compared to net cash used in
investing activities of $0 for the year ended December 31, 2007.
Net cash flows from financing
activities for the year ended December 31, 2008 was $1,851, compared to net cash
flows from financing activities of $276,058 for the year ended December 31,
2007.
Plan
of Operation
We
intend to continue to refine the technology we have licensed.
Our
license grants us worldwide marketing rights to the technology (except in
Israel) while allowing us to develop the technology further. Currently, our
technology employs an algorithm to measure a person’s center of gravity. We
intend to refine the measurement of this algorithm to better focus the center of
gravity. We have agreed to sublicense our technology to Elya Orthopedics, a sole
proprietorship owned by Yael Alush, who is one of our Directors.
We intend
to work with Elya Orthopedics to develop footwear designs in both men’s and
women’s models.
We
plan to have our shoes manufactured in Israel.
We
are actively seeking strategic partners for the marketing of our
shoes.
Once we
have completed our medical studies, we intend to locate a large international
shoe manufacturer or orthopedic shoe distributor that will be a strategic
partner in marketing our product.
We
are seeking to establish a reputation and credibility in the medical field in
the major target markets.
We have
been in discussions with Israel’s leading medical institutions regarding the
conduct of research. We are currently awaiting a cost breakdown and anticipate
beginning medical research by the end of the first quarter of 2009.
We
may seek other opportunities.
If none
of the above is successful, we may seek other opportunities to maximize value
for our shareholders.
Additional
Capital Formation Activities
On
December 9, 2007, we raised $225,000 by selling 1,125,000 shares of our common
stock to two investors in a transaction that was exempt from registration
pursuant to the exemption from the registration requirements of the Securities
Act provided by Regulation S. We anticipate that the monies we have raised will
be used to finalize shoe production in Israel, allowing the Company to begin
marketing the product in the United States, and to pay some of the expenses
listed below.
Despite
this, we still do not have sufficient resources to effectuate our business. As
of December 31, 2008, we had approximately $377 in cash. We expect to incur a
minimum of $190,000 in expenses during the next twelve months of operations. We
estimate that this will be comprised of the following expenses:
|
Category
|
|
Planned Expenditures Over The Next 12
Months (US$)
|
|
|
Legal
and Accounting Fees
|
|
$ |
30,000 |
|
|
Marketing
Materials
|
|
|
3,000 |
|
|
Travel
Expenses
|
|
|
3,000 |
|
|
Office
Expenses
|
|
|
4,000 |
|
|
Development
/ Licensing
|
|
|
150,000 |
|
|
TOTAL
|
|
$ |
190,000 |
|
Additionally,
$20,000 will be needed for general working capital.
Accordingly,
we will have to raise the funds to pay for these expenses. We may have to borrow
money from our officers, or issue debt or equity securities, or seek to enter
into a strategic arrangement with a third party. There can be no assurance that
additional capital will be available to us. We currently have no agreements,
arrangements or understandings with any person to obtain funds through bank
loans, lines of credit or any other sources. Unless we are able to make
arrangements to raise additional funds, our inability to raise funds will have a
severe negative impact on our ability to remain a viable company.
In January 2009,
one of our shareholders lent us $11,000 to pay the legal and accounting costs of
preparing this annual report, and of preparing a post-effective amendment to the
registration statement we filed on Form SB-2 that became effective in January
2008, which we hope to file in the near future.
Going
Concern Consideration
Our
registered independent auditors included an explanatory paragraph in their
report on the accompanying consolidated financial statements regarding concerns
about our ability to continue as a going concern. Our consolidated financial
statements contain additional note disclosures describing the circumstances that
lead to this disclosure by our registered independent auditors.
Off-Balance
Sheet Arrangements
We have
no off-balance sheet arrangements.
Item 8. Consolidated Financial
Statements.
CHERRY
TANKERS INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2008, AND 2007
|
Report
of Registered Independent Auditors
|
F-2
|
|
|
|
|
|
Consolidated
Financial Statements-
|
|
|
|
|
|
|
|
Consolidated
Balance Sheets as of December 31, 2008, and 2007
|
F-3
|
|
|
|
|
|
|
Consolidated
Statements of Operations for the Year Ended December 31,
2008, Period Ended December 31, 2007, and Cumulative from
Inception
|
F-4
|
|
|
|
|
|
|
Consolidated
Statement of Stockholders’ Equity (Deficit) for the Period from Inception
Through December 31, 2008
|
F-5
|
|
|
|
|
|
|
Consolidated
Statements of Cash Flows for the Year Ended December 31,
2008, Period Ended December 31, 2007, and Cumulative from
Inception
|
F-6
|
|
|
|
|
|
|
Notes
to Consolidated Financial Statements December 31, 2008, and
2007
|
F-7
|
REPORT
OF REGISTERED INDEPENDENT AUDITORS
To the
Board of Directors and Stockholders
of Cherry
Tankers Inc.:
We have
audited the accompanying consolidated balance sheets of Cherry Tankers Inc. (a
Delaware corporation in the development stage) and subsidiary as of December 31,
2008, and 2007, and the related consolidated statements of operations,
stockholders’ equity (deficit), and cash flows for each of the periods then
ended, and from inception (March 30, 2007) through December 31,
2008. These consolidated financial statements are the responsibility
of the Company’s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States of America). Those
standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated 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 audits 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 of the Company’s 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 consolidated financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall consolidated financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Cherry Tankers
Inc. and subsidiary as of December 31, 2008, and 2007, and the results of its
consolidated operations and its consolidated cash flows for each of the periods
then ended, and from inception (March 30, 2007) through December 31, 2008, in
conformity with accounting principles generally accepted in the United States of
America.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2
to the consolidated financial statements, the Company is in the development
stage and has not established any source of revenues to cover its operating
costs. As such, it has incurred an operating loss since
inception. Further, as of December 31, 2008, and 2007, the cash
resources of the Company were insufficient to meet its planned business
objectives. These and other factors raise substantial doubt about the
Company’s ability to continue as a going concern. Management’s plan
regarding these matters is also described in Note 2 to the financial
statements. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Respectfully
submitted,
/S/ Davis
Accounting Group P.C.
Cedar
City, Utah
January
15, 2009.
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
BALANCE SHEETS (NOTE 2)
AS
OF DECEMBER 31, 2008, AND 2007
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
Cash
in bank
|
|
$ |
377 |
|
|
$ |
244,109 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
377 |
|
|
|
244,109 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$ |
377 |
|
|
$ |
244,109 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable - Trade
|
|
$ |
2,439 |
|
|
$ |
4,789 |
|
|
Accrued
liabilities
|
|
|
8,910 |
|
|
|
33,240 |
|
|
Due
to related party - Stockholder
|
|
|
1,851 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
13,200 |
|
|
|
38,029 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
13,200 |
|
|
|
38,029 |
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity (Deficit):
|
|
|
|
|
|
|
|
|
|
Common
stock, par value $0.0001 per share, 100,000,000 shares authorized;
13,705,000 shares issued and outstanding
|
|
|
1,370 |
|
|
|
1,370 |
|
|
Additional
paid-in capital
|
|
|
274,688 |
|
|
|
274,688 |
|
|
(Deficit)
accumulated during the development stage
|
|
|
(288,881 |
) |
|
|
(69,978 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders' equity (deficit)
|
|
|
(12,823 |
) |
|
|
206,080 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity (Deficit)
|
|
$ |
377 |
|
|
$ |
244,109 |
|
The
accompanying notes to consolidated financial statements are
an
integral part of these consolidated balance sheets.
