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EX-23.1 - SHADES HOLDINGS, INC. | v199516_ex23-01.htm |
AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 20,
2010
Registration
No. 333- 168139
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
AMENDMENT NO. 3
TO
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
SHADES
HOLDINGS, INC.
(Exact
name of registrant as specified in its charter)
Florida
|
5961
|
27-1368114
|
(State
or other jurisdiction of
incorporation
or organization)
|
(Primary
Standard Industrial
Classification
Code Number)
|
(I.R.S.
Employer
Identification
No.)
|
20711
Sterlington Drive
Land
O’ Lakes, Florida 34638
(813)
454-0130• Fax: (813) 388-4430
(Address,
including zip code, and telephone number, including area code, of registrant’s
principal executive offices)
Sean
M. Lyons, Chief Executive Officer
Shades
Holdings, Inc.
20711
Sterlington Drive
Land
O’ Lakes, Florida 34638
(813)
454 0130• Fax: (813) 388-4430
(Name,
address, including zip code, and telephone number, including area code, of agent
for service)
Copies
to:
John
N. Giordano, Esq.
Bush
Ross, P.A.
1801
N. Highland Avenue
Tampa,
Florida 33602
(813)
224-9255 Fax (813) 223-9620
Approximate date of commencement of
proposed sale to the public: As soon as practicable after this
Registration Statement is declared effective.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box: x
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
(Do not check if a smaller reporting company)
|
Smaller
reporting company x
|
CALCULATION
OF REGISTRATION FEE
Title of Each Class of Securities to be Registered
|
Amount to be Registered(3)
|
Proposed Maximum
Offering Price Per Security
|
Proposed Maximum
Aggregate Offering Price
|
Amount of Registration Fee
|
||||||||||||
Common
Stock, $0.0001 par value
|
5,102,222 | (2) | $ | 0.25 | (1) | $ | 1,275,555 | $ | 90.95 | |||||||
Total
Registration Fee
|
$ | 90.95 |
(1)
|
Estimated
solely for the purpose of computing the registration fee pursuant to Rule
457(o) of the Securities Act of 1933, as amended. The proposed
maximum offering price per share is calculated in accordance with Rule
457(o) of the Securities Act and is based upon the most recent sales price
of the common stock of Shades Holdings, Inc.
|
(2)
|
The
number of shares of common stock of Shades Holdings, Inc. to be registered
has been determined based on the sum of (i) 1,102,222 shares of common
stock of Shades Holdings, Inc. offered by the Selling Security Holders and
(ii) 4,000,000 shares of common stock of Shades Holdings, Inc., which are
being offered directly by the officers and directors of Shades Holdings,
Inc.
|
(3)
|
Pursuant
to Rule 416(a) of the Securities Act of 1933, as amended, this
registration statement also covers additional shares of common stock that
may be offered to prevent dilution as a result of stock splits, stock
dividends or similar transactions relating to these
shares.
|
The
registrant hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
The
information in this prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PRELIMINARY
PROSPECTUS (SUBJECT TO COMPLETION), DATED OCTOBER 20, 2010
SHADES
HOLDINGS, INC.
4,000,000
SHARES OF COMMON STOCK BY THE COMPANY
1,102,222
SHARES OF COMMON STOCK BY SELLING SECURITY HOLDERS
This
prospectus relates to the offer and sale of 5,102,222 shares of our common
stock during the period in which the registration statement containing this
prospectus is effective. Of the shares being registered, 1,102,222
shares are being registered for sale by the selling security holders set forth
on page 22 of this prospectus and 4,000,000 shares are being offered for sale
by the Company. Our common
stock is not presently traded on any market or securities exchange, and we have
not applied for listing or quotation on any public market. We
anticipate the trading of our common stock on the Over-The-Counter Bulletin
Board (“OTCBB”) maintained by the Financial Industry Regulatory Authority,
however, there can be no assurances that our common stock will be approved for
trading on the OTCBB, or any other trading exchange.
We are
offering up to 4,000,000 shares of our common stock at a fixed price of $0.25
per share through our directors and executive officers on a “best efforts”
basis. There is no minimum number of shares that must be sold in this
offering and there is no arrangement to place funds in an escrow, trust, or
similar account and all proceeds will be paid directly to us. As the
proceeds of this offering will be paid directly to us and held in our operating
accounts, the funds may be subject to claims of our creditors. Since there is no
minimum amount of shares that must be sold in this offering, the proceeds of
this offering may be $0 to $950,000, after payment of associated offering
expenses, which are estimated to be $50,000. As a result, if you are
an initial investor in this offering and we only sell a small number of shares
in this offering, your investment will be rendered worthless. For
example, if we only sell 40,000 shares of common stock (10% of the offering) we
will only raise $10,000 and will not be able to implement our business plan as
all proceeds will be applied towards expenses related to the
offering. We intend to continue the offering until the earlier of the
date all of the shares of common stock are sold or the expiration of 180 days,
subject to our right to extend the offering for an additional 180-day period.
The
selling security holders will offer our shares at $0.25 per share until our
shares are quoted on the OTCBB, or listed for trading or quoted on any other
public market, and thereafter at prevailing market prices or privately
negotiated prices. We will not receive any of the proceeds from the
sale of these shares by the selling security holders. See “Use of Proceeds.”
The
selling security holders and intermediaries through whom the common stock is
sold may be deemed “underwriters” within the meaning of the Securities Act of
1933 with respect to the securities offered hereby, and any profits realized or
commissions received may be deemed underwriting compensation. We have
agreed to indemnify the selling security holders against certain liabilities,
including liabilities under the Securities Act.
Please see page 22 for a list of the “Selling Security
Holders” who are offering shares of common stock pursuant to this
prospectus.
An investment in the common stock
offered for sale under this prospectus involves a high degree of
risk. See “Risk Factors” beginning on page 8 of this prospectus.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is
[Ÿ], 2010
2
PAGE
|
|
Prospectus
Summary
|
4
|
Risk
Factors
|
8
|
Use
of Proceeds
|
17
|
Determination
of Offering Price
|
19
|
Dilution
|
20
|
Selling
Security Holders
|
21
|
Plan
of Distribution
|
24
|
Description
of Securities to be Registered
|
28
|
Interest
of Named Experts and Counsel
|
29
|
Description
of Business
|
29
|
Description
of Property
|
32
|
Legal
Proceedings
|
32
|
Market
Price of and Dividends on the Registrant’s Common Equity and Related
Stockholder Matters
|
32-33
|
Financial
Statements
|
F-1-F-15
|
Management’s
Discussion and Analysis of Financial Condition and Plan of Operations
|
34
|
Changes
In and Disagreements with Accountants on Accounting and Financial
Disclosure
|
37
|
Directors,
Executive Officers, Promoters, and Control Persons
|
38
|
Executive
Compensation
|
41
|
Security
Ownership of Certain Beneficial Owners and Management
|
|
Transactions
with Related Persons, Promoters and Certain Control Persons
|
42
|
Disclosure
of Commission Position on Indemnification for Securities Act Liabilities
|
43
|
Other
Expenses of Issuance and Distribution
|
44
|
Indemnification
of Directors and Officers
|
44
|
Recent
Sales of Unregistered Securities
|
44
|
Exhibits
and Financial Statement Schedules
|
46
|
Undertakings
|
47
|
We have
not authorized anyone to provide you with information different from that
contained in this prospectus. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of common stock.
Until the
date forty days after the date of the first bona fide offering of securities
under this registration statement, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers’ obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions, if any.
3
This
summary highlights important information about our Company and
business. Because it is a summary, it may not contain all of the
information that is important to you. To understand this offering
fully, you should read this entire prospectus and the consolidated financial
statements and related notes included in this prospectus carefully, and, in
particular, the section of this prospectus captioned “Risk
Factors.” Unless the context requires otherwise, “Company,”
“registrant,” “we,” “us,” and “our” and similar terms refer to Shades Holdings,
Inc.
Our
Company and Business
We are an
online retailer of discount sunglasses. We conduct our operations
through our wholly-owned subsidiary, Daily Shades, Inc. We are a
development stage company and have recently commenced our business
operations. To date, we have derived nominal revenues from the sale
of our products. All of our products have been sold solely through
our wholly-owned subsidiary, Daily Shades, Inc., on our web site at
www.dailyshades.com and we intend to continue offering our products only through
our website.
We
acquire high quality, name brand sunglasses from manufacturers, distributors and
retailers at substantial discounts and then offer these sunglasses for sale to
the public through our website. We generally are able to acquire our
products at a discount off manufactured suggested retail price. We
currently only have one contract with a supplier, which is terminable by either
party upon 30 days notice. With the exception of our current
contract, we do not have a contract with any other manufacturer, distributor or
retailer to supply us with our products. As such, there is no
assurance we will be able to secure our products at these prices. We
generally do not purchase inventory from our suppliers; rather, we typically
negotiate an arrangement with our suppliers to acquire the products at a fixed
cost which we do not incur unless and until the product is
sold. However, there will be limited instances where we purchase
inventory such as greatly discounted models and carry that inventory from time
to time.
We
currently offer a different pair of sunglasses each day to our customers through
our website. We generally offer our sunglasses for a limited period
of time and present the offer as a “daily deal” on our website. Each
day our quantities vary so our customers do not know how many pairs of
sunglasses we will have of a particular model. We provide a full
description of the sunglasses that we are offering as well as high quality
pictures of the sunglasses on our website. We have also recently
added a bargain bin that consist of single models, old models and slightly
damaged models. Sunglasses available through our bargain bin are
typically offered a discount prices as well.
We
anticipate generating revenue streams from the sale of our products to our
customers and the sale of advertising space on our website to other
companies. To date, our operations have been limited and we have only
earned $1,487 in revenues from the sale of our products. We have
earned less than $100 from the sale of advertising space on our website.
Our
independent auditors have issued a going concern qualification in their report
dated June 29, 2010, which raises substantial doubt about our ability to
continue as a going concern. Our ability to continue as a going
concern is dependent upon our ability to generate sufficient cash flows to meet
our obligations on a timely basis, to obtain additional financing as may be
required, and ultimately to attain profitable operations. However, there can be
no assurance that we will generate sufficient revenues from the services offered
by us to operate at a profit or pay expenses.
We do not
have any current plans to engage in a merger, acquisition or business
combination with another entity.
Corporate
Information
We are a
Florida corporation that was incorporated in the State of Florida on November
23, 2009. Our
wholly-owned subsidiary, Daily Shades, Inc., also was incorporated in the State
of Florida on November 23, 2009.
Our
executive offices are located at 20711 Sterlington Drive, Land O’ Lakes, Florida
34638, and our telephone number is (813) 454-0130. Our website
address is www.dailyshades.com
The
Public Offering
The
Issuer:
|
Shades
Holdings, Inc.
|
|
Fixed
Offering Price:
|
$0.25
per share (fixed price for duration of offering)
|
|
Common
Stock outstanding before the Offering
|
There
were 23,527,000 shares of our common stock issued and outstanding as
of June 30, 2010.
|
|
Common
Stock outstanding after the Offering
|
There
will be 27,527,000 shares of our common stock issued and outstanding
if the offering is fully subscribed.
|
|
Termination
of Offering
|
The
offering will continue until the earlier of the date all of the shares of
common stock are sold or the expiration of 180 days, subject to our right
to extend the offering for an additional 180-day period.
|
4
Use
of Proceeds
|
We
expect to use the proceeds received from the offering for advertising,
social media, and search engine optimization services; acquisition of
inventory; website enhancement and development; and for general working
capital needs. See “Use of Proceeds”
beginning on page 18.
|
|
Risk
Factors
|
The
common stock offered hereby involves a high degree of risk and should not
be purchased by investors who cannot afford to lose their entire
investment. See “Risk Factors” beginning
on page 9.
|
|
Offering
by Selling Security Holders
|
||
The
Selling Security Holders:
|
The
selling security holders consist of some of our existing stockholders who
are identified in this prospectus on page 22
|
|
Outstanding
shares of common stock
|
There
were 23,527,000 shares of our common stock issued and outstanding as
of June 30, 2010.
|
|
Common
stock offered by Selling Security Holders
|
The
selling security holders are offering up to 1,102,222 shares of our
common stock.
|
|
Terms
of the Offering
|
The
selling security holders will determine when and how they will sell the
common stock offered in this prospectus. We will pay the
expenses associated with the offering, which we estimate will be
approximately $50,000.
|
|
Termination
of the Offering
|
The
offering by the selling security holders will conclude upon the earliest
of (a) such time as all of the common stock has been sold pursuant to the
registration statement or (b) such time as all of the common stock becomes
eligible for resale without volume limitations pursuant to Rule 144 under
the Securities Act, or any other rule of similar
effect.
|
|
Use
of Proceeds
|
We
are not selling any shares of common stock offered for resale by the
selling security holders, and, as a result, will not receive any proceeds
from this offering of shares by the selling security
holders.
|
|
No
Present Public Market for our Common Stock
|
Our
common stock is presently not traded or quoted on any market or securities
exchange and we have not applied for listing or quotation on any public
market.
|
|
Risk
Factors
|
The
common stock offered hereby involves a high degree of risk and should not
be purchased by investors who cannot afford to lose their entire
investment. See “Risk Factors” beginning
on page 9.
|
5
Summary
of Comparative Financial Information
The
following tables summarize consolidated financial data regarding the business of
the Company and should be read together with “Management Discussion and Analysis
of Financial Condition and Plan of Operations” and the financial
statements of the Company and the related notes included with those financial
statements. The summary financial information as of December 31, 2009
and for the period from November 23, 2009 (inception) to December 31, 2009 have
been derived from our consolidated financial statements and notes thereto
audited by Meeks International, LLC, our independent registered public
accounting firm. The summary financial information as of June 30,
2010 and for six months ended June 30, 2010 is unaudited. All
monetary amounts are expressed in U.S. dollars unless otherwise indicated.
SUMMARY
FINANCIAL INFORMATION
June 30, 2010
|
December 31, 2009
|
|||||||
(Unaudited)
|
||||||||
Cash
and cash equivalents
|
$ | 43,801 | $ | 19,950 | ||||
Account
Receivable
|
19 | |||||||
Prepaid
Expenses
|
81,363 | 80,890 | ||||||
Total
current assets
|
$ | 125,183 | $ | 100,840 | ||||
Total
assets
|
$ | 127,683 | $ | 103,840 | ||||
Accounts
Payable
|
||||||||
and
Accrued Expenses
|
$ | 1,434 | $ | 1,712 | ||||
Total
stockholders' equity
|
$ | 126,249 | $ | 102,128 | ||||
Total
liabilities and shareholders' equity
|
$ | 127,683 | $ | 103,840 |
6
For The Period
|
||||||||||||||||
For The Period
|
From
|
|||||||||||||||
From November 23,
|
November 23,
|
|||||||||||||||
For The Three
|
2009 (Date of
|
2009 (Date of
|
||||||||||||||
Month Period Ended
|
For The Six Month Period
|
Inception) To
|
Inception) To
|
|||||||||||||
June 30, 2010
|
Ended June 30, 2010
|
December 31, 2009
|
June 30, 2010
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||||||
Revenue
|
$ | 1,269 | $ | 1,686 | $ | - | $ | 1,686 | ||||||||
Cost
of goods sold
|
949 | 1,039 | - | 1,039 | ||||||||||||
Gross
Profit
|
320 | 647 | - | 647 | ||||||||||||
Selling
and General Administrative
|
17,199 | 30,776 | 4,015 | 34,791 | ||||||||||||
Net
loss
|
$ | (16,879 | ) | $ | (30,129 | ) | $ | (4,015 | ) | $ | (34,144 | ) | ||||
Basic
and diluted loss per share
|
$ | - | $ | - | $ | - | ||||||||||
Weighted
average shares outstanding
|
||||||||||||||||
basic
and diluted
|
23,501,400 | 23,411,978 | 22,228,421 |
7
An
investment in our common stock involves a high degree of risk and is subject to
many uncertainties. These risks and uncertainties may adversely
affect our business, operating results and financial condition. In
order to attain an appreciation for these risks and uncertainties, you should
read this prospectus in its entirety and consider all of the information and
advisements contained in this prospectus, including the following risk factors
and uncertainties. If any of the following risks occur, our business,
operating results and financial condition could be seriously harmed and you
could lose all or part of your investment.
Risk
Factors Related to Our Business.
We
have a limited operating history upon which you can evaluate our
business.
We are a
development stage company with very limited operating history. Since
our inception on November 23, 2009 through June 30, 2010, we have only generated
revenues of approximately $1,686 and have incurred a cumulative net operating
loss through June 30, 2010 of ($34,144). Our limited operating
history will make it difficult, if not impossible, to predict future operating
results and to assess the likelihood of our business success. Risks
and issues inherent in the establishment and expansion of a new business
enterprise which we face include, among others, problems of attracting a
significant number of customers to our website, offering acceptable products to
our customers at competitive prices, and establishing relationships with
manufacturers, retailers and other suppliers to obtain sufficient quantities of
quality merchandise on acceptable terms. As a development stage
company, we are also subject to risks and levels of risk that are often greater
than those encountered by companies with established operations and
relationships. Development stage companies often require significant
capital from sources other than operations. Since we are a
development stage company, our management and employees will shoulder the
burdens of the business operations and a workload associated with company growth
and capitalization that is disproportionately greater than that for an
established business. We cannot give you any assurance that we will successfully
address these risks. Our prospects must be considered speculative, which may
limit our ability to encourage further investment in our Company.
As
our auditors have expressed a substantial doubt as to our ability to continue as
a going concern, there is a significant risk that our business will
fail.
From our
inception on November 23, 2009 through June 30, 2010, we have incurred operating
losses of $34,144. The likelihood of our success must be considered in light of
the expenses, complications and delays frequently encountered in connection with
the establishment and expansion of new businesses. Our independent auditors have
issued a going concern qualification in their report dated June 29, 2010, which
raises substantial doubt about our ability to continue as a going concern. Our
ability to continue as a going concern is dependent upon our ability to generate
sufficient cash flows to meet our obligations on a timely basis, to obtain
additional financing as may be required, and ultimately to attain profitable
operations. However, there can be no assurance that we will generate sufficient
revenues from the services offered by us to operate at a profit or pay expenses.
Our cash on hand is not sufficient to fund our planned operations for 12 months
from the date of this prospectus.
No minimum offering size.
There is
no minimum number of shares that must be sold in this offering and there is no
arrangement to place funds in an escrow, trust, or similar account and all
proceeds will be paid directly to us. We will begin to immediately
use the funds that we receive from investors in this offering without knowing if
we will raise any additional capital in this offering. Accordingly,
the initial investors in our company will bear this additional
risk. Since there is no minimum amount of shares that must be sold in
this offering, the proceeds of this offering may be $0 to $950,000, after
payment of associated offering expenses, which are estimated to be
$50,000. As a result, if you are an initial investor in this offering
and we only sell a small number of shares in this offering, your investment will
be rendered worthless. For example, if we only sell 40,000 shares of
common stock (10% of the offering) we will only raise $10,000 and will not be
able to implement our business plan as all proceeds will be applied towards
expenses related to the offering. Further, as the proceeds of this offering
will be paid directly to us and held in our operating accounts, the funds may be
subject to claims of our creditors.
We
may not be able to implement our business strategies, which could impair our
ability to continue operations.
Implementation
of our business strategies will depend, in large part, on our ability to
(i) attract a significant number of customers to our website;
(ii) offer acceptable products to our customers at competitive prices;
(iii) establish relationships with manufacturers, retailers and other suppliers
to obtain sufficient quantities of quality merchandise on acceptable terms;
(iv) continue to operate with increasing competition in the internet retail
industry; (v) establish, develop and maintain name recognition; and
(vi) obtain adequate financing on favorable terms to fund our business
strategies. Our inability to obtain or maintain any or all these
factors could impair our ability to implement our business strategies
successfully, which could have material adverse effects on our results of
operations and financial condition.
8
If
we are unable to raise additional working capital, we will be unable to fully
fund our operations and to otherwise execute our business plan, leading to the
reduction or suspension of our operations and ultimately our going out of
business.
We
believe that our currently available working capital will be sufficient to
continue our business for at least the next three to four
months. Should our costs and expenses prove to be greater than we
currently anticipate, or should we change our current business plan in a manner
that will increase or accelerate our anticipated costs and expenses, the
depletion of our working capital would be accelerated. To the extent
it becomes necessary to raise additional cash in the future as our current cash
and working capital resources are depleted, we will seek to raise it through the
public or private sale of debt or equity securities, funding from joint-venture
or strategic partners, debt financing or short-term loans, or a combination of
the foregoing. We may also seek to satisfy indebtedness without any
cash outlay through the private issuance of debt or equity
securities. We currently do not have any binding commitments for, or
readily available sources of, additional financing. We cannot give
you any assurance that we will be able to secure the additional cash or working
capital we may require to continue our operations.
Even
if we are able to raise additional financing, we might not be able to obtain it
on terms that are not unduly expensive or burdensome to the Company or
disadvantageous to our existing shareholders.
Even if
we are able to raise additional cash or working capital through the public or
private sale of debt or equity securities, funding from joint-venture or
strategic partners, debt financing or short-term loans, or the satisfaction of
indebtedness without any cash outlay through the private issuance of debt or
equity securities, the terms of such transactions may be unduly expensive or
burdensome to the Company or disadvantageous to our existing shareholders. For
example, we may be forced to sell or issue our securities at significant
discounts to market, or pursuant to onerous terms and conditions, including the
issuance of preferred stock with disadvantageous dividend, voting or veto, board
membership, conversion, redemption or liquidation provisions; the issuance of
convertible debt with disadvantageous interest rates and conversion features;
the issuance of warrants with cashless exercise features; the issuance of
securities with anti-dilution provisions; and the grant of registration rights
with significant penalties for the failure to quickly register. If we raise debt
financing, we may be required to secure the financing with all of our business
assets, which could be sold or retained by the creditor should we default in our
payment obligations.
