Attached files
file | filename |
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EX-2.1 - LENDER TO LENDER FRANCHISE, INC | v198832_ex2-1.htm |
EX-3.1 - LENDER TO LENDER FRANCHISE, INC | v198832_ex3-1.htm |
EX-3.2 - LENDER TO LENDER FRANCHISE, INC | v198832_ex3-2.htm |
EX-10.4 - LENDER TO LENDER FRANCHISE, INC | v198832_ex10-4.htm |
EX-10.6 - LENDER TO LENDER FRANCHISE, INC | v198832_ex10-6.htm |
EX-21.1 - LENDER TO LENDER FRANCHISE, INC | v198832_ex21-1.htm |
EX-10.1 - LENDER TO LENDER FRANCHISE, INC | v198832_ex10-1.htm |
EX-23.1 - LENDER TO LENDER FRANCHISE, INC | v198832_ex23-1.htm |
EX-14.1 - LENDER TO LENDER FRANCHISE, INC | v198832_ex14-1.htm |
EX-10.3 - LENDER TO LENDER FRANCHISE, INC | v198832_ex10-3.htm |
EX-10.5 - LENDER TO LENDER FRANCHISE, INC | v198832_ex10-5.htm |
EX-10.7 - LENDER TO LENDER FRANCHISE, INC | v198832_ex10-7.htm |
AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 3,
2011
Registration
No. 333-___________
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
LENDER
TO LENDER FRANCHISE, INC.
(Exact
name of issuer as specified in its charter)
Florida
|
6141
|
27-3181737
|
(State
or other jurisdiction of
|
(Primary
Standard Industrial
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Classification
Code Number)
|
Identification
No.)
|
27322
Twenty Three Mile Road, Suite 5
Chesterfield,
Michigan 48051
(586)
598-1634
(Address
and telephone number of principal executive offices)
27322
Twenty Three Mile Road, Suite 5
Chesterfield,
Michigan 48051
(586)
598-1634
(Address
of principal place of business or intended
principal
place of business)
Richard
Vanderport, Chief Executive Officer
27322
Twenty Three Mile Road, Suite 5
Chesterfield,
Michigan 48051
(586)
598-1634
(646)
219-2572 (fax)
(Name,
address and telephone number of agent for service)
Copies
to:
Brian
Pearlman, Esq.
Quintairos,
Prieto, Wood & Boyer, P.A.
One
East Broward Blvd., Suite 1400
Fort
Lauderdale, Florida 33301
(954)
523-7008
(954)
523-7009 (fax)
APPROXIMATE
DATE OF PROPOSED SALE TO PUBLIC: From time to time after this Registration
Statement becomes effective.
If any of
the securities 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. þ
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act of
1933, please check the following box and list the Securities Act of 1933
registration 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 of
1933, check the following box and list the Securities Act of 1933 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 of
1933, check the following box and list the Securities Act of 1933 registration
statement number of the earlier effective registration statement for the same
offering. ¨
Indicate
by check mark whether registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definitions
of “large accelerated filer,” “accelerated filer,” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
|
¨
|
Accelerated Filer
|
¨
|
Non-accelerated filer
|
¨
|
Smaller reporting company
|
þ
|
CALCULATION
OF REGISTRATION FEE
Title of Each
Class of Securities
To Be Registered
|
Amount To Be
Registered
|
Proposed Maximum
Offering
Price Per Unit (1)
|
Proposed Maximum
Aggregate Offering Price
|
Amount of
Registration Fee
|
||||||||||||
Common
Stock (2)
|
125,000 | $ | 0.20 | $ | 25,000 | $ | 1.78 | |||||||||
Common
Stock (3)
|
330,050 | $ | 1.00 | $ | 330,050 | $ | 23.53 | |||||||||
Common
Stock (4)
|
1,060,000 | $ | 1.00 | $ | 1,060,000 | $ | 75.58 | |||||||||
Total
Registration Fee
|
$ | 100.89 |
———————
(1)
|
The
selling shareholders will offer their shares at $0.20 per share until the
Company’s shares are quoted on the OTC Bulletin Board and, assuming we
secure this qualification, thereafter at prevailing market prices or
privately negotiated prices.
|
(2)
|
Estimated
solely for the purpose of calculating the registration fee pursuant to
Rule 457. The proposed maximum offering price is based on the
estimated high end of the range at which the common stock will initially
be sold.
|
(3)
|
Estimated
solely for purposes of calculating the registration fee pursuant to
Rule 457(g). Shares issuable upon exercise of
warrants.
|
(4)
|
Estimated
solely for purposes of calculating the registration fee pursuant to Rule
457(g). Shares issuable upon exercise of
options.
|
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 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 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, JANUARY 3, 2011
LENDER
TO LENDER FRANCHISE, INC.
1,515,050
Shares of
Common
Stock
The
selling shareholders are offering up to 1,515,050 shares of common stock (the
“Shares”), including 1,390,050 shares represent shares underlying outstanding
warrants and options. The selling shareholders will offer their
shares at $0.20 per share until our shares are quoted on the OTC Bulletin Board
and, assuming we secure this qualification, thereafter at prevailing market
prices or privately negotiated prices. We will not receive proceeds from the
sale of shares from the selling shareholders.
There are
no underwriting commissions involved in this offering. We have agreed to pay all
the costs and expenses of this offering. Selling shareholders will pay no
offering expenses. As of the date of this prospectus, there is no trading market
in our common stock, and we cannot assure you that a trading market will develop
Our common stock is not currently listed on any national securities exchange,
the NASDAQ stock market, or the OTC Bulletin Board. There is no guarantee that
our securities will ever trade on the OTC Bulletin Board or other
exchange.
This
offering is highly speculative and these securities involve a high degree of
risk and should be considered only by persons who can afford the loss of their
entire investment. See “Risk Factors” beginning on page ___.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
The
date of this prospectus is __________, 2010
TABLE
OF CONTENTS
PROSPECTUS
SUMMARY
|
1
|
SUMMARY
FINANCIAL DATA
|
4
|
RISK
FACTORS
|
5
|
FORWARD-LOOKING
STATEMENTS
|
13
|
USE
OF PROCEEDS
|
13
|
DETERMINATION
OF OFFERING PRICE
|
13
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
|
14
|
BUSINESS
|
18
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DIVIDEND
POLICY
|
24
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REPORT
TO SHAREHOLDERS
|
24
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LEGAL
PROCEEDINGS
|
24
|
MANAGEMENT
|
24
|
EXECUTIVE
COMPENSATION
|
26
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
27
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
27
|
DESCRIPTION
OF SECURITIES
|
29
|
SELLING
SHAREHOLDERS
|
29
|
PLAN
OF DISTRIBUTION
|
35
|
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
|
36
|
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
|
36
|
LEGAL
MATTERS
|
37
|
EXPERTS
|
37
|
CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
37
|
WHERE
YOU CAN FIND MORE INFORMATION
|
37
|
INDEX
TO FINANCIAL STATEMENTS
|
F-1
|
You may
only rely on the information contained in this prospectus or that we have
referred you to. We have not authorized anyone to provide you with different
information. This prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the common stock
offered by this prospectus. This prospectus does not constitute an offer to sell
or a solicitation of an offer to buy any common stock in any circumstances in
which such offer or solicitation is unlawful. Neither the delivery of this
prospectus nor any sale made in connection with this prospectus shall, under any
circumstances, create any implication that there has been no change in our
affairs since the date of this prospectus or that the information contained by
reference to this prospectus is correct as of any time after its
date.
i
PROSPECTUS
SUMMARY
The
following summary highlights selected information contained in this prospectus.
This summary does not contain all the information you should consider before
investing in the securities. Before making an investment decision, you should
read the entire prospectus carefully, including the “RISK FACTORS” section, the
financial statements and the notes to the financial statements. As used
throughout this prospectus, the terms “Lender to Lender Franchise”, “Company”,
“we,” “us,” or “our” refer to Lender to Lender Franchise, Inc. and its
subsidiaries.
Organization
Lender to
Lender Franchise, Inc., a Florida corporation, organized in July 2010, provides
auto loans to consumers through a network of automobile dealers. The
Company principally operates through its wholly owned subsidiary, Lender to
Lender Financing, LLC, a Michigan limited liability company
(“LLFI”). LLFI has been in operations since 2002. In
addition, through its wholly owned subsidiary, Lender to Lender Franchise
System, LLC, a Michigan limited liability company (“LLFS”), the Company intends
to franchise its automobile loan programs. The Company acquired LLFI
and LLFS on August 12, 2010 under a stock purchase agreement. For
accounting purposes, this business combination has been treated as a stock
acquisition with the Company as the acquirer. The Company’s management has over
30 years experience in the automobile loan industry.
Our
executive offices are located at 27322 Twenty Three Mile Road, Suite #5,
Chesterfield, MI 48051; our telephone number is (586)
598-1634. Our Website address is
www.lendertolender.com. Information contained on our Websites does
not constitute a part of this prospectus.
There is
currently no public market for our common stock.
We had
total assets of $2,019,718 at September 30, 2010. From July 15, 2010
(inception) through September 30, 2010 we had total net revenues of $124,717 and
net loss of $22,770. At September 30, 2010 we had a working capital
deficit of $491,629. Our ability to continue as a going concern is
dependent on increasing revenues from our loans. In the event we are
unable to generate additional revenues, we will be dependent upon third party
financing. We cannot provide any reasonable assurances that we will
receive third party financing or in the event we obtain third party financing
that the terms of such financing will be reasonable.
As with
any investment, there are certain risks involved in this offering. All potential
investors should consult their own tax, legal and investment advisors prior to
making any decision regarding this offering. The purchase of the Shares is
highly speculative and involves a high degree of risk, including, but not
necessarily limited to, the “Risk Factors” described herein. Any person who
cannot afford the loss of their entire investment should not purchase the
Shares.
Business
Since
2002, LLFI has provided auto loans to consumers (“Consumer Loans”), regardless
of their credit history. Our product is offered through a network of automobile
dealers who benefit from sales of vehicles to consumers who otherwise could not
obtain financing and from repeat and referral sales generated by these same
customers.
We refer
to automobile dealers who participate in our programs as “Auto Dealers”. Upon
enrollment in our financing programs, the Auto Dealer enters into a dealer
servicing agreement with us that defines the legal relationship between our
Company and the Auto Dealer. The dealer servicing agreement assigns the
responsibilities for administering, servicing, and collecting the amounts due on
Consumer Loans from the Auto Dealers to us. A consumer who does not qualify for
conventional automobile financing can purchase a used vehicle from an Auto
Dealer and finance the purchase through us. We are an indirect lender from a
legal perspective, meaning the Consumer Loan is originated by the Auto Dealer
and assigned to us.
Selling
Shareholders
The
Company previously sold an aggregate of 125,000 shares under a private placement
to 50 investors, in the gross amount of $25,000. The shares were sold
to 23 accredited investors and 27 qualified investors, which shares were issued
throughout September 2010, at $0.20 per share. No commission or
finder fees were paid.
1
On August
12, 2010, the Company issued options to purchase an aggregate of 1,060,000
shares of common stock to five employees. Such options vest over a
period of five years in equal installments. The options, subject to
vesting, are exercisable for a period of ten years from date of
grant. The options are exercisable at $l.00 per share. In
addition, on August 12, 2010, the Company issued warrants to purchase an
aggregate of 330,050 shares of common stock to four individuals and
consultants. The warrants are exercisable at $1.00 per share and vest
over a period of five years in equal installments. The warrants
expire ten years from the date of issuance.
The
warrant shares, options shares and shares issued under the private placement are
sometimes collectively referred to in this prospectus as the “Shares”. The
Shares are being offered for resale under this registration, and the Selling
Shareholders intend to sell, as soon as practicable following the effectiveness
of this registration, the Shares in the public market.
The
Company will receive up to $1,390,050 in the event the warrants and options are
exercised. The proceeds, if any, will be used for general working capital
purposes.
2
The
Offering
Common
stock outstanding before the offering:
|
30,125,000
|
|
Common
stock offered by selling stockholders
|
Up
to 1,515,050 shares (including 1,390,050 shares underlying options and
warrants). The maximum number of shares to be sold by the
selling stockholders represents less than 1% of our current outstanding
stock. As of the date of this prospectus, none of the options and warrants
have vested.
|
|
The
selling stockholders will offer their shares at $0.20 per share until the
Company’s shares are quoted on the OTC Bulletin Board (OTCBB) and,
assuming our common stock commences quotation on the OTCBB, thereafter at
prevailing market prices or privately negotiated
prices.
|
||
Common
stock to be outstanding after the offering
|
Up
to 31,640,050 shares based on 30,125,000 shares of common stock
outstanding as of November 30, 2010, assuming vesting and exercise of
outstanding options and warrants.
|
|
Use
of proceeds
|
We
will not receive any material proceeds from the sale of the common stock.
