BioCorRx Inc. - Annual Report: 2009 (Form 10-K)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
________________
FORM
10-K
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2009
Commission
File Number: 333-153381
_______________________________
CETRONE ENERGY
COMPANY
(Exact
name of registrant as specified in its charter)
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NEVADA
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26-1972677
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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11010 E. Boundary
Road
Elk,
WA 99009
(Address
of principal executive offices, including zip code)
(509)
435-2339
(Registrant's
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
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Title
of class
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Name
of each exchange on which registered
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None
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None
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Securities
registered pursuant to Section 12(g) of the Act:
None
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
405 of the Securities Act. Yes o No
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Exchange Act. Yes
x No
o
Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No
o
1
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of "large accelerated filer," "accelerated filer," and
"smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check
one):
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Large
accelerated filer o
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Accelerated
filer o
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Non-accelerated
filer o
(Do
not check if smaller reporting company)
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Smaller
Reporting Company x
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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
As of
April 13, 2010 no market price existed for voting and non-voting common equity
held by non-affiliates of the registrant.
As of
April 13, 2010, the Registrant had 2,252,150 outstanding shares of Common Stock
with a par value of $0.001 per share.
DOCUMENTS
INCORPORATED BY REFERENCE
None.
2
INDEX
CETRONE
ENERGY COMPANY
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PAGE
NO
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PART I
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ITEM 1.
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BUSINESS
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4
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ITEM 1A.
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RISK
FACTORS
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5
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ITEM 1B.
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UNRESOLVED
STAFF COMMENTS
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5
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ITEM 2.
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PROPERTIES
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5
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ITEM 3.
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LEGAL
PROCEEDINGS
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6
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ITEM 4.
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SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
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6
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PART II
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ITEM 5.
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MARKET
FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
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6
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ITEM 6.
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SELECTED
FINANCIAL DATA
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7
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ITEM 7.
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MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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7
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ITEM 7A.
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QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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9
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ITEM 8.
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FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
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9
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ITEM 9.
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CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
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9
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ITEM 9A(T).
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CONTROLS
AND PROCEDURES
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10
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ITEM 9B.
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OTHER
INFORMATION
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12
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PART III
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ITEM 10.
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DIRECTORS
AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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12
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ITEM 11.
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EXECUTIVE
COMPENSATION
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13
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ITEM 12.
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
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14
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ITEM 13.
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
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14
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ITEM 14.
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PRINCIPAL
ACCOUNTANT FEES AND SERVICES
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14
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PART IV
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ITEM 15.
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EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
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15
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SIGNATURES
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16
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3
PART
I.
Cautionary
Note
Actual results may vary materially
from those in such forward-looking statements as a result of various factors
that are identified in "Item 1A.—Risk Factors" and elsewhere in this
document. No assurance can be given that the risk factors described in this
Annual Report on Form 10-K are all of the factors that could cause actual
results to vary materially from the forward-looking statements. All
forward-looking statements speak only as of the date of this Annual Report on
Form 10-K. These statements appear in a number of places and can be
identified by the use of forward-looking terminology such as "may," "will,"
"should," "expect," "plan," "anticipate," "believe," "estimate," "predict,"
"future," "intend," or "certain" or the negative of these terms or other
variations or comparable terminology, or by discussions of
strategy.
References
in this Annual Report on Form 10-K to (i) the "Company," the
"Registrant”, "Cetrone” "we," "our," “CEC,” and "us" refer to Cetrone
Energy Company.
Company
History
Cetrone
Energy Company Inc. is a Nevada Corporation; incorporated on January 28, 2008.
We are a development stage business and have not begun operations or generated
any revenue to date. CEC’s fiscal year end is December 31.
Cetrone
Energy has never declared bankruptcy, it has never been in receivership, and it
has never been involved in any legal action or proceedings. Since becoming
incorporated, Cetrone has not made any significant purchase or sale of assets,
nor has it been involved in any mergers, acquisitions or
consolidations. Cetrone has no subsidiaries or
predecessors.
Since our
inception, we have been engaged in business planning activities, including
researching the industry, developing our economic models and financial
forecasts, performing due diligence regarding potential geographic locations
most suitable for our products and identifying future sources of
capital.
We filed
a Post-Effective Amendment to our registration statement filed on Form S-1 on
August 12, 2009; this was deemed effective on August 13, 2009. As of
the date of this report we had sold approximately 152,150 common shares at a
price of $0.08 per share. On December 23, 2009 are common stock was
approved for quotation on the Over-the-Counter Bulletin Board under the ticker
symbol CEYY. As of the date of this report there has been no trading
activity for our common stock. Moreover, there can be no guarantee
that a market will ever be developed in the future for our common
stock.
Currently,
CEC has two Officers and Directors, Michael Cetrone and Armando Kiyoshi
Narita. Mr. Cetrone has assumed responsibility for all planning,
development and operational duties, and will continue to do so throughout the
beginning stages of the Company. Other than the Officers/Directors, there are no
employees at the present time and there are no plans to hire employees during
the next twelve months. The Company’s administrative office is located
at 11010 E. Boundary Road, Elk, WA 99009, and our telephone number is: (509)
435.2339.
Business
Development
We have
not conducted any revenue generating operations since our
inception. Our objective is to enter into the re-manufactured
bio-fuels industry. We anticipate that this industry will become more
and more completive over the course of the next twelve
months. Competitors within this market segment will more than likely
have superior financing and be better positioned than CEC.
4
CEC plans
to source raw materials needed for the remanufacture of bio-fuel domestically;
and then if and when, revenues allow we plan to produce our own bio-fuel in
small batches customized to meet the needs of specific clientele. If
and when we can establish clientele and subsequently increase revenue we plan to
produce larger quantities of bio-fuel as demand dictates within our market
segment. In order to begin generating bio-fuel CEC will be required
to source out raw materials including vegetable oil and petroleum
distillates. We currently have no contracts or agreements in place
with any supplier of the required raw materials and there can be no guarantee or
assurance that we will be capable of securing any such contract at favorable
terms in the future.
We
anticipate that profit margins will increase as batch size and storage limits
can be increased. We cannot guarantee however, that demand for our
product will ever increase. The vast majority of all agricultural
enterprises use distillate fuel oil in their operations. We believe
our intended product(s) could represent a cost effective environmental friendly
alternative to diesel fuel not only agricultural applications but also across
multiple market segments that rely on diesel fuel for their energy
needs.
We
anticipate that our largest target market will be agribusinesses. In
order to reach and grow within our market segment it is critical we establish
our bio-fuel products as reliable and available to potential customers. This
will require us to coordinate closely with third-party providers such as tanker
truck delivery services and potentially conversion services needed in order for
engines and machinery to effectively utilize our bio-fuel. It should
be noted that agribusiness is seasonally driven, as such during off seasons our
anticipated business would likely suffer and we cannot provide any assurance to
investors that we will be able to endure during these downtimes.
Compliance with Government
Regulation
If and
when we conduct operations we will be required to comply with all regulations,
rules and directives of governmental authorities and agencies applicable to the
manufacturing of alternative fuels, specifically bio-fuel in the United States.
