UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K
[X]
ANNUAL REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31,
2008
[ ]
TRANSITION REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For transition period ___ to ____
Commission file number: 000-49900
RIVAL TECHNOLOGIES, INC.
(Exact name of registrant as specified in
its charter)
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Nevada
(State or other jurisdiction of
incorporation
or organization)
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43-2114971
(I.R.S.
Employer Identification No.)
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375 N.
Stephanie Street, Henderson, Nevada
(Address of
principal executive offices)
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89014
(Zip
Code)
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Registrant’s telephone number:
(702)
990-0884
Securities registered under Section 12(b) of the Exchange
Act: None
Securities registered under Section 12(g) of the Exchange
Act: Common Stock
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [
] No [X]
Indicate by check mark if the registrant is not required
to file reports pursuant to Section 13 or 15(d) of the Exchange Act.
Yes [ ] No [X]
Indicate by check mark whether the registrant (1) filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company:
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Large accelerated filer [
]
Non-accelerated filer
[ ]
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Accelerated filed [
]
Smaller reporting company
[X]
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1
Indicate by check mark whether
the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).
Yes [ ] No [X]
The aggregate market value of the voting
and non-voting common equity held by non-affiliates computed by reference to the
price at which the common equity was last sold as of the last business day of
the registrant’s most recently completed second fiscal quarter was approximately
$7,085,938.
The number of shares outstanding of the registrant’s
common stock as April 14, 2009 was 47,182,560.
Documents incorporated by reference: None
TABLE OF CONTENTS
PART I
Item 1.
Business
3
Item 2.
Properties
6
Item 3.
Legal Proceedings
6
Item 4.
Submission of Matters to a Vote of Security Holders
6
PART II
Item 5. Market for Registrant’s
Common Equity, Related Stockholder Matters
and
Issuer Purchases of Equity Securities
6
Item 6.
Selected Financial Data
7
Item 7.
Management’s Discussion and Analysis of Financial
Condition and Results of Operations
7
Item 8.
Financial Statements and Supplementary Data
9
Item 9.
Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
38
Item 9A(T). Controls and
Procedures
38
Item 9B. Other
Information
38
PART III
Item 10. Directors,
Executive Officers and Corporate Governance
39
Item 11. Executive
Compensation
39
Item 12. Security Ownership of Certain Beneficial
Owners and Management
and
Related Stockholder Matters
40
Item 13. Certain
Relationships and Related Transactions, and Director Independence
42
Item 14. Principal
Accounting Fees and Services
42
PART IV
Item 15. Exhibits,
Financial Statement Schedules
42
Signatures
44
2
In this report references
to “Rival,” “Rival Technologies,” “we,” “us,” and “our” refer to Rival
Technologies, Inc.
FORWARD LOOKING STATEMENTS
The Securities and Exchange Commission
(“SEC”) encourages companies to disclose forward-looking information so that
investors can better understand future prospects and make informed investment
decisions. This report contains these types of statements. Words
such as “may,” “will,” “expect,” “believe,” “anticipate,” “estimate,” “project,”
or “continue” or comparable terminology used in connection with any discussion
of future operating results or financial performance identify forward-looking
statements. You are cautioned not to place undue reliance on the
forward-looking statements, which speak only as of the date of this report.
All forward-looking statements reflect our present expectation of future
events and are subject to a number of important factors and uncertainties that
could cause actual results to differ materially from those described in the
forward-looking statements.
PART I
ITEM 1. BUSINESS
Historical Development
Rival Technologies Inc., was incorporated
in the Province of British Columbia, Canada on February 10, 1987, under the name
North American Fire Guardian Technologies Inc. (“Rival-British Columbia”).
On September 2, 2005, Rival-British Columbia incorporated Rival
Technologies, Inc., a Nevada corporation (“Rival-Nevada”), as its wholly-owned
subsidiary for the sole purpose of changing Rival-British Columbia’s domicile
from British Columbia to Nevada. Pursuant to the Plan of Merger
Amalgamation Agreement, dated September 6, 2005, Rival-British Columbia merged
with Rival-Nevada. The domicile merger was effective October 28, 2005.
On October 31, 2005, Rival Technologies
incorporated CWI Technology, Inc., a Nevada corporation, as a wholly-owned
subsidiary for the purpose of developing and marketing the CWI Technology,
described below.
Rival Technologies incorporated TRU
Oiltech, Inc, a Nevada corporation (“TRU Oiltech”), on October 31, 2005, for the
purpose of acquiring, developing and marketing the TRU™ process, described
below. On October 31, 2005, Rival Technologies received 6,000,000 shares
of TRU Oiltech common stock and the owners of the technology received 4,000,000
TRU Oiltech shares. As a result TRU Oiltech is a majority-owned subsidiary
of Rival Technologies.
Our Business
We are a holding company operating on a
consolidated basis with our wholly-owned subsidiary, CWI Technology, Inc., and
our majority-owned subsidiary, TRU Oiltech, Inc. These subsidiaries are
development stage companies engaged in the business of developing technologies
related to continuous water injection in diesel engines and a primary upgrading
process for heavy crude oil and bitumen. Both subsidiaries are in the
licensing and marketing stage for their technologies.
TRU Oiltech, Inc.
On September 20, 2005, we entered into a
purchase agreement with G.A. Constable, Norman L. Carlson and Gerald A. Heelan,
the owners of TRU Oiltech technology (“TRU process”). The TRU
™
technology is a mild, thermal reagent, primary upgrading process designed
for heavy crudes and oil sands bitumen which improves viscosity for acceptance
by pipeline transportation systems. Pursuant to the terms of the purchase
agreement, we incorporated TRU Oiltech and transferred the TRU Oiltech
technology into TRU Oiltech. Mr. Constable was appointed Director and
President of TRU Oiltech. Rival Technologies agreed to provide financing
to TRU Oiltech to fund research and tests aimed at obtaining a patent and
developing a commercially viable process. In June 2007 Douglas B.
Thomas was appointed Managing Director of TRU Oiltech.
On April 11, 2007, TRU Oiltech filed with
the United States Patent and Trademark Office a patent application titled,
“Method of Upgrading Heavy Crude Oil.”
Light crude oil is defined
as having an API gravity higher than 31.1°,
3
medium oil as
having an API gravity between 22.3° and 31.1°, and heavy oil as having an API
gravity below 22.3°. Oil that does not flow, or cannot be pumped without
being heated or diluted is called bitumen. It generally has an API gravity of
less than 12°. The bitumen mined from the oil sands deposits in the
Athabasca area of Canada has an API gravity of around 8°, but can be upgraded to
an API gravity of 31° to 33°. This upgraded oil is known as synthetic crude
oil.
To begin the TRU™ process, a bitumen
feedstock and our cracking resistant additive are introduced into a non-coking
visbreaker where the bitumen is cracked, then sent for distillation. The
additive is recovered and the gas oil is sent for blending. H
2
S
rich off-gases from the non-coking visbreaker and distillation tower functions
are re-directed for potential process fuel supply. Next, the gas oil
distillation residue is sent to a solvent deasphalter where the residual
extractables (deasphalter pitch) are separated from the asphaltenes. The
solvent is recovered and the deasphalter extract is sent for blending with the
gas oil. The resulting metal free, low sulphur, ultra high yield blend
is a premium synthetic crude oil branded TRULITE™. TRULITE™ is
refinery friendly and suitable for pipeline transportation eliminating the need
for diluent.
Management believes the TRU™ process could
reduce costs for oil producers that transfer millions of barrels of heavy crude
each day. Generally, adding diluent or condensates to heavier oils
represents 30% of the total cost per barrel of blended heavy oils. The
TRU™ process may potentially reduce this cost by $5 to $10 per barrel, and, as
licensor of the technology, we anticipate receiving a licensing fee of $1 to $2
per barrel.
In January 2008 we announced that TRU
Oiltech had contracted with an independent engineering consultant to provide an
unbiased linear program analysis of our synthetic crude product TRULITE™.
In April we received that report which expressed concern regarding our
testing methods and it recommended that we alter our testing methodology by
undertaking a continuous feed pilot program that would simulate to a reasonable
degree the expected operating conditions for a commercial production thermal
cracker-solvent extraction process. However, management believes that the
TRU™ process will provide benefits and the operation of a commercial unit can be
projected from the existing test results. We intend to seek out oil
industry partners to participate in the continuing testing phase for the
commercial development of the TRU™ process.
Worldwide, oil sand and heavy oil resources
are massive. The prime market for this technology is in Alberta, Canada
which holds three major oilsands deposits. The Athabasca Oil Sands deposit
is the largest and estimated to hold 1.3 trillion barrels of bitumen and is the
primary target market for commercialization of the TRU™ process.
Additional heavy oil reserves estimated at
1.2 trillion barrels are located in Venezuela’s Orinoco heavy oil belt. On
February 23, 2007, Rival and TRU Oiltech entered into a joint venture agreement
with Harrison Kramer Corp. that entitled the joint venture partner a 25%
interest and exclusive right to exploit the TRU™ process in Venezuela until
March 21, 2008. The Orinoco Oil belt is located in eastern Venezuela and
it is one of the largest bitumen accumulations in the world. The TRU™
process can substantially increase the economic recoveries of Orinoco bitumen
and Harrison Kramer has agreed to assist in the commercialization of the TRU™
process in Venezuela. Under the joint venture agreement, Harrison Kramer
has the responsibility, out of its share of the joint venture participation, to
compensate others that may assist, either directly or indirectly, in
facilitating the commercial exploitation of the TRU™ process in Venezuela.