CHERRY
TANKERS INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF OPERATIONS (NOTE 2)
FOR
THE YEAR ENDED DECEMBER 31, 2008, PERIOD ENDED
DECEMBER
31, 2007, AND CUMULATIVE FROM INCEPTION
(MARCH
30, 2007) THROUGH DECEMBER 31, 2008
|
|
|
Year
|
|
|
Period
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Cumulative
|
|
|
|
|
December
31,
|
|
|
December
31,
|
|
|
from
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Inception
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
fees
|
|
|
133,534 |
|
|
|
21,600 |
|
|
|
155,134 |
|
|
Accounting
and audit fees
|
|
|
31,627 |
|
|
|
16,000 |
|
|
|
47,627 |
|
|
Legal
fees
|
|
|
12,823 |
|
|
|
23,322 |
|
|
|
36,145 |
|
|
Transfer
agent fees
|
|
|
18,298 |
|
|
|
- |
|
|
|
18,298 |
|
|
Other
|
|
|
12,518 |
|
|
|
1,304 |
|
|
|
13,822 |
|
|
Other
professional fees
|
|
|
10,103 |
|
|
|
2,023 |
|
|
|
12,126 |
|
|
Travel
|
|
|
- |
|
|
|
5,236 |
|
|
|
5,236 |
|
|
Legal
- Incorporation fees
|
|
|
- |
|
|
|
493 |
|
|
|
493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
general and administrative expenses
|
|
|
218,903 |
|
|
|
69,978 |
|
|
|
288,881 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
from Operations
|
|
|
(218,903 |
) |
|
|
(69,978 |
) |
|
|
(288,881 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Expense)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for Income Taxes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(Loss)
|
|
$ |
(218,903 |
) |
|
$ |
(69,978 |
) |
|
$ |
(288,881 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
Per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
per common share - Basic and Diluted
|
|
$ |
(0.02 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
Average Number of Common Shares Outstanding - Basic and
Diluted
|
|
|
13,705,000 |
|
|
|
9,742,827 |
|
|
|
|
|
The
accompanying notes to consolidated financial statements are
an
integral part of these consolidated statements.
CHERRY
TANKERS INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (NOTE 2)
FOR
THE PERIOD FROM INCEPTION (MARCH 30, 2007)
THROUGH
DECEMBER 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
During
the
|
|
|
|
|
|
|
|
Common stock
|
|
|
Paid-in
|
|
|
Development
|
|
|
|
|
|
Description
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Totals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- March 30, 2007
|
|
|
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for cash
|
|
|
13,705,000 |
|
|
|
1,370 |
|
|
|
274,688 |
|
|
|
- |
|
|
|
276,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) for the period
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(69,978 |
) |
|
|
(69,978 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2007
|
|
|
13,705,000 |
|
|
|
1,370 |
|
|
|
274,688 |
|
|
|
(69,978 |
) |
|
|
206,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) for the period
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(218,903 |
) |
|
|
(218,903 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2008
|
|
|
13,705,000 |
|
|
$ |
1,370 |
|
|
$ |
274,688 |
|
|
$ |
(288,881 |
) |
|
$ |
(12,823 |
) |
The
accompanying notes to consolidated financial statements are
an
integral part of this consolidated statement.
CHERRY
TANKERS INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF CASH FLOWS (NOTE 2)
FOR
THE YEAR ENDED DECEMBER 31, 2008, PERIOD ENDED
DECEMBER
31, 2007, AND CUMULATIVE FROM INCEPTION (MARCH 30, 2007)
THROUGH
DECEMBER 31, 2008
|
|
|
Year Ended
|
|
|
Period Ended
|
|
|
Cumulative
|
|
| |
|
December 31,
|
|
|
December 31,
|
|
|
From
|
|
| |
|
2008
|
|
|
2007
|
|
|
Inception
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)
|
|
$ |
(218,903 |
) |
|
$ |
(69,978 |
) |
|
$ |
(288,881 |
) |
|
Adjustments
to reconcile net (loss) to net cash (used in) operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in assets and liabilities-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable - Trade
|
|
|
(2,350 |
) |
|
|
4,789 |
|
|
|
2,439 |
|
|
Accrued
liabilities
|
|
|
(24,330 |
) |
|
|
33,240 |
|
|
|
8,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash (Used in) Operating Activities
|
|
|
(245,583 |
) |
|
|
(31,949 |
) |
|
|
(277,532 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash (Used in) Investing Activities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan
from stockholder
|
|
|
2,301 |
|
|
|
- |
|
|
|
2,301 |
|
|
Repayment
of loan from stockholder
|
|
|
(450 |
) |
|
|
- |
|
|
|
(450 |
) |
|
Issuance
of common stock for cash
|
|
|
- |
|
|
|
276,058 |
|
|
|
276,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
|
1,851 |
|
|
|
276,058 |
|
|
|
277,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(Decrease) Increase in Cash
|
|
|
(243,732 |
) |
|
|
244,109 |
|
|
|
377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
- Beginning of Period
|
|
|
244,109 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
- End of Period
|
|
$ |
377 |
|
|
$ |
244,109 |
|
|
$ |
377 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
The
accompanying notes to consolidated financial statements are
an
integral part of these consolidated statements.
1. Summary
of Significant Accounting Policies
Basis
of Presentation and Organization
Cherry
Tankers Inc. (“Cherry Tankers” or the “Company”) is a Delaware corporation in
the development stage and has not commenced operations. The Company
was incorporated under the laws of the State of Delaware on March 30,
2007. The business plan of Cherry Tankers is to manufacture, market,
and distribute orthopedic shoes based on licensed patented
technology. The accompanying consolidated financial statements of
Cherry Tankers and its wholly owned subsidiary were prepared from the accounts
of the entities under the accrual basis of accounting.
In April
2007, Cherry Tankers commenced a capital formation activity through a Private
Placement Offering (the “PPO #1”), exempt from registration under the Securities
Act of 1933, to raise up to $1,058 through the issuance of 10,580,000 shares of
its common stock to founders of the Company, par value $0.0001 per share, at an
offering price of $0.0001 per share. As of June 18, 2007, the Company
had closed PPO #1 and received proceeds of $1,000. The remaining $58
was received as of December 31, 2007.
