ITEM 1. BUSINESS.
General
We were incorporated in the State of Nevada on September 12, 2006 and changed our name to GreenChek Technology Inc. (the “Company”) on August 5, 2008. From inception to May 31, 2008, our principal business was the acquisition and exploration of mineral resources. On July 14, 2008, we entered into a licensing agreement to acquire patent and intellectual rights relating to the manufacturing, marketing, and distributing of products designed to reduce gas emissions by motor vehicles through the use of hydrogen technology.
In 2008, we negotiated the license acquisition of a development stage company that limits emissions emanating from the Internal Combustion Engine (ICE). The company has completed its first generation Onboard Hydrogen Generating (OHG) technology that permits any ICE, independent of fuel source (gasoline, diesel, ethanol, propane, and natural gas) to operate with reduced emissions. Negotiations with this group were successful and an acquisition of its assets was completed.
We have no plans to change our business activities or to combine with another business, and are not aware of any events or circumstances that might cause us to change our plans. Currently, we do not intend to acquire other interests in any other business. Our business plan is solely to manufacture and market our Emission Reduction Device (ERD-2.0) pursuant to a licensing agreement. The ERD-2.0 is designed for installation on all vehicles with an internal combustion engine. The compact, self-contained ERD-2.0 includes a proprietary modular multiple cell Electrolyser (creates electrolysis) Unit for an Internal Combustion Engine that can be retrofitted to any type of internal combustion engine to enhance the combustion process, independent of the fuel used (gasoline, diesel, ethanol or propane/natural gas). The ERD-2.0 product generates hydrogen by means of electrolysis. Water molecules are spontaneously split into hydrogen and oxygen gases of high purity, the resulting gases can then be distributed according to the user’s requirements.
Background
In September 2006, Pardeep Sarai, our president and sole member of the board of directors acquired one mineral property containing twelve Mineral Titles Online cells in British Columbia, Canada. British Columbia allows a mineral explorer to claim a portion of available Crown lands as its exclusive area for exploration by registering the claim area on the British Columbia Mineral Titles Online system. The Mineral Titles Online system is the Internet-based British Columbia system used to register, maintain and manage the claims. A cell is an area which appears electronically on the British Columbia Internet Minerals Titles Online Grid and was formerly called a claim. A claim is a grant from the Crown of the available land within the cells to the holder to remove and sell minerals. The online grid is the geographical basis for the cell. Formerly, the claim was established by sticking stakes in the ground to define the area and then recording the staking information. The staking system is now antiquated in British Columbia and has been replaced with the online grid. The property was registered by James McLeod, a non affiliated third party. Mr. McLeod is a self-employed contract staker and field worker residing in Vancouver, British Columbia.
The claim is recorded in the name of Mr. Sarai, one of our officers and directors, to avoid paying additional fees. Mr. McLeod, a Vancouver geologist, suggested that the property be held in Mr. Sarai’s name and we concurred therein. The property was selected by Mr. Sarai after consulting with Mr. McLeod. Mr. McLeod was paid $3,300 to stake the claim. No money was paid to Mr. Sarai to hold the claim. No money will be paid to Mr. Sarai to transfer the property to us. Mr. Sarai has executed a declaration of trust wherein he has agreed to hold the property for us and will deliver title upon our demand. Mr. Sarai has not provided us with a signed or executed bill of sale in our favor as of the date of this prospectus. Mr. Sarai will issue a bill of sale to a subsidiary corporation to be formed by us should mineralized material be discovered on the property.
Under British Columbia law, title to British Columbia mineral claims can only be held by British Columbia residents. In the case of corporations, title must be held by a British Columbia corporation. Since we are an American corporation, we can never possess legal mineral claim to the land. In order to comply with the law we would have to incorporate a British Columbia wholly owned subsidiary corporation and obtain audited financial statements. We believe those costs would be a waste of our money at this time because the legal costs of incorporating a subsidiary corporation, the accounting costs of audited financial statements for the subsidiary corporation, together with the legal and accounting costs of expanding this registration statement would cost several thousands of dollars. Accordingly, we have elected not to create the subsidiary at this time, but will do so if mineralized material is discovered on the property.
We completed our public offering on March 7, 2007 by raising $41,400.
In summer 2008, we terminated our mining operations.
ITEM 1A.
ITEM 1A. RISK FACTORS.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 2.
ITEM 2. PROPERTIES.
We own no property.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
We are not presently a party to any litigation.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter, there were no matters submitted to a vote of our shareholders.
PART II
ITEM 5.
ITEM 5.
MARKET PRICE FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our shares are traded on the Bulletin Board operated by the Federal Industry Regulatory Authority under the symbol “GCHK.” A summary of trading by quarter for 2009 fiscal year is as follows:
On May 17, 2008, we completed a seven-for-one stock split. The par value of the common stock will remain $0.00001 per share and the number of authorized shares of common stock and preferred stock will remain 100,000,000 shares each. The information contained in this report reflects the stock split.
In September 2006, we issued a total of 35,000,000 shares of restricted common stock to our sole officer and director in consideration of $5,000.
In March 2007, we issued 28,980,000 shares of common stock to forty-six individuals in consideration of $0.00143 per share or a total of $41,400. All of the shares were issued pursuant to Regulation S of the Securities Act of 1933 in that all of the shares were sold outside the United States of America to non-US persons. Further, no commissions were paid to anyone in connection with the sale of the shares and general solicitation was made to anyone.
Cash Dividends
As of the date of this report, we have not paid any cash dividends to stockholders. The declaration of any future cash dividend will be at the discretion of our board of directors and will depend upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.
Section Rule 15(g) of the Securities Exchange Act of
Our shares are covered by section 15(g) of the Securities Exchange Act of 1934, as amended, and Rules 15g-1 through 15g-6, and 15g-9 promulgated thereunder. They impose additional sales practice requirements on broker-dealers who sell our securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouses).
