UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-KSB
(Mark
One)
x
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the
fiscal year ended December 31, 2007
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF 1934
For
the
transition period from __________________ to ____________________.
Commission
file number: 333-148346
Cherry
Tankers, Inc.
(Name
of
small business issuer in its charter)
|
Delaware
(State
or other jurisdiction of incorporation or
organization)
|
98-0531496
(I.R.S.
Employer Identification No.)
|
78
Sokolov Street, Herzeliya, Israel
(Address
of principal executive offices) (Zip Code)
Issuer’s
telephone number: 011-972-9-958-3777
Securities
registered under Section 12(b) of the Exchange Act: None.
Securities
registered under Section 12(g) of the Exchange Act:
Common
Stock, $0.0001 par value
(Title
of
class)
Check
whether the issuer (1) filed all reports required to be filed by Section
13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter
period
that the Registrant was required to file such reports), and (2) has been
subject
to such filing requirements for the past 90 days.
Yes
o
No
x
Check
if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained,
to
the best of Registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. x
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes
x
No
o
The
issuer’s revenues for its most recent fiscal year were $0.
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates is not able to be determined as there is no bid and ask
price of such common equity.
The
number of shares of the issuer’s common stock issued and outstanding as of
February 20, 2008 was 13,705,000.
Documents
Incorporated By Reference: None.
Transitional
Small Business Issuer Disclosure Format (check one): Yes o
No
x
TABLE
OF CONTENTS
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Page
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PART
I
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Item
1.
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Description
of business
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3
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Item
2.
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Description
of property
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17
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Item
3.
|
Legal
proceedings
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17
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Item
4.
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Submission
of matters to a vote of security holders
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17
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PART
II
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Item
5.
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Market
for common equity and related stockholder matters
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18
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Item
6.
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Management’s
discussion and analysis or plan of operation
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19
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Item
7.
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Consolidated
Financial Statements
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F-1
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Item
8.
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Changes
in and disagreements with accountants on accounting and financial
disclosure
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21
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Item
8a.
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Controls
and procedures
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21
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Item
8b.
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Other
information
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21
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PART
III
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Item
9.
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Directors,
executive officers, promoters, control persons and corporate governance;
compliance with section 16(a) of the Exchange Act
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21
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Item
10.
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Executive
compensation
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22
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Item
11.
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Security
ownership of certain beneficial owners and management
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23
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Item
12.
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Certain
relationships and related transactions and Director
independence
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25
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Item
13.
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Exhibits
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25
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Item
14.
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Registered
Independent Auditor fees and services
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26
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SIGNATURES
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27
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CERTIFICATIONS
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PART
I
Item
1. Description of Business.
As
used
in this Annual Report, references to “Cherry Tankers,” the “Company,” “we,”
“our,” or “us” refer to Cherry Tankers, Inc., unless the context otherwise
indicates.
Forward-Looking
Statements
This
Annual Report contains forward-looking statements which relate to future
events
or our future financial performance. In some cases, such forward-looking
statements may be identified by terminology such as “may,” “should,” “expects,”
“plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or
“continue” or the negative of these terms or other comparable terminology. These
statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled
“Risk Factors,” that may cause our or our industry’s actual results, levels of
activity, performance or achievements to be materially different from any
future
results, levels of activity, performance or achievements expressed or implied
by
these forward-looking statements.
While
these forward-looking statements, and any assumptions upon which they are
based,
are made in good faith and reflect our current judgment regarding the direction
of our business, actual results will almost always vary, sometimes materially,
from any estimates, predictions, projections, assumptions or other future
performance suggested herein. Except as required by applicable law, including
the securities laws of the United States, we do not intend to update any
of the
forward-looking statements to conform these statements to actual results.
Corporate
Background
Cherry
Tankers, Inc. was incorporated under the laws of the State of Delaware on
March
30, 2007. We hope to revolutionize the footwear industry by providing a
technology that makes an orthotic shoe that alleviates lower knee, back and
hip
pain by pinpointing the wearer’s anatomical center of gravity and adjusting his
current center accordingly. We have not generated any revenue to date and
are a
development stage company. We currently have no employees.
Our
Business
We
are
focused on developing, marketing and selling footwear that will alleviate
the
back, knee and hip pain resulting from walking abnormalities. We have been
granted a perpetual, irrevocable, non-transferable (but sub-licensable) license
to use a patent pending technology that restores the human body’s center of
gravity to its optimal position for the sole purpose of manufacturing, marketing
and distributing and selling the footwear everywhere in the world except
for
Israel. Our Israeli Subsidiary, described in the next paragraph, will do
the
same in Israel.
On
November 27, 2007, our wholly owned subsidiary, Cherry Tankers Ltd. or the
Israeli Subsidiary, purchased the rights to certain technology from its
inventors for nominal consideration. The technology includes an Israeli patent
application and a United States provisional patent application titled “A system
and a method for selecting a type of a curved sole out of a limited group
of
types of curved sole
to
match a person.”
We
have
signed a Licensing Agreement with the Israeli Subsidiary, (the "Licensing
Agreement"), pursuant to which we obtained a perpetual, irrevocable,
non-transferable (but sub-licensable) license to use the technology for the
sole
purpose of manufacturing, marketing, distributing and selling the product
(the
footwear that we plan to manufacture) everywhere in the world except for
Israel.
The Israeli Subsidiary will market our products in Israel.
In
consideration of the Licensing Agreement, we have agreed to fund the Israeli
Subsidiary’s development activities for the footwear in an amount up to $150,000
pursuant to a schedule that is attached to the Licensing Agreement and we
have
agreed to pay royalty fees in an amount equal to 4% of Net Revenues (as defined
in the Licensing Agreement) from sales of the products or exploitation of
the
technology.
