Attached files
file | filename |
---|---|
EX-10.1 - ACCELERATED ACQUISITIONS III INC | v182581_ex10-1.htm |
EX-99.1 - ACCELERATED ACQUISITIONS III INC | v182581_ex99-1.htm |
UNITED
STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C.
20549
FORM 8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF
1934
Date
of Report (Date of earliest event reported): April 26, 2010
CLS
Capital Group, Inc.
(Formerly
known as Accelerated Acquisitions III, Inc.)
(Exact
Name of Registrant as Specified in its Charter)
Delaware
|
000-53393
|
26-2517715
|
||
(State
or Other Jurisdiction of
Incorporation)
|
(Commission
File
No.)
|
(I.R.S.
Employer
Identification
No.)
|
||
6800 W. Central Avenue, Suite E-1, Toledo,
OH
|
43617
|
|||
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
Registrant’s
telephone number, including area code: 888-616-6639
Accelerated
Acquisitions III, Inc.
122 Ocean Park Blvd. Suite
307, Santa Monica, CA 90405
(Former
name or former address, if changed since last report)
(Address
of Principal Offices)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
o
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
o
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
|
o
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13e-4(c))
|
TABLE
OF CONTENTS
Item
1.01 Entry into a Material Definitive Agreement
|
3
|
Item
5.06 Change in Shell Company Status
|
3
|
Item
9.01 Financial Statements and Exhibits
|
26
|
SIGNATURES
|
27
|
EXHIBIT
INDEX
|
27
|
2
Item
1.01 Entry into
a Material Definitive Agreement
On April
26, 2010, the Company entered into a Assignment of Rights Under Servicing
Agreements (“Servicing Agreement”) with CLS Capital Group LLC
(“LLC”). Pursuant to the terms of the Servicing Agreement, LLC
assigned to the Company certain rights and obligations with respect to a loan
portfolio of approximately $8.9 billion. Pursuant to the Servicing
Agreement, the Company will assume the obligations of LLC to service the loans
in the portfolio and earn fees with respect to such services. By
entering into the Servicing Agreement, the Company commenced business as a
specialty investment company principally providing capital and other assistance
to start-up and micro companies. The Company intends to focus its portfolio in a
wide variety of different sectors including but not limited to alternative
resources, technology, biotech, insurance, and services.
The
Company and LLC are both controlled by the same principals who believe that
substantial benefit will be derived from the assignment of the Loan Portfolio to
a publicly-reporting entity by potentially facilitating the funding of future
operations and permitting the expansion of the business and thereby opening up
new funding resources for the business.
A copy of
the Servicing Agreement is attached as Exhibit 10.1
Item
5.06 Change in Shell Company
Status.
Prior to
our entry into the investment industry through the execution of the CLS Capital
Group LLC. Servicing Agreement and the development of sales channels in
connection therewith as described in Item 1.01 above, we were a “shell company”
(as such term is defined in Rule 12b-2 under the Securities Exchange Act of
1934, as amended). As a result of entering into these agreements and undertaking
efforts to begin financial consulting services and product distribution
operations, we ceased to be a shell company. There has not, however,
been a change of control of our company.
FORM
10 DISCLOSURE
Item
2.01(f) of Form 8-K states that if the registrant was a shell company, like our
company, the registrant must disclose the information that would be
required if the registrant were filing a general form for registration of
securities on Form 10. Accordingly, we are providing below the
information that would be included in a Form 10 if we were to file a Form
10.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This
report contains forward-looking statements. These forward-looking statements are
subject to known and unknown risks, uncertainties and other factors which may
cause actual results, performance or achievements to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. These forward-looking statements
were based on various factors and were derived utilizing numerous assumptions
and other factors that could cause our actual results to differ materially from
those in the forward-looking statements. These factors include, but
are not limited to our ability to develop our operations, our ability to satisfy
our obligations, our ability to consummate the acquisition of additional assets,
our ability to generate revenues and pay our operating expenses, our ability to
raise capital as necessary, economic, political and market conditions and
fluctuations, government and industry regulation, interest rate risk, U.S. and
global competition, and other factors. Most of these factors are
difficult to predict accurately and are generally beyond our
control. You should consider the areas of risk described in
connection with any forward-looking statements that may be made
herein. Readers are cautioned not to place undue reliance on these
forward-looking statements and readers should carefully review this report in
its entirety, including the risks described in "Risk Factors" and the risk
factors described in our other filings with the Securities and Exchange
Commission. Except for our ongoing obligations to disclose material
information under the Federal securities laws, we undertake no obligation to
release publicly any revisions to any forward-looking statements, to report
events or to report the occurrence of unanticipated events. These
forward-looking statements speak only as of the date of this report, and you
should not rely on these statements without also considering the risks and
uncertainties associated with these statements and our
business.
3
OTHER
PERTINENT INFORMATION
Unless
specifically set forth to the contrary, when used herein, the terms “CLS Capital
Group, Inc.”, “Accelerated Acquisitions III, Inc.”, "we"", "our", the "Company"
and similar terms refer to, CLS Capital Group, Inc., a Delaware corporation
(formerly known as Accelerated Acquisitions III, Inc., a Delaware
corporation).
OUR
BUSINESS
From
inception April 30, 2008, Accelerated Acquisitions III, Inc. was organized as a
vehicle to investigate and, if such investigation warrants, acquire a target
company or business seeking the perceived advantages of being a publicly held
corporation. Our principal business objectives were to achieve long-term growth
potential through a combination with a business rather than immediate,
short-term earnings. The Company has not restricted our potential candidate
target companies to any specific business, industry or geographical location
and, thus, may acquire any type of business.
On April
29, 2008, the Registrant sold 5,000,000 shares of Common Stock to Accelerated
Venture Partners, LLC for an aggregate investment of $4,000.00. The
Registrant sold these shares of Common Stock under the exemption from
registration provided by Section 4(2) of the Securities Act.
On December 29, 2009, Redell Vincent
Napper II and Reynaldo Uballe, Jr. (“Purchasers”) each agreed to acquire
8,500,000 shares of the Company’s common stock par value $0.0001 (17,000,000
shares in the aggregate) for a price of $0.0001 per share. At the
same time, Accelerated Venture Partners, LLC agreed to tender 3,750,000 of their
5,000,000 shares of the Company’s common stock par value $0.0001 for
cancellation. Following these transactions, each of Messrs. Napper
and Uballe owned 46.57% of the Company’s 18,250,000 issued and outstanding
shares of common stock par value $0.0001 and the interest of Accelerated Venture
Partners, LLC was reduced to approximately 6.86% of the total issued and
outstanding shares. Simultaneously with the share purchase, Timothy
Neher resigned from the Company’s Board of Directors and Messrs. Napper and
Uballe were simultaneously appointed to the Company’s Board of
Directors. Such action represents a change of control of the
Company. The Purchasers used their working capital to acquire the
Shares. Prior to the
purchase of the shares, the Purchasers were not affiliated with the Company.
However, the Purchasers will be deemed affiliates of the Company after the share
purchase as a result of their stock ownership interest in the Company.
The purchase of the shares by the
Purchasers was completed pursuant to written Subscription Agreements with the
Company. The purchase was not subject to any other terms and conditions other
than the sale of the shares in exchange for the cash
payment.
Concurrent
with the sale of the shares, the Company filed a Certificate of Amendment to its
Certificate of Incorporation with the Secretary of State of Delaware in order to
change its name to “CLS Capital Group, Inc.”.
CLS
Capital Group, Inc. (formally known as Accelerated Acquisitions III) has become
a specialty investment company principally providing capital and other
assistance to start-up and micro companies. The Company intends to focus its
portfolio in a wide variety of different sectors including but not limited to
alternative resources, technology, biotech, insurance, and services. Our
investment objective is to maximize our portfolio’s total return by using a
unique financing models that collateralizes traditional loan using investment
grade fixed income instruments, such as CD, Bonds, Medium Term Notes, etc.
and investing in the debt and/or equity securities of start-up and
micro companies. We also seek to provide our stockholders with current income on
investments in debt securities and long-term capital growth through the
appreciation in the value of warrants or other equity instruments that we may
receive when we make debt investments or equity investments.
The
Company commenced operations on April 26, 2010 by entering into the Servicing
Agreement detailed in Item 1.01, above.
4
Our
capital will generally be invested to purchase investment grade fixed income
instruments, such as CD, Bonds, Medium Term Notes, etc. used as collateral by
our portfolio companies or invested to finance organic growth, acquisitions,
recapitalizations and working capital. Our investment decisions are based on
analysis of potential portfolio companies’ business operations supported by an
in-depth, including proprietary intangible assets and intellectual
property.
We are a
Delaware corporation that has elected to be regulated as a business development
company under the Investment Company Act of 1940, as amended (the “1940 Act”).
As a business development company, we are required to meet certain regulatory
tests, including the requirement to invest at least 70% of our total assets in
eligible portfolio companies. In addition, we have elected to be treated for
federal income tax purposes as a regulated investment company, or RIC, under the
Internal Revenue Code of 1986 (the “Code”).
We may seek other investment
opportunities outside the start-up and micro companies arena and may also have
up to 30% of our assets invested other than in eligible portfolio companies.
Currently our headquarters are at 6800 W. Central Avenue, Suite E-1, Toledo, OH,
43617 and our telephone number is (888) 616-6639.
Market
Opportunity
Many
start-up and micro companies have merged with competitors, scaled back their
operations or simply closed down in response to difficult business conditions
following the 2008 market crash. At the same time, start-up and micro companies
with strong balance sheets, stable revenues and efficient operating structures
are benefiting from the consolidation or elimination of competitors in their
markets.