On
November 27, 2007, Cherry Tankers organized and incorporated a wholly owned
subsidiary under the name Cherry Tankers Ltd. (an Israeli corporation) for the
purpose of research and development as well as manufacturing and marketing for
its products and services in Israel. Cherry Tankers currently owns
all of the 10,000 shares of capital stock issued and outstanding; each share
valued at 0.01 New Israeli Shekels.
In
addition, in July 2007, the Company began a second capital formation activity
through a Private Placement Offering (“PPO #2”), exempt from registration under
the Securities Act of 1933, to raise up to $50,000 through the issuance of
2,000,000 shares of its common stock, par value $0.0001 per share, at an
offering price of $0.025 per share. As of December 31, 2007, Cherry
Tankers had received $50,000 in proceeds from PPO #2 and closed the
offering. In December 2007, Cherry Tankers also submitted a
Registration Statement on Form SB-2 to the Securities and Exchange Commission
(“SEC”) to register 2,000,000 of its outstanding shares of common stock on
behalf of selling stockholders. This Registration Statement on Form
SB-2 became effective with the SEC on January 10, 2008. The Company
will not receive any of the proceeds of this registration activity once the
shares of common stock are sold.
In
December 2007, Cherry Tankers commenced a third capital formation activity
through a Private Placement Offering (“PPO #3”), exempt from registration under
the Securities Act of 1933, to raise up to $225,000 through the issuance of
1,125,000 shares of its common stock, par value $0.0001 per share, at an
offering price of $0.20 per share. As of December 9, 2007, the
Company had closed the PPO and received proceeds of $225,000.
Principles
of Consolidation
The
accompanying consolidated financial statements include the accounts of Cherry
Tankers and its wholly owned subsidiary, Cherry Tankers Ltd.
(“Subsidiary”). All significant intercompany accounts and
transactions have been eliminated in consolidation.
Cash and Cash
Equivalents
For
purposes of reporting within the statement of cash flows, the Company considers
all cash on hand, cash accounts not subject to withdrawal restrictions or
penalties, and all highly liquid debt instruments purchased with a maturity of
three months or less to be cash and cash equivalents.
Revenue Recognition
Cherry
Tankers is in the development stage and has yet to realize revenues from
operations. At the time the Company commences operations, it will
recognize revenues when delivery of goods or completion of services has
occurred, provided there is persuasive evidence of an agreement, acceptance has
been approved by its customers, the fee is fixed or determinable based on the
completion of stated terms and conditions, and collection of any related
receivable is probable.
Loss per Common
Share
Basic
loss per share is computed by dividing the net loss attributable to the common
stockholders by the weighted average number of shares of common stock
outstanding during the period. Diluted loss per share is computed
similar to basic loss per share except that the denominator is increased to
include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common
shares were dilutive. There were no dilutive financial instruments
issued or outstanding as of December 31, 2008, and 2007.
Income Taxes
Cherry
Tankers accounts for income taxes pursuant to Statement of Financial Accounting
Standards (“SFAS”) No. 109, “Accounting for Income
Taxes” (“SFAS No.
109”). Under SFAS No. 109, deferred tax assets and liabilities are
determined based on temporary differences between the bases of certain assets
and liabilities for income tax and financial reporting purposes. The
deferred tax assets and liabilities are classified according to the financial
statement classification of the assets and liabilities generating the
differences.
The
Company maintains a valuation allowance with respect to deferred tax
assets. Cherry Tankers establishes a valuation allowance based upon
the potential likelihood of realizing the deferred tax asset while taking into
consideration the Company’s financial position and results of operations for the
current period. Future realization of the deferred tax benefit
depends on the existence of sufficient taxable income within the carryforward
period under Federal tax laws.
Changes
in circumstances, such as Cherry Tankers generating taxable income, could cause
a change in judgment about the realizability of the related deferred tax
asset. Any change in the valuation allowance will be included in
income in the year of the change in estimate.
Fair Value of Financial
Instruments
The
Company estimates the fair value of financial instruments using the available
market information and valuation methods. Considerable judgment is
required in estimating fair value. Accordingly, the estimates of fair
value may not be indicative of the amounts Cherry Tankers could realize in a
current market exchange. As of December 31, 2008, and 2007, the
carrying value of the Company’s financial instruments approximated fair value
due to the short-term nature and maturity of these instruments.
Deferred Offering Costs
The
Company defers as other assets the direct incremental costs of raising capital
until such time as the offering is completed. At the time of the
completion of the offering, the costs are charged against the capital
raised. Should the offering be terminated, deferred offering costs
are charged to operations during the period in which the offering is
terminated.
Concentration of Risk
As of
December 31, 2008, and 2007, Cherry Tankers maintained its cash account at one
commercial bank. The balance in the account was subject to FDIC
coverage.
Common Stock Registration
Expenses
The
Company considers incremental costs and expenses related to the registration of
equity securities with the SEC, whether by contractual arrangement as of a
certain date or by demand, to be unrelated to original issuance
transactions. As such, subsequent registration costs and expenses are
reflected in the accompanying consolidated financial statements as general and
administrative expenses and are expensed as incurred.
Lease Obligations
All
noncancellable leases with an initial term greater than one year are categorized
as either capital leases or operating leases. Assets recorded under
capital leases are amortized according to the methods employed for property and
equipment or over the term of the related lease, if shorter.
Estimates
The
accompanying consolidated financial statements are prepared and presented on the
basis of accounting principles generally accepted in the United States of
America. The preparation of consolidated 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 as of December 31, 2008, and 2007, and expenses for the year ended
December 31, 2008, period ended December 31, 2007, and cumulative from
inception. Actual results could differ from those estimates made by
management.
2. Development
Stage Activities and Going Concern
The
Company is currently in the development stage, and has not commenced
operations. The business plan of Cherry Tankers is to manufacture,
market, and distribute orthopedic shoes that will alleviate back, knee, and hip
pain resulting from walking abnormalities.
During
the period from inception through December 31, 2008, Cherry Tankers was
incorporated and completed capital formation activities to raise up to $276,058
from the sale of 13,705,000 shares of common stock through PPO’s to various
stockholders. As of December 31, 2008, Cherry Tankers raised $276,058
in proceeds from the PPO’s. Cherry Tankers also submitted to the SEC
a Registration Statement on Form SB-2 to register 2,000,000 shares of its common
stock for selling stockholders. This Registration Statement on Form
SB-2 became effective with the SEC on January 10, 2008. No proceeds
will be received by the Company from the sale of common stock by selling to
stockholders. The Company also intends to conduct additional capital
formation activities through the issuance of its common stock and to commence
operations.
The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America,
which contemplate continuation of the Company as a going
concern. Cherry Tankers has not established any source of revenues to
cover its operating costs, and as such, has incurred an operating loss since
inception. Further, as of December 31, 2008, and 2007, the cash
resources of the Company were insufficient to meet its current business
plan. These and other factors raise substantial doubt about the
Company’s ability to continue as a going concern. The accompanying
consolidated financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.