We
anticipate depending on third-party search engines and referral sources to
attract visitors to our websites, and if we are unable to attract these visitors
or convert them into customers in a cost-effective manner, our business and
results of operations will be harmed.
Our
success depends on our ability to attract consumers to our websites and convert
them into customers in a cost-effective manner. We anticipate that
most of our website visits will be referred to us through paid and unpaid search
engine listings and other sources that provide a link to our
websites. These third parties utilize various algorithms and key
words to determine the websites that they display in response to certain search
criteria. If these methods are changed, it could cause fewer consumers to click
through to our websites and adversely affect our financial results. We also
anticipate paying these third parties to include or highlight our websites in
their search results. If such third parties modify or terminate their
relationship with us or increase the price they charge to us, if our competitors
offer them greater fees for traffic or if any free third-party website on which
we rely begins charging fees for listing or placement, our expenses could rise
and traffic to our websites could decrease, resulting in harm to our
operations.
We
may not succeed in promoting or establishing the “Daily Shades” brand, which
could prevent us from acquiring customers and generating revenues.
We
believe that brand recognition is a primary competitive factor in the e-commerce
market and will be a key factor in creating and establishing our customer base
and market position. If we are unable to establish and promote our
brand, or if our brand is not viewed favorably, we may not be successful in
attracting and acquiring customers, which would have a material adverse effect
on our results of operations and financial condition.
If
we do not anticipate and respond to changing consumer preferences in a timely
manner, our operating results will suffer.
Consumer
tastes and preferences will continue to evolve and change, and these changes may
have a significant impact on our market and our business. In order
for our business to succeed, we must be responsive and adapt dynamically to
these changes. Failure to successfully predict and accommodate constantly
changing consumer tastes, preferences, spending patterns and other lifestyle
decisions, or to effectively address consumer concerns, could have a material
adverse effect on our revenue, results of operations and relationship with our
customers.
9
If
we are unable to provide a satisfactory customer experience, our reputation
would be harmed and we could lose customers.
A
critical component of our strategy is providing a high-quality customer shopping
experience. Accordingly, the effective performance, reliability and availability
of our website and network infrastructure are critical to establishing our
reputation and our ability to attract and retain customers. As an online
retailer, we cannot offer some of the services or match certain aspects of the
shopping experience offered by or available at brick-and-mortar retailers or
online retailers that also have brick-and-mortar operations, such as the ability
to allow consumers to touch, test and feel products, personally interact with
sales or customer service representatives, and receive or return products
without waiting or potentially paying for the products to be shipped. The lack
of these services and inability to successfully provide an adequate online
shopping experience may cause certain consumers to purchase products from our
competitors rather than from us. Therefore, it is important that we continue to
improve our website content and operations, including efforts to encourage the
creation of more high quality and useful user-generated content, such as reviews
and commentary, on the products we sell. If we do not make investments in our
website development, content and functionality and customer service operations,
and as a result, or due to other reasons, fail to provide a high-quality
customer experience, we may lose customers, which would adversely impact our
operating results.
If
the products that we offer on our website do not reflect our customers' tastes
and preferences, our sales and anticipated profitability will
suffer.
Our
success will depend in part on our ability to offer products that reflect
consumers' tastes and preferences. Consumers' tastes are subject to frequent,
significant and sometimes unpredictable changes. Because the products
that we sell typically consist of manufacturers' and retailers' excess
inventory, we have limited control over the specific products that we will be
able to offer for sale. If our merchandise fails to satisfy customers' tastes or
respond to changes in customer preferences, our sales could be less than we
forecast and we could be required to mark down unsold inventory which would
depress our anticipated profit margins. This could have an adverse effect on our
business, results of operations and financial condition.
We
do not anticipate entering into any contracts or arrangements with suppliers
that guarantee the availability of merchandise, or provide for the continuation
of particular pricing or other practices, as this is atypical in our
industry. As such, our suppliers may cease selling us inventory on
current terms or entirely, and, if the terms are changed, we may not be able to
establish new supply relationships on similar or better terms.
We do not
anticipate entering into any contracts or arrangements with suppliers that
guarantee the availability of merchandise, or provide for the continuation of
particular pricing or other practices, as this is atypical in our
industry. As such, our suppliers may cease selling us inventory on
current terms or entirely, and, if the terms are changed, we may not be able to
establish new supply relationships on similar or better terms. We
also do not anticipate that our future relationships with our suppliers will
restrict them from selling their products through our competitors. In
addition, some suppliers whose products we offer on our websites, also sell
their products directly to consumers. If we are unable to develop and maintain
relationships with suppliers that permit us to obtain sufficient quantities of
desirable merchandise on favorable terms, our business, results of operations
and financial condition could be adversely impacted.
We
depend on third-party delivery services to deliver our products to us and our
customers on a reliable and timely basis, and these third parties may increase
the fees that they charge, limit or end their relationship with us with minimal
prior notice, or become less reliable.
We use
the United Postal Service, UPS and other third parties to ship our
products. We do not have any agreements with any delivery service and
we cannot assure you that our relationships with these delivery service
providers will continue on terms favorable to us, or at all. Continued increases
in shipping costs could harm our business, financial condition and results of
operations by increasing our costs of doing business and reducing our gross
margins. Passing these increased costs on to our customers could also cause us
to lose sales to competitors. Furthermore, due to competitive pressures, we are
increasingly either heavily discounting or not charging our customers for
shipping. Our online competitors often provide for free or reduced shipping
charges, and we expect to continue to offer similar programs to build our
customer base, which will have the effect of decreasing net sales from freight
and decreasing our margins.
10
We
will likely utilize third parties to perform a number of our fulfillment,
distribution and other functions. If such parties are unwilling or
unable to continue providing these services, our business could be
harmed.
We will
likely employ a technique known as “drop shipping” where a customer will place
an order with us and then we will transfer the order and shipment details to
either the manufacturer or a wholesaler, who will then ship the goods directly
to the customer. If we employ “drop shipping,” we have no effective
means to ensure that these third parties will continue to perform these services
to our satisfaction, in a manner satisfactory to our customers or on
commercially reasonable terms. Our customers could become dissatisfied and
cancel their orders or decline to make future purchases if these third parties
fail to deliver products on a timely basis. If our customers become dissatisfied
with the services provided by these third parties, our reputation and our brand
could suffer.
We
may become liable for collecting and paying more sales taxes, and other fees and
penalties, which could have an adverse effect on our business.
We
currently collect sales or other similar taxes only on the shipment of goods to
customers in the state of Florida, which is the only U.S. state where we have a
physical presence. To the extent we are not subject to certain tax
obligations, we enjoy a competitive advantage to the extent our competitors are
subject to those obligations. Several states have enacted, and a
number of states and the U.S. Congress have been considering, various
initiatives that could impose broad sales and use tax collection obligations on
Internet retailers. Federal, state and local governments could accelerate
efforts to pass Internet sales tax initiatives in response to pressure to make
up budgetary shortfalls resulting from recessionary economic conditions and the
failure to collect sales and use taxes on Internet purchases under current
self-assessment regimes. Any of these initiatives would increase total costs to
our customers, which could adversely affect our net sales. We are closely
monitoring developments in this area. If we fail to collect and remit
or pay required sales, income or other taxes in a jurisdiction, or qualify
or register to do business in a jurisdiction that requires us to do
so or if we have failed to do so in the past, we could face material liabilities
for taxes, fees, interest and penalties. If various jurisdictions
impose new tax obligations on our business activities, our net sales and net
income in those jurisdictions could decrease significantly, which could harm our
financial results.
Our
reputation could be damaged or we could be liable if our customer data security
is breached.
If third
parties, such as hackers, are able to circumvent our network security and
penetrate our technology systems, or if we lose, misuse, misplace or provide
third parties with improper access to the personal or credit card information of
our customers, we could be subject to significant liability. This liability
could include claims for unauthorized credit card purchases, identity theft or
other similar fraud claims. This liability could also include claims for other
misuses of personal information, such as engaging in unauthorized marketing
activities. These claims could result in investigations, litigation, fines and
penalties. Remediation of and liability for loss or misappropriation of customer
or employee personal information could have a material adverse effect on our
business and financial results. We could incur additional expenses if new
regulations regarding the use and protection of personal information are
introduced or if government agencies, such as the Federal Trade Commission, or
state agencies investigate our privacy practices and find them to be deficient.
We rely on encryption and authentication technology licensed from third parties
to secure transmission of confidential information such as customer credit card
numbers. Advances in technology, the expertise of hackers, new discoveries in
the field of cryptography or other events or developments could result in a
compromise or breach of the technology that we use to protect customer and
employee information. Significant capital investment and other resources may be
required to protect against such security breaches or alleviate problems caused
by such breaches. We cannot guarantee that our current or future security
measures will prevent security breaches. Failures to prevent such security
breaches may harm our reputation and have a material adverse effect on our
business, financial condition and results of operations.
11
Credit
card fraud could adversely affect our business.
We do not
carry insurance against the risk of credit card fraud, so the failure to
adequately control fraudulent credit card transactions could reduce our net
revenues and our gross margin. We anticipate implementing technology
to help us detect the fraudulent use of credit card
information. Currently we use a shopping cart which helps protect
transactions on a secure server. We also use Authorize.net which uses
secure servers to deliver our customers financial information to our Merchant
Processor/Bank and they also verify customer’s information and approve the
transaction. Additionally our website is protected by McAfee Secure
which monitors the website daily for consumer protection. This does
not guarantee however that we will avoid in the future suffering losses as a
result of orders placed with fraudulent credit card data even though the
associated financial institution approved payment of the orders. Under current
credit card practices, we may be liable for fraudulent credit card transactions
because we do not obtain a cardholder's signature. If we are unable to detect or
control credit card fraud, our liability for these transactions could harm our
business, results of operation or financial condition.
We
face intense competition and operate in an industry with limited barriers to
entry, and most of our competitors are better positioned than we
are.
The
e-commerce market is rapidly evolving and intensely competitive with limited
barriers to entry. Our primary competition will likely be internet retailers
such as Woot.com, dealofday.com, ebay.com, and other similar “deal of the day”
websites. Our competitors also could likely include established
internet retailers such as hiSunglasses.com, eyesave.com, Overstock, Bluefly,
and Amazon.com, and internet auction websites such as eBay and Bidz, and
traditional brick and mortar discount retail chains like Marshalls, TJMaxx and
Ross. Many of our potential online and brick-and-mortar competitors
have longer operating histories, larger customer bases, greater brand
recognition and significantly greater financial, marketing, technical,
management and other resources than we do. In addition, our competitors have
used and may continue to use aggressive pricing or promotional strategies, have
stronger supplier relationships with more favorable terms and inventory
allocation and devote substantially greater resources to website and system
development than we do. We expect competition will intensify in the
future as e-commerce continues to grow worldwide. Increased competition may
result in reduced operating margins, reduced profitability, loss of market share
and diminished brand recognition. These and other competitive
pressures may have a material adverse effect on our business, financial
condition and results of operations.
A
significant number of merchandise returns could harm our business, financial
condition and results of operations.
Our
current return policy allows our customers to return to us most items purchased
within 30 days after the customer receives the product for a 100% refund of
the merchandise price, not including shipping fees. Our ability to
handle a large volume of returns is unproven. In addition, any policies intended
to reduce the number of product returns may result in customer dissatisfaction
and fewer return customers. If merchandise returns are significant, our
business, financial condition and results of operations could be
harmed.
Our
wide variety of accepted payment methods subjects us to third-party payment
processing-related risks.
We accept
payments using a variety of methods, including credit cards and Paypal. As we
offer new payment options to our customers, we may be subject to additional
regulations, compliance requirements and incidents of fraud. For certain payment
methods, including credit, we pay interchange and other fees, which may increase
over time and raise our operating costs and lower our profit margins. We rely on
third parties to provide payment processing services, including the processing
of credit cards,. If these companies become unwilling or unable to provide these
services to us, our business could be disrupted. We are also subject to payment
card association operating rules, certification requirements and rules governing
electronic funds transfers, which could change or be reinterpreted to make it
difficult or impossible for us to comply. If we fail to comply with these rules
or requirements, we may be subject to fines and higher transaction fees and lose
our ability to accept credit card payments from our customers, process
electronic funds transfers or facilitate other types of online payments, and our
business and operating results could be adversely affected.
12
We
may be subject to intellectual property infringement and other claims, disputes
or litigation.
In the
future, third parties may assert allegations and claims of intellectual property
infringement against us. Any such claims, disputes or litigation, even if
resolved in our favor, could be time-consuming and costly, and could divert our
management’s efforts from growing our business. Uncertainties resulting from the
initiation and continuation of any litigation could harm our operations. If any
parties prevail in certain intellectual property rights claims, we may be
required to pay significant licensing fees, damages and attorney’s fees, and may
even be liable for treble or punitive damages if we are found to have willfully
infringed third parties’ proprietary rights. We have not been made
the subject of any such claims as of the date of this prospectus.
Our
business may be harmed if we sell pirated, counterfeit, illegal or “gray market”
items.
While we
have not received any such communications to date, we may receive in the future,
communications alleging that certain items sold through our website infringe
third-party patents, copyrights, trademarks and trade names or other
intellectual property rights, or may be “gray market” or counterfeit
products. These and future claims could increase our cost of doing
business as a result of legal expenses, adverse judgments or settlements, and
reputational harm, and require us to change our business practices in a way that
would be less efficient and more costly. In addition, key manufacturers and
vendors, for instance, may be less likely to offer us favorable terms or
authorization to carry their products if we sell products of theirs, purchased
on the “gray market.” We currently do not have any insurance to cover
the types of claims that could be asserted in such litigation or in legal or
administrative actions initiated by customers of such products, or by government
agencies. If a claim were brought against us successfully, it could expose us to
significant liability, which could have a material adverse effect on our
business and operations.
We
may be subject to product liability claims that could be costly and time
consuming.
We sell
products manufactured by third parties on our websites, some of which may be
defectively designed or manufactured. If any product that we sell were to cause
physical injury or injury to property, an injured party could bring claims
against us as the retailer of the product. We currently do not have
any insurance to cover the types of claims that could be asserted in such
litigation. If a successful claim were brought against us, it could
adversely affect our operating results and financial condition. Even
unsuccessful claims could result in the expenditure of funds and management time
in defending them and could have a negative impact on our
reputation.
Our
website could become obsolete if we fail to operate it in line with customer
preferences and the latest technological standards.
Our
internet retail website, www.dailyshades.com, requires
substantial development and maintenance efforts. To remain competitive, we must
continue to enhance and improve the responsiveness, functionality and features
of our websites. The internet and the e-commerce industry are characterized by
rapid technological change, the emergence of new industry standards and
practices, and changes in customer requirements and preferences. Therefore, we
may be required to license technologies, enhance our existing website, develop
new services and technology that address the increasingly sophisticated and
varied needs of our current and prospective customers and adapt to technological
advances and emerging industry and regulatory standards and practices in a
cost-effective and timely manner. There can be no assurance that any technology
licenses will be available on commercially reasonable terms. Substantial
investments will be required to remain technologically competitive and our
failure to do so may harm our business and results of operations.
As
a development stage company, we will likely issue shares of our common stock, or
options or warrants to purchase shares of common stock, to certain employees and
consultants for services rendered to us. Our issuance of additional common
stock, or options or warrants to purchase shares of common stock, would dilute
your proportionate ownership and voting rights.
Our board
of directors may generally issue shares of common stock, or options or warrants
to purchase shares of our common stock, without further approval by our
shareholders based upon such factors as our board of directors may deem relevant
at that time. As a development stage company, we will likely issue shares of our
common stock, or options or warrants to purchase shares of our commons stock, to
certain employees and consultants as compensatory grants in connection with
their services rendered to us. Our issuance of additional common stock, or
options or warrants to purchase those shares, to employees and consultants as
compensation would dilute your proportionate ownership and voting
rights.
13
We
are dependent on key personnel and need to hire additional qualified personnel.
Were we to lose our directors and officers, we would be forced to expend
significant time and money in the pursuit of replacements, which would result in
both a delay in the implementation of our business plan and the diversion of
working capital.
Our
success depends to a critical extent on the continued efforts of Mr. Sean
Lyons, our President, Secretary, and member of the Board of Directors, and
Mr. Jesus Diaz, our Chief Financial Officer and member of the Board of
Directors. The loss of any of these officer’s services could have a
material adverse affect on the business, results of operations and our financial
condition. Our future success also depends on our continuing ability
to attract and retain highly qualified information-technology and managerial
personnel. We do not carry key person life insurance on either of our senior
management personnel. Mr. Lyons and Mr. Diaz are also both
involved in other business activities in addition to their management role with
our company. As such, they may not be able to devote sufficient time
to our business affairs, which may negatively impact our ability to market and
conduct our current operations. Mr. Lyons and Mr. Diaz currently spend
approximately 25% and 5%, respectively, of their working hours with
us. When and if our business increases, Mr. Lyons and Mr. Diaz
intend to increase the number of working hours spent with us, on an as needed
basis. Ultimately, Mr. Lyons and Mr. Diaz could devote a majority of their
work time to managing our operations.
Risk
Factors Related to Our Stock.
There
is no active trading market for our common stock, and if a market for our common
stock does not develop our investors will be unable to sell their
shares.
There is
currently no active trading market for our common stock and such a market may
not develop or be sustained. We currently plan to have our common stock quoted
on the National Association of Securities Dealers Inc.’s OTC Bulletin Board upon
the effectiveness of a registration statement of which this prospectus forms a
part. In order to do this, a market maker must file a Form 15c-211 to allow the
market maker to make a market in our shares of common stock. As of the date
hereof, we are not aware that any market maker has any such intention. We cannot
provide our investors with any assurance that our common stock will be traded on
the OTC Bulletin Board or, if traded, that a public market will materialize.
Further, the OTC Bulletin Board is not a listing service or exchange, but is
instead a dealer quotation service for subscribing members. If our common stock
is not quoted on the OTC Bulletin Board or if a public market for our common
stock does not develop, then investors may not be able to resell the shares of
our common stock that they have purchased and may lose all of their
investment.
The
market price for our common shares, if listed, is likely to be highly volatile
given our status as a relatively unknown development stage company, limited
operating history, and lack of revenues or profits to date, which could lead to
wide fluctuations in our share price. The price at which you purchase our common
shares may not be indicative of the price which will prevail in the trading
market, if a trading market is ever established. You may be unable to sell your
common shares at or above your purchase price, which may result in substantial
losses to you. The volatility in our common share price may subject us to
securities litigation.
The
market price of our common stock, if listed, is likely to be highly volatile and
could fluctuate widely in price in response to various factors. First, if our
common stock is listed, we will likely have relatively few common shares
outstanding in the “public float” since most of our shares are held by a small
number of shareholders. In addition, if listed, our common shares will likely be
sporadically or thinly traded. As a consequence of this lack of liquidity, the
trading of relatively small quantities of shares by our shareholders may
disproportionately influence the price of those shares in either direction. The
price for our shares could, for example, decline precipitously in the event that
a large number of our common shares are sold on the market without commensurate
demand, as compared to a seasoned issuer which could better absorb those sales
without a material reduction in share price. Secondly, we are a speculative or
“risky” investment due to our limited operating history and lack of revenues or
profits to date, and the uncertainty of future market acceptance for our
services. As a consequence of this enhanced risk, more risk-adverse investors
may, under the fear of losing all or most of their investment in the event of
negative news or lack of progress, be more inclined to sell their shares on the
market more quickly and at greater discounts than would be the case with the
stock of a seasoned issuer. Additionally, in the past, plaintiffs have often
initiated securities class action litigation against a company following periods
of volatility in the market price of its securities. We may in the future be the
target of similar litigation. Securities litigation could result in substantial
costs and liabilities and could divert management’s attention and resources from
operations. The following factors may add to the volatility in the price of our
common shares: actual or anticipated variations in our quarterly or annual
operating results; development of a successful marketing
program; acceptance of our services; government regulations and approvals;
our capital commitments; and additions or departures of our key personnel. Many
of these factors are beyond our control and may decrease the market price of our
common shares, regardless of our operating performance.
14
If
our shares become quoted on the OTC Bulletin Board, our common stock will be
subject to the “Penny Stock” rules of the SEC, which will make transactions in
our common stock cumbersome and may reduce the value of an investment in our
common stock.
We
currently plan to have our common stock quoted on the National Association of
Securities Dealers Inc.’s OTC Bulletin Board, which is generally considered to
be a less efficient market than markets such as NASDAQ or other national
exchanges, and which may cause difficulty in conducting trades and obtaining
future financing. Further, our securities will be subject to the “penny stock
rules” adopted pursuant to Section 15(g) of the Securities Exchange Act of
1934, as amended. The penny stock rules apply generally to companies whose
common stock trades at less than $5.00 per share, subject to certain limited
exemptions. Such rules require, among other things, that brokers who trade
“penny stock” to persons other than “established customers” complete certain
documentation, make suitability inquiries of investors and provide investors
with certain information concerning trading in the security, including a risk
disclosure document and quote information under certain circumstances. Many
brokers have decided not to trade “penny stock” because of the requirements of
the “penny stock rules” and, as a result, the number of broker-dealers willing
to act as market makers in such securities is limited. In the event that we
remain subject to the “penny stock rules” for any significant period, there may
develop an adverse impact on the market, if any, for our securities. Because our
securities are subject to the “penny stock rules,” investors will find it more
difficult to dispose of our securities. Further, it is more difficult:
(i) to obtain accurate quotations, (ii) to obtain coverage for
significant news events because major wire services, such as the Dow Jones News
Service, generally do not publish press releases about such companies, and
(iii) to obtain needed capital.
State
Securities Laws may limit the ability of purchasers to re-sell their
shares.