Large,
underserved market for product. An increasing number of well-positioned
start-up and micro companies have been seeking to raise capital. Historically,
growing micro companies have generally relied upon equity rather than debt
financing. As a result, the market for debt financing for these companies is
generally less developed than the debt markets serving other industries. In
spite of the large number of start-up and micro companies in the United States
today, we believe that these companies are significantly underserved by
traditional lenders such as banks, savings and loan institutions and finance
companies for the following reasons:
·
|
Non-traditional
financial profile - The high revenue growth rates
characteristic of start-up and micro companies often render them difficult
to evaluate from a credit perspective. Moreover, these companies often
incur relatively high expenditures for research and development, utilize
unconventional sales and marketing techniques and selling channels, and
experience rapid shifts in technology, consumer demand and market share.
These attributes can make it difficult for traditional lenders to analyze
these companies using conventional analytical
methods.
|
|
|
·
|
Industry
scale, concentration and regulation - Many companies lack the size, and
the markets in which they operate lack the scale, necessary to service
large loans by traditional lenders. In the banking industry, in
particular, consolidation over the last decade has increased the size, and
reduced the number, of surviving banks. The surviving institutions have
sought to limit their credit exposures to, and the monitoring costs
associated with loans to, smaller businesses. In addition, traditional
lending institutions operate in a regulatory environment that favors
lending to large, established businesses. In response to such regulation,
many traditional lending institutions have developed loan approval
processes which conflict with the entrepreneurial culture of start-up and
micro companies.
|
For the
reasons outlined above, we believe that many viable start-up and micro companies
have either not been able, or have elected not, to obtain financing from
traditional lending institutions. We believe that these factors are likely to
continue, given the ongoing consolidation in the financial services
industry.
Complementing
private equity and venture capital funds. Our investment approach to
purchase investment grade fixed income instruments, such as CD, Bonds, Medium
Term Notes, etc. used as collateral by our portfolio companies and investing in
their debt and equity securities complements other sources of capital available
to start-up and micro companies. For example, although we may compete with
private equity and venture capital funds as a source of capital for such
businesses, those types of investors typically invest primarily in equity-based
securities. We intend to make investments in both debt securities and equity
securities. We believe that the nature of our investments in debt securities may
be viewed by such entities as an attractive alternative source of capital.
Private equity and venture capital funds may base their investments on
anticipated annual internal rates of return that are substantially higher than
the annual internal rates of return that we set as our operating target.
Moreover, private equity and venture capital funds generally require a
significantly greater percentage of equity ownership interests than we require.
However, private equity and venture capital investments typically entail
considerably more risk than the debt investments that we make, as they are
usually uncollateralized and rank lower in priority in the capital structure of
the portfolio companies. We believe the prospect of obtaining additional capital
without incurring substantial incremental dilution makes us attractive to
owner-managers as a prospective source of capital.
5
Competitive
Advantages
We
believe that we are well positioned to provide financing to start-up and micro
companies at least for the following reasons:
Identification of
prospective portfolio companies. We identify and source new prospective
portfolio companies through a network of venture capital and private equity
funds, investment banks, accounting and law firms and direct company
relationships.
Due diligence
review. Prior to an investment, we perform a preliminary due diligence
review including company and technology assessments, market analysis,
competitive analysis, evaluation of management, risk analysis and transaction
size, pricing and structure analysis. Upon successful completion of this
preliminary evaluation process, we then decide whether to move forward towards
the completion of a transaction.
Investment
structuring. We seek to achieve income by purchasing investment grade
fixed income instruments, such as CD, Bonds, Medium Term Notes, etc. used as
collateral by our portfolio companies, investing a portion of our assets in debt
securities, consisting primarily of senior notes, senior subordinated notes and
junior subordinated notes, of start-up and micro companies. We also seek to
provide our stockholders with long-term capital growth through the appreciation
in the value of warrants or other equity instruments that we may receive when we
make loans, and through direct equity investments.
Ongoing
Relationships With Portfolio Companies
Monitoring.
We monitor the financial trends of each portfolio company to assess the
appropriate course of action for each company and to evaluate overall portfolio
quality. We monitor the status and performance of each individual company on at
least a quarterly basis.
Managerial
assistance. As a business development company, we are required to offer,
and in some cases may provide and be paid for, significant managerial assistance
to portfolio companies. This assistance typically involves monitoring the
operations of portfolio companies, participating in their board and management
meetings, consulting with and advising their officers and providing other
organizational and financial guidance.
Competition
Our
primary competitors in providing financing to start-up and micro companies
include private equity and venture capital funds, other equity and non-equity
based investment funds and investment banks and other sources of financing,
including traditional financial services companies such as commercial banks and
specialty finance companies. Many of these entities have greater financial and
managerial resources than we will have. For additional information concerning
the competitive risks we face, see “Risk factors — We operate in a highly
competitive market for investment opportunities.”
Employees
We have
three employees that manage our day-to-day investment operations: Redell V.
Napper II is serving as our CEO/CFO and Reynaldo Uballe Jr. is serving as our
chief compliance officer, or CCO and COO. In addition, Helen Odum provides
back-office administrative support.
6
Federal
Income Tax Considerations
We have
elected to be treated, and intend to qualify annually, as a RIC under Subchapter
M of the Code, beginning with our 2010 taxable year. As a RIC, we generally will
not have to pay corporate-level federal income taxes on any ordinary income or
capital gains that we distribute to our stockholders as dividends. To continue
to qualify as a RIC, we must, among other things, meet certain source-of-income
and asset diversification requirements (as described below). In addition, to
qualify for RIC tax treatment we must distribute to our stockholders, for each
taxable year, at least 90% of our “investment company taxable income,” which is
generally our ordinary income plus the excess of our realized net short-term
capital gains over our realized net long-term capital losses (the “Annual
Distribution Requirement”).
Taxation as a
Regulated Investment Company. If we qualify as a RIC and satisfy the
Annual Distribution Requirement, we will not be subject to federal income tax on
the portion of our investment company taxable income and net capital gain (i.e.,
realized net long-term capital gains in excess of realized net short-term
capital losses) we distribute to stockholders. We will be subject to U.S.
federal income tax at the regular corporate rates on any income or capital gain
not distributed (or deemed undistributed) to our stockholders. We will be
subject to a 4% non-deductible federal excise tax on certain undistributed
income unless we distribute in a timely manner an amount at least equal to the
sum of (1) 98% of our ordinary income for each calendar year, (2) 98% of our
capital gain net income for the one-year period ending October 31 in that
calendar year and (3) any income realized, but not distributed, in preceding
years (the “Excise Tax Avoidance Requirement”). We currently intend to make
sufficient distributions each taxable year to satisfy the Excise Tax Avoidance
Requirement. In order to qualify as a RIC for federal income tax purposes, we
must, among other things:
·
|
at all times during each taxable
year, have in effect an election to be treated as a business development
company under the 1940 Act.
|
·
|
derive in each taxable year at
least 90% of our gross income from dividends, interest, payments with
respect to certain securities loans, gains from the sale of stock or other
securities, or other income derived with respect to our business of
investing in such stock or
securities.
|
·
|
diversify our holdings so that at
the end of each quarter of the taxable
year:
|
|
1.
|
at least 50% of the value of our
assets consists of cash, cash equivalents, U.S. government securities,
securities of other RICs, and other securities if such other securities of
any one issuer do not represent more than 5% of the value of our assets or
more than 10% of the outstanding voting securities of the issuer;
and
|
|
2.
|
no more than 25% of the value of
our assets is invested in the securities, other than U.S. government
securities or securities of other RICs, of one issuer or of two or more
issuers that are controlled, as determined under applicable tax rules, by
us and that are engaged in the same or similar or related trades or
businesses.
|
Pursuant
to the American Jobs Creation Act of 2004 (the “2004 Tax Act”), for taxable
years of a RIC beginning after October 22, 2004, net income derived from an
interest in certain “qualified publicly traded partnerships” will be treated as
qualifying income for purposes of the 90% gross income requirement, and no more
than 25% of a RIC’s assets may be invested in the securities of one or more
qualified publicly traded partnerships. In addition, the separate treatment for
publicly traded partnerships under the passive loss rules applies to a RIC
holding an interest in a qualified publicly traded partnership, with respect to
items attributable to such interest.
We may be
required to recognize taxable income in circumstances in which we do not receive
cash. For example, if we hold debt obligations that are treated under applicable
tax rules as having original issue discount (such as debt instruments with
payment-in-kind interest or, in certain cases, increasing interest rates or
issued with warrants), we must include in income each year a portion of the
original issue discount that accrues over the life of the obligation, regardless
of whether cash representing such income is received by us in the same taxable
year. Because any original issue discount accrued will be included in our
investment company taxable income for the year of accrual, we may be required to
make a distribution to our stockholders in order to satisfy the Annual
Distribution Requirement, even though we will not have received any
corresponding cash amount.
7
Regulation
as a Business Development Company
General. A
business development company (“BDC”) is regulated under applicable provisions of
the 1940 Act. A BDC must be organized in the United States for the purpose of
investing in or lending to primarily private companies and making managerial
assistance available to them. A BDC may use capital provided by public
stockholders and from other sources to invest in long-term, private investments
in businesses. A BDC provides stockholders the ability to retain the liquidity
of a publicly traded stock, while sharing in the possible benefits, if any, of
investing in primarily privately owned companies.
We may
not change the nature of our business so as to cease to be, or withdraw our
election as, a BDC unless authorized by vote of a majority of the outstanding
voting securities, as required by the 1940 Act. A majority of the outstanding
voting securities of a company is defined under the 1940 Act as the lesser of:
(i) 67% or more of such company’s voting securities present at a meeting if more
than 50% of the outstanding voting securities of such company are present or
represented by proxy, or (ii) more than 50% of the outstanding voting securities
of such company. We do not anticipate any substantial change in the nature of
our business.