Moreover, if we ever enter into production, we may have expenses to comply with
permit and regulatory environment laws both locally and federally.
Investors
and security holders may obtain a free copy of the Annual Report on Form10-K and
other documents filed by CEC with the Securities and Exchange Commission ("SEC")
at the SEC's website at http://www.sec.gov. Free copies of the Annual Report on
Form 10-K and other documents filed by Cetrone with the SEC may also be
obtained from Cetrone Energy Company by directing a request to Cetrone,
Attention: Michael Cetrone, President and Chief Executive Officer,
11010 E. Boundary Road Elk, WA 99009 Telephone: (509)
435.2339.
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ITEM
1A.
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RISK
FACTORS
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Not
Applicable
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ITEM
1B.
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UNRESOLVED
STAFF COMMENTS
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Not
Applicable
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ITEM
2.
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PROPERTIES
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Michael Cetrone,
officer and director, makes available his home office located at 11010 E.
Boundary Road, Elk, WA 99009- telephone (509) 435.2339 to the Company free of
charge. There are no arrangements by and between Mr. Cetrone and the
Company for use of the office space. The Company does not have
exclusive use of this office space; Mr. Cetrone also utilizes this space for
purposes other than those of the Company.
Cetrone’s
management does not currently have policies regarding the acquisition or sale of
real estate assets primarily for possible capital gain or primarily for income.
Cetrone does not presently hold any investments or interests in real
estate, investments in real estate mortgages or securities of or interests in
persons primarily engaged in real estate activities.
5
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ITEM
3.
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LEGAL
PROCEEDINGS
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Cetrone
Energy Company is not currently a party to any legal proceedings. Cetrone Energy
Company agent for service of process in Nevada is: InCorp Services
Inc., 3155 East Patrick Lane, Suite 1, Las Vegas, NV 89120 – Telephone (702)
866-2500
CEC’s
officers and directors have not been convicted in a criminal proceeding nor have
they been permanently or temporarily enjoined, barred, suspended or otherwise
limited from involvement in any type of business, securities or banking
activities.
Mr.
Cetrone and Mr. Narita, the Company’s officers and directors have not been
convicted of violating any federal or state securities or commodities law. There
are no known pending legal or administrative proceedings against the
Company.
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ITEM
4.
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SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
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None.
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MARKET
FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
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As of
date of this annual report the Company has 2,252,150 common shares issued and
outstanding. There is currently no market for Cetrone’s common stock
and there can be no assurance that a market will ever develop in the
future.
Sales of Unregistered
Securities. We have sold securities within the past three years without
registering the securities under the Securities Act of 1933 on two separate
occasions.
On March
7, 2008, the Company issued 2,000,000 common shares to Michael Cetrone,
Officer/Director, for total consideration of $2,000. The Company
believes that this issuance was exempt from registration pursuant to Section
4(2) of the Securities Act of 1933, as amended, as a transaction by an issuer
not involving any public offering.
On March
7, the Company issued 100,000 shares of its common stock to Jameson Capital, LLC
for services valued at $1,000. The Company believes that this issuance was
exempt from registration pursuant to Section 4(2) of the Securities Act of 1933,
as amended, as a transaction by an issuer not involving any public
offering.
Sales of Registered
Securities. As of the date of this annual report the Company
has sold pursuant to its effective prospectus filed on Form S-1 and subsequent
Post-Effective Amendment thereto approximately 152,150 common shares to
thirty-seven individual investors.
Issuer Purchases of Equity
Securities. None during the Fiscal Year 2009.
Holders. There
were approximately thirty-nine shareholders of our common stock as of the date
of this annual report.
Dividends. We did not
declare or pay dividends during the Fiscal Year 2009 and do not anticipate
declaring or paying dividends in fiscal year 2010.
Securities Authorized for Issuance
under Equity Compensation Plans. The Company has no Equity Compensation
Plan.
6
Summary of Financial
Data
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As
of December 31, 2009
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||||
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Revenues
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$
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0
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Operating
Expenses
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$
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(18,218)
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Earnings
(Loss)
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$
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(18,218)
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Total
Assets
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$
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8,156
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Liabilities
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$
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11,202
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Stockholders’
Equity
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$
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(8,156)
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The
following discussion is intended to assist in the understanding and assessment
of significant changes and trends related to the results of operations and
financial condition of Cetrone Energy Company. This discussion and analysis
should be read in conjunction with our financial statements and notes thereto
included elsewhere in this Annual Report on Form 10-K for the fiscal year
ended December 31, 2009.
Cautionary
Statement
Except
for the historical information contained herein, the matters discussed should be
considered forward-looking statements and readers are cautioned not to place
undue reliance on those statements. The forward-looking statements in this
discussion are made based on information available as of the date hereof and are
subject to a number of risks and uncertainties that could cause the Company's
actual results and financial position to differ materially from those expressed
or implied in the forward-looking statements and to be below the expectations of
public market analysts and investors. The Company undertakes no obligation to
publicly release the results of any revisions to these forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events, except as required by applicable
laws and regulations.
Recently
Adopted Accounting Standards:
In June
2009, the Financial Accounting Standards Board (FASB) issued a standard that
established the FASB Accounting Standards Codification ™ (ASC) and amended the
hierarchy of generally accepted accounting principles (GAAP) such that the ASC
became the single source of authoritative nongovernmental U.S. GAAP. The ASC did
not change current U.S. GAAP, but was intended to simplify user access to all
authoritative U.S. GAAP by providing all the authoritative literature related to
a particular topic in one place. All previously existing accounting standard
documents were superseded and all other accounting literature not included in
the ASC is considered non-authoritative. New accounting standards issued
subsequent to June 30, 2009 are communicated by the FASB through Accounting
Standards Updates (ASUs). For the Company, the ASC was effective July 1, 2009.
This standard did not have an impact on the Company’s consolidated results of
operations or financial condition. However, throughout the notes to the
consolidated financial statements references that were previously made to
various former authoritative U.S. GAAP pronouncements have been changed to
coincide with the appropriate section of the ASC.
7
In April
2009, the FASB issued an accounting standard which provides guidance on (1)
estimating the fair value of an asset or liability when the volume and level of
activity for the asset or liability have significantly declined and (2)
identifying transactions that are not orderly. The standard also amended certain
disclosure provisions for fair value measurements and disclosures in ASC 820 to
require, among other things, disclosures in interim periods of the inputs and
valuation techniques used to measure fair value as well as disclosure of the
hierarchy of the source of underlying fair value information on a disaggregated
basis by specific major category of investment. For the Company, this standard
was effective prospectively beginning April 1, 2009. The adoption of this
standard did not have a material impact on the Company‘s consolidated results of
operations or financial condition.
In May
2009, the FASB issued a new accounting standard regarding subsequent events.
This standard incorporates into authoritative accounting literature certain
guidance that already existed within generally accepted auditing standards, with
the requirements concerning recognition and disclosure of subsequent events
remaining essentially unchanged. This guidance addresses events which occur
after the balance sheet date but before the issuance of financial statements.