Rule 15g-1 exempts a number of specific transactions from the scope of the penny stock rules.
Rule 15g-2 declares unlawful broker-dealer transactions in penny stocks unless the broker-dealer has first provided to the customer a standardized disclosure document.
Rule 15g-3 provides that it is unlawful for a broker-dealer to engage in a penny stock transaction unless the broker-dealer first discloses and subsequently confirms to the customer current quotation prices or similar market information concerning the penny stock in question.
Rule 15g-4 prohibits broker-dealers from completing penny stock transactions for a customer unless the broker-dealer first discloses to the customer the amount of compensation or other remuneration received as a result of the penny stock transaction.
Rule 15g-5 requires that a broker-dealer executing a penny stock transaction, other than one exempt under Rule 15g-1, disclose to its customer, at the time of or prior to the transaction, information about the sales persons compensation.
Rule 15g-6 requires broker-dealers selling penny stocks to provide their customers with monthly account statements.
Rule 15g-9 requires broker-dealers to approve the transaction for the customer’s account; obtain a written agreement from the customer setting forth the identity and quantity of the stock being purchased; obtain from the customer information regarding his investment experience; make a determination that the investment is suitable for the investor; deliver to the customer a written statement for the basis for the suitability determination; notify the customer of his rights and remedies in cases of fraud in penny stock transactions; and, the FINRA's toll free telephone number and the central number of the North American Administrators Association, for information on the disciplinary history of broker-dealers and their associated persons.
The application of the penny stock rules may affect your ability to resell your shares.
Securities authorized for issuance under equity compensation plans
We do not have any equity compensation plans and accordingly we have no securities authorized for issuance thereunder.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 7.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
This section of the report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.
We have not yet generated or realized any revenues from our business activities.
Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our expenses. This is because we have not generated any revenues and no revenues are anticipated until we begin selling ERD-2.0 units. Accordingly, we must raise cash from private placements or other equity financings. Our only other source for cash at this time is investment by others in our recently completed private placement. The cash we raised will allow us to stay in business for at least one quarter. Our success or failure will be determined in the short term by additional equity financings and, in the long term by the number of ERD-2.0 units we sell.
On July 14, 2008, we entered into a licensing agreement with China Bright Technology Development Limited, a Chinese corporation located in Hong Kong (“China Bright”) to use all of China Bright’s patent and intellectual rights for the purpose of manufacturing, marketing, and distributing products designed to reduce gas emissions by motor vehicles. The China Bright patents and intellectual rights are directed at the use of hydrogen technology to reduce gas emissions in motor vehicles. The territory to be covered by the license is the European Union and the United States of America. The fee for the license is $3,500,000 payable as follows: $300,000 on August 13, 2008; $1,000,000 by December 31, 2008; $1,000,000 by March 31, 2009; and, $1,200,000 by August 31, 2009. In addition we are obligated to issue to China Bright, an amount of common stock equal to the value of 60% of our total outstanding common shares.
We have since terminated our mining operations.
To meet our need for cash we recently raised $300,000, of which a balance of $64,000 has yet to be paid. The receipt of the balance of these funds should allow us to operate for one quarter. Other than as described in this paragraph, we are actively pursuing other financing options.
We do not own any interest in any property. We lease our office space.
We do not intend to hire additional employees at this time.
Our Business
General
We are a development stage business incorporated under the laws of the State of Nevada on September 12, 2006. Currently, we are manufacturing and marketing one product.
Our Product
The device we are developing, manufacturing and marketing, pursuant to our licensing agreement, is the Emission Reduction Device 2.0 (“ERD-2.0”). The ERD-2.0 is designed for installation on all vehicles with an internal combustion engine (“ICE”). The compact, self-contained ERD-2.0 includes a proprietary modular multiple cell Electrolyser (creates electrolysis) Unit for an internal combustion engine that can be retrofitted to any type of ICE to enhance the combustion process, independent of the fuel used (gasoline, diesel, ethanol or propane/natural gas). The ERD-2.0 product generates hydrogen by means of electrolysis. Water molecules are spontaneously split into hydrogen and oxygen gases of high purity, the resulting gases can then be distributed according to the user’s requirements.
Specifically focused on ICE integration, the ERD unit produces an amalgamation of hydrogen and oxygen gases, exclusively on demand, at miniscule pressure, only when the engine is operational. These gases are transported to the engine where they are entirely exhausted in the combustion procedure. The ERD unit ameliorates engine performance efficiency by generating augmented combustion of the air-fuel amalgam. The combustion intensity valuation of the hydrogen is not viewed as noteworthy, when contrasted with the operational benefit observed. The supplemental hydrogen is functioning as an octane adjunct. As well, the hydrogen acts as a dissemination minimization factor in regards to greenhouse gases propagated by the combustion procedure.
The ERD 2.0 is engineered to operate in a modular format for greater efficiency. The ability to link units together contribute to our ability to service larger engines, obtain further fuel cost savings and greater emission reduction, at the same time maintaining durability and overall quality. The product has a two year warranty.
History
GreenChek is focused on sales of the ERD units and further developing its technology for use as an onboard power source for ICEs. We have invented and developed, over the last five years, a proprietary process of hydrogen generation using environmentally safe materials and techniques that can take place onboard the vehicle. Management believes that the addition of this onboard hydrogen generating technology eliminates the need for hydrogen storage on the vehicle, potentially making the vehicle lighter and safer, and reducing its reliance on an infrastructure to provide hydrogen.
The world is becoming more environmentally aware and so is the market. There is a great deal of interest in hydrogen-supplemented engines, which are considered to be environmentally friendly. These engines create substantially less emissions than purely fossil fuel operated ICEs. It has become apparent that human technological innovations and fossil fuel utilizing advancements are the basis of the majority of the increased heat-trapping gases, also known as greenhouse gases (GHG). Most industrialized nations have enacted environmental initiatives with a view to decreasing GHG, many of which are generated from fossil fuel emissions.