Additionally, the parties are to share in long-term savings obtained from
the use of the TRU™ process in Venezuela on a ratio of a minimum of 25% of the
savings for the account of Rival and Harrison Kramer. This joint venture
will be accounted for in our financial statements as a majority-owned
subsidiary, adjusted for any majority interest.
Our strategy for 2008 was to enter into one
or more partnerships with major oil producers, and continue ongoing testing
aimed at optimizing the formula’s value. This stage of development would
allow TRU Oiltech to build a pilot production facility in conjunction with an
oil company. During the past year 2008 our management has been actively
meeting with heavy oil producers to negotiate license agreements for the
TRU
TM
process. However, we have been unsuccessful at negotiating a
partnership agreement as of the date of this filing and we may need to delay
further development of the TRU
TM
process.
In the third quarter of 2008, the Company
moved towards the second phase of its four phase business development plan for
the TRU
TM
process; building a pilot plant. The Company commenced
preliminary engineering and design for the pilot plant and construction is now
expected to commence during the first half of 2009 subject to financing
4
becoming
available. The pilot plant will be constructed at a well known industry leader’s
facilities in Eastern Canada and shipped to Alberta where it will be operated.
Our strategy for 2009 is to continue the
search for development partners and to pursue opportunities for financing the
final engineering and construction of the pilot plant. Management believes
interest in the project remains positive. However, we cannot assure you that we
will be successful in negotiating a final contract with these development
partners as the market for reducing viscosity of heavy oil and oil sands has
been negatively affected by the downturn occurring in the global economy.
We will compete directly with larger companies with longer operating
histories and greater financial resources with established distribution
channels. We are likely to encounter a high degree of competition in
developing a customer base for this technology.
CWI Technology, Inc.
In April, 2003, we acquired a diesel engine
technology called Continuous Water Injection technology (“CWI Technology”) from
M.A. Turbo/Engine Ltd. (“M.A. Turbo”). The CWI technology is designed to
reduce harmful nitrogen oxide and smoke emissions, improve fuel efficiency and
provide cleaner operations of diesel engines. We acquired a 100% interest
in the CWI Technology for the automotive transportation industry, and a 20%
interest in CWI Technology for the marine industry. The purchase agreement
for the CWI Technology included an option clause to acquire the balance of the
marine application of this technology. We also committed to providing M.A.
Turbo with funding to develop and market the CWI Technology for the automotive
transportation industry and the marine industry. However, in April, 2005,
we decided not to exercise our right to acquire the 20% interest in the CWI
Technology for the marine industry.
On July 25, 2005, we entered into a
distribution agreement with M.A. Turbo that granted us the exclusive
distribution rights to the marine application of CWI Technology in Europe and
non-European countries bordering the Mediterranean Sea. The term of the
exclusive license is a period of five years, and M.A. Turbo will receive 50% of
any net profit received from sales of the marine CWI Technology.
In September, 2006, we announced that CWI
Technology had entered into a commercial contract with Neptune Bulk Terminals,
which operates switching locomotives in Vancouver, British Columbia. On
October 31, 2006 we announced that the CWI Technology had been installed on a
locomotive equipped with a two-stroke naturally aspirated EMD-645 engine (1,500
HP) and field testing continues at this time.
On January 26, 2007, the United States
Patent and Trademark Office allowed the CWI Technology patent titled,
“
Emission Control Water Injection System for Diesel Engines”
.
During 2008 there have been no new
developments in this subsidiary. The market for emission reductions is very
competitive with many larger companies offering technologies and products to
satisfy environmental clean air laws in Canada and the United States. We
will compete directly with companies that have longer operating histories, more
experience, substantially greater financial resources, greater size, more
substantial research and development and marketing organizations, established
distribution channels and are better situated in the market. We do not
have an established customer base and are likely to encounter a high degree of
competition in developing a customer base.
Research and Development
For the year ended December 31, 2008, we
spent $0 on research and development related to testing of our CWI technology
and TRU™ process compared to $73,900 for the year ended December 31, 2007.
We anticipate that we will continue to record research and development
expenses as we continue testing our technologies for commercialization.
Employees
Rival does not have any employees at this time.
Our management expects to confer with consultants, attorneys and
accountants as necessary. We do not anticipate a need to engage any
full-time employees so long as we are seeking financing to pursue our business
plan.
5
ITEM 2.
PROPERTIES
Rival’s principal administrative office is located at 375
N. Stephanie Street, Suite 1411, Henderson, Nevada, 89014, USA. The office
is a registered office, and the relevant service expenses, including the
secretarial, photocopying, and similar services will be charged on a
month-to-month basis depending on the services provided as requirements by the
Company.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any proceedings or threatened
proceedings as of the date of this filing.
ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
We have not submitted a matter to a vote of our
shareholders during the 2008 fiscal year.
PART II
ITEM 5. MARKET FOR REGISTRANT’S
COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY
SECURITIES
Our common stock was listed on the OTC
Bulletin Board under the symbol “RVTI” from January 1, 2006 through June 2006.
From June 2006 through June 18, 2008 our common stock was listed on the
Pink Sheets, LLC. On June 18, 2008, the listing of our common stock
returned to the OTC Bulletin Board. Our common stock also trades on the Berlin
Stock Exchange and the Frankfurt Stock Exchange and our Regulation S common
stock is traded on the Berlin Stock Exchange. In October 2008 we changed
the CUSIP number for the Regulation S common stock from CUSIP No. C788451 01 to
the same CUSIP number used for our common stock, No. 768027 10 4. Regulation S
provides for the offer and sale of restricted securities outside of the United
States. An aggregate of 9,000,000 shares were issued under Regulation S and
offered and sold in Europe. All Regulation S sales were offshore transactions,
with no directed selling efforts in the United States. These securities are not
registered under the Securities Act of 1933 and cannot be offered or sold in the
United States unless registered under the Securities Act or an exemption from
registration is available.
The following table lists the range for the high and low
closing bid prices of our common stock for each quarter for the years ended
December 31, 2008 and 2007, as reported by the OTC Bulletin Board and Pink
Sheets, LLC. Over-the-counter market bid quotations reflect inter-dealer
prices, without retail mark-up, mark-downs or commissions, and may not
necessarily represent actual transactions.
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2008
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2007
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Quarter ended
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High
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Low
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High
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Low
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March 31
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$ 0.52
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$ 0.52
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$ 1.25
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$ 0.61
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June 30
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0.21
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0.21
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1.10
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0.57
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September 30
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0.75
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0.30
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0.75
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0.43
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December 31
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0.19
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0.19
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0.70
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0.35
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Our shares are subject to Section 15(g) and
Rule 15g-9 of the Securities and Exchange Act, commonly referred to as the
“penny stock” rule. The rule defines penny stock to be any equity security
that has a market price less than $5.00 per share, subject to certain
exceptions. The rule provides that any equity security is considered to be
a penny stock unless that security is registered and traded on a national
securities exchange meeting specified criteria set by the SEC or excluded from
the definition on the basis of share price or the issuer’s net tangible assets.
These rules may restrict the ability of
broker-dealers to trade or maintain a market in our common stock and may affect
the ability of shareholders to sell their shares. Broker-dealers who sell
penny stocks to persons other than established customers and accredited
investors must make a special suitability determination for the purchase of the
security. Accredited investors, in general, include individuals with
assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000
together with their spouse, and certain institutional investors. The rules
require the
6
broker-dealer to
receive the purchaser’s written consent to the transaction prior to the purchase
and require the broker-dealer to deliver a risk disclosure document relating to
the penny stock prior to the first transaction. A broker-dealer also must
disclose the commissions payable to both the broker-dealer and the registered
representative, and current quotations for the security. Finally, monthly
statements must be sent to customers disclosing recent price information for the
penny stocks.
Holders
As of April 14, 2009, we had 181
stockholders of record of our common stock, which does not include shareholders
of our Regulation S common stock or shareholders who hold shares in “street
accounts” of securities brokers.
Dividends
We have not paid any dividends on our common stock.
We currently intend to retain any earnings for use in our business, and do
not anticipate paying cash dividends in the foreseeable future.
Recent Sales of Unregistered Securities
None.
Issuer Purchase of Securities
None.
ITEM 6. SELECTED FINANCIAL
DATA
Not applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial Condition
We have not received, nor recorded,
consolidated revenue from ongoing operations for the past two years and have
relied on equity transactions and loans to fund development of our business
plan. Our auditors have expressed an opinion that these factors raise
substantial doubt as to our ability to continue as a going concern.
Management intends to raise funds through private placement offerings,
targeting strategic partners in an effort to increase revenues and expanding
revenues through strategic acquisitions.
During the past two years we have relied on
debt financing, sales of our common stock for cash and we have issued our common
stock in consideration for services. During 2007 we received funding from
Epsom Investment Services NV (“Epsom”) under a convertible promissory note in
the amount of $500,000 (USD) bearing interest of 7% per annum. The
promissory note is payable on or before March 31, 2009, but Epsom has the option
to convert the principal and interest outstanding at the end of the term into
Rival common stock. The conversion price will be the closing market value
of the common stock on the last trading day prior to the date Epsom provides
Rival with written notice of conversion. As of December 31, 2008, the
interest accrued on this loan is $49,595.
To avoid using our cash, in 2008 we issued
an aggregate of 25,000 shares of common stock and options to purchase 18,000
shares in consideration for services valued at US$21,608. In April
2008, Rival issue 25,000 restricted shares of common stock to Midsouth Capital
Markets Group (“MSCM”) a Georgia company, for financial services for a six month
period on a non-exclusive basis. In February 2008 we entered into a
consulting agreement with L.G. Zangani, LLC to provide business development
consulting to Rival for a six month period, terminating on August 15, 2008.