Under the
securities laws of some states, securities may be sold in such states only
through registered or licensed brokers or dealers. In addition, in some states
the common shares may not be sold unless the shares have been registered or
qualified for sale in the state or an exemption from registration or
qualification is available and is complied with.
Since
one shareholder currently beneficially owns the majority of our outstanding
common shares, this shareholder will retain the ability to control our
management and the outcome of corporate actions requiring shareholder approval
notwithstanding the overall opposition of our other shareholders. This
concentration of ownership could discourage or prevent a potential takeover of
our Company which might otherwise result in you receiving a premium over the
market price for your common shares.
Our
principal shareholder owns a majority of our outstanding common
shares. As of June 30, 2010, Sean M. Lyons beneficially owned or
controlled 20,000,000 shares of our common stock, representing 85% of our
outstanding shares of common stock. Further, Mr. Lyons will own more
than 50% of our outstanding shares of common stock after the
offering. By virtue of his shareholdings, our principal shareholder
will be able to elect members of our board of directors, control our management
and affairs and cause or prevent corporate transactions such as mergers,
consolidation or the sale of all or substantially all of our assets. The
interests of our principal shareholder may differ from that of other
shareholders, with the result that our principal shareholder may cause us to
enter into transactions that may not be viewed as favorable to our other
shareholders.
There
are no foreseeable dividends on our common shares.
We do not
anticipate paying any dividends on our common shares in the foreseeable future.
Rather, we plan to retain earnings, if any, for the operation and expansion of
our business.
15
Our
issuance of additional common shares or preferred shares, or options or warrants
to purchase those shares, would dilute your proportionate ownership and voting
rights. Our issuance of preferred shares, or options or warrants to purchase
those shares, could negatively impact the value of your investment in our common
shares as the result of preferential voting rights or veto powers, dividend
rights, disproportionate rights to appoint directors to our board, conversion
rights, redemption rights and liquidation provisions granted to the preferred
shareholders, including the grant of rights which could discourage or prevent
the distribution of dividends to you, or prevent the sale of our assets or a
potential takeover of our Company which might otherwise result in you receiving
a distribution or a premium over the market price for your common
shares.
We are
entitled, under our articles of incorporation, to issue up to 100,000,000 common
shares and 10,000,000 preferred shares. After taking into
consideration our outstanding shares of capital stock as of June 30, 2010, we
are entitled to issue up to 76,473,000 additional common shares and 10,000,000
shares of preferred stock. Our board may generally issue those common
shares and preferred shares, or options or warrants to purchase those shares,
without further approval by our shareholders based upon such factors as our
board of directors may deem relevant at that time. It is likely that we will be
required to issue a large amount of additional securities to raise capital to
further our development and marketing plans. It is also likely that we will be
required to issue a large amount of additional securities to directors,
officers, employees and consultants as compensatory grants in connection with
their services, both in the form of stand-alone grants or under our various
stock plans. We cannot give you any assurance that we will not issue additional
common shares, or options or warrants to purchase those shares, under
circumstances we may deem appropriate at the time.
You
will experience immediate dilution if you purchase shares in this
offering.
If you
purchase shares in this offering, you will experience immediate dilution because
the price that you pay will be substantially greater than the net tangible book
value per share of the shares you acquire. This dilution is due in
large part to the fact that our earlier investors paid substantially less than
the offering price when they purchased their shares.
Shares
eligible for future sale may adversely affect the market price of our common
stock, as the future sale of a substantial amount of our restricted stock in the
public marketplace could reduce the price of our common stock.
From time
to time, certain of our stockholders may be eligible to sell their shares of
common stock by means of ordinary brokerage transactions in the open market
pursuant to Rule 144 of the Securities Act (“Rule 144”), subject to certain
requirements. In general, under Rule 144, unaffiliated stockholders
(or stockholders whose shares are aggregated) who have satisfied a six month
holding period may sell shares of our common stock, so long as we have filed all
required reports under Section 13 or 15(d) of the Exchange Act during the
12-month period preceding such sale. Once a period of six months has
elapsed since the date the common stock was acquired from us or from an
affiliate of ours, unaffiliated stockholders can freely sell shares of our
common stock. Twelve months after acquiring shares from us or an
affiliate, unaffiliated stockholders can freely sell their shares without any
restriction or requirement that we are current in our SEC filings.
Any substantial sale of common stock pursuant to Rule 144 may have an adverse
affect on the market price of our common stock.
In this
prospectus we make a number of statements, referred to as “forward-looking statements,”
which are intended to convey our expectations or predictions regarding the
occurrence of possible future events or the existence of trends and factors that
may impact our future plans and operating results. These
forward-looking statements are derived, in part, from various assumptions and
analyses we have made in the context of our current business plan and
information currently available to us and in light of our experience and
perceptions of historical trends, current conditions and expected future
developments and other factors we believe to be appropriate in the
circumstances. You can generally identify forward-looking statements through
words and phrases such as “seek,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “budget,” “project,” “may be,” “may continue,” “may likely result,” and
similar expressions. When reading any forward looking statement, you
should remain mindful that actual results or developments may vary substantially
from those expected as expressed in or implied by that statement for a number of
reasons or factors, such as those relating to:
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whether
or not a market for our products and services develop and, if a market
develops, the pace at which it
develops;
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our
ability to successfully sell our products and services if a market
develops;
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our
ability to attract the qualified personnel to implement our growth
strategies;
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our
ability to develop sales and marketing
capabilities;
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the
accuracy of our estimates and
projections;
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|
·
|
our
ability to fund our short-term and long-term financing
needs;
|
|
·
|
changes
in our business plan and corporate strategies;
and
|
|
·
|
other
risks and uncertainties discussed in greater detail in the sections of
this prospectus, including those captioned “Risk Factors” and
“Plan of
Operation.”
|
Each
forward-looking statement should be read in context with, and with an
understanding of, the various other disclosures concerning our Company and our
business made elsewhere in this prospectus, as well as other public reports
filed with the SEC. You should not place undue reliance on any
forward-looking statement as a prediction of actual results or developments.
We are not obligated to update or revise any forward-looking statement
contained in this prospectus to reflect new events or circumstances unless and
to the extent required by applicable law.
USE
OF PROCEEDS
Assuming
the offering is fully subscribed, we will receive gross proceeds of
$1,000,000. From this we will receive net proceeds of approximately
$950,000, after deducting estimated expenses of this offering (this does not
include any placement agent fees). We may not be successful in
selling any or all of the securities offered hereby. Since there is
no minimum amount of shares that must be sold in this offering, the proceeds of
this offering may be $0 to $950,000.
We expect
to use any proceeds received from the offering for:
|
·
|
Advertising,
social media, and search engine optimization (“SEO”) services;
|
|
·
|
Acquisition
of inventory;
|
|
·
|
Website
maintenance and enhancement; and
|
|
·
|
General
working capital needs.
|
Advertising,
social media, and SEO services are a large part of our business
plan. In order for our business model to be successful, we must
acquire, convert and retain customers. In order to acquire customers,
we must increase the traffic to our website. As such, our highest
priority, regardless of the amount of proceeds we receive from this offering,
will be to increase our marketing/advertising expenses. We utilize
various channels to market our products, including click-through based
advertising on shopping comparison engines, targeted e-mails, display and banner
advertisements on high-traffic portals, social networking via major social media
sites, and onsite promotions on our websites. If this offering is
successful, we intend to increase the ads we purchase from internet search
engine providers like Google and Yahoo!. While we believe that
repetitive ads on the internet are a highly effective marketing tool, the costs
associated with these advertisements are high. If this offering is
successful, we intend to budget $10,000 a month for our initial advertisement
campaign on Google Ad Words. On Google Ad Words, we can create
advertisements and choose keywords, which are words or phrases related to our
business. When people search on Google using one of our keywords, our
ad may appear next to the search results. This allows us to advertise
to an audience that is already interested in the products we
provide. Using this form of advertising, we can establish spending
limits for our advertising budget and we are generally only charged if someone
clicks our ad, not just when our ad is displayed. Since we are only
charged if someone clicks on our ad, it is difficult to estimate how long our
monthly budget of $10,000 will last; however, we estimate this sum should last
approximately 30 days. We intend to use tools similar to Google Ad
Words offered by other search engine providers as well. As we launch
our advertising campaign, we will periodically review our budget and modify it
as necessary.
17
All of
our social media brand development, such as through Facebook and Twitter, is
currently done by our management. We believe this is an excellent
marketing tool; however, we believe it would be more effective if it was done by
a professional group specializing in that market. We have initially
budgeted $10,000 per month to pay a professional group to manage this marketing
aspect of our business. We intend to construct “fan pages” of our
business on Facebook and similar sites, each of which cost approximately $2,500
just for setup. There are also monthly costs associated with the
maintenance of these “fan pages.” This campaign would be initiated
shortly after our Google Ad Words marketing launch. We also
anticipate establishing a blog on our website. We believe this will
assist us in drawing additional traffic to our website. Estimates for
establishing a “blog” can vary depending on the amount of content and number of
bloggers. We believe initial costs will be approximately $1,500, with
monthly costs related to maintenance. Finally, we also intend to
reach our customers through daily “tweets” on Twitter. We find that
this is a valuable tool to remind customers to check out our website for our
“daily deal.”
Our
search engine optimization (SEO) work would be the next marketing aspect to be
expanded. We have retained an outside marketing firm to assist us in
enhancing and developing our website and to assist us with SEO. SEO
is the practice of maximizing the volume or quality of traffic to a web site
from search engines such as Google or Yahoo! via "natural" or un-paid search
results. Our efforts in this area have been limited due to our
limited budget. However, with proper funding, this aspect of our
marketing campaign would be vastly expanded to increase our ranking in
searches. We initially anticipate budgeting approximately $10,000 per
month for our SEO services.
Even if
we sell all of the common stock subject to this offering on favorable terms, of
which there can be no assurance, we will still need to obtain additional
financing in the future in order to fully implement our business
plan. We may seek to raise this additional capital through the public
or private sale of our equity securities, the procurement of advances from our
majority shareholder, debt financing or short-term loans, or a combination of
the foregoing. We currently do not have any financing commitments (binding or
non-binding) and we cannot give you any assurance that we will be able to secure
the additional cash or working capital we may require to continue our operations
and fully implement the initial phase of our business plan. We will
have significant discretion in the use of any net proceeds. Investors
will be relying on the judgment of our management regarding the application of
the proceeds of any sale of the common stock.
Should we
sell less than the full amount of securities available in this offering, we will
allocate such less amount of the net proceeds of the offering as set forth in
the following table (which sets forth the order of priority of the net proceeds
assuming we sell 100%, 75%, 50% and 25%, respectively, of the shares offered):
100%
|
75%
|
50%
|
25%
|
|||||||||||||
Advertising
|
$ | 300,000 | $ | 250,000 | $ | 200,000 | $ | 100,000 | ||||||||
Social
Media/Blogging
|
$ | 200,000 | $ | 150,000 | $ | 25,000 | $ | 15,000 | ||||||||
SEO
Development
|
$ | 150,000 | $ | 125,000 | $ | 100,000 | $ | 30,000 | ||||||||
Inventory
|
$ | 75,000 | $ | 25,000 | $ | 10,000 | $ | 5,000 | ||||||||
Website
Maintenance/Enhancement
|
$ | 100,000 | $ | 75,000 | $ | 50,000 | $ | 15,000 | ||||||||
General
Working Capital
|
$ | 125,000 | $ | 75,000 | $ | 65,000 | $ | 35,000 | ||||||||
Maximum
Net Proceeds of the Offering
|
$ | 950,000 | $ | 700,000 | $ | 450,000 | $ | 200,000 |
Assuming 75% of the offering
is subscribed
If we are
only able to sell 75% of the total shares made available in this offering (or
only 3 million of the 4 million shares we are offering), we estimate that we
will receive net proceeds of $700,000. Of that revised net proceed
total, we will allocate $250,000 to advertising expenses. Our
advertising outlay will focus on increasing recognition of and traffic to our
website. As discussed in greater detail in the section titled
“Management’s Discussion and Analysis,” our website is our primary sales
tool. However, because social media sites such as Facebook, Twitter
and MySpace are now such a ubiquitous part of our target market’s lives, we will
also spend a large portion of the revised net proceed total on increasing our
presence in those arenas. Similarly, in that internet search engines
drive many purchasing habits, we will invest a substantial amount of the revised
proceeds to SEO development. We will decrease our intended
expenditures on inventory and will also reduce our general working capital.
Assuming 50% of the offering
is subscribed
If we are
only able to sell 50% of the total shares made available in this offering (or
only 2 million of the 4 million shares we are offering), we estimate that we
will receive net proceeds of $450,000. With this reduced available
capital, we will continue to make advertising our first priority. We
will shift our secondary focus so that SEO development in our next highest
expenditure. Because SEO development is a highly technical area with
which we have limited knowledge, we feel that our resources will best be spent
by hiring someone with that specialized knowledge. In contrast,
social media development is an area in which we have a higher comfort level and
would feel more confident developing on our own with smaller capital
outlays. While our knowledge level of social media websites will not
allow us to match the level of exposure we could get from an outside
professional, we feel we would be able to maintain and expand our presence on
those websites. If we are only able to sell half of the shares
offered through this prospectus, we would have to reduce inventory and working
capital. Our goal would be to maintain sufficient working capital to
give us liquidity to proceed with our business plan, albeit on a reduced scope.
Assuming 25% of the offering
is subscribed
If we are
only able to sell 25% of the total shares made available in this offering (or
only 1 million of the 4 million shares we are offering), we estimate that we
will receive net proceeds of $200,000. Even with this low amount of
net proceeds, we will continue to focus on advertising. Our business
plan is dependent on driving customers to our website and increasing orders for
our product. Therefore, every attempt will be made to achieve this
objective. Our ability to spend money on SEO and social media development would
be greatly reduced. However, we would continue to use in-house
resources to develop our presence and increase our recognition in our niche
market. As our inventory budget would be drastically reduced, we
would be highly dependent on maintaining a close working relationship with our
suppliers and shippers to ensure a smooth delivery to our end user consumers. In
that our website development budget would be much lower, we would focus our
resources on maintaining our existing website rather than upgrading and
improving our website.
Offering
by Selling Security Holders
We will
not receive any of the proceeds from the sale of the common stock by the selling
security holders named in this prospectus. All proceeds from the sale
of the common stock will be paid directly to the selling security
holders.
18
DETERMINATION
OF OFFERING PRICE
Public
Offering
As there
is no public market for our common stock, we fixed the benchmark offering by
reference to our most recent private offering of our common stock, which was
effected at $0.25 per share. There is no relationship whatsoever
between the offering price and our assets, earnings, book value or any other
objective criteria of value.
Offering
by Selling Security Holders
The
selling security holders will sell their common stock at the price of $0.25 per
share, until our common stock is quoted on the Over The Counter Bulletin Board
(the “OTCBB”) or in another quotation medium and, thereafter, at prevailing
market prices or at privately negotiated prices. There is no
relationship whatsoever between the offering price and our assets, earnings,
book value or any other objective criteria of value.
We have
not applied for listing or quotation on any public market. If our
common stock becomes publicly traded and a market for the stock develops, the
actual offering price of the shares offered by the selling security holders that
are the subject of this prospectus will be determined by prevailing market
prices at the time of sale or by private transactions negotiated by the selling
security holders named in this prospectus. The offering price would thus be
determined by market factors and the independent decisions of the selling
security holders named in this prospectus. Although we anticipate the
trading of our common stock on the OTCBB, there can be no assurances that our
common stock will be approved for trading on the OTCBB, or any other trading
exchange. The OTCBB operates as a dealer system. As a
result, all securities being quoted on the OTCBB must be sponsored by a
participating market maker that registers the security by completing a Form 211
unless an exemption applies. The market maker must submit a Form 211
to the FINRA OTC Compliance Unit along with two copies of the required issuer
information prior to publication of a quote on the OTCBB. Once
cleared, Nasdaq Market Data Integrity will notify the market maker that it has
been registered in the security and may enter a quote. There can be
no assurances that our common stock will be approved to trade on the OTCBB, or
any other exchange.
19
DILUTION
We
currently have 23,527,000 shares of common stock issued and
outstanding. Of the 23,527,000 shares of common stock issued and
outstanding, (i) 20,000,000 shares of common stock were issued to Sean M. Lyons,
our President, in connection with our organization and development of our
business plan at $0.0001 per share for total proceeds of $2,000 (the “Founder’s
Shares”), (ii) 3,000,000 shares of common stock were sold to four investors at
$0.01 per share for total net proceeds of $26,643 (the “2009 Investors”), and
(iii) 310,000 shares of common stock were issued to various consultants as
compensation for services rendered (the “Service Shares”). The
Service Shares are valued at the fair value of the services to be received
amounting to $77,500. See Recent Sales of
Unregistered Securities described on page II-44 of this Registration Statement.
In 2010,
we completed an offering of 217,000 shares of our common stock at a price of
$0.25 per share to 25 investors, for total proceeds of $54,250 (the “2010
Investors”). See 2010 Common Stock
Offering described on page II-44 of this Registration Statement.
As a
result, there is a substantial disparity between the effective cash cost for the
Founder’s Shares and the shares acquired by the 2009 Investors, and the
effective cash cost to (i) the investors that purchased shares in connection
with the 2010 Common Stock Offering, and (ii) to the purchasers of the common
stock in this offering.
The
discussion below summarizes the dilution that will be experienced by purchasers
in this offering, assuming that all of the shares offered for sale in this
offering are sold. The dilution analysis presented below considers
the cash contributions for the Founder’s Shares and the shares acquired by the
2009 Investors and 2010 Investors. The dilution analysis presented
below also assumes a fair value of $0.25 per share for the Service Shares issued
to various consultants as compensation for services rendered and takes into
account the Company’s net operating loss since inception through June 30, 2010
of ($34,144). Purchasers may incur significant dilution in the net
book value of the acquired shares, due to the fact that our Founders’ Shares
were issued for nominal cash and consideration consisting primarily of our
founder’s contribution of services associated with our formation and that our
2009 shares were sold at a substantially lower price per share.
Effect
on Existing Stockholders (Founder’s Shares, 2009 Investors and 2010 Investors)
assuming offering is fully subscribed1:
Price
per share (Founders’ Shares) (20,000,000 shares)
|
$ | 0.0001 | ||
Price
per share (2009 Investors) (3,000,000 shares)
|
$ | 0.0100 | ||
Price
per share (2010 Investors) (217,000)
|
$ | 0.2500 | ||
Price
per share assumed (Service Shares) (310,000)
|
$ | 0.2500 | ||
Net
tangible book value per share as of June 30, 2010 before
offering:
|
$ | 0.0054 | ||
Net
tangible book value per share after
offering (assuming offering is fully subscribed)
|
$ | 0.0391 | ||
Potential
gain to existing investors (Founder’s Shares, 2009 Investors and 2010
Investors) in net tangible book value per share.
|
624 | % | ||
Number
of shares outstanding before the offering
|
23,527,000 | |||
Number
of shares outstanding after the offering (assuming offering is fully
subscribed)
|
27,527,000 |
Effect
on purchasers of shares of our common stock in this offering assuming offering
is fully subscribed1:
Price
per share
|
$ | 0.250 | ||
Dilution
per share
|
$ | 0.211 | ||
Increase
in net tangible book value per share attributable to the cash payments
made by purchasers in this offering
|
$ | 0.034 | ||
Net
tangible book value per share after
offering (assuming offering is fully subscribed)
|
$ | 0.039 | ||
Aggregate
purchase price
|
$ | 1,000,000 | ||
Percentage
of capital contributions by existing shareholders
|
11.73 | % | ||
Percentage
of capital contribution by new investors
|
88.27 | % |
1 Assumes
sale of 4,000,000 shares of common stock by the Company in this offering, and
net offering proceeds of $950,000.
20
SELLING
SECURITY HOLDERS
The
following table sets forth certain information regarding beneficial ownership of
our common stock by the selling security holders as of June 30,
2010. The table further sets forth (i) the name of each selling
security holder who is offering the resale of shares of common stock,
(ii) the number of shares of common stock that may be sold in this
offering; (iii) the number of shares of common stock to be beneficially
owned by each selling security holder after the completion of this offering
assuming the sale of all of the shares of the common stock offered by each
selling security holder; and (iv) if one (1%) percent or more, the
percentage of outstanding shares of common stock to be beneficially owned by
each selling security holder after the completion of this offering assuming the
sale of all of the shares of common stock offered by each selling security
holder. The percentage of beneficial ownership reported in the
following table is based upon 23,527,000 shares of our common stock which were
outstanding on June 30, 2010. Except as noted below, none of the
selling security holders have had any position, office, or other material
relationship with us or any of our predecessors or affiliates within the past
three years.
Unless
otherwise provided for in the footnotes below, the shares to be sold by the
selling stockholders were issued in the following transactions:
2009
Common Stock Offering
In 2009,
we completed an offering of 3,000,000 shares of our common stock at a price of
$0.01 per share to 4 investors, for total proceeds of approximately
$30,000. The offer and sale of such shares of our common stock was
effected in reliance on the exemptions for sales of securities not involving a
public offering, as set forth in Rule 506 promulgated under the Securities Act
and in Section 4(2) of the Securities Act, based on the following:
(a) the investors confirmed to us that they were either “accredited
investors,” as defined in Rule 501 of Regulation D promulgated under the
Securities Act or had such background, education and experience in financial and
business matters as to be able to evaluate the merits and risks of an investment
in the securities; (b) there was no public offering or general solicitation
with respect to the offering; (c) the investors were provided with certain
disclosure materials and all other information requested with respect to our
company; (d) the investors acknowledged that all securities being purchased
were “restricted securities” for purposes of the Securities Act, and agreed to
transfer such securities only in a transaction registered under the Securities
Act or exempt from registration under the Securities Act; and (e) a legend
was placed on the certificates representing each such security stating that it
was restricted and could only be transferred if subsequently registered under
the Securities Act or transferred in a transaction exempt from registration
under the Securities Act.