Under the new standard, as under previous practice, an entity must record the
effects of subsequent events that provide evidence about conditions that existed
at the balance sheet date and must disclose but not record the effects of
subsequent events which provide evidence about conditions that did not exist at
the balance sheet date. This standard added no additional required disclosure
relative to the date through which subsequent events have been evaluated. For
the Company, this standard was effective beginning April 1, 2009.
Executive
Overview
Fiscal
Year 2009 the focus of the Company was primarily on maintaining its reporting
requirements with the SEC and preparing and filing the post-effective amendment
to the registration statement on Form S-1 in order to register 1,900,000 common
shares to be sold as a direct offering to the public at a price of $0.08 per
share to fund the anticipated business developments. As of the date
of this annual report the Company had sold approximately 152,150 shares of
common stock through the offering. Management intends to focus on
raising additional funds for the first and second quarters of
2010.
If the
Company is unsuccessful in raising additional proceeds the business would likely
fail and any investment made into the Company would be lost in its
entirety.
Fiscal
2009
Liquidity. As of December 31,
2009, the Company had $5,656 of cash on hand. The Company will be
required to raise additional funds in order to continue its
business. Management plans to focus efforts on raising these required
funds over the course of the next two quarters of 2010.
The
Company has not generated any revenues. From inception to December
31, 2009 the only cash proceeds received by the Company have been approximately
$14,352 through the sale of its common stock.
Capital Resources. We will
require significant amounts of working capital to begin our business operations
described herein and to pay expenses relating to maintaining the status of a
reporting company including legal, accounting and filing fees. We
currently have $5,656 of cash available. In order to maintain our
status as a going concern we must raise additional proceeds of $25,000 over the
course of the next twelve months in order to cover expenses related to
maintaining its status as a reporting company (legal, auditing, and filing fees)
estimated at $20,000 and $5,000 to cover administrative costs. There
is no assurance we will receive the required financing to complete our business
strategies. Even if we are successful in raising proceeds from the
offering we have no assurance that future financing will be available to us
on acceptable terms. If financing is not available on satisfactory terms,
we may be unable to continue, develop or expand our
operations. If we are unable to accomplish raising adequate funds
then any it would be likely that any investment made into the Company would be
lost in its entirety.
8
Results of
Operations. The Company has not begun operations and to date
has only been engaged in business planning activities, including researching the
industry, developing our economic models and financial forecasts, performing due
diligence regarding potential geographic locations most suitable for our
products and identifying future sources of capital. There can be no
guarantee that the business will ever begin operations or generate revenue and
if it does a complete loss of any investment made into the Company would be
realized.
Off-Balance Sheet Arrangements.
None
|
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
|
There is
no market for our common stock. We do not currently hold any market risk
sensitive instruments entered into for hedging transaction risks related to
foreign currencies. In addition, we have not entered into any
transactions with derivative financial instruments for trading
purposes.
Our
financial statements appear beginning on page F-2, immediately following the
signature page of this report.
On
November 5, 2009, Board of Directors of the Registrant dismissed The Blackwing
Group, LLC, its independent registered public account firm. On the
same date, November 5, 2009, the accounting firm of Kyle L. Tingle CPA, LLC was
engaged as the Registrant's new independent registered public account firm. The
Board of Directors of the Registrant and the Registrant's Audit Committee
approved of the dismissal of The Blackwing Group, LLC and the engagement of Kyle
L. Tingle, CPA, LLC as its independent auditor. None of the reports
of The Blackwing Group, LLC on the Company's financial statements for either of
the past two years or subsequent interim period contained an adverse opinion or
disclaimer of opinion, or was qualified or modified as to uncertainty, audit
scope or accounting principles, except that the Registrant's audited financial
statements contained in its Form 10-K for the fiscal year ended December 31,
2008 a going concern qualification in the registrant's audited financial
statements.
During
the registrant's two most recent fiscal years and the subsequent interim periods
thereto, there were no disagreements with The Blackwing Group, LLC whether or
not resolved, on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which, if not resolved to
The Blackwing Group, LLC 's satisfaction, would have caused it to make reference
to the subject matter of the disagreement in connection with its report on the
registrant's financial statements, nor were there any up to and including the
time of dismissal on November 5, 2009.
9
Disclosure
Controls and Procedures
Management
of Cetrone Energy Company is responsible for maintaining disclosure controls and
procedures that are designed to ensure that information required to be disclosed
in the reports that the Company files or submits under the Securities Exchange
Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission’s
rules and forms.
In addition, the
disclosure controls and procedures must ensure that such information is
accumulated and communicated to the Company’s management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required financial and other required
disclosures.
At the
end of the period covered by this report, an evaluation of the effectiveness of
our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and
15(d)-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) was
carried out under the supervision and with the participation of our Principal
Executive Officer, Principal Financial and Accounting Officer, Michael Cetrone.
Based on his evaluation of our disclosure controls and procedures, he concluded
that during the period covered by this report, such disclosure controls and
procedures were not effective. For details of the specific areas that
management identified as problems leading to the ineffectiveness of control and
procedures see “Management’s
Annual Report on Internal Control over Financial Reporting”
below.
Cetrone
plan to continue to create and refine a structure in which critical accounting
policies and estimates are identified, and together with other complex areas,
are subject to multiple reviews by accounting personnel. In addition, Cetrone
will enhance and test our year-end financial close process. Additionally,
Cetrone’s audit committee will increase its review of our disclosure controls
and procedures. Finally, we plan to designated individuals responsible for
identifying reportable developments. We believe these actions will remediate the
material weakness by focusing additional attention and resources in our internal
accounting functions. However, the material weakness will not be considered
remediated until the applicable remedial controls operate for a sufficient
period of time and management has concluded, through testing, that these
controls are operating effectively.
Management’s
Annual Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act, for the company.
Internal
control over financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of our assets;
(2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of its management and directors; and (3)
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because changes in conditions may occur or the degree of compliance
with the policies or procedures may deteriorate.
Management
assessed the effectiveness of our internal control over financial reporting as
of December 31, 2009. This assessment is based on the criteria for
effective internal control described in Internal Control — Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on its assessment, management concluded that our internal control over
financial reporting as of December 31, 2009 was not
effective.
10
As of
December 31, 2009 the Principal Executive Officer/Principal Financial
Officer identified the following specific material weaknesses in the Company’s
internal controls over its financial reporting processes:
•
Policies and Procedures for the Financial Close and Reporting Process —
Currently there are no policies or procedures that clearly define the roles in
the financial close and reporting process. The various roles and
responsibilities related to this process should be defined, documented, updated
and communicated. Failure to have such policies and procedures in place amounts
to a material weakness to the Company’s internal controls over its financial
reporting processes.
•
Representative with Financial Expertise — For the year ending December 31,
2009, the Company did not have a representative with the requisite knowledge and
expertise to review the financial statements and disclosures at a sufficient
level to monitor the financial statements and disclosures of the Company.
Failure to have a representative with such knowledge and expertise amounts to a
material weakness to the Company’s internal controls over its financial
reporting processes.