3. Common
Stock
In April
2007, the Company commenced a capital formation activity through PPO #1, exempt
from registration under the Securities Act of 1933, to raise up to $1,058
through the issuance of 10,580,000 shares of its common stock to founders of the
Company, par value $0.0001 per share, at an offering price of $0.0001 per
share. As of June 18, 2007, Cherry Tankers had closed PPO #1 and
received proceeds of $1,000. The remaining $58 was received as of
December 31, 2007.
Additionally,
in July 2007, the Board of Directors of Cherry Tankers began PPO #2, exempt from
registration under the Securities Act of 1933, to raise up to $50,000 through
the issuance of 2,000,000 shares of its common stock, par value $0.0001 per
share, at an offering price of $0.025 per share. As of December 31,
2007, the Company had fully subscribed PPO #2, closed PPO #2, and received a
total of $50,000 in proceeds.
In
December 2007, Cherry Tankers commenced a capital formation activity through PPO
#3, exempt from registration under the Securities Act of 1933, to raise up to
$225,000 through the issuance of 1,125,000 shares of its common stock, par value
$0.0001 per share, at an offering price of $0.20 per share. As of
December 9, 2007, the Company had closed PPO #3 and received proceeds of
$225,000.
The
Company also commenced an activity to submit a Registration Statement on Form
SB-2 to the SEC to register 2,000,000 of its outstanding shares of common stock
on behalf of selling stockholders. This Registration Statement on
Form SB-2 became effective with the SEC on January 10, 2008. The
Company will not receive any of the proceeds of this registration activity once
the shares of common stock are sold.
4.
Income Taxes
The
provision (benefit) for income taxes for the year ended December 31, 2008 and
period ended December 31, 2007 was as follows (assuming a 23% effective tax
rate):
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Current
Tax Provision:
|
|
|
|
|
|
|
|
Federal
and state-
|
|
|
|
|
|
|
|
Taxable
income
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Total
current tax provision
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
Tax Provision:
|
|
|
|
|
|
|
|
|
|
Federal
and state-
|
|
|
|
|
|
|
|
|
|
Loss
carryforwards
|
|
$ |
50,348 |
|
|
$ |
16,095 |
|
|
Change
in valuation allowance
|
|
|
(50,348 |
) |
|
|
(16,095 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total
deferred tax provision
|
|
$ |
- |
|
|
$ |
- |
|
The
Company had deferred income tax assets as of December 31, 2008, and 2007, as
follows:
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Loss
carryforwards
|
|
$ |
66,443 |
|
|
$ |
16,095 |
|
|
Less
- Valuation allowance
|
|
|
(66,443 |
) |
|
|
(16,095 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total
net deferred tax assets
|
|
$ |
- |
|
|
$ |
- |
|
As of
December 31, 2008, and 2007, Cherry Tankers had approximately $288,881, and
$69,978, respectively, in tax loss carryforwards that can be utilized in future
periods to reduce taxable income, and expire in the year 2028.
The
Company provided a valuation allowance equal to the deferred income tax assets
for the year ended December 31, 2008, and period ended December 31, 2007,
because it is not presently known whether future taxable income will be
sufficient to utilize the loss carryforwards.
5. Patent
Licensing Agreement
On
November 27, 2007, Cherry Tankers entered into a patent licensing agreement (the
“Patent Licensing Agreement”) with its Subsidiary. The Patent
Licensing Agreement grants the Company an irrevocable, non-transferable,
perpetual right, and license to make use of certain technology and products in
the Orthopedic Shoe Soles field (the “Technology”) for the sole purpose of
manufacturing, marketing, distributing, and selling the products based on the
Technology, on a worldwide basis, except for in Israel. The Company
is entitled to sub-License the Technology to third-party strategic partners if
agreed upon by both parties in advance. The Subsidiary retains all
rights, title, and interest in and to the Technology, including the design of
the products, copyrights, trademarks, and trade secrets. In
consideration for the Technology, the Company is obligated to pay development
fees to the Subsidiary in the amount of $150,000 as well as royalties due each
calendar quarter based on 4% of Net Revenues.
6. Commitment
and Contingencies
As
discussed in Note 5, on November 27, 2007, the Company entered into a Patent
Licensing Agreement with its Subsidiary. The Patent Licensing
Agreement grants the Company an irrevocable, non-transferable, perpetual right,
and license to make use of the Technology in the Orthopedic Shoe Soles field for
the sole purpose of manufacturing, marketing, distributing, and selling the
products based on the Technology, on a worldwide basis, except for in
Israel. The Company is entitled to sub-License the Technology to
third-party strategic partners if agreed upon by both parties in
advance. The Subsidiary retains all rights, title, and interest in
and to the Technology, including the design of the products, copyrights,
trademarks, and trade secrets. In consideration for the Technology,
the Company is obligated to pay development fees to the Subsidiary in
installments in the amount of $150,000.
The first
development fee installment of $20,000 was due on February 1,
2008. On February 1, 2008, the Company and Subsidiary amended the
Patent Licensing Agreement to rescheduling the installment due dates with the
first development fee installment payment of $20,000 due on July 15,
2008. On July 15, 2008, the Company did not make the first
development fee installment payment, and was in default on the Patent Licensing
Agreement. On September 15, 2008, and November 15, 2008,
respectively, the Company did not make the second and third
development fee installment payments of $50,000 each, and remained in default on
the Patent Licensing Agreement.
On
December 23, 2008, the Company and Subsidiary amended the Patent Licensing
Agreement to reschedule the installment payments and due dates as
follows:
|
Installment
#1 April 15, 2009
|
|
$ |
50,000 |
|
|
Installment
#2 July 15, 2009
|
|
|
100,000 |
|
|
|
|
|
|
|
|
|
|
$ |
150,000 |
|
The
Company is also obligated to pay the Subsidiary royalties in the amount of 4% of
Net Revenues. This amount will be due on the fifth business day
following the end of each calendar quarter.
7. Change
in Management
On
November 22, 2007, the existing President, Secretary, Treasurer, Chief Executive
Officer, and Director notified Cherry Tankers of his resignation. On
the same day, the Company appointed an individual as President, Chief Executive
Officer, and Director. The Company also appointed another individual
as Secretary, Treasurer, and Director. Both individuals accepted
their positions on November 22, 2007.
8. Related
Party Transactions
During
the year ended December 31, 2007, the Subsidiary purchased the right, title, and
interest of the Technology discussed in Note 5 for $1 from a stockholder of the
Company.
During
the year ended December 31, 2008, a stockholder loaned Cherry Tankers
$2,301. As of December 31, 2008, the Company repaid $450 of this
amount. The loan from the stockholder is unsecured, noninterest
bearing, and has no terms for repayment.
9. Recent
Accounting Pronouncements
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities – Including an amendment of FASB Statement No.
