| NOTE 1 - | BASIS OF FINANCIAL STATEMENT PRESENTATION |
The accompanying unaudited condensed financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim condensed financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim condensed financial statements be read in conjunction with the Company's most recent audited financial statements and notes thereto included in its December 31, 2008 Annual Report on Form 10-KSB of the Company. Operating results for the three months ended March 31, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.
The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not established revenues sufficient to cover its operating costs and allow it to continue as a going concern. Management intends to increase operations through expanding its operations into other locals, in the interim, management and primary shareholders are committed to meeting the Company minimal operating expenses.
| NOTE 3 - | AGREEMENT AND PLAN OF MERGER |
On October 26, 2006, the Company completed the acquisition of MedaCure International, Inc., a Nevada corporation located in Salt Lake City, Utah (“MedaCure”). The acquisition was consummated pursuant to an agreement entered into on June 22, 2006, whereby the Company agreed to merge its newly created, wholly-owned subsidiary, CuraTech Acquisitions, Inc., with and into MedaCure with MedaCure being the surviving entity as the Company’s wholly owned subsidiary.
Prior to completion of the acquisition the Company changed its corporate name to CuraTech Industries, Inc. The Company also changed its corporate domicile from the State of Utah to Nevada. Also, the Company added three new directors, each nominated by MedaCure, to its Board of Directors.
From the consummation of the Merger Agreement, the Company has begun the development and bringing to market a certain health supplement that is intended to enhance and build-up the body’s natural immune system defenses. The Company intends to commence commercial marketing of its supplement in the near future primarily outside the U.S. Initial marketing in the U.S. will primarily be to the veterinarian market for use in treating animals. The Company also intends to initiate a collaboration and partnering program that will focus on developing business alliances designed to generate sales, applications and marketing opportunities.
| NOTE 4 - | SIGNIFICANT EVENTS |
Equity Activity – During the three months ended March 31, 2009 the Company received $100,000 from various investors in exchange for 100,000 shares of common stock at $1.00 per share. As of March 31, 2009 the shares have not been issued; therefore, this amount has been recorded as stock subscriptions payable in the Company’s financial statements.
CURATECH INDUSTRIES, INC.
Notes to the Financial Statements (Continued)
March 31, 2009 and December 31, 2008
| NOTE 4 - | SIGNIFICANT EVENTS (Continued) |
Notes Payable – Related Party – During the three months ended March 31, 2009, the Company received a total of $221,500 in cash from related parties. These amounts have been recorded as notes payable – related parties. Each note is unsecured, bears interest at a rate of 8.0% per annum, and is due on demand. As of March 31, 2009 the Company had made payments on these notes amounting to $30,000. Accrued interest payable on these notes totaled $2,013 as of March 31, 2009.
Notes Receivable – During the three months ended March 31, 2009, the Company loaned a total of $200,000 to various unrelated entities. These amounts have been recorded as notes receivable in these financial statements. The notes are unsecured, bear interest at a rate of 9.5% per annum, and are due on demand. The Company recorded $1,979 in interest income on these notes during the three months ended March 31, 2009.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form 10-Q.
Recent Events
During the quarter ended March 31, 2009, the Company received $100,000 in gross offering proceeds for which the Company has agreed to issue 100,000 shares at $1.00 per share. The shares have not been issued yet. The Company anticipates issuing the shares in the second quarter ending June 30, 2009.
Plan of Operation
Following the completion of the acquisition of MedaCure on October 26, 2006, we have become engaged in the developing and marketing of MedaCure’s health supplement that is believed to enhance and build-up the body’s natural immune system defenses in both humans and animals. In November 2008, we engaged a third party manufacturer to begin manufacturing the MedaCure product. A total of 785,000 capsules have been manufactured to date. Our next priority will be to establish new facilities for our corporate headquarters and to warehouse the product. Management is seeking a 3,000 square foot facility that can be leased on a long-term basis. The facility will also handle shipping of product. We have not selected a final site, but we are searching for one in Utah County, Utah.
Contemporaneous with selecting the site for our headquarters and warehouse, we will be creating a distribution network that will focus on initiating a collaboration and partnering program and developing business alliances designed to generate sales, applications and marketing opportunities. At present, we are negotiating with two groups of potential distributors. We anticipate that during the next 12 months we will hire approximately 10-15 persons, 3-5 for administrative duties, sand 7-10 for sales and marketing.
We estimate that during the next 12 months we will need approximately $500,000 to establish our headquarters/warehouse facility, establish a sales and distribution network, and begin selling activities. We anticipate that the source of the remaining funds needed will be from the private sale of securities and/or other financing activities conducted by our officers and directors. We hope to raise approximately $500,000 during 2009, although there presently are no commitments for funds, and we cannot offer any assurance that we will be able to raise such funds on terms acceptable to the Company.