•
Adequacy of Accounting Systems at Meeting Company Needs — The accounting system
in place at the time of the assessment lacks the ability to provide high quality
financial statements from within the system, and there were no procedures in
place or built into the system to ensure that all relevant information is
secure, identified, captured, processed, and reported within the accounting
system. Failure to have an adequate accounting system with procedures to ensure
the information is secure and accurately recorded and reported amounts to a
material weakness to the Company’s internal controls over its financial
reporting processes.
•
Segregation of Duties — Management has identified a significant general lack of
definition and segregation of duties throughout the financial reporting
processes. Due to the pervasive nature of this issue, the lack of adequate
definition and segregation of duties amounts to a material weakness to the
Company’s internal controls over its financial reporting processes.
•
Lack of Audit Committee and Outside Directors in the Company’s Board of
Directors - We do not have a functioning audit committee or outside directors on
our board of directors, resulting in ineffective oversight in the establishment
and monitoring of required internal controls and procedures.
In light
of the foregoing, once we have the adequate funds, management plans to develop
the following additional procedures to help address these material
weaknesses:
• Cetrone
will create and refine a structure in which critical accounting policies and
estimates are identified, and together with other complex areas, are subject to
multiple reviews by accounting personnel. In addition, we plan to enhance and
test our month-end and year-end financial close process. Additionally, our audit
committee will increase its review of our disclosure controls and procedures. We
also intend to develop and implement policies and procedures for the financial
close and reporting process, such as identifying the roles, responsibilities,
methodologies, and review/approval process. We believe these actions will
remediate the material weaknesses by focusing additional attention and resources
in our internal accounting functions. However, the material weaknesses will not
be considered remediated until the applicable remedial controls operate for a
sufficient period of time and management has concluded, through testing, that
these controls are operating effectively.
This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management’s report in this annual
report.
This
report shall not be deemed to be filed for purposes of Section 18 of the
Securities Exchange Act of 1934, or otherwise subject to the liabilities of
that section , and is not incorporated by reference into any filing of the
Company, whether made before or after the date hereof, regardless of any general
incorporation language in such filing.
11
Changes
in Internal Controls
There
have been no changes in our internal control over financial reporting that
occurred during our fiscal quarter ended December 31, 2009 that have
materially affected, or are reasonable likely to materially affect, our internal
control over financial reporting.
|
ITEM
9B.
|
OTHER
INFORMATION.
|
None.
PART
III
Cetrone
Energy Company executive officer and director and respective age as of December
31, 2009 are as follows:
Director:
|
Name of Director
|
Age
|
Period of Service
|
|
|
Michael
Cetrone
|
46
|
Since
January 28, 2008
|
|
|
Armando
Kiyoshi Narita
|
55
|
Since
November 2009
|
Executive
Officer:
|
Name of Officer
|
Age
|
Office
|
|
|
Michael
Cetrone
|
46
|
President,
Treasurer, Principal Executive Officer, Principal Financial
Officer, and Principal Accounting Officer
|
|
|
Armando
Kiyoshi Narita
|
55
|
Secretary
|
The term
of office for each director is one year, or until the next annual meeting of the
shareholders.
Biographical
Information
Set forth
below is a brief description of the background and business experience of our
executive officer and director for the past five years
Michael Cetrone,
Officer and Director.
Currently,
Mr. Cetrone is involved in the agricultural industry and has been for the past 5
years. Mr. Cetrone owns and operates his own farm in Elk,
Washington. In addition, during this period Mr. Cetrone has conducted
his own personal research into the development and use of bio-fuel for
applications relating to his own farming operations. Prior to his
farming operations Mr. Cetrone’s employments have generally been focused in
facility management operations.
Mr.
Cetrone anticipates spending at a minimum 10 hours per week on the development
of Cetrone Energy Company at no cost to the Company.
12
Armando
Kiyoshi Narita, Officer and Director
Mr.
Narita is 55 years of age and within the past five years he has been involved
with financial business management including his employment from 1989 to 2006
with Daicolor do Brasil Industria e Comércio Ltda, as Accountant and Financial
Manager. Currently he works part-time as accountant with Narita
Design.
There is
no family relationship between Mr. Narita and any director, executive officer,
or person nominated or chosen by the Company to become a director or executive
officer.
Cetrone
Energy Company’s Officers and Directors have not been involved, during the past
five years, in any bankruptcy proceeding, conviction or criminal proceedings;
has not been subject to any order, judgment, or decree, not subsequently
reversed or suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; and
has not been found by a court of competent jurisdiction, the Commission or the
Commodity Futures trading Commission to have violated a federal or state
securities or commodities law.
Corporate
Governance
Code of Ethics. We have
adopted a Code of Ethics for our principal executive and financial officer,
Michael Cetrone. Our Code of Ethics was filed as an Exhibit to the
2008 Annual Report.
Nominating Committee. We have
not established a Nominating Committee because of our limited operations; and
because we have only one director/officer, we believe that we are able to
effectively manage the issues normally considered by a Nominating
Committee.
Audit Committee. We have has
not established an Audit Committee because of our limited operations; and
because we have only one director and two officers, we believe that we are able
to effectively manage the issues normally considered by a Audit
Committee
|
ITEM
11.
|
EXECUTIVE
COMPENSATION.
|
Summary Compensation
Table
|
Name
and principal position
|
Fiscal
Year
|
Salary
|
Bonus
|
Other
annual compensation
|
Restricted
stock
award(s)
|
Securities
underlying
options/
SARs
|
LTIP
payouts
|
All
other
compensation
|
||||||||
|
Michael
Cetrone
Director,
President
|
2008
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
||||||||
|
2009
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||
|
Armando
K. Narita
Secretary/Director
|
2009
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
There has
been no cash payment paid to the executive officers for services rendered in all
capacities to us for the period ended December 31, 2009. There has been no
compensation awarded to, earned by, or paid to the executive officer by any
person for services rendered in all capacities to us for the fiscal period ended
December 31, 2009. No compensation is anticipated within the next six
months to any officer or director of the Company.
Stock Option
Grants
Cetrone
did not grant any stock options to the executive officer during the most recent
fiscal period ended December 31, 2009. Cetrone has also not granted
any stock options to the executive officer of the Company.
13
The
following table provides the names and addresses of each person known to Cetrone
to own more than 5% of the outstanding common stock as of December 31, 2009 and
by the officers and directors, individually and as a group. Except as otherwise
indicated, all shares are owned directly.
|
Title
of class
|
Name
and address
of
beneficial owner
|
Amount
of
beneficial
ownership
|
Percent
of
class
|
|||
|
Common
Stock
|
*Michael
Cetrone
11010
E. Boundary Road, Elk, WA 99009
|
2,000,000
shares
|
89%
|
*Officer
and Director.
The
percent of class is based on 2,252,150 shares of common stock issued and
outstanding as of December 31, 2009.
Changes in Control. There are
known arrangement known to the Company involving any pledge by any person of
securities of the Company’s common stock to effective a change of control of the
Company.