115” (“SFAS No. 159”), which permits entities to measure many financial
instruments and certain other items at fair value that are not currently
required to be measured at fair value. An entity would report
unrealized gains and losses on items for which the fair value option has been
elected in earnings at each subsequent reporting date. The objective
is to improve financial reporting by providing entities the opportunity to
mitigate volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. The decision about whether to elect the fair value option
is applied instrument by instrument, with a few exceptions: the decision is
irrevocable, and applied only to entire instruments – not to portions of
instruments. SFAS No. 159 requires disclosures that facilitate
comparisons (a) between entities that choose different measurement attributes
for similar assets and liabilities and (b) between assets and liabilities in the
financial statements of an entity that selects different measurement attributes
for similar assets and liabilities. SFAS No. 159 is effective for
financial statements issued for fiscal years beginning after November 15,
2007. Early adoption is permitted as of the beginning of a fiscal
year, provided the entity also elects to apply the provisions of SFAS No.
157. Upon implementation, an entity shall report the effect of the
first re-measurement to fair value as a cumulative-effect adjustment to the
opening balance of retained earnings. Since the provisions of SFAS
No. 159 are applied prospectively, any potential impact will depend on the
instruments selected for fair value measurement at the time of
implementation. The management of the Company does not believe that
this new pronouncement will have a material impact on its financial
statements.
In
December 2007, the FASB issued SFAS No. 141R, “Business Combinations – Revised
2007” (“SFAS No. 141R”), which replaces FASB Statement No. 141, “Business
Combinations.” SFAS No. 141R establishes principles
and requirements intending to improve the relevance, representational
faithfulness, and comparability of information that a reporting entity provides
in its financial reports about a business combination and its
effects. This is accomplished through requiring the acquirer to
recognize assets acquired and liabilities assumed arising from contractual
contingencies as of the acquisition date, measured at their acquisition-date
fair values. This includes contractual contingencies only if it is
more likely than not that they meet the definition of an asset of a liability in
FASB Concepts Statement No. 6, “Elements of Financial
Statements – a
replacement of FASB Concepts Statement No. 3.” This statement also
requires the acquirer to recognize goodwill as of the acquisition date, measured
as a residual. However, this statement improves the way in which an
acquirer’s obligations to make payments conditioned on the outcome of future
events are recognized and measured, which in turn improves the measure of
goodwill. This statement also defines a bargain purchase as a
business combination in which the total acquisition-date fair value of the
consideration transferred plus any noncontrolling interest in the acquiree, and
it requires the acquirer to recognize excess in earnings as a gain attributable
to the acquirer. This, therefore, improves the representational
faithfulness and completeness of the information provided about both the
acquirer’s earnings during the period in which it makes a bargain purchase and
the measures of the assets acquired in the bargain purchase. The
management of Cherry Tankers does not expect the adoption of this pronouncement
to have a material impact on its financial statements.
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements – an amendment of ARB No. 51” (“SFAS
No. 160”), which
establishes accounting and reporting standards to improve the relevance,
comparability, and transparency of financial information in its consolidated
financial statements. This is accomplished by requiring all entities,
except not-for-profit organizations, that prepare consolidated financial
statements to (a) clearly identify, label, and present ownership interests in
subsidiaries held by parties other than the parent in the consolidated statement
of financial position within equity, but separate from the parent’s equity; (b)
clearly identify and present both the parent’s and the noncontrolling interest’s
attributable consolidated net income on the face of the consolidated statement
of income; (c) consistently account for changes in parent’s ownership interest
while the parent retains its controlling financial interest in subsidiary and
for all transactions that are economically similar to be accounted for
similarly; (d) measure of any gain, loss, or retained noncontrolling equity at
fair value after a subsidiary is deconsolidated; and (e) provide sufficient
disclosures that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. This Statement also
clarifies that a noncontrolling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the
consolidated financial statements. SFAS No. 160 is effective for
fiscal years and interim periods on or after December 15, 2008. The
management of Cherry Tankers does not expect the adoption of this pronouncement
to have a material impact on its financial statements.
In March
2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment of FASB Statement 133”
(“SFAS No. 161”). SFAS No. 161 enhances required disclosures
regarding derivatives and hedging activities, including enhanced disclosures
regarding how: (a) an entity uses derivative instruments; (b)
derivative instruments and related hedged items are accounted for under SFAS No.
133, “Accounting for
Derivative Instruments and Hedging Activities”; and (c) derivative
instruments and related hedged items affect an entity’s financial position,
financial performance, and cash flows. Specifically, SFAS No. 161
requires:
|
|
●
|
Disclosure
of the objectives for using derivative instruments in terms of underlying
risk and accounting designation
|
|
|
●
|
Disclosure
of the fair values of derivative instruments and their gains and losses in
a tabular format
|
|
|
●
|
Disclosure
of information about credit-risk-related contingent
features
|
|
|
●
|
Cross-reference
from the derivative footnote to other footnotes in which
derivative-related information is
disclosed.
|
SFAS No.
161 is effective for fiscal years and interim periods beginning after November
15, 2008. Earlier application is encouraged. The
management of Cherry Tankers does not expect the adoption of this pronouncement
to have a material impact on its financial statements.
In May
2008, the FASB issued FASB Statement No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS No. 162”). SFAS No. 162
identifies the sources of accounting principles and the framework for selecting
the principles used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally
accepted accounting principles in the United States of America. The
sources of accounting principles that are generally accepted are categorized in
descending order as follows:
|
|
a)
|
FASB
Statements of Financial Accounting Standards and Interpretations, FASB
Statement 133 Implementation Issues, FASB Staff Positions, and American
Institute of Certified Public Accountants (AICPA) Accounting Research
Bulletins and Accounting Principles Board Opinions that are not superseded
by actions of the FASB
|
|
|
b)
|
FASB
Technical Bulletins and, if cleared by the FASB, AICPA Industry Audit and
Accounting Guides and Statements of
Position
|
|
|
c)
|
AICPA
Accounting Standards Executive Committee Practice Bulletins that have been
cleared by the FASB, consensus positions of the FASB Emerging Issues Task
Force (EITF), and the Topics discussed in Appendix D of EITF Abstracts
(EITF D-Topics)
|
|
|
d)
|
Implementation
guides (Q&As) published by the FASB staff, AICPA Accounting
Interpretations, AICPA Industry Audit and Accounting Guides and Statements
of Position not cleared by the FASB, and practices that are widely
recognized and prevalent either generally or in the
industry.
|
On May
26, 2008, the FASB issued FASB Statement No. 163, “Accounting for Financial Guarantee
Insurance Contracts” (“SFAS No. 163”). SFAS No. 163 clarifies
how FASB Statement No. 60, “Accounting and Reporting by
Insurance Enterprises” (“SFAS No. 60”), applies to financial guarantee
insurance contracts issued by insurance enterprises including the recognition
and measurement of premium revenue and claim liabilities. It also
requires expanded disclosures about financial guarantee insurance
contracts.