As part of this agreement, Rival granted options to Leonardo G. Zangani to
purchase 18,000 shares of common stock at an exercise price of $0.55 US.(See
Item 12, below.) During 2007 we issued an aggregate of 522,070 shares of
common stock in 2007 in consideration for consultant and professional services
valued at US$211,168.
7
As a result of
equity financing and loans our consolidated cash position at December 31, 2008
was $28,860, but we recorded a net loss of $360,876 for the year ended December
31, 2008. During the year ended December 31, 2008, we spent $0 on research
and development compared to $73,900 for the year ended December 31, 2007.
We anticipate that we will have research and development expenses in
future periods as our subsidiaries further develop their technologies. We
do not anticipate hiring employees in the short term, but this action will be
based upon the success of our subsidiaries’ development of their respective
technologies.
Our challenge for the next twelve months
will be to obtain financing to assist the development of our subsidiaries’
technologies to a commercially viable application and then market them to
customers. However, our subsidiaries may be unable to develop each
technology to a point where it satisfies the needs of the market. In that
case, our subsidiaries may have to research and develop other applications or we
may need to abandon our business plans.
Results of Operations
The following selected financial data is
based on the consolidated financial statements of Rival and CWI Technology and
TRU Oiltech. The following chart summarizes our consolidated financial
statements for the years ended December 31, 2008 and 2007 and should be read in
conjunction with the financial statements, and notes thereto, included with this
report at Part II, Item 8, below.
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Year ended
December 31
2008
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Year ended
December 31
2007
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SUMMARY OF BALANCE SHEET
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Cash and cash equivalents
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$
28,860
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$
351,526
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Total current assets
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30,738
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353,333
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Total assets
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40,362
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365,318
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Total current liabilities
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644,136
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619,622
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Long-term obligations
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-
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-
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Accumulated deficit
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(11,955,119)
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(11,594,243)
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Total stockholder’s equity
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$
(603,773)
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$
(254,304)
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Year ended December 31
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2008
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2007
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SUMMARY OF OPERATING RESULTS
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Revenues
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$
-
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$
-
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Total operating expenses
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325,774
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715,719
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Total other income (expense)
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(35,102)
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(18,300)
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Income taxes
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-
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-
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Net loss
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(360,876)
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(734,019)
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Net loss per share
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$
(0.01)
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$
(0.02)
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Off-balance Sheet
Arrangements
None.
8
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
RIVAL TECHNOLOGIES,
INC.
AND
SUBSIDIARIES
(A Development Stage
Company)
CONSOLIDATED FINANCIAL
STATEMENTS
(Expressed in US
Dollars)
December 31, 2008 and
2007
C O N T E N T
S
Report of
Independent Registered Public Accounting
Firm
10
Consolidated
Balance
Sheets
11
Consolidated Statements of
Operations
12
Consolidated
Statements of Other Comprehensive
Loss
13
Consolidated
Statements of Stockholders’ Equity
(Deficit)
14-20
Consolidated
Statements of Cash
Flows 21-22
Notes to
the Consolidated Financial
Statements
23-37
9
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[Logo]
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CHISHOLM,
BIERWOLF, NILSON & MORRILL, LLC
Certified
Public Accountants
Phone
(801) 292-8756 • Fax (801) 292-8809 • www.cbnmcpa.com
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Todd D.
Chisholm
Nephi J. Bierwolf
Troy F. Nilson
Douglas W.
Morrill
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To The Board of
Directors and Shareholders
Rival
Technologies, Inc.
Las Vegas, Nevada
We have audited
the accompanying consolidated balance sheets of
Rival Technologies, Inc.
as of December 31, 2008 and 2007, and the related consolidated statements of
operations, stockholders' deficit, and cash flows for the years then ended.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our
audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required
to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion,
the financial statements referred to above present fairly, in all material
respects, the financial position of Rival Technologies, Inc. as of December 31,
2008 and 2007, and the results of its operations and its cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
The accompanying
financial statements have been prepared assuming that the Company will continue
as a going concern. As discussed in Note 2 to the consolidated financial
statements, the Company has incurred substantial losses from operations,
recurring negative cash flows from operations, and has limited sales of its
products which raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described
in Note 2. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
/s/ Chisholm. Bierwolf, Nilson & Morrill LLC
Chisholm,
Bierwolf, Nilson & Morrill LLC
Bountiful,
Utah
March 27,
2009
|
|
|
|
PCAOB
Registered, Members of AICPA, CPCAF and UACPA
|
|
533 West 2600 South, Suite
25 • Bountiful, Utah 84010
|
12
South Main, Suite 208, Layton, Utah 84041
|
10
|
|
|
|
|
|
|
|
|
RIVAL TECHNOLOGIES, INC. AND SUBSIDIARIES
|
|
(A Development Stage Company)
|
|
Consolidated Balance Sheets
|
|
Expressed in US Dollars
|
|
|
|
|
|
|
|
|
|
|
|
December 31
|
|
December 31,
|
|
|
|
|
|
2008
|
|
2007
|
|
|
|
ASSETS
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
$
|
28,860
|
$
|
351,526
|
|
|
Other
current assets
|
|
1,878
|
|
1,807
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
30,738
|
|
353,333
|
|
|
|
|
|
|
|
|
|
PROPERTY
AND EQUIPMENT, net
|
|
9,624
|
|
11,984
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
$
|
40,362
|
|
365,318
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
$
|
89,981
|
$
|
99,344
|
|
|
Accrued
interest
|
|
49,595
|
|
14,595
|
|
|
Convertible
note payable
|
|
500,000
|
|
500,000
|
|
|
Promissory
note payable
|
|
4,559
|
|
5,683
|
|
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
644,136
|
|
619,622
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities
|
|
644,136
|
|
619,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock, 100,000,000 shares authorized without
|
|
|
|
|
|
|
par
value, 47,182,560 and 47,157,560 shares issued
|
|
|
|
|
|
|
and
outstanding, respectively
|
|
10,759,546
|
|
10,746,975
|
|
|
Additional
paid-in capital
|
|
514,327
|
|
505,290
|
|
|
Accumulated
other comprehensive income
|
|
77,473
|
|
87,674
|
|
|
Deficit
accumulated during the development stage
|
|
(6,923,135)
|
|
(6,562,259)
|
|
|
Accumulated
deficit
|
|
(5,031,984)
|
|
(5,031,984)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity and Deficit
|
|
(603,774)
|
|
(254,304)
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
$
|
40,362
|
$
|
365,318
|
|
|
|
|
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
RIVAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
|
|
(A Development
Stage Company)
|
|
Consolidated
Statements of Operations
|
|
Expressed in US
Dollars
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
|
|
Amounts From
|
|
|
|
|
|
|
|
|
|
Beginning of
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
|
|
|
|
|
Stage on April 1,
|
|
|
|
|
|
For the Years Ended
|
|
2003 to
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
REVENUES
|
$
|
-
|
$
|
-
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of beneficial conversion feature
|
|
-
|
|
-
|
|
63,327
|
|
|
Consulting
|
|
63,953
|
|
359,814
|
|
927,601
|
|
|
Depreciation
|
|
2,359
|
|
3,154
|
|
9,699
|
|
|
Finders'
fees
|
|
-
|
|
-
|
|
509,700
|
|
|
Investor
relations
|
|
86,394
|
|
109,180
|
|
650,592
|
|
|
Other
general and administrative
|
|
173,068
|
|
169,670
|
|
783,018
|
|
|
Research
and development
|
|
-
|
|
73,900
|
|
443,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
325,774
|
|
715,719
|
|
3,387,310
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE OTHER INCOME (EXPENSE)
|
|
(325,774)
|
|
(715,719 )
|
|
(3,387,310)
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment
of intangible property (Note 4)
|
|
-
|
|
(3,743)
|
|
(3,491,167)
|
|
|
Write
off payable
|
|
-
|
|
-
|
|
18,102
|
|
|
Interest
expense
|
|
(35,102)
|
|
(14,595)
|
|
(66,225)
|
|
|
Interest
income
|
|
-
|
|
37
|
|
399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Income (Expense)
|
|
(35,102)