During
Fiscal Year 2009, there were no material transactions between the Company and
any Officer, Director or related party and the Company described herein, none of
the following parties has, since the date of incorporation, had any material
interest, direct or indirect, in any transaction with us or in any presently
proposed transaction that has or will materially affect us:
-The
Officers and Directors;
-Any
person proposed as a nominee for election as a director;
-Any
person who beneficially owns, directly or indirectly, shares carrying more than
5% of the voting rights attached to the outstanding shares of common
stock;
-Any
relative or spouse of any of the foregoing persons who have the same house as
such person.
Any
future transactions between us and our Officers, Directors, and Affiliates will
be on terms no less favorable to us than can be obtained from unaffiliated third
parties. Such transactions with such persons will be subject to approval of our
Board of Directors.
As of
December 31, 2009 the Company has incurred auditing expenses of approximately
$5,850 which includes bookkeeping and auditing services. There were
no other audit related services or tax fees incurred.
14
PART
IV
|
(a)
|
The
following documents have been filed as a part of this Annual Report on
Form 10-K.
|
|
1.
|
Financial
Statements- Year end 2009
|
|
Page
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
|
Balance
Sheets
|
F-2
|
|
Statements
of Operations
|
F-3
|
|
Statements
of Cash Flows
|
F-4
|
|
Statements
of Stockholders' Equity
|
F-5
|
|
Notes
to Financial Statements
|
F-6-12
|
|
2.
|
Financial
Statement Schedules.
|
All
schedules are omitted because they are not applicable or not required or because
the required information is included in the Financial Statements or the Notes
thereto.
|
3.
|
Exhibits.
|
The
following exhibits are filed as part of, or incorporated by reference into, this
Annual Report:
EXHIBIT
|
NUMBER
|
DESCRIPTION
|
|
31.1
|
Certifications
of Chief Executive Officer and Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of
2002
|
|
32.1
|
Certifications
of Chief Executive Officer and Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of
2002
|
15
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
CETRONE
ENERGY COMPANY
|
||
|
By:
|
/s/
Michael Cetrone
|
|
|
Michael
Cetrone
|
||
|
President
|
||
|
Chief
Executive Officer
|
||
|
Chief
Financial Officer
|
||
|
Chief
Accounting Officer
|
||
|
Director
|
||
|
Date:
April 13, 2010
|
||
16
Report of Independent
Registered Public Accounting Firm
To the
Board of Directors
Cetrone
Energy Company
We have
audited the accompanying balance sheets of Cetrone Energy Company (A Development
Stage Enterprise) as of December 31, 2009 and 2008 and the related statements of
operations, stockholders’ deficit, and cash flows for the years then ended and
the period January 28, 2008 (inception) through December 31,
2009. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. 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 financial statements. An
audit also includes assessing the accounting
principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Cetrone Energy Company (A
Development Stage Enterprise) as of December 31, 2009 and 2008 and the results
of its operations and cash flows for the years then ended and the period January
28, 2008 (inception) through December 31, 2009, in conformity with U.S.
generally accepted accounting principles.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has limited operations and has no established source of
revenue. This raises substantial doubt about its ability to continue
as a going concern. Management’s plan in regard to these matters is also
described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Kyle L.
Tingle, CPA, LLC
April 5, 2010
Las Vegas, Nevada
F-1
|
(A
Development Stage Enterprise)
|
||||||||
|
BALANCE
SHEETS
|
||||||||
|
December
31
|
December
31
|
|||||||
|
2009
|
2008
|
|||||||
|
ASSETS
|
||||||||
|
CURRENT
ASSETS
|
||||||||
|
Cash
|
$ | 5,656 | $ | 3,296 | ||||
|
Prepaid
expenses
|
2,500 | - | ||||||
|
Total
Current Assets
|
8,156 | 3,296 | ||||||
|
TOTAL
ASSETS
|
$ | 8,156 | $ | 3,296 | ||||
|
LIABILITIES
AND STOCKHOLDERS' (DEFICIT) EQUITY
|
||||||||
|
CURRENT
LIABILITIES
|
||||||||
|
Accounts
payable
|
$ | 10,922 | $ | 2,975 | ||||
|
Note
payable - related party
|
100 | 100 | ||||||
|
Note
payable
|
180 | 180 | ||||||
|
Total
Current Liabilities
|
11,202 | 3,255 | ||||||
|
COMMITMENTS
AND CONTINGENCIES
|
- | - | ||||||
|
STOCKHOLDERS'
(DEFICIT) EQUITY
|
||||||||
|
Common
stock, $0.001 par value; 50,000,000 shares
|
||||||||
|
authorized,
2,252,150 and 2,125,775 shares issued
|
||||||||
|
and
outstanding, respectively
|
2,252 | 2,126 | ||||||
|
Additional
paid-in capital
|
12,920 | 2,936 | ||||||
|
Accumulated
deficit
|
(18,218 | ) | (5,021 | ) | ||||
|
Total
Stockholders' (Deficit) Equity
|
(3,046 | ) | 41 | |||||
|
TOTAL
LIABILITIES AND
|
||||||||
|
STOCKHOLDERS'
(DEFICIT) EQUITY
|
$ | 8,156 | $ | 3,296 | ||||
| - | - | |||||||
F-2
|
(A
Development Stage Enterprise)
|
||||||||||||
|
STATEMENTS
OF OPERATIONS
|
||||||||||||
|
Period
from
|
||||||||||||
|
Year
|
Year
|
January
28, 2008
|
||||||||||
|
Ended
|
Ended
|
(Inception)
to
|
||||||||||
|
December
31,
|
December
31,
|
December
31,
|
||||||||||
|
2009
|
2008
|
2009
|
||||||||||
|
REVENUES
|
$ | - | $ | - | $ | - | ||||||
|
OPERATING
EXPENSES
|
||||||||||||
|
Consulting
|
524 | 2,000 | 2,524 | |||||||||
|
Professional
fees
|
7,525 | 2,150 | 9,675 | |||||||||
|
General
and administrative expenses
|
5,148 | 871 | 6,019 | |||||||||
|
Total
operating expenses
|
13,197 | 5,021 | 18,218 | |||||||||
|
LOSS
FROM OPERATIONS
|
(13,197 | ) | (5,021 | ) | (18,218 | ) | ||||||
|
OTHER
INCOME (EXPENSES)
|
||||||||||||
|
Other
income
|
- | - | - | |||||||||
|
Interest
income
|
- | - | - | |||||||||
|
TOTAL
OTHER INCOME (EXPENSES)
|
- | - | - | |||||||||
|
LOSS
BEFORE TAXES
|
(13,197 | ) | (5,021 | ) | (18,218 | ) | ||||||
|
INCOME
TAX EXPENSE
|
- | |||||||||||
|
NET
LOSS
|
$ | (13,197 | ) | $ | (5,021 | ) | $ | (18,218 | ) | |||
|
NET
LOSS PER COMMON SHARE,
|
||||||||||||
|
BASIC
AND DILUTED
|
$ | (0.01 | ) | $ | (0.00 | ) | ||||||
|
WEIGHTED
AVERAGE NUMBER
|
||||||||||||
|
OF
COMMON SHARES OUTSTANDING,
|
||||||||||||
|
BASIC
AND DILUTED
|
2,146,868 | 2,103,335 | ||||||||||
F-3
|
CETRONE
ENERGY COMPANY
|
||||||||||||
|
(A
Development Stage Enterprise)
|
||||||||||||
|
STATEMENTS
OF CASH FLOWS
|
||||||||||||
|
Period
from
|
||||||||||||
|
January
28, 2008
|
||||||||||||
|
Year