2010
Common Stock Offering
In 2010,
we completed an offering of 217,000 shares of our common stock at a price of
$0.25 per share to 25 investors, for total proceeds of approximately
$54,250. The offer and sale of such shares of our common stock was
effected in reliance on the exemptions for sales of securities not involving a
public offering, as set forth in Rule 506 promulgated under the Securities Act
and in Section 4(2) of the Securities Act, based on the following:
(a) the investors confirmed to us that they were either “accredited
investors,” as defined in Rule 501 of Regulation D promulgated under the
Securities Act or had such background, education and experience in financial and
business matters as to be able to evaluate the merits and risks of an investment
in the securities; (b) there was no public offering or general solicitation
with respect to the offering; (c) the investors were provided with certain
disclosure materials and all other information requested with respect to our
company; (d) the investors acknowledged that all securities being purchased
were “restricted securities” for purposes of the Securities Act, and agreed to
transfer such securities only in a transaction registered under the Securities
Act or exempt from registration under the Securities Act; and (e) a legend
was placed on the certificates representing each such security stating that it
was restricted and could only be transferred if subsequently registered under
the Securities Act or transferred in a transaction exempt from registration
under the Securities Act.
21
TABLE OF SELLING SECURITY
HOLDERS
|
Securities Owned By Selling Security Holders Prior to
Offering(1,2)
|
Securities Being Offered
By Selling Security Holders
|
Securities Beneficially Owned By
Selling Security Holders After the
Offering (3)
|
|||||||||||||||
Name of Selling Security Holder
|
Common Stock
(direct ownership)
|
Common Stock issuable upon
conversion or exercise of
derivative securities
(indirect ownership)
|
Common Stock
(direct
ownership)
|
Common Stock issuable upon
conversion or exercise of
derivative securities (indirect
ownership)
|
Common Stock
to be
Beneficially
Owned After
Offering
|
Percentage
Assuming All
Shares Offered
are Sold
|
||||||||||||
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
|||||||||||||
Total CFO, LLC7
|
50,000 | 16,665 | 33,335 | * | ||||||||||||||
Tyler Ryan Group,
LLC6
|
40,000 | 13,332 | 26,668 | * | ||||||||||||||
Ron Rule, Jr.9
|
10,000 | 3,333 | 6,667 | * | ||||||||||||||
Natalie Collins4, 8
|
600,000 | 199,980 | 400,020 | 1.7 | % | |||||||||||||
Richard J.
Diamond4
|
900,000 | 299,970 | 600,030 | 2.6 | % | |||||||||||||
D. Jerry Diamond4
|
400,000 | 133,320 | 266,680 | 1.1 | % | |||||||||||||
Marilyn Phillips4
|
1,100,000 | 366,630 | 733,370 | 3.1 | % | |||||||||||||
Huguette Nelson5
|
2,000 | 667 | 1,333 | * | ||||||||||||||
Phillip Humphrey5
|
10,000 | 3,333 | 6,667 | * | ||||||||||||||
Lynn Jondro5
|
4,000 | 1,333 | 2,667 | * | ||||||||||||||
Tonya Phillips5
|
10,000 | 3,333 | 6,667 | * | ||||||||||||||
Oscar Rodriguez5
|
4,000 | 1,333 | 2,667 | * | ||||||||||||||
Ricky Howe5
|
2,000 | 667 | 1,333 | * | ||||||||||||||
Mark Humphrey5
|
4,000 | 1,333 | 2,667 | * | ||||||||||||||
Mike Alexander5
|
4,000 | 1,333 | 2,667 | * | ||||||||||||||
Raymond Hulse5
|
4,000 | 1,333 | 2,667 | * | ||||||||||||||
Paul Melton5
|
10,000 | 3,333 | 6,667 | * | ||||||||||||||
Jim Beck5
|
20,000 | 6,666 | 13,334 | * | ||||||||||||||
Curtis Emily5
|
20,000 | 6,666 | 13,334 | * | ||||||||||||||
Brendon Rennert5
|
20,000 | 6,666 | 13,334 | * | ||||||||||||||
Charles Yawn5
|
1,000 | 333 | 667 | * | ||||||||||||||
Shannon Andrews5
|
2,000 | 1,333 | 667 | * | ||||||||||||||
Brandon Powell5
|
6,000 | 2,000 | 4,000 | * | ||||||||||||||
Craig Beck5
|
20,000 | 6,666 | 13,334 | * | ||||||||||||||
Jason Post5
|
4,000 | 1,333 | 2,667 | * | ||||||||||||||
Joseph J. Jacob5
|
8,000 | 2,666 | 5,334 | * | ||||||||||||||
Jay Shafer5
|
25,000 | 8,333 | 16,667 | * | ||||||||||||||
Mike Lambermont5
|
4,000 | 1,333 | 2,667 | * | ||||||||||||||
Marie Jansik5
|
1,000 | 333 | 667 | * | ||||||||||||||
Andre Salazar5
|
20,000 | 6,666 | 13,334 | * | ||||||||||||||
TOTAL
|
3,305,000 | 1,102,222 | 2,202,778 |
* Less
than 1%
|
1.
|
The
number of shares beneficially owned is determined in accordance with Rule
13d-3 of the Securities Exchange Act of 1934, and the information is not
necessarily indicative of beneficial ownership for any other purpose.
Under such rule, beneficial ownership includes any shares as to which the
selling security holder has sole or shared voting power or investment
power and also any shares as to which the selling security holder has the
right to acquire within sixty (60) days.
|
|
2.
|
The
percentage of beneficial ownership reported in the table is based upon
23,527,000 shares of our common stock which were outstanding on June 30,
2010.
|
|
3.
|
Assumes
all shares registered on this prospectus for resale by the selling
security holders are sold.
|
22
|
4.
|
Acquired
in the 2009 Common Stock Offering at $0.01 per share.
|
|
5.
|
Acquired
in the 2010 Common Stock Offering at $0.25 per share.
|
|
6.
|
Represents
shares issued in exchange for consulting services performed by Tyler Ryan
Group, LLC. On December 17, 2009, we entered into a Services Retainer
Agreement with the Tyler Ryan Group, LLC under which Tyler Ryan agreed to
provide us with certain services related to social media and website
development and maintenance for a period of one year. In
exchange for the services rendered under the agreement, we agreed to pay
$500 per month and issued 40,000 shares of our restricted common
stock. We completed this offering pursuant to Section 4(2)
of the Securities Act. The 40,000 shares of common stock are restricted
shares, as defined in the Securities Act, and have been endorsed with a
legend confirming that the shares cannot be resold or transferred unless
registered under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act.
|
Tyler
Ryan has sole voting and dispositive control over the securities of Shades
Holdings, Inc. owned by Tyler Ryan Group, LLC. Mr. Ryan
disclaims beneficial ownership of the securities of Shades Holdings, Inc. owned
by Tyler Ryan Group, LLC, except to the extent of his pecuniary interest
therein, and the inclusion of these shares in this filing shall not be deemed an
admission of beneficial ownership of all of the reported shares or for any other
purpose. Ryan Ford, a member of our board of directors, owns 15% of
Tyler Ryan Group, LLC. Mr. Ford disclaims beneficial ownership
of the securities of Shades Holdings, Inc. owned by Tyler Ryan Group, LLC,
except to the extent of his pecuniary interest therein, and the inclusion of
these shares in this filing shall not be deemed an admission of beneficial
ownership of all of the reported shares or for any other
purpose. Tyler Ryan Group, LLC is not a licensed broker-dealer or an
affiliate of a broker-dealer.
|
7.
|
Represents
shares issued in exchange for consulting services performed by Total CFO,
LLC. On November 23, 2009, we entered into an agreement with Total CFO,
LLC under which Total CFO agreed to provide us with tax preparation
services and general book keeping services. In exchange for the
services rendered under the agreement, we issued Total CFO 50,000 shares
of our restricted common stock. We completed this offering
pursuant to Section 4(2) of the Securities Act. The 50,000 shares of
common stock are restricted shares, as defined in the Securities Act, and
have been endorsed with a legend confirming that the shares cannot be
resold or transferred unless registered under the Securities Act or
pursuant to an exemption from the registration requirements of the
Securities Act.
|
Dale
Philips has voting and dispositive control over the securities of Shades
Holdings, Inc. owned by Total CFO, LLC. Mr. Philips disclaims
beneficial ownership of the securities of Shades Holdings, Inc. owned by Total
CFO, LLC, except to the extent of his pecuniary interest therein, and the
inclusion of these shares in this filing shall not be deemed an admission of
beneficial ownership of all of the reported shares or for any other
purpose. Total CFO, LLC is not a licensed broker-dealer or an
affiliate of a broker-dealer.
|
8.
|
Natalie
Collins owns 50% of Total CFO, LLC. Ms. Collins disclaims
beneficial ownership of the securities of Shades Holdings, Inc. owned by
Total CFO, LLC, except to the extent of her pecuniary interest therein,
and the inclusion of these shares in this filing shall not be deemed an
admission of beneficial ownership of all of the reported shares or for any
other purpose.
|
|
9.
|
Represents
shares issued in exchange for information-technology services performed by
Ron Rule. On November 23, 2009, we entered into an Independent
Contractor Agreement with Ron Rule under which Mr. Rule agreed to provide
us with information-technology services. In exchange for the
services rendered under the agreement, we issued Mr. Rule 10,000 shares of
our restricted common stock. We completed this offering
pursuant to Section 4(2) of the Securities Act. The 10,000 shares of
common stock are restricted shares, as defined in the Securities Act, and
have been endorsed with a legend confirming that the shares cannot be
resold or transferred unless registered under the Securities Act or
pursuant to an exemption from the registration requirements of the
Securities Act.
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23
PLAN
OF DISTRIBUTION
Public Offering
We are
offering up to 4,000,000 shares of our common stock at a fixed price of $0.25
per share through our directors and executive officers on a “best efforts”
basis. There is no minimum number of shares that must be sold in this
offering and there is no arrangement to place funds in an escrow, trust, or
similar account and all proceeds will be paid directly to us. As the proceeds of
this offering will be paid directly to us and held in our operating accounts,
the funds may be subject to claims of our creditors. Since there is no minimum
amount of shares that must be sold in this offering, the proceeds of this
offering may be $0 to $950,000, after payment of associated offering expenses,
which are estimated to be $50,000. As a result, if you are an initial
investor in this offering and we only sell a small number of shares in this
offering, your investment will be rendered worthless. For example, if
we only sell 40,000 shares of common stock (10% of the offering) we will only
raise $10,000 and will not be able to implement our business plan as all
proceeds will be applied towards expenses related to the offering. We
intend to continue the offering until the earlier of the date all of the shares
of common stock are sold or the expiration of 180 days, subject to our right to
extend the offering for an additional 180-day period.
Our
shares of our common stock will be offered and sold by our Chief Executive
Officer, Sean M. Lyons, and our Chief Financial Officer, Jesus
Diaz. Neither will register as a broker-dealer pursuant to Section 15
of the Securities Exchange Act of 1934 (the “Exchange Act”) in reliance upon
Rule 3(a)4-1 of the Exchange Act. Neither Mr. Lyons nor Mr. Diaz (i)
is subject to a statutory disqualification, as that term is defined in section
3(a)(39) of the Act; (ii) will be compensated in connection with his
participation in the offering by the payment of commissions or other
remuneration based either directly or indirectly on transactions in securities;
and (iii) is an associated person of a broker or dealer. Further, Mr.
Lyons and Mr. Diaz each meets the conditions of paragraph (a)(4)(ii) of Rule
3(a)4-1 of the Exchange Act, in that (A) each primarily performs, and will
primarily perform at the end of the offering, substantial duties for the Company
otherwise than in connection with transactions in securities; (B) neither was a
broker or dealer, or an associated person of a broker or dealer, within the
preceding twelve (12) months; and (C) neither has/will participate(d) in the
selling and offering of securities for any issuer more than once every twelve
(12) months, other than in reliance on paragraphs (a)(4)(i) or (a)(4)(iii).
Our
common stock is not being sold through commissioned sales agents or
underwriters; however, we reserve the right to engage a licensed broker-dealer
as our placement agent. If we engage a placement agent, the placement
agent will not purchase the securities offered by us, and is not required to
sell any specific number or dollar amount of shares, but will assist us in this
offering on a “best efforts” basis. The placement agent may engage
selected dealers to assist in the placement of common stock.
If we
retain a placement agent, we expect to pay the placement agent a cash fee equal
to 7% of the gross proceeds of the offering of securities by us, as well as
“placement agent warrants” to purchase shares of our common stock equal to 7% of
the aggregate number of shares of common stock sold in the
offering. The placement agent warrants will have a term of five years
from a closing of the sale of shares and will otherwise comply with FINRA Rule
5110. Further, the placement agent warrant will comply with FINRA
Rule 5110(g)(1) in that for a period of 180 days after the issuance
date of the placement agent warrant (which shall not be earlier than the closing
date of this offering), neither the placement agent warrant nor any shares of
our common stock issued upon exercise of the placement agent warrant shall be
sold, transferred, assigned, pledged, or hypothecated, or be the subject of any
hedging, short sale, derivative, put, or call transaction that would result in
the effective economic disposition of such securities by any person for a period
of 180 days immediately following the date of effectiveness of the
registration statement of which this prospectus is a part or commencement of
sales of the offering pursuant to which the placement agent warrant are being
issued, except the transfer of any security:
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·
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by
operation of law or by reason of reorganization of the
Company;
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24
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·
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to
any FINRA member firm participating in this offering and the officers or
partners thereof, if all securities so transferred remain subject to the
lock-up restriction described above for the remainder of the time
period;
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·
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if
the aggregate amount of securities of the Company held by either placement
agent or related person do not exceed 1% of the securities being
offered;
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·
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that
is beneficially owned on a pro-rata basis by all equity owners of an
investment fund, provided that no participating member manages or
otherwise directs investments by the fund, and participating members in
the aggregate do not own more than 10% of the equity in the fund;
or
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|
·
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the
exercise or conversion of any security, if all securities received remain
subject to the lock-up restriction set forth above for the remainder of
the time period.
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Any
placement agent warrants will likely have piggyback registration rights with
respect to the shares of common stock underlying the placement agent warrant. In
addition, the warrants will likely have a cashless exercise right.
If we
retain a placement agent we are obligated to file a post-effective amendment to
this registration statement disclosing such arrangement.
Offering
by Selling Security Holders
Timing
of Sales
The
selling security holders may offer and sell the shares of common stock covered
by this prospectus at various times. The selling security holders
will act independently of us in making decisions with respect to the timing,
manner and size of each sale.
No
Agreements to Resell the Shares
No
selling security holder has any agreement or understanding, directly or
indirectly, with any person to resell the shares covered by this
prospectus.
Offering
Price
The
selling security holders will sell their shares at an offering price of $0.25
per share until our shares are quoted on the Over The Counter Bulletin Board, or
listed for trading or quoted on any other public market. Thereafter,
the sales price offered by the selling security holders to the public may
be:
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1.
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The
market price prevailing at the time of
sale;
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2.
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A
price related to such prevailing market price;
or
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3.
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Such
other price as the selling security holders determine from time to
time.
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Our
common stock is not currently listed on any national exchange or qualified for
trading on any electronic quotation system. To date, no actions have
been taken to list our shares of common stock on any national exchange or to
qualify our common stock for trading on any electronic quotation
system. If our common stock becomes publicly traded, then the sales
price to the public will vary according to the selling decisions of each selling
security holder and the market for our stock at the time of resale.
Manner
of Sale
The
shares may be sold by means of one or more of the following
methods:
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1.
|
a
block trade in which the broker-dealer so engaged will attempt to sell the
shares as agent, but may position and resell a portion of the block as
principal to facilitate the
transaction;
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25
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2.
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purchases
by a broker-dealer as principal and resale by that broker-dealer for its
account pursuant to this
prospectus;
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3.
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ordinary
brokerage transactions in which the broker solicits
purchasers;
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4.
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through
options, swaps or derivatives;
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5.
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in
transactions to cover short sales;
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6.
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privately
negotiated transactions; or
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7.
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in
a combination of any of the above
methods.
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The
selling security holders may sell their shares of common stock directly to
purchasers or may use brokers, dealers, underwriters or agents to sell their
shares. Brokers or dealers engaged by the selling security holders
may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions, discounts or concessions from the selling
security holders, or, if any such broker-dealer acts as agent for the purchaser
of shares, from the purchaser in amounts to be negotiated immediately prior to
the sale. The compensation received by brokers or dealers may, but is
not expected to, exceed that which is customary for the types of transactions
involved. Broker-dealers may agree with a selling security holder to sell a
specified number of shares at a stipulated price per share, and, to the extent
the broker-dealer is unable to do so acting as agent for a selling security
holder, to purchase as principal any unsold shares at the price required to
fulfill the broker-dealer commitment to the selling security holder.
Broker-dealers who acquire shares of common stock as principal may thereafter
resell the shares from time to time in transactions, which may involve block
transactions and sales to and through other broker-dealers, including
transactions of the nature described above, in the over-the-counter market or
otherwise at prices and on terms then prevailing at the time of sale, at prices
then related to the then-current market price or in negotiated
transactions. In connection with re-sales of the shares of common
stock, broker-dealers may pay to or receive from the purchasers of shares
commissions as described above.
If our
selling security holders enter into arrangements with brokers or dealers, as
described above, we are obligated to file a post-effective amendment to this
registration statement disclosing such arrangements, including the names of any
broker dealers acting as underwriters.
The
selling security holders and any broker-dealers or agents that participate with
the selling security holders in the sale of the shares may be deemed to be
“underwriters” within the meaning of the Securities Act. In that
event, any commissions received by broker-dealers or agents and any profit on
the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
Sales
Pursuant to Rule 144
The
selling security holders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
Regulation
M
The
selling security holders must comply with the requirements of the Securities Act
and the Exchange Act in the offer and sale of the common stock. In
particular, we will advise the selling security holders that the
anti-manipulation rules of Regulation M under the Exchange Act will apply to
sales of shares in the market and to the activities of the selling security
holders and their affiliates. Regulation M under the Exchange Act
prohibits, with certain exceptions, participants in a distribution from bidding
for, or purchasing for an account in which the participant has a beneficial
interest, any of the securities that are the subject of the
distribution.
Accordingly,
during such times as a selling security holder may be deemed to be engaged in a
distribution of the common stock, and therefore be considered to be an
underwriter, the selling security holder must comply with applicable law and,
among other things:
26
|
1.
|
may
not engage in any stabilization activities in connection with our common
stock;
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|
2.
|
may
not cover short sales by purchasing shares while the distribution is
taking place; and
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3.
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may
not bid for or purchase any of our securities or attempt to induce any
person to purchase any of our securities other than as permitted under the
Exchange Act.
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In
addition, we will make copies of this prospectus available to the selling
security holders for the purpose of satisfying the prospectus delivery
requirements of the Securities Act.
Penny
Stock Rules
The
Securities and Exchange Commission has adopted regulations which generally
define “penny stock” to be any equity security that has a market price (as
defined) of less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exceptions. Our securities are covered
by the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
“institutional accredited investors.” The term “institutional accredited
investor” refers generally to those accredited investors who are not natural
persons and fall into one of the categories of accredited investor specified in
subparagraphs (1), (2), (3), (7) or (8) of Rule 501 of Regulation D
promulgated under the Securities Act, including institutions with assets in
excess of $5,000,000.
The penny
stock rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form required by the Securities and Exchange Commission, obtain
from the customer a signed and dated acknowledgement of receipt of the
disclosure document and to wait two business days before effecting the
transaction. The risk disclosure document provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer’s account.
The bid
and offer quotations, and the broker-dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before or
with the customer’s confirmation. In addition, the penny stock rules require
that prior to a transaction in a penny stock not otherwise exempt from these
rules, the broker-dealer must make a special written determination that the
penny stock is a suitable investment for the purchaser and receive the
purchaser’s written agreement to the transaction.
These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for the stock that is subject to these penny
stock rules. Consequently, these penny stock rules may affect the ability of
broker-dealers to trade our securities. We believe that the penny stock rules
discourage investor interest in and limit the marketability of our common
stock.
State
Securities Laws
Under the
securities laws of some states, the shares of our common stock may be sold in
such states only through registered or licensed brokers or
dealers. In addition, in some states the shares of our common stock
may not be sold unless the shares have been registered or qualified for sale in
the state or an exemption from registration or qualification is available and is
complied with.
Expenses
of Registration
We are
bearing all costs relating to the registration of the common
stock. These expenses are estimated to be $50,000, including, but not
limited to, legal, accounting, printing and mailing fees. The selling security
holders, however, will pay any commissions or other fees payable to brokers or
dealers in connection with any sale of the common stock.
27
DESCRIPTION
OF SECURITIES
General
As of
June 30, 2010, the Company had 23,527,000 shares of common stock outstanding,
and no shares of preferred stock outstanding. The following
description of the Company's capital stock is a summary and is qualified by the
provisions of the Company's Articles of Incorporation and Bylaws, a copy of
which are exhibits to the registration statement, of which this prospectus is a
part. Our shares of common stock were held by 35 stockholders of
record as of the date hereof.
Common
Stock
The
Company has 100,000,000 authorized shares of common stock. Holders of
the Company's common stock are entitled to one vote for each share held of
record on each matter submitted to a vote of stockholders. Holders of the common
stock do not have cumulative voting rights, which means that the holders of more
than one-half of the Company's outstanding shares of common stock can elect all
of the Company's directors, if they choose to do so. In this event, the holders
of the remaining shares of common stock would not be able to elect any
directors. Subject to the prior rights of any class or series of preferred stock
which may from time to time be outstanding, if any, holders of common stock are
entitled to receive ratably, dividends when, as, and if declared by the Board of
Directors out of funds legally available for that purpose and, upon the
Company's liquidation, dissolution, or winding up, are entitled to share ratably
in all assets remaining after payment of liabilities and payment of accrued
dividends and liquidation preferences on any preferred stock. Holders of common
stock have no preemptive rights and have no rights to convert their common stock
into any other securities. The outstanding common stock is duly authorized and
validly issued, fully paid, and non assessable. In the event the
Company were to elect to sell additional shares of common stock, holders of our
common stock would have no right to purchase additional shares. As a result, the
common stockholders’ percentage equity interest would be diluted.