As with
other companies regulated by the 1940 Act, a BDC must adhere to certain
substantive regulatory requirements. For instance, a majority of our directors
must be persons who are not interested persons, as that term is defined in the
1940 Act. Additionally, we are required to provide and maintain a bond issued by
a reputable fidelity insurance company to protect the BDC. Furthermore, as a
BDC, we are prohibited from protecting any director or officer against any
liability to the company or our stockholders arising from willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such person’s office.
As a BDC,
we are required to meet a coverage ratio of the value of total assets to total
senior securities, which include all of our borrowings and any preferred stock
with liquidation preference that we may issue in the future, of at least
200%.
We may
also be prohibited under the 1940 Act from knowingly participating in certain
transactions with our affiliates without the prior approval of our directors who
are not interested persons and, in some cases, prior approval by the
SEC.
We are
not generally able to issue and sell our common stock at a price below net asset
value per share. See “Risk factors—Risks relating to our business and
structure—Regulations governing our operation as a business development company
affect our ability to, and the way in which we raise additional capital.” We
may, however, sell our common stock, or warrants, options or rights to acquire
our common stock, at a price below the then-current net asset value of our
common stock if our Board of Directors determines that such sale is in our best
interests and the best interests of our stockholders, and our stockholders
approve such sale. In addition, we may generally issue new shares of our common
stock at a price below net asset value in rights offerings to existing
stockholders, in payment of dividends and in certain other limited
circumstances.
We will
be periodically examined by the SEC for compliance with the 1940
Act.
We are
subject to other regulatory requirements in addition to those set forth
above.
As a BDC,
we are subject to certain risks and uncertainties. See “Risk factors—Risks
relating to our business and structure.”
Qualifying
Assets
As a
business development company, we may not acquire any asset other than
“qualifying assets” unless, at the time we make the acquisition, the value of
our qualifying assets represent at least 70% of the value of our total assets.
The principal categories of qualifying assets relevant to our business
are:
8
·
|
Securities of an eligible
portfolio company that are purchased in transactions not involving any
public offering. An eligible portfolio company is defined under the 1940
Act to include any issuer
that:
|
|
a)
|
is organized and has its
principal place of business in the U.S.;
and
|
|
b)
|
is not an investment company or a
company operating pursuant to certain exemptions under the 1940 Act, other
than a small business investment company wholly owned by a business
development company.
|
·
|
Securities received in exchange
for or distributed with respect to securities described in the bullet
above or pursuant to the exercise of options, warrants, or rights relating
to those securities; and
|
·
|
Cash, cash items, government
securities, or high quality debt securities (as defined in the 1940 Act),
maturing in one year or less from the time of
investment.
|
Significant
Managerial Assistance. To include certain securities described above as
qualifying assets for the purpose of the 70% test, a business development
company must offer to make available to the issuer of those securities
significant managerial assistance such as providing guidance and counsel
concerning the management, operations, or business objectives and policies of a
portfolio company. We offer to provide managerial assistance to our portfolio
companies.
Investment
Concentration. Our investment objective is to maximize our portfolio’s
total return. In this respect, we intend to concentrate in the
technology-related sector and invest, under normal circumstances, at least 60%
of the value of our net assets (including the amount of any borrowings for
investment purposes) in technology-related companies. This 60% policy is not a
fundamental policy and therefore may be changed without the approval of our
stockholders. However, we may not change or modify this policy unless we provide
our stockholders with at least 60 days prior notice, pursuant to Rule 35d-1 of
the 1940 Act. See
“Risk factors—Risks related to our investments—Our portfolio may be concentrated
in a limited number of portfolio companies.”
Code of Ethics.
As required by the 1940 Act, we maintain a code of ethics that
establishes procedures for personal investments and restricts certain
transactions by our personnel. See “Risk factors—Risks relating to our business
and structure—There are significant potential conflicts of interest.” Our code
of ethics generally does not permit investments by our employees in securities
that may be purchased or held by us. You can request a copy of our Code of
Ethics free of charge by mailing a request to us at 6800 W. Central Avenue,
Suite E-1, Toledo, OH, 43617.
Compliance
Policies and Procedures. We have adopted and implemented written policies
and procedures reasonably designed to prevent violation of the federal
securities laws, and are required to review these compliance policies and
procedures annually for their adequacy and the effectiveness of their
implementation. We have designated a Chief Compliance Officer to be responsible
for administering the policies and procedures.
Sarbanes-Oxley
Act of 2002. On July 30, 2002, President Bush signed into law the
Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act, as well as the rules and
regulations promulgated there under, imposed a wide variety of new regulatory
requirements on publicly-held companies and their insiders. Many of these
requirements affect us. For example:
·
|
Pursuant to Rule 13a-14 of the
Securities Exchange Act of 1934, as amended (the “1934 Act”), our Chief
Executive Officer and Chief Financial Officer must certify the accuracy of
the financial statements contained in our periodic
reports.
|
·
|
Pursuant to Item 307 of
Regulation S-K, our periodic reports must disclose our conclusions about
the effectiveness of our disclosure controls and
procedures.
|
·
|
Pursuant to Rule 13a-15 of the
1934 Act, our management must prepare a report regarding its assessment of
our internal control over financial reporting, which must be audited by
our independent registered public accounting
firm.
|
9
·
|
Pursuant to Item 308 of
Regulation S-K and Rule 13a-15 of the 1934 Act, our periodic reports must
disclose whether there were significant changes in our internal controls
or in other factors that could significantly affect these controls
subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
|
·
|
The Sarbanes-Oxley Act requires
us to review our current policies and procedures to determine whether we
comply with the Sarbanes-Oxley Act and the regulations promulgated there
under. We will continue to monitor our compliance with all regulations
that are adopted under the Sarbanes-Oxley Act and will take actions
necessary to ensure that we are in compliance
therewith.
|
RISK
FACTORS
Before
you invest in our securities, you should be aware that there are various risks.
You should consider carefully these risk factors, together with all of the other
information included in this annual report before you decide to purchase our
securities. If any of the following risks and uncertainties develop into actual
events, our business, financial condition or results of operations could be
materially adversely affected.
Our
independent auditors have expressed substantial doubt about our ability to
continue as a going concern, which may hinder our ability to continue as a going
concern and our ability to obtain future financing.
In their
report dated December 31, 2009 our independent auditors stated that our
financial statements for the period ended December 31, 2009 were prepared
assuming that we would continue as a going concern. Our ability to continue as a
going concern is an issue raised as a result of recurring losses from operations
and cash flow deficiencies since our inception. We continue to experience net
losses. Our ability to continue as a going concern is subject to our ability to
generate a profit and/or obtain necessary funding from outside sources,
including obtaining additional funding from the sale of our securities,
increasing sales or obtaining loans and grants from various financial
institutions where possible. If we are unable to continue as a going concern,
you may lose your entire investment.
We
were formed in April, 2008 and commenced operations in April 2010, and we
therefore have a limited operating history and, accordingly, you will not have
any basis on which to evaluate our ability to achieve our business
objectives.
We are a
development stage company with limited operating results to date. Since we do
not have an established operating history or regular sales yet, you will have no
basis upon which to evaluate our ability to achieve our business
objectives.
The
absence of any significant operating history for us makes forecasting our
revenue and expenses difficult, and we may be unable to adjust our spending in a
timely manner to compensate for unexpected revenue shortfalls or unexpected
expenses.
As a
result of the absence of any operating history for us, it is difficult to
accurately forecast our future revenue. In addition, we have limited meaningful
historical financial data upon which to base planned operating expenses. Current
and future expense levels are based on our operating plans and estimates of
future revenue. Revenue and operating results are difficult to forecast because
they generally depend on our ability to promote and sell our services. As a
result, we may be unable to adjust our spending in a timely manner to compensate
for any unexpected revenue shortfall, which would result in further substantial
losses. We may also be unable to expand our operations in a timely manner to
adequately meet demand to the extent it exceeds expectations.
Our
limited operating history does not afford investors a sufficient history on
which to base an investment decision.
We are
currently in the early stages of developing our business. There can be no
assurance that at this time that we will operate profitably or that we will have
adequate working capital to meet our obligations as they become
due.
10
Investors
must consider the risks and difficulties frequently encountered by early stage
companies, particularly in rapidly evolving markets. Such risks include the
following:
§
|
Competition
|
§
|
ability
to anticipate and adapt to a competitive
market;
|
§
|
ability
to effectively manage expanding operations; amount and timing of operating
costs and capital expenditures relating to expansion of our business,
operations, and infrastructure; and
|
§
|
dependence
upon key personnel to market and sell our services and the loss of one of
our key managers may adversely affect the marketing of our
services.
|
We cannot
be certain that our business strategy will be successful or that we will
successfully address these risks. In the event that we do not successfully
address these risks, our business, prospects, financial condition, and results
of operations could be materially and adversely affected and we may not have the
resources to continue or expand our business operations.
We
have no profitable operating history and May Never Achieve
Profitability
From
inception (April 30, 2008), the Company (formerly known as Accelerated
Acquisitions III, Inc.) was organized as a vehicle to investigate and, if such
investigation warrants, acquire a target company or business seeking the
perceived advantages of being a publicly held corporation. Our principal
business objectives were to achieve long-term growth potential through a
combination with a business rather than immediate, short-term earnings. As of
April 2010, we changed out business plan to focus on the investment industry and
have only just recently commenced operations in that industry. As a
result, through December 31, 2009, the Company has an accumulated deficit of
$10,087 notwithstanding the fact that the principals of the Company have worked
without salary and the Company has operated with minimal overhead. We are an
early stage company and have a limited history of operations and have not
generated revenues from operations since our inception. We are faced with all of
the risks associated with a company in the early stages of development. Our
business is subject to numerous risks associated with a relatively new,
low-capitalized company engaged in our business sector. Such risks include, but
are not limited to, competition from well-established and well-capitalized
companies, and unanticipated difficulties regarding the marketing and sale of
our services. There can be no assurance that we will ever generate significant
commercial sales or achieve profitability. Should this be the case, our common
stock could become worthless and investors in our common stock or other
securities could lose their entire investment.