The
accounting and disclosure requirements of SFAS No. 163 are intended to improve
the comparability and quality of information provided to users of financial
statements by creating consistency. Diversity exists in practice in
accounting for financial guarantee insurance contracts by insurance enterprises
under SFAS No. 60, “Accounting
and Reporting by Insurance Enterprises.” That diversity
results in inconsistencies in the recognition and measurement of claim
liabilities because of differing views about when a loss has been incurred under
FASB Statement No. 5, “Accounting for Contingencies”
(“SFAS No. 5”). SFAS No. 163 requires that an insurance enterprise
recognize a claim liability prior to an event of default when there is evidence
that credit deterioration has occurred in an insured financial
obligation. It also requires disclosure about (a) the risk-management
activities used by an insurance enterprise to evaluate credit deterioration in
its insured financial obligations and (b) the insurance enterprise’s
surveillance or watch list.
SFAS No.
163 is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and all interim periods within those fiscal years
except for disclosures about the insurance enterprise’s risk-management
activities. Disclosures about the insurance enterprise’s
risk-management activities are effective the first period beginning after
issuance of SFAS No. 163. Except for those disclosures, earlier
application is not permitted. The management of the Company does not
expect the adoption of this pronouncement to have material impact on its
financial statements.
10. Subsequent
Events
On
January 11, 2009, Elya Orthopedics (“Elya”), a sole proprietorship owned by an
officer, Director, and stockholder of Cherry Tankers, entered into a patent
licensing agreement (the Patent License Agreement #2”) with the Company’s
Subsidiary.
The
Patent Licensing Agreement #2 grants to Elya an irrevocable, non-transferable,
renewable right, and license to make use of certain technology and products in
the Orthopedic Shoe Soles field (the “Technology #2”) for the sole purpose of
manufacturing, marketing, distributing, and selling the products based on the
Technology in Israel. Elya is entitled to sub-License the Technology
to third-party strategic partners if agreed upon by both parties in
advance. The Subsidiary retains all rights, title, and interest in
and to the Technology, including the design of the products, copyrights,
trademarks, and trade secrets. In consideration for the Technology,
Elya is obligated to pay development fees to the Subsidiary in the amount of
$150,000 as well as royalties due each calendar quarter based on 4% of Net
Revenues.
On January 12, 2009, a stockholder loaned the Company $11,000 to pay
for legal and accounting fees. The loan from the stockholder is unsecured,
non-interest bearing, and is due in one payment on March 31, 2009, with a
default date of April 15, 2009.
Item
9. Changes In and Disagreements with Accountants on Accounting and Financial
Disclosure.
Davis
Accounting Group P.C. is our registered independent auditor. There have not been
any changes in or disagreements with the accountants on accounting and financial
disclosure or any other matter.
Item 9A(T). Controls and
Procedures.
Evaluation
of Disclosure Controls and Procedures
We
evaluated the effectiveness of our disclosure controls and procedures as of the
end of the 2008 year. This evaluation was conducted by our chief executive
officer and chief financial officer.
Disclosure
controls are controls and other procedures that are designed to ensure that
information that we are required to disclose in the reports we file pursuant to
the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported.
Limitations
on the Effective of Controls
Our
management does not expect that our disclosure controls or our internal controls
over financial reporting will prevent all error and fraud. A control
system, no matter how well conceived and operated, can provide only reasonable,
but not absolute, assurance that the objectives of a control system are
met. Further, any control system reflects limitations on resources, and the
benefits of a control system must be considered relative to its
costs. These limitations also include the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more people or by
management override of a control. A design of a control system is also
based upon certain assumptions about potential future conditions; over time,
controls may become inadequate because of changes in conditions, or the degree
of compliance with the policies or procedures may deteriorate. Because of
the inherent limitations in a cost-effective control system, misstatements due
to error or fraud may occur and may not be detected.
Conclusions
Based
upon their evaluation of our controls, the chief executive officer and principal
accounting officer have concluded that, subject to the limitations noted above,
the disclosure controls are effective providing reasonable assurance that
material information relating to us is made known to management on a timely
basis during the period when our reports are being prepared.
There
were no changes in our internal controls that occurred during the year covered
by this report that have materially affected, or are reasonably likely to
materially affect our internal controls.
This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management’s report in this annual
report.
Item
9B. Other Information.
None.
PART
III
Item
10. Directors, Executive Officers, Promoters , Control Persons and Corporate
Governance; Compliance With Section 16(a) of the Exchange Act.
Directors,
Executive Officers, Promoters, and Control Persons
Each
director of our Company serves for a term of one year or until the successor is
elected at the Company's annual shareholders' meeting and is qualified, subject
to removal by the Company's shareholders. Each officer serves, at the pleasure
of the Board of Directors, for a term of one year and until the successor is
elected at the annual meeting of the Board of Directors and is
qualified.
Set forth
below is the name, age, present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years of our
current Directors and executive officers.
|
Name
and Business
Address
|
Age
|
Position
|
|
Dr.
Reuven Gepstein
Herzeliya
Medical Center
Herzeliya
Pituach, Israel
|
59
|
President,
Chief Executive
Officer,
and Director
|
|
Ms.
Yael Alush
78
Sokolov St. Herzeliya, Israel
|
26
|
Secretary,
Treasurer and
Director
|
Dr.
Reuven Gepstein has been our Director and our President and Chief Executive
Officer since joining our company on November 22, 2007. Dr. Gepstein is the head
of the Spinal unit at the Sapir Medical Center in Israel. He is a practicing
spinal surgeon. Dr. Gepstein received his MD from the Technion School of
Medicine in Israel in 1978 and received his specialization certificate in 1984.
He has been a practicing spinal surgeon ever since. Dr. Gepstein has written
numerous research papers in the field of spinal surgery and participated in
conferences on the matter in 2007 in Switzerland, in 2006 in Greece, Turkey and
Israel, in 2005 in Russia, and in 2003 in Korea.
Ms. Yael
Alush has been our Director, Treasurer and Secretary since joining the Company
on November 22, 2007. Ms. Alush is currently the owner of the ELYA Orthotics
Center in Herzeliya, Israel. Ms. Alush is responsible for sales, customer
service, bookkeeping and sourcing of products. The facility caters to
individuals seeking out orthotics. Ms. Alush has been at ELYA Orthotics since
2003. Between 2001 and 2003, Ms. Alush worked at the Israel Center for Orthotics
where she worked as a customer service representative.
There are
no familial relationships among our Directors and officers. None of our
Directors or officers is a director in any other reporting companies. None of
our Directors or officers has been affiliated with any company that has filed
for bankruptcy within the last five years. We are not aware of any proceedings
to which any of our officers or Directors, or any associate of any such officer
or Director, is a party adverse to us or to our Subsidiary or has a material
interest adverse to us or to our Subsidiary.