Industry
Background
Many
options are available for management of lower back pain. However, there has
been
little consensus, either within or between specialties, on appropriate clinical
evaluation and management of lower back pain. Numerous studies show unexplained,
large variations in use of treatments. Despite wide variations in practice,
patients seem to experience broadly similar outcomes, although costs of care
can
differ substantially among and within specialties.
Conventional
medical treatments include over-the-counter pain relievers and various types
of
physical therapy. However, according to an article in WebMd, many back pain
sufferers seek out “alternative” treatments -- everything from orthotics
(shoe
inserts),
massage and acupuncture to mind-body therapies and exercise programs like
yoga
and tai chi.
Causes
of
Back Pain
Back
pain
can be caused by a number of problems:
|
|
· |
Small
fractures to the spine from
osteoporosis
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· |
Muscle
spasm (very tense muscles that remain
contracted)
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Ruptured
or herniated disk
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· |
Degeneration
of the disks
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· |
Poor
alignment of the vertebrae
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· |
Spinal
stenosis(narrowing of the spinal
canal)
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· |
Strainor
tears to the muscles or ligaments supporting the
back
|
|
|
· |
Spine
curvatures (like scoliosis or kyphosis) which may be inherited
and seen in
children or teens
|
|
|
· |
Other
medical conditions like
fibromyalgia
|
However,
most cases of back pain have not been traced to a specific, definable cause.
As
a result, all the efforts to resolve back pain (as well as neck pain, knee
pain
and other assorted aches) have inconsistent results. Changes of the hip-spine
alignment cause changes in the center of gravity and can induce lower back
pain.
In a study reported in Spine
in
2004,
it was shown that a backwards shift of the gravity lines with respect to
the
hips was compensated for by lumbar hyperlordosis, which led to a posterior
shift
of the center of the spine. The main clinical symptom was lower back
pain.
There
have been recent studies that point to center of gravity and gait changes
as a
result of aging (and other factors) as the culprits for back pain. During
the
process of aging, or in situations such as pregnancy, leg length discrepancy
or
shortening of muscles, the muscular system does not work efficiently due
to the
change in the center of gravity. This change can cause altered load balancing
on
the joints which in turn causes pain. In short, the change in gait due to
a
displaced center of gravity causes undue stress on the joints and muscles
of the
knees, neck and back, which in turn causes pain in those areas.
Center
of Gravity
The
line
or center of gravity in the human body, is a line passing through the center
of
the body to the earth. It is an imaginary point at which all the weight of
a
body can be considered concentrated. If the center of gravity moves too far
outside (anterior, posterior or lateral) the base of support, a fall will
occur.
An
example is described in the Mayo Clinic’s Proceeding; a book’s center of gravity
is at its geometric center. As the book is pushed towards the edge of a shelf,
it protrudes over the edge and its center of gravity moves closer to the
edge,
which is the limit of its base of support. When the base of the shelf is
too
small, it does not offer enough support to the book and the book will fall.
The
human body is analogous in that the torso is the book, and the feet are the
base
of support.
Defining
the ideal state of spinal balance is difficult. Since one of the roles of
the
spine is to bear the weight of the upper body, the body’s center of gravity is
important in determining stability and balance.
According
to Emedicine, the center of gravity changes with the configuration and function
of the body. If the center of gravity shifts, the body becomes more unstable,
causing the muscles and tendons to work harder to maintain stability. This
naturally causes aches and pains which if not treated become
chronic.
The
Human Foot (the base) and Orthotics
The
human
foot has more than 100 working parts with 26 bones working together with
the
foot's ligaments, muscles and tendons. All these little mechanisms reside
in two
relatively small structures that support and balance the weight of the entire
body. On average, our feet can walk as much as 1,000 miles each year. Our
feet
act as shock absorbers for our body, cushioning, on average, up to one million
pounds of pressure during only one hour of arduous exercise such as aerobics
or
running.
The
field
of Orthotics is concerned with the application and manufacturing of devices
which support the function on the foot. Simpler foot orthotics allow the
muscles, tendons and bones of the feet and lower legs to function at their
highest potential. When appropriately prescribed, orthotics can decrease
pain,
not only in the foot, but in other parts of the body such as the knee, hip
and
lower back. They can also increase stability in an unstable joint, prevent
a
deformed foot from developing additional problems, and improve overall quality
of life.
In
theory, the purpose of using devices such as a shoe insert is to enhance
normal
movement and to decrease abnormal posture and tone. These types of devices
are
often prescribed to reduce pain, to provide better positioning, to relieve
pressure on a certain area of the foot, and to improve the overall biomechanical
function of the foot. Orthotics work like shock absorbers, removing pressure
and
stress from painful areas in the foot and ankle. Orthotics also promote the
proper alignment of the feet. They can restore balance, improve sports
performance and even alleviate pain in the knee, hip and lower
back.
Measuring
Foot Pressure Distribution
Our
product requires the use of sophisticated pedometers that measure foot pressure
distribution (FPD) for evaluation of foot and gait pathologies. A number
of
companies provide the foot care industry with devices that digitally measure
feet and determine foot type and pressure points. The customer steps on the
pressure-sensitive pedometer, and a thirty-second test automatically begins.
An
image of both feet appears on a screen showing pressure distribution on each
foot. Colors towards the blue end of the spectrum indicate low pressure and
colors towards the red end of the spectrum indicate high pressure. If a printer
is connected to the pedometer, the customer may receive a full-color printout
of
the test results. This technology then instantaneously recommends appropriate
off the shelf footwear and orthotic options.
These
devices are positioned in approximately 8,000 locations across the United
States, and enable retail footwear stores to provide a more accurate shoe
for
the individual without consulting with a medical professional. However, these
devices are only a partial answer to finding a suitable shoe and or orthotic
device to help alleviate back and foot pain. The Company believes that its
technology provides a better solution to alleviate back and foot
pain.