See “Use of Proceeds” for a complete description.
|
|
Risk
Factors
|
The
purchase of our common stock involves a high degree of risk. You should
carefully review and consider “Risk Factors” beginning on
page __.
|
Forward-Looking
Statements
This
prospectus contains forward-looking statements that address, among other things,
our strategy to develop our business, projected capital expenditures, liquidity,
and our development of additional revenue sources. The forward-looking
statements are based on our current expectations and are subject to risks,
uncertainties and assumptions. We base these forward-looking statements on
information currently available to us, and we assume no obligation to update
them. Our actual results may differ materially from the results anticipated in
these forward-looking statements, due to various factors.
3
SUMMARY
FINANCIAL DATA
In the
table below, we provide you with historical summary financial information for
the year ended December 31, 2009, derived from our unaudited pro forma combined
financial statements included elsewhere in this prospectus. We also provide
below financial information for the nine months ended September 30, 2010 derived
from our unaudited pro forma combined financial statements included elsewhere in
this prospectus. Historical results are not necessarily indicative of the
results that may be expected for any future period. When you read this
historical summary financial information, you should also consider the
historical financial statements and related notes, and the section entitled
Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
Statements
of Operations Data:
Fiscal Year Ended
December 31,
2009
|
Nine Months
Ended
September 30,
2010
|
|||||||
Revenues
|
$ | 1,161,855 | $ | 1,074,164 | ||||
Cost
of Goods sold
|
$ | 9,234 | $ | 90 | ||||
Gross
profit
|
$ | 1,152,651 | $ | 1,074,074 | ||||
Total
operating expenses
|
$ | 988,338 | $ | 961,164 | ||||
Net
Income
|
$ | 174,331 | $ | 104,285 |
Balance
Sheet Data:
As of
December 31,
2009
|
As of
September 30,
2010
|
|||||||
Total
assets
|
$ | 3,189,343 | $ | 2,133,476 | ||||
Total
liabilities
|
$ | 3,101,382 | $ | 1,807,190 | ||||
Working
capital (deficit)
|
$ | 87,961 | $ | (1,476,561 | ) | |||
Shareholders'
Equity
|
$ | 87,961 | $ | 326,286 |
Capitalization:
The
following tables set forth our capitalization as of September 30, 2010 on
an unaudited basis. The tables should be read in conjunction with our pro forma
and consolidated financial statements and related notes included elsewhere in
this prospectus.
September 30,
2010
|
September 30,
2010
|
|||||||
(pro forma)
|
(consolidated)
|
|||||||
Current
Liabilities
|
$ | 1,807,190 | $ | 1,807,190 | ||||
Shareholders'
equity:
|
||||||||
Preferred
Stock; 5,000,000 authorized; none issued and
outstanding
|
$ | -0- | $ | -0- | ||||
Common
stock; $0.0001 par value; 100,000,000 shares authorized; 30,125,000 shares
issued and outstanding
|
$ | 3,013 | $ | 3,013 | ||||
Additional
paid-in capital
|
$ | 227,912 | $ | 330,752 | ||||
Accumulated
deficit
|
$ | 22,770 | $ | 7,479 | ||||
Total
shareholders’ equity
|
$ | 212,528 | $ | 326,286 | ||||
Total
liabilities and shareholders’ equity
|
$ | 2,019,718 | $ | 2,133,476 |
4
RISK
FACTORS
You
should carefully consider the risks described below as well as other information
provided to you in this document, including information in the section of this
document entitled “Information Regarding Forward Looking
Statements.” If any of the following risks actually occur, the
Company’s business, financial condition or results of operations could be
materially adversely affected, the value of the Company common stock could
decline, and you may lose all or part of your investment.
Risks Related to Our
Business and Industry
Our
independent auditors have raised substantial doubt about our ability to continue
as a going concern.
At
September 30, 2010, we had a cash balance of approximately $201,829,
working capital of approximately $491,629 and an accumulated deficit of
approximately $22,770. These factors, among others, raise substantial doubt
about our ability to continue as a going concern. Our ability to generate future
revenues will depend on a number of factors, many of which are beyond our
control. These factors include general economic conditions, interest rates,
market acceptance of our products, and competitive efforts. Due to these
factors, we cannot anticipate with any degree of certainty what our revenues
will be in future periods. You have limited historical financial data and
operating results with which to evaluate our business and our
prospects.
Our
substantial debt could negatively impact our business, prevent us from
satisfying our debt obligations and adversely affect our financial
condition.
We have a
substantial amount of debt and have a working capital deficit. At
September 30, 2010, we had a note payable in the amount of $1,702,383 under
our line of credit. The note requires monthly payments of $100,000
plus interest. The note bears interest at the thirty-day LIBOR plus
5.5%, is secured by cash held at the bank, accounts receivable, life insurance
and is personally guaranteed by our chief executive officer. The
substantial amount of our debt could have important consequences, including the
following:
|
•
|
our
ability to obtain additional financing for Consumer Loan assignments,
working capital, debt refinancing or other purposes could be
impaired;
|
|
•
|
a
substantial portion of our cash flows from operations will be dedicated to
paying principal and interest on our debt, reducing funds available for
other purposes;
|
|
•
|
we
may be vulnerable to interest rate increases, as some of our borrowings,
including those under our revolving credit facility, bear interest at
variable rates;
|
|
•
|
we
could be more vulnerable to adverse developments in our industry or in
general economic conditions;
|
|
•
|
we
may be restricted from taking advantage of business opportunities or
making strategic acquisitions; and
|
|
•
|
we
may be limited in our flexibility in planning for, or reacting to, changes
in our business and the industries in which we
operate.
|
Our
inability to accurately forecast and estimate the amount and timing of future
collections could have a material adverse effect on results of
operations.
Substantially
all of the Consumer Loans assigned to us are made to individuals with impaired
or limited credit histories or higher debt-to-income ratios than are permitted
by traditional lenders. Consumer Loans made to these individuals generally
entail a higher risk of delinquency, default and repossession and higher losses
than loans made to consumers with better credit. Since most of our revenue and
cash flows from operations are generated from these Consumer Loans, our ability
to accurately forecast Consumer Loan performance is critical to our business and
financial results. At the time of Consumer Loan acceptance or purchase, we
forecast future expected cash flows from the Consumer Loan. Based on these
forecasts, which include estimates for wholesale vehicle prices in the event of
vehicle repossession and sale, we make an advance or cash payment to the related
Auto Dealer at a level designed to achieve an acceptable return on capital.
These forecasts also serve as a critical assumption in our accounting for
recognizing finance charge income and determining our allowance for credit
losses. If Consumer Loan performance equals or exceeds original expectations, it
is likely our target return on capital will be achieved. However, actual cash
flows from any individual Consumer Loan are often different than cash flows
estimated at Consumer Loan inception. There can be no assurance that our
forecasts will be accurate or that Consumer Loan performance will be as
expected. Recent economic conditions have made forecasts regarding the
performance of Consumer Loans more difficult. In the event that our forecasts
are not accurate, our financial position, liquidity and results of operations
could be materially adversely affected.
5
We
may be unable to execute our business strategy due to current economic
conditions.
Our
financial position, liquidity and results of operations depend on management’s
ability to execute our business strategy. Key factors involved in the execution
of our business strategy include achieving our desired Consumer Loan assignment
volume, continued and successful use of our “webware” and pricing strategy, the
use of effective credit risk management techniques and servicing strategies,
implementation of effective Consumer Loan servicing and collection practices,
continued investment in technology to support operating efficiency and continued
access to funding and liquidity sources. Our failure or inability to execute any
element of our business strategy could materially adversely affect our financial
position, liquidity and results of operations.
We
may be unable to continue to access or renew funding sources and obtain capital
needed to maintain and grow our business.
We use
debt financing to fund new Consumer Loans. We currently utilize a
revolving secured line of credit with a commercial bank for our debt
financing. Some of our debt agreements impose requirements that we
maintain specified financial measures not in excess of, or not below, specified
levels. A breach of any of the covenants in our debt instruments
would result in an event of default thereunder if not promptly cured or waived.
Any continuing default would permit the creditors to accelerate the related
debt, which could also result in the acceleration of other debt containing a
cross-acceleration or cross-default provision. In addition, an event of default
under our revolving credit facility would permit the lenders thereunder to
terminate all commitments to extend further credit under our revolving credit
facility. Furthermore, if we were unable to repay the amounts due and payable
under our revolving credit facility or other secured debt, the lenders
thereunder could cause the collateral agent to proceed against the collateral
securing that debt. In the event our creditors accelerate the repayment of our
debt, there can be no assurance that we would have sufficient assets to repay
that debt, and our financial condition, liquidity and results of operations
would suffer.
The
conditions of the U.S. and international capital markets may adversely affect
lenders with which we have relationships, causing us to incur additional costs
and reducing our sources of liquidity, which may adversely affect our financial
position, liquidity and results of operations.
Turbulence
in the global capital markets and the current economic slowdown or recession
have resulted in disruptions in the financial sector and potentially affected
lenders with which we have relationships. The current adverse conditions, the
severity and duration of which are unknown, may increase our exposure to credit
risk and adversely affect the ability of lenders to perform under the terms of
their lending arrangements with us. Failure by our lenders to perform under the
terms of our lending arrangements could cause us to incur additional costs that
may adversely affect our liquidity, financial condition and results of
operations.
Due
to competition from traditional financing sources and non-traditional lenders,
we may not be able to compete successfully.
The
automobile finance market for consumers who do not qualify for conventional
automobile financing is large and highly competitive. The market is served by a
variety of companies including “buy here, pay here” dealerships. The market is
also currently served by banks, captive finance affiliates of automobile
manufacturers, credit unions and independent finance companies both publicly and
privately owned. Many of these companies are much larger and have greater
financial resources than are available to us, and many have long standing
relationships with automobile dealerships. Providers of automobile financing
have traditionally competed based on the interest rate charged, the quality of
credit accepted, the flexibility of loan terms offered and the quality of
service provided to dealers and consumers. There is potential that significant
direct competition could emerge and that we may be unable to compete
successfully. Additionally, if we are unsuccessful in maintaining and expanding
our relationships with the Auto Dealers, we may be unable to accept Consumer
Loans in the volume and on the terms that we anticipate.
6
We
may not be able to generate sufficient cash flows to service our outstanding
debt and fund operations and may be forced to take other actions to satisfy our
obligations under such debt.
Our
ability to make payments of principal and interest on indebtedness will depend
in part on our cash flows from operations, which are subject to economic,
financial, competitive and other factors beyond our control. We cannot assure
you that we will maintain a level of cash flows from operations sufficient to
permit us to meet our debt service obligations. If we are unable to generate
sufficient cash flows from operations to service our debt, we may be required to
sell assets, refinance all or a portion of our existing debt or obtain
additional financing. There can be no assurance that any refinancing will be
possible or that any asset sales or additional financing can be completed on
acceptable terms or at all.
Interest
rate fluctuations may adversely affect our borrowing costs, profitability and
liquidity.
Our
profitability may be directly affected by the level of and fluctuations in
interest rates, whether caused by changes in economic conditions or other
factors, which affect our borrowing costs. Our profitability and liquidity could
be materially adversely affected during any period of higher interest rates. We
monitor the interest rate environment and employ hedging strategies designed to
mitigate the impact of increases in interest rates. We can provide no assurance,
however, that hedging strategies will mitigate the impact of increases in
interest rates.
Reduction
in our credit rating could increase the cost of our funding from, and restrict
our access to, the capital markets and adversely affect our liquidity, financial
condition and results of operations.
Credit
rating agencies evaluate us, and their ratings of our debt and creditworthiness
are based on a number of factors. These factors include our financial strength
and other factors not entirely within our control, including conditions
affecting the financial services industry generally. In light of the
difficulties facing the financial services industry and the financial markets,
there can be no assurance that we will maintain our current ratings. Failure to
maintain those ratings could, among other things, adversely limit our access to
the capital markets and affect the cost and other terms upon which we are able
to obtain financing.