|
|
(18,300)
|
|
(3,538,891)
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
BEFORE INCOME TAXES AND
|
|
|
|
|
|
|
|
MINORITY
INTEREST
|
|
(360,876)
|
|
(734,019)
|
|
(6,926,201)
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
-
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS BEFORE MINORITY INTEREST
|
|
(360,876)
|
|
(734,019)
|
|
(6,926,201)
|
|
|
|
|
|
|
|
|
|
|
|
MINORITY
INTEREST
|
|
-
|
|
-
|
|
3,066
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
$
|
(360,876)
|
$
|
(734,019)
|
$
|
(6,923,135)
|
|
|
|
|
|
|
|
|
|
|
|
EARNING
PER SHARE:
|
|
|
|
|
|
|
|
BASIC
|
$
|
(0.01)
|
$
|
(0.02)
|
|
|
|
DILUTED
|
$
|
(0.01)
|
$
|
(0.02)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING:
|
|
|
|
|
|
|
|
BASIC
|
|
47,174,227
|
|
46,768,151
|
|
|
|
DILUTED
|
|
50,066,832
|
|
48,054,639
|
|
|
The accompanying notes
are an integral part of these financial statements
12
|
|
|
|
|
|
|
|
|
|
|
RIVAL
TECHNOLOGIES, INC. AND SUBSIDIARIES
|
|
(A Development
Stage Company)
|
|
Consolidated
Statements of Other Comprehensive Loss
|
|
Expressed in US
Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
|
|
Amounts From
|
|
|
|
|
|
|
|
|
|
Beginning of
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
|
|
|
|
|
Stage on April 1,
|
|
|
|
|
|
For the Years Ended
|
|
2003 to
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
$
|
(360,876)
|
$
|
(734,019)
|
$
|
(6,923,135)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency exchange
|
|
(10,201)
|
|
(10,938)
|
|
77,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE LOSS
|
$
|
(371,077)
|
$
|
(744,957)
|
$
|
(6,845,662)
|
The accompanying notes
are an integral part of these financial statements
13
|
|
|
|
|
|
|
|
|
|
|
|
RIVAL TECHNOLOGIES, INC. AND SUBSIDIARIES
|
|
(A Development Stage Company)
|
|
Consolidated Statements of Cash Flows
|
|
Expressed in US Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
|
|
|
Amounts From
|
|
|
|
|
|
|
|
|
|
|
Beginning of
|
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
|
|
|
|
|
|
|
|
Stage on April 1,
|
|
|
|
|
|
|
For the Years Ended
|
|
2003 to
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(360,876)
|
$
|
(734,019)
|
$
|
(6,923,135)
|
|
Adjustments
to reconcile net loss to net cash
|
|
|
|
|
|
|
|
|
used
by operating activities:
|
|
|
|
|
|
|
|
|
|
Amortization
of beneficial conversion feature
|
|
|
-
|
|
-
|
|
65,899
|
|
|
Depreciation
|
|
|
2,359
|
|
3,154
|
|
9,699
|
|
|
Shares
issued for services
|
|
|
12,572
|
|
211,168
|
|
1,373,732
|
|
|
Impairment
of intangible property
|
|
|
|
|
3,743
|
|
3,289,343
|
|
|
Valuation
of options
|
|
|
9,037
|
|
-
|
|
9,037
|
|
|
Minority
interest
|
|
|
-
|
|
-
|
|
(3,743)
|
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Receivables
and prepayments
|
|
|
-
|
|
15,537
|
|
-
|
|
|
|
Prepaid
expenses
|
|
|
|
|
-
|
|
|
|
|
|
Other
current assets
|
|
|
(71)
|
|
(441)
|
|
38,057
|
|
|
|
Accounts
payable and accrued liabilities
|
|
|
(10,487)
|
|
12,601
|
|
35,689
|
|
|
|
Accrued
interest
|
|
|
35,000
|
|
14,595
|
|
49,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Used by Operating Activities
|
|
|
(312,465)
|
|
(473,663)
|
|
(2,055,827)
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of equipment
|
|
|
-
|
|
(11,984)
|
|
(19,323)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Used by Investing Activities
|
|
|
-
|
|
(11,984)
|
|
(19,323)
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
debenture
|
|
|
-
|
|
-
|
|
19,890
|
|
|
Promissory
note payable
|
|
|
-
|
|
|
|
4,559
|
|
|
Proceeds
from issuance of convertible notes payable
|
-
|
|
500,000
|
|
500,000
|
|
|
Proceeds
from issuance of common stock, net of
|
|
|
|
|
|
|
|
|
issue
costs
|
|
|
-
|
|
-
|
|
1,500,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
|
-
|
|
500,000
|
|
2,024,553
|
|
|
|
|
|
|
|
|
|
|
|
|
EFFECT
OF EXCHANGE RATE CHANGES ON CASH
|
|
(10,201)
|
|
(10,938)
|
|
77,473
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH
|
|
|
(322,666)
|
|
3,415
|
|
26,876
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AT BEGINNING OF PERIOD
|
|
|
351,526
|
|
348,111
|
|
1,984
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AT END OF PERIOD
|
|
$
|
28,860
|
$
|
351,526
|
$
|
28,860
|
The accompanying notes
are an integral part of these financial statements
21
|
|
|
|
|
|
|
|
|
|
|
|
|
RIVAL TECHNOLOGIES, INC. AND SUBSIDIARIES
|
|
(A Development Stage Company)
|
|
Consolidated Statements of Cash Flows (Continued)
|
|
Expressed in US Dollars
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
|
|
|
|
|
|
|
|
Amounts
|
|
|
|
|
|
|
|
|
|
|
From
|
|
|
|
|
|
|
|
|
|
|
Beginning of
|
|
|
|
|
|
|
|
|
|
|
Development
|
|
|
|
|
|
|
|
|
|
|
Stage on April 1,
|
|
|
|
|
|
|
For the Years Ended
|
|
2003 to
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
|
|
2008
|
|
2007
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Paid For:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
$
|
-
|
$
|
-
|
|
|
Income
taxes
|
|
$
|
-
|
$
|
-
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Cash
Transactions:
|
|
|
|
|
|
|
|
|
|
Settlement
of accounts payable to an officer of the
|
|
|
|
|
|
|
|
|
Company
|
|
$
|
-
|
$
|
-
|
$
|
42,301
|
|
|
Shares
issued to acquire intangible property
|
|
$
|
-
|
$
|
-
|
$
|
3,285,600
|
|
|
Shares
issued for services
|
|
$
|
12,572
|
$
|
211,168
|
$
|
1,373,732
|
|
|
Shares
issued to settle convertible debenture and
|
|
|
|
|
|
|
|
|
accrued
interest payable
|
|
$
|
-
|
$
|
-
|
$
|
10,099
|
|
|
Beneficial
conversion feature recorded as
|
|
|
|
|
|
|
|
|
|
additional
paid in capital
|
|
$
|
-
|
$
|
-
|
$
|
69,364
|
|
|
Contributed
capital on settlement of accounts
|
|
|
|
|
|
|
|
|
|
Payable
|
|
$
|
-
|
$
|
-
|
$
|
5,580
|
|
|
Common
stock issued in lieu of debt
|
|
$
|
-
|
$
|
13,506
|
$
|
13,506
|
|
|
Options
granted for services
|
|
|
$
|
9,037
|
$
|
-
|
$
|
9,037
|
The accompanying notes
are an integral part of these financial statements
22
RIVAL TECHNOLGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008
NOTE
1 -
ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
Rival Technologies, Inc. is incorporated under the laws of the
State of Nevada as a result of its amalgamation and merger between Rival
Technologies, Inc., a British Columbia Company (“Rival BC”), and Rival
Technologies, Inc. (the “Company”), a Nevada Company. Tru Oiltech, Inc.
was organized on September 20, 2005, under the laws of the State of Nevada.
The Company currently has limited operations and, in accordance with
Statement of Financial Accounting Standard (SFAS) No. 7, “
Accounting and
Reporting by Development Stage Enterprises,
” is considered a Development
Stage Enterprise.
The Company was the exclusive licensed manufacturer and
distributor worldwide of a brand of fire extinguishants and fire retardant
products. The license agreement was terminated December 1999. During the
three years ended December 31, 2002, all sales were made to customers in North
America. The Company does not expect any further sales of these products
and has abandoned this business effective the three-month period beginning April
1, 2003.
During the period beginning April 1, 2003, the Company acquired a
new technology for reducing diesel emissions and will now focus on developing
and marketing this technology.
On October 31, 2005, the Company incorporated TRU Oiltech, Inc. a
Nevada corporation (“TRU Oiltech”) for the purpose of acquiring, developing and
marketing the TRU Oitech technology. On October 31, 2005, the Company
received 6,000,000 shares of TRU Oiltech common stock and the owners of the
technology received 4,000,000 shares of TRU Oiltech. As a result TRU
Oiltech is a majority-owned subsidiary of the Company.
On October 31, 2005, the Company incorporated CWI Technology, Inc.
a Nevada corporation, as a wholly-owned subsidiary for the purpose to develop
and market the CWI Technology.
Significant Accounting Polices
These consolidated financial statements have been prepared in
conformity with generally accepted accounting principles in the United States of
America. The significant accounting policies adopted by the Company are as
follows:
23
RIVAL TECHNOLGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008
NOTE
1 -
ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Significant Accounting Polices (Continued)
a. Basis of Presentation
The Company’s current functional and reporting currency is the
United States Dollar. The financial statements of the Company are presented in
the United States Dollars in accordance with SFAS No.52 “Foreign Currency
Translation”. Monetary assets and liabilities denominated in foreign currencies
are translated using the exchange rate prevailing at the balance sheet date.
Gains and losses arising on translation or settlement of foreign currency
denominated transaction or balances are included in the determination of income.
Foreign currency transactions are primarily undertaken in Canadian dollars.
Foreign Currency Translation Adjustments are included in Other
Comprehensive Income and disclosed as a separate category of
Stockholders’ Equity, whereas, gains or losses relating from foreign currency
transaction are included in the results of operations.
However, in the prior years, the consolidated financial statements
were presented in Canadian dollars and there were no exchange restrictions.
The Company’s functional currency was the Canadian dollar. In accordance
with the Statement of Financial Accounting Standard (SFAS) No. 52, “
Foreign
Currency Translation
,” which stipulated that if the US-incorporated
registrant had little or no assets and operations in the U.S., substantially all
the operations were conducted in a functional currency other that the U.S.
dollar, and the reporting currency selected was the same as the functional
currency, then reporting in the foreign currency would produce little or no
foreign currency translation effects. The assets and liabilities
denominated in foreign currency were translated into Canadian dollars at the
current rate of exchange existing at period end and revenues and expenses were
translated at daily exchange rates. Related translation adjustments were
reported as a separate component of stockholders’ equity, whereas, gains or
losses relating from foreign currency transactions were included in the results
of operations.
In 2008, the administrative office of the Company was moved to the
US. The transactions of the business are in US dollars which is not considered
to be a foreign operation; and the subsidiary, which is considered to be an
integrated foreign operation, are all translated into the Company’s function
currency of US dollars based on the translation method.