Our
Technology
Our
licensed technology requires that an individual stand on a pedometer which
measures foot pressure distribution (FPD). In addition, it is pertinent that
the
pedometer have software that employs our algorithm that measures the
individual’s anatomical center
of
gravity. Once we have identified an individual’s anatomical center of gravity,
we can provide footwear that properly addresses this individual’s needs. Once an
individual wears our shoes for some period of time, his center of gravity
will
be shifted to its optimal position thereby significantly alleviating back,
knee
and neck pain.
The
Product
Our
licensed technology allows us to produce off the shelf footwear that shifts
a
person’s center of gravity back to his anatomical center of gravity. The
footwear that we plan to manufacture, distribute and sell should significantly
alleviate back, knee and neck pain.
As
noted
above, some sophisticated pedometers measure FPD. These devices are currently
placed in over 8,000 stores across the United States. The pedometer incorporates
infrared LED’s and receptors that, when combined with software, capture an
accurate size of the foot (both length and width) without using moving parts.
It
provides an accurate size and pressure analysis and uses “relative pressure
analysis” to provide a highly accurate image.
With
the
information from the pedometer, our technology employs an algorithm to measure
each person’s anatomical center
of
gravity, which is in effect the optimal center of gravity of that individual.
A
corrective shoe designed to restore that individual’s anatomical center of
gravity is then recommended.
Principal
Markets and Marketing Strategy
Potential
Customers
Lower
back pain is the fifth most common reason for all physician visits in the
United
States. Approximately one quarter of U.S. adults reported having lower back
pain
lasting at least one whole day in the past 3 months and 7.6% reported at
least
one episode of severe acute lower back pain. According to the Annals
of Internal Medicine, 50%
of
the American adult population will experience back pain each year. Back pain
is
also the most common cause of job-related disability in America, according
to
the National Institutes of Health, and costs about $50 billion a year in
treatments. Some 80% of Americans will experience back pain at some time
in
their lives.
The
figures are similar in Europe: Musculoskeletal disorders (MSD) or back, knee
and
neck pain, are the most common work-related health problem across the EU,
according to the director of the European Agency for Safety and Health at
Work.
Additionally, MSDs are the most common cause of absenteeism from work in
most of
the EU. In some countries this translates into a cost of up to 1.6% of the
GDP.
While
workers, especially in physically demanding jobs, constitute a large percentage
of those with back pain, many other people also suffer from MSDs. The Bone
and
Joint Decade Report (2005) states that, “Most episodes of lower back pain settle
after a couple of weeks but many have a recurrent course with further acute
episodes affecting 20-44% of patients in the population within one
year.”
Geriatrics
In
an
article in BMC
Geriatrics,
researchers from Harvard University’s medical school relate how age-related
anatomical and physiological changes in foot bone and ligament structure
affect
FPD during gait. Gait analysis of healthy elderly people revealed decreased
stride length, reduced step force and increased variability in gait parameters.
These findings indicated that unsteadiness during walking is increased in
the
community-dwelling elderly people, posing a risk for falls.
Shoes
manufactured using our technology can help re-shift the center of gravity
for
the elderly, stabilizing their gait and reducing the number of falls in that
population.
Pregnancy
Up
to
eighty percent of pregnant women suffer from lower back pain. In addition,
hip,
leg, arch and heel pain are also common in pregnancy. There is a significant
increase in the severity and frequency of back, hip, leg and foot pain between
the second and third trimesters.
As
a
result of this pain, and due to physiological changes associated with pregnancy,
such as an increase in weight, a change in weight distribution, tissue and
joint
laxity, and changes in hormones, the pregnant woman’s body progressively alters
its posture in an attempt to alleviate the pain.
Marketing
Strategy
The
elements of our marketing plan are:
Enticing
retail outlets that already have pre-installed pedometers which measure a
person’s FPD to install our algorithm in their pedometers. With the goal of
having these outlets sell our footwear, we will supply the retail chains
and our
future distributors with a CD-ROM to install our software, free of charge.
We
are also in discussions to supply the software to the largest manufacturer
of
the pedometers, whose devices are currently placed in over 5,000 locations
in
the United States.
In
order
to expand our marketing capabilities, we intend to publicize scientific research
by world renowned medical doctors showing the benefits of using our footwear
to
alleviate back and neck pain.
In
addition, we plan to attend at least two trade shows in 2008 in order to
convince retailers to install our algorithm in their FPD’s and to carry our
shoes on their shelves. We expect to have an attractive marketing booth at
each
trade show we attend, which will include an FPD with our algorithm installed
so
that all those who visit can measure their gait.
Competition
There
are
a number of competitors in the market many of whom are larger than we are
and
have more resources available than we have. There are also a number of different
solutions to the problem that are marketed by those competitors. We believe
that
our solution is unique and does a better job of solving the problem than
the
competitors’ solutions.
General
Orthotics
As
mentioned above, orthotics, or shoe inserts, are commonly prescribed as a
solution to back pain. Custom foot orthotics generate sales of about $500
million dollars per year (end user cost) in the United States.
Companies
such as Spenco Medical, Aetrex, Bio-sole, PowerStep and Pedag sell standard
shoe
inserts for approximately $15-$30 for a pair.
Custom
orthotic inserts such as Dr. Wilson, Shoe Master, Health Quest, OthoDynamics
and
Dr.’s Foot Laboratories, cost between $200 for home kits to $1,000.
The
APOS system
The
APOS
system applies special semispherical shoes, with individually adjusted implants.
The system can be individually adjusted in order to optimally balance loading
and re-train postural control during gait. The system costs close to
$1,000.