We
may incur substantially more debt and other liabilities. This could exacerbate
further the risks associated with our current debt levels.
We may be
able to incur substantial additional debt in the future. Although the terms of
our debt instruments contain restrictions on our ability to incur additional
debt, these restrictions are subject to exceptions that could permit us to incur
a substantial amount of additional debt. In addition, our debt instruments do
not prevent us from incurring liabilities that do not constitute indebtedness as
defined for purposes of those debt instruments. If new debt or other liabilities
are added to our current debt levels, the risks associated with our having
substantial debt could intensify.
The
regulation to which we are or may become subject could result in a material
adverse effect on our business.
Our
business is subject to laws and regulations including the Truth in Lending Act,
the Equal Credit Opportunity Act, the Fair Credit Reporting Act and other
various state and federal laws and regulations. These laws and regulations,
among other things, require licensing and qualification; limit interest rates,
fees and other charges associated with the Consumer Loans assigned to us;
require specified disclosures by Auto Dealers to consumers; govern the sale and
terms of ancillary products; and define the rights to repossess and sell
collateral. Our failure or any Auto Dealer’s failure to comply with
these laws or regulations could have a material adverse effect on us by, among
other things, limiting the jurisdictions in which we may operate, restricting
our ability to realize the value of the collateral securing the Consumer Loans,
making it more costly or burdensome to do business or resulting in potential
liability. The volume of new or modified laws and regulations has increased in
recent years and has increased significantly in response to issues arising with
respect to consumer lending. From time to time, legislation and regulations are
enacted which increase the cost of doing business, limit or expand permissible
activities or affect the competitive balance among financial services providers.
Proposals to change the laws and regulations governing the operations and
taxation of financial institutions and financial services providers are
frequently made in the U.S. Congress, in state legislatures and by various
regulatory agencies. This legislation may change our operating environment in
substantial and unpredictable ways and may have a material adverse effect on our
business.
7
Our Auto
Dealers must also comply with credit and trade practice statutes and
regulations. Failure of our Auto Dealers to comply with these statutes and
regulations could result in consumers having rights of rescission and other
remedies that could have a material adverse effect on us.
Adverse
changes in economic conditions, the automobile or finance industries, or the
non-prime consumer market could adversely affect our financial position,
liquidity and results of operations, the ability of key vendors that we depend
on to supply us with services, and our ability to enter into future financing
transactions.
As a
result of the consumer-oriented nature of the industry in which we operate and
uncertainties with respect to the application of various laws and regulations in
some circumstances, we are subject to various consumer claims and litigation
seeking damages and statutory penalties, based upon, among other things, usury,
disclosure inaccuracies, wrongful repossession, violations of bankruptcy stay
provisions, certificate of title disputes, fraud and breach of contract. As the
assignee of Consumer Loans originated by Auto Dealers, we may also be named as a
co-defendant in lawsuits filed by consumers principally against Auto Dealers. We
may also have disputes and litigation with Auto Dealers relating to our dealer
servicing and related agreements, including claims for, among other things,
breach of contract or other duties purportedly owed to the Auto Dealers. The
damages and penalties that may be claimed by consumers or Auto Dealers in these
types of matters can be substantial. The relief requested by the plaintiffs
varies but may include requests for compensatory, statutory and punitive
damages, and plaintiffs may seek treatment as purported class actions. A
significant judgment against us in connection with any litigation or arbitration
could have a material adverse effect on our financial position, liquidity and
results of operations.
Our
reputation is a key asset to our business, and our business may be affected by
how we are perceived in the marketplace.
Our
reputation is a key asset to our business. Our ability to attract consumers
through our Auto Dealers is highly dependent upon external perceptions of our
level of service, trustworthiness, business practices and financial condition.
Negative publicity regarding these matters could damage our reputation among
existing and potential consumers and Auto Dealers, which could make it difficult
for us to attract new consumers and Auto Dealers and maintain existing Auto
Dealers. Adverse developments with respect to our industry may also, by
association, negatively impact our reputation or result in greater regulatory or
legislative scrutiny or litigation against us.
Failure
to properly safeguard confidential consumer information could subject us to
liability, decrease our profitability and damage our reputation.
If third
parties or our team members are able to breach our network security or otherwise
misappropriate our customers’ personal information or loan information, or if we
give third parties or our team members improper access to our customers’
personal information or loan information, we could be subject to liability. This
liability could include identity theft or other similar fraud-related claims.
This liability could also include claims for other misuses or losses of personal
information, including for unauthorized marketing purposes. Other liabilities
could include claims alleging misrepresentation of our privacy and data security
practices.
Natural
disasters, acts of war, terrorist attacks and threats or the escalation of
military activity in response to these attacks or otherwise may negatively
affect our business, financial condition and results of operations.
Natural
disasters, acts of war, terrorist attacks and the escalation of military
activity in response to these attacks or otherwise may have negative and
significant effects, such as imposition of increased security measures, changes
in applicable laws, market disruptions and job losses. These events may have an
adverse effect on the economy in general. Moreover, the potential for future
terrorist attacks and the national and international responses to these threats
could affect the business in ways that cannot be predicted. The effect of any of
these events or threats could have a material adverse effect on our business,
financial condition and results of operations.
The
Company is dependent on its management team and the unexpected loss of any key
member of the team may prevent the Company from implementing the Company’s
business plan in a timely manner, or at all.
The
Company’s success depends upon the continued contributions of our executive
officers. The loss of their services would have an adverse affect on
the Company’s business and may prevent the Company from implementing the
Company’s business plan in a timely manner, or at all. We do not have
any employment agreements with any of our employees.
8
The
Company’s failure to retain and attract qualified personnel could harm the
Company’s business.
The
Company’s success depends on the Company’s ability to attract, train and retain
qualified personnel. Competition for qualified personnel is intense
and the Company may not be able to hire sufficient personnel to achieve the
Company’s goals or support the anticipated growth in the Company’s
business. The market for the personnel the Company requires is
competitive. If the Company fails to attract and retain qualified
personnel, the Company’s business will suffer.
The
infringement of our trademarks and other intellectual property, or the erosion
of our brand, could substantially harm our business.
The
Lender to Lender trademark and our webware software are vital to maintaining our
brand awareness and competitive position. Protecting our intellectual property
rights and combating unlicensed copying of our marks and intellectual property
can be difficult and costly. This is because we may be required to initiate
litigation or other action to enforce our rights or establish their
validity. Our webware software is not patent protected. As
we expand our brand, protecting our intellectual property rights may be more
challenging, because we may expand to countries where laws are less protective
of these rights. We devote resources to the establishment and protection of
these trademarks and proprietary rights. However, these measures may be
inadequate to prevent imitation of our products and concepts by others. If we
are unable to protect our marks, brand and intellectual property, or if our
brand becomes confused with the business of our competitors, our business could
suffer substantially.
Risks Related to Our
Intended Franchise Business
We
currently have no franchisees and if we are unable to sell franchises we may be
unable to expand our revenue base.
To expand
our business and increase our revenues, we intend to identify franchise
opportunities. To date we do not have any franchisees and our franchise system
is unproven. Our ability to expand successfully will depend on a number of
factors, many of which are beyond our control. Among other things, we
must:
·
|
attract
and retain qualified franchisees;
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·
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recruit,
train and retain qualified corporate personnel and
management;
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·
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create
customer awareness of our products;
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·
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compete
in our markets; and
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·
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adjust
to general economic conditions.
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In
addition, our franchisees must:
·
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locate
suitable territories in new and existing
markets;
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·
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obtain
acceptable financing for commencing operations;
and
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·
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obtain
and maintain required local and state governmental approvals and permits
related to the operation of their
business.
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Future
revenues may be adversely impacted. Deteriorating national and global
economic conditions have negatively impacted the ability of our franchisees to
obtain financing for new franchises, and these conditions may worsen. In addition,
the disruptions in credit and other financial markets caused by deteriorating
national and international economic conditions have caused franchisees to
experience great difficulty over the past 24 months in obtaining new credit
on reasonable terms and extensions of existing credit. If these conditions
continue, they could further impair our ability to attract suitable franchisees,
making it difficult or impossible for us, to develop our franchise
business.
9
We
will rely on the accuracy of the unaudited financial information we receive from
our franchisees, over which we do not have direct supervision or control and
which we may or may not routinely audit.
Under our
franchise agreements, the franchisees will be required to report financial and
other data to us, including their revenues and results of
operations. We will rely on franchisee data to make important
business decisions. However, we may not routinely audit the
information that the franchisees report to us, and we do not have direct
supervision over the reporting of the franchisees. Therefore, we will
be unable to ensure that the data reported by the franchisees is
accurate. If the data reported by our franchisees is not accurate, it
may cause determinations made by us in reliance on the reported data to be
inaccurate and may result in less informed business decisions by
management.
Franchise
regulations could limit the ability to terminate or replace unproductive
franchises, which could result in lower franchise royalties.
Applicable
laws may delay or prevent the termination of an unproductive franchise or the
withholding of our consent to renew or transfer a franchise, which could result
in lower franchise royalties. As a franchisor, we are subject to
federal, state and international laws regulating the offer and sale of
franchises. These laws also frequently apply substantive standards to
the relationship between franchisor and franchisee and limit the ability of a
franchisor to terminate or refuse to renew a franchise. Compliance
with federal, state and international franchise laws can be costly and time
consuming, and we cannot be certain that we will not encounter delays, expenses
or other difficulties in this area. Further, the nature and effect of
any future legislation or regulation of our franchise operations cannot be
predicted.
Our
franchisees may take actions that could harm our business.
We
provide training and support to franchisees, but the quality of their operations
may be diminished by any number of factors beyond our control. Our
franchisees are independent contractors and are not our employees and may not
have the business acumen or financial resources necessary to operate successful
franchises in their franchise areas. Consequently, franchisees may
not operate their businesses in a manner consistent with our standards and
requirements or may not hire and train qualified managers and other
personnel. If franchisees do not adequately manage their operations,
our image and reputation, and the image and reputation of other franchisees, may
suffer materially, and system-wide sales could significantly
decline.
If
we fail to comply with FDD registration requirements in certain states our
growth prospects will be adversely affected.
While the
majority of U.S. states do not require state specific franchise disclosure
document (FDD) registration, we are required to register our FDD in 13
states in order to market franchises. Of the 13 states that require
registration, our FDD is currently registered in Michigan. If we choose to
register in additional states that require registration, there is no certainty
that we will be approved to sell franchises in those states. If we are
unable to register in any of these states, our market may be
limited. While we are currently authorized to sell franchises in 37
states, in order to sell the franchise in additional states, we will need to
register in those states.
Risks Related to this
Offering
The
Company arbitrarily determined the offering price and terms of the Shares
offered through this Prospectus.
The price
of the Shares has been arbitrarily determined and bears no relationship to the
assets or book value of the Company, or other customary investment criteria. No
independent counsel or appraiser has been retained to value the Shares, and no
assurance can be made that the offering price is in fact reflective of the
underlying value of the Shares offered hereunder. Each prospective investor is
therefore urged to consult with his or her own legal counsel and tax advisors as
to the offering price and terms of the Shares offered hereunder.
The
Shares are an illiquid investment and transferability of the Shares is subject
to significant restriction.
There is
presently no market for the Shares, and we cannot be certain that a public
market will become available, or that there will be sufficient liquidity to
allow for sale or transferability of the shares within the near future.
Therefore, the purchase of the Shares must be considered a long-term investment
acceptable only for prospective investors who are willing and can afford to
accept and bear the substantial risk of the investment for an indefinite period
of time. There is not a public market for the resale of the Shares. A
prospective investor, therefore, may not be able to liquidate its investment,
even in the event of an emergency, and Shares may not be acceptable as
collateral for a loan.
10
Our
shares are subject to the U.S. “Penny Stock” Rules and investors who purchase
our shares may have difficulty re-selling their shares as the liquidity of the
market for our shares may be adversely affected by the impact of the “Penny
Stock” Rules.
Our stock
is subject to U.S. “Penny Stock” rules, which may make the stock more difficult
to trade on the open market. Our common shares are not currently traded on the
OTCBB, but it is the Company’s plan that the common shares be quoted on the
OTCBB. A “penny stock” is generally defined by regulations of the U.S.