Ended
|
Year
Ended
|
Through
|
||||||||||
|
December
31,
|
December
31,
|
December
31,
|
||||||||||
|
2009
|
2008
|
2009
|
||||||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||||
|
Net
(loss)
|
$ | (13,197 | ) | $ | (5,021 | ) | $ | (18,218 | ) | |||
|
Common
stock issued for services
|
- | 1,000 | 1,000 | |||||||||
|
Adjustments
to reconcile net loss to net cash
|
- | |||||||||||
|
(used)
by operating activities:
|
- | |||||||||||
|
(Increase)
in prepaid expenses
|
(2,500 | ) | (2,500 | ) | ||||||||
|
Increase
in accounts payable
|
7,947 | 2,975 | 10,922 | |||||||||
|
Net
cash (used) by operating activities
|
(7,750 | ) | (1,046 | ) | (8,796 | ) | ||||||
|
CASH
FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
|
||||||||||||
|
Net
cash provided by (used in) by investing activities
|
- | - | - | |||||||||
|
CASH
FLOWS PROVIDED BY FINANCING ACTIVITIES:
|
||||||||||||
|
Proceeds
from sale of common stock
|
10,110 | 4,062 | 14,352 | |||||||||
|
Proceeds
from note payable - related party
|
- | 100 | 100 | |||||||||
|
Proceeds
from note payable
|
180 | - | ||||||||||
|
Net
cash provided by financing activities
|
10,110 | 4,342 | 14,452 | |||||||||
|
Net
increase in cash and cash equivalents
|
2,360 | 3,296 | 5,656 | |||||||||
|
Cash
at beginning of period
|
3,296 | - | - | |||||||||
|
Cash
at end of period
|
$ | 5,656 | $ | 3,296 | $ | 5,656 | ||||||
| - | ||||||||||||
|
SUPPLEMENTAL
CASH FLOW DISCLOSURES:
|
||||||||||||
|
Income
taxes paid
|
$ | - | $ | - | $ | - | ||||||
|
Interest
paid
|
$ | - | $ | - | $ | - | ||||||
F-4
|
CETRONE
ENERGY COMPANY
|
||||||||||||||||||||
|
(A
Development Stage Enterprise)
|
||||||||||||||||||||
|
STATEMENT
OF STOCKHOLDERS' (DEFICIT) EQUITY
|
||||||||||||||||||||
|
Additional
|
Total
|
|||||||||||||||||||
|
Common
Stock
|
Paid-in
|
Accumulated
|
Stockholders'
|
|||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
(Deficit)
|
||||||||||||||||
|
Common
stock issued for cash
|
||||||||||||||||||||
|
at
$0.001 per share
|
2,000,000 | $ | 2,000 | $ | - | $ | - | $ | 2,000 | |||||||||||
|
Common
Stock for services
|
||||||||||||||||||||
|
at
$0.01 per share
|
200,000 | 200 | 1,800 | - | 2,000 | |||||||||||||||
|
Cancellation
of stock issued for
|
||||||||||||||||||||
|
services
at $0.01 per share
|
(100,000 | ) | (100 | ) | (900 | ) | - | (1,000 | ) | |||||||||||
|
Common
stock issued for cash
|
||||||||||||||||||||
|
at
$0.08 per share
|
25,775 | 26 | 2,036 | - | 2,062 | |||||||||||||||
|
Net
loss for period ended
|
||||||||||||||||||||
|
December31,
2008
|
0 | 0 | - | (5,021 | ) | (5,021 | ) | |||||||||||||
|
Balance,
December 31, 2008
|
2,125,775 | $ | 2,126 | $ | 2,936 | $ | (5,021 | ) | $ | 41 | ||||||||||
|
Common
stock issued for cash
|
||||||||||||||||||||
|
at
$0.08 per share
|
126,375 | 126 | 9,984 | - | 10,110 | |||||||||||||||
|
Net
loss for period ended
|
||||||||||||||||||||
|
December31,
2009
|
- | - | - | (13,197 | ) | (13,197 | ) | |||||||||||||
|
Balance,
December 31, 2009
|
2,252,150 | $ | 2,252 | $ | 12,920 | $ | (18,218 | ) | $ | (3,046 | ) | |||||||||
F-5
CETRONE
ENERGY COMPANY
NOTES TO
THE FINANCIAL STATEMENTS
DECEMBER
31, 2009
NOTE
1 – DESCRIPTION OF BUSINESS
Cetrone
Energy Company was incorporated on January 28, 2008 in the State of
Nevada. The principal business of the Company is to develop “green”
renewable fuel source for agricultural operations, specifically
biodiesel. The Company’s year-end is December 31. The Company
currently has no operations or realized revenues from its planned principle
business purpose and, in accordance with FASB ASC 915 “Development Stage Entities,”
is considered a Development Stage Enterprise.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
This
summary of significant accounting policies of Cetrone Energy Company is
presented to assist in understanding the Company’s financial
statements. The financial statements and notes are representations of
the Company’s management, which is responsible for their integrity and
objectivity. These accounting policies conform to accounting
principles generally accepted in the United States of America, and have been
consistently applied in the preparation of the financial
statements.
Accounting
Method
The
Company’s financial statements are prepared using the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States of America.
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Cash and cash
equivalents
For the
Statements of Cash Flows, all highly liquid investments with maturity of three
months or less are considered to be cash equivalents. There were no
cash equivalents as of December 31, 2009 or 2008.
Income
taxes
The
Company accounts for income taxes under FASB ASC 740 "Income Taxes." Under the
asset and liability method of FASB ASC 740, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statements carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period the enactment
occurs. A valuation allowance is provided for certain deferred tax assets if it
is more likely than not that the Company will not realize tax assets through
future operations.
F-6
CETRONE
ENERGY COMPANY
NOTES TO
THE FINANCIAL STATEMENTS
DECEMBER
31, 2009
Share Based
Expenses
FASB ASC
718 "Compensation - Stock
Compensation" prescribes accounting and reporting standards for all
stock-based payments award to employees, including employee stock options,
restricted stock, employee stock purchase plans and stock appreciation rights,
may be classified as either equity or liabilities. The Company determines if a
present obligation to settle the share-based payment transaction in cash or
other assets exists. A present obligation to settle in cash or other assets
exists if: (a) the
option to settle by issuing equity instruments lacks commercial substance or
(b) the present
obligation is implied because of an entity's past practices or stated policies.
If a present obligation exists, the transaction should be recognized as a
liability; otherwise, the transaction should be recognized as
equity The Company accounts for stock-based compensation issued to
non-employees and consultants in accordance with the provisions of FASB ASC
505-50 "Equity - Based
Payments to Non-Employees." Measurement of share-based payment
transactions with non-employees is based on the fair value of whichever is more
reliably measurable: (a) the goods or services
received; or (b) the
equity instruments issued. The fair value of the share-based payment transaction
is determined at the earlier of performance commitment date or performance
completion date.