Dependence
on the Founders, without whose services Company business operations could
cease.
At this
time, our founders are wholly responsible for the development and execution of
our business plan. Our founders are under no contractual obligation to remain
employed by us, although they have no present intent to leave. If our founders
should choose to leave us for any reason before we have hired additional
personnel our operations may fail. Even if we are able to find additional
personnel, it is uncertain whether we could find qualified management who could
develop our business along the lines described herein or would be willing to
work for compensation the Company could afford. Without such management, the
Company could be forced to cease operations and investors in our common stock or
other securities could lose their entire investment.
Our
officers and directors devote limited time to the Company’s business and are
engaged in other business activities
At this
time, none of our officers and directors devotes his full-time attention to the
Company’s business. Based upon the growth of the business, we would intend to
employ additional management and staff. The limited time devoted to the
Company’s business could adversely affect the Company’s business operations and
prospects for the future. Without full-time devoted management, the Company
could be forced to cease operations and investors in our common stock or other
securities could lose their entire investment.
11
Concentrated
control risks; shareholders could be unable to control or influence key
corporate actions or effect changes in the Company’s board of directors or
management.
Our
current officers and directors currently own 17,000,000 shares of our common
stock, representing approximately 95% of the voting control of the Company. Our
current officers and directors therefore has the power to make all major
decisions regarding our affairs, including decisions regarding whether or not to
issue stock and for what consideration, whether or not to sell all or
substantially all of our assets and for what consideration and whether or not to
authorize more stock for issuance or otherwise amend our charter or
bylaws.
Lack
of employment agreements with key management risking potential of the loss of
the Company’s top management
We do not
currently have an employment agreement with any of our key management or key man
insurance on their lives. Our future success will depend in significant part on
our ability to retain and hire key management personnel. Competition for such
personnel is intense and there can be no assurance that we will be successful in
attracting and retaining such personnel. Without such management, the Company
could be forced to cease operations and investors in our common stock or other
securities could lose their entire investment.
Lack
of additional working capital may cause curtailment of any expansion plans while
raising of capital through sale of equity securities would dilute existing
shareholders’ percentage of ownership
Our
available capital resources will not be adequate to fund our working capital
requirements based upon our present level of operations for the 12-month period
subsequent to December 31, 2009. A shortage of capital would affect our ability
to fund our working capital requirements. If we require additional capital,
funds may not be available on acceptable terms, if at all. In addition, if we
raise additional capital through the sale of equity or convertible debt
securities, the issuance of these securities could dilute existing shareholders.
If funds are not available, we could be placed in the position of having to
cease all operations.
We
do not presently have a traditional credit facility with a financial
institution. This absence may adversely affect our operations
We do not
presently have a traditional credit facility with a financial institution. The
absence of a traditional credit facility with a financial institution could
adversely impact our operations. If adequate funds are not otherwise available,
we may be required to delay, scale back or eliminate portions of our operations
and product development efforts. Without such credit facilities, the Company
could be forced to cease operations and investors in our common stock or other
securities could lose their entire investment.
Our
inability to successfully achieve a critical mass of sales could adversely
affect our financial condition
No
assurance can be given that we will be able to successfully achieve a critical
mass of sales in order to cover our operating expenses and achieve sustainable
profitability. Without such critical mass of sales, the Company could be forced
to cease operations.
Our
success is substantially dependent on general economic conditions and business
trends, particularly in the natural products, a downturn of which could
adversely affect our operations
The
success of our operations depends to a significant extent upon a number of
factors relating to business spending. These factors include economic
conditions, activity in the financial markets, general business conditions,
personnel cost, inflation, interest rates and taxation. Our business is affected
by the general condition and economic stability of our customers and their
continued willingness to work with us in the future. An overall decline in the
demand for document formatting services could cause a reduction in our sales and
the Company could face a situation where it never achieves a critical mass of
sales and thereby be forced to cease operations.
12
Changes
in generally accepted accounting principles could have an adverse effect on our
business financial condition, cash flows, revenue and results of
operations
We are
subject to changes in and interpretations of financial accounting matters that
govern the measurement of our performance. Based on our reading and
interpretations of relevant guidance, principles or concepts issued by, among
other authorities, the American Institute of Certified Public Accountants, the
Financial Accounting Standards Board, and the United States Securities and
Exchange Commission, our management believes that our current contract terms and
business arrangements have been properly reported. However, there continue to be
issued interpretations and guidance for applying the relevant standards to a
wide range of contract terms and business arrangements that are prevalent in the
industries in which we operate. Future interpretations or changes by the
regulators of existing accounting standards or changes in our business practices
could result in future changes in our revenue recognition and/or other
accounting policies and practices that could have a material adverse effect on
our business, financial condition, cash flows, revenue and results of
operations.
We
will need to increase the size of our organization, and may experience
difficulties in managing growth.
We are a
small company with three full-time employees. We expect to experience a period
of significant expansion in headcount, facilities, infrastructure and overhead
and anticipate that further expansion will be required to address potential
growth and market opportunities. Future growth will impose significant added
responsibilities on members of management, including the need to identify,
recruit, maintain and integrate managers. Our future financial performance and
its ability to compete effectively will depend, in part, on its ability to
manage any future growth effectively.
We
are subject to compliance with securities law, which exposes us to potential
liabilities, including potential rescission rights.
We have
offered and sold our common stock to investors pursuant to certain exemptions
from the registration requirements of the Securities Act of 1933, as well as
those of various state securities laws. The basis for relying on such exemptions
is factual; that is, the applicability of such exemptions depends upon our
conduct and that of those persons contacting prospective investors and making
the offering. We have not received a legal opinion to the effect that any of our
prior offerings were exempt from registration under any federal or state law.
Instead, we have relied upon the operative facts as the basis for such
exemptions, including information provided by investors themselves.
If any
prior offering did not qualify for such exemption, an investor would have the
right to rescind its purchase of the securities if it so desired. It is possible
that if an investor should seek rescission, such investor would succeed. A
similar situation prevails under state law in those states where the securities
may be offered without registration in reliance on the partial preemption from
the registration or qualification provisions of such state statutes under the
National Securities Markets Improvement Act of 1996. If investors were
successful in seeking rescission, we would face severe financial demands that
could adversely affect our business and operations. Additionally, if we did not
in fact qualify for the exemptions upon which it has relied, we may become
subject to significant fines and penalties imposed by the SEC and state
securities agencies.
We
incur costs associated with SEC reporting compliance.
The
Company made the decision to become an SEC “reporting company” in order to
comply with applicable laws and regulations. We incur certain costs of
compliance with applicable SEC reporting rules and regulations including, but
not limited to attorneys fees, accounting and auditing fees, other professional
fees, financial printing costs and Sarbanes-Oxley compliance costs in an amount
estimated at approximately $25,000 per year. On balance, the Company determined
that the incurrence of such costs and expenses was preferable to the Company
being in a position where it had very limited access to additional capital
funding.
13
The
availability of a large number of authorized but unissued shares of common stock
may, upon their issuance, lead to dilution of existing
stockholders.
We are
authorized to issue 100,000,000 shares of common stock, $0.0001 par value per
share, of which, as of April 26, 2010, 18,250,000 shares of common stock were
issued and outstanding. We are also authorized to issue 10,000,000 shares of
preferred stock, $0.0001 par value, none of which are issued and outstanding.
These shares may be issued by our board of directors without further
stockholder approval. The issuance of large numbers of shares, possibly at below
market prices, is likely to result in substantial dilution to the interests of
other stockholders. In addition, issuances of large numbers of shares may
adversely affect the market price of our common stock.
We
may need additional capital that could dilute the ownership interest of
investors.
We
require substantial working capital to fund our business. If we raise additional
funds through the issuance of equity, equity-related or convertible debt
securities, these securities may have rights, preferences or privileges senior
to those of the rights of holders of our common stock and they may experience
additional dilution. We cannot predict whether additional financing will be
available to us on favorable terms when required, or at all. Since our
inception, we have experienced negative cash flow from operations and expect to
experience significant negative cash flow from operations in the future. The
issuance of additional common stock by the Company may have the effect of
further diluting the proportionate equity interest and voting power of holders
of our common stock.
We
may not have adequate internal accounting controls. While we have certain
internal procedures in our budgeting, forecasting and in the management and
allocation of funds, our internal controls may not be adequate.
We are
constantly striving to improve our internal accounting controls. Our board of
directors has not designated an Audit Committee and we do not have any outside
directors. We do not have a dedicated full time Chief Financial Officer.
We hope to develop an adequate internal accounting control to budget, forecast,
manage and allocate our funds and account for them. There is no guarantee that
such improvements will be adequate or successful or that such improvements will
be carried out on a timely basis. If we do not have adequate internal accounting
controls, we may not be able to appropriately budget, forecast and manage our
funds, we may also be unable to prepare accurate accounts on a timely basis to
meet our continuing financial reporting obligations and we may not be able to
satisfy our obligations under US securities laws.
We
do not have inadequate insurance coverage
We do not
have any insurance coverage of any description at this time and therefore have
the risk of loss or damages to our business and assets. We cannot assure you
that we would not face liability upon the occurrence of any event which could
result in any loss or damages being assessed against the Company. Moreover, any
insurance we may ultimately acquire may not be adequate to cover any loss or
liability we may incur.
We
are subject to numerous laws and regulations that can adversely affect the cost,
manner or feasibility of doing business.