According
to a report on Channel Two Israel television’s morning news show, APOS sold more
than 3000 pairs of its shoes in 2006 in Israel.
MBT
Shoes
MBT
shoes
distribute pressure evenly across the foot. An initial study into the effects
of
an unstable shoe construction suggests that MBTs alter certain gait
characteristics and that with frequent use they may reduce the incidence
of some
musculoskeletal problems. According to MBT’s web site more than one million MBT
shoes were sold last year in more than 20 countries.
The
MBT
shoes cost an average of $250 per pair in the United States and £159 in
England.
As
noted,
we believe that our solution is unique and will do a better job of correcting
gait and alleviating back, leg, hip and foot pain than the competitors’
solutions. We anticipate that an off the shelf pair of shoes that is tailored
to
the customer’s anatomical center of gravity after the customer stands on a
pedometer that measures his FPD and applies our algorithm will retail for
between $175 and $300. We believe that our shoes will last as long as a typical
pair of athletic shoes, which, depending upon the extent of use, will be
between
12 and 24 months.
Employees
We
presently have no employees. All functions including development, strategy,
negotiations and clerical functions are currently being provided by our
executive officers on a voluntary basis.
Risk
Factors
An
investment in our common stock involves a high degree of risk. A potential
investor should carefully consider the following factors and other information
in this Form 10-KSB before deciding to invest in our Company. If any of the
following risks actually occur, our business, financial condition, results
of
operations and prospects for growth would likely suffer. As a result, our
investors could lose all or part of their investment in our
Company.
Risks
related to our Company
1.
We are a development stage company and may never be able to effectuate our
business plan or achieve any revenues or profitability. Therefore, at this
stage
of our business, potential investors have a high probability of losing their
entire investment.
We
were
established on March 30, 2007, and have no operating history. We are in the
development stage and are subject to all of the risks inherent in the
establishment of a new business enterprise. We have had no revenues or customers
to date. Our operations to date have been focused on organizational, start-up,
and capital formation activities. As a development stage company, we are
a
highly speculative venture involving significant financial risk. It is uncertain
as to when we will become profitable, if ever.
There
is
nothing at this time on which to base an assumption that our business operations
will prove to be successful or that we will ever be able to operate profitably.
We may not be able to successfully effectuate our business. There can be
no
assurance that we will ever achieve any revenues or profitability. The revenue
and income potential of our proposed business and operations is unproven
as the
lack of operating history makes it difficult to evaluate the future prospects
of
our business.
2.
We expect losses in the future because we have no
revenues.
We
are
expecting losses over the next twelve months because we do not yet have any
revenues to offset the expenses associated with the development and the
marketing of our footwear to alleviate lower back, knee and hip pain. We
cannot
guarantee that we will ever be successful in generating revenues in the future.
We recognize that if we are unable to generate revenues, we will not be able
to
earn profits or continue operations. There is no history upon which to base
any
assumption as to the likelihood that we will prove successful, and we can
provide investors with no assurance that we will generate any operating revenues
or ever achieve profitable operations.
3.
If our business strategy is not successful, we may not be able to continue
operations as a going concern, and our stockholders may lose their entire
investment in us.
As
discussed in the Notes to Consolidated Financial Statements included in this
Form 10 KSB, as of December 31, 2007 we had no revenues and incurred a net
loss
of $69,978 for the year ended December 31, 2007. These factors raise substantial
doubt that we will be able to continue operations as a going concern, and
our
registered independent auditors included an explanatory paragraph regarding
this
uncertainty in their report on our consolidated financial statements for
the
year ended December 31, 2007. Our ability to continue as a going concern
is
dependent upon our generating cash flow sufficient to fund operations and
reducing operating expenses. Our business strategy may not be successful
in
addressing these issues. If we cannot continue as a going concern, our
stockholders may lose their entire investment in us.
4.
Since our officers can work or consult for other companies, their activities
could slow down our operations.
Our
officers are also members of our Board of Directors, and they are not required
to work exclusively for us. They do not devote all of their time to our
operations. Therefore, it is possible that a conflict of interest with regard
to
their time may arise based on their employment for other companies. Their
other
activities may prevent them from devoting full-time to our operations which
could slow our operations and may reduce our financial results because of
the
slow down in operations. It is expected that our Directors will devote between
five and ten hours per week to our operations on an ongoing basis, and will
devote whole days and even multiple days at a stretch when
required.
5.
We are heavily dependent upon our officers and Directors. The loss of either
Dr.
Gepstein or Ms. Alush, upon whose knowledge, leadership and technical expertise
we rely, would harm our ability to execute our business
plan.
We
are
dependent on the continued contributions of Dr. Reuven Gepstein, our President,
Chief Executive Officer and Director, and Ms. Yael Alush, our Secretary,
Treasurer and Director, whose knowledge and leadership would be difficult
to
replace. If we were to lose either of their services, or if either of them
is
not available to us when we need them, our ability to execute our business
plan
would be harmed, and we may be forced to cease operations until such time
as we
could hire a suitable replacement.
6.
We operate in a competitive market with limited personnel resources, and
a
failure to attract and retain qualified employees could harm our ability
to
execute our business plan.
Our
future success depends on our ability to identify, attract and retain qualified
personnel. Competition for employees in our industry is intense and we may
not
be successful in attracting and retaining such personnel. We will be competing
with other footwear companies that have many more resources than we have.
Other
footwear manufacturers may choose to enter our niche market and may have
greater
resources and experience than we have in facilitating the necessary sales
channels.
7.
We may not be able to compete with current products, such as custom orthotics
special implants and other specially designed footwear, some of whose
manufacturers have greater resources and experience than we
do.