These consolidated financial statements are also prepared in
conformity with accounting principles generally accepted in the United States of
America and include the accounts of the Company and its wholly-owned subsidiary,
Rival Technologies (Delaware) Inc., its former subsidiary Tracker Capital Corp.
which merged with Rival Technologies (Delaware) Inc. during 2002, its
wholly-owned subsidiary, CWI Technology, (Nevada) Inc., and its 60% owned
subsidiary, Tru Oiltech, (Nevada) Inc. All significant intercompany
accounts and transactions have been eliminated.
24
RIVAL TECHNOLGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008
NOTE
1 -
ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Significant Accounting Polices (Continued)
b. Use of Estimates
The preparation of these consolidated financial statements in
conformity with accounting principles generally accepted in the United State of
America requires management to make estimates and assumptions that could affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenue and expenses during the period. Actual
results could differ from those reported.
c. Foreign Currency Translation
Transaction amounts denominated in foreign currencies are
translated at exchange rates prevailing at transaction dates. Carrying
values of monetary assets and liabilities are adjusted at each balance sheet
date to reflect the exchange rate at that date. Non-monetary assets and
liabilities are translated at the exchange rate on the original transaction
date. Gains and losses from restatement of foreign currency monetary
assets and liabilities are included in the statement of operations.
Revenues and expenses are translated at the rates of exchange prevailing
on the dates such items are recognized in the statements of operations.
d. Cash and Cash Equivalents
The Company considers cash held at banks and all highly liquid
investments with original maturities of three months or less to be cash and cash
equivalents.
e. Concentrations
Financial instruments that potentially subject the Company to
concentrations of credit risks consist of cash and cash equivalents. The
Company places its cash and cash equivalents at well known quality financial
institutions. At times, such cash and investments may be in excess of
government insurance limits. Credit Suisse insures CHF 30,000 of funds for
the bank accounts that the Company has with Credit Suisse. At December 31,
2008, the Company had funds totaling CHF 16,072 within insured limit
.
The FDIC of the
United States insures $250,000 of funds for the bank accounts that the Company
has with FDIC. At December 31, 2008, the Company had funds totaling $10,956
within insured limited.
25
RIVAL TECHNOLGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008
NOTE
1 -
ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Significant Accounting Polices (Continued)
f
.
Property and Equipment
Property and equipment is recorded at cost. Major additions
and improvement are capitalized. The cost and related accumulated
depreciation of property and equipment retired or sold are removed from the
accounts and any differences between the undepreciated amount and the proceeds
from the sale are recorded as gain or loss on sale. Depreciation is
computed using the straight-line method over the estimated useful life of the
assets as follows:
Description
Estimated Useful Life
Furniture
and equipment
5 years
Computer
equipment
3 years
g. Intangible Property
Intangible property is recorded at cost.
The carrying value of intangible property is evaluated for
potential permanent impairment on an ongoing basis at the reporting unit level.
In order to determine whether permanent impairments exists, management
considers the Company’s and its subsidiaries’ financial condition as well as
expected pre-tax earnings, undiscounted cash flows or market related values.
If the carrying value of intangible property of a reporting unit exceeds
the fair value of the reporting unit, the carrying value of the intangible
property must be written down to fair value in the year the impairment is
recognized. The Company did not have any intangible property at December 31,
2008 and 2007.
h. Research and Development
Research and development costs are expensed as incurred.
Research and development costs charged to expenses were $0 and $73,900 for
the years ended December 31, 2008 and 2007, respectively. There are no
significant agreements relating to research and development expenditures.
26
RIVAL TECHNOLGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008
NOTE
1 -
ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Significant Accounting Polices (Continued)
i.
Income Taxes
In July 2006, the Financial Accounting
Standards Board (FASB) issued Interpretation No 48, Accounting for Uncertainty
in Income Taxes - an Interpretation of FASB Statement No 109 (FIN 48). FIN
48 is intended to clarify the accounting for uncertainty in income taxes
recognized in a company’s financial statements and prescribes the recognition
and measurement of a tax position taken or expected to be taken in a tax return.
FIN 48 also provides guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition.
As a result of the implementation
of FIN 48, the Company performed a review of its material tax positions in
accordance with recognition and measurement standards established by FIN
48.
At the adoption date of January 1, 2007, the
Company had no unrecognized tax benefit which would affect the effective tax
rate if recognized.
Income taxes are computed in accordance with Statement of
Financial Accounting Standard (SFAS) No. 109 “
Accounting for Income
Taxes
.” A deferred tax asset or liability is recorded for all
temporary differences between financial and tax reporting and net operating loss
carry forwards. Deferred tax expenses (benefit) result from the net change
during the period of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in
the opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
j. Net Loss per Share
Basic net loss per share is computed by dividing net loss
attributable to common stockholders by the weighted average number of shares of
common stock outstanding during the period. Diluted net loss per share
takes into consideration shares of common stock outstanding (computed under
basic loss per share) and potentially dilutive shares of common stock. In
periods where losses are reported the weighted average number of common shares
outstanding excludes common stock equivalents because their inclusion would be
anti-dilutive.
Potentially issuable common shares totaling 2,892,605 and
1,286,488 related to convertible notes and accrued interest were included in the
calculation of diluted earnings per share for the years ended December 31, 2008
and 2007.
27
RIVAL TECHNOLGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008
NOTE
1 -
ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Significant Accounting Polices (Continued)
j.
Net Loss per Share (Continued)
Potentially issuable common shares totaling 18,000 related to
options were considered but excluded from the calculation of diluted loss per
share for the period ended December 31, 2008 because their inclusion would be
anti-dilutive.
Following is a reconciliation of the loss per share for the years
ended December 31, 2008 and 2007:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2008
|
2007
|
|
|
|
|
|
Net (loss) attributable to
|
|
|
|
common shareholders
|
$ (360,876)
|
$ (734,019)
|
|
|
|
|
|
Weighted average shares
|
|
|
|
basic
|
47,174,227
|
46,768,151
|
|
diluted
|
50,066,832
|
48,054,639
|
|
Loss per share
|
|
|
|
basic
|
$ (0.01)
|
$ (0.02)
|
|
diluted
|
$ (0.01)
|
$
(0.02)
|
k. Comparative Figures
Certain comparative figures have been reclassified in the prior
year consolidated financial statements to conform with the presentation adopted
in the current year, mainly due to foreign currency translation. All the figures
were translated from Canadian Dollars into US Dollars, which were complied with
the foreign currency translation method adopted by the Company.
l. Segment Information
The Company operates in one reportable segment for Rival
Technologies, Tru Oiltech Technology, being the diesel technology industry, in
Canada and the United States of America.
m. Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities approximate
the carrying value based on their effective interest rates compared to current
market prices.
28
RIVAL TECHNOLGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008
NOTE
1 -
ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Significant Accounting Polices (Continued)
n.
Convertible Debt
The Company has adopted Emerging Issues Task Force (EITF) Issue
No. 98-5, “
Accounting for Convertible Securities with Beneficial Conversion
Features or Contingently Adjustable Conversion Ratios
”, and EITF Issue No.
00-27, “
Application
of EITF Issue No. 98-5 to Certain Convertible Instruments
.”
The Company incurred debt whereby the convertible feature of
the debt provides for a rate of conversion based upon the closing market value
of the common stock on the last trading day prior to the date upon which the
note holder provides written notice. Therefore, the Company has not
recorded a beneficial conversion feature on this note pursuant to EITF Issue No.
98-5 and 00-27.
o.
Recent
Accounting Pronouncements
In December 2007, the FASB
issued SFAS No. 160, “Non-controlling interests in Consolidated Financial
Statements – An amendment of ARB No. 51.” This statements objective is to
improve the relevance, comparability, and transparency of the financial
information that a reporting entity provides in its consolidated financial
statements by establishing accounting and reporting standards that require
ownership interests in the subsidiaries held by parties other than the parent be
clearly identified. The adoption of SFAS 160 did not have an impact on the
Company’s financial statements.
In December 2007, the FASB
issued SFAS No. 141 (revised), “Business Combinations.” This revision
statement’s objective is to improve the relevance, representational
faithfulness, and comparability of the information that a reporting entity
provides in its effects on recognizing identifiable assets and measuring
goodwill. The adoption of SFAS 141 (revised) did not have an impact on the
Company’s financial statements.
In February 2007, the FASB
issued SFAS 159, “The Fair Value Option for Financial Assets and Financial
Liabilities.” SFAS 159 creates a fair value option allowing an entity to
irrevocably elect fair value as the initial and subsequent measurement attribute
for certain financial assets and financial liabilities, with changes in fair
value recognized in earnings as they occur. SFAS 159 also requires an entity to
report those financial assets and financial liabilities measured at fair value
in a manner that separates those reported fair values from the carrying amounts
of assets and liabilities measured using another measurement attribute on the
face of the statement of financial position. Lastly, SFAS 159 requires an entity
to provide information that would allow users to understand the effect on
earnings of changes in the fair value on those instruments selected for the fair
value election. SFAS 159 is effective for fiscal years beginning after November
15, 2007 with early adoption
29
RIVAL TECHNOLGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008
NOTE
1 -
ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Significant Accounting Polices (Continued)
o.
Recent Accounting
Pronouncements (Continued)
permitted. The Company is
continuing to evaluate SFAS 159 and to assess the impact on the Company’s
results of operations and financial condition if an election is made to adopt
the standard.