The
issued and outstanding shares of the Company's common stock are fully paid and
not liable for further call and assessment. Except as otherwise permitted by
Florida law, and subject to the rights of the holders of preferred stock, all
stockholder action is taken by the vote of a majority of the outstanding shares
of common stock voted as a single class present at a meeting of stockholders at
which a quorum consisting of a majority of the outstanding shares of common
stock is present in person or proxy.
The par
value of the common stock is $0.0001.
Preferred
Stock
The
Company has 10,000,000 authorized shares of preferred stock. The
Company may issue preferred stock in one or more series and having the rights,
privileges, and limitations, including voting rights, conversion rights,
liquidation preferences, dividend rights and preferences and redemption rights,
as may, from time to time, be determined by the Board of Directors. Preferred
stock may be issued in the future in connection with acquisitions, financing, or
other matters, as the Board of Directors deems appropriate. In the event that
the Company determines to issue any shares of preferred stock, a certificate of
designation containing the rights, privileges, and limitations of this series of
preferred stock shall be filed with the Florida Secretary of State. The effect
of this preferred stock designation power is that the Company’s Board of
Directors alone, subject to federal securities laws, applicable blue sky laws,
and Florida law, may be able to authorize the issuance of preferred stock which
could have the effect of delaying, deferring, or preventing a change in control
of the Company without further action by the Company’s stockholders, and may
adversely affect the voting and other rights of the holders of the Company’s
common stock. The issuance of preferred stock with voting and
conversion rights may also adversely affect the voting power of the holders of
the Company’s common stock, including the loss of voting control to
others. As of the date hereof, the Company has not issued any shares
of preferred stock.
The par
value of the preferred stock is $0.01.
28
Options,
Warrants and Other Securities Convertible into Common Stock
As of
June 30, 2010, the Company does not have any options, warrants or other
securities outstanding that are convertible into common stock.
Anti-Takeover
Provisions
The
Florida Control Share Act (the "FCSA") generally provides that shares acquired
in a control share acquisition will not possess any voting rights unless such
voting rights are approved by a majority of the corporation's disinterested
shareholders. A "control share acquisition" is an acquisition,
directly or indirectly, by any person of ownership of, or the power to direct
the exercise of voting power with respect to, issued and outstanding control
shares of a publicly held Florida corporation. "Control shares" are
shares which, except for the FCSA, would have voting power that, when added to
all other shares owned by a person or in respect to which such person may
exercise or direct the exercise of voting power, would entitle such person
immediately after acquisition of such shares, directly or indirectly, alone or
as part of a group, to exercise or direct the exercise of voting power in the
election of directors within any of the following ranges: (i) at
least 20% but less than 33.33% of all voting power; (ii) at least 33.33% but
less than a majority of all voting power; or (iii) a majority or more of all
voting power.
Under the
FCSA, a Florida corporation may expressly opt out of the application of the
terms of the FCSA in its bylaws, in which case the shares acquired in a control
share acquisition will automatically possess full voting rights without the
requirement of the approval of a majority of the corporation's disinterested
shareholders. We have not opted out of the FCSA in our
bylaws.
INTEREST
OF NAMED EXPERTS AND COUNSEL
The
validity of the shares of common stock of Shades Holdings, Inc. will be passed
upon for Shades Holdings, Inc. by Bush Ross, P.A. Bush Ross,
P.A. currently owns 200,000 shares of our common stock.
The
consolidated balance sheet of Shades Holdings, Inc. as of December 31, 2009 and
the consolidated statements of operations, cash flows, and stockholders’ equity
for the period from November 23, 2009 (inception) to December 31, 2009, and
included in the registration statement on Form S-1, of which this prospectus
forms a part, have been included herein in reliance on the reports of Meeks
International, LLC, an independent registered public accounting firm, given on
the authority of that firm as experts in auditing and accounting.
General
We are an
online retailer of discount sunglasses incorporated under the laws of Florida on
November 23, 2009. We are a development stage company and have
recently commenced our business operations. From our inception on November
23, 2009 through June 30, 2010, we incurred a cumulative loss of ($34,144) and
have only generated nominal revenues from our business operations.
We offer
and sell high quality, name brand sunglasses to our customers through our wholly
owned subsidiary, Daily Shades, Inc. We offer recognized designer brand
sunglasses, such as Armani®, Prada®, Versace®, Ray Ban® and Gucci®, at discounts
of up to 70% of the manufacturer’s suggested retail price. Sunglasses
available through our bargain bin are typically offered a discount prices as
well. Our products are offered and sold through our website at
www.dailyshades.com and we intend to continue offering our products only through
our website. We currently offer a different pair of sunglasses each day to
our customers through our website. We generally offer our sunglasses for a
limited period of time and present the offer as a “daily deal” on our
website. Each day our quantities vary so our customers do not know how
many pairs of sunglasses we will have of a particular model. We also offer
single models, old models and slightly damaged models in our “bargain
bin.”
29
We
anticipate generating revenue streams from the sale of our products to our
customers and the sale of advertising space on our website to other
companies. To date, our operations have been limited and we have only
earned $1,686 in revenues from the sale of our products. We have earned
less than $100 from the sale of advertising space on our website.
In order
for our business model to be successful, we must acquire, convert and retain
customers while developing the processes, methods and infrastructure necessary
to do so efficiently and cost-effectively. This requires specific
competencies in creating a compelling online shopping experience, ensuring
reliable and timely product fulfillment and providing superior customer
service.
Our
website and our products
Because
online shoppers cannot touch or feel products, online retailers must find ways
to supplant the physical shopping experience with a content-rich, user-friendly
interface that makes it easy for shoppers to find, research and compare
products, answer their questions and direct them toward a buying decision.
Shoppers must also feel comfortable enough with the reliability and reputability
of an online retailer to make a purchase online. Many online retailers’
websites are clogged with needless information and products. We have
designed a website that we believe is simple and user friendly with a focus on
our “daily deal.” Our website contains high quality pictures and detailed
descriptions of all of our products and prominently features our “daily deal”
product. If customers desire to purchase one of our products, they simply
click “Buy Now” and are taken to our checkout center. We accept all major
credit cards as well as PayPal and we believe the payment process is extremely
easy.
We also
sell advertisement space on our website. To date, our sale of advertising
space has generated de minimus revenues; however, we anticipate this will
develop into a consistent and significant source of revenues for our
business.
Product
delivery
Delivering
customer purchases quickly and efficiently is critical to our customer
satisfaction. We strive to exceed customer expectations by fulfilling
orders rapidly and accurately. We generally utilize a “drop shipping”
arrangement to deliver the products offered as our “daily deal.” When we
receive an order, we transfer the order and shipment details to either the
manufacturer or a wholesaler, who then ships the goods directly to the
customer. In the instances where we ship the products to our customers
directly, we utilize the United States Postal Service or UPS®, both of which use signature
confirmation for delivery and arrive in two to three business days generally.
These processes allow our customers to receive our products promptly and also
allow us to minimize our overhead costs as we are not required to maintain
inventory of our product. The inventory we do carry is generally limited
to single models, old models and slightly damaged models that we offer through
our “bargain bin.”
Further,
while other online retailers run the risk of running out of stock of a certain
item, our customers generally understand that the items we offer are of a
limited quantity. Therefore, we do not believe our customer’s inability to
order a certain product once it has been sold out will have a negative impact on
that customer’s experience with our company.
We offer
free shipping within the continental U.S.
Customer
Service
A high
level of customer service both during and after a transaction is essential to
reduce new customer acquisition costs and to improve sales and margins from
existing customers. Our customers can contact us via telephone or email
with any questions about our products or their specific
orders. Further, once our customers place an order, we provide
our customers email notifications on the status of their order from the time the
purchase is made through delivery. Our standard return policy allows
merchandise purchased on our websites to be returned within 30 days of the
original invoice date for a full refund, less certain shipping expenses.
To date we have only had 1 product returned to us.
30
Marketing
We
utilize various channels to market our products, including click-through based
advertising on shopping comparison engines, targeted e-mails, display and banner
advertisements on high-traffic portals, social networking via major social media
sites, and onsite promotions on our websites. We currently do not conduct
any “offline” marketing activities.
Our
primary marketing channels to date have been through the social networking sites
Twitter (http://twitter.com/DailyShades) and Facebook. We believe these
social networking sites allow us to reach our target customer base. We
also have retained an outside marketing firm to assist us in enhancing and
developing our website and to assist us with “search engine optimization.”
Search engine optimization is the practice of maximizing the volume or quality
of traffic to a web site from search engines such as Google or Yahoo! via
"natural" or un-paid search results. In the future, we may also bid for
specific keywords on search engine websites, such as Google and Yahoo! in order
to receive optimum visibility in the displayed results when visitors browse for
product on these sites. We also anticipate entering into contracts with
other online retailers to allow them to link to our “daily deal.” We have
been featured on several “deal of the day” websites which has generated traffic
to our website.
Suppliers
We
generally do not purchase inventory from our suppliers; rather, we typically
negotiate an arrangement with our supplier to acquire the products at a fixed
cost, which we do not incur until the item is sold. However, there
are limited instances where we purchase inventory such as greatly discounted
models and carry that inventory from time to time. We currently only have
one contract with a supplier, Snazzy Buys, Inc., which is terminable by either
party upon 30 days notice. Our agreement with Snazzy Buys, Inc.
provides that we will pay them 15% over their cost of goods for the merchandise
we acquire from them. It also contains a warranty that all products
we acquire from Snazzy Buys are genuine and authentic products of the brands
represented and are not counterfeit. We pay Snazzy Buys monthly for
the products we acquire from them. If Snazzy Buy’s invoices are not
satisfied timely, interest accrues at 1.5% per month on the outstanding
amount.
While we
will seek to establish supply channels with other manufacturers, retail chains,
wholesalers and liquidators that have excess sunglass inventory, we do not
anticipate entering into any contracts or arrangements with our suppliers that
guarantee the availability of merchandise, or provide for the continuation of
particular pricing or other practices, as this is atypical in our
industry. As such, our suppliers may cease selling us inventory on current
terms or entirely, and, if the terms are changed, we may not be able to
establish new supply relationships on similar or better
terms.
Technology
Our
technology systems are a critical component of our success and are designed to
enhance efficiency and scalability. As noted above, our website provides
product descriptions, search and ordering functionalities and product reviews.
We utilize secure encryption technology to send and receive confidential
financial information during the transaction process. Online fraud is a
constant threat to security and reliability of e-commerce retailers. We work
with third-party vendors to assist us in monitoring our network security devices
and to secure our online payment systems. We have developed and deployed a
scalable back office platform that allows us to monitor transactions and changes
to financial data as well as provide our management with daily updates. We
utilize third-party applications for accepting and validating customer orders,
placing and tracking orders with suppliers, managing inventory and assigning it
to customer orders and ensuring proper shipment of products to
customers.
31
Competition
The
e-commerce market is rapidly evolving and intensely competitive with limited
barriers to entry. The internet’s development into a significant
global medium for communication, content and commerce has led to substantial
growth in online shopping. According to the Forrester Research report,
“U.S. eCommerce Forecast, 2008 to 2013,” published February 2, 2009, the U.S.
e-commerce market was $141.3 billion in 2008 and is expected to grow to $229.1
billion in 2013, representing a 10.1% compound annual growth rate. In addition,
Forrester predicts that online retail sales will grow from 5% of total retail
sales in 2008 to 8% of total retail sales by 2013. We expect that our
primary competition will come from internet retailers such as Woot.com, ebay.com
and other “deal of the day” websites. Our
primary supplier, Snazzy Buy’s, also is a competitor of ours in that they offer
designer sunglasses through their website. Our competitors will also
include established internet retailers such as hiSunglasses.com, eyesave.com,
Overstock, Bluefly, and Amazon, internet auction websites such as eBay and Bidz,
and traditional discount retail chains like Marshalls, TJMaxx and Ross.
Competitors can enter our market with little difficulty and can launch competing
website locations with relatively low costs. Many of our potential online
and brick-and-mortar competitors have longer operating histories, larger
customer bases, greater brand recognition and significantly greater financial,
marketing, technical, management and other resources than we do. In
addition, our competitors have used and may continue to use aggressive pricing
or promotional strategies, have stronger supplier relationships with more
favorable terms and inventory allocation and devote substantially greater
resources to website and system development than we do. We expect
competition will intensify in the future as e-commerce continues to grow
worldwide. Increased competition may result in reduced operating margins,
reduced profitability, loss of market share and diminished brand recognition.
Growth
Strategy
Our plan
is to be one of the internet’s premiere discount sunglass retailers with our
“daily deal.” To accomplish this, we must acquire, convert and retain
customers while developing the processes, methods and infrastructure necessary
to do so efficiently and cost-effectively. This requires specific
competencies in creating a compelling online shopping experience, ensuring
reliable and timely product fulfillment and providing superior customer
service. If we are successful in establishing our sunglass segment, we
will likely rollout additional “daily deal” sites for other clothing accessories
such as hats, watches, shoes and other similar items. We have acquired the
website domain names of dailychrono.com, dailytote.com, dailylids.com,
dailyflops.com, and dailysneaks.com.
Employees
Sean
Lyons is our Chief Executive Officer and President. Jesus Diaz is our
Chief Financial Officer. We have no other employees other than Messrs.
Lyons and Diaz at this time.
DESCRIPTION
OF PROPERTIES
Our
principal executive offices are located at 20711 Sterlington Drive, Land O’
Lakes, Florida 34638. The space is provided at no charge by a related
party. In the future we will need to obtain warehouse space and
office space if business increases.
LEGAL
PROCEEDINGS
None.
MARKET
PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
No
Public Market for Common Stock
There is
presently no public market for our common stock. We currently plan to
have our common stock quoted on the Over The Counter Bulletin Board (the
“OTCBB”), subject to the effectiveness of the registration statement of which
this prospectus forms a part. However, we can provide no assurance
that our shares will be quoted on the OTCBB or, if quoted, that a public market
will materialize.
Holders
As of
June 30, 2010, there were 35 registered holders or persons otherwise entitled to
hold our common stock.
32
Outstanding
Options, Warrants and Convertible Securities
As of
June 30, 2010, the Company did not have any options, warrants or other
securities outstanding that are convertible into common stock.
Rule
144 Shares
Pursuant
to Rule 144, after satisfying a six month holding period: (a) affiliated
stockholders (or stockholders whose shares are aggregated) may, under certain
circumstances, sell within any three month period a number of securities which
does not exceed the greater of 1% of the then outstanding shares of common stock
or the average weekly trading volume of the class during the four calendar weeks
prior to such sale and (b) non-affiliated stockholders may sell without
such limitations, provided we have “current public information” available (as
such term is defined in Rule 144). Rule 144 also permits the sale of
securities by non-affiliates that have satisfied a one year holding period
without any limitation or restriction.
We
currently do not have current public information available about our
Company. As such, only non-affiliates that have satisfied a one year
holding period can sell our common stock pursuant to Rule 144. As of
the date of this prospectus, none of our shares of common stock are available
for resale to the public in accordance with the requirements of Rule 144 of the
Act.
Dividends
We have
never paid cash dividends on our capital stock and do not anticipate paying any
cash dividends with respect to those securities in the foreseeable
future. Our current business plan is to retain any future earnings to
finance the expansion and development of our business. Any future
determination to pay cash dividends will be at the sole discretion of the Board
of Directors and will be dependent upon our financial condition, results of
operations, capital requirements and other factors, as our Board of Directors
may deem relevant at that time. Our Board of Directors has the right to
authorize the issuance of preferred stock, without further shareholder approval,
the holders of which may have preferences over the holders of the common stock
as to the payment of dividends.
Securities
Authorized for Issuance under Equity Compensation Plans
We have
not adopted any equity compensation plans.
33
Shades
Holdings Inc.
(A
Development Stage Company)
Index To
Consolidated Financial Statements
Table of Contents |
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
|
Balance
Sheet December 31, 2009 and June 30, 2010 (Unaudited)
|
F-3
|
|
Consolidated
Statement of Operations:
|
F-4
|
|
For
The Period From November 23, 2009 (Inception) To December 31,
2009, For The Three Months Ended June 30, 2010 (Unaudited), For the Six
Month Period Ended June 30, 2010, and For The Period From November 23,
2009 (Inception) To June 30, 2010 (Unaudited)
|
||
Consolidated
Statement of Stockholders' Equity:
|
F-5
|
|
For
The Period From November 23, 2009 (Inception) To December 31, 2009 and
June 30, 2010 (Unaudited)
|
||
Consolidated
Statement of Cash Flows:
|
F-6
|
|
For
The Period From November 23, 2009 (Inception) To December 31,
2009, For The Six Month Period Ended June 30, 2010
(Unaudited), and For The Period From November 23, 2009 (Inception) To June
30, 2010
|
||
Notes
To The Consolidated Financial Statements
|
F-7
|
F-1
REPORT OF
MEEKS INTERNATIONAL, LLC, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and
Stockholders
of Shades Holdings, Inc.
We have
audited the accompanying consolidated balance sheet of Shades Holdings, Inc. as
of December 31, 2009 and the related consolidated statements of operations,
stockholders’ equity, and cash flows for the period from November 23, 2009 (date
of inception) through December 31, 2009. Shades Holding’s management is
responsible for these financial statements. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Shades
Holdings, Inc. as of December 31, 2009, and the consolidated results of its
operations and its cash flows for the period from November 23, 2009 through
December 31, 2009 in conformity with accounting principles generally accepted in
the United States of America.
The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As shown in the consolidated
financial statements and discussed in Note 2 of the accompanying consolidated
financial statements, the Company has incurred losses from operations since
inception and is dependent on additional sources of financing for continuation
of its operations. These factors raise substantial doubt about the Company’s
ability to continue as a going concern.
/s/ Meeks
International, LLC
Tampa,
Florida
June 29,
2010
F-2
(A
Development Stage Company)
Consolidated
Balance Sheets
June 30, 2010
|
December 31, 2009
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 43,801 | $ | 19,950 | ||||
Accounts
Receivable
|
19 | - | ||||||
Prepaid
Expenses
|
81,363 | 80,890 | ||||||
Total
current assets
|
125,183 | 100,840 | ||||||
Website-Net
|
2,500 | 3,000 | ||||||
Total
assets
|
$ | 127,683 | $ | 103,840 | ||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
Payable
|
$ | 270 | $ | 1,712 | ||||
Accrued
Expenses
|
1,164 | 0 | ||||||
Total
current liabilities
|
1,434 | 1,712 | ||||||
Stockholders'
Equity (Deficit):
|
||||||||
Preferred
stock, $0.01 par value;
|
||||||||
10,000,000
shares authorized, none designated or issued
|
- | - | ||||||
Common
stock, $0.0001 par value;
|
||||||||
100,000,000
shares authorized;23,527,000 and 23,310,000 shares
|
||||||||
issued
and outstanding, respectivley
|
2,353 | 2,331 | ||||||
Additional
paid in capital
|
158,040 | 103,812 | ||||||
Deficit
accumulated during development stage
|
(34,144 | ) | (4,015 | ) | ||||
Total
stockholders' equity
|
126,249 | 102,128 | ||||||
Total
liabilities and shareholders' equity
|
$ | 127,683 | $ | 103,840 |
See Notes
To Consolidated Financial Statements
F-3
Shades
Holdings Inc.
(A
Development Stage Company)
Consolidated
Statement of Operations
For The Period
|
||||||||||||||||
For The Period
|
From
|
|||||||||||||||
From November 23,
|
November 23,
|
|||||||||||||||
For The Three
|
2009 (Date of
|
2009 (Date of
|
||||||||||||||
Month Period Ended
|
For The Six Month Period
|
Inception) To
|
Inception) To
|
|||||||||||||
June 30, 2010
|
Ended June 30, 2010
|
December 31, 2009
|
June 30, 2010
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||||||
Revenue
|
$ | 1,269 | $ | 1,686 | $ | - | $ | 1,686 | ||||||||
Cost
of goods sold
|
949 | 1,039 | - | 1,039 | ||||||||||||
Gross
Profit
|
320 | 647 | - | 647 | ||||||||||||
Selling
and General Administrative
|
17,199 | 30,776 | 4,015 | 34,791 | ||||||||||||
Net
loss
|
$ | (16,879 | ) | $ | (30,129 | ) | $ | (4,015 | ) | $ | (34,144 | ) | ||||
Basic
and diluted loss per share
|
$ | - | $ | - | $ | - | ||||||||||
Weighted
average shares outstanding basic and diluted
|
23,501,400 | 23,411,978 | 22,228,421 |
See Notes
To Consolidated Financial Statements
F-4
Shades
Holdings Inc.
(A
Development Stage Company)
Consolidated
Statement of Stockholders’ Equity
Deficit
|
||||||||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||||||||
Preferred Stock
|
Common Stock
|
Additional
|
During
|
|||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Paid in Capital
|
Development Stage
|
Total
|
||||||||||||||||||||||
Balance,
Nov 23, 2009 (Inception):
|
||||||||||||||||||||||||||||
Issuance
of common stock to founder and president valued at $0.0001 per share
|
- | $ | - | 20,000,000 | $ | 2,000 | $ | - | $ | - | $ | 2,000 | ||||||||||||||||
Issue
shares of common stock for services
|
- | - | 310,000 | 31 | 77,469 | 77,500 | ||||||||||||||||||||||
Issue
shares of common stock for $0.01 per share, net
|
- | - | 3,000,000 | 300 | 26,343 | 26,643 | ||||||||||||||||||||||
Net
loss for December 31, 2009
|
- | - | - | - | - | (4,015 | ) | (4,015 | ) | |||||||||||||||||||
Balance
at December 31, 2009
|
- | - | 23,310,000 | 2,331 | 103,812 | (4,015 | ) | 102,128 | ||||||||||||||||||||
Issue
of common stock for $0.25 per share
|
- | - | 217,000 | 22 | 54,228 | 54,250 | ||||||||||||||||||||||
Net
loss
|
- | - | (30,129 | ) | (30,129 | ) | ||||||||||||||||||||||
Balance
at June 30, 2010 (unaudited)
|
- | $ | - | 23,527,000 | $ | 2,353 | $ | 158,040 | $ | (34,144 | ) | $ | 126,249 |
See Notes
To Consolidated Financial Statement
F-5
Shades
Holdings Inc.