The
corrective shoe market is intensely competitive and we believe that it will
become even more competitive in the future. Our footwear will compete with
numerous other footwear solutions to back pain, such as orthotics, custom
orthotics and other specially designed shoes. We will compete with national
companies such as Spenco Medical, Aetrex, Bio-sole, PowerStep and Pedag with
respect to orthotics. We will also compete with Dr. Wilson, Shoe Master,
Health
Quest, OthoDynamics and Dr.’s Foot Laboratories with respect to custom
orthotics, and with MBT shoes and the APOS system in the specialized orthotic
footwear market.
While
we
believe that we have certain competitive advantages against our competitors
in
the orthotic footwear market, the entry of one or more of the large competitors
who sell orthotics and custom footwear into our potential market could force
us
to reduce the prices that we charge to our customers. In some cases,
publicly-traded competitors may decide to undercut the price points of our
products by relying on their greater financial resources to increase sales.
If
such an event should occur, it may result in a decrease in our ability to
sell
our products at a profitable margin and may cause our products to be non-price
competitive. There can be no assurance that such an event will not occur
in the
future, and such an event could severely limit our ability to increase sales
or
expand our business and could have a serious negative effect on our financial
condition, results of operations and prospects. We can provide no assurance
that
competitive pressures will not have a material adverse effect on
us.
8.
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 may 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.
9.
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.
10.
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.
11.
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.
12.
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.
13.
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.
14.
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 into 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 Relating to Operations in Israel”
beginning on Page 15.
15.
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.
16.
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.
17.
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.
18.
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
19.
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.
20.
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.
21.
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.
|
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.
|
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.
22.
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. We intend to have a market maker apply for admission to quotation
of
our securities on the NASD Bulletin Board. If for any reason our common stock
is
not quoted on the NASD Bulletin Board or a public trading market does not
otherwise develop, purchasers of the shares may have difficulty selling their
common stock should they desire to do so. No market makers have committed
to
becoming market makers for our common stock and none may do so.
23.
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.
24.
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.
25.
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.
26.
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 registered independent auditors 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.
27.
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
28.
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.
29.
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.
30.
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.
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.
31.
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.
32.
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.
33.
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.
34.
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 fiscal year ended December 31, 2007.
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 not traded or listed on any exchange. We intend to have our common
stock quoted on the OTC Bulletin Board. However, there is no assurance that
we
will be successful in finding a market maker who will be successful at having
our shares quoted. Further, even assuming we do locate such a market maker,
it
could take several months before the market maker’s listing application for our
shares is approved.
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 20, 2008, 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, 2007, 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 for 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
None.
Item
6. Management's Discussion and Analysis or Plan of
Operation
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.
Create
an attractive design for our footwear.
We
plan
to have footwear designs in both men’s and women’s models, but to date we have
designed only a simple unisex model. We are in discussions to hire shoe
designers in Israel and we are currently researching the coloring and styling
of
our shoes.
We
are searching for a manufacturer for our shoes.
We
have
held discussions with footwear manufacturers in Israel to reach an agreement
by
which they would manufacture our footwear. We hope to reach an agreement
with an
orthopedic shoe manufacturer in early 2008.
Actively
seek strategic partners for the marketing of the device.
Because
our products require a pedometer at the sales location, we are in discussions
with the largest manufacturer of pedometers in Israel about installing our
algorithm in its pedometers. The manufacturer’s products are currently installed
in over 5,000 locations in the United States.
Establish
a reputation and credibility in medical field in the major target
markets.
Our
President, a renowned spinal surgeon, has been in discussions with his
professional counterparts in Israel and the United States in order to further
academic research into the benefits our footwear.
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 February 20, 2008, we had approximately $170,184 in cash. We expect to
incur
a minimum of $265,000 in expenses during the next twelve months of operations.
We estimate that this will be comprised of the following expenses:
|
Category
|
Planned
Expenditures Over
The
Next 12 Months (US$)
|
|
Legal
and Accounting Fees
|
$30,000
|
|
Advertising
|
30,000
|
|
Marketing
Materials
|
15,000
|
|
Travel
Expenses
|
12,000
|
|
Shoe
Design Expenses
|
10,000
|
|
Office
Expenses
|
18,000
|
|
Development
/ Licensing
|
150,000
|
|
TOTAL
|
$265,000
|
Additionally,
$50,000 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.
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
7. Consolidated Financial Statements.
CHERRY
TANKERS INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
|
Report
of Registered Independent Auditors
|
F-2
|
| |
|
|
Consolidated
Financial Statements-
|
|
| |
|
|
Consolidated
Balance Sheet as of December 31, 2007
|
F-3
|
| |
|
|
Consolidated
Statements of Operations for the Period Ended December 31, 2007,
and
Cumulative from Inception
|
F-4
|
|
|
|
|
Consolidated
Statement of Stockholders’ Equity for the Period from Inception Through
December 31, 2007
|
F-5
|
| |
|
|
Consolidated
Statements of Cash Flows for the Period Ended December 31, 2007,
and
Cumulative from Inception
|
F-6
|
| |
|
|
Notes
to Consolidated Financial Statements December 31, 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 sheet of Cherry Tankers Inc.
(a
Delaware corporation in the development stage) and subsidiary as of December
31,
2007, and the related consolidated statements of operations, stockholders’
equity, and cash flows for the period ended December 31, 2007, and from
inception (March 30, 2007) through December 31, 2007. 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 audit.
We
conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform the audit 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 audit included consideration
of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of
expressing an opinion on the effectiveness 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 audit provides 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, 2007, and the results of its consolidated
operations and its consolidated cash flows for the period ended December
31,
2007, and from inception (March 30, 2007) through December 31, 2007, 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, 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
February
19, 2008.