In March 2008, the FASB
issued SFAS 161 which amends and expands the disclosure requirements of SFAS 133
to provide an enhanced understanding of an entity’s use of derivative
instruments, how they are accounted for under SFAS 133 and their effect on the
entity’s financial position, financial performance and cash flows. The
provisions of SFAS 161 are effective for the period beginning after November 15,
2008. The Company is currently reviewing the effect, if any, that the adoption
of this statement will have on the Company’s financial statements.
On May 8, 2008, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 162, The Hierarchy
of Generally Accepted Accounting Principles, which will provide framework for
selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. generally accepted accounting
principles (GAAP) for nongovernmental entities. With the issuance of SFAS No.
162, the GAAP hierarchy for nongovernmental entities will move from auditing
literature to accounting literature. The adoption of SFAS 162 did not have an
impact on the Company’s financial statements.
30
RIVAL TECHNOLGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008
NOTE
1-
ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Significant Accounting Polices (Continued)
o.
Recent Accounting
Pronouncements (Continued)
The FASB has issued Statement of Financial Accounting Standards
No. 163, Accounting for Financial Guarantee Insurance Contracts. SFAS No. 163
clarifies how SFAS No. 60, Accounting and Reporting by Insurance Enterprises,
applies to financial guarantee insurance contracts issued by insurance
enterprises, and addresses the recognition and measurement of premium revenue
and claim liabilities. It requires expanded disclosures about contracts, and
recognition of claim liability prior to an event of default when there is
evidence that credit deterioration has occurred in an insured financial
obligation. It also requires disclosure about (a) the risk-management activities
used by an insurance enterprise to evaluate credit deterioration in its insured
financial obligations, and (b) the insurance enterprise's surveillance or watch
list. The adoption of SFAS No. 163 did not have an impact on the
Company’s financial statements.
NOTE 2-
GOING CONCERN
As shown in the accompanying consolidated financial statements,
the Company incurred net losses of $360,876 and $734,019 during the years ended
December 31, 2008 and 2007, respectively. The Company has historically
incurred significant net losses which have resulted in an accumulated deficit of
$11,955,119 at December 31, 2008. In addition, the Company’s current
liabilities exceeded its current assets by $613,398 and $266,289 at December 31,
2008 and 2007, respectively. These factors, as well as the uncertain conditions
that the Company faces relative to capital raising activities, create
substantial doubt as to the Company’s ability to continue as a going concern.
The Company is seeking to raise additional capital through public and/or
private placement offerings, targeting strategic partners in an effort to
increase revenues, and expanding revenues through strategic acquisitions.
The ability of the Company to continue as a going concern is dependent
upon the success of capital offerings or alternative financing arrangements and
expansion of its operations. The consolidated financial statements do not
include any adjustments that might be necessary should the Company be unable to
continue as a going concern. As of December 31, 2008 and 2007, the Company
had cash and cash equivalents of $28,860 and $351,526, respectively.
The Company will require additional funding during the next twelve
months to finance the growth of its current operations and achieve its strategic
objectives. Management is actively pursuing additional sources of
financing sufficient to generate enough cash flow to fund its operations through
2009 and 2010. However, management cannot make any assurances that such
financing will be secured.
31
RIVAL TECHNOLGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008
NOTE 3-
PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31,
2008 and 2007:
|
|
|
|
|
|
December 31
|
|
|
2008
|
2007
|
|
|
|
|
|
Furniture and equipment
|
$
15,181
|
$
15,181
|
|
Computer equipment
|
4,142
|
4,142
|
|
Accumulated depreciation
|
(9,699)
|
(7,340)
|
|
Total property and equipment
|
$
9,624
|
$
11,984
|
Depreciation expense was $2,359 and $3,154 for the years ended
December 31, 2008 and 2007, respectively.
NOTE 4 -
INTANGIBLE PROPERTY
On September 20, 2005, the Company executed an agreement with the
now director and president of Tru Oiltech and two other businessmen (see Note
11). Under the terms of the agreement, the director and president along
with the two other businessmen agreed to sell the TRU Technology to the Company
in exchange for 4,000,000 shares of Tru Oiltech valued at 0.001 per share.
Fair value of the shares was determined to be par value as no shares or
assets exist prior to this date. Tru Oiltech issued 4,000,000 shares.
Fair value of the TRU Technology was negotiated in an arms-length
transaction by the parties to be $3,743. As the year ended December 31, 2007,
the Company determined that the intangible property was fully impaired, and
recorded an impairment expense of $3,743.
NOTE 5-
CONVERTIBLE NOTE PAYABLE
During August 2007, the Company received $500,000 from a company
pursuant to a convertible note payable. The note bears interest at 7% per
annum, and is due on July 30, 2008. As of December 31, 2007, accrued
interest on the note totaled $14,595. Until July 30, 2008, the note holder has
the right, at the holder’s option, to convert the principal and accrued interest
on the note, in whole or in part, into shares of the Company’s common stock at
the closing market value of the common stock on the last trading day prior to
the date upon which the note holder provides written notice (see also Note 1).
On July 30, 2008, the note holder extended the note payable until September 30,
2008. And on September 29, 2008 the convertible note holder extended the
convertible note payable again to March 31, 2009. This convertible note payable
is currently in default. As of December 31, 2008 and 2007, accrued
interest on the note totaled $49,595 and $14,595, respectively.
32
RIVAL TECHNOLGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008
NOTE 5-
CONVERTIBLE NOTE PAYABLE (Continued)
For the year ended December 31, 2008 and 2007, the accrued
interest was convertible into 2,892,605 and 1,286,488 shares of the Company’s
common stock.
NOTE 6-
PROMISSORY NOTE PAYABLE
On April 17, 2003, the Company issued a promissory note of $4,559
to a former director of the Company. The note is unsecured, non-interest
bearing and payable on demand. The Company intends to redeem the
promissory note in the near future. Consequently, it is classified as a
current liability in the balance sheet.
NOTE 7-
COMMON STOCK
On September 9, 2005, the Company’s board of director’s resolved
to issue and transfer 5,000,000 shares of common stock to a trustee for the sole
purpose of selling the shares of common stock. The trustee will receive a
trustee fee equal to 3% of the selling value of the shares of common stock.
There is no time limit as to when the trustee has to sell the shares of
common stock. Any shares of common stock not sold by the trustee will be
returned to the Company at its request. Accordingly, those shares of
common stock have not been recorded as issued and outstanding on the
consolidated balance sheet at December 31, 2008. Effective August 1, 2005,
the trustee fee was increased to 5% of the selling value of the shares of common
stock.
In conjunction with the above, the Company entered into an
agreement with a third party for investor relations services whereby the third
party is entitled to receive a fee equal to 47% of the selling value of the
shares of common stock. Additionally, the third party is entitled to
receive, on a one-time basis only, 250,000 shares of common stock which was
delivered upon execution of this agreement dated November 15, 2004. These
shares were value at $1.24(CAD) per share for a total value of $253,922.
The shares were issued on February 9, 2005. Further, during March
and August of 2005, the third party received a total of 505,000 shares of common
stock for investor relations services. 5,000 shares were valued at
$1.88(CAD) per share for a total value of $7,747, and 500,000 shares were
valued at $1.33(CAD) per share for a total value of $551,478. All
issues approximated the trading price when the shares were issued. This
agreement was terminated at the end of July 2005.
The Company engaged a third party for investor relations services
whereby the third party receives a fee equal to 43% of the selling value of the
shares of common stock issued pursuant to Regulation S. Through December
31, 2007, 6,717,326 shares of common stock had been issued by the trustee for
proceeds of $2,625,229 (net of issue costs), and for investor relations and
other services rendered.
33
RIVAL TECHNOLGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008
NOTE 7-
COMMON STOCK (Continued)
On July 6, 2005, the Company issued 45,000 shares of common stock
to various directors and consultants at $1.25(CAD) per share for a total value
of $45,954 which approximated the trading price when the shares were issued.
These shares were issued pursuant to an equity incentive plan that the
Company has in place.
On October 24, 2005, the Company issued 20,000 shares of common
stock to a director of Tru Oiltech in consideration of engineering services
provided to the Company. The weighted average of the share price of the Company
was $1.2592(CAD) for the 5 trading days prior to the issuance of the
shares. Consulting expense of $21,404 was recognized as the fair market
value of the shares. These shares were issued pursuant to an equity
incentive plan that the Company has in place.
Only July 12, 2006, the Company issued 10,000 shares at $0.75(CAD)
per share to a director in lieu of services. Shares are issued as
per S-8 and Director and Form 4 Insider Filing was filed.
On August 3, 2006, the Company issued 12,500 shares at $0.56(CAD)
per share to a consultant in lieu of services. Shares are issued as
per S-8.
On October 26, 2006, the Company issued 5,000 shares at $0.81(CAD)
per share to a consultant in lieu of services. Shares are issued as
per S-8.
On April 6, 2007, the Company issued 26,862 shares at $0.57(CAD)
per share to an individual in lieu of investor relations debt incurred
during 2006, as described above.
On August 17, 2007, the Company issued 375,000 shares at
$0.43(CAD) per share to various related parties for services rendered.
These shares were issued pursuant to an equity incentive plan that the
Company has in place.
On December 31, 2007, the Company issued 147,070 shares at
$0.40(CAD) per share to a consultant in lieu of services.
On April 21, 2008, the Company issued 25,000 Common Shares to
consultants for consulting services rendered, valued at $0.50(CAD) per share, or
$12,571.
Reg S shareholders have the same voting and dividend rights as
common shareholders, being one vote per share present at any shareholder meeting
of the Company. The Company does not intend to issue dividends at this
time.