Management believes that the GreenChek model of onboard hydrogen generation for supplemented combustion, as carried out by our proprietary process, results in a procedure for generating hydrogen that is both safe in operation because of the use of small portions of hydrogen and hydrogen is only generated while the engine is in operation (generated only upon demand). In our tests, as well as independent third party testing, we believe that the increased efficiency of the ICE energy is excellent as well the observance of decreased emissions while the unit is in operation. The operating costs for the system are small.
The main focus of the Company is the further development, manufacture, real world third party testing, and sale of our ERD product.
The ERD-2.0 is the outcome of five years of experimentation and testing. The Company focused particular attention to the environmental safety of the hydrogen being produced, with the main focus being the development of the knowledge needed to properly utilize hydrogen in an ICE safely as well as ensure that the ERD unit is stable and can operate in extreme environments without failure.
The development of the ERD-2.0 also focused on creating a stable, viable electrochemical process and gathering data from testing. The expected results of the development fell into several key categories:
1. The conversion of an entirely fossil fuel operated conventional ICE to an ICE equipped with the ERD and an ICE which now operates on hydrogen and fossil fuel mixture instead of only fossil fuel such as diesel or gasoline;
2. The collection of test data obtained from the ERD equipped engines described in (1) above;
3. The collection of test data from the ERD equipped vehicle described in (2) above;
4. Gaining third party certification for the internal combustion engines tested on the road;
5. The development of the project design of a series of ERD units using real-world data obtained from the above-mentioned tests.
Planning
The Company continues to pursue its development plans under the following timelines, with the understanding however, that such timelines are guidelines only, and may not be strictly adhered to and dependent upon many variables.
For Immediate Implementation
The following activities are planned for immediate implementation and are expected to take up to twelve months based on financing:
1. Preliminary third party testing of the ERD technology was completed February 2008. From this test, a report was generated, which includes emission reduction and fuel reduction data for the ERD, quantified in real time. Four (4) components of vehicle exhaust and the fuel consumption rate were measured. The pollutants measured are oxides of nitrogen (NOx), total hydrocarbons (HC), carbon monoxide (CO), and carbon dioxide (CO2). NOx is a common product of ICEs caused by the oxidation of nitrogen from the air used for the intake air supply to the engine. Hydrocarbons results from incomplete combustion, originating from the fuel supply. CO and CO2 are created by the bonding of the carbon in the fuel combining with the oxygen in the intake air. CO2 is the main product of combustion while CO is a more toxic component which is produced at two orders of magnitude smaller than CO2.
2. Complete further third party testing and sale of ERD units for fleets in the United Kingdom in the second quarter 2009.
3. Complete further third party testing and sale of ERD units throughout Europe in the third quarter 2009.
4. Secure agreements to distribute our ERD-2.0 in China in the fourth quarter 2010.
Manufacturing
Our ERD-2.0 is assembled by Tianjin Shenma Science and Technology Development Company Ltd. (“Tianjin”) located in Tianjin, China pursuant to a verbal agreement. Tianjin obtains the parts required to manufacture our ERD-2.0 from various parts manufacturers throughout China, however, Tianjin is not dependent on a particular vendor, as the parts are generic and available from multiple parts supply sources. GreenChek designs its product so as not to be dependent on the continuing availability of specialty parts or processes.
Tianjin Shenma Science and Technology Development Company Ltd., has committed a 4,000 square foot facility in Tianjin, China, for the manufacture of GreenChek’s ERD technology. The production capacity for the facility is expected to be 1,050 units per month.
The production line of Tianjin’s manufacturing facility is ready for operation. Currently, Tianjin’s capacity for ERD production is approximately 1,050 ERD units per month based on an existing 4,000 square foot factory area. GreenChek is currently negotiating for additional factory area. With additional investment in assembly stations, dies, molds and machines, the Company believes it can increase the monthly production capacity if required to meet the needs of its customers.
Our ERD-2.0 is also assembled in China and shipped to customers in Asia, Europe and North America as directed by the Company. We aim to design and manufacture our product to perform reliably for the life of the product and system into which they are integrated. We seek to achieve high reliability through the application of proprietary technologies and rigorously controlled design, development, manufacturing and test processes.
Marketing
We market our ERD-2.0 through Technical Environment Solutions Ltd. (“TESEL”), a European-based sales and distribution company with extensive worldwide experience in environmental technologies and their applications. TESEL specializes in emissions reduction technologies.
Currently, we market our ERD-2.0 only in Europe. We also promote our product through our website at www.greenchektech.com and through trade magazines, newspapers and at broadcast exhibitions. GreenChek is continuing to identify, qualify and establish direct dealers, distributor arrangements and agents to market our product.
Competition
We compete against existing and emerging technologies in our targeted markets for mobile and stationary applications. We compete primarily on the basis of safety, reliability, efficiency, cost and environmental considerations. Currently, there are only two (2) competitors that we are aware of who are developing electrolysis based hydrogen cell technology for the mobile and stationary markets.
We also compete against PEM fuel cells. A PEM fuel cell is a device that produces electricity through an electrochemical reaction in which hydrogen and oxygen are combined to generate electricity, with usable heat and water as the principal by-products. An example of a PEM fuel cell company would be Ballard Power Systems Inc. A number of major manufacturing and automotive companies also have in-house PEM fuel cell development efforts. Many corporations are engaged in the area of alternative power generation in the United States, Canada and abroad, including, among others, major electric, oil, chemical, natural gas and specialized electronic firms, as well as universities, research institutions and foreign government-sponsored corporations. Many of these companies have substantially greater financial, research and development, manufacturing and marketing resources than we do.