Audit
Committee; Financial Expert
The Board
of Directors has not established an audit committee and does not have an audit
committee financial expert. The Board is of the opinion that an audit committee
is not necessary since the Company has only two Directors and to date, such
Directors have been performing the functions of an audit committee.
Code
of Ethics
The
Company has not yet adopted a Code of Ethics because it has only two Directors
and officers.
Compliance
with Section 16(a) of the Exchange Act
Section
16(a) of the Exchange Act requires our executive officers, directors and persons
who beneficially own more than 10% of our common stock, the class of our equity
securities, to file with the SEC initial reports of beneficial ownership and
reports of changes in ownership of our common stock. Reporting persons are
required under SEC rules to furnish us with copies of all Forms 3, 4 and 5 which
they file. During the year ended December 31, 2008, all required reports were
filed.
Item
11. Executive Compensation.
Summary
Compensation
Since our
incorporation on March 30, 2007, we have not paid any compensation to our
Directors or officers. On April 15, 2007, Dr. Reuven Gepstein, our President,
Chief Executive Officer and Director purchased 900,000 shares of our common
stock at par value, and on June 18, 2007, Mrs. Yael Alush, our Secretary,
Treasurer and Director purchased 962,500 shares of our common stock at par
value. Dr. Gepstein and Ms. Alush did not join us until November 22, 2007. The
officers and Directors of our Company do not intend to receive cash remuneration
or salaries for their efforts unless and until our business operations are
successful, at which time salaries and other remuneration will be established by
the Board of Directors, as appropriate.
We have
no employment agreements with any of our Directors or executive
officers.
During
the year ended December 31, 2008, no stock options or stock appreciation rights
were granted to any of our Directors or executive officers, none of our
Directors or executive officers exercised any stock options or stock
appreciation rights, and none of them held unexercised stock options as of
December 31, 2008. We have no long-term incentive plans.
The
following table sets forth information concerning the compensation paid or
earned during the year ended December 31, 2008 for services rendered to our
Company in all capacities by our principal executive officer and any officer
with total compensation over $100,000 per year.
|
SUMMARY COMPENSATION TABLE
|
|
Name
and
principal
position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
Nonqualified
Deferred
Compensation
Earnings ($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
(h)
|
|
(i)
|
|
(j)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Reuven Gepstein (1)
|
|
2008
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
Ms.
Yael Alush
(2)
|
|
2008
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
(1) Dr.
Reuven Gepstein has been our President, Chief Executive Officer, and Director
since November 22, 2007.
(2) Ms.
Yael Alush has been our Secretary, Treasurer and Director since November 22,
2007.
Outstanding
Equity Awards
As of
December 31, 2008, none of our Directors or executive officers held unexercised
options, stock that had not vested, or equity incentive plan
awards.
Compensation
of Directors
No
compensation was paid to our Directors during the year ending December 31,
2008.
The
following table sets forth information concerning the compensation paid or
earned during the year ended December 31, 2007 to our Directors.
|
DIRECTOR COMPENSATION
|
|
Name
(a)
|
|
Fees
Earned
or Paid
in Cash
($)
(b)
|
|
Stock
Awards
($)
(c)
|
|
Option
Awards
($)
(d)
|
|
Non-Equity
Incentive
Plan
Compensation
($)
(e)
|
|
Non-Qualified
Deferred
Compensation
Earnings
($)
(f)
|
|
All
Other
Compensation
($)
(g)
|
|
Total ($)
(j)
|
|
Dr.
Reuven Gepstein
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
Ms.
Yael Alush
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The
following table lists, as of February 3, 2009, the number of shares of common
stock of our Company that are beneficially owned by (i) each person or entity
known to our Company to be the beneficial owner of more than 5% of the
outstanding common stock; (ii) each officer and Director of our Company; and
(iii) all officers and Directors as a group. Information relating to beneficial
ownership of common stock by our principal stockholders and management is based
upon information furnished by each person using “beneficial ownership” concepts
under the rules of the Securities and Exchange Commission. Under these rules, a
person is deemed to be a beneficial owner of a security if that person has or
shares voting power, which includes the power to vote or direct the voting of
the security, or investment power, which includes the power to vote or direct
the voting of the security. The person is also deemed to be a beneficial owner
of any security of which that person has a right to acquire beneficial ownership
within 60 days. Under the Securities and Exchange Commission rules, more than
one person may be deemed to be a beneficial owner of the same securities, and a
person may be deemed to be a beneficial owner of securities as to which he or
she may not have any pecuniary beneficial interest. Except as noted below, each
person has sole voting and investment power.
The
percentages below are calculated based on 13,705,000 shares of our common stock
issued and outstanding as of January 8, 2009. We do not have any outstanding
options, warrants or other securities exercisable for or convertible into shares
of our common stock. Unless otherwise indicated, the address of each person
listed is c/o Cherry Tankers, Inc. 78 Sokolov Street, Herzeliya,
Israel.
|
Name of Beneficial
Owner
|
|
Title Of Class
|
|
Amount and Nature
of Beneficial
Ownership
|
|
|
Percent of Class
|
|
| |
|
|
|
|
|
|
|
|
|
Dr.
Reuven Gepstein (1)
|
|
Common
|
|
|
900,000 |
|
|
|
6.57 |
% |
|
Yael
Alush (2)(3)
|
|
Common
|
|
|
962,500 |
|
|
|
7.02 |
% |
|
Directors
and Officers as a Group (2 persons)(3)
|
|
Common
|
|
|
1,862,000 |
|
|
|
13.59 |
% |
|
Rivka
Benchaya
97
Hanasi Street
Herzeliya,
Israel
|
|
Common
|
|
|
1,509,000 |
|
|
|
11.01 |
% |
|
Ofer
Ben-Ner
21
Hagefen Street
Tzaron,
Israel
|
|
Common
|
|
|
1,045,000 |
|
|
|
7.62 |
% |
|
Sharone
Perlstein(4)
4
HaOgen Street
Herzeliya,
Israel
|
|
Common
|
|
|
2,509,000 |
|
|
|
18.31 |
% |
|
Sivan
Alush(5)
3
Haait Street
Raanana,
Israel
|
|
Common
|
|
|
962,500 |
|
|
|
7.02 |
% |
|
Haim
Perlstein(6)
9
Meshesk Street
Givat
Chen, Israel
|
|
Common
|
|
|
467,500 |
|
|
|
3.41 |
% |
|
Atsmaout
Perlstein(7)
9
Meshesk Street
Givat
Chen, Israel
|
|
Common
|
|
|
467,500 |
|
|
|
3.41 |
% |
|
Shomit
Yaron(8)
4
HaOgen Street
Herzeliya,
Israel
|
|
Common
|
|
|
509,000 |
|
|
|
3.71 |
% |
(1) Our
President, Chief Executive Officer, and Director
(2) Our
Secretary, Treasurer and Director.
(3) Does
not include 962,500 shares owned by Sivan Alush, Ms. Yael Alush’s sister, with
respect to which Ms. Yael Alush disclaims beneficial ownership.