Our
operations are subject to extensive federal, state and local laws and
regulations relating to the financial markets. Future laws or regulations,
any adverse change in the interpretation of existing laws and regulations or our
failure to comply with existing legal requirements may result in substantial
penalties and harm to our business, results of operations and financial
condition. We may be required to make large and unanticipated capital
expenditures to comply with governmental regulations. Our operations could
be significantly delayed or curtailed and our cost of operations could
significantly increase as a result of regulatory requirements or restrictions.
We are unable to predict the ultimate cost of compliance with these requirements
or their effect on our operations.
We
do not intend to pay cash dividends in the foreseeable future
We
currently intend to retain all future earnings for use in the operation and
expansion of our business. We do not intend to pay any cash dividends in the
foreseeable future but will review this policy as circumstances
dictate.
14
There
is currently no market for our securities and there can be no assurance that any
market will ever develop or that our common stock will be listed for
trading.
There has
not been any established trading market for our common stock and there is
currently no market for our securities. While we have been approved for trading
on the OTC Bulletin Board (“OTCBB”), there can be no assurance as the prices at
which our common stock will trade if a trading market develops, of which there
can be no assurance. Until our common stock is fully distributed and an
orderly market develops, (if ever) in our common stock, the price at which it
trades is likely to fluctuate significantly.
Prices
for our common stock will be determined in the marketplace and may be influenced
by many factors, including the depth and liquidity of the market for shares of
our common stock, developments affecting our business, including the impact of
the factors referred to elsewhere in these Risk Factors, investor perception of
us and general economic and market conditions. No assurances can be given that
an orderly or liquid market will ever develop for the shares of our common
stock. Due to the anticipated low price of the securities, many brokerage firms
may not be willing to effect transactions in the securities.
Our common stock
is subject to the Penny Stock Regulations
Our
common stock will likely be subject to the SEC's “penny stock” rules to the
extent that the price remains less than $5.00. Those rules, which require
delivery of a schedule explaining the penny stock market and the associated
risks before any sale, may further limit your ability to sell your
shares.
The SEC
has adopted regulations which generally define “penny stock” to be an equity
security that has a market price of less than $5.00 per share. Our common stock,
when and if a trading market develops, may fall within the definition of penny
stock and subject to rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000, or annual incomes exceeding $200,000 or $300,000, together with
their spouse).
For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of such securities and have received
the purchaser's prior written consent to the transaction. Additionally, for any
transaction, other than exempt transactions, involving a penny stock, the rules
require the delivery, prior to the transaction, of a risk disclosure document
mandated by the Commission relating to the penny stock market. The broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, current quotations for the securities and, if the
broker-dealer is the sole market-maker, the broker-dealer must disclose this
fact and the broker-dealer's presumed control over the market. Finally, monthly
statements must be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks.
Consequently, the `penny stock` rules may restrict the ability of broker-dealers
to sell our common stock and may affect the ability of investors to sell their
common stock in the secondary market.
Our
common stock is illiquid and subject to price volatility unrelated to our
operations
The
market price of our common stock could fluctuate substantially due to a variety
of factors, including market perception of our ability to achieve our planned
growth, quarterly operating results of other companies in the same industry,
trading volume in our common stock, changes in general conditions in the economy
and the financial markets or other developments affecting our competitors or us.
In addition, the stock market is subject to extreme price and volume
fluctuations. This volatility has had a significant effect on the market price
of securities issued by many companies for reasons unrelated to their operating
performance and could have the same effect on our common stock. Sales of
substantial amounts of common stock, or the perception that such sales could
occur, could adversely affect the market price of our common stock and could
impair our ability to raise capital through the sale of our equity
securities.
We
have not voluntarily implemented various corporate governance measures, in the
absence of which, shareholders may have more limited protections against
interested director transactions, conflicts of interest and similar
matters.
Recent
Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in
the adoption of various corporate governance measures designed to promote the
integrity of the corporate management and the securities markets. Some of these
measures have been adopted in response to legal requirements. Others have been
adopted by companies in response to the requirements of national securities
exchanges, such as the NYSE or the Nasdaq Stock Market, on which their
securities are listed. Among the corporate governance measures that are required
under the rules of national securities exchanges are those that address board of
directors' independence, audit committee oversight, and the adoption of a code
of ethics. We have not yet adopted any of these corporate governance
measures and, since our securities are not yet listed on a national securities
exchange, we are not required to do so. It is possible that if we
were to adopt some or all of these corporate governance measures, stockholders
would benefit from somewhat greater assurances that internal corporate decisions
were being made by disinterested directors and that policies had been
implemented to define responsible conduct. Prospective investors
should bear in mind our current lack of corporate governance measures in
formulating their investment decisions.
15
Our investments may not generate
sufficient income to cover our operations.
We intend
to make investments into qualified companies that will provide the greatest
overall return on our investment. However, certain of those investments may
fail, in which case we will not receive any return on our investment. In
addition, our investments may not generate income, either in the immediate
future, or at all. As a result, we may have to sell additional stock, or borrow
money, to cover our operating expenses. The effect of such actions could cause
our stock price to decline or, if we are not successful in raising additional
capital, we could cease to continue as a going concern.
We
are a company with a limited operating history, and our management lacks
experience in operating a business development company.
We
elected to be regulated as a business development company, or BDC, in April of
2010 and have a limited operating history as a BDC. We are subject to all of the
business risks and uncertainties associated with any new business enterprise,
including the risk that we will not achieve our investment objective and that
the value of your investment in us could decline substantially. In addition,
none of our executive officers has any experience in managing the operations of
a business development company. This lack of experience may adversely affect the
value of your investment in our company if, for instance, our lack of experience
causes us to not be in compliance with our regulatory requirements.
Any failure on our part to maintain
our status as a “business development company” would reduce our operating
flexibility.
If we do
not remain a business development company, we may be required to register as a
closed-end investment company under the 1940 Act, which would make us subject to
additional regulatory requirements and decrease our operating flexibility.
We
may change our investment policies without further shareholder
approval.
Although
we are limited by the Investment Company Act of 1940 with respect to the
percentage of our assets that must be invested in qualified investment
companies, we are not limited with respect to the minimum standard that any
investment company must meet, nor the industries in which those investment
companies must operate. We may make investments without shareholder approval and
such investments may deviate significantly from our historic operations. Any
change in our investment policy or selection of investments could adversely
affect our stock price, liquidity, and the ability of our shareholders to sell
their stock.
Our
financial condition and results of operations will depend on our ability to
manage our future growth effectively.
We have a
limited operating history. As such, we are subject to the business risks and
uncertainties associated with any new business enterprise, including the lack of
experience in managing or operating a business development company. Our ability
to achieve our investment objective will depend on our ability to grow, which
will depend, in turn, on our investment team’s ability to identify, analyze,
invest in and finance companies that meet our investment criteria. Accomplishing
this result on a cost-effective basis is largely a function of our management’s
structuring of the investment process, its ability to provide competent,
attentive and efficient services to us, and our access to financing on
acceptable terms. As we grow, we will need to hire, train, supervise and manage
new employees. Failure to manage our future growth effectively could have a
material adverse effect on our business, financial condition and results of
operations.
16
We
operate in a highly competitive market for investment
opportunities.
A large
number of entities compete with us to make the types of investments that we make
in start-up and micro companies. We compete with a large number of private
equity and venture capital funds, other equity and non-equity based investment
funds, investment banks and other sources of financing, including traditional
financial services companies such as commercial banks and specialty finance
companies. Many of our competitors are substantially larger and have
considerably greater financial, technical and marketing resources than we do.
For example, some competitors may have a lower cost of funds and access to
funding sources that are not available to us. In addition, some of our
competitors may have higher risk tolerances or different risk assessments, which
could allow them to consider a wider variety of investments and establish more
relationships than us. Furthermore, many of our competitors are not subject to
the regulatory restrictions that the 1940 Act imposes on us as a business
development company. There can be no assurance that the competitive pressures we
face will not have a material adverse effect on our business, financial
condition and results of operations. Also, as a result of this competition, we
may not be able to take advantage of attractive investment opportunities from
time to time, and we can offer no assurance that we will be able to identify and
make investments that are consistent with our investment objective.
Our
business model depends upon the development of strong referral relationships
with private equity and venture capital funds and investment banking
firms.
If we
fail to maintain our relationships with key firms, or if we fail to establish
strong referral relationships with other firms or other sources of investment
opportunities, we will not be able to grow our portfolio and achieve our
investment objectives. In addition, persons with whom we have informal
relationships are not obligated to provide us with investment opportunities, and
therefore there is no assurance that such relationships will lead to the
origination of investments.
We
may not realize gains from our equity investments.
When we
invest in debt securities, we generally expect to acquire warrants or other
equity securities as well. However, the equity interests we receive may not
appreciate in value and, in fact, may decline in value. Accordingly, we may not
be able to realize gains from our equity interests, and any gains that we do
realize on the disposition of any equity interests may not be sufficient to
offset any other losses we experience.
The
lack of liquidity in our investments may adversely affect our
business.
As stated
above, our investments are not generally in publicly traded securities.
Substantially all of these securities are subject to legal and other
restrictions on resale or will otherwise be less liquid than publicly traded
securities. The illiquidity of our investments may make it difficult for us to
sell such investments if the need arises. Also, if we are required to liquidate
all or a portion of our portfolio quickly, we may realize significantly less
than the value at which we have previously recorded our investments. We expect
that our holdings of equity securities may require several years to appreciate
in value, and we can offer no assurance that such appreciation will
occur.
We
may experience fluctuations in our quarterly results.
We may
experience fluctuations in our quarterly operating results due to a number of
factors, including the rate at which we make new investments, the interest rates
payable on the debt securities we acquire, the default rate on such securities,
the level of our expenses, variations in and the timing of the recognition of
realized and unrealized gains or losses, the degree to which we encounter
competition in our markets and general economic conditions. As a result of these
factors, results for any period should not be relied upon as being indicative of
performance in future periods.