We also compete with corporations that are building other types of fuel cells. These include phosphoric acid fuel cells, molten carbonate fuel cells, solid oxide fuel cells and alkaline fuel cells are generally thought to to have viable commercial potential. These fuel cells can be differentiated in regard to cell materials and temperature while operating. While all fuel cell types have probable environmental and efficiency advantages over traditional power sources, we believe that the GreenChek ERD is ready for immediate commercialization in mobile transportation sector, does not require hydrogen storage, and can be manufactured less expensively and is more efficient and more practical in mobile and stationary applications than our competition.
Patents and Trademarks
We own no patents or trademarks.
License
We manufacture and sell the ERD-2.0 pursuant to a license from China Bright Technology Development Limited (“China Bright”), a Chinese corporation located in Hong Kong. We have the right to use all of China Bright’s patent and intellectual rights for the purpose of manufacturing, marketing, and distributing products designed to reduce gas emissions by motor vehicles. The China Bright patents and intellectual rights are directed at the use of hydrogen technology to reduce gas emissions in motor vehicles. The territory to be covered by the license is the European Union and the United States of America. The fee for the license is $3,500,000 payable as follows: $300,000 on August 13, 2008, $1,000,000 by December 31, 2008; $1,000,000 by March 31, 2009; and, $1,200,000 by August 31, 2009. In addition we are obligated to issue to China Bright, an amount of common stock equal to the value of 60% of our total outstanding common shares.
Limited Operating History and Need for Additional Capital
There is no historical financial information about us upon which to base an evaluation of our performance. We have just started our current operations and have not generated any revenues from our activities. We cannot guarantee we will be successful in our business activities. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in manufacturing our product, and possible cost overruns due to price and cost increases in services.
The development and marketing of new technology is capital intensive. We have funded our current operations either from the sale of our common stock or through loans made by our chief executive officer and directors. We have utilized funds obtained to date for corporate organizational purposes, license payments and parts and supplies purchases to manufacture our ERD product. We require additional funding for license payments to China Bright, marketing and IR program costs and manufacturing costs of our ERD-2.0.
To become profitable and competitive, we must sell a sufficient number of ERD-2.0 units to generate revenues and profits.
We have no assurance that future financing will be available to us in the future on satisfactory terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our activities. Equity financing could result in additional dilution to existing shareholders.
Results of Activities
From Inception on September 12, 2006 to February 28, 2009:
In 2006, we acquired the right to explore one property containing twelve cells. We do not own any interest in any property, but merely the right to conduct exploration activities on the property. In 2008, we discontinued our mining operations.
On July 14, 2008, we entered into a licensing agreement with China Bright Technology Development Limited, a Chinese corporation located in Central Hong Kong (“China Bright”) to use all of China Bright’s patent and intellectual rights for the purpose of manufacturing, marketing, and distributing products designed to reduce gas emissions by motor vehicles. The China Bright patents and intellectual rights are directed at the use of hydrogen technology to reduce gas emissions in motor vehicles. The territory to be covered by the license is the European Union and the United States of America. The fee for the license is $3,500,000 payable as follows: $300,000 on August 13, 2008; $1,000,000 by December 31, 2008; $1,000,000 by March 31, 2009; and, $1,200,000 by August 31, 2009. In addition we are obligated to issue to China Bright, an amount of common stock equal to the value of 60% of our total outstanding common shares.
We have spent this quarter preparing technical amendments to our ERD 2.0 in order to conform to European-built vehicles. In summer 2009 we expect to complete Pilots with major customers having sales potentials greater than 100 GreenChek ERD units.
In 2010 to 2011 we have a minimum expectation of selling 500 ERD 2.0 installations. Also, we continue to develop our ERD 2.0 specifically for application on locomotives.
Liquidity and Capital Resources
As of February 28, 2009, we had incurred losses since inception and had a working capital deficiency of $3,524,074. As of the date of this report, we have yet to generate any revenues from our business activities. Management believes the ability of the Company to continue as a going concern, earn revenues and achieve profitability is highly dependent on a number of factors including, but not limited to: our ability to improve and continue to manufacture our product; obtain sufficient financing; market our product; and to secure agreements with distributors to distribute a sufficient quantity of our product, the ERD-2.0.
As of the date of this report, we have yet to generate any revenues from our business activities.
We issued 35,000,000 shares of common stock through a private placement pursuant to Regulation S of the Securities Act of 1933 to Pardeep Sarai, our sole officer and director in September 2006, in consideration of $5,000. The shares were sold to non-US persons and all transactions closed outside the United States of America. This was accounted for as a purchase of shares of common stock.
In March 2007, we completed a private placement of 28,980,000 restricted shares of common stock pursuant to Reg. S of the Securities Act of 1933 and raised $41,400. All of the shares were sold to non-US persons and all transactions closed outside the United States of America. This was accounted for as a purchase of shares of common stock.
On September 17, 2008 we sold 400,000 units to Noya Management Corp. in consideration of the $300,000. Each unit consisted on one share of common stock and one warrant. Each warrant allowed Noya Management Corp. to purchase one additional share of common stock at a price of $0.75 per share. As of the date hereof, no warrants have been exercised. The Units were sold to Noya Management Corp. pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933. The transaction took place outside the United States and Noya Management Corp. is a non-US person.
General and Administrative Expenses
General and administrative expenses include those costs incurred to manufacture the Company’s ERD-2.0 product, professional services provided to us in connection with the execution of our license agreement, research and development, marketing, and general administration.
Recent accounting pronouncements
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115" (hereinafter "SFAS No. 159"). This statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board's long-term measurement objectives for accounting for financial instruments. This statement is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007, although earlier adoption is permitted. Management has not determined the effect that adopting this statement would have on the Company's financial condition or results of operation.