(4) Does
not include 467,500 shares owned by Haim Perlstein and 467,500 shares owned by
Atsmaout Perlstein, Mr. Sharone Perlstein’s father and mother, respectively,
with respect to which Mr. Sharone Perlstein disclaims beneficial ownership. Does
not include 509,000 shares owned by Shlomit Yaron, Mr. Sharone Perlstein’s wife,
with respect to which Mr. Sharone Perlstein disclaims beneficial
ownership.
(5) Does
not include 962,500 shares owned by Yael Alush, Ms. Sivan Alush’s sister and our
Secretary, Treasurer and Director, with respect to which Ms. Sivan Alush
disclaims beneficial ownership.
(6) Does
not include 467,500 shares owned by Atsmaout Perlstein and 2,509,000 shares
owned by Sharone Perlstein, Mr. Haim Perlstein’s former wife and son,
respectively, with respect to which Mr. Haim Perlstein disclaims beneficial
ownership.
(7) Does
not include 467,500 shares owned by Haim Perlstein and 2,509,000 shares owned by
Sharone Perlstein, Ms. Perlstein’s former husband and son, respectively, with
respect to which Ms. Perlstein disclaims beneficial ownership.
(8) Does
not include 2,509,000 shares owned by Sharone Perlstein, Ms. Yaron’s husband,
with respect to which Ms. Yaron disclaims beneficial ownership.
Item
13. Certain Relationships and Related Transactions, and Director
Independence.
Certain
Relationships and Related Transactions
On April
15, 2007, by action taken by our Board of Directors, we accepted Dr. Reuven
Gepstein’s subscription for 900,000 shares at par for a total consideration of
$90.00. The shares were issued under Regulation S. On November 22, 2007, Dr.
Gepstein was appointed our President, Chief Executive Officer and
Director.
On June
18, 2007, by action taken by our Board of Directors, we accepted Yael Alush’s
subscription for 962,500 shares at par for a total consideration of $96.20. The
shares were issued under Regulation S. On November 22, 2007, Yael Alush was
appointed our Secretary, Treasurer and Director.
On
January 11, 2009, our Subsidiary granted a renewable, non-transferable,
sub-licensable license to make use of our technology for the sole purpose of
manufacturing, marketing, distributing and selling the shoes and otherwise
exploiting our technology in Israel to Elya Orthopedics Ltd (“Elya”). Elya is a
sole proprietorship owned by Yael Alush, our Secretary, Treasurer and
Director.
In
January 2009, one of our shareholders lent us $11,000 to pay the legal and
accounting costs of preparing this annual report, and of preparing a
post-effective amendment to the registration statement that we filed on Form
SB-2 that became effective in January 2008, which we hope to file in the near
future.
Director
Independence
We are
not subject to listing requirements of any national securities exchange or
national securities association and, as a result, we are not at this time
required to have our board comprised of a majority of “independent directors.”
We do not believe that any of our Directors currently meet the definition of
“independent” as that term is defined by the rules and regulations of the
American Stock Exchange or any other national securities exchange.
Item
14. Principal Accountant Fees and Services.
(1) AUDIT
FEES
The
aggregate fees billed for the year ending December 31, 2008 for professional
services rendered by the principal accountant for the audit of our annual
consolidated financial statements included in our Form 10-K or services that are
normally provided by the accountant in connection with statutory and regulatory
filings or engagements for such period was $22,000.
(2)
AUDIT-RELATED FEES
The
aggregate fees billed for year ending December 31, 2008 for assurance and
related services by the principal accountant that are reasonably related to the
performance of the audit or review of our consolidated financial statements was
$0.
(3) TAX
FEES
The
aggregate fees billed for the year ending December 31, 2008 for professional
services rendered by the principal accountant for tax compliance, tax advice,
and tax planning was $0.
(4) ALL
OTHER FEES
The
aggregate fees billed for the year ending December 31, 2008 for products and
services provided by the principal accountant, other than the services reported
above was $0.
(5)
PRE-APPROVAL POLICIES AND PROCEDURES
Before
the accountant is engaged by us to render audit or non-audit services, the
accountant is nominated and approved by our Board of Directors.
Part IV
Item
15. Exhibits and Financial Schedules.
|
Exhibit
|
|
Description
|
|
|
|
|
|
*3.1
|
|
Our
Articles of Incorporation, incorporated by reference herein from Exhibit
3.1 to our Registration Statement on Form SB-2 (Registration No.
333-148346) filed with the Securities and Exchange Commission on December
26, 2007
|
|
|
|
|
|
*3.2
|
|
Our
By-Laws, incorporated by reference herein from Exhibit 3.2 to our
Registration Statement on Form SB-2 (Registration No. 333-148346) filed
with
the Securities and Exchange Commission on December 26,
2007
|
|
|
|
|
|
*4.1
|
|
Specimen
of our common stock certificate, incorporated by reference herein from
Exhibit 4.1 to our Registration Statement on Form SB-2 (Registration No.
333-148346) filed with the Securities and Exchange Commission on December
26, 2007
|
|
|
|
|
|
*10.1
|
|
Form
of our Regulation S Subscription Agreement, incorporated by reference
herein from Exhibit 10.2 to our Registration Statement on Form SB-2
(Registration No. 333-148346) filed with the Securities and Exchange
Commission on December 26, 2007
|
| |
|
|
|
10.2
|
|
Form
of renewable,
non-transferable, sub-licensable license to make use of our
technology for the sole purpose of manufacturing, marketing, distributing
and selling the shoes and otherwise exploiting our technology in Israel
between Cherry Tankers Ltd., our wholly-owned subsidiary and Elya
Orthopedics (“Elya”). Elya is a sole proprietorship owned by Yael Alush,
our Secretary, Treasurer and Director.
|
| |
|
|
|
31.1
|
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| |
|
|
|
31.2
|
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. |
| |
|
|
|
32.1
|
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. |
| |
|
|
* Previously filed
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized, on February 19, 2009.
|
|
Cherry
Tankers, Inc.
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Reuven Gepstein
|
|
|
Name:
Reuven Gepstein
|
|
|
Title:
President, Chief Executive Officer, and
Director
|
|
|
(Principal
Executive, Officer)
|
| |
|
|
By:
|
/s/ Yael Alush
|
|
|
Name:
Yael Alush
|
|
|
Title:
Secretary, Treasurer, and Director
|
|
|
(Principal
Financial and Accounting
Officer)
|
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
|
Signature
and Name
|
|
Title:
|
|
Date:
|
|
|
|
|
|
|
|
/s/ Reuven Gepstein
|
|
President,
Chief Executive Officer, and
|
|
February
19,
|
|
Reuven
Gepstein
|
|
Director
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Yael Alush
|
|
Secretary,
Treasurer and Director
|
|
February
19,
|
|
Yael
Alush
|
|
|
|
2009 |