(A
Development Stage Company)
Consolidated
Statement of Cash Flows
For The Six Month
|
November 23, 2009
|
November 23, 2009
|
||||||||||
Period Ended
|
(Inception)
|
( Inception)
|
||||||||||
June 30, 2010
|
To December 31, 2009
|
To June 30, 2010
|
||||||||||
(unaudited)
|
(unaudited)
|
|||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
loss
|
$ | (30,129 | ) | $ | (4,015 | ) | $ | (34,144 | ) | |||
Adjustments
to reconcile net loss to net cash used in operating activities:
|
||||||||||||
Issuance
of common stock for services
|
13,750 | 1,875 | 15,625 | |||||||||
Amortization
|
500 | - | 500 | |||||||||
Changes
in operating assets and liabilities:
|
||||||||||||
Prepaid
expenses
|
(14,223 | ) | (5,265 | ) | (19,488 | ) | ||||||
Accounts
receivable
|
(19 | ) | (19 | ) | ||||||||
Accounts
payable
|
(1,442 | ) | 1,712 | 270 | ||||||||
Accrued
Expenses
|
1,164 | - | 1,164 | |||||||||
Net
cash used in operating activities
|
(30,399 | ) | (5,693 | ) | (36,092 | ) | ||||||
Cash
flows from investing activities:
|
||||||||||||
Intangible
Assets: Purchase
|
- | (3,000 | ) | (3,000 | ) | |||||||
Net
cash used for investing activities
|
- | (3,000 | ) | (3,000 | ) | |||||||
Cash
flows from financing activities:
|
||||||||||||
Cash
received from issuance of common stock
|
54,250 | 32,000 | 86,250 | |||||||||
Cash
paid for stock issuance costs
|
- | (3,357 | ) | (3,357 | ) | |||||||
Net
cash provided by financing activities
|
54,250 | 28,643 | 82,893 | |||||||||
Net
increase in cash and cash equivalents
|
23,851 | 19,950 | 43,801 | |||||||||
Cash
and cash equivalents at beginning of year
|
19,950 | - | - | |||||||||
Cash
and cash equivalents
|
$ | 43,801 | $ | 19,950 | $ | 19,233 | ||||||
Supplemental
disclosures:
|
||||||||||||
Cash
paid for interest
|
$ | - | $ | - | $ | - | ||||||
Cash
paid for taxes
|
$ | - | $ | - | $ | - | ||||||
Supplemental
disclosures for non-cash items:
|
||||||||||||
Stock
issued for future services
|
$ | - | $ | 75,625 | $ | 75,625 |
See Notes
To Consolidated Financial Statements
F-6
Shades
Holdings Inc.
(A
Development Stage Company)
Notes To
Consolidated Financial Statements
NOTE
1.
BASIS OF PRESENTATION AND NATURE OF OPERATIONS
The Company – Shades Holdings
Inc. (the Company) was organized in Florida on November 23, 2009. The Company is
in the development stage and has realized only minimal revenues
from its planned operations.
Nature of Businesss - We are
an internet sales company which, through our wholly owned subsidiary, Daily
Shades, Inc., sells name brand sunglasses at up to 70% off manufactured
suggested retail prices at our website www.dailyshades.com. Our business
strategy is focused on a “daily deal” that is a niche in the internet market
place.
The
Summary of Significant Accounting Policies (Note 3) is presented to assist in
understanding the financial statements. The financial statements and notes are
representations of the Company’s management, which is responsible for their
integrity and objectivity. These accounting policies conform to accounting
principles generally accepted in the United States of America and have been
consistently applied in the preparation of the financial statements.
References
to accounting principles generally accepted in the Unites States of America are
to those standards promulgated and described in the Accounting Standards
Codification (“ASC”) of the Financial Accounting Standards Board.
Unaudited Consolidated Financial
Statements June 30, 2010 - The accompanying unaudited consolidated
financial statements as of and for the three and six month period ended June 30,
2010 have been prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial information.
Accordingly, they do not include all the information and footnotes required for
complete financial statements. However, the unaudited consolidated financial
information includes all adjustments which are, in the opinion of management,
necessary to fairly present the consolidated financial position and the
consolidated results of operations for the interim period presented. The
operations for the three and six month period ended June 30, 2010 are not
necessarily indicative of the results for the year ending December 31, 2010.
NOTE
2.
GOING CONCERN
The
preparation of financial statements in accordance with accounting principles
generally
accepted in the United States contemplates that operations will be sustained for
a
reasonable period. However, we have incurred operating losses of $4,015 and
$34,144 from November 23, 2009 (Inception date) through December 31, 2009 and
from our inception date through June 30, 2010 (unaudited), respectively. Our
revenues are minimal. In addition, during these periods, we used cash of $5,693
and $36,272 (unaudited), respectively, in our operating activities. Since our
inception, we have been substantially dependent upon funds raised through the
sale of common stock and the issuance of common stock for services. We will need
to obtain additional financing to implement our business plan. We may not be
successful unless we can successfully market our products and generate revenue
sufficient to continue our operations. These conditions raise substantial doubt
about our ability to continue as a going concern for a reasonable
period.
F-7
Our
ability to continue as a going concern for a reasonable period is dependent upon
our ability to raise sufficient capital to implement our business plan and to
generate profits sufficient to become financially viable. During the years ended
December 31, 2009 and since inception through June 30, 2010 (unaudited), we
raised $28,643 and$82,893, respectively, from the sale of common stock. We
cannot give any assurances regarding the success of our current operations or
our ability to raise adequate capital to finance our operations. Our
consolidated financial statements do not include adjustments relating to the
recoverability of recorded assets or liabilities that might be necessary should
we be unable to continue as a going concern.
NOTES
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates—The Company
prepares the financial statements in accordance with generally accepted
accounting principles of the United States of America and, accordingly, requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Principles of consolidation –
Our consolidated financial statements include the accounts of Shades Holding
Inc. and its wholly owned subsidiary, Daily Shades Inc. All significant
intercompany accounts, profits and transactions have been eliminated in
consolidation.
Impairment of Long-Lived
Assets - In accordance with FASB Topic ASC 420 “Exit on Disposal Cost
Obligations”, the Company evaluates the carrying value of long-lived assets to
be held and used when events and circumstances warrant such a review. The
carrying value of long-lived assets is considered impaired when the anticipated
undiscounted cash flow from such assets is less than its carrying value. In that
event, a loss is recognized based on the amount by which the carrying value
exceeds the fair market value of the long-lived assets. Fair market value is
determined primarily using the anticipated cash flows discounted at a rate
commensurate with the risk involved.
Cash and Cash
Equivalents—Cash equivalents are comprised of all highly liquid
investments with maturity of three months or less when purchased.
Revenue Recognition — Revenue
is recognized when persuasive evidence of an arrangement exists, the product is
shipped to a customer, the sales price is fixed or determinable and
collectability is reasonably assured. Estimated amounts for sales returns and
allowances are recorded at the time of sale.
F-8
Inventories – Inventories
consist of retail merchandise that is in its finished form and ready for sale to
end-user customers. Inventories are recorded at the lower of average cost or
market. In-bound freight-related costs from our vendors are included as part of
the net cost of merchandise inventories. Other costs associated with acquiring,
storing and transporting merchandise inventories are expensed as incurred and
included in cost of goods sold. Our inventories are acquired and carried for
retail sale and, accordingly, the carrying value is susceptible to, among other
things, market trends and conditions and overall customer demand.
Intangible assets – Website
is recorded at cost and has a finite life. The Website is amortized over the
estimated periods of benefit of three years.
Earnings (Loss) Per Share -
The Company uses the guidance set forth under FASB topic ASC 260, “Earnings Per
Share” for calculating the basic and diluted loss per share. Basic loss per
share is computed by dividing loss by the weighted average number of common
shares outstanding. Diluted loss per share is computed similar to basic loss per
share except that the denominator is increased to include the number of
additional common shares that would have been outstanding if the potential
shares had been issued and if the additional shares were dilutive. Common
equivalent shares are excluded from the computation of net loss per share if
they would be anti-dilutive. The company has no potentially dilutive securities
at December 31, 2009 and June 30, 2010 (unaudited).
Fair Value of Financial
Instruments - The Company carries cash and cash equivalents, and accounts
payable and accrued expense at historical cost which approximates the fair value
because of the short-term nature of these instruments.
Income Taxes - Income taxes
are accounted for using the liability method of accounting. Under this method,
deferred tax assets and liabilities are recognized for the expected future tax
consequences of differences between the carrying amounts of assets and
liabilities and their respective tax basis, using currently enacted tax rates.
The effect on deferred assets and liabilities of a change in tax rates is
recognized in income in the period when the change is enacted. Deferred tax
assets are reduced by a valuation allowance when it is more likely than not that
some portion or all of the deferred tax assets will not be realized.
Share-Based Compensation – We
apply the grant-date fair value method to our share-based payment arrangements
with employees under the rules provided in ASC 718 Accounting for Share-Based
Payments and Staff Accounting Bulletin 107. Share-based compensation cost for
employees is measured at the grant date fair value based on the value of the
award and is recognized over the requisite service period, which is usually the
vesting period for employees.
F-9
For
share-based payment transactions with parties other than employees, we apply ASC
505-50 Equity Based Payments to Non-Employees. These non-employee services are
accounted for based on the fair value of the consideration received or the fair
value of the equity instruments issued, whichever is more reliably measureable.
The measurement date for valuing share-based payments made to non-employees is
the earlier of the date at which a commitment for performance by the
counterparty to earn the equity instruments is reached or the date at which the
counterparty’s performance is complete. Share-based payments to non-employees
are recorded at fair value on the measurement date and reflected in expense over
the requisite service period.
Recent Accounting
Pronouncements— The Company does not expect the adoption of recent
accounting pronouncements to have any material impact on its consolidated
financial statements.
NOTE
4.
PREPAID EXPENSES
Prepaid
expense consisted of the following:
June 30, 2010
|
December 31, 2010
|
|||||||
(unaudited)
|
||||||||
Registration
statement services
|
$ | 69,486 | $ | 55,265 | ||||
Accounting
services
|
5,208 | 11,458 | ||||||
Search
engine optimization services
|
4,585 | 9,583 | ||||||
Information
technology services
|
2,084 | 4,584 | ||||||
Total
prepaid expenses
|
$ | 81,363 | $ | 80,890 |
F-10
NOTE
5.
INTANGIBLE ASSETS
The
Company’s intangible assets as of June 30, 2010 (unaudited) and December 31,
2009 are as follows:
June 30, 2010
|
December 31, 20009
|
|||||||
(unaudited)
|
||||||||
Website
Development
|
$ | 3,000 | $ | 3,000 | ||||
Accumilated
Amortization
|
(500 | ) | - | |||||
Intangible
Assets, Net
|
$ | 2,500 | $ | 3,000 | ||||
Unamortized
intangible assets:
|
||||||||
Estimated
Amortization Expense:
|
||||||||
June 30, 2010
|
December 31, 2009
|
|||||||
(unaudited)
|
||||||||
Six
months ended December 31, 2010
|
$ | 500 | $ | 1,000 | ||||
For
the year ended December 31, 2011
|
1,000 | 1,000 | ||||||
For
the year ended December 31, 2012
|
1,000 | 1,000 | ||||||
$ | 2,500 | $ | 3,000 |
NOTE
6.
EQUITY
TRANSACTIONS
We have
100,000,000 authorized shares of common stock with a par value of $0.0001.
Holders of voting shares are entitled to one vote for each share that they own
at any shareholders' meeting. Each share of common stock entitles the holder to
one vote, either in person or by proxy, at meetings of shareholders.
We issued
20,310,000 shares of common stock upon formation on November 23, 2009 (date of
inception). We issued 20,000,000 shares to our President and director at par
value for proceeds of $2,000 and the additional 310,000 shares were issued to
vendors in exchange for future services, including legal services, accounting
services, information technology services and search engine optimization
services. See below for a description of each agreement. We also sold 3,000,000
shares of our common stock at $0.01 per share to accredited investors and
received $30,000 in proceeds.
On
February 1, 2010, we distributed to potential investors a Private Placement
Memorandum offering 250,000 shares of our common stock at a price of $0.25 per
share. The shares are being offered by us on a “best efforts” basis through the
efforts of our President. Although there is no minimum purchase requirement,
each investor is permitted to purchase a maximum of 25,000 shares subject to our
right to permit an investor to purchase more than the maximum individual
subscription. We have sold 217,000 shares of our common stock resulting in cash
proceeds of $54,500 to the Company. This Private Placement Memorandum offering
is now closed.
F-11
Common Stock
Issued for Services to Non-employees
On
November 23, 2009 the Company entered into a one (1) year consulting agreement
with Ryan Ford for web consultation on our website dailyshades.com. In
consideration for services performed the Company compensated Mr. Ford with
10,000 shares of common stock.
On
December 17, 2009 the Company entered into a one year consulting agreement with
the Tyler Ryan Group to provide services on content and social media content. In
consideration for the services preformed, the Company will compensate TRG at
$500 a month and issued 40,000 shares of our common stock as compensation for
these services.
On
November 23, 2009 the Company entered into a one (1) year consulting agreement
with Ron Rule for IT services on our website dailyshades.com. In consideration
for services performed the Company compensated Mr. Rule with 10,000 shares of
common stock.
On
November 23, 2009 we issued 200,000 shares of our common stock as compensation
for legal services.
The fair
value of these shares is based upon the fair value of the services to be
performed. See Note 3 and Note 10 for the Share-Based Compensation.
NOTE
7.
INCOME TAXES
The
components of the provision for income taxes are as follows:
The
income tax provision consists of the following:
June 30, 2010
|
December 31, 2009
|
|||||||
(unaudited)
|
||||||||
Current
taxes
|
$ | - | $ | - | ||||
Deferred
taxes
|
$ | - | $ | - | ||||
Provision
for income taxes
|
$ | - | $ | - |
F-12
The items
accounting for the difference between income taxes computed at the federal
statutory rate and the provision for income taxes are as follows
June 30, 2010
|
December 31, 2009
|
|||||||
Income
tax at federal statutory rate
|
-34.00 | % | -34.00 | % | ||||
State
tax, net of federal effect
|
-3.63 | % | -3.63 | % | ||||
Valuation
allowance
|
37.63 | % | 37.63 | % | ||||
Effective
rate
|
0.00 | % | 0.00 | % |
Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amount of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Significant components of the
Company's deferred income taxes are as follows:
|
June 30, 2010
Six Month Period |
December 31,
2009 |
||||||
(unaudited)
|
||||||||
Net
operating loss carry forwards
|
$ | 12,849 | $ | 1,524 | ||||
Valuation
allowance
|
(12,849 | ) | (1,524 | ) | ||||
Deferred
taxes
|
$ | - | $ | - |
We had a
net operating loss for the year ended December 31, 2009 and for the six months
ended June 30, 2010. We have provided no current income tax expense or benefit
due to the losses incurred. Our net operating loss is $4,015 for the period from
November 23, 2009 (date of inception) to December 31, 2009 and $30,129 for the
six month period ending June 30, 2010 (unaudited), which is available for carry
forward. The net operating losses are carried forward for up to twenty years and
available to offset future taxable income, if any. The Company has provided a
valuation allowance for the deferred tax benefit resulting from the net
operating loss carryover. The valuation allowance is being applied because of
the limited operating history of the company and inability to predict taxable
income going forward. In addressing the potential impact of deferred tax assets,
management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income.
NOTE
8.
COMPENSATION
AGREEMENTS
Employment Compensation — We
have not entered into an employment agreement or non-competition agreement with
our President. Our President is compensated $500 monthly for his services.
F-13
NOTE
9. RELATED PARTIES
On
November 23, 2009, we issued 20,000,000 shares of our restricted common stock to
Sean M. Lyons, our founder, at a share price of $.0001, for consideration of
$2,000. Mr. Lyons developed our business plan and founded the Company.
On
December 10, 2009, a shareholder, who purchased 1,100,000 shares of our common
stock valued at $0.01 per share, is currently a supplier of merchandise. Our
operations are limited and have not achieved operational status to date. At
December 31, 2009 and for the six month period through June 30, 2010
(unaudited), we had purchases from this supplier of $0 and $704, respectively.
Two
shareholders are members of an accounting services organization that provide
services to the Company and are related to the shareholder who provides
merchandise to the Company. During the period ended December 31, 2009, this
service organization received 50,000 shares of our common stock valued at $0.25
per share or a total value of $12,500 in exchange for their accounting services
charged to prepaid expense and amortized over a period of twelve months.
We do not
own any real estate and do not intend to own real estate in the future.
We
utilize space leased by a non-affiliated entity of our President on a rent free
basis. If our business expands, we will likely need to lease office and/or
warehouse space.
NOTE
10 SHARE- BASED COMPENSATION
Share-based
payments awards of 310,000 shares of our common stock were granted to
non-employee service providers. These share based payments were initially
charged to prepaid expenses and are amortized to expense over the requisite
service period. Legal services related to our registration statements and
included in prepaid expenses will be charged to paid in capital upon completion
of our registration statement or to expense if our registration is unsuccessful.
These share based services totaled $77,500 and $0 for the period ended December
31, 2009 and the six months ended June 30, 2010 (unaudited), respectively. Share
based compensation expense amounted to $1,875 for the period from November 23,
2009 (inception date) through December 31, 2009 and $6,875 and $13,750 for the
three and six month periods ended June 30, 2010 (unaudited), respectively.
NOTE
11.
SUBSEQUENT
EVENTS
On
July 9, 2010 the company elected three Board of Directors to serve one year
terms. The individuals are Sean Lyons, Jesus Diaz, and Ryan Ford. Mr. Ford will
receive 30,000 shares a year for his services which will vest quarterly and will
be awarded at end of the calendar year. Mr. Diaz was also added as CFO and will
receive 50,000 shares a year for his services as a board member and CFO. His
shares will vest quarterly and be awarded at end of the calendar year. We will
apply the grant date fair value method to our share based arrangement for these
awards and record compensation expense as these shares vest.
F-14
On July
9, 2010 the Company’s directors authorized the company to set aside 4,000,000
shares of common stock for the sale and issuance of the Company’s stock pursuant
to the S-1 Registration Statement.
F-15
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
PLAN OF OPERATIONS
The
following Management’s Discussion and Analysis of Financial Condition and Plan
of Operations contains forward-looking statements regarding our business
development plans, timing, strategies, expectations, anticipated
expenses levels, projected profits, business prospects and positioning with
respect to market, demographic and pricing trends, business outlook, technology
spending and various other matters (including contingent liabilities and
obligations and changes in accounting policies, standards and interpretations)
and express our current intentions, beliefs, expectations, strategies or
predictions. These forward-looking statements are based on a number
of assumptions and currently available information and are subject to a number
of risks and uncertainties. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of various
factors, including those set forth under “Forward-Looking Statements” and under
“Risk Factors” and elsewhere in this prospectus. The following discussion should
be read in conjunction with our consolidated financial statements and related
notes thereto included elsewhere in this prospectus.
We are an
online retailer of discount sunglasses incorporated under the laws of Florida on
November 23, 2009. We are a development stage company and have
recently commenced our business operations. From our inception on November
23, 2009 through June 30, 2010, we incurred a cumulative loss of ($34,144) and
have only generated nominal revenues from our business operations. We
offer and sell high quality, name brand sunglasses to our customers through our
wholly owned subsidiary, Daily Shades, Inc., at discounts of up to 70% of the
manufacturer’s suggested retail price. Our products are offered and
sold through our website at www.dailyshades.com and we intend to continue
offering our products only through our website. We currently offer a
different pair of sunglasses each day to our customers through our
website. We generally offer our sunglasses for a limited period of time
and present the offer as a “daily deal” on our website. Each day our
quantities vary so our customers do not know how many pairs of sunglasses we
will have of a particular model. We have also recently added a bargain bin
that consist of single models, old models and slightly damaged
models.