Regulations
governing our operation as a business development company affect our ability to,
and the way in which we raise additional capital, which may expose us to risks,
including the typical risks associated with leverage.
Our
business will require a substantial amount of capital, which we may acquire from
the following sources:
17
Senior securities
and other indebtedness. We may issue debt securities or preferred stock
and/or borrow money from banks or other financial institutions, which we refer
to collectively as “senior securities,” up to the maximum amount permitted by
the 1940 Act. Under the provisions of the 1940 Act, we are permitted, as a
business development company, to issue senior securities in amounts such that
our asset coverage ratio, as defined in the 1940 Act, equals at least 200% of
gross assets, less all liabilities and indebtedness not represented by senior
securities, after each issuance of senior securities. If we issue senior
securities, including preferred stock and debt securities, we will be exposed to
typical risks associated with leverage, including an increased risk of loss. If
we incur leverage to make investments, a decrease in the value of our
investments would have a greater negative impact on the value of our common
stock. If we issue debt securities or preferred stock, it is likely that such
securities will be governed by an indenture or other instrument containing
covenants restricting our operating flexibility. In addition, such securities
may be rated by rating agencies, and in obtaining a rating for such securities,
we may be required to abide by operating and investment guidelines that could
further restrict our operating flexibility. Our ability to pay dividends or
issue additional senior securities would be restricted if our asset coverage
ratio was not at least 200%. If the value of our assets declines, we may be
unable to satisfy this test. If that happens, we would be unable to issue any
additional senior securities. Furthermore, any amounts that we use to service
our indebtedness would not be available for distributions to our common
stockholders.
Common stock.
We are not generally able to issue and sell our common stock at a price
below net asset value per share. However, we may, sell our common stock, or
warrants, options or rights to acquire our common stock, at a price below the
then-current net asset value of our common stock if our Board of Directors
determines that such sale is in our best interests and that of our stockholders,
and our stockholders approve such sale. In certain limited circumstances,
pursuant to an SEC staff interpretation, we may also issue shares at a price
below net asset value in connection with a transferable rights offering so long
as: (1) the offer does not discriminate among shareholders; (2) we use our best
efforts to ensure an adequate trading market exists for the rights; and (3) the
ratio of the offering does not exceed one new share for each three rights held.
If our stock price is less that our net asset value per share, it will be
extremely difficult to raise capital through the sale of common stock without
obtaining shareholder approval. In the event shareholder approval is not
obtained, our ability to raise adequate capital to continue as a going concern
will be negatively impacted. If we raise additional funds by issuing more common
stock or senior securities convertible into, or exchangeable for, our common
stock, the percentage ownership of our stockholders at that time would decrease
and they may experience dilution. Moreover, we can offer no assurance that we
will be able to issue and sell additional equity securities in the future, on
favorable terms or at all.
A change in interest rates may
adversely affect our profitability.
A portion
of our income will depend upon the difference between the rate at which we
borrow funds (if we do borrow) and the interest rate on the debt securities in
which we invest. We anticipate using a combination of equity and long-term and
short-term borrowings to finance our investment activities. Some of our
investments in debt securities are at fixed rates and others at variable rates.
We may, but will not be required to, hedge against interest rate fluctuations by
using standard hedging instruments such as futures, options and forward
contracts, subject to applicable legal requirements. These activities may limit
our ability to participate in the benefits of lower interest rates with respect
to the hedged portfolio. Adverse developments resulting from changes in interest
rates or hedging transactions could have a material adverse effect on our
business, financial condition and results of operations. Also, we have limited
experience in entering into hedging transactions, and we will initially have to
purchase or develop such expertise.
We
will be subject to corporate-level income tax if we are unable to qualify as a
RIC.
To remain
entitled to the tax benefits accorded RIC under the Code, we must meet certain
income source, asset diversification and annual distribution requirements. The
annual distribution requirement for a RIC is satisfied if we distribute at least
90% of our ordinary income and realized net short-term capital gains in excess
of realized net long-term capital losses, if any, to our stockholders on an
annual basis. Because we may use debt financing in the future, we may be subject
to certain asset coverage ratio requirements under the 1940 Act and financial
covenants under loan and credit agreements that could, under certain
circumstances, restrict us from making distributions necessary to satisfy the
annual distribution requirement. If we are unable to obtain cash from other
sources, we may fail to qualify for special tax treatment as a RIC and, thus,
may be subject to corporate-level income tax on all our income. To qualify as a
RIC, we must also meet certain asset diversification requirements at the end of
each calendar quarter. Failure to meet these tests may result in our having to
dispose of certain investments quickly in order to prevent the loss of RIC
status. Because most of our investments will be in private companies, any such
dispositions could be made at disadvantageous prices and may result in
substantial losses. If we fail to qualify as a RIC for any reason and remain or
become subject to corporate income tax, the resulting corporate taxes could
substantially reduce our net assets, the amount of income available for
distribution and the amount of our distributions. Such a failure would have a
material adverse effect on us and our stockholders.
18
We
may have difficulty paying our required distributions if we recognize income
before or without receiving cash representing such income.
For
federal income tax purposes, we will include in income certain amounts that we
have not yet received in cash, such as original issue discount, which may arise
if we receive warrants in connection with the making of a loan or possibly in
other circumstances, or contracted payment-in-kind interest, which represents
contractual interest added to the loan balance and due at the end of the loan
term. We also may be required to include in income certain other amounts that we
will not receive in cash. Since in certain cases we may recognize income before
or without receiving cash representing such income, we may have difficulty
satisfying the annual distribution requirement applicable to RICs. Accordingly,
we may have to sell some of our investments at times we would not consider
advantageous, raise additional debt or equity capital or reduce new investments
to meet these distribution requirements. If we are not able to obtain cash from
other sources, we may fail to qualify for RIC tax treatment and thus be subject
to corporate-level income tax.
RISKS
RELATED TO OUR INVESTMENTS
Start-up
and micro companies are subject to many risks, including volatility, intense
competition, decreasing life cycles and periodic downturns.
We invest
in companies in the technology-related sector, some of which may have relatively
short operating histories. The revenues, income (or losses) and valuations of
start-up and micro companies can and often do fluctuate suddenly and
dramatically.
Our investments in start-up and
micro companies
that we are targeting may be extremely risky and we could lose all or part of
our investments.
Although
a prospective portfolio company’s assets are one component of our analysis when
determining whether to provide debt capital, we generally do not base an
investment decision primarily on the liquidation value of a company’s balance
sheet assets. Instead, given the nature of the companies that we invest in, we
also review the company’s historical and projected cash flows, equity capital
and “soft” assets, including intellectual property (patented and non-patented),
databases, business relationships (both contractual and non-contractual) and the
like. Accordingly, considerably higher levels of overall risk will likely be
associated with our portfolio compared with that of a traditional asset-based
lender whose security consists primarily of receivables, inventories, equipment
and other tangible assets. Interest rates payable by our portfolio companies may
not compensate for these additional risks. Specifically, investment in the
start-up and micro companies that we are targeting involves a number of
significant risks, including:
·
|
these companies may have limited
financial resources and may be unable to meet their obligations under
their debt securities that we hold, which may be accompanied by a
deterioration in the value of any collateral and a reduction in the
likelihood of us realizing any value from the liquidation of such
collateral;
|
·
|
they typically have limited
operating histories, narrower product lines and smaller market shares than
larger businesses, which tend to render them more vulnerable to
competitors’ actions and market conditions, as well as general economic
downturns;
|
·
|
because they tend to be privately
owned, there is generally little publicly available information about
these businesses;
|
·
|
they are more likely to depend on
the management talents and efforts of a small group of persons; therefore,
the death, disability, resignation or termination of one or more of these
persons could have a material adverse impact on our portfolio company and,
in turn, on us; and
|
19
·
|
they generally have less
predictable operating results, may from time to time be parties to
litigation, may be engaged in rapidly changing businesses with products
subject to a substantial risk of obsolescence, and may require substantial
additional capital to support their operations, finance expansion or
maintain their competitive
position.
|
A
portfolio company’s failure to satisfy financial or operating covenants imposed
by us or other lenders could lead to defaults and, potentially, termination of
its loans and foreclosure on its secured assets, which could trigger
cross-defaults under other agreements and jeopardize our portfolio company’s
ability to meet its obligations under the debt securities that we hold. We may
incur expenses to the extent necessary to seek recovery upon default or to
negotiate new terms with a defaulting portfolio company. In addition, if a
portfolio company goes bankrupt, even though we may have structured our interest
as senior debt, depending on the facts and circumstances, including the extent
to which we actually provided significant “managerial assistance” to that
portfolio company, a bankruptcy court might re-characterize our debt holding and
subordinate all or a portion of our claim to that of other
creditors.
Elections
to not make follow-on investments in our portfolio companies could impair the
value of our portfolio.
Following
an initial investment in a portfolio company, we may make additional investments
in that portfolio company as “follow-on” investments, in order to: (1) increase
or maintain in whole or in part our equity ownership percentage; (2) exercise
warrants, options or convertible securities that were acquired in the original
or subsequent financing; or (3) attempt to preserve or enhance the value of our
investment. We may elect not to make follow-on investments or otherwise lack
sufficient funds to make those investments. We have the discretion to make any
follow-on investments, subject to the availability of capital resources. The
failure to make follow-on investments may, in some circumstances, jeopardize the
continued viability of a portfolio company and our initial investment, or may
result in a missed opportunity for us to increase our participation in a
successful operation. Even if we have sufficient capital to make a desired
follow-on investment, we may elect not to make a follow-on investment because we
may not want to increase our concentration of risk, because we prefer other
opportunities, or because we are inhibited by compliance with business
development company requirements or the desire to maintain our tax
status.