Securities and Exchange Commission (“SEC”) as an equity security with a market
price of less than US$5.00 per share. However, an equity security with a market
price under US$5.00 will not be considered a penny stock if it fits within any
of the following exceptions:
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(i)
|
the
equity security is listed on NASDAQ or a national securities
exchange;
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(ii)
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the
issuer of the equity security has been in continuous operation for less
than three years, and either has (a) net tangible assets of at least
US$5,000,000, or (b) average annual revenue of at least US$6,000,000;
or
|
(iii)
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the
issuer of the equity security has been in continuous operation for more
than three years, and has net tangible assets of at least
US$2,000,000.
|
Our
common stock does not currently fit into any of the above exceptions. If an
investor buys or sells a penny stock, SEC regulations require that the investor
receive, prior to the transaction, a disclosure explaining the penny stock
market and associated risks. Furthermore, trading in our common stock will be
subject to Rule 15g-9 of the Exchange Act, which relates to non-NASDAQ and
non-exchange listed securities. Under this rule, broker/dealers who recommend
our securities to persons other than established customers and accredited
investors must make a special written suitability determination for the
purchaser and receive the purchaser’s written agreement to a transaction prior
to sale. Securities are exempt from this rule if their market price is at least
$5.00 per share.
Since
our common stock is currently deemed penny stock regulations, it may tend to
reduce market liquidity of our common stock, because they limit the
broker/dealers’ ability to trade, and a purchaser’s ability to sell, the stock
in the secondary market.
The low
price of our common stock has a negative effect on the amount
and percentage of transaction costs paid by individual shareholders. The
low price of our common stock also limits our ability to raise additional
capital by issuing additional shares. There are several reasons for these
effects. First, the internal policies of certain institutional investors
prohibit the purchase of low-priced stocks. Second, many brokerage houses do not
permit low-priced stocks to be used as collateral for margin accounts or to be
purchased on margin. Third, some brokerage house policies and practices tend to
discourage individual brokers from dealing in low-priced stocks. Finally,
broker’s commissions on low-priced stocks usually represent a
higher percentage of the stock price than commissions on higher priced
stocks. As a result, the Company’s shareholders may pay transaction costs that
are a higher percentage of their total share value than if our share price
were substantially higher.
Our
chief executive officer owns approximately 99% of our outstanding common shares
and as majority shareholder, is able to control voting on issues and actions
that may not be beneficial or desired by other shareholders.
As of the
date of this registration statement, our chief executive officer owns
approximately 99% of the issued and outstanding common stock. Accordingly, our
chief executive officer could elect all directors, and dissolve, merge or sell
our assets or otherwise direct our affairs. This concentration of ownership may
have the effect of delaying, deferring or preventing a change in control; impede
a merger, consolidation, takeover or other business combination
involving the Company, which, in turn, could depress the market price of
our common stock.
The
exercise of the warrants and options could negatively affect the market price
for our common stock and would cause dilution to existing
shareholders.
In the
event that a market for our common stock develops, to the extent that holders of
the warrants exercise such convertible securities and then sell the underlying
shares of common stock in the open market, our common stock price may decrease
due to the additional shares in the market. Furthermore, any exercise
of options or warrants will cause dilution to existing
shareholders.
11
The
issuance of preferred stock could change control of the company.
Our
articles of incorporation authorize the Board of Directors, without approval of
the shareholders, to cause shares of preferred stock to be issued in one or more
series, with the numbers of shares of each series to be determined by the Board
of Directors. Our articles of incorporation further authorize the Board of
Directors to fix and determine the powers, designations, preferences and
relative, participating, optional or other rights (including, without
limitation, voting powers, preferential rights to receive dividends or assets
upon liquidation, rights of conversion or exchange into common stock or
preferred stock of any series, redemption provisions and sinking fund
provisions) between series and between the preferred stock or any series thereof
and the common stock, and the qualifications, limitations or restrictions of
such rights. In the event of issuance, preferred stock could be used, under
certain circumstances, as a method of discouraging, delaying or preventing a
change of control of our company. Although we have no present plans to issue
additional series or shares of preferred stock, we can give no assurance that we
will not do so in the future.
12
FORWARD-LOOKING
STATEMENTS
Some
of the statements contained in this Registration Statement that are not
historical facts are “forward-looking statements” which can be identified by the
use of terminology such as
“estimates,” “projects,” “plans,” “believes,” “expects,” “anticipates,” “intends,”
or the negative or other variations, or by discussions of strategy that involve
risks and uncertainties. We urge you to be cautious of the forward-looking
statements, that such statements, which are contained in this Registration
Statement, reflect our current beliefs with respect to future events and involve
known and unknown risks, uncertainties and other factors affecting our
operations, market growth, services, products and licenses. No assurances can be
given regarding the achievement of future results, as actual results may differ
materially as a result of the risks we face, and actual events may differ from
the assumptions underlying the statements that have been made regarding
anticipated events. Factors that may cause actual results, our performance or
achievements, or industry results, to differ materially from those contemplated
by such forward-looking statements include without limitation:
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·
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our
growth strategies;
|
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·
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anticipated
trends in our business;
|
|
·
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our
future results of operations;
|
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·
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our
ability to make or develop and maintain dealer
agreements;
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·
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our
liquidity and ability to finance our
operations;
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·
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the
impact of government regulation;
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·
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estimates
regarding future net revenues;
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·
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planned
capital expenditures (including the amount and nature
thereof);
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·
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our
financial position, business strategy and other plans and objectives for
future operations;
|
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·
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competition;
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·
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the
ability of our management team to execute its plans to meet its
goals;
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·
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general
economic conditions, whether internationally, nationally or in the
regional and local market areas in which we are doing business, that may
be less favorable than expected;
and
|
|
·
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other
economic, competitive, governmental, legislative, regulatory, geopolitical
and technological factors that may negatively impact our businesses,
operations and pricing.
|
All
written and oral forward-looking statements made in connection with this
Form S-1 that are attributable to us or persons acting on our behalf are
expressly qualified in their entirety by these cautionary statements. Given the
uncertainties that surround such statements, you are cautioned not to place
undue reliance on such forward-looking statements.
USE
OF PROCEEDS
This
prospectus relates to shares of our common stock that may be offered and sold
from time to time by the selling stockholders. We will not receive any proceeds
from the sale of shares of common stock in this offering. The Company will
receive up to $1,390,000 in the event the warrants and options are exercised.
The proceeds, if any, will be used for general working capital
purposes.
DETERMINATION
OF OFFERING PRICE
The
pricing of the Shares has been arbitrarily determined and established by the
Company. No independent accountant or appraiser has been retained to protect the
interest of the investors. No assurance can be made that the offering price is
in fact reflective of the underlying value of the Shares. Each prospective
investor is urged to consult with his or her counsel and/or accountant as to
offering price and the terms and conditions of the Shares. Factors to be
considered in determining the price include the amount of capital expected to be
required, the market for securities of entities in a new business venture,
projected rates of return expected by prospective investors of speculative
investments, the Company’s prospects for success and prices of similar
entities.
13
MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
You
should read the following discussion and analysis of our financial condition and
results of operations together with our consolidated financial statements and
the related notes appearing in this registration statement. Some of the
information contained in this discussion and analysis or set forth elsewhere in
this registration statement, including information with respect to our plans and
strategy for our business and related financing, includes forward-looking
statements that involve risks and uncertainties. You should review the “Risk
Factors” in this registration statement for a discussion of important factors
that could cause actual results to differ materially from the results described
in or implied by the forward-looking statements contained in the following
discussion and analysis.
Overview
While
Lender to Lender Franchise Inc. was organized in July 2010, LLFI and LLFS were
organized in 2002 and 2008, respectively. On August 12, 2010, Lender
to Lender Franchise Inc. completed its acquisition of LLFI and
LLFS. For accounting purposes, this business combination has been
treated as a stock acquisition with Lender to Lender Franchise Inc. as the
acquirer. The following discussion and analysis addresses the major
factors that affected our operations and financial condition reflected in our
unaudited pro forma combined financial statements for the year ended December
31, 2009 and December 31, 2008 and nine-month period ended September 30,
2010. This discussion is intended to supplement and highlight information
contained in, and should be read in conjunction with, our financial statements
and related notes and the selected financial data presented elsewhere in this
prospectus.
The
Company, through LLFI, has entered into multiple servicing agreements with Auto
Dealers where the Company advances the dealer a percentage of the face amount of
the Consumer Loan the Auto Dealer makes to its customers and takes assignment of
the underlying loan as collateral. The percentage of the face amount
that is advanced is computed by the Company’s proprietary web-based software on
a customer-by-customer basis. The Company charges a 20% service fee
on each payment collected from the customer; the remaining payment in excess of
the service fee is applied to the loan’s outstanding principal
balance. In the event that collections on a loan exceed the original
loan advance, the Company retains its service fee and the excess balance is due
back to the dealer. The dealers guarantee the collection of the loan
advances. Collections in excess of the advances on one loan may be
offset against unpaid advances with that Auto Dealer’s loan pool.
Significant
Accounting Policies
Our
consolidated financial statements and accompanying notes have been prepared in
accordance with accounting principles generally accepted in the United States of
America applied on a consistent basis. The preparation of these financial
statements requires us to make a number of estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. We evaluate these
estimates and assumptions on an ongoing basis. We base these estimates on the
information currently available to us and on various other assumptions that we
believe are reasonable under the circumstances. Actual results could vary
materially from these estimates under different assumptions or
conditions.
We
believe that the following critical accounting policies affect the more
significant estimates and assumptions used in the preparation of our financial
statements.
Fair
Value of Financial Instruments
The
Company’s financial instruments consist of cash and cash equivalents, prepaid
expenses, accounts payable and accrued expenses. The carrying amount of these
financial instruments approximates fair value due either to length of maturity
or interest rates that approximate prevailing market rates unless otherwise
disclosed in these financial statements. If we fail to recognize
impairment in value on a timely basis our assets and/or liabilities may be
overstated and our income may be overstated.
14
Consumer
Loans
The
Company follows an approach similar to ASC Topic 310 in determining its
allowance for credit losses. The allowance is maintained at an amount that
reduces the net asset value (dealer loan balance less the allowance) to the
discounted value of future cash flows. The allowance for credit
losses is comprised of estimated future collections on the loans to consumers,
less any estimated dealer holdback payments. In estimating future
collections and dealer holdback payments for each nonaffiliated dealer, the
Company considers a dealer’s actual collection and loss data on a static pool
basis and also considers the Company’s historical loss and collection
experience. The Company’s collection forecast for each dealer is
updated monthly and considers the most recent static pool data available for
each dealer.
Cash
flows from any individual dealer loan are often different than estimated cash
flows and dealer loan inception. If such a difference is favorable,
the difference is recognized into income over the life of the dealer loan
through a yield adjustment. If such a difference is unfavorable, a
provision for credit losses is recorded as a current period expense and a
corresponding allowance for credit loss is established. Because
differences between estimated cash flows at inceptions and actual cash flows can
occur often, an allowance is required for a significant portion of the Company’s
dealer loan portfolio. Allowance for credit loss does not necessarily
indicate that a dealer loan is unprofitable, and in recent years very seldom are
cash flows from a dealer loan portfolio insufficient to repay the initial
amounts advance to the dealer. If a positive revision occurs to the
estimated cash flows for a dealer loan pool that has an allowance for credit
loss recorded, the allowance is reversed up to the lesser of the amount of the
positive revision or allowance. If we fail to properly adjust the
loan allowance account our net income and assets may be incorrect and could be
overstated or understated.
Pro
Forma Combined Results of Operations—2009 Compared to 2008
Revenues
Revenues
totaled $1,161,885 in 2009 compared to $481,560 in 2008, an increase of $680,325
or 141%. Revenues in 2008 were derived from Consumer Loans, warranty
and starter device sales and in 2009 were derived from Consumer Loans and
warranty and starter device sales. The increase in revenues was due
to our access to capital under a line of credit which commenced in March
2008. The majority of our Consumer Loans were funded through the line
of credit which expired in September 2010. We are expecting that 2011
will be a challenging year as our current line of credit expired in September
2010 and we are currently negotiating a renewal or extension with the
bank. We currently have approximately 13 active dealer services
agreements.
Costs of
goods sold totaled $9,234 in 2009 as compared to $215,664 in 2008, a decrease of
$206,430. This decrease was primary due to a reduction in the
sale of starter-interrupter devices and warranties in 2009 due to a reduction in
new Consumer Loans.
Expenses
Total
expenses were $988,338 during 2009 compared to $1,119,570 in 2008, a decrease of
$131,232, or 13%. The decrease was
primarily attributable to a reduction in personnel and interest expense. The
total number of personnel averaged 10 during 2009 compared to 11 in
2008.