34
RIVAL TECHNOLGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008
NOTE 8-
STOCK OPTIONS AND WARRANTS
On February 15, 2008, the Company issued to an individual options
to purchase up to 18,000 shares of the Company’s common stock for consulting
services. The options vested upon their issuance. The options have
an exercise price equal to the closing price of the common stock, the day prior
to the signing or renewal of the corresponding consulting agreement. The
options expire at the close of business on August 15, 2013.
The Company estimates the fair value of each stock option at the
grant date by using the Black-Scholes option pricing model pursuant to FASB
Statement 123(R), “Share Based Payment” and the following assumptions: expected
term of 5 ½ years, a risk free interest rate of 2.76%, a dividend yield of
0% and volatility of 142%. Under the provisions of SFAS 123(R), additional
consulting expense of $9,037 was recorded for the period ended December 31, 2008
pursuant to the Black-Scholes option pricing model for these options. The
following table summarizes the changes in options outstanding during 2008:
|
|
|
|
|
|
Number of
Options
|
Weighted
Average
Exercise
Price
|
|
Outstanding and
exercisable at January 1, 2008
|
-
|
-
|
|
|
|
|
|
Granted
|
18,000
|
$
0.55
|
|
Exercised
|
-
|
-
|
|
Cancelled
|
-
|
-
|
|
|
|
|
|
Outstanding and
exercisable at December 31, 2008
|
18,000
|
$
0.55
|
The
following table summarizes the exercisable options at December 31, 2008.
|
|
|
|
|
|
|
|
|
Options
Outstanding
|
|
Options
Exercisable
|
|
Year
|
Exercise
Price
|
Number
Shares
Outstanding
|
Weighted
Average
Contractual Life
(Years)
|
|
Number
Exercisable
|
Weighted
Average
Exercise
Price
|
|
2008
|
$
0.55
|
18,000
|
4.62
|
|
18,000
|
$
0.55
|
NOTE 9-
INCOME TAXES
Income taxes are computed in accordance with Statement of
Financial Accounting Standard (SFAS) No. 109 (SFAS 109) “
Accounting for
Income Taxes”
. A deferred tax asset or liability is recorded for all
temporary differences between financial and tax reporting and net operating loss
carry forwards. Deferred tax expenses (benefits) result from the net
change during the period of deferred tax assets and liabilities.
35
RIVAL TECHNOLGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008
NOTE 9-
INCOME TAXES (Continued)
Deferred tax assets are reduced by a valuation allowance, when, in
the opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
The Company has approximately $5,412,744 of operating loss
carry-forwards, which expire in various periods through 2028. The availability
of certain operating loss carry-forwards for income tax purposes is subject to
certain restrictions due to Internal Revenue Code Section 382 because there was
a change in control of the Company in 2001.
The Company has provided a valuation allowance against its
deferred tax assets given that it is in the development stage and it is more
likely than not that these benefits will not be realized.
The provision for deferred federal income tax from the amount
computed at federal statutory rates of approximately 48% as follows:
|
|
|
|
|
|
For the Years Ended
|
|
|
December 31,
|
|
|
2008
|
2007
|
|
Current income tax expense (benefit):
|
|
|
|
Federal
|
$
-
|
$
-
|
|
State
|
$
-
|
$
-
|
|
|
|
|
|
Current tax expense
|
$
-
|
$
-
|
|
|
|
|
|
Deferred tax expense (benefit) arising from:
|
|
|
|
Valuation allowance
|
$
(173,000)
|
$
(352,000)
|
|
Net operating loss carryforward
|
173,000
|
352,000
|
|
|
|
|
|
Net deferred tax assets
|
$
-
|
$
-
|
|
|
|
|
|
Income tax provision
|
$
-
|
$
-
|
The deferred tax asset consisted of the following at December 31,
2008 and 2007,
|
|
|
|
|
|
For the Years Ended
|
|
|
December 31,
|
|
|
2008
|
2007
|
|
Deferred tax Asset:
|
|
|
|
NOL carryforward
|
$
2,774,000
|
$ 2,601,000
|
|
Valuation allowance
|
(2,774,000)
|
(2,601,000)
|
|
Total
|
$
-
|
$
-
|
36
RIVAL TECHNOLGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
(Expressed in US Dollars)
December 31, 2008
NOTE 10-
BUSINESS COMBINATION
On September 20, 2005, the Company executed an agreement with the
now director and president of Tru Oiltech (See Note 4). The purpose of the
business combination was to acquire a majority interest in the new technology
for reducing diesel emissions (See Note 1). The agreement provides that
the Company be issued 6,000,000 shares of Tru Oiltech common stock valued at
$0.001 per share. Fair value of the shares was determined to be par value
as no shares or assets exist prior to this date. Tru Oiltech accordingly
issued 6,000,000 shares to the Company making it a 60% majority shareholder.
The agreement also provides that the Company will provide additional
financing of $150,000(CAN$). As of December 31, 2008, the Company had
advanced $219,777 toward that financing, which amount is eliminated in the
consolidation.
NOTE 11-
AMALGAMATION AGREEMENT
The Company and Rival Technologies, Inc. (“Rival Nevada”) have
agreed to amalgamate and merge pursuant to an agreement dated September 6, 2005.
Rival Nevada was incorporated in the State of Nevada on September 2, 2005,
and was inactive and a wholly-owned subsidiary of the Company at the time of the
amalgamation and merger. The provisions of the agreement provide for the
Company to have its jurisdiction in the State of Nevada. All issued and
outstanding shares of the Company shall remain outstanding. The
amalgamation agreement took effect on October 14, 2005.
NOTE 12-
JOINT VENTURE AGREEMENT
On February 23, 2007, the Company and its subsidiary, TRU Oiltech,
entered into a joint venture agreement that entitled the joint venture partner a
25% interest and exclusive right to exploit the TRU Oiltech technology in
Venezuela until March 2008. The joint venture partner has the
responsibility, out of its share of joint venture participation, to compensate
others that may assist, either directly or indirectly, in facilitating the
commercial exploitation of the Company’s technology in Venezuela.
Additionally, the Company and the joint venture partner are to share in
long-term savings obtained from the use of Rival’s technology in Venezuela on a
ratio of a minimum of 25% of the savings for the account of the Company and
joint venture partner. No significant transactions have occurred with this
joint venture through the date of this report. As of December 31, 2008, this
agreement was expired and terminated without further action.
37
ITEM 9. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
In our current report on Form 8-K, dated
August 29, 2007 and filed September 5, 2007, we reported that our board of
directors had approved the dismissal of Dohan and Company, CPA’s, P.A. as our
independent registered public accounting firm. In our current report on
Form 8-K, dated September 13, 2007 and filed September 14, 2007, we reported
that we had engaged Chisholm, Bierwolf & Nilson, LLC, Certified Public
Accountants, as our independent registered public accounting firm.
ITEM 9A(T). CONTROLS AND
PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and
procedures that are designed to ensure that information required to be disclosed
in our filings under the Exchange Act is recorded, processed, summarized and
reported within the periods specified in the rules and forms of the SEC.
This information is accumulated and communicated to our executive officers
to allow timely decisions regarding required disclosure. Our Chief
Executive Officer, who also is our principal financial officer, evaluated the
effectiveness of our disclosure controls and procedures as of the end of the
period covered by this report. Based on that evaluation, he concluded that
our disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control over
Financial Reporting
Management is responsible to establish and maintain
adequate internal control over financial reporting. Our principal
executive officer is responsible to design or supervise a process that provides
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. The policies and procedures
include:
•
maintenance of records in reasonable
detail to accurately and fairly reflect the transactions and dispositions of
assets,
•
provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that
receipts and expenditures are being made only in accordance with authorizations
of management and directors, and
•
provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or
disposition of assets that could have a material effect on our financial
statements.
For the year ended December 31, 2008,
management has relied on the Committee of Sponsoring Organizations of the
Treadway Commission (COSO), “Internal Control - Integrated Framework,” issued in
1992, to evaluate the effectiveness of our internal control over financial
reporting and based upon that framework, management has determined that our
internal control over financial reporting is effective.
Our management determined that there were
no changes made in our internal controls over financial reporting during the
fourth quarter of 2008 that have materially affected, or are reasonably likely
to materially affect our internal control over financial reporting.
This annual report does not include an
attestation report of our registered public accounting firm regarding
management’s report on internal control over financial reporting. The
Management’s report was not subject to attestation by the our registered public
accounting firm pursuant to temporary rules of the SEC that permit the company
to provide only the management’s report in this annual report.
ITEM 9B. OTHER INFORMATION
None.
38
PART III
ITEM 10. DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
Biographical information about our director and executive
officer is set forth below. Our bylaws require at least one director to
serve until he is replaced by a qualified director. Our executive officers
are chosen by our Board of Directors and serve at its discretion.
|
|
|
|
|
|
Name
|
Age
|
Position Held
|
Term of Directorship
|
|
Douglas B. Thomas
|
55
|
President, Chief Executive Officer
Secretary/Treasurer and Director
|
From August 2007 until next annual
meeting
|
On August 29, 2007, our board of directors
appointed Douglas B. Thomas to the positions of Director, President and CEO of
Rival Technologies. Mr. Thomas serves as Managing Director of TRU Oiltech,
our majority-owned subsidiary. Mr. Thomas has worked for the past twenty
years as an independent marketing consultant. He brings extensive
worldwide oilfield experience to the company and his experience will be useful
as we move to commercialize our recently patented TRU™ process and TRULITE™
synthetic crude oil. He has worked on delivery of marketing initiatives of
manufactured products and has introduced oilfield products to markets in North
and South America, Russia, China and Australia.