Fair Value of Financial
Instruments
The
Company's financial instruments as defined by FASB ASC 825-10-50 include cash,
trade accounts receivable, and accounts payable and accrued
expenses. All instruments are accounted for on a historical cost
basis, which, due to the short maturity of these financial instruments,
approximates fair value at December 31, 2009.
FASB ASC
820 defines fair value, establishes a framework for measuring fair value in
accordance with generally accepted accounting principles, and expands
disclosures about fair value measurements. ASC 820 establishes a three-tier fair
value hierarchy which prioritizes the inputs used in measuring fair value as
follows:
Level 1.
Observable inputs such as quoted prices in active markets;
Level 2.
Inputs, other than the quoted prices in active markets, that are observable
either directly or indirectly; and
Level 3.
Unobservable inputs in which there is little or no market data, which requires
the reporting entity to develop its own assumptions.
The
Company does not have any assets or liabilities measured at fair value on a
recurring basis at December 31, 2009. The Company did not have any fair value
adjustments for assets and liabilities measured at fair value on a nonrecurring
basis during the period ended December 31, 2009.
Accounting
Pronouncements
F-7
CETRONE
ENERGY COMPANY
NOTES TO
THE FINANCIAL STATEMENTS
DECEMBER
31, 2009
Recently Implemented
Standards
ASC 105,
Generally Accepted Accounting
Principles ("ASC 105") (formerly Statement of Financial Accounting
Standards No. 168, The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles a replacement of FASB Statement No. 162)
reorganized by topic existing accounting and reporting guidance issued by the
Financial Accounting Standards Board ("FASB") into a single source of
authoritative generally accepted accounting principles ("GAAP") to be applied by
nongovernmental entities.
All
guidance contained in the Accounting Standards Codification ("ASC") carries an
equal level of authority. Rules and interpretive releases of the Securities and
Exchange Commission ("SEC") under authority of federal securities laws are also
sources of authoritative GAAP for SEC registrants. Accordingly, all other
accounting literature will be deemed "non-authoritative". ASC 105 is effective
on a prospective basis for financial statements issued for interim and annual
periods ending after September 15, 2009. The Company has implemented the
guidance included in ASC 105 as of July 1, 2009. The implementation of this
guidance changed the Company's references to GAAP authoritative guidance but did
not impact the Company's financial position or results of
operations.
ASC 855,
Subsequent Events ("ASC
855") (formerly Statement of Financial Accounting Standards No. 165, Subsequent Events) includes
guidance that was issued by the FASB in May 2009, and is consistent with current
auditing standards in defining a subsequent event. Additionally, the guidance
provides for disclosure regarding the existence and timing of a company's
evaluation of its subsequent events. ASC 855 defines two types of subsequent
events, "recognized" and "non-recognized". Recognized subsequent events provide
additional evidence about conditions that existed at the date of the balance
sheet and are required to be reflected in the financial statements.
Non-recognized subsequent events provide evidence about conditions that did not
exist at the date of the balance sheet but arose after that date and, therefore;
are not required to be reflected in the financial statements. However, certain
non-recognized subsequent events may require disclosure to prevent the financial
statements from being misleading. This guidance was effective prospectively for
interim or annual financial periods ending after June 15, 2009. The Company
implemented the guidance included in ASC 855 as of April 1, 2009. The effect of
implementing this guidance was not material to the Company's financial position
or results of operations.
In
August 2009, the FASB issued Accounting Standards Update No. 2009-05,
“Measuring Liabilities at Fair
Value,” (“ASU 2009-05”). ASU 2009-05 provides guidance on measuring the
fair value of liabilities and is effective for the first interim or annual
reporting period beginning after its issuance. The Company’s adoption of ASU
2009-05 did not have an effect on its disclosure of the fair value of its
liabilities.
In
September 2009, the FASB issued ASC Update No. 2009-12, Fair Value Measurements and
Disclosures (Topic 820): Investments in Certain Entities that Calculate Net
Asset Value per Share (or Its Equivalent) ("ASC Update No. 2009-12").
This update sets forth guidance on using the net asset value per share provided
by an investee to estimate the fair value of an alternative investment.
Specifically, the update permits a reporting entity to measure the fair value of
this type of investment on the basis of the net asset value per share of the
investment (or its equivalent) if all or substantially all of the underlying
investments used in the calculation of the net asset value is consistent with
ASC 820.
F-8
CETRONE
ENERGY COMPANY
NOTES TO
THE FINANCIAL STATEMENTS
DECEMBER
31, 2009
The
update also requires additional disclosures by each major category of
investment, including, but not limited to, fair value of underlying investments
in the major category, significant investment strategies, redemption
restrictions, and unfunded commitments related to investments in the major
category. The amendments in this update are effective for interim and annual
periods ending after December 15, 2009 with early application permitted. The
Company does not expect that the implementation of ASC Update No. 2009-12 will
have a material effect on its financial position or results of
operations.
In June
2009, FASB issued Statement of Financial Accounting Standards No. 167, Amendments to FASB Interpretation
No. 46(R) ("Statement No. 167"). Statement No. 167 amends FASB
Interpretation No. 46R, Consolidation of Variable Interest
Entities an interpretation of ARB No. 51 ("FIN 46R") to require an
analysis to determine whether a company has a controlling financial interest in
a variable interest entity. This analysis identifies the primary beneficiary of
a variable interest entity as the enterprise that has a) the power to direct the
activities of a variable interest entity that most significantly impact the
entity's economic performance and b) the obligation to absorb losses of the
entity that could potentially be significant to the variable interest entity or
the right to receive benefits from the entity that could potentially be
significant to the variable interest entity. The statement requires an ongoing
assessment of whether a company is the primary beneficiary of a variable
interest entity when the holders of the entity, as a group, lose power, through
voting or similar rights, to direct the actions that most significantly affect
the entity's economic performance. This statement also enhances disclosures
about a company's involvement in variable interest entities. Statement No. 167
is effective as of the beginning of the first annual reporting period that
begins after November 15, 2009. Although Statement No. 167 has not been
incorporated into the Codification, in accordance with ASC 105, the standard
shall remain authoritative until it is integrated. The Company does not expect
the adoption of Statement No. 167 to have a material impact on its financial
position or results of operations
In June
2009, the FASB issued Statement of Financial Accounting Standards No. 166, Accounting for Transfers of
Financial Assets an amendment of FASB Statement No. 140 ("Statement No.
166"). Statement No. 166 revises FASB Statement of Financial Accounting
Standards No. 140, Accounting
for Transfers and Extinguishment of Liabilities a replacement of FASB Statement
125 ("Statement No. 140") and requires additional disclosures about
transfers of financial assets, including securitization transactions, and any
continuing exposure to the risks related to transferred financial assets. It
also eliminates the concept of a "qualifying special-purpose entity", changes
the requirements for derecognizing financial assets, and enhances disclosure
requirements. Statement No. 166 is effective prospectively, for annual periods
beginning after November 15, 2009, and interim and annual periods thereafter.