Gross
Profit
Gross
profit increased by $886,775, or 333%, from $265,896 in 2008 to $1,152,651 in
2009. As discussed above, the increase was principally due to our
access to capital under the line of credit which expired in September
2010.
Pro
Forma Combined Results of Operations— Nine Months Ended September 30,
2010
Revenues
Revenues
totaled $1,074,164 for the nine month period ended September 30, 2010. Revenues
were derived from Consumer Loans.
Expense
Expenses
were $961,164 for the nine months ended September 30, 3010, which primarily
consisted of employee wages and benefits ($363,659), interest expense ($114,334)
and professional fees ($58,480). Professional fees were primarily due
to the costs of our business combination and preparations for going public. The
total number of personnel averaged 7 during the nine months ended September 30,
2010.
15
Liquidity
and Capital Resources
At
September 30, 2010, we had a cash balance of approximately $201,828,
working capital deficit of $491,629 and an accumulated deficit of
$22,770. These factors, among others, raise substantial doubt about our
ability to continue as a going concern. Due to our financial condition, the
report of our independent registered public accounting firm on our July 31,
2010 audited financial statements includes an explanatory paragraph indicating
that these conditions raise substantial doubt about our ability to continue as a
going concern. The accompanying financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result from
the outcome of these uncertainties.
Our
primary source of liquidity is cash provided by operations and our line of
credit. During March 2008, we entered into a credit agreement with a
commercial bank that provided for up to a $5 million revolving line of credit.
The credit facility expired on September 30, 2010. The amount due
under the line of credit at September 30, 2010 is $1,702,383. We are
currently paying interest only on the balance of the line of credit
(approximately $8,000 per month) and are negotiating a renewal or extension of
the line of credit with the bank. In accordance with generally
accepted accounting principles (GAAP), amounts drawn on our revolving credit
facility are shown as debt due within one year. We continue to seek
alternative debt and equity financing. However, the Company cannot
provide any assurances that it will be able to extend its line of credit or
obtain alternative adequate financing. If the Company is unable to obtain
adequate financing or increase its operating revenues, it may reduce its
operating activities until sufficient funding is secured or revenues are
generated to support operating activities.
Recently,
the capital and credit markets have become volatile as a result of adverse
conditions that have caused the failure or near failure of a number of large
financial services companies. If the capital and credit markets continue to
experience volatility and the availability of funds remains limited, it is
possible that our ability to access the capital and credit markets may be
limited at a time when we would like or need to do so, which could have an
impact on our ability to fund our operations, refinance maturing debt or react
to changing economic and business conditions. At this time, we believe that our
available short-term and long-term capital resources are sufficient to fund our
working capital requirements, scheduled debt payments, interest payments,
capital expenditures, income tax obligations, anticipated dividends to our
stockholders, and anticipated share repurchases for the foreseeable
future.
As
reflected under LLFI’s consolidated financial statements, net cash provided by
operating activities was $(711,881) in 2008 and $239,464 in 2009. Net
cash provided by operating activities was $4,247 for in the period from
inception to September 30, 2010. The increase in operating cash flows is
primarily attributable to additional lending during 2009.
As
reflected under LLFI’s consolidated financial statements, net cash used by
investing activities for the year ended December 31, 2009 was $1,050,942,
which consisted of advances and payments on Consumer Loans of approximately
$487,456, advances and payments on notes receivable-related party of
approximately $655,100 and the purchase of equipment of approximately
$91,614. The note receivable relates to loans to a related
entity. The equipment was primarily automobiles. We do not
expect any material purchase of equipment during 2011. Net cash used by
investing activities for the year ended December 31, 2008 was $(1,210,531),
which consisted of advances and payments on Consumer Loans of approximately
($1,559,855), advances and payments on notes receivable-related party of
approximately $356,665 and purchase of equipment of approximately
$7,341. The equipment was primarily computers and office equipment.
Net cash used by investing activities for the period from inception through
September 30, 2010 was $337,582, which primarily consisted of advances and
payments on Consumer Loans of approximately $201,728, payments on notes
receivable-related party of approximately $28,862 and cash acquired and
acquisition of LLFI and LLFS of $106,992.
As
reflected under LLFI’s consolidated financial statements, net cash used by
financing activities was $2,001,454 in 2008 and $(1,266,228) in 2009. The use of
cash for financing activities in 2008 primarily consisted of $2,312,895 in under
our line of credit and $(311,441) in member draws to members of
LLFI. The use of cash for financing activities in 2009
primarily consisted of $(1,171,000) from the pay down of our line of credit and
$(95,228) in member draws.
During
the three months ended September 30, 2010, the Company accepted an aggregate of
$25,000 from 50 investors to subscribe for 125,000 of our common shares under a
private placement memorandum. The Company netted $25,000 in proceeds from
the subscription, as no commissions were paid in connection with the
offering.
16
Sales
of Equity Securities
In
September 2010, we accepted subscriptions from the sale of shares of our common
stock to investors. The funds received from the sale of our common stock have
been used for operational purposes. We have received funded subscriptions as
follows:
Table
of funded subscriptions, less selling expenses
Common
Stock
Proceeds
|
Selling
Expenses
|
Net
Proceeds
|
||||||||||
$ | 25,000 | $ | 0 | $ | 25,000 |
Concentration
of Risk
All
Consumer Loans are originated in Michigan. To the extent that laws and
regulations are passed that affect our ability to offer Consumer Loans or the
manner in which we offer loans in Michigan, our financial position, results of
operations and cash flows could be adversely affected.
Impact
of Inflation
We do not
believe that inflation has a material impact on our income or
operations.
Seasonality
Our
business is not seasonal.
Material
Commitments
None.
Off
Balance Sheet Arrangements
None.
Quantitative
and Qualitative Disclosures about Market Risk
None.
Recent
Accounting Pronouncements
The
Company does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on the Company’s results of
operations, financial position or cash flow.
17
BUSINESS
Organization
and Overview
Lender to
Lender Franchise, Inc., a Florida corporation, organized in July 2010, provides
auto loans to consumers through a network of automobile dealers. The
Company principally operates through its wholly owned subsidiary, Lender to
Lender Financing, LLC, a Michigan limited liability company
(“LLFI”). LLFI has been in operations since 2002. In
addition, through its wholly owned subsidiary, Lender to Lender Franchise
System, LLC, a Michigan limited liability company (“LLFS”), the Company intends
to franchise its automobile loan programs. The Company acquired LLFI
and LLFS on August 12, 2010 under a stock purchase agreement. For
accounting purposes, this business combination has been treated as a stock
acquisition with the Company as the acquirer. The Company’s management has over
30 years experience in the automobile loan industry.
We had
total assets of $2,019,718 at September 30, 2010. From July 15, 2010
(inception) through September 30, 2010 we had total net revenues of $124,717 and
net loss of $22,770. At September 30, 2010 we had a working capital
deficit of $491,629. Our ability to continue as a going concern is
dependent on increasing revenues from our loans. In the event we are
unable to generate additional revenues, we will be dependent upon third party
financing. We cannot provide any reasonable assurances that we will
receive third party financing or in the event we obtain third party financing
that the terms of such financing will be reasonable.
Our
executive offices are located at 27322 Twenty Three Mile Road, Suite #5,
Chesterfield, MI 48051; our telephone number is (586)
598-1634. Our Website address is www.lendertolender.com.
Information contained on our Websites does not constitute a part of this
prospectus.
The
Auto Loan Industry
The
automobile financing industry is the third-largest consumer finance market in
the country, after mortgage debt and credit card revolving debt. This industry
is served by such traditional lending sources as banks, savings and loans, and
captive finance subsidiaries of automobile manufacturers, as well as by
independent finance companies and buy-here pay-here dealers. In general, the
industry is categorized according to the type of car sold (new versus used) and
the credit characteristics of the borrower. Based on these credit
characteristics, credit worthiness classifications have evolved generally
ranging from A through D, with the D classification representing those customers
being the least credit worthy. The C and D, or sub-prime segment, is comprised
of customers who typically have limited credit histories, low incomes or past
credit problems. Our company provides auto loans to the sub-prime
segment.
Our
Auto Loan Operations
Since
2002, LLFI has provided auto loans to consumers (“Consumer Loans”), regardless
of their credit history. Our product is offered through a network of automobile
dealers who benefit from sales of vehicles to consumers who otherwise could not
obtain financing and from repeat and referral sales generated by these same
customers.
We refer
to dealers who participate in our programs and who share our commitment as “Auto
Dealers”. Upon enrollment in our financing programs, the Auto Dealer enters into
a dealer servicing agreement with us that defines the legal relationship between
Lender Finance and the Auto Dealer. The dealer servicing agreement assigns the
responsibilities for administering, servicing, and collecting the amounts due on
Consumer Loans from the Auto Dealers to us. A consumer who does not qualify for
conventional automobile financing can purchase a used vehicle from an Auto
Dealer and finance the purchase through us. We are an indirect lender from a
legal perspective, meaning the Consumer Loan is originated by the Auto Dealer
and assigned to us.
Consumers
and the Auto Dealers benefit from our programs as follows:
Consumers. Without our
product, consumers are often unable to purchase a vehicle or they purchase an
unreliable one. Further, as we report to a major credit-reporting agency, we
believe an ancillary benefit of our program is that we provide a significant
number of our consumers with an opportunity to improve their credit score and
move on to more traditional sources of financing.
Auto Dealers. Our program increases Auto
Dealers’ profits in the following ways:
18
Enables
the Auto Dealers to sell cars to consumers who may not be able to obtain
financing without our program. In addition, consumers often become repeat
customers by financing future vehicle purchases either through our program or,
after they have successfully established or reestablished their credit, through
conventional financing.
|
•
|
Allows
the Auto Dealers to share in the profit, not only from the sale of
the vehicle, but also from its
financing.
|
|
•
|
Enables
the Auto Dealers to attract consumers who mistakenly assume they do not
qualify for conventional financing.
|
Loan
Programs
Overview
We have
two dealer loan (“Dealer Loan”) programs: the Pooling Program and the Recourse
Program. Under the Pooling Program, we advance money to Auto Dealers in exchange
for the right to service the underlying Consumer Loan; all advances are
supported by the consumer receivables under one account with the Auto Dealer.
Under the Recourse Program, we advance money to Auto Dealers in exchange for the
right to service the underlying Consumer Loan and all advances are supported by
Auto Dealer on a contract-by-contract basis. The secured Consumer
Loans are generally payable over three years at interest rates of approximately
22% or the maximum rate permitted under state law and require a down payment
from the consumer of approximately 10% of the value of the
automobile. The maximum Consumer Loan is less than $15,000. We
currently have active dealer service agreements with approximately 13 Auto
Dealers. While all of our Auto Dealers are currently in Michigan, we
are licensed to provide Consumer Loans in Michigan and Florida.
Program
Enrollment
The Auto
Dealers that enroll in our programs have two enrollment options available to
them. The first enrollment option allows the Auto Dealers to assign Consumer
Loans under the Pooling Program and requires completion of the pooling dealer
agreement. If the Auto Dealer qualifies, the second enrollment option allows the
Auto Dealers to assign individual Consumer Loans under the Recourse Program and
requires completion of individual recourse dealer agreements. The
pooling dealer agreement and recourse dealer agreement are sometimes referred to
as a “dealer servicing agreement”. Advances are based on our
proprietary “webware” that will give the Auto Dealer the probability of
repayment based on historical facts.
Pooling
Program
Under our
Pooling Program all of our advances to Auto Dealers are accounted for under one
account. As payment for the vehicle, the Auto Dealer generally
receives the following:
|
•
|
a
down payment from the consumer;
|
|
•
|
a
cash advance from us of up to 70% of the principal amount to be financed;
and
|
|
•
|
after
the cash advance has been recovered by us, the cash from payments made on
the Consumer Loan, net of certain collection costs and our servicing
fee.
|
Cash
advanced to the Auto Dealers is automatically assigned to the originating Auto
Dealer’s open pool of advances. All advances due from an Auto Dealer
are secured by the future collections on the Auto Dealer’s portfolio of Consumer
Loans assigned to us. We perfect our security interest in the Dealer Loans by
taking possession of the Consumer Loans, which list us as lien holder on the
vehicle title.