In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106, and 132(R)”. This statement requires employers to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This statement also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. The provisions of SFAS No. 158 are effective for employers with publicly traded equity securities as of the end of the fiscal year ending after December 15, 2006. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The objective of SFAS No. 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.
In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statements No. 109”. FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a two-step method of first evaluating whether a tax position has met a more likely than not recognition threshold and second, measuring that tax position to determine the amount of benefit to be recognized in the financial statements. FIN 48 provides guidance on the presentation of such positions within a classified statement of financial position as well as on derecognition, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The adoption of this statement is not expected to have a material effect on the Company's future reported financial position or results of operations.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
GreenChek Technology Inc.
I have audited the accompanying balance sheets of GreenChek Technology Inc. (the Company), a development stage company, as of February 28, 2009 and February 29, 2008 and the related statements of operations, stockholders’ equity (deficiency), and cash flows for the years ended February 28, 2009 and February 29, 2008 and for the period September 12, 2006 (date of inception) to February 28, 2009. These financial statements are the responsibility of the Company’s management. My responsibility is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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. I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of GreenChek Technology Inc., a development stage company, as of February 28, 2009 and February 29 , 2008 and the results of its operations and its cash flows for the years ended February 28, 2009 and February 29 , 2008 and for the period September 12, 2006 (date of inception) to February 28, 2009 in conformity with accounting principles generally accepted in the United States.
The accompanying financial statements referred to above have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s present financial situation raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to this matter are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
MICHAEL T. STUDER CPA P.C.
Michael T. Studer CPA P.C.
Freeport, New York
May 29,
GreenChek Technology Inc.
(formerly Ridgestone Resources, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 28, 2009
Note 1. Development Stage Company
Ridgestone Resources, Inc. was incorporated in the State of Nevada on September 12, 2006, and changed its name to GreenChek Technology Inc. (the “Company”) on August 5, 2008. From inception to May 31, 2008, the Company’s principal business was the acquisition and exploration of mineral resources. On July 14, 2008, the Company entered into a licensing agreement to acquire patent and intellectual rights relating to the manufacturing, marketing, and distributing of products designed to reduce gas emissions by motor vehicles through the use of hydrogen technology (see Note 3).
These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has never generated revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at February 28, 2009, the Company has accumulated losses of $3,676,874 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 2. Summary of Significant Accounting Policies
a)
Basis of Presentation
These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. The Company’s fiscal year end is February 28.
b)
Use of Estimates
The preparation of financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to deferred income tax asset valuation allowances and loss contingencies. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
GreenChek Technology Inc.
(formerly Ridgestone Resources, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 28, 2009
Note 2. Summary of Significant Accounting Policies (continued)
c)
Basic and Diluted Net Earnings (Loss) Per Share
The Company computes net earnings (loss) per share in accordance with SFAS No. 128, "Earnings per Share". SFAS No. 128 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive. As at February 28, 2009, there were no dilutive potential common shares.
d)
Comprehensive Loss
SFAS No. 130, “Reporting Comprehensive Income,” establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. Since inception, the Company has had no items other than net loss that represent a comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.
e)
Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturities of three months or less at the time of issuance to be cash equivalents.
f)
Mineral Property Costs
The Company had been in the exploration stage since its inception on September 12, 2006 to May 31, 2008, and had not yet realized any revenues from its planned operations. It was primarily engaged in the acquisition and exploration of mining properties. Mineral property exploration costs were expensed as incurred. Mineral property acquisition costs were initially capitalized when incurred using the guidance in EITF 04-02, “Whether Mineral Rights Are Tangible or Intangible Assets”. The Company assessed the carrying costs for impairment under SFAS 144, “Accounting for Impairment or Disposal of Long Lived Assets” at each fiscal quarter end. If it had been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, the costs then incurred to develop such property, would be capitalized. Such costs would be amortized using the units-of-production method over the estimated life of the probable reserve. If mineral properties were subsequently abandoned or impaired, any capitalized costs would be charged to operations.
GreenChek Technology Inc.
(formerly Ridgestone Resources, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 28, 2009
Note 2. Summary of Significant Accounting Policies (continued)
g)
Financial Instruments
SFAS No. 157 “Fair Value Measurements” requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. SFAS No. 157 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. SFAS No. 157 prioritizes the inputs into three levels that may be used to measure fair value:
Level
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Company’s financial instruments consist principally of cash, accounts payable, and due to related parties. Pursuant to SFAS No. 157, the fair value of our cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets. The Company believes that the recorded values of all of the other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
The Company’s partial operations are in Canada, which results in exposure to market risks from changes in foreign currency rates. The financial risk is the risk to the Company’s operations that arise from fluctuations in foreign exchange rates and the degree of volatility of these rates. Currently, the Company does not use derivative instruments to reduce its exposure to foreign currency risk.
h)
Offering Costs
Offering costs represent legal fees incurred in connection with the Company’s filing of a Registration Statement on Form SB-2 to register the 4,140,000 shares of common stock sold by the Company to non-affiliates through March 7, 2007. These costs have been charged to additional paid-in capital.
GreenChek Technology Inc.
(formerly Ridgestone Resources, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 28, 2009
Note 2. Summary of Significant Accounting Policies (continued)
i)
Income Taxes
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company accounts for income taxes using the asset and liability method in accordance with SFAS No. 109, “Accounting for Income Taxes” as of its inception. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
j)
Foreign Currency Translation
The Company’s functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with SFAS No. 52 “Foreign Currency Translation”, using the exchange rate prevailing at the balance sheet date. Gains and losses arising on settlement of foreign currency denominated transactions or balances are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars. The Company has not, to the date of these financials statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
k)
Stock-based Compensation
In accordance with SFAS 123(R), “Share-Based Payments,” the Company accounts for share-based payments using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
l)
Research and Development
Research and development costs ($89,069 in the year ended February 28, 2009) are expensed as incurred.
m) Recent Accounting Pronouncements
In June 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities”. FSP EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting, and therefore need to be included in the computation of earnings per share under the two-class method as described in FASB Statement of Financial Accounting Standards No. 128, “Earnings per Share.” FSP EITF 03-6-1 is effective for financial statements issued for fiscal years beginning on or after December 15, 2008 and earlier adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.