CHERRY
TANKERS INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
BALANCE SHEET (NOTE 2)
AS
OF DECEMBER 31, 2007
|
ASSETS
|
|
| |
|
|
|
| |
|
2007
|
|
|
Current
Assets:
|
|
|
|
|
|
Cash
in bank
|
|
$
|
244,109
|
|
| |
|
|
|
|
|
Total
current assets
|
|
|
244,109
|
|
| |
|
|
|
|
|
Total
Assets
|
|
$
|
244,109
|
|
| |
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
| |
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
Accounts
payable - Trade
|
|
$
|
4,789
|
|
|
Accrued
liabilities
|
|
|
33,240
|
|
| |
|
|
|
|
|
Total
current liabilities
|
|
|
38,029
|
|
| |
|
|
|
|
|
Total
liabilities
|
|
|
38,029
|
|
| |
|
|
|
|
|
Commitments
and Contingencies
|
|
|
|
|
| |
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
Common
stock, par value $0.0001 per share, 100,000,000 shares
authorized;
13,705,000 shares issued and outstanding
|
|
|
1,370
|
|
|
Additional
paid-in capital
|
|
|
274,688
|
|
|
(Deficit)
accumulated during the development stage
|
|
|
(69,978
|
)
|
| |
|
|
|
|
|
Total
stockholders' equity
|
|
|
206,080
|
|
| |
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$
|
244,109
|
|
The
accompanying notes to consolidated financial statements are
an
integral part of this consolidated balance sheet.
CHERRY
TANKERS INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
CONSOLIDATED
STATEMENTS OF OPERATIONS (NOTE 2)
FOR
THE PERIOD ENDED DECEMBER 31, 2007, AND
CUMULATIVE
FROM INCEPTION (MARCH 30, 2007)
THROUGH
DECEMBER 31, 2007
| |
|
Period
Ended
|
|
Cumulative
|
|
| |
|
December
31,
|
|
From
|
|
| |
|
2007
|
|
Inception
|
|
| |
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
$
|
-
|
|
| |
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
General
and administrative-
|
|
|
|
|
|
|
|
|
Professional
fees
|
|
|
62,945
|
|
|
62,945
|
|
|
Travel
expense
|
|
|
5,236
|
|
|
5,236
|
|
|
Other
|
|
|
1,304
|
|
|
1,304
|
|
|
Legal
- Incorporation fees
|
|
|
493
|
|
|
493
|
|
| |
|
|
|
|
|
|
|
|
Total
general and administrative expenses
|
|
|
69,978
|
|
|
69,978
|
|
| |
|
|
|
|
|
|
|
|
(Loss)
from Operations
|
|
|
(69,978
|
)
|
|
(69,978
|
)
|
| |
|
|
|
|
|
|
|
|
Other
Income (Expense)
|
|
|
-
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
Provision
for Income Taxes
|
|
|
-
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
Net
(Loss)
|
|
$
|
(69,978
|
)
|
$
|
(69,978
|
)
|
| |
|
|
|
|
|
|
|
|
(Loss)
Per Common Share:
|
|
|
|
|
|
|
|
|
(Loss)
per common share - Basic and Diluted
|
|
$
|
(0.01
|
)
|
|
|
|
| |
|
|
|
|
|
|
|
|
Weighted
Average Number of Common Shares
|
|
|
|
|
|
|
|
|
Outstanding
- Basic and Diluted
|
|
|
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 (NOTE 2)
FOR
THE PERIOD FROM INCEPTION (MARCH 30, 2007)
THROUGH
DECEMBER 31, 2007
| |
|
|
|
|
|
|
|
(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
|
|
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 PERIOD ENDED DECEMBER 31, 2007, AND
CUMULATIVE
FROM INCEPTION (MARCH 30, 2007)
THROUGH
DECEMBER 31, 2007
| |
|
Period
Ended
|
|
Cumulative
|
|
| |
|
December
31,
|
|
From
|
|
| |
|
2007
|
|
Inception
|
|
| |
|
|
|
|
|
|
Operating
Activities:
|
|
|
|
|
|
|
Net
(loss)
|
|
$
|
(69,978
|
)
|
$
|
(69,978
|
)
|
|
Adjustments
to reconcile net (loss) to net cash
|
|
|
|
|
|
|
|
|
(used
in) operating activities:
|
|
|
|
|
|
|
|
|
Changes
in assets and liabilities-
|
|
|
|
|
|
|
|
|
Accounts
payable - Trade
|
|
|
4,789
|
|
|
4,789
|
|
|
Accrued
liabilities
|
|
|
33,240
|
|
|
33,240
|
|
| |
|
|
|
|
|
|
|
|
Net
Cash (Used in) Operating Activities
|
|
|
(31,949
|
)
|
|
(31,949
|
)
|
| |
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
-
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
Net
Cash (Used in) Investing Activities
|
|
|
-
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
Issuance
of common stock for cash
|
|
|
276,058
|
|
|
276,058
|
|
| |
|
|
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
|
276,058
|
|
|
276,058
|
|
| |
|
|
|
|
|
|
|
|
Net
Increase in Cash
|
|
|
244,109
|
|
|
244,109
|
|
| |
|
|
|
|
|
|
|
|
Cash
- Beginning of Period
|
|
|
-
|
|
|
-
|
|
| |
|
|
|
|
|
|
|
|
Cash
- End of Period
|
|
$
|
244,109
|
|
$
|
244,109
|
|
| |
|
|
|
|
|
|
|
|
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.
CHERRY
TANKERS INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
1.
Summary
of Significant Accounting Policies
Basis
of Presentation and Organization
Cherry
Tankers Inc. (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 proposed business plan of the
Company is to manufacture, market, and distribute orthopedic shoes based
on
licensed patented technology. The accompanying consolidated financial statements
of the Company were prepared from the accounts of the Company and its wholly
owned subsidiary under the accrual basis of accounting.