The
dealer servicing agreement provides that collections received by us during a
calendar month on Consumer Loans assigned by the Auto Dealer are applied on
a pool-by-pool basis as follows:
|
•
|
First,
to reimburse us for certain collection
costs;
|
|
•
|
Second,
to pay us our servicing fee, which generally equals 20% of
collections;
|
|
•
|
Third,
to reduce the aggregate advance balance and to pay any other amounts due
from the Auto Dealer to us; and
|
19
|
•
|
Fourth,
to the Auto Dealer as payment.
|
Since
typically the combination of the advance and the consumer’s down payment
provides the Auto Dealer with a cash profit at the time of sale, the Auto
Dealer’s risk in the Consumer Loan is limited. We cannot demand repayment of the
advance from the Auto Dealer except in the event the Auto Dealer is in default
of the dealer servicing agreement. Advances are made only after the consumer and
Auto Dealer have signed a Consumer Loan contract, we have received the original
Consumer Loan contract and supporting documentation, and we have approved all of
the related stipulations for funding.
For
accounting purposes, the transactions described under the Pooling Program are
not considered to be loans to consumers. Instead, our accounting reflects that
of a lender to the Auto Dealer. The classification as a Dealer Loan for
accounting purposes is primarily a result of (1) the Auto Dealer’s
financial interest in the Consumer Loan and (2) certain elements of our
legal relationship with the Auto Dealership.
Individual Recourse
Program
Under our
Recourse Program, each advance Consumer Loan is segregated.
As
payment for the vehicle, the Auto Dealer generally receives the
following:
|
•
|
a
down payment from the consumer;
|
|
•
|
a
cash advance from us up to 70% of the principal amount to be advanced;
and
|
|
•
|
after
the advance has been recovered by us, the cash from payments made on the
Consumer Loan, net of certain collection costs and our servicing
fee.
|
Cash
advanced to Auto Dealers is automatically assigned to the originating Auto
Dealer’s open pool of advances. All advances due from an Auto Dealer are
secured by the future collections on the Auto Dealer’s portfolio of Consumer
Loans assigned to us. We perfect our security interest in the Dealer Loans by
taking possession of the Consumer Loans, which list us as lien holder on the
vehicle title. In the event of default of a Consumer Loan, the dealer must
reimburse Lender to Lender with 48 hours of notice.
The
dealer servicing agreement provides that collections received by us during a
calendar month on Consumer Loans assigned by an Auto Dealer are applied on an
individual consumer basis as follows:
|
•
|
First,
to reimburse us for certain collection
costs;
|
|
•
|
Second,
to pay us our servicing fee, which generally equals 20% of
collections;
|
|
•
|
Third,
to reduce the advance balance and to pay any other amounts due from the
Auto Dealer to us; and
|
|
•
|
Fourth,
to the Auto Dealer as payment.
|
Since
typically the combination of the advance and the consumer’s down payment
provides the Auto Dealer with a cash profit at the time of sale, the Auto
Dealer’s risk in the Consumer Loan is limited. Unless, however, the consumer
defaults on the loan, we will demand repayment of the advance along with any
other costs from the Auto Dealer. Advances are made only after the consumer and
Auto Dealer have signed a Consumer Loan contract, we have received the original
Consumer Loan contract and supporting documentation, and we have approved all of
the related stipulations for funding. Advances are based on our proprietary
webware that will give the Auto Dealer the probability of repayment based on
historical facts.
Dealer Servicing
Agreements
General
We
principally derive our revenues under dealer servicing agreements from charges,
which are comprised of: (1) servicing fees earned as a result of servicing
Consumer Loans assigned to us by Auto Dealers under the dealer servicing
agreements (approximately 20% of collections on Customer Loans) and (2)
administration fee of approximately $595 associated with each Consumer
Loan.
20
Servicing
We select
potential Auto Dealers using various criteria to compare and measure each Auto
Dealer against other Auto Dealers in their area as well as the top performing
Auto Dealers. We generally offer our Programs to Auto Dealers that are licensed,
insured and bonded and that can provide us with two years of tax
returns.
Once
an Auto Dealer has enrolled in our programs, the Auto Dealer may begin
assigning Consumer Loans to us. For accounting purposes, a Consumer Loan is
considered to have been assigned to us after all of the following has
occurred:
|
•
|
the
consumer and Auto Dealerships have signed a Consumer Loan
contract;
|
|
•
|
we
have received the original Consumer Loan contract and supporting
documentation;
|
|
•
|
we
have verified all of the related stipulations for funding;
and
|
|
•
|
we
have provided funding to the Auto Dealer in the form of either an advance
or a Dealer Loan.
|
A
Consumer Loan is originated by the Auto Dealer when a consumer enters into a
contract with an Auto Dealer that sets forth the terms of the agreement
between the consumer and the Auto Dealer for the payment of the purchase price
of the vehicle. The amount of the Consumer Loan consists of the total principal
and interest that the consumer is required to pay over the term of the Consumer
Loan. In the majority of states, Consumer Loans are written on a contract form
by the dealer. Although the Auto Dealer is named in the Consumer Loan contract,
the Auto Dealer generally does not have legal ownership of the Consumer Loan for
more than a moment and we, not the Auto Dealer, are listed as lien holder on the
vehicle title.
Consumers
are obligated to make payments on the Consumer Loan directly to us, and any
failure to make such payments will result in us pursuing payment through
collection efforts. We provide customers with payment books which gives the
customer the option of making payments by check or by electronic transfer. At
the date of this prospectus, approximately 65% of customers make payment via
electronic transfer. A monthly statement is made available to Auto Dealers from
us summarizing all activity on Consumer Loans assigned by such Auto
Dealer.
All
Consumer Loans submitted to us for assignment are processed through our very own
proprietary web based software “webware”. The webware was developed over time by
taking all of the contracts that LLFI advanced against and verifying all of the
information that was originally submitted. By doing so we were able to develop
our own probability of repayment calculation from actual facts and collection
history. The webware offers 110 different fields to be completed by the dealer
to then give the dealer a foundation of whether or not they should or shouldn’t
deliver the vehicle. The decision is ultimately up to the dealership to deliver
the vehicle to the customer, we believe that the webware makes the difference in
the dealer making a decision that benefits them, the customer and our
company.
Our
business model allows us to share the risk and reward of collecting on the
Consumer Loans with the Auto Dealers. Such sharing is intended to motivate the
Auto Dealer to assign better quality Consumer Loans, follow our underwriting
guidelines, comply with legal regulations, meet our credit compliance
requirements, and provide appropriate service and support to the consumer after
the sale.
The
typical dealer servicing agreement may be terminated by us or by the Auto Dealer
upon written notice. We may terminate the dealer servicing agreement immediately
in the case of an event of default by the Auto Dealer. In the event of a
termination of the dealer servicing agreement by us, we may continue to service
Consumer Loans assigned by Auto Dealers accepted prior to termination in the
normal course of business.
Collections
Our
collectors service Consumer Loans that are in the early stages of delinquency.
Collection efforts typically consist of placing a call to the consumer within
one day of the missed payment due date. These collectors, in addition to
securing payment arrangements, locate consumers by finding new contact
information to assist in their team’s collection efforts.
21
The
decision to repossess a vehicle is based on statistical models or policy based
criteria. When a Consumer Loan is approved for repossession, the account is
transferred to our repossession team. Repossession personnel continue to service
the Consumer Loan as it is being assigned to a third party repossession
contractor, who works on a contingency fee basis. Once a vehicle has been
repossessed, the consumer can negotiate to redeem the vehicle, whereupon the
vehicle is returned to the consumer in exchange for paying off the Consumer Loan
balance; or, where appropriate, or if required by law, the vehicle is returned
to the consumer and the Consumer Loan is reinstated in exchange for a payment
that reduces or eliminates the past due balance. If neither process is
successful, the vehicle is sold at a wholesale automobile auction. Prior to
sale, the vehicle is usually inspected by our remarketing representatives who
authorize repair and reconditioning work in order to maximize the net sale
proceeds at auction.
If the
vehicle sale proceeds are not sufficient to satisfy the balance owing on the
Consumer Loan, the Consumer Loan is serviced by either: (1) our internal
collection team, in the event the consumer is willing to make payments on the
deficiency balance; or (2) our external collection team, if it is believed that
legal action is required to reduce the deficiency balance owing on the Consumer
Loan. Our external collection team generally assigns Consumer Loans to third
party collection attorneys who work on a contingency fee basis. The third party
collection attorneys then file a claim, and upon obtaining a judgment, garnish
wages or other assets. Additionally, we may sell or assign Consumer Loans to
third party collection companies.
Franchising
Potential
Through
LLFS we intend to offer franchises businesses which will provide financial
services to automobile dealerships that will assist the dealerships in providing
automobile loans to persons that would not otherwise qualify for auto loans, and
ancillary products such as vehicle service contracts, starter interrupters, GPS
starter interrupters/locators and short term financing and lending and related
financial services through franchise locations. Our franchisees will offer
products and financial services similar to those offered by LLFI. To date
we have no franchisees.
The
current initial franchise fee for a single franchise location with a specific
geographic area ("Exclusive Area") is approximately $20,000. The Exclusive Area
will be based on general market factors, demographic information and the number
of automobile dealers and competitive businesses in the area and is payable upon
the execution of a franchise agreement (the “Franchise Agreement”) with LLFS.
All initial franchise fees are due and payable in full upon the signing of the
Franchise Agreement. The franchise fees are non-refundable, except in three
instances: (1) if a license or permit from a governmental agency is required in
order for a franchisee to operate the franchised business and the agency refuses
to grant you a license after franchisee has taken all possible steps to obtain
the license, or (2) franchisee is unable to obtain a minimum line of credit of
$5,000,000, or (3) LLFS decides to return all or a portion of the initial
franchise fee as an economic incentive for a franchisee to franchise in a
specific area, with the determination made on a case by case review of all
relevant economic factors. The initial term of each franchise agreement
will be 10 years and each agreement, subject to franchisee being in compliance
with our franchise agreement and payment of a $5,000 fee, may be renewed for an
additional 5 year term.
LLFS will
provide each franchisee with access to our copyrighted and proprietary software
for use with operation of its franchise. Our franchises will be licensed to use
the trademark Lender to Lender Financing™ and our “webware” software. The
initial charge for a license of this software is currently included in the
franchise fee. The license to use the software, which is Internet based, will
continue as long as the franchisee is in compliance with the Franchise
Agreement. While there is no current charge, we reserve the right to charge for
access to the software in the future to offset the cost of maintaining the web
based application. In the event we enter into a Franchise Agreement, we
currently intend to charge each franchisee a monthly royalty fee of the greater
of $1,000 or between 2% and 7% of the franchisee’s monthly
collections. Furthermore, our franchisees will be required to purchase
certain products, such as auto warranties, starter interrupter devices, GPS
tracking devices and roadside assistance (service) contracts from our affiliate,
On the Road Again Service Contracts LLC which is the only approved supplier of
required products for LLFS franchisees. We anticipate that On the Road Again
will make a profit on sales of products to our franchisees, but that such profit
will not exceed $10 per item purchased from On the Road Again. This profit may
be adjusted based upon a change in the consumer price index. On the Road
Again is owned and controlled by our chief executive officer, Richard
Vanderport.
Competition
The
market for consumers who do not qualify for conventional automobile financing is
large and highly competitive. The market is currently served by “buy here, pay
here” dealerships, banks, captive finance affiliates of automobile
manufacturers, credit unions and independent finance companies both publicly and
privately owned. Many of these companies are much larger and have greater
resources than us. We compete by offering a profitable and efficient method for
the Auto Dealers to finance customers who would be more difficult or less
profitable to finance through other methods. In addition, we compete on the
basis of the level of service provided by our origination and sales
personnel.
22
Trademarks
We have
registered for trademark protection for “Webware”, “Lender to Lender” and
“Lender to Lender Financing” in the United States.
Geographic
Financial Information
For the
two years ended December 31, 2009 and 2008, LLFI revenues from continuing
operations were primarily derived from operations in the State of Michigan. We
currently have active dealer service agreements with approximately five Auto
Dealers all located in the State of Michigan. The loss of any of these Auto
Dealers could have a negative effect on our current operations.