GreenChek Technology Inc.
(formerly Ridgestone Resources, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 28, 2009
Note 2. Summary of Significant Accounting Policies (continued)
m) Recent Accounting Pronouncements (continued)
In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts - An interpretation of FASB Statement No. 60”. SFAS No. 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. It is effective for financial statements issued for fiscal years beginning after December 15, 2008, except for some disclosures about the insurance enterprise’s risk-management activities. SFAS No. 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period beginning after issuance. Except for those disclosures, earlier application is not permitted. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.
In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. It is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles”. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities - an amendment to FASB Statement No. 133”. SFAS No. 161 is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash flows. Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.
GreenChek Technology Inc.
(formerly Ridgestone Resources, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 28, 2009
Note 2. Summary of Significant Accounting Policies (continued)
m) Recent Accounting Pronouncements (continued)
In December 2007, the FASB issued SFAS No. 160 “Non-controlling Interests in Consolidated Financial Statements-an amendment of ARB No. 51”. SFAS 160 establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. The guidance will become effective for the fiscal year beginning after December 15, 2008. The adoption of this statement is not expected to have a material effect on the Company's financial statements.
In December 2007, the FASB issued SFAS No. 141R, “Business Combinations”. This statement replaces SFAS 141 and defines the acquirer in a business combination as the entity that obtains control of one or more businesses in a business combination and establishes the acquisition date as the date that the acquirer achieves control. SFAS 141R requires an acquirer to recognize the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition date, measured at their fair values as of that date. SFAS 141R also requires the acquirer to recognize contingent consideration at the acquisition date, measured at its fair value at that date. This statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company's financial statements.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities - Including an Amendment of FASB Statement No. 115”. This statement permits entities to choose to measure many financial instruments and certain other items at fair value. Most of the provisions of SFAS No. 159 apply only to entities that elect the fair value option. However, the amendment to SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities” applies to all entities with available-for-sale and trading securities. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provision of SFAS No. 157, “Fair Value Measurements”. The adoption of this statement did not have a material effect on the Company's consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. The objective of SFAS No. 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The adoption of this statement did not have a material effect on the Company's financial statements.
GreenChek Technology Inc.
(formerly Ridgestone Resources, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 28, 2009
Note 3. License Agreement Costs, Net
License agreement costs, net, at February 28, 2009 consists of:
On July 14, 2008, the Company entered into an Agreement with China Bright Technology Development Limited (the Licensor) and Lincoln Parke (the Principal), and acquired a Comprehensive License to use certain patent and intellectual rights for the purpose of manufacturing, marketing, and distributing products designed to reduce gas emissions by motor vehicles. The territory covered by the license is the European Union and the United States of America. The price for the license is $3,500,000, payable as follows: $300,000 on August 13, 2008 (deemed paid); $1,000,000 by December 31, 2008 (unpaid); $1,000,000 by March 31, 2009 (unpaid); and, $1,200,000 by August 31, 2009. In addition, provided that the $1,000,000 payment due December 31, 2008 is made, the Company is to issue the Principal a total of 43,470,000 shares or approximately 60% of the Company’s total outstanding common shares after the issuance. The Company must also use its best efforts to provide funding for business development of $3,500,000 payable on the same schedule as the license fee payments noted above. The Company must also use its best efforts to fund a $2,000,000 product and investor awareness marketing campaign through the issuance of shares.
The term of the Comprehensive License is 20 years. In the event of failure by the Company to fulfill any of its obligations under the Agreement, the Agreement and Comprehensive License may be terminated by the Licensor with 120 days notice. On July 15, 2008, the Principal was appointed Chief Executive Officer, Chief Financial Officer, and director of the Company.
The Agreement did not state any interest on the $3,500,000 total amounts due the Licensor between August 13, 2008 and August 31, 2009. Accordingly, the Company recorded the license price at the $3,101,578 present value (discounted at an 18% annual interest rate) of the $3,500,000 total payments due and recorded amortization expense of $20,394 for the period July 14, 2008 to August 31, 2008 (using the straight line method over the 20 years term of the Agreement).
As of August 31, 2008, the Company reviewed the remaining $3,081,184 carrying value of the license agreement costs for potential impairment. Considering all facts and circumstances, the Company concluded that it was not more likely than not that any of the $3,081,184 carrying costs were recoverable. Accordingly, the Company expensed a $3,081,184 provision for impairment of license agreement costs at August 31, 2008 and reduced the license agreement costs, net to $0.
GreenChek Technology Inc.
(formerly Ridgestone Resources, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 28, 2009
Note 4. Due to Related Parties
Due to related parties consist of:
During the year ended February 28, 2009, the Company, the Licensor, and the Principal agreed to deem the $300,000 license agreement instalment due August 13, 2008 as paid in exchange for the Company’s agreement to pay $300,000 to the Principal.
Note 5. Amount due to Licensor of License Agreement
Amount due to licensor of license agreement, net, at February 28, 2009, consists of:
GreenChek Technology Inc.