Compliance with Section 16(a) of the Exchange
Act
Section 16(a) of the Securities Exchange
Act of 1934 requires our directors, executive officers and persons who own more
than ten percent of a registered class of our equity securities, to file with
the SEC initial reports of ownership and reports of changes in ownership of
common stock and our other equity securities. Officers, directors and
greater than ten-percent beneficial owners are required by SEC regulations to
furnish us with copies of all Section 16(a) reports they file and provide
written representation that no Form 5 is required. Based upon a review of
these forms furnished to us for the fiscal year ended December 31, 2008, we
believe all forms were filed timely.
Code of Ethics
Since we have only one person acting as a
director and officer and have minimal operations, we have not adopted a code of
ethics for our principal executive and financial officers. Our board of
directors will revisit this issue in the future to determine if adoption of a
code of ethics is appropriate. In the meantime, our management intends to
promote honest and ethical conduct, full and fair disclosure in our reports to
the SEC, and compliance with applicable governmental laws and regulations.
Committee
s
We are a smaller reporting company with
only one director and officer who has an active role in our operations.
As a result, we do not have a standing nominating committee for
directors, nor do we have an audit committee with an audit committee financial
expert serving on that committee. Our director acts as our nominating and audit
committee.
ITEM 11. EXECUTIVE
COMPENSATION
Executive Officer Compensation
The following table shows the compensation
paid to our principal executive officer for the past two fiscal years ended
December 31, 2008 and 2007.
39
|
|
|
|
|
|
|
SUMMARY
COMPENSATION TABLE
|
|
Name and Principal
Position
|
Year
|
Salary
(1)
|
All Other
Compensation (1)
|
Total
(1)
|
|
Douglas B. Thomas
CEO
|
2008
|
-
|
-
|
-
|
|
|
2007
|
$
28,070
|
$ 80,466
(2)
|
$
108,536
|
(1) In US dollars.
(2) Represents
the fair value of 200,000 shares issued under the 2005 Equity Incentive
Plan.
We have not entered into an employment
contract with our executive officer and as our sole director he
determines the amount of his compensation.
Outstanding Equity Awards
Our named executive officer does not hold any outstanding
equity awards as of December 31, 2008 and 2007.
Retirement or Change of Control
Arrangements
We do not offer retirement benefit plans to
our executive officer, nor have we entered into any contract, agreement, plan or
arrangement, whether written or unwritten, that provides for payments to the
named executive officer at or in connection with the resignation, retirement or
other termination of the named executive officer, or a change in control of the
company or a change in the named executive officer’s responsibilities following
a change in control.
Compensation of Directors
We do not have any standard arrangement for
compensation of our directors for any services provided as director, including
services for committee participation or for special assignments.
ITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
Securities Under Equity Compensation
Plans
The following table lists the securities
authorized for issuance under any equity compensation plans approved by our
shareholders and any equity compensation plans not approved by our shareholders
as of December 31, 2008.
This chart also includes individual compensation
arrangements described below.
|
|
|
|
|
|
EQUITY COMPENSATION PLAN
INFORMAT
ION
|
|
Plan
category
|
Number of securities to be issued upon
exercise of outstanding options, warrants and rights
(a)
|
Weighted-average exercise price of
outstanding options,
warrants and rights
(b)
|
Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column (a))
(c)
|
|
Equity compensation plans
approved by security holders
|
0
|
$
0.00
|
4,532,500
|
|
Equity compensation
plans
not approved by security
holders
|
18,000
|
$
0.55
|
18,000
|
|
Total
|
18,000
|
$
0.55
|
4,550,500
|
40
2005 Equity Incentive Plan
On June 1, 2005, our board of directors
adopted "The 2005 Equity Incentive Plan of Rival Technologies, Inc." (the
"Plan"). The purpose of the Plan is to aid the company in maintaining and
continuing its development of a quality management team, in attracting qualified
employees, consultants, and advisors who can contribute to our future success,
and in providing such individuals with an incentive to use their best efforts to
promote our growth and profitability.
Pursuant to the Plan, the Board may
authorize the issuance of stock or options to purchase stock up to an aggregate
of five million (5,000,000) shares of our common stock over a maximum of a five
year period, although the Board may shorten this period. Any options
granted under the Plan are "non-qualified" stock options. The Board shall
determine which employees are eligible to receive shares or options under the
Plan. The term "Employee" includes any employee, director, officer, or
consultant or advisor of the company or any of its subsidiaries, provided that
bona fide services are rendered by consultants and advisors and such services
are not rendered in connection with the offer or sale of securities in a
capital-raising transaction and do not directly or indirectly promote or
maintain a market for our common stock.
On June 30, 2005, we filed a registration
statement on Form S-8 (Registration No. 333-126241) which registered the
5,000,000 common shares to be issued under the Plan. As of December 31,
2008, our Board has granted 467,500 common shares to consultants and advisors
pursuant to the Plan.
Consulting Agreement
On February 15, 2008 Rival entered into a
consulting agreement with L.G. Zangani, LLC (“Zangani”). Under the
agreement Zangani agreed to provide business development consulting to Rival for
a six month period, terminating on August 15, 2008. Rival agreed to pay
Zangani $5,000 in advance for each month of service and granted options to
Leonardo G. Zangani to purchase 18,000 shares of common stock at an exercise
price of $0.55 US. The options expire August 15, 2013. On July 15,
2008 Rival Technologies terminated this consulting agreement. Even though the
Company terminated the consulting agreement, the board of the Company approved
to grant the whole amount of 18,000 options to satisfy with the agreement.
Beneficial Ownership
The following table sets forth the
beneficial ownership of our outstanding common stock of each person or group
known by us to own beneficially 5% or more of our outstanding common stock and
ownership of our management. Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes voting or investment
power with respect to securities. Except as indicated by footnote, the
persons named in the table below have sole voting power and investment power
with respect to all shares of common stock shown as beneficially owned by them.
The percentage of beneficial ownership is based on 47,182,560 shares of
common stock outstanding as of April 14, 2009.
|
|
|
|
|
CERTAIN
BENEFICIAL OWNERS
|
|
Name and address of
beneficial owners
|
Amount and
nature
of
beneficial owner
|
Percent
of
class
|
|
Rockridge Capital Corp.
1 Beim
Antonskraiz, Bridel,
Luxembourg 8116
|
11,240,000
|
23.8
|
|
|
|
|
|
MANAGEMENT
|
|
Name of
beneficial owner
|
Amount and
nature
of
beneficial owner
|
Percent
of
class
|
|
Douglas B. Thomas
|
200,000
|
Less than
1%
|
41
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
Transactions with Related Parties
During the past two fiscal years we have not engaged in,
or propose to engage in, any transactions involving our executive officers,
directors, 5% or more stockholders or immediate family members of such
persons.
Director Independence
We do not have an independent director, as defined by
NASDAQ Stock Market Rule 4200(a)(15), serving on our board.
ITEM 14. PRINCIPAL ACCOUNTING FEES
AND SERVICES
Auditor Fees
The following table presents the aggregate
fees billed for the past two years by our independent registered public
accounting firm, Chisholm, Bierwolf, Nilson & Morrill, LLC, Certified Public
Accountants, in connection with the audit of our financial statements and other
professional services rendered by that accounting firm.
|
|
|
|
|
|
2008
|
2007
|
|
Audit fees
|
$
27,947
|
$
26,284
|
|
Audit-related fees
|
0
|
0
|
|
Tax fees
|
0
|
0
|
|
All other fees
|
$
102
|
$
0
|
Audit fees represent the professional
services rendered for the audit of our annual financial statements and the
accounting firm review of our financial statements included in quarterly
reports, along with services normally provided by the firm in connection with
statutory and regulatory filings or engagements. Audit-related fees
represent professional services rendered for assurance and related services by
the accounting firm that are reasonably related to the performance of the audit
or review of our financial statements that are not reported under audit fees.
Tax fees represent professional services
rendered by the accounting firm for tax compliance, tax advice, and tax
planning. All other fees represent fees billed for products and services
provided by the accounting firm, other than the services reported for the other
categories.
Pre-approval Policies
We do not have a standing audit committee
currently serving and as a result our board of directors performs the duties of
an audit committee. Our board of directors will evaluate and approve in
advance, the scope and cost of the engagement of an accounting firm before the
accounting firm renders audit and non-audit services. We do not rely on
pre-approval policies and procedures.
PART IV
ITEM 15. EXHIBITS, FINANCIAL
STATEMENT SCHEDULES
Exhibits
No.
Description
3.1
Articles of Incorporation of Rival
Technologies, Inc. (Incorporated by reference to exhibit 3.1 to Form 8-K, filed
October 31, 2005)
42
3.2
Articles of Merger, dated September
6, 2005 (Incorporated by reference to exhibit 3.2 to Form 8-K, filed October 31,
2005)
3.3
Bylaws of Rival Technologies, Inc.
(Incorporated by reference to exhibit 3.3 to Form 8-K, filed October 31,
2005)
4.1
The 2005 Stock Equity Incentive Plan
of Rival Technologies Inc. (Incorporated by reference to exhibit 4.1 to Form
S-8, filed June 30, 2005)
21.1
Subsidiaries of Rival
Technologies (Incorporated by reference to exhibit 21.1 of Form 10-QSB, as
amended,
filed
May 1, 2007)
31.1
Chief Executive Officer Certification
31.2
Principal Financial Officer
Certification
32.1 Section 1350 Certification
43
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d)
of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, there unto duly
authorized
RIVAL TECHNOLOGIES, INC.
By:
/s/ Douglas B. Thomas
Douglas B. Thomas, President
Director, CEO,
Secretary, Treasurer, and
Principal Financial and Accounting Officer
Date: April 15, 2009
44