Plan of
Operation
As of the
date of this prospectus, our activities have been limited to various
organizational matters, limited operations, and the development of our business
plan. Assuming the offering of our common stock is fully subscribed, we
anticipate receiving net proceeds of $950,000. We anticipate that the
net proceeds obtained from this offering will be used to fund the following
initiatives in order of priority:
Advertising
|
$ | 300,000 | ||
Social
Media/Blogging
|
$ | 200,000 | ||
SEO
development
|
$ | 150,000 | ||
Inventory
|
$ | 75,000 | ||
Website
Maintenance/Enhancement
|
$ | 100,000 | ||
General
Working Capital
|
$ | 125,000 | ||
Maximum
Net Proceeds of the Offering
|
$ | 950,000 |
However,
we recognize the possibility that we may sell less than all the shares offered
under this prospectus. Should we sell less than the full amount of
securities available in this offering, we will allocate such less amount of the
net proceeds of the offering as set forth in the following table (which sets
forth the order of priority of the net proceeds assuming we sell 100%, 75%, 50%
and 25%, respectively, of the shares offered):
100%
|
75%
|
50%
|
25%
|
|||||||||||||
Advertising
|
$ | 300,000 | $ | 250,000 | $ | 200,000 | $ | 100,000 | ||||||||
Social
Media/Blogging
|
$ | 200,000 | $ | 150,000 | $ | 25,000 | $ | 15,000 | ||||||||
SEO
Development
|
$ | 150,000 | $ | 125,000 | $ | 100,000 | $ | 30,000 | ||||||||
Inventory
|
$ | 75,000 | $ | 25,000 | $ | 10,000 | $ | 5,000 | ||||||||
Website
Maintenance/Enhancement
|
$ | 100,000 | $ | 75,000 | $ | 50,000 | $ | 15,000 | ||||||||
General
Working Capital
|
$ | 125,000 | $ | 75,000 | $ | 65,000 | $ | 35,000 | ||||||||
Maximum
Net Proceeds of the Offering
|
$ | 950,000 | $ | 700,000 | $ | 450,000 | $ | 200,000 |
Assuming 75% of the offering
is subscribed
If we are
only able to sell 75% of the total shares made available in this offering (or
only 3 million of the 4 million shares we are offering), we estimate that we
will receive net proceeds of $700,000. Of that revised net proceed
total, we will allocate $250,000 to advertising expenses. Our
advertising outlay will focus on increasing recognition of and traffic to our
website. As discussed in greater detail in the section titled
“Management’s Discussion and Analysis,” our website is our primary sales
tool. However, because social media sites such as Facebook, Twitter
and MySpace are now such a ubiquitous part of our target market’s lives, we will
also spend a large portion of the revised net proceed total on increasing our
presence in those arenas. Similarly, in that internet search engines
drive many purchasing habits, we will invest a substantial amount of the revised
proceeds to SEO development. We will decrease or intended
expenditures on inventory and will also reduce our general working capital.
34
Assuming 50% of the offering
is subscribed
If we are
only able to sell 50% of the total shares made available in this offering (or
only 2 million of the 4 million shares we are offering), we estimate that we
will receive net proceeds of $450,000. With this reduced available
capital, we will continue to make advertising our first priority. We
will shift our secondary focus so that SEO development in our next highest
expenditure. Because SEO development is a highly technical area with
which we have limited knowledge, we feel that our resources will best be spent
by hiring someone with that specialized knowledge. In contrast,
social media development is an area in which we have a higher comfort level and
would feel more confident developing on our own with smaller capital
outlays. While our knowledge level of social media websites will not
allow us to match the level of exposure we could get from an outside
professional, we feel we would be able to maintain and expand our presence on
those websites. If we are only able to sell half of the shares
offered through this prospectus, we would have to reduce inventory and working
capital. Our goal would be to maintain sufficient working capital to
give us liquidity to proceed with our business plan, albeit on a reduced scope.
Assuming 25% of the offering
is subscribed
If we are
only able to sell 25% of the total shares made available in this offering (or
only 1 million of the 4 million shares we are offering), we estimate that we
will receive net proceeds of $200,000. Even with this low amount of
net proceeds, we will continue to focus on advertising. Our business
plan is dependent on driving customers to our website and increasing orders for
our product. Therefore, every attempt will be made to achieve this
objective. Our ability to spend money on SEO and social media development would
be greatly reduced. However, we would continue to use in-house
resources to develop our presence and increase our recognition in our niche
market. As our inventory budget would be drastically reduced, we
would be highly dependent on maintaining a close working relationship with our
suppliers and shippers to ensure a smooth delivery to our end user consumers. In
that our website development budget would be much lower, we would focus our
resources on maintaining our existing website rather than upgrading and
improving our website.
The
following is a brief description of each of the budget items referenced in our
use of proceeds discussion:
|
·
|
Advertising, social media, and
search engine optimization (“SEO”) services. In order
for our business model to be successful, we must acquire, convert and
retain customers. In order to acquire customers, we must
increase the traffic to our website. As such, our highest
priority will be to increase our marketing/advertising
expenses. We utilize various channels to market our products,
including click-through based advertising on shopping comparison engines,
targeted e-mails, display and banner advertisements on high-traffic
portals, social networking via major social media sites, and onsite
promotions on our websites. If this offering is successful, we
intend to increase the ads we purchase from internet search engine
providers like Google and Yahoo!. While we believe that
repetitive ads on the internet are a highly effective marketing tool, the
costs associated with these advertisements is high. We intend
to budget $10,000 a month for our initial advertisement campaign on Google
Ad Words. On Google Ad Words, we can create advertisements and
choose keywords, which are words or phrases related to our
business. When people search on Google using one of our
keywords, our ad may appear next to the search results. This
allows us to advertise to an audience that is already interested in the
products we provide. Using this form of advertising, we can
establish spending limits and we are generally only charged if someone
clicks our ad, not just when our ad is displayed. Since we are
only charged if someone clicks on our ad, it is difficult to estimate how
long our monthly budget of $10,000 will last; however, we estimate this
sum should last approximately 30 days. We intend to use tools
similar to Google Ad Words offered by other search engine providers as
well. As we launch our advertising campaign, we will
periodically review our budget and modify it as necessary.
|
All of
our social media through Facebook and Twitter is currently done by our
management. We believe this is an excellent marketing tool; however,
we believe it should be done by a professional group. We have
initially budgeted $10,000 per month to pay a professional group to manage this
marketing aspect of our business. We intend to construct “fan pages”
of our business on Facebook and similar sites, each of which cost approximately
$2,500 for setup alone. There are also monthly costs associated with
the maintenance of these “fan pages.” This campaign would be
initiated shortly after our Google Ad Words project. We also
anticipate establishing a blog on our website. We believe this will
assist us in drawing additional traffic to our website. Estimates for
establishing a “blog” can vary depending on the amount of content and number of
bloggers. We believe initial costs will be approximately $1,500, with
monthly costs related to maintenance. Finally, we also intend reach
our customers through daily “tweets” on Twitter. We find this is a
valuable tool to remind customers to check out our website for our “daily deal.”
Our
search engine optimization (SEO) work would be the next marketing aspect to be
expanded. We have retained an outside marketing firm to assist us in
enhancing and developing our website and to assist us with SEO. SEO
is the practice of maximizing the volume or quality of traffic to a web site
from search engines such as Google or Yahoo! via "natural" or un-paid search
results. Our efforts in this area have been limited due to our
limited budget. However, with proper funding this aspect of our
marketing campaign would be vastly expanded to increase our ranking in
searches. We initially anticipate budgeting approximately $10,000 per
month for our SEO services.
|
·
|
Acquisition of
inventory. With the expansion of our marketing campaign,
we anticipate an increase in our sales. As such, additional
inventory channels would need to be found. While our current
business model does not require that we maintain high inventory levels, as
our business grows, we may need to acquire and hold
inventory. If our inventory demands reach a certain level, we
might need to find warehouse space. The determination of size
and cost at this point would be unknown. However, we do not
believe we will require warehouse space until the third or fourth quarter
of 2011 at the earliest.
|
|
·
|
Website maintenance and
enhancement. Our expenses related to our website
maintenance and enhancement will also need to be increased. Due
to our existing budget constraints, we do a minimum amount of maintenance
and updating to our website. If our marketing campaign is
successful and additional traffic is directed to our website, we will need
to spend additional money on maintaining and enhancing our website to
remain competitive.
|
|
·
|
General working capital
needs. If we are successful in establishing our sunglass
segment, we will likely rollout additional “daily deal” sites for other
clothing accessories such as hats, watches, shoes and other similar
items. We have acquired the website domain names of dailychrono.com,
dailytote.com, dailylids.com, dailyflops.com, and
dailysneaks.com. We do not anticipate expanding our business
until the third or fourth quarter of 2011. As we expand, we
will focus on those markets that we believe have the greatest sales
potential and the least competition. The advertising/marketing
campaign for these new segments would be substantially similar to those
used for our sunglasses segment.
|
As our
business grows, we also will need to hire additional employees. We
currently only employ two people on a part-time basis. If our sales
increase dramatically, we anticipate the need to hire three additional people in
the first quarter of 2011. We believe our personnel needs will be in
website maintenance, sales/customer service and a general operations manager.
Liquidity
and Capital Resources
We have
prepared our financial statements under the presumption that we will continue as
a going concern for a reasonable period. However, we are currently a
development stage company and, as of the date of this prospectus, our activities
have been limited to various organizational matters, limited operations, and the
development of our business plan.
We had
$19,950 cash on hand as of December 31, 2009 and $43,801 as of June 30,
2010. As of August 31, 2010, we had cash on hand of
$27,119. We do not believe that our cash on hand will be sufficient
to satisfy our operating requirements through December 31,
2010. Based on the current rate at which we are using capital, we
believe that we will need to obtain a minimum in financing of approximately
$50,000 to continue our current minimal operations through December 31,
2010. If we do not secure at least $950,000 we will not be able to
fully implement our business plan, and if we do not secure at least $250,000 we
may not be able to continue our current minimal operations beyond the next
twelve months and our business plan may fail. We may seek to raise this
additional capital through the public or private sale of our equity securities,
the procurement of advances from our majority shareholder, debt financing or
short-term loans, or a combination of the foregoing. We currently do not have
any financing commitments (binding or non-binding) and we cannot give you any
assurance that we will be able to secure the additional cash or working capital
we may require to continue our operations and fully implement the initial phase
of our business plan.
35
Results
of Operations
Since we
were incorporated, our efforts have focused on implementing our business plan,
which includes our plan to access the public capital markets for additional
equity financing.
Our loss
since inception to December 31, 2009 totaled $4,015, primarily representing
$1,378 of organization costs and $1,875 of amortization of prepaid expense.
For the
six months ended June 30, 2010 unaudited, our loss totaled
$30,129. Our revenues were $1,686 during the six months ended June
30, 2010. Our selling, general and administrative expense totaled
$30,776 consisting primarily of $13,295 of accounting fees, $12,139 of IT
services and $3,229 of payroll expenses.
Off-Balance
Sheet Arrangements
We do not
have any off-balance sheet arrangements.
Off-Balance
Sheet Arrangements
We do not
have any off-balance sheet arrangements.
Critical
Accounting Policies
Our
discussion and analysis of our financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these consolidated financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosures of contingent assets
and liabilities. For a description of those estimates, see Note 3, Summary of
Significant Accounting Policies, contained in the explanatory notes to our
audited financial statements for the period ended December 31, 2009 and June 30,
2010 (unaudited). On an on-going basis, we evaluate our estimates, including
those related to deferred tax assets and valuation allowance, impairment of
long-lived assets, fair value of our financial instruments and equity
instruments. We base our estimates on historical experience and on various other
assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions; however, we believe that our estimates, including those for the
above-described items, are reasonable.
While all
of our accounting policies impact the consolidated financial statements, certain
policies are viewed to be critical. Critical accounting policies are those that
are both most important to the portrayal of our financial condition and results
of operations and that require management’s most subjective or complex judgments
and estimates. Management believes the policies that fall within this category
are the policies on revenue recognition and accounts receivable and intangible
assets, investments, financial instruments.
Revenue recognition – Revenue
is recognized when evidence of the arrangement exists, the product is shipped to
a customer, or in the limited circumstances, at destination, when terms provide
that title passes at destination, and when we have concluded that amounts are
collectible from the customers. Estimated amounts for sales returns and
allowances are recorded at the time of sale. Shipping costs billed to customers
are included as a component of product sales. The associated cost of shipping is
included as a component of cost of product sales.
Accounts receivable –
Accounts receivable represents normal trade obligations from customers
that are subject to normal trade collection terms, without discounts or rebates.
Notwithstanding these collections, we periodically evaluate the collectability
of our accounts receivable and consider the need to establish an allowance for
doubtful accounts based upon our historical collection experience and
specifically identifiable information about our customers.
36
Inventories – Inventories
consist of retail merchandise that is in its finished form and ready for sale to
end-user customers. Inventories are recorded at the lower of average cost or
market. In-bound freight-related costs from our vendors are included as part of
the net cost of merchandise inventories. Other costs associated with acquiring,
storing and transporting merchandise inventories are expensed as incurred and
included in cost of goods sold. Our inventories are acquired and carried for
retail sale and, accordingly, the carrying value is susceptible to, among other
things, market trends and conditions and overall customer demand.
Impairments – The Company’s
management evaluates its tangible and definite-lived intangible assets for
impairment under Statement of Financial Accounting for the
Impairment or Disposal of Long-Lived Assets annually at the
beginning of our fourth fiscal quarter or more frequently in the presence of
circumstances or trends that may be indicators of impairment. Our evaluation is
a two step process. The first step is to compare our undiscounted cash flows, as
projected over the remaining useful lives of the assets, to their respective
carrying values. In the event that the carrying values are not recovered by
future undiscounted cash flows, as a second step, we compare the carrying values
to the related fair values and, if lower, record an impairment adjustment. For
purposes of fair value, we generally use replacement costs for tangible fixed
assets and discounted cash flows, using risk-adjusted discount rates, for
intangible assets.
Financial instruments –
Financial instruments consist of cash, evidence of ownership in an
entity, and contracts that both (i) impose on one entity a contractual
obligation to deliver cash or another financial instrument to a second entity,
or to exchange other financial instruments on potentially unfavorable terms with
the second entity, and (ii) conveys to that second entity a contractual right
(a) to receive cash or another financial instrument from the first entity, or
(b) to exchange other financial instruments on potentially favorable terms with
the first entity. Accordingly, our financial instruments consist of cash and
cash equivalents, accounts receivable, accounts payable, accrued
liabilities. We carry cash and cash equivalents, accounts payable and
accrued liabilities at historical costs; their respective estimated fair values
approximate carrying values.
Recent
Accounting Pronouncements
Effective
July 1, 2009, the Company adopted the Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) 105-10, Generally Accepted
Accounting Principles – Overall (“ASC 105-10”). ASC 105-10 establishes
the FASB Accounting Standards
Codification (the “Codification”) as the source of
authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with U.S. GAAP. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative U.S. GAAP
for SEC registrants. All guidance contained in the Codification carries an equal
level of authority. The Codification superseded all existing non-SEC accounting
and reporting standards. All other non-grandfathered, non-SEC accounting
literature not included in the Codification is non-authoritative. The FASB will
not issue new standards in the form of Statements, FASB Staff Positions or
Emerging Issues Task Force Abstracts. Instead, it will issue Accounting
Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in
their own right. ASUs will serve only to update the Codification, provide
background information about the guidance and provide the bases for conclusions
on the change(s) in the Codification. References made to FASB guidance
throughout this document have been updated for the Codification.
We have
had no changes in or disagreements with our accountants.
37
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The
following table sets forth certain information with respect to each of our
directors, executive officers and key employees as of July 16,
2010. Their ages, positions, dates of initial election or
appointment, and the expiration of their terms are as follows:
Name
|
Age
|
Position
|
Period
Served
|
|||
Sean
M. Lyons
|
39
|
Chief
Executive Officer, President, Secretary and Director
|
November
23, 2009 to present
|
|||
Jesus
Diaz
|
40
|
Chief
Financial Officer
|
July
2010 to present
|
|||
Ryan
Ford
|
|
35
|
|
Director
|
|
July
2010 to present
|
Unless
expressly indicated in the above table, each director and officer will serve in
these capacities until their successors are duly elected, qualified and seated
in accordance with the Company’s Articles of Incorporation and
Bylaws.
Duties,
Responsibilities and Experience
Sean M. Lyons, Director, President and
Secretary. Sean Lyons is the Company’s Chief Executive
Officer, President and Secretary and also serves as a member of our board of
directors. He has served the Company in these capacities since
November 2009. Mr. Lyons also currently serves as the president of
Recapitalize, Inc., a company he founded in August 2008, which is in the
business of negotiating payment terms for companies that are not able to
currently pay their accounts payable on a timely basis. Previously,
Mr. Lyons served as regional manager for Accredited Home Lender (“Accredited”)
for nine years, a nationwide wholesale lender with over 2,000
employees. While he was employed by Accredited, Mr. Lyons’ sales
teams were in the top five percent of the company’s sales teams in annual sales,
even though Mr. Lyons was often developing new territories for the
company. The profitability of Mr. Lyons’ territories were
consistently some of the best in the company. He was also
instrumental in helping the company rollout its online sales
platform. Mr. Lyons was often used to help train the company’s
employees on a nationwide basis. Prior to his employment with
Accredited, Mr. Lyons was with US Bank in its wholesale lending arena for two
years and was a leader of the group that expanded the company’s operations into
Florida. Before joining US Bank, Mr. Lyons worked in the in the real
estate and finance sectors for several years Mr. Lyons is a graduate
of the University of South Florida with a BS in Interdisciplinary Social Science
with a focus in History and Economics.
Jesus Diaz, Director and Chief
Financial Officer. Jesus Diaz is the Company’s Chief Financial
Officer and also serves as a member of our board of directors. He has
served the Company in these capacities since July 2010. Mr. Diaz also
has served as the Chief Financial Officer and Chief of Operations of Abazias,
Inc. since 2002. Abazias, Inc. is a nationally recognized online
jeweler and is a subsidiary of Omni Reliant Holdings Inc., a publicly traded
company. Since 2009 Mr. Diaz has also served as the Chief Operating
Officer of Business Consulting Options, LLC, a national merchant cash advance
company. He also serves as the operations manager of National WLD
Techmark Inc., an internet administration and marketing firm and has held this
position since 2001. Mr. Diaz served as the Chief Operating Officer
of University Cash Inc. from May 1999 to June 2002. Mr. Diaz received
his Bachelors degree in History from the University of Florida in
1998.
Ryan Ford, Director. Ryan Ford
is a member of our board of directors. Mr. Ford was elected to our
board of directors in July 2010. Since September 2009, Mr. Ford has
served as the Vice-President of Operations for The Tyler Ryan Group, LLC, a
national marketing & media agency. He also has served as the
Chief Operational Officer of Natural Sundae, Inc., a national natural body care
company, since October 2007. Prior to his employment with Natural
Sundae, Inc., he owned Haul and Oats LLC, a trucking and logistic company from
January of 2006 to June of 2007. From January of 2002 to December of
2005, Mr. Ford served as the Vice-President/Partner of Worldwide Multi-Media LLC
, a marketing and e-commerce firm. Mr Ford has significant experience
in designing, hosting, and promoting e-commerce
businesses.
38
Significant
Employees
Other
than the executive officers named above, the Company does not have any
“significant employees.”
Family
Relationships
There are
no known family relationships among any of our directors and executive
officers.
Involvement
in Legal Proceedings
To the
best of our knowledge, during the past ten years, none of our directors or
executive officers were involved in any of the following: (1) any bankruptcy
petition filed by or against any business of which such person was a general
partner or executive officer either at the time of the bankruptcy or within two
years prior to that time; (2) any conviction in a criminal proceeding or being
subject to a pending criminal proceeding (excluding traffic violations and other
minor offenses); (3) being subject to any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or
otherwise limiting his involvement in any type of business, securities or
banking activities; and (4) being found by a court of competent jurisdiction (in
a civil action), the SEC or the Commodities Futures Trading Commission to have
violated a federal or state securities or commodities law, and the judgment has
not been reversed, suspended, or vacated.
Committees
of the Board of Directors
At
present, we do not have an audit committee, compensation committee, nominating
committee, an executive committee of our board of directors, stock plan
committee or any other committees. This is primarily due to our size
and our status as a development stage company. Jesus Diaz will
perform certain functions of an audit committee, such as recommending a firm of
independent certified public accountants to audit the annual financial
statements; reviewing the independent auditor’s independence, the financial
statements and their audit report; and reviewing management’s administration of
the system of internal accounting controls.
39
BENEFICIAL
OWNERSHIP OF THE COMPANY
The
following table sets forth information with respect to the securities holdings
of our executive officers, directors and all persons which we have reason to
believe may be deemed the beneficial owners of more than 5% of our outstanding
common stock. Also set forth in the table is the beneficial ownership
of all shares of our outstanding common stock of all proposed officers and
directors as a group.
Beneficial
ownership of shares is determined under Rule 13d-3(d)(1) of the Exchange Act and
generally includes any shares over which a person exercises sole or shared
voting or investment power and the number of shares that can be acquired within
sixty (60) days upon exercise of an option or conversion of warrants and
debentures. Common stock subject to these convertible securities are
deemed to be outstanding for the purpose of computing the ownership percentage
of the person holding such convertible security, but are not deemed to be
outstanding for the purpose of computing the ownership percentage of any other
person.
Title
of Class
|
Name
and Address of Beneficial
Owner(1)
|
Amount
and Nature of
Beneficial
Owner
|
Percentage
of
Class(2)
|
|||||||
Common
Stock
|
Sean
M. Lyons
|
20,008,000 | (3) | 85 | % | |||||
Common
Stock
|
Jesus
Diaz
|
4,000 | * | |||||||
Common
Stock
|
Ryan
Ford
|
10,000 | * | |||||||
Executive
Officers and Directors as a Group (3 persons)
|
20,022,000 | 85.09 | % |
* Less
than 1%
(1)
Unless otherwise indicated, the address of each shareholder is 20711 Sterlington
Drive, Land O’ Lakes, Florida 34638.
(2)
Applicable percentage of ownership is based on 23,527,000 shares of
Shades Holdings, Inc. common stock being issued and outstanding as of June 30,
2010.
(3)
Includes 8,000 shares of common stock owned by Michelle Lyons, Sean M. Lyons’
spouse. Each disclaims beneficial ownership of the other’s shares of
the Company’s capital stock.
40
EXECUTIVE
COMPENSATION
Compensation
of Our Executive Officers
The
following table contains compensation information for our executive officers for
the fiscal years ended December 31, 2009. No other officer received
compensation greater than $100,000 for either fiscal year. All of the
information included in this table reflects compensation earned by the
individuals for services rendered to our Company and all references in the
following tables to stock awards relate to awards of stock granted by
us.