In
April
2007, the Company commenced a capital formation activity through a Private
Placement Offering (the “PPO”), exempt from registration under the Securities
Act of 1933, to raise up to $1,058 through the issuance 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
the PPO and received proceeds of $1,000. The remaining $58 was received as
of
December 31, 2007.
On
November 27, 2007, the Company 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. The Company currently owns all 10,000
shares issued and outstanding, each valued at 0.01 New Israeli
Shekels.
In
addition, in July 2007, the Company began a capital formation activity through
a
PPO, 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 received $50,000 in proceeds from the PPO. In December
2007, the Company 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 went 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, the Company commenced a capital formation activity through
a PPO,
exempt from registration under the Securities Act of 1933, to raise up to
$225,000 through the issuance 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
consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, Cherry Tankers
Ltd. ("Subsidiary"), an Israeli corporation. All significant intercompany
accounts and transactions have been eliminated in consolidation.
CHERRY
TANKERS INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
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
The
Company is in the development stage and has yet to realize revenues from
operations. Once the Company has commenced 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. Fully 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
for
the period ended December 31, 2007.
Income Taxes
The
Company 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.
The
Company establishes a valuation allowance based upon the potential likelihood
of
realizing the deferred tax asset, and 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 the Federal tax
laws.
Changes
in circumstances, such as the Company 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.
CHERRY
TANKERS INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
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 the Company could realize in a current market
exchange. As of December 31, 2007, the carrying value of accounts payable
and
accrued liabilities 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, 2007, the Company 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 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
consolidated financial statements are prepared 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,
2007,
and expenses for the period ended December 31, 2007, and cumulative from
inception. Actual results could differ from those estimates made by
management.
CHERRY
TANKERS INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
2.
Development
Stage Activities and Going Concern
The
Company is currently in the development stage, and has not commenced operations.
The business plan of the Company is to manufacture, market, and distribute
orthopedic shoes that will alleviate the back, knee, and hip pain resulting
from
walking abnormalities.
During
the period ended December 31, 2007, the Company 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,
2007, the Company had raised $276,058 in proceeds from the PPO’s. The Company
has 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 went effective with the SEC on January
10,
2008. No proceeds will be received by the Company from the sale of common
stock
by selling 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. The Company
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, 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 a PPO exempt
from registration under the Securities Act of 1933, to raise up to $1,058
through the issuance 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 the PPO and received proceeds
of
$1,000. The remaining $58 was received as of December 31, 2007.
In
addition, in July 2007, the Board of Directors of the Company resolved a
PPO,
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 the PPO, closed the PPO, and received
a
total of $50,000 in proceeds.
In
December 2007, the Company commenced a capital formation activity through
a
Private Placement Offering (the “PPO”), exempt from registration under the
Securities Act of 1933, to raise up to $225,000 through the issuance 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.
CHERRY
TANKERS INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
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 went 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 period ended December 31, 2007,
is
as follows (assuming a 23% effective tax rate):
| |
|
Period
Ended
|
|
Cumulative
|
|
| |
|
December
31,
|
|
From
|
|
| |
|
2007
|
|
Inception
|
|
| |
|
|
|
|
|
|
Current
Tax Provision:
|
|
|
|
|
|
|
|
|
Federal
and state-
|
|
|
|
|
|
|
|
|
Taxable
income
|
|
$
|
-
|
|
$
|
-
|
|
| |
|
|
|
|
|
|
|
|
Total
current tax provision
|
|
$
|
-
|
|
$
|
-
|
|
| |
|
|
|
|
|
|
|
|
Deferred
Tax Provision:
|
|
|
|
|
|
|
|
|
Federal
and state-
|
|
|
|
|
|
|
|
|
Loss
carryforwards
|
|
$
|
16,095
|
|
$
|
16,095
|
|
|
Change
in valuation allowance
|
|
|
(16,095
|
)
|
|
(16,095
|
)
|
| |
|
|
|
|
|
|
|
|
Total
deferred tax provision
|
|
$
|
-
|
|
$
|
-
|
|
The
Company had deferred income tax assets as of December 31, 2007, as
follows:
| |
|
2007
|
|
| |
|
|
|
|
Loss
carryforwards
|
|
$
|
16,095
|
|
|
Less
- Valuation allowance
|
|
|
(16,095
|
)
|
| |
|
|
|
|
|
Total
net deferred tax assets
|
|
$
|
-
|
|
The
Company provided a valuation allowance equal to the deferred income tax assets
for the period ended December 31, 2007, because it is not presently known
whether future taxable income will be sufficient to utilize the loss
carryforwards.
As
of
December 31, 2007, the Company had $69,978 in tax loss carryforwards that
can be
utilized in future periods to reduce taxable income, and expire in the year
2027.
CHERRY
TANKERS INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
5. Patent
Licensing Agreement
On
November 27, 2007, the Company entered into a patent licensing agreement
(the
“Patent Licensing Agreement”) with its wholly owned subsidiary Cherry Tankers,
Ltd. (the “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 up to $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 (the “Patent Licensing Agreement”) with its Subsidiary. The
Patent Licensing Agreement grants the Company 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 up to $150,000, which will be paid in installments, described as follows.
|
Installment
#1 February 1, 2008
|
|
$
|
20,000
|
|
|
Installment
#2 April 1, 2008
|
|
|
50,000
|
|
|
Installment
#3 June 1, 2008
|
|
|
50,000
|
|
|
Installment
#4 September 1, 2008
|
|
|
30,000
|
|
| |
|
|
|
|
| |
|
$
|
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 the Company 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.
CHERRY
TANKERS INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
8.
Related
Party Transactions
As
discussed in Note 5, the Subsidiary purchased the right, title, and interest
of
the Technology for $1 from a shareholder of the Company.