(formerly Ridgestone Resources, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 28, 2009
Note 6. Common Stock
a)
During the period ended February 28, 2007, the Company accepted stock subscriptions for 27,090,000 shares of common stock at $0.00143 per share for cash proceeds of $38,700. The shares were issued on March 7, 2007.
b)
In March 2007, the Company accepted stock subscriptions for 1,890,000 shares of common stock at $0.00143 per share for cash proceeds of $2,700.
c)
On June 18, 2007, the Securities and Exchange Commission declared effective the Company’s registration statement on Form SB-2 to register for sale the 28,980,000 shares of common stock owned by its stockholders other than the president. The Company did not receive any proceeds from such sales.
d)
On May 28, 2008, the Company effected a 7 to 1 forward stock split of the issued and outstanding common stock. As a result, the issued and outstanding shares increased from 9,140,000 shares of common stock to 63,980,000 shares of common stock. All share amounts have been retroactively adjusted for all periods presented.
e)
On October 7 and October 8, 2008, pursuant to a Subscription Agreement dated September 17, 2008, the Company sold 281,333 Units to Noyz Management Corp. at $0.75 per unit for gross proceeds of $211,000. After deducting $21,100 in finder’s fees, the net proceeds to the Company were $189,900. Each Unit consists of one share of common stock and one warrant to purchase one share of common stock at an exercise price of 0.75 per share to September 17, 2009.
f)
On October 21, 2008, the Company entered into a Return to Treasury Agreement with Pardeep Sarai, former majority stockholder and chief executive officer of the Company (“Sarai”), whereby the Company agreed to purchase 35,000,000 shares of Company common stock owned by Sarai for $100,000. Pursuant to this agreement, the Company paid $75,000 to Sarai on October 21, 2008. The agreement provides that the 35,000,000 shares are to be returned to Sarai if the Company fails to pay the remaining $25,000 to Sarai by March 1, 2009 (which date has been extended to June 30, 2009 under an Amendment to Agreement dated May 19, 2009 between the Company and Sarai) or if certain transactions contemplated by the License Agreement do not occur.
g)
On December 12, 2008, pursuant to a Subscription Agreement dated September 17, 2008, the Company sold 26,667 Units to Noyz Management Corp. at $0.75 per unit for gross proceeds of $20,000. After deducting $2,000 in finder’s fees, the net proceeds to the Company were $18,000. Each Unit consists of one share of common stock and one warrant to purchase one share of common stock at an exercise price of 0.75 per share to September 17, 2009.
GreenChek Technology Inc.
(formerly Ridgestone Resources, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 28, 2009
Note 7. Income Taxes
The provisions for (benefit from) income taxes differs from the amounts computed by applying the statutory United States federal income tax rate of 35% to income (loss) before income taxes. The sources of the difference follow:
Significant components of the Company’s deferred income tax assets are as follows:
Based on management’s present assessment, the Company has not yet determined it to be more likely than not that a deferred tax asset of $95,362 at February 28, 2009 attributable to the future utilization of the net operating loss carryforwards of $272,462 at February 28, 2009 will be realized. Accordingly, the Company has provided a 100% allowance against the deferred tax asset in the financial statements. The Company will continue to review this valuation allowance and make adjustments as appropriate. The $272,462 net operating loss carryforwards expire $7,277 in 2027, $28,608 in 2028 and $236,577 in 2029.
Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.
GreenChek Technology Inc.
(formerly Ridgestone Resources, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
February 28, 2009
Note 8. Discontinued Operations
On May 31, 2008, the Company discontinued its mineral property acquisition and exploration operations.
The results of discontinued operations are summarized as follows:
Note 9. Commitments and Contingencies
On August 1, 2008, the Company entered into a Management Contract with Lincoln Parke (“Parke”), the Company’s chief executive officer. Under the agreement, Parke is to perform certain services for the Company and the Company is to pay monthly management fees of 5,000 Canadian dollars (approximately $3,930 translated at the February 28, 2009 exchange rate) to Parke. Either party can terminate the agreement with 30 days written notice.
On August 14, 2008, the Company entered into a Consulting Agreement with an investor relations firm. Under the Consulting Agreement, the investor relations firm is to be paid $5,000 per month for a term of 12 months.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial disclosures from the inception of our company through the date of this Form 10-K. Our financial statements for the period from inception to February 28, 2009, included in this report have been audited by Michael T. Studer CPA, P.C., 18 East Sunrise Highway, Suite 311 Freeport, New York 11520, as set forth in this annual report.
PART III
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (“Disclosure Controls”) as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our CEO and CFO concluded that our Disclosure Controls were effective as of the end of the period covered by this report.
Limitations on the Effectiveness of Controls
Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management or board override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
CEO and CFO Certifications
Appearing immediately following the Signatures section of this report there are Certifications of the CEO and the CFO. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
Management’s 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 Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention of overriding controls. Accordingly, even effective internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of our internal control over financial reporting as of February 28, 2009. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment, we believe that, as of February 28, 2009, the Company’s internal control over financial reporting was effective based on those criteria.
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.
Changes in Internal Controls
We have also evaluated our internal controls for financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of their last evaluation.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Officers and Directors
Our directors serve until their successor is elected and qualified. Our officers are elected by the board of directors to a term of one (1) year and serves until their successor is duly elected and qualified, or until they are removed from office. The board of directors has no nominating, auditing or compensation committees.
The name, age and position of our officers and directors are set forth below:
The persons named above have held their offices/positions since inception of our company and are expected to hold their offices/positions until the next annual meeting of our stockholders.
Background of Officers and Directors
From June 2002 to February 2006, Mr. Parke was president of Tianjin Jiaxin Investment Guarantee Co. Ltd. located in Tianjin, Peoples' Republic of China ("PRC"). Tianjin Jiaxin Investment Guarantee Co. Ltd. was engaged in the business of making loans to small corporations located in China. From March 2001 to April 2002, Mr. Parke was chief financial officer of Sol Produce located in Vancouver, British Columbia. Sol Produce was an international produce distributor.
Antoinette Boquiren is a Certified Public Accountant with 15 years of experience in business management and accounting. Ms. Boquiren is a Partner at Global Forensic Consultants Ltd. since 2006, a Hong Kong based firm specializing in forensic accounting and providing investigative accounting services to clients in Asia, United Kingdom and the United States. She is a Certified Fraud Examiner (CFE), Forensic Certified Public Accountant (CPA) and Business Valuator Accredited in Litigation (BVAL).