Regulation
Our
business is subject to laws and regulations, including the Truth in Lending Act,
the Equal Credit Opportunity Act, the Fair Credit Reporting Act and other
various state and federal laws and regulations. These laws and regulations,
among other things, require licensing and qualification; limit interest rates,
fees and other charges associated with the Consumer Loans assigned to us;
require specified disclosures by the Auto Dealers to consumers; govern the
sale and terms of ancillary products; and define the rights to repossess and
sell collateral. Failure to comply with these laws or regulations could have a
material adverse effect on us by, among other things, limiting the jurisdictions
in which we may operate, restricting our ability to realize the value of the
collateral securing the Consumer Loans, making it more costly or burdensome to
do business or resulting in potential liability. The volume of new or modified
laws and regulations has increased in recent years and has increased
significantly in response to issues arising with respect to consumer lending.
From time to time, legislation and regulations are enacted which increase the
cost of doing business, limit or expand permissible activities or affect the
competitive balance among financial services providers. Proposals to change the
laws and regulations governing the operations and taxation of financial
institutions and financial services providers are frequently made in the U.S.
Congress, in the state legislatures and by various regulatory agencies. This
legislation may change our operating environment in substantial and
unpredictable ways and may have a material adverse effect on our business. In
addition, governmental regulations which would deplete the supply of used
vehicles, such as environmental protection regulations governing emissions or
fuel consumption, could have a material adverse effect on us.
Our Auto
Dealers must also comply with credit and trade practice statutes and
regulations. Failure of our Auto Dealers to comply with these statutes and
regulations could result in consumers having rights of rescission and other
remedies that could have a material adverse effect on us.
We
believe that we maintain all material licenses and permits required for our
current operations and are in substantial compliance with all applicable laws
and regulations. Our agreements with the Auto Dealers provide that the Auto
Dealer shall indemnify us with respect to any loss or expense we incur as a
result of the Auto Dealer’s failure to comply with applicable laws and
regulations.
Facilities
The
Company’s operations are located at 27322 Twenty-Three Mile Road, Suite #5,
Chesterfield, Michigan. The Company leases these facilities at a cost of
approximately $2,600 per month. The lease term is through June 30,
2012. These facilities are approximately 2,500 square feet and are
sufficient to maintain our current and anticipated operations.
Employees
As of the
date of this Prospectus we employed six full-time and part time employees. Two
of the employees are management personnel, one is an administrative member and
three are sales staff members. We maintain a satisfactory working
relationship with our employees and we have not experienced any labor disputes
or any difficulty in recruiting staff for our operations.
23
DIVIDEND
POLICY
We have
not declared any cash dividends on our common stock since our inception and do
not anticipate paying such dividends in the foreseeable future. We plan to
retain any future earnings for use in our business. Any decisions as to future
payments of dividends will depend on our earnings and financial position and
such other facts, as the Board of Directors deems relevant.
REPORT
TO SHAREHOLDERS
After we
complete this offering, we will not be required to furnish you with an annual
report. Further, we will not voluntarily send you an annual report. We will be
required to file reports with the SEC under section 15(d) of the Securities Act.
The reports will be filed electronically. The reports we will be required to
file are Forms 10-K, 10-Q, and 8-K. You may read copies of any materials we file
with the SEC at the SEC's Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. You may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an Internet site that will contain copies of the reports we file
electronically. The address for the Internet site is www.sec.gov.
LEGAL
PROCEEDINGS
In the
normal course of business and as a result of the consumer-oriented nature of the
industry in which we operate, industry participants are frequently subject to
various consumer claims and litigation. The claims allege, among other theories
of liability, violations of state, federal and foreign truth-in-lending, credit
availability, credit reporting, consumer protection, warranty, debt collection,
insurance and other consumer-oriented laws and regulations, including claims
seeking damages for physical and mental damages relating to our repossession and
sale of the consumer’s vehicle and other debt collection activities. As we
accept assignments of Consumer Loans originated by the Auto Dealers, we may also
be named as a co-defendant in lawsuits filed by consumers principally against
the Auto Dealers. We may also have disputes and litigation with the Auto Dealers
relating to our dealer servicing and related agreements, including claims for,
among other things breach of contract or other duties purportedly owed to the
Auto Dealers. The damages and penalties that may be claimed by consumers or the
Auto Dealers in these types of matters can be substantial. The relief requested
by plaintiffs varies but may include requests for compensatory, statutory and
punitive damages, and plaintiffs may seek treatment as purported class actions.
A significant judgment against us in connection with any litigation or
arbitration could have a material adverse effect on our financial position,
liquidity and results of operations.
There are
currently no pending claims or litigation that we believe will be material in
relation to our consolidated financial position or results of
operations.
MANAGEMENT
Directors
and Executive Officers
The
following table sets forth certain information regarding our executive officers,
key employees and directors as of the date of this registration statement.
Directors are elected annually and serve until the next annual meeting of
shareholders or until their successors are elected and qualify. Officers are
elected by our board of directors and their terms of office are at the
discretion of our board.
Name
|
Age
|
Position
|
||
Richard
Vanderport
|
62
|
Director
and Chief Executive Officer and Principal Accounting
Officer
|
||
Jeffrey
Bartlett
|
35
|
Chief
Operating Officer
|
||
Renee
Trout
|
|
44
|
|
Treasurer
and Secretary
|
Richard Vanderport has served
as director and chief executive officer of the Company since its inception and
as chief executive officer of LLFS and LLFI since their inception. Mr.
Vanderport has over 30 years experience in the auto finance industry. From 1982
through 1988 he was employed by Don Foss Used Cars (the founder of Credit
Acceptance Corporation), an auto sales company located in Redford, Michigan and
served in various capacities with the company. Mr. Vanderport was employed by
Credit Acceptance Corporation, a publicly traded auto finance company, from 1989
through 1999. From 2003 through 2008, Mr. Vanderport owned Easy Credit Inc., a
vehicle sales company located in Mt. Clemens, Michigan and Quality Auto Inc., a
vehicle sales company located in Pontiac, Michigan. Mr. Vanderport is the
stepfather of Jeffrey Bartlett.
24
Jeffrey Bartlett has
served as an officer of the Company since its inception and as chief operating
officer of LLFS and LLFI since 2007. From June 2003 through 2009, he served as
vice president of Easy Credit Inc., a vehicle sales company where he oversaw
day-to-day operations. From 2003 through 2008, Mr. Bartlett served as general
manager of Easy Credit Inc., a vehicle sales company and Quality Auto Inc., a
vehicle sales company. These entities were also owned by Richard Vanderport.
From May 2006 through October 2007, he served as president of Quality Auto
Liquidators of Pontiac, Inc., a vehicle sales company where he also oversaw all
day-to-day operations. From January 2008 through March 2010, he served as vice
president of Lender to Lender Financing LLC, an entity affiliated with the
Company. Mr. Bartlett is the stepson of Richard Vanderport.
Renee Trout has served as an officer
of the Company since its inception and treasurer and secretary of LLFS and LLFI
since 2004. She has served as chief financial officer of LLFI since 2004. Since
1995, she has also been employed by Godfrey, Hammel, Danneels & Co., PC
where she provided individual and corporate tax accounting and planning
services.
Employment
Agreements
We have
not entered into employment agreements with any of our officers. Salaries
payable to our officers are subject to adjustment and deferral based on
operations and cash flow of the Company. Each of our officers are eligible to
receive and participate in all benefit, bonus, retirement, health, insurance and
incentive programs provided by the Company for its employees.
Board
of Directors
Our Board
of Directors currently consists of one director. Our Bylaws provide that our
board shall consist of not less than one or more than ten individuals. The terms
of directors expire at the next annual shareholders’ meeting unless their terms
are staggered as permitted in our Bylaws. Each shareholder is entitled to vote
the number of shares owned by him for as many persons as there are directors to
be elected. Shareholders do not have a right to cumulate their votes for
directors.
Director
Compensation
Currently,
we do not pay our directors any cash or other compensation for their services as
director. In the future, we may consider appropriate forms of
compensation.
Committees
To date,
we have not established a compensation committee, nominating committee or an
audit committee. Our board of directors review the professional services
provided by our independent auditors, the independence of our auditors from our
management, our annual financial statements and our system of internal
accounting controls. None of the members of our board of directors are
considered financial experts as defined under Regulation S-K.
Code
of Ethics
In 2010
we adopted a Code of Ethics and Business Conduct which is applicable to our
employees and includes our chief executive officer and principal financial
officer and persons performing similar functions. A code of ethics is a written
standard designed to deter wrongdoing and to promote:
|
·
|
honest
and ethical conduct,
|
|
·
|
full,
fair, accurate, timely and understandable disclosure in regulatory
filings and public statements,
|
|
·
|
compliance
with applicable laws, rules and
regulations,
|
|
·
|
the
prompt reporting violation of the code,
and
|
|
·
|
accountability
for adherence to the code.
|
25
EXECUTIVE
COMPENSATION
The
following table sets forth annual compensation for our chief executive officer
who was employed by the Company and its subsidiaries for each of the last two
fiscal years.
SUMMARY
COMPENSATION TABLE
Name/Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
|
Options
($)
|
Non-Equity
Incentive Plan
Compensation
($)
|
Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
|
All Other
Compen-
sation
($)
|
Total
($)
|
|||||||||||||||||||
Richard Vanderport
|
2009
|
$
|
290,700
|
—
|
—
|
—
|
—
|
—
|
—
|
$
|
290,700
|
|||||||||||||||||
2008
|
$
|
240,833
|
—
|
—
|
—
|
—
|
—
|
—
|
$
|
240,833
|
We have
not entered into employment agreements with, nor have we authorized any payments
upon termination or change-in-control to any of our executive officers or key
employees.
Compensation
While
Lender to Lender has not entered into any written employment agreements with its
executive officers, we may enter into an employment agreement with our chief
executive officer. Current annual salaries for executive officers and key
employees are as follows:
Richard
Vanderport
|
$ | 108,000 | ||
Jeffrey
Bartlett
|
$ | 114,400 | ||
Renee
Trout
|
$ | 33,800 |
Compensation
amounts are determined by the board of directors and the board of directors may
issue cash bonuses, stock options and other non-cash incentives to its executive
officers, directors and employees. The Company also provides its officers with a
car allowance.
Equity
Incentive Plan
In August
2010, the directors and a majority of our shareholders adopted our 2010 Equity
Incentive Plan (the “Plan”). We have reserved an aggregate of 5,000,000 shares
of common stock for issuance pursuant to options or restricted stock granted
under the Plan. As of the date of this Registration Statement, we have issued
1,060,000 options under the Plan. The purpose of the Plan is to advance the
interests of the Company and its stockholders by providing a means of attracting
and retaining key employees, directors and consultants for the Company and its
subsidiaries. The Plan shall be administered by the board of directors until
such time as a committee shall be appointed (the “Administrator”). Options
granted under the Plan may either be options qualifying as incentive stock
options (“Incentive Options”) under Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”), or options that do not so qualify (“Non-Qualified
Options”).
The price
per share issuable upon exercise of an option shall be determined by the
Administrator at the time of the grant and shall (i) in the case of an ISO, not
be less than the fair market value of the shares on the date of grant; (ii) in
the case of an ISO granted to a holder of more than 10% of the total combined
voting power of all classes of stock of the Company or any subsidiary, be at
least 110% of the fair market value of the shares on the date of grant; or (iii)
in the case of an NQSO, shall be no less than ninety percent (90%) of the fair
market value per share on the date of grant. For the purposes of the Plan, the
“fair market value” of the shares shall mean (i) if shares are traded on an
exchange or over-the-counter market, the mean between the high and low sales
prices of shares on such exchange or over-the-counter market on which such
shares are traded on that date, or if such exchange or over-the-counter market
is closed or if no shares have traded on such date, on the last preceding date
on which such shares have traded or (ii) if shares are not traded on an exchange
or over-the-counter market, then the fair market value of the shares shall be
the value determined in good faith by the Administrator, in its sole
discretion.
The per
share purchase price of shares subject to options granted under the Plan may be
adjusted in the event of certain changes in our capitalization, but any such
adjustment shall not change the total purchase price payable upon the exercise
in full of options granted under the Plan. Officers, directors and key employees
of and consultants to us and our subsidiaries will be eligible to receive
Non-Qualified Options under the Plan. Only our officers, directors and employees
who are employed by us or by any of our subsidiaries thereof are eligible to
receive Incentive Options.
26
The term
of each option and the manner in which it may be exercised is determined by the
Administrator, provided that no option may be exercisable more than ten years
after the date of its grant and, in the case of an Incentive Option granted to
an eligible employee owning more than 10% of our common stock, no more than five
years after the date of the grant.