Inflation
In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.
Results of Operations - Three Months Ended March 31, 2009 compared to the Three Months Ended March 31, 2008.
Revenues
Revenues from continuing operations for the three month period ended March 31, 2009 were $-0- compared to $-0- for the three month period ended March 31, 2008. This lack of revenues was due primarily to the fact that we have not yet commenced sales of our MedaCure product. We anticipate such sales may begin as early as second quarter 2009.
Expenses
Total operating expenses for the three month period ended March 31, 2009 were $141,406, an increase of $34,008 from the $107,398 of total operating expenses incurred in the three month period ended March 31, 2008. General and administrative expenses for the three month period ended March 31, 2009 were $42,047, a decrease of $64,160 from the $106,207 of general and administration expenses incurred during the three months ended March 31, 2008. Consulting expenses totaled $36,518 in the three months ended March 31, 2009, an increase of $35,668 from the $850 of consulting expenses incurred in the three months ended March 31, 2008. Officer compensation totaled $62,500 in the three months ended March 31, 2009 compared to $-0- in the three months ended March 31, 2008. The Company anticipates that general and administrative expenses and consulting expenses will increase in the future as the Company’s sales activities commence. The Company anticipates that officer compensation should remain at the current level for the rest of 2009.
Net Loss
We reported a net loss of $141,440, or $0.01 per share for the three months ended March 31, 2009, which is $35,522 more than the $105,918 net loss, or $0.01 per share, incurred during the three months ended March 31, 2008. The increased net loss is primarily attributed to the significant increase in consulting expense and officer compensation during the later period partially offset by a substantial reduction in general and administrative expenses incurred during the quarter ended March 31, 2009.
Liquidity and Capital Resources
At March 31, 2009, our current assets consisted of cash on hand of $55,842, a note receivable of $200,000 and interest receivable of $1,979. We believe that current cash on hand is not sufficient to satisfy our cash requirements for the next twelve months, which we estimate to be approximately $500,000. Due to the fact that our limited operations have not generated cash flow sufficient to cover ongoing business expenses, we may have to rely on our directors, or on outside sources, to provide additional funds. However, we have no agreements with anyone to provide future funds to our Company. If our directors are unable to provide future funding, if the need arises, we may have to look at alternative sources of funding. There is no assurance that such funds will be available or, that even if they are available, that they will be available on terms that will be acceptable to us. In the event we are unable to secure necessary future funding, we may have to curtail our business or cease operations completely. At the present time, the Company is attempting to raise additional funds through a private placement offering of the Company’s common stock. No one is obligated to purchase any additional shares in the offering.
At March 31, 2009, we had total assets of $492,430 and stockholders' equity of $121,913, compared to total assets of $243,254 and total stockholders' equity of $163,353 at December 31, 2008.
All of the Company’s liabilities of $370,517 as of March 31, 2009 are current liabilities due within the next year, and primarily consist of $191,500 in notes payable related party, $102,077 accrued officer salaries and $60,000 in notes payable.
The Company expects to hire 10-15 employees in the next 12 months.
Capital Expenditures
The Company expended no amounts on capital expenditures during the three months ended March 31, 2009. The Company has no current plans for capital expenditures.
Critical Accounting Policies
In the notes to the audited consolidated financial statements for the year ended December 31, 2008, included in the Company’s Annual Report on Form 10-K, the Company discusses those accounting policies that are considered to be significant in determining the results of operations and its financial position. The Company believes that the accounting principles utilized by it conform to accounting principles generally accepted in the United States of America.
The preparation of financial statements requires Company management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. By their nature, these judgments are subject to an inherent degree of uncertainty. On an on-going basis, the Company evaluates estimates. The Company bases its estimates on historical experience and other facts and circumstances that are believed to be reasonable, and the results form the basis for making judgments about the carrying value of assets and liabilities. The actual results may differ from these estimates under different assumptions or conditions.
Going Concern
The Company’s auditors expressed substantial doubt as to the Company’s ability to continue as a going concern as a result of recurring losses, lack of revenue-generating activities and a deficit accumulated during the development stage in the amount of $4,813,528 as of March 31, 2009. The Company’s ability to continue as a going concern is subject to the ability of the Company to realize a profit from operations and /or obtain funding from outside sources. Since the Company has no revenue generating operations, our plan to address the Company’s ability to continue as a going concern over the next twelve months includes obtaining additional funding from the sale of our securities. Although we believe that we will be able to obtain the necessary funding to allow the Company to remain a going concern through the methods discussed above, there can be no assurances that such methods will prove successful.