Involvement in Certain Legal Proceedings
Other than as described in this section, to our knowledge, during the past five years, no present or former director or executive officer of our company: (1) filed a petition under the federal bankruptcy laws or any state insolvency law, nor had a receiver, fiscal agent or similar officer appointed by a court for the business or present of such a person, or any partnership in which he was a general partner at or within two yeas before the time of such filing, or any corporation or business association of which he was an executive officer within two years before the time of such filing; (2) was convicted in a criminal proceeding or named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting the following activities: (i) acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, associated person of any of the foregoing, or as an investment advisor, underwriter, broker or dealer in securities, or as an affiliated person, director of any investment company, or engaging in or continuing any conduct or practice in connection with such activity; (ii) engaging in any type of business practice; (iii) engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal or state securities laws or federal commodity laws; (4) was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described above under this Item, or to be associated with persons engaged in any such activity; (5) was found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission to have violated any federal or state securities law and the judgment in subsequently reversed, suspended or vacate; (6) was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated.
Audit Committee and Charter
We have a separately-designated audit committee of the board. Audit committee functions are performed by our board of directors. None of our directors are deemed independent. All directors also hold positions as our officers. Our audit committee is responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the outside auditory and any outside advisors engagement by the audit committee. A copy of our audit committee charter is filed as an exhibit to this report.
Audit Committee Financial Expert
None of our directors or officers have the qualifications or experience to be considered a financial expert. We believe the cost related to retaining a financial expert at this time is prohibitive. Further, because of our limited operations, we believe the services of a financial expert are not warranted.
Code of Ethics
We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. A copy of the code of ethics is attached hereto.
Disclosure Committee and Charter
We have a disclosure committee and disclosure committee charter. Our disclosure committee is comprised of all of our officers and directors. The purpose of the committee is to provide assistance to the Chief Executive Officer and the Chief Financial Officer in fulfilling their responsibilities regarding the identification and disclosure of material information about us and the accuracy, completeness and timeliness of our financial reports. A copy of the code of ethics is attached hereto.
Section 16(a) of the Securities Exchange Act of 1934
As of the date of this report, we are not subject to section 16(a) of the Securities Exchange Act of 1934.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the compensation paid by us for the last three fiscal years ending February for each of our officers. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any. The compensation discussed addresses all compensation awarded to, earned by, or paid or named executive officers.
Officer’s Summary Compensation Table
We do not anticipate paying any salaries in 2009. We do not anticipate paying salaries until we have sold a sufficient number of ERD units.
Compensation of Directors
The members of our board of directors are not compensated for their services as directors. The board has not implemented a plan to award options to any directors. There are no contractual arrangements with any member of the board of directors. We have no director's service contracts.
Director’s Summary Compensation Table
Option/SAR Grants
There are no stock option, retirement, pension, or profit sharing plans for the benefit of our officers and directors.
Long-Term Incentive Plan Awards
We do not have any long-term incentive plans.
Indemnification
Under our Articles of Incorporation and Bylaws of the corporation, we may indemnify an officer or director who is made a party to any proceeding, including a law suit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in our best interest. We may advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he is to be indemnified, we must indemnify him against all expenses incurred, including attorney's fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada.
Regarding indemnification for liabilities arising under the Securities Act of 1933, which may be permitted to directors or officers under Nevada law, we are informed that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy, as expressed in the Act and is, therefore, unenforceable.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of the date of this report, the total number of shares owned beneficially by each of our directors, officers and key employees, individually and as a group, and the present owners of 5% or more of our total outstanding shares. The stockholders listed below have direct ownership of his/her shares and possess voting and dispositive power with respect to the shares.
Changes in Control
There are no arrangements which may result in a change of control of Greenchek Technology Inc.
ITEM 13.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
We issued 35,000,000 shares of common stock to Mr. Sarai in September 2006, in consideration of $5,000.
For fiscal year 2008, Mr. Sarai allowed us to use a portion of his home as our office on a rent free basis.
As of February 29, 2008, we owed Mr. Sarai, our sole officer and director, $6,510 for advances made to us. This amount is unsecured, bears no interest with no specific terms of repayment.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
(1) Audit Fees
The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for our audit of annual financial statements and review of financial statements included in our Form 10-QSBs or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years was:
$
11,600
Michael T. Studer CPA
$
11,300
Michael T. Studer CPA
(2) Audit-Related Fees
The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountants that are reasonably related to the performance of the audit or review of our financial statements and are not reported in the preceding paragraph:
$
Michael T. Studer CPA
$
Michael T. Studer CPA
(3) Tax Fees
The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning was:
$
Michael T. Studer CPA
$
Michael T. Studer CPA
(4) All Other Fees
The aggregate fees billed in each of the last tow fiscal yeas for the products and services provided by the principal accountant, other than the services reported in paragraphs (1), (2), and (3) was:
$
Michael T. Studer CPA
$
Michael T. Studer CPA
(5) Our audit committee’s pre-approval policies and procedures described in paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X were that the audit committee pre-approve all accounting related activities prior to the performance of any services by any accountant or auditor.
(6) The percentage of hours expended on the principal accountant’s engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full time, permanent employees was not more than 50%.
PART IV. OTHER INFORMATION
ITEM 15.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following documents are included herein:
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities on this 11th day of June, 2009.
BY:
ANTOINETTE BOQUIREN
Antoinette Boquiren
Principal Financial Officer, Principal Accounting Officer and a member of the Board of Directors.
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
Date
LINCOLN PARKE
Director
June 11th ,
Lincoln Parke
ANTOINETTE BOQUIREN
Director
June 11th ,
Antoinette Boquiren
EXHIBIT INDEX