Our
portfolio companies may incur debt that ranks equally with, or senior to, our
investments in such companies.
We intend
primarily purchase investment grade fixed income instruments, such as CD, Bonds,
Medium Term Notes, etc. used as collateral by our portfolio companies and invest
a portion of our assets in debt securities, consisting primarily of senior
notes, senior subordinated notes and junior subordinated notes, of start-up and
micro companies. In some cases portfolio companies will be permitted to have
other debt that ranks equally with, or senior to, the debt securities in which
we invest. By their terms, such debt instruments may provide that the holders
thereof are entitled to receive payment of interest or principal on or before
the dates on which we are entitled to receive payments in respect of the debt
securities in which we invest. Also, in the event of insolvency, liquidation,
dissolution, reorganization or bankruptcy of a portfolio company, holders of
debt instruments ranking senior to our investment in that portfolio company
would typically be entitled to receive payment in full before we receive any
distribution in respect of our investment. After repaying such senior creditors,
such portfolio company may not have any remaining assets to use for repaying its
obligations to us. In the case of debt ranking equally with debt securities in
which we invest, we would have to share on an equal basis any distributions with
other creditors holding such debt in the event of an insolvency, liquidation,
dissolution, reorganization or bankruptcy of the relevant portfolio company. In
addition, we will not be in a position to control any portfolio company by
investing in its debt securities. As a result, we are subject to the risk that a
portfolio company in which we invest may make business decisions with which we
disagree and the management of such companies, as representatives of the holders
of their common equity, may take risks or otherwise act in ways that do not best
serve our interests as debt investors.
Because
we generally do not hold controlling equity interests in our portfolio
companies, we may not be in a position to exercise control over our portfolio
companies or to prevent decisions by management of our portfolio companies that
could decrease the value of our investments.
Although
we may do so in the future, to date we have generally not taken controlling
equity positions in our portfolio companies. As a result, we are subject to the
risk that a portfolio company may make business decisions with which we
disagree, and the stockholders and management of a portfolio company may take
risks or otherwise act in ways that are adverse to our interests. Due to the
lack of liquidity for the debt and equity investments that we typically hold in
our portfolio companies, we may not be able to dispose of our investments in the
event we disagree with the actions of a portfolio company, and may therefore
suffer a decrease in the value of our investments.
20
FINANCIAL
INFORMATION
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
The
following discussion of our financial condition and results of operation for the
twelve months ended December 31, 2009 and December 31, 2008 should be read
in conjunction with the financial statements and the notes to those statements
that are included elsewhere in this report. Our discussion includes
forward-looking statements based upon current expectations that involve risks
and uncertainties, such as our plans, objectives, expectations and intentions.
Actual results and the timing of events could differ materially from those
anticipated in these forward-looking statements as a result of a number of
factors, including those set forth under the “Risk Factors,” “Cautionary Notice
Regarding Forward-Looking Statements” and “Our Business” sections in this Form
8-K. We use words such as “anticipate,” “estimate,” “plan,”
“project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,”
“will,” “should,” “could,” and similar expressions to identify forward-looking
statements.
Plan
of Operation
From
inception April 30, 2008, the Company (formerly known as Accelerated
Acquisitions III, Inc.) was organized as a vehicle to investigate and, if such
investigation warrants, acquire a target company or business seeking the
perceived advantages of being a publicly held corporation. Our principal
business objectives were to achieve long-term growth potential through a
combination with a business rather than immediate, short-term earnings. The
Company has not restricted our potential candidate target companies to any
specific business, industry or geographical location and, thus, may acquire any
type of business.
The
Company has now become a specialty investment company principally providing
capital and other assistance to start-up and micro companies. The Company
intends to focus its portfolio in a wide variety of different sectors including
but not limited to alternative resources, technology, biotech, insurance, and
services. Our investment objective is to maximize our portfolio’s total return
by using a unique financing models that collateralizes traditional loan using
investment grade fixed income instruments, such as CD, Bonds, Medium Term Notes,
etc. and investing in the debt and/or equity securities of start-up
and micro companies. We also seek to provide our stockholders with current
income on investments in debt securities and long-term capital growth through
the appreciation in the value of warrants or other equity instruments that we
may receive when we make debt investments or equity investments.
Our
capital will generally be invested to purchase investment grade fixed income
instruments, such as CD, Bonds, Medium Term Notes, etc. used as collateral by
our portfolio companies or invested to finance organic growth, acquisitions,
recapitalizations and working capital. Our investment decisions are based on
analysis of potential portfolio companies’ business operations supported by an
in-depth, including proprietary intangible assets and intellectual
property.
We are a
Delaware corporation that has elected to be regulated as a business development
company under the Investment Company Act of 1940, as amended (the “1940 Act”).
As a business development company, we are required to meet certain regulatory
tests, including the requirement to invest at least 70% of our total assets in
eligible portfolio companies. In addition, we have elected to be treated for
federal income tax purposes as a regulated investment company, or RIC, under the
Internal Revenue Code of 1986 (the “Code”).
We may
seek other investment opportunities outside the start-up and micro companies
arena and may also have up to 30% of our assets invested other than in eligible
portfolio companies.
21
Going
Concern
We were a
shell company from April 30, 2008 until our entry into the investment industry
in April 2010. We have incurred net losses of approximately $8,831
since inception through December 31, 2009. At December 31, 2009 we
had approximately $120 in cash and approximately $0 other assets and our
total liabilities were approximately $6,207. The report of our
independent registered public accounting firm on our financial statements for
the year ended December 31, 2009 contains an explanatory paragraph regarding our
ability to continue as a going concern based upon recurring operating
losses and our need to obtain additional financing to sustain
operations. Our ability to continue as a going concern is dependent
upon our ability to obtain the necessary financing to meet our obligations and
repay our liabilities when they become due and to generate sufficient revenues
from our operations to pay our operating expenses. There are no
assurances that we will continue as a going concern.
Results
of Operations
Results of Operations for
the period ended December 31, 2009
Accelerated Acquisitions III,
Inc. (now known as CLS
Capital Group, Inc.) was incorporated on April 30, 2008, and as such had no meaningful results of
operations for the period ended December 31, 2009.
During
the period from inception (April 30, 2008) to December 31, 2009, we had no
revenues and recognized expenses of $8,831 which primarily comprised
professional and legal fees and other costs related to the start-up and
organization of our business and raising initial capital for the
Company.
Liquidity
and Capital Resources
As of
December 31, 2009, the Company had cash on hand of $120 and had total current
liabilities of $6,207. For the year ending December 31, 2009, we incurred
expenses of approximately $8,831 as a result of professional fees required for
the compliance of our financial reporting.
Off-Balance
Sheet Arrangements
The
Company does not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on the Company’s financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to investors.
Seasonality
Our
operating results are not affected by seasonality.
Inflation
Our
business and operating results are not affected in any material way by
inflation.
Critical
Accounting Policies
The
Securities and Exchange Commission issued Financial Reporting Release No. 60,
"Cautionary Advice Regarding Disclosure About Critical Accounting Policies"
suggesting that companies provide additional disclosure and commentary on their
most critical accounting policies. In Financial Reporting Release No.
60, the Securities and Exchange Commission has defined the most critical
accounting policies as the ones that are most important to the portrayal of a
company's financial condition and operating results, and require management to
make its most difficult and subjective judgments, often as a result of the need
to make estimates of matters that are inherently uncertain. The
nature of our business generally does not call for the preparation or use of
estimates. Due to the fact that the Company does not have any
operating business, we do not believe that we do not have any such critical
accounting policies.
22
PROPERTIES
Offices
At this
time, the Company maintains its designated office at 6800 W. Central Ave;
Suite E1; Toledo, OH 43617. The Company’s telephone number is
888-61-MONEY and 419-381-5626. The Company’s fax number is
419-381-5627. The Company’s website is www.clscapitalgroup.com
and a request for information can be email to the Company at info@clscapitalgroup.com.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS
AND MANAGEMENT
The
following table sets forth certain information regarding beneficial ownership of
the Company's Common Stock as of March 31, 2010, by: (i) each current director;
each nominee for director, and executive officer of the Company; (ii) all
directors and executive officers as a group; and (iii) each shareholder who owns
more than five percent of the outstanding shares of the Company's Common Stock.
Except as otherwise indicated, the Company believes each of the persons listed
below possesses sole voting and investment power with respect to the shares
indicated.
Name and Address
|
Number of Shares
|
Percentage Owned
|
||||||
Reynaldo
Uballe Jr
|
8,500,000 | 46.57 | % | |||||
3855
Forrest Green
|
||||||||
Toledo,
OH 43615
|
||||||||
Redell
V Napper II
|
8,500,000 | 46.57 | % | |||||
723
Weatherstone Rd.
|
||||||||
Holland,
OH 43528
|
||||||||
Timothy
Neher
|
1,250,000 | 6.86 | % |
(1) This
table is based upon 18,250,000 shares issued and outstanding as March 31,
2010.
(2)
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting and investment power with
respect to the shares. Shares of Common Stock subject to options or warrants
currently exercisable or exercisable within 60 days are deemed outstanding for
computing the percentage of the person holding such options or warrants, but are
not deemed outstanding for computing the percentage of any other
person.
DIRECTORS
AND EXECUTIVE OFFICERS
Set forth
below is the name of our directors and executive officers, their ages, all
positions and offices that he held with us, the period during which each has
served as such, and their business experience during at least the last five
years.
Name
|
Age
|
Position
|
||
Redell
Vincent Napper III
|
35
|
Director,
CEO, CFO and Treasurer
|
||
Reynaldo
Uballe Jr.
|
47
|
Director,
COO
|
||
Helen
Odum
|
37
|
Director,
Secretary
|
Redell Vincent Napper II
became CEO, CFO, Treasurer and a director of the Company in December
2009. Since 2007, he has been a Managing Member of CLS Capital Group,
LLC. From 2003 to the present date, he has also been the Managing
Member of Napper Investments, LLC which was involved in the business of
purchasing, renovating, leasing and managing residential and commercial real
estate. Mr. Napper attended Ohio Northern
University.