9.
Recent
Accounting Pronouncements
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157, “Fair
Value Measurements”
(“SFAS
No. 157). This statement defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles, and expands
disclosure about fair value measurements. This statement applies under other
accounting pronouncements that require or permit fair value measurement,
the
FASB having previously concluded in those accounting pronouncement that fair
value is the relevant measurement attribute. This statement does not require
any
new fair value measurements. However, for some entities, the application
of the
statement will change current practice. This statement is effective for
financial statements issued for fiscal years beginning after November 15,
2007,
and interim periods within those fiscal years. The management of the Company
does not expect the adoption of this pronouncement to have a material impact
on
its financial statements.
In
September 2006, the FASB issued SFAS No. 158, “Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans - an
amendment of FASB Statements No. 87, 88, 106, and 132(R).”
This
statement improves financial reporting by requiring an employer to recognize
the
overfunded or underfunded status of a defined benefit postretirement plan
(other
than a multi-employer plan) as an asset or liability in its statement of
financial position and to recognize changes in that funded status in the
year in
which the changes occur through comprehensive income of a business entity
or
changes in unrestricted net assets of a not-for-profit organization. This
statement also improves financial reporting by requiring an employer to measure
the funded status of a plan as of the date of its year-end statement of
financial position, with limited exceptions. The requirement to measure plan
assets and benefit obligations as of the date of the employer’s fiscal year-end
statement of financial position is effective for fiscal years ending after
December 15, 2008. The management of the Company does not expect the adoption
of
this pronouncement to have a material impact on its financial
statements.
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 choose 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 with 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 it is applied only to
entire
instruments and 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 expect the adoption of this pronouncement
to have a material impact on its financial statements.
CHERRY
TANKERS INC. AND SUBSIDIARY
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER
31, 2007
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 recognized 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 purchases 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 that 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 Company
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’s interest
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 it 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 the Company does
not
expect the adoption of this pronouncement to have a material impact on its
financial statements.
Item
8. 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 accountants on accounting and financial
disclosure or any other matter.
Item
8A. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
This
Annual Report does not include a report of management’s assessment regarding
internal control over financial reporting or an attestation report of the
Company’s registered public accounting firm due to a transition period
established by rules of the Securities and Exchange Commission for newly
public
companies.
Changes
in Internal Controls over Financial Reporting
There
have been no changes in the Company’s internal control over financial reporting
during the last quarterly period covered by this report that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.
Item
8B. Other Information.
None.
PART
III
Item
9. 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
|
58
|
President,
Chief Executive Officer and Director
|
|
Ms.
Yael Alush
78
Sokolov St. Herzeliya, Israel
|
25
|
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 fiscal year ended December 31, 2007, all required reports
were filed.
Item
10. 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 fiscal year ended December 31, 2007, 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, 2007. We have no long-term incentive plans.
The
following table sets forth information concerning the compensation paid or
earned during the fiscal year ended December 31, 2007 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
($)
|
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Reuven Gepstein (1)
|
2007
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
Ms.
Yael Alush (2)
|
2007
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
(1)
Dr.
Reuven Gepstein has been our President, Chief Executive Officer and Director
since November 22, 2007.
(2)
Ms. Yael
Alush has been our Secretary, Treasurer and Director since November 22,
2007.
Outstanding
Equity Awards
As
of
December 31, 2007, none of our Directors or executive officers held unexercised
options, stock that had not vested, or equity incentive plan
awards.
Compensation
of Directors
No
compensation was paid to our Directors during the period from our inception
(March 30, 2007) to December 31, 2007.
The
following table sets forth information concerning the compensation paid to,
or
earned by our Directors during the fiscal year ended December 31, 2007.
|
DIRECTOR
COMPENSATION
|
|
Name
(a)
|
Fees
Earned or Paid in Cash
($)
(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
11. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters.
The
following table lists, as of January 23, 2008, 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 February 20, 2008. 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%
|
|
Lavi
Krasney
8
Paamoni Street
Tel
Aviv, 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
|
|
1,000,000
|
|
7.30%
|
|
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 1,000,000 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 1,000,000 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 1,000,000 shares owned by Sharone Perlstein, Ms. Yaron’s husband,
with respect to which Ms. Yaron disclaims beneficial ownership.
Item
12. 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.
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
13. Exhibits.
|
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
|
Item
14. Registered Independent Auditor Fees and Services.
(1)
AUDIT
FEES
The
aggregate fees billed for the period March 30, 2007 (inception) until December
31, 2007 for professional services rendered by our registered independent
auditor for the audit of our annual consolidated financial statements
included in our Form 10-KSB or services that are normally provided by our
registered independent auditor in connection with statutory and regulatory
filings or engagements for such period was $13,000.
(2)
AUDIT-RELATED FEES
The
aggregate fees billed for the period March 30, 2007 (inception) until December
31, 2007 for assurance and related services by our
registered independent auditor 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 period March 30, 2007 (inception) until December
31, 2007 for professional services rendered by our
registered independent auditor for tax compliance, tax advice, and tax
planning was $0.
(4)
ALL
OTHER FEES
The
aggregate fees billed for the period March 30, 2007 (inception) until December
31, 2007 for products and services provided by our
registered independent auditor, other than the services reported above
was $0.
(5)
PRE-APPROVAL POLICIES AND PROCEDURES
Before
our
registered independent auditor is engaged by us to render audit or
non-audit services, our
registered independent auditor is nominated and approved by our Board of
Directors.
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 26, 2008.
| |
|
|
| |
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
Reuven
Gepstein
|
|
President,
Chief Executive Officer, and Director
|
|
February
26, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Yael Alush
Yael
Alush
|
|
Secretary,
Treasurer and Director
|
|
February
26, 2008
|