Although Statement No. 166 has not been incorporated into the Codification, in
accordance with ASC 105, the standard shall remain authoritative until it is
integrated. The Company does not expect the adoption of Statement No. 166 will
have a material impact on its financial position or results of
operations.
F-9
CETRONE
ENERGY COMPANY
NOTES TO
THE FINANCIAL STATEMENTS
DECEMBER
31, 2009
In
October 2009, the FASB issued changes to revenue recognition for
multiple-deliverable arrangements. These changes require separation of
consideration received in such arrangements by establishing a selling price
hierarchy (not the same as fair value) for determining the selling price of a
deliverable, which will be based on available information in the following
order: vendor-specific objective evidence, third-party evidence, or estimated
selling price; eliminate the residual method of allocation and require that the
consideration be allocated at the inception of the arrangement to all
deliverables using the relative selling price method, which allocates any
discount in the arrangement to each deliverable on the basis of each
deliverable’s selling price; require that a vendor determine its best estimate
of selling price in a manner that is consistent with that used to determine the
price to sell the deliverable on a standalone basis; and expand the disclosures
related to multiple-deliverable revenue arrangements.
These
changes become effective on January 1, 2011. The Company has determined
that the adoption of these changes will not have an impact on the consolidated
financial statements, as the Company does not currently have any such
arrangements with its customers.
Going
Concern
As shown
in the accompanying financial statements, the Company had negative working
capital and an accumulated deficit incurred through December 31,
2009. The Company currently has minimal operations which raise
substantial doubt about the Company’s ability to continue as a going
concern. The financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets, or the
amounts and classification of liabilities that might be necessary in the event
the Company cannot continue in existence.
Management
has established plans designed to increase the sales of the Company’s products,
and decrease debt. The Company plans to source raw materials needed
for remanufacture domestically, then produce the needed biofuel in small batches
tailored to the needs of customer demand until such time as larger quantities
can be produced. Profit margins will presumably increase as batch
size and storage limits can be increased. However, currently the Company is
dependent upon raising proceeds from the sale of its common stock or through
debt financing in order to continue the development of its proposed
business. Management intends to seek additional capital from new
equity securities offerings that will provide funds needed to increase
liquidity, fund internal growth and fully implement its business
plan.
An
estimated $120,000 is believed necessary to continue operations and increase
development through the next fiscal year. The timing and amount of
capital requirements will depend on a number of factors, including demand for
products and services and the availability of opportunities for expansion
through affiliations and other business relationships. Management
intends to seek new capital from new equity securities issuances to provide
funds needed to increase liquidity, fund internal growth, and fully implement
its business plan.
NOTE
3– PREPAID EXPENSES
The
Company paid $2,500 for services in November 2009. The services were
performed in March 2010. The Company deemed the expenses as prepaid
in 2009 and expensed upon performance of services in 2010.
F-10
CETRONE
ENERGY COMPANY
NOTES TO
THE FINANCIAL STATEMENTS
DECEMBER
31, 2009
NOTE
4– CAPITAL STOCK
Common
Stock
The
Company is authorized to issue 50,000,000 shares of common stock. All
shares have equal voting rights, are non-assessable and have one vote per
share. Voting rights are not cumulative and, therefore, the holders
of more than 50% of the common stock could, if they choose to do so, elect all
of the directors of the Company.
In its
initial capitalization, the Company issued 2,200,000 shares of common stock for
a total of $2,000 cash, and $2,000 in services. Subsequent to the
issuance of shares, a consultant was unable to complete the required services
and 100,000 shares for $1,000 in services were returned to the
Company.
During
the year ended December 31, 2008 the Company sold 25,775 shares of common stock
pursuant to a registered offering at $0.08 per share for total cash of
$2,062.
The
Company sold 126,375 shares of common stock pursuant to a registered offering at
$0.08 per share for total cash of $10,110.
Net loss per common
share
Net loss
per share is calculated in accordance with FASB ASC 260, “Earnings Per
Share.” The weighted-average number of common shares
outstanding during each period is used to compute basic loss per
share. Diluted loss per share is computed using the weighted averaged
number of shares and dilutive potential common shares
outstanding. Dilutive potential common shares are additional common
shares assumed to be exercised.
Basic net
loss per common share is based on the weighted average number of shares of
common stock outstanding during 2009 or 2008 and since inception. As
of December 31, 2009 and 2008 and since inception, the Company had no dilutive
potential common shares.
NOTE
5 – RELATED PARTY TRANSACTIONS
On May
16, 2008, an officer and director of the Company used $100 to open up a bank
account on behalf of the Company. As of December 31, 2009, the Company has not
yet reimbursed the officer for this cash advance. The funds advanced
are unsecured, non-interest bearing, and due on demand.
NOTE
6 – INCOME TAXES
We did
not provide any current or deferred U.S. federal income tax provision or benefit
for any of the periods presented because we have experienced operating losses
since inception. When it is more likely than not that a tax asset
cannot be realized through future income the Company must allow for this future
tax benefit. We provided a full valuation allowance on the net deferred
tax asset, consisting of net operating loss carryforwards, because management
has determined that it is more likely than not that we will not earn income
sufficient to realize the deferred tax assets during the carryforward
period.
F-11
CETRONE
ENERGY COMPANY
NOTES TO
THE FINANCIAL STATEMENTS
DECEMBER
31, 2009
The
Company has not taken a tax position that, if challenged, would have a material
effect on the financial statements for the twelve-months ended December 31, 2009
and 2008, or during the prior three years applicable under FASB ASC
740. We did not recognize any adjustment to the liability for
uncertain tax position and therefore did not record any adjustment to the
beginning balance of accumulated deficit on the consolidated balance
sheet. All tax returns have been appropriately filed by the
Company.
|
Income
tax provision at the federal statutory rate
|
35 | % | ||
|
Effect
on operating losses
|
(35 | %) | ||
| - |
Net
deferred tax assets consist of the following:
|
2009
|
2008
|
|||||||
|
Net
operating loss carry forward
|
$ | 6,376 | $ | (1,757 | ) | |||
|
Valuation
allowance
|
(6,376 | ) | 1,757 | |||||
|
Net
deferred tax asset
|
$ | - | $ | - | ||||
A
reconciliation of income taxes computed at the statutory rate is as
follows:
|
2009
|
2008
|
Since
Inception
|
||||||||||
|
Tax
at statutory rate (35%)
|
$ | 4,619 | $ | 1,757 | $ | 6,376 | ||||||
|
Increase
in valuation allowance
|
(4,619 | ) | (1,757 | ) | (6,376 | ) | ||||||
|
Net
deferred tax asset
|
$ | - | $ | - | $ | - | ||||||
The
Company did not pay any income taxes during the years ended December 31, 2009 or
2008.
The net
federal operating loss carry forward will expire from 2028 through
2029. This carry forward may be limited upon the consummation of a
business combination under IRC Section 381.
NOTE
7 - SUBSEQUENT EVENTS
The
Company has evaluated subsequent events through April 5, 2010 and determined
there are no events to disclose.
F-12