23
Reynaldo Uballe, Jr. became
COO, Secretary and a director of the Company in December 2009. Since
March 2008, he has been Managing Member of CLS Capital Group,
LLC. From November 2004 to March 2008, he was Regional Manager for
Homeloan USA Corp./ Macloud Financial; from June 2004 to November 2004, he was
Branch Manager for Macloud Financial; from June 2002 to June 2004, he was Branch
Manager of 1st
Metropolitan Mortgage and from August 2000 to June 2002 he was Branch Operator
for Pacific Guarantee Mortgage. Mr. Uballe attended Tiffin University
and the University of Toledo.
Helen Odum became Secretary
and a Director of the Company in December 2009. She had previously
served in various capacities for CLS Capital Group, LLC.
Messrs.
Napper and Uballe and Ms. Odum devote less than 25% of their business time
to the affairs of the Company. The time Messrs. Napper and Uballe
spend on the business affairs of the Company varies from week to week and is
based upon the needs and requirements of the Company.
Audit
Committee and Audit Committee Financial Expert
We do not
currently have an audit committee financial expert, nor do we have an audit
committee. Our entire board of directors, which currently consists of
Messrs. Napper and Uballe and Ms. Odum, handles the functions that would
otherwise be handled by an audit committee. We do not currently have
the capital resources to pay director fees to a qualified independent expert who
would be willing to serve on our board and who would be willing to act as an
audit committee financial expert. As our business expands and as we
appoint others to our board of directors we expect that we will seek a qualified
independent expert to become a member of our board of
directors. Before retaining any such expert our board would make a
determination as to whether such person is independent.
There are
no family relationships between our officers and directors. Each
director is elected at our annual meeting of stockholders and holds office until
the next annual meeting of stockholders, or until his successor is elected and
qualified.
EXECUTIVE
COMPENSATION
The
following table summarizes all compensation recorded by us in 2009 for our
principal executive officers, each other executive officer serving as such whose
annual compensation exceeded $100,000, and up to two additional individuals for
whom disclosure would have been made in this table but for the fact that the
individual was not serving as an executive officer of our Company at December
31, 2008.
None
Outstanding
Equity Awards at Fiscal Year-End
The
following table provides information concerning unexercised options, stock that
has not vested and equity incentive plan awards for each named executive officer
outstanding as of December 31, 2009 and March 31, 2010:
None
Compensation
of Directors
We have
not established standard compensation arrangements for our directors and the
compensation, if any, payable to each individual for their service on our Board
will be determined from time to time by our Board of Directors based upon the
amount of time expended by each of the directors on our behalf. None
of our directors received any compensation for their services.
24
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS,
AND
DIRECTOR INDEPENDENCE
Related
Transactions
The
Company neither owns real or personal property. The Company leases its
office space from Forrester Wehrle Properties. The Company is on a
month to month lease paying $2,209 per month. The Company is
responsible for all utilities, telephone, and internet services. The
company also leases two (2) copier machines from Peninsular
Leasing. Upon completion of the lease agreement, the Company will
purchase the copiers for $1.00 each.
The
officers and directors for the Company are involved in other business activities
and may, in the future, become involved in other business opportunities.
If a specific business opportunity becomes available, such persons may
face a conflict in selecting between the Company and their other business
interest. The Company has not formulated a policy for the resolution of
such conflicts.
Director
Independence
The
Company has no “independent” directors within the meaning of Nasdaq Marketplace
Rule 4200.
LEGAL
PROCEEDINGS
None
MARKET
PRICE OF AND DIVIDENDS ON THE REGISTRANT’S
COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
Market
Price of the Registrant’s Common Equity
Our stock
has yet to trade on any established market.
Dividend
Policy
We have
never paid cash dividends on our common stock. Under Delaware law, we
may declare and pay dividends on our capital stock either out of our surplus, as
defined in the relevant Delaware statutes, or if there is no such surplus, out
of our net profits for the fiscal year in which the dividend is declared and/or
the preceding fiscal year. If, however, the capital of our company,
computed in accordance with the relevant Delaware statutes, has been diminished
by depreciation in the value of our property, or by losses, or otherwise, to an
amount less than the aggregate amount of the capital represented by the issued
and outstanding stock of all classes having a preference upon the distribution
of assets, we are prohibited from declaring and paying out of such net profits
any dividends upon any shares of our capital stock until the deficiency in the
amount of capital represented by the issued and outstanding stock of all classes
having a preference upon the distribution of assets shall have been
repaired.
RECENT
SALES OF UNREGISTERED SECURITIES
On April
29, 2008, the Registrant sold 5,000,000 shares of Common Stock to Accelerated
Venture Partners, LLC for an aggregate investment of $4,000.00. The
Registrant sold these shares of Common Stock under the exemption from
registration provided by Section 4(2) of the Securities Act.
25
On
December 29, 2009, Redell Vincent Napper II and Reynaldo Uballe, Jr.
(“Purchasers”) each agreed to acquire 8,500,000 shares of the Company’s common
stock par value $0.0001 (17,000,000 shares in the aggregate) for a price of
$0.0001 per share. At the same time, Accelerated Venture Partners,
LLC agreed to tender 3,750,000 of their 5,000,000 shares of the Company’s common
stock par value $0.0001 for cancellation. Following these
transactions, each of Messrs. Napper and Uballe owned 46.57% of the Company’s
18,250,000 issued and outstanding shares of common stock par value $0.0001 and
the interest of Accelerated Venture Partners, LLC was reduced to approximately
6.86% of the total issued and outstanding shares. Simultaneously with
the share purchase, Timothy Neher resigned from the Company’s Board of Directors
and Messrs. Napper and Uballe were simultaneously appointed to the Company’s
Board of Directors. Such action represents a change of control of the
Company. The Purchasers used their working capital to acquire the
Shares. Prior to the
purchase of the shares, the Purchasers were not affiliated with the Company.
However, the Purchasers will be deemed affiliates of the Company after the share
purchase as a result of their stock ownership interest in the Company. The purchase of the shares
by the Purchasers was completed pursuant to written Subscription Agreements with
the Company. The purchase was not subject to any other terms and conditions
other than the sale of the shares in exchange for the cash payment.
DESCRIPTION
OF SECURITIES
Our
authorized capital stock consists of 100,000,000 shares of common stock, par
value $0.0001 per share, and 10,000,000 shares of preferred stock, par value
$0.0001 per share, the rights and preferences of which may be established from
time to time by our board. As of March 31, 2010, there were
18,250,000 shares of common stock and no shares of preferred stock issued and
outstanding.
Common
Stock
Holders
of our common stock are entitled to one vote for each share on all matters voted
upon by our stockholders, including the election of directors, and do not have
cumulative voting rights. Subject to the rights of holders of any
then outstanding shares of our preferred stock, our common stockholders are
entitled to any dividends that may be declared by our board. Holders
of our common stock are entitled to share ratably in our net assets upon our
dissolution or liquidation after payment or provision for all liabilities and
any preferential liquidation rights of our preferred stock then
outstanding. Holders of our common stock have no preemptive rights to
purchase shares of our stock. The shares of our common stock are not
subject to any redemption provisions and are not convertible into any other
shares of our capital stock. All outstanding shares of our common
stock are, and the shares of common stock to be issued in the offering will be,
upon payment therefor, fully paid and nonassessable. The rights, preferences and
privileges of holders of our common stock will be subject to those of the
holders of any shares of our preferred stock we may issue in the
future.
Preferred
Stock
Our board
may, from time to time, authorize the issuance of one or more classes or series
of preferred stock without stockholder approval. Subject to the provisions of
our certificate of incorporation and limitations prescribed by law, our board is
authorized to adopt resolutions to issue shares, establish the number of shares,
change the number of shares constituting any series, and provide or change the
voting powers, designations, preferences and relative rights, qualifications,
limitations or restrictions on shares of our preferred stock, including dividend
rights, terms of redemption, conversion rights and liquidation preferences, in
each case without any action or vote by our stockholders. One of the effects of
undesignated preferred stock may be to enable our board to discourage an attempt
to obtain control of our company by means of a tender offer, proxy contest,
merger or otherwise. The issuance of preferred stock may adversely affect the
rights of our common stockholders by, among other things:
• Restricting
dividends on the common stock;
• diluting
the voting power of the common stock;
• impairing
the liquidation rights of the common stock; or
• delaying
or preventing a change in control without further action by the
stockholders.
Item 9.01 Financial Statements
and Exhibits.
(a)
Financial Statements
Financial
Statements (Audited) for the periods ended December 31, 2009 and December 31,
2008 (audited by Paritz & Co., P.A.) are attached hereto as Exhibit
99.1.
26
(d) Exhibits
EXHIBIT
|
||
NUMBER
|
DESCRIPTION
|
|
10.1
|
Assignment
of Rights Under Servicing Agreements
|
|
99.1
|
Financial
Statements (Audited) for the period ended December 31,
2009
|
SIGNATURES
Pursuant
to the requirements of the Securities and Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
CLS
CAPITAL GROUP, INC.
|
|
By:
|
/s/ Redell Napper
|
Name:
|
|
Redell
Napper II
|
|
Title:
|
|
Chief
Executive Officer
|
Dated:
April 26, 2010
EXHIBIT
LIST
EXHIBIT
|
||
NUMBER
|
DESCRIPTION
|
|
10.1
|
Assignment
of Rights Under Servicing Agreements
|
|
99.1
|
Financial
Statements (Audited) for the period ended December 31,
2009
|
27