We have
not issued any options, warrants or other equity or non-equity based incentives
nor has any equity award/compensation has been awarded to, earned by, or paid to
any of our executive officers, directors or key employees; therefore, we have
omitted an Outstanding Equity Awards at Fiscal Year End Table as permitted under
Regulation S-K. Further, as a “smaller reporting company” we are providing the
scaled disclosures as permitted by Regulation S-K and therefore, have omitted a
Grants of Plan Based Award Table, Options Exercised and Stock Vested Table,
Pension Benefits Table and Nonqualified Deferred Compensation
Table.
Director
Compensation
No annual
compensation was paid to our directors during 2010, our last fiscal
year.
A copy of
our Code of Business Conduct and Ethics has been filed with the Securities and
Exchange Commission as an exhibit to this Form S-1 filing. Any person desiring a
copy of the Code of Business Conduct and Ethics, can obtain one by going to
www.sec.gov and looking at the attachments to this Form S-1.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
We do not
currently have any independent members on our board of directors.
On August
12, 2010, the Company issued 30,000,000 shares of its common stock to its chief
executive officer and founder in exchange for his wholly owned interests in LLFS
and LLFI pursuant to a stock purchase agreement.
Jeffrey
Bartlett and Thomas Bartlett are Richard Vanderport’s stepsons. Jeffrey Bartlett
is an officer of the Company and Thomas Bartlett is an employee of the
Company.
Lender to
Lender requests Auto Dealers participating in our Recourse Program to install
starter interrupter devices on vehicles and requires Auto Dealers participating
in our Pooling Program to install starter interrupter devices on vehicles. These
products are purchased from On the Road Again Service Contracts LLC.
Furthermore, in the event an Auto Dealer elects to apply advances under a
Consumer Loan to cover a warranty payment, such warranty must be through a
warranty provider approved by On the Road Again. These approved warranty
providers provide On the Road Again with a nominal fee per each warranty, if
any. On the Road Again is controlled by Richard Vanderport.
As
disclosed under the consolidated financial statements, at September 30, 2010,
the note receivable-related party at September 30, 2010 of $155,283 is
principally due to loans to Easy Credit, Inc., Quality Auto Liquidators of
Pontiac, Inc. and On the Road Again Service Contracts, LLC, which were entities
owned 100% by Richard Vanderport. The advances are non-interest bearing or
provide for nominal interest. As of the date of this prospectus, Easy Credit,
Inc. and Quality Auto Liquidators of Pontiac, Inc. are no longer in
operations.
The
Company has also received loans from its sole officer for working capital. The
loans are due upon demand, unsecured and non-interest bearing. The total amount
due to the officers was $44,083 as of September 30, 2010. In addition, the
Company has received loans from an entity controlled by its sole officer. These
amounts are also non-interest bearing, unsecured and due upon demand. The total
amount due to the entity was $10,267 as of September 30, 2010.
27
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table shows the number of shares and percentage of all shares of
common stock issued and outstanding as of the date of this prospectus, held by
any person known to the Company to be the beneficial owner of 5% or more of the
Company’s outstanding common stock, by each executive officer and director, and
by all directors and executive officers as a group. The persons named in the
table have sole voting and investment power with respect to all shares
beneficially owned. Unless otherwise noted below, the address for each
shareholder is 27322 Twenty Three Mile Road, Suite 5, Chesterfield, Michigan
48051.
Number of
|
Percentage of
|
|||||||
Name and Address
|
Shares Owned
|
Shares Outstanding
|
||||||
Richard
Vanderport
|
30,000,000 | (1) | 100.0 | % | ||||
Jeffery
Bartlett
|
0 | (2) | 0.0 | % | ||||
Renee
Trout
|
0 | (3) | 0.0 | % | ||||
Officers
and Directors as a group (3 persons)
|
30,000,000 | 100.0 | % |
(1)
|
Excludes
up to 330,050 shares of common stock underlying options and warrants
exercisable at $1.00 per share which are held by various family members.
Mr. Vanderport disclaims beneficial ownership of such securities. Such
options and warrants are exercisable over a five-year period in equal
annual installments and will expire in ten years. The initial tranche of
options and warrants are exercisable on August 12,
2011.
|
(2)
|
Excludes
up to 1,100,000 shares of common stock underlying options and warrants
exercisable at $1.00 per share. Such options and warrants are exercisable
over a period of five years in equal annual installments. The initial
tranche of options and warrants are exercisable on August 12,
2011.
|
(3)
|
Excludes
up to 25,000 shares of common stock underlying options exercisable at
$1.00 per share. Such options are exercisable over a period of five years
in equal annual installments. The initial tranche of options is
exercisable on August 12, 2011.
|
28
DESCRIPTION
OF SECURITIES
Common
Stock
Our
articles of incorporation authorize us to issue up to One Hundred Five Million
(105,000,000) shares of common stock, par value $.0001. At September 30, 2010,
we had issued and outstanding 30,125,000 shares of common stock of which,
30,000,000 shares or 99% is owned or controlled by our officers and
directors.
Holders
of shares of common stock are entitled to one vote for each share on all matters
to be voted on by the shareholders. Holders of common stock have no cumulative
voting rights. In the event of liquidation, dissolution or winding up of the
Company, the holders of shares of common stock are entitled to share, pro rata,
all assets remaining after payment in full of all liabilities. Holders of common
stock have no preemptive rights to purchase our common stock. There are no
conversion rights or redemption or sinking fund provisions with respect to the
common stock. All of the outstanding shares of common stock are validly issued,
fully paid and non-assessable.
Preferred
Stock
Our
articles of incorporation authorize our board of directors, without shareholder
approval, to issue up to Five Million (5,000,000) shares of preferred stock and
to establish one or more series of preferred stock and to determine, with
respect to each of these series, their preferences, voting rights and other
terms. There are no shares of preferred stock issued and outstanding as of the
date of this prospectus. Issuance of additional shares of preferred stock could
adversely affect the voting power or other rights of our shareholders or be
used, to discourage, delay or prevent a change in control, which could have the
effect of discouraging bids for us and prevent shareholders from receiving
maximum value for their shares. Although we have no present intention to issue
shares of preferred stock, we cannot assure you that we will not do so in the
future.
Securities
Authorized for Issuance Under Equity Compensation Plans
As of
July 31, 2010, there were no stock options or other equity incentive securities
issued and outstanding.
Options
and Warrants
The
Company has adopted and implemented an equity incentive plan (the
“Plan”). The purpose of the Plan is to increase employee, consultant and
director interest in the Company and to align more closely their interests with
the interests of the Company’s shareholders and to enable the Company to attract
and retain the services of experienced and highly qualified employees and
directors. The Company has reserved an aggregate of 5,000,000 shares of
common stock under the Plan. Under the Plan, the Company may grant awards
in the form of incentive stock options, non-qualified stock options and other
stock awards. As of the date of this memorandum, there are options to
acquire an aggregate of 1,060,000 shares of common stock outstanding. On August
12, 2010, the Company issued options to purchase 1,060,000 shares of common
stock to five employees of the Company. Such options vest over a period of five
years in equal installments. The options, subject to vesting, are exercisable
for a period of ten years from the date of grant at $1.00 per
share.
In
addition, on August 12, 2010 the Company issued warrants to purchase an
aggregate of 330,050 shares of common stock to four individuals and consultants.
The warrants are exercisable at $1.00 per share and vest over a period of five
years in equal installments. The warrants expire ten years from the issuance
date.
Transfer
Agent and Registrar
The
transfer agent and registrar for our common stock is Island Stock Transfer,
located in St. Petersburg, Florida.
SELLING
SHAREHOLDERS
The
selling shareholders named below are selling the securities. The table assumes
that all of the securities will be sold in this offering. However, any or all of
the securities listed below may be retained by any of the selling shareholders,
and therefore, no accurate forecast can be made as to the number of securities
that will be held by the selling shareholders upon termination of this
Offering.
During
September 2010, the Company accepted an aggregate of $25,000 from 50 investors
to subscribe for 125,000 of our common shares at $0.20 per share under a private
placement under section 4(2) of the Securities Act of 1933. The Company netted
$25,000 in proceeds from the offering. No commissions or finder fees were paid
in connection with the offering.
29
On August
12, 2010, the Company issued options to purchase an aggregate of 1,060,000
shares of common stock to five employees. Such options vest over a period of
five years in equal installments. The options, subject to vesting, are
exercisable for a period of ten years from date of grant. The options are
exercisable at $l.00 per share. In addition, on August 12, 2010, the Company
issued warrants to purchase an aggregate of 330,050 shares of common stock to
four individuals and consultants. The warrants are exercisable at $1.00 per
share and vest over a period of five years in equal installments. The warrants
expire ten years from the date of issuance. The initial installments of options
and warrants are exercisable commencing August 12, 2011.
We
believe that the selling shareholders listed in the table have sole voting and
investment powers with respect to the securities indicated. We will not receive
any proceeds from the sale of the securities by the selling shareholders. In the
event the warrants are exercised, we will receive up to $1,390,050 in proceeds,
which will be used for general working capital purposes. No selling shareholders
are broker-dealers or affiliates of broker-dealers. The number and percentage 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 stockholders
has sole or shared voting power or investment power and also any shares, which
the selling stockholders has the right to acquire within 60 days. The percentage
of shares owned by each selling stockholder is based on 30,125,000 shares issued
and outstanding as of November 30, 2010, including warrants and options
exercisable within 60 days of November 30, 2010. Information after the Offering
assumes that all securities registered will be sold. Unless otherwise noted
below, the address for each shareholder is 27322 Twenty Three Mile Road, Suite
5, Chesterfield, Michigan 48051.
30
Stockholder and Address
|
Shares of
Common
Stock
Included in
Prospectus
|
Percentage of
Common
Stock Before
Offering
|
Beneficial
Ownership
Before
Offering
|
Beneficial
Ownership
After the
Closing
|
Percentage of
Common
Stock Owned
After
Offering
|
|||||||||||||||
Section
4(2) Private Placement Investors
|
||||||||||||||||||||
Margaret
Aggeler
7218
Middle Channel Drive
Harsens
Island, MI 48028
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Maria
Almada
49764
Thornapple Court
Shelby
Township, MI 48315
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Allan
Apple
6724
Oyster Cove
West
Bloomfield, MI 48323
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
John
Barberino, Jr.
351
Conestoga Street
Windsor,
CT 06095
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Douglas
Borr
217
Roaring Brook Drive
St
Augustine, FL 32084-6559
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
William
Bristol, Jr.
51
Sterling Drive
Canton,
CT 06019
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Douglas
Brown
48463
Declaration Dr.
Macomb
Township, MI 48044-1921
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
David
Chernow
Resource
431
Stephenson Highway
Troy,
MI 48033
|
2,500 | * | 2,500 | 0 | 0 |
31
Gerald
Chernow
Resource
431
Stephenson Highway
Troy,
MI 48033
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Chesterfield
Industrial Corporation
27322
Twenty Three Mile Road
Suite
3
Chesterfield,
MI 48051
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
James
Elder III
718
Wilcox
Rochester,
MI 48307
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Keith
Evola
9886
Springborn
Casco,
MI 48064
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Robert
Foss
Detroit
II Autofiance Center, Inc.
25300
Grand River Avenue
Redford,
MI 48240
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Garry
Gogo
14196
Longneedle Court
Shelby
Township, MI 48315
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Nancy
Gogo
48496
Tilch Road
Macomb
Township, MI 48044-1997
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Wayne
and Keli Gogo
8136
Orchardview
Washington,
MI 48094
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Sebastian
Guzzo
31016
Morgan Drive
Warren,
MI 48088
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Brent
Havard
5145
Greer Road
West
Bloomfield, MI 48324
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Robert
and Paulette Havard
7238
Middle Channel Drive
Harsens
Island, MI 48028
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Adam
Heinrich
7305
Aqua Isle
Algonac,
MI 48001
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
David
Herbert
17900
Clover Hill Drive
Macomb
Township, MI 48044-2055
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Brad
Horton
26918
Koerber
St.
Clair Shores, MI 48081
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Fred
Howard
20143
Cumberland Ct.
Brownstown,
MI 48183
|
2,500 | * | 2,500 | 0 | 0 |
32
Kathy
Ianitelli-Deeb
4
Asti Circle
Palm
Desert, CA 92211
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Kathy
Koch
1457
Ainsley
Ypsilanti,
MI 48197
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
John
Kocis
14846
Sparrow Drive
Shelby
Township, MI 48315
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
William
A.J. Kovacs
3751