Net Operating Loss
We have accumulated approximately $1,030,046 of net operating loss carryforwards as of March 31, 2009, which may be offset against taxable income and income taxes in future years. The use of these losses to reduce future income taxes will depend on the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. The carry-forwards expire in the year 2029. In the event of certain changes in control, there will be an annual limitation on the amount of net operating loss carryforwards which can be used. No tax benefit has been reported in the financial statements for the year ended December 31, 2008 because there is a 50% or greater chance that the carryforward will not be used. Accordingly, the potential tax benefit of the loss carryforward is offset by a valuation allowance of the same amount.
Forward Looking and Cautionary Statements
This report, including the sections entitled "Business," "Risk Factors" and "Management's Discussion and Analysis or Plan of Operations" contains forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks and uncertainties. These factors may cause our company's or our industry's actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by the forward- looking statements. These risks and other factors include those listed under "Risk Factors" and elsewhere in this report. In some cases, you can identify forward-looking statements by terminology such as "may," "will" "should," "expects," "intends," "plans," anticipates," "believes," "estimates," "predicts," "potential," "continue," or the negative of these terms or other comparable terminology.
You should be aware that a variety of factors could cause actual results to differ materially from the anticipated results or other matters expressed in forward-looking statements. These risks and uncertainties, many of which are beyond our control, include:
| * | the sufficiency of existing capital resources and our ability to raise additional capital to fund cash requirements for future operations; |
| * | uncertainties following any successful acquisition or merger related to the future rate of growth of our business and acceptance of our products and/or services; |
| * | volatility of the stock market, particularly within the technology sector; and |
| * | general economic conditions. |
Although we believe the expectations reflected in these forward-looking statements are reasonable, such expectations cannot guarantee future results, levels of activity, performance or achievements.
You are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may differ materially from those included within the forward-looking statements as a result of various factors. Cautionary statements in the risk factors section and elsewhere in this report identify important risks and uncertainties affecting our future, which could cause actual results to differ materially from the forward-looking statements made in this report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
A “smaller reporting company” (as defined by Item 10 of Regulation S-K) is not required to provide the information required by this Item.
Item 4. Controls and Procedures.
Under the supervision and with the participation of management, our principal executive officer and principal financial officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (“Exchange Act”), as of March 31, 2009. Based on this evaluation, our principal executive officer and our principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective and adequately designed to ensure that the information required to be disclosed by us in the reports we submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms and that such information was accumulated and communicated to our chief executive officer and chief financial officer, in a manner that allowed for timely decisions regarding required disclosure.
During the last fiscal quarter ended March 31, 2009, there has been no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.
ANY FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-Q REPORT REFLECT MANAGEMENT’S BEST JUDGMENT BASED ON FACTORS CURRENTLY KNOWN AND INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY VARY MATERIALLY.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There are no material pending legal proceedings to which we or our subsidiary is a party or to which any of our property is subject and, to the best of our knowledge, no such action against us is contemplated or threatened.
Item 1A. Risk Factors.
A “smaller reporting company” (as defined by Item 10 of Regulation S-K) is not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the three month period ended March 31, 2009, the Company has not sold any shares of its common stock without registration under the Securities Act of 1933, except for the following:
(1) The Company received a total of $100,000 in gross offering proceeds from subscriptions receivable from one person during the quarter ended March 31, 2009. The Company plans to issue 100,000 shares of its common stock at $1.00 per share to the subscriber. The shares will be issued without registration pursuant to Section 4(2) of the Securities Act of 1933 and/or Rule 506 of Regulation D for transactions not involving any public offering. The purchaser represented that he is acquiring the shares with investment intent, and the certificate representing the shares will be given a restricted legend. The purchaser received a private placement memorandum prior to making his/her investment.
For a description of any sales of shares of the Company’s unregistered stock made in the past three years, please refer to the Company’s Annual Reports on Form 10-KSB or Form 10-K, and the Company’s Quarterly Reports on Form 10-QSB or Form 10-Q filed since December 31, 2005.
Item 3. Defaults Upon Senior Securities.
None; not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None; not applicable.
Item 5. Other Information.
None; not applicable.
Item 6. Exhibits.
(a) Exhibits.
| | Exhibit Number | Description |
| | | |
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | CURATECH INDUSTRIES, INC. | |
| | | | |
| Date: May 15, 2009 | By: | /s/ Lincoln M. Dastrup | |
| | | Lincoln M. Dastrup | |
| | | President, Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer | |
| | | | |