SUMMARY
COMPENSATION TABLE
Name
and Principal
Position
|
Year
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
(S)
|
||||||||||||||||||||||||||
Sean
M. Lyons, Principal Executive Officer
|
2009(1)
|
- | - | - | - | - | - | - | - | ||||||||||||||||||||||||||
Jesus
Diaz, Principal Financial Officer
|
2009(2)
|
- | - | - | - | - | - | - | - |
(1)
|
Mr.
Lyons was appointed to serve as our President on November 23,
2009. All amounts reflected in this table are from the date of
Mr. Lyons’ appointment to the end of the fiscal year on December 31,
2009. Commencing January 1, 2010, Mr. Lyons is compensated $500
per month for his services.
|
(2)
|
Jesus
Diaz was appointed to serve as our Chief Financial Officer in July
2010. As such, Mr. Diaz did not receive any compensation from
the Company in 2009. Commencing in 2010, Mr. Diaz will receive
50,000 shares of common stock each year for his service as our Chief
Financial Officer. The stock award shall vest quarterly (i.e.,
12,500 per quarter) and will be awarded to Mr.Diaz at the end of our
fiscal year. The
shares Mr. Diaz will receive will be valued at the time at
vesting. We anticipate the shares will be valued at $0.25 per
share, or $12,500, however, if our shares are quoted on the OTCBB, or
listed for trading or quoted on any other public market, the shares will
likely be valued at prevailing market prices. Should Mr. Diaz
resign or be removed as our Chief Financial Officer mid-year, Mr. Diaz
will be paid the vested portion of the award.
|
Overview
The
following is a discussion of our program for compensating our named executive
officers and directors. Currently, we do not have a compensation
committee, and as such, our board of directors is responsible for determining
the compensation of our named executive officers. We are a
development stage company with limited revenue. The compensation of
our named executive officers reflects our limited revenue. The
primary goal of our executive compensation policy is to attract and retain the
most talented and loyal executives possible. Our intent is to ensure
that our executives are compensated effectively in a manner consistent with our
strategy and competitive practice and to align executive compensation with the
achievement of our short and long term business objectives. As our
business becomes established, we anticipate entering into traditional
compensation arrangements with our executed officers that would include a base
salary, bonus and standard benefits.
Our board
of directors considers a variety of factors in determining compensation of
executives including the executive’s background, training and prior work
experience.
Outstanding
Stock Options
Our
directors and officers do not hold any options to purchase any shares of our
common stock.
Compensation
of Directors
With the
exception of Ryan Ford, our directors do not receive compensation for their
services as directors. Mr. Ford will receive 30,000 shares of common
stock each year for his service as a member of our board of
directors. The stock award shall vest quarterly (i.e., 7,500 per
quarter) and will be awarded to Mr. Ford at the end of our fiscal
year. The
shares Mr. Ford will receive will be valued at the time at
vesting. We anticipate the shares will be valued at $0.25 per share,
or $12,500, however, if our shares are quoted on the OTCBB, or listed for
trading or quoted on any other public market, the shares will likely be valued
at prevailing market prices. Should Mr. Ford resign or be removed
from our board of directors mid-year, Mr. Ford will be paid the vested portion
of the award.
Retirement
Benefits
Currently,
we do not provide any company sponsored retirement benefits to any employee,
including named executive officers.
41
Employment
Agreements
On
November 23, 2009, we entered into an Independent Contractor Agreement with Ryan
Ford, a member of our board of directors. Under the Independent
Contractor Agreement, Mr. Ford agreed to provide us with consulting services
related to our website. The agreement is for a term of one year and
can be terminated by us upon 15 days notice. In exchange for the
services rendered under the agreement, we issued Mr. Ford 10,000 shares of our
restricted common stock.
Except as
set forth above, we do not have any other written employment agreements or
consulting agreement with any of our directors or executive
officers.
Change
of Control
There is
currently no arrangement which may result in a change of control of the
Company.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Except as
set forth below, there were no transactions since the beginning of our last
completed fiscal year, and there are no proposed transactions, that involve
amount that exceed the lesser of $120,000 or one percent of the average of our
total assets at year end for the last two completed fiscal years to which we
were or are to become a party in which any director, executive officer,
beneficial owner of more than five (5%) percent of our common stock, or members
of their immediate families had, or is to have, a direct or indirect material
interest.
On November 23, 2009, we issued 20,000,000 shares of our restricted common stock to Sean M. Lyons, our founder, at a share price of $.0001, for consideration of $2,000. Mr. Lyons developed our business plan and founded the Company.
On
November 23, 2009, we entered into an Independent Contractor Agreement with Ryan
Ford under which Mr. Ford agreed to provide us with consulting services related
to our website. The agreement is for a term of one year and can be
terminated by us upon 15 days notice. In exchange for the services
rendered under the agreement, we issued Mr. Ford 10,000 shares of our restricted
common stock. These services were valued at $2,500 based on a price
of $0.25 per share. Mr. Ford was appointed to our board of directors
in July 2010. A copy of the Independent Agreement is filed as an
exhibit with this Registration Statement.
On
November 23, 2009, we entered into an agreement with Total CFO, LLC under which
Total CFO agreed to provide us with tax preparation services and general book
keeping services. The agreement can be terminated by either party
upon 30 days notice. In exchange for the services rendered under the
agreement, we issued Total CFO 50,000 shares of our restricted common
stock. These services were valued at $12,500 based on a price of
$0.25 per share. Natalie Collins, who owns fifty percent (50%) of
Total CFO, owns 600,000 shares of the Company’s common stock. These
shares were acquired in our 2009 common stock offering at a price of $0.01 per
share, for an aggregate purchase price of $6,000. A copy of the
agreement with Total CFO, LLC is filed as an exhibit with this Registration
Statement.
On
December 15, 2009, we entered into an agreement with Snazzy Buys, Inc., which is
terminable by either party upon 30 days notice. Our agreement
with Snazzy Buys, Inc. provides that we will pay them 15% over their cost of
goods for the merchandise we acquire from them. It also contains a
warranty that all products we acquire from Snazzy Buys are genuine and authentic
products of the brands represented and are not counterfeit. We pay
Snazzy Buys monthly for the products we acquire from them. If Snazzy
Buy’s invoices are not satisfied timely, interest accrues at 1.5% per month on
the outstanding amount. For the
six month period ended June 30, 2010, we purchased $500 in products from Snazzy
Buys. Since inception through August 31, 2010, we have purchased
$1,258 in products from Snazzy Buys. Marilyn R. Philips,
the principal of Snazzy Buys, Inc., owns 1,100,000 shares of our common stock
and acquired these shares in our 2009 common stock offering. The
shares were acquired a $0.01 per share, for an aggregate purchase price of
$11,000. A copy of the Master Supplier Agreement is filed as an
exhibit with this Registration Statement.
42
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION
FOR
SECURITIES ACT LIABILITIES
Our
Articles of Incorporation provide that we will indemnify an officer or director
to the fullest extent permitted by law. Insofar as indemnification
for liabilities arising under the Securities Act of 1933 (the “Act”) may be
permitted to directors, officers or other persons controlling the registrant
pursuant to the foregoing provisions, the registrant has been informed that, in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities is asserted by one of our directors, officers, or controlling
persons in connection with the securities being registered, we will, unless, in
the opinion of our legal counsel, the matter has been settled by controlling
precedent, submit the question of whether such indemnification is against public
policy to a court of appropriate jurisdiction. We will then be
governed by the court’s decision.
WHERE
YOU CAN FIND MORE INFORMATION
We have
filed a registration statement on Form S-1 under the Securities Act of 1933 with
the Securities and Exchange Commission with respect to the shares of our common
stock offered through this prospectus. This prospectus is filed as a part of
that registration statement, but does not contain all of the information
contained in the registration statement and exhibits. Statements made
in the registration statement are summaries of the material terms of the
referenced contracts, agreements or documents of the Company. You may
inspect the registration statement, exhibits and schedules filed with the
Securities and Exchange Commission at the Commission’s principal office in
Washington, D.C. Copies of all or any part of the registration statement may be
obtained from the Public Reference Section of the Securities and Exchange
Commission, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call
the Commission at 1-800-SEC-0330 for further information on the operation of the
public reference rooms.
We are
not currently subject to the Securities Exchange Act of 1934 (the “Exchange
Act”) and currently are not required to, and do not, deliver annual, quarterly
or special reports to stockholders. However, once this registration statement is
declared effective by the SEC, we will be required to file annual, quarterly and
current reports, proxy statements and other information with the Securities and
Exchange Commission. As a public company with fewer than 300
shareholders, the Company files its periodic reports with the SEC and registers
its shares of common stock under the Exchange Act on a voluntary
basis. Since the company has fewer than 300 shareholders of record,
we are eligible to de-register our common stock under the Exchange
Act. The Company has no current intention of terminating its
registration of the common stock under the Exchange Act. Our
Securities and Exchange Commission filings will be available to the public over
the internet at the SEC’s website at
www.sec.gov.
43
PART
II - INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION
The
estimated costs of this offering are as follows:
Securities
and Exchange Commission registration fee
|
$ | 100 | ||
Transfer
Agent Fees
|
$ | 7,400 | ||
Accounting
fees and expenses
|
$ | 12,500 | ||
Legal
fees and expenses
|
$ | 30,000 | ||
Total
|
$ | 50,000 |
All
amounts are estimates, other than the Commission’s registration
fee.
We are
paying all expenses of the offering listed above. No portion of these expenses
will be borne by the selling security holders. The selling security holders,
however, will pay any other expenses incurred in selling their common stock,
including any brokerage commissions or costs of sale.
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
Our
Articles of Incorporation, as amended, provide that we shall, to the fullest
extent permitted by law, indemnify each of our directors and officers against
judgments, fines, settlements and other amounts, including expenses such as
attorneys’ fees, actually and reasonably incurred in connection with any
proceeding, arising by reason of the fact that such person is or was an agent of
the corporation.
The
foregoing indemnification obligations could result in our company incurring
substantial expenditures to cover the cost of settlement or damage awards
against directors, officers and employees, which we may be unable to recoup.
These provisions and resultant costs also may discourage our Company from
bringing a lawsuit against directors, officers and employees for breaches of
their fiduciary duties, including breaches resulting from negligent or grossly
negligent behavior, except under certain situations defined by statute, and may
similarly discourage the filing of derivative litigation by our shareholders
against our directors, officers and employees, even though such actions, if
successful, might otherwise benefit our company and the shareholders. We believe
that the indemnification provisions in our Articles of Incorporation are
necessary to attract and retain qualified persons as directors and
officers.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 (the
“Act”) may be permitted to directors, officers or other persons controlling the
Company pursuant to the foregoing provisions, we have been informed that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. No pending material litigation or proceeding
involving our directors, executive officers, employees or other agents as to
which indemnification is being sought exists, and we are not aware of any
pending or threatened material litigation that may result in claims for
indemnification by any of our directors or executive officers.
RECENT
SALES OF UNREGISTERED SECURITIES
Common
Stock Issuance to Sean Lyons
On
November 23, 2009, we issued 20,000,000 shares of our restricted common stock to
Sean M. Lyons, our founder, at a share price of $.0001, for consideration of
$2,000. Mr. Lyons developed our business plan and founded the
Company. We completed this offering pursuant to Section 4(2) of
the Securities Act. The 20,000,000 shares of common stock are
restricted shares, as defined in the Securities Act, and have been endorsed with
a legend confirming that the shares cannot be resold or transferred unless
registered under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act.
2009
Common Stock Offering
In 2009,
we completed an offering of 3,000,000 shares of our common stock at a price of
$0.01 per share to 4 investors, for total proceeds of approximately
$30,000.
44
The offer
and sale of such shares of our common stock was effected in reliance on the
exemptions for sales of securities not involving a public offering, as set forth
in Rule 506 promulgated under the Securities Act and in Section 4(2) of the
Securities Act, based on the following: (a) the investors confirmed to us
that they were either “accredited investors,” as defined in Rule 501 of
Regulation D promulgated under the Securities Act or had such background,
education and experience in financial and business matters as to be able to
evaluate the merits and risks of an investment in the securities; (b) there
was no public offering or general solicitation with respect to the offering;
(c) the investors were provided with certain disclosure materials and all
other information requested with respect to our company; (d) the investors
acknowledged that all securities being purchased were “restricted securities”
for purposes of the Securities Act, and agreed to transfer such securities only
in a transaction registered under the Securities Act or exempt from registration
under the Securities Act; and (e) a legend was placed on the certificates
representing each such security stating that it was restricted and could only be
transferred if subsequently registered under the Securities Act or transferred
in a transaction exempt from registration under the Securities Act.
Common
Stock Issuance to Bush Ross, P.A.
On
November 23, 2009, we issued 200,000 shares of our restricted common stock to
Bush Ross, P.A., our legal counsel as partial payment for legal services
rendered. These services were valued at $50,000 based on the fair
value of services provided. We completed this offering pursuant to
Section 4(2) of the Securities Act. The 200,000 shares of common stock are
restricted shares, as defined in the Securities Act, and have been endorsed with
a legend confirming that the shares cannot be resold or transferred unless
registered under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act.
Common
Stock Issuance to Total CFO, LLC
On
November 23, 2009, we entered into an agreement with Total CFO, LLC under which
Total CFO agreed to provide us with tax preparation services and general book
keeping services. The agreement can be terminated by either party
upon 30 days notice. In exchange for the services rendered under the
agreement, we issued Total CFO 50,000 shares of our restricted common
stock. These services were valued at $12,500 based on the fair value
of services provided. We completed this offering pursuant to Section 4(2)
of the Securities Act. The 50,000 shares of common stock are restricted shares,
as defined in the Securities Act, and have been endorsed with a legend
confirming that the shares cannot be resold or transferred unless registered
under the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act.
Common
Stock Issuance to Tyler Ryan Group, LLC
On
December 17, 2009, we entered into a Services Retainer Agreement with the Tyler
Ryan Group, LLC under which Tyler Ryan agreed to provide us with certain
services related to social media and website development and
maintenance. The Services Retainer Agreement is a one
year contract. In exchange for the services rendered under the
agreement, we agreed to pay $500 per month and issued 40,000 shares of our
restricted common stock. These services were valued at $10,000 based
on the fair value of services provided. We completed this offering
pursuant to Section 4(2) of the Securities Act. The 40,000 shares of common
stock are restricted shares, as defined in the Securities Act, and have been
endorsed with a legend confirming that the shares cannot be resold or
transferred unless registered under the Securities Act or pursuant to an
exemption from the registration requirements of the Securities Act.
Common
Stock Issuance to Ron Rule, Jr.
On
November 23, 2009, we entered into an Independent Contractor Agreement with Ron
Rule under which Mr. Rule agreed to provide us with information-technology
services. The agreement is for a term of one year and can be
terminated by us upon 15 days notice. In exchange for the services
rendered under the agreement, we issued Mr. Rule 10,000 shares of our restricted
common stock. These services were valued at $2,500 based on the fair
value of services provided. We completed this offering pursuant to
Section 4(2) of the Securities Act. The 10,000 shares of common stock are
restricted shares, as defined in the Securities Act, and have been endorsed with
a legend confirming that the shares cannot be resold or transferred unless
registered under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act.
Common
Stock Issuance to Ryan Ford
On
November 23, 2009, we entered into an Independent Contractor Agreement with Ryan
Ford under which Mr. Ford agreed to provide us with consulting services related
to our website. The agreement is for a term of one year and can be
terminated by us upon 15 days notice. In exchange for the services
rendered under the agreement, we issued Mr. Ford 10,000 shares of our restricted
common stock. These services were valued at $2,500 based on the fair
value of services provided. We completed this offering pursuant to
Section 4(2) of the Securities Act. The 10,000 shares of common stock are
restricted shares, as defined in the Securities Act, and have been endorsed with
a legend confirming that the shares cannot be resold or transferred unless
registered under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act.
45
2010
Common Stock Offering
In 2010,
we completed an offering of 217,000 shares of our common stock at a price of
$0.25 per share to 25 investors, for total proceeds of approximately $54,250.
The 2010 Common Stock Offering commenced on February 1, 2010 and closed on May
21, 2010.
The offer
and sale of such shares of our common stock was effected in reliance on the
exemptions for sales of securities not involving a public offering, as set forth
in Rule 506 promulgated under the Securities Act and in Section 4(2) of the
Securities Act, based on the following: (a) the investors confirmed to us
that they were either “accredited investors,” as defined in Rule 501 of
Regulation D promulgated under the Securities Act or had such background,
education and experience in financial and business matters as to be able to
evaluate the merits and risks of an investment in the securities; (b) there
was no public offering or general solicitation with respect to the offering;
(c) the investors were provided with certain disclosure materials and all
other information requested with respect to our company; (d) the investors
acknowledged that all securities being purchased were “restricted securities”
for purposes of the Securities Act, and agreed to transfer such securities only
in a transaction registered under the Securities Act or exempt from registration
under the Securities Act; and (e) a legend was placed on the certificates
representing each such security stating that it was restricted and could only be
transferred if subsequently registered under the Securities Act or transferred
in a transaction exempt from registration under the Securities
Act.
EXHIBITS
Exhibit No.
|
Description
|
|
3.01*
|
Articles
of Incorporation of Shades Holdings, Inc.
|
|
3.02*
|
Bylaws
of Shades Holdings, Inc.
|
|
5.01***
|
Form
of Legal Opinion of Bush Ross, P.A.
|
|
10.01*
|
Master
Supplier Agreement dated December 15, 2009 by and between the Company and
Snazzy Buys, Inc.
|
|
10.02*
|
Independent
Contractor Agreement dated November 23, 2009 by and between the Company
and Ryan Ford.
|
|
10.03*
|
Independent
Contractor Agreement dated November 23, 2009 by and between the Company
and Ron Rule.
|
|
10.04*
|
Services
Retainer Agreement dated December 17, 2009 by and between the Company and
Tyler Ryan Group, LLC.
|
|
10.05*
|
Letter
Agreement dated November 23, 2009 by and between the Company and Total
CFO, LLC.
|
|
10.06**
|
Form
of Subscription Agreement for 2009 Common Stock Offering.
|
|
10.07**
|
Form
of Subscription Agreement for 2010 Common Stock Offering.
|
|
10.08**
|
Amendment
to Services Retainer Agreement dated December 17, 2009 by and between the
Company and Tyler Ryan Group, LLC
|
|
21.01*
|
List
of Subsidiaries
|
|
23.01****
|
Consent
of Certified Public Accountants Meeks International, LLC
|
|
23.02
|
Consent
of counsel, Bush Ross, P.A. Filed with exhibit 5.01.
|
* Filed
with Registration Statement on Form S-1 on July 16, 2010.
** Filed
with Amendment No. 1 to Registration Statement on Form S-1 on September 21,
2010.
*** Filed with Amendment No. 2 to Registration Statement on
Form S-1 on October 8, 2010.
**** Filed herewith.
46
UNDERTAKINGS
The
undersigned registrant hereby undertakes to:
(1) File,
during any period in which offers or sales are being made, a post-effective
amendment to this registration statement to:
(i) Include
any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
(ii) Reflect
in the prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20% change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the
registration statement; and
(iii) Include
any material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement;
(2) For
determining liability under the Securities Act, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide offering;
and
(3) File
a post-effective amendment to remove from registration any of the securities
that remain unsold at the end of the offering.
(4) For
determining liability of the undersigned registrant under the Securities Act to
any purchaser in the initial distribution of the securities, the undersigned
registrant undertakes that in a primary offering of securities of the
undersigned registrant pursuant to this registration statement, regardless of
the underwriting method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any of the
following communications, the undersigned registrant will be a seller to the
purchaser and will be considered to offer or sell such securities to such
purchaser:
(i) Any
preliminary prospectus or prospectus of the undersigned registrant relating to
the offering required to be filed pursuant to;
(ii) Any
free writing prospectus relating to the offering prepared by or on behalf of the
undersigned registrant or used or referred to by the undersigned
registrant;
(iii) The
portion of any other free writing prospectus relating to the offering containing
material information about the undersigned registrant or its securities provided
by or on behalf of the undersigned registrant; and
(iv) Any
other communication that is an offer in the offering made by the undersigned
registrant to the purchaser.
(5) Each
prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering shall be deemed to be part of and included in the
registration statement as of the date it is first used after effectiveness.
Provided, however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such first use, supersede or modify any
statement that was made in the registration statement or prospectus that was
part of the registration statement or made in any such document immediately
prior to such date of first use; and
(6) Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such
issue.
47
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tampa, State of Florida,
on October 20, 2010.
SHADES
HOLDINGS, INC.
|
||
By:
|
/s/ Sean M. Lyons
|
|
Sean
M. Lyons, Principal Executive Officer
|
||
By:
|
/s/ Jesus Diaz
|
|
Jesus
Diaz, Principal
Financial Officer and Principal Accounting
Officer
|
KNOW ALL PERSONS BY THESE PRESENTS,
that each person whose signature appears below hereby constitutes and appoints
Sean M. Lyons and Jesus Diaz, and each of them, as such person’s true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
for such person and in such person’s name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
and additions to this registration statement on Form S-1 and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, and hereby grants to such
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to all intents
and purposes as such person might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or such person’s
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the
Securities Act of 1933, as amended this registration statement has been signed
by the following persons in the capacities indicated as of the 20th day of
October, 2010.
By:
|
/s/ Sean M. Lyons
|
|
Name:
|
Sean
M. Lyons
|
|
Title:
|
Member
of the Board of Directors and
|
|
Principal
Executive Officer
|
||
Date:
|
October 20, 2010
|
|
By:
|
/s/ Jesus Diaz
|
|
Name:
|
Jesus
Diaz
|
|
Title:
|
Member
of the Board of Directors and
|
|
Principal
Financial Officer and Principal Accounting
Officer
|
||
Date:
|
October 20,
2010
|
|
By:
|
/s/ Ryan Ford
|
|
Name:
|
Ryan
Ford
|
|
Title:
|
Member
of the Board of Directors
|
|
Date:
|
October 20,
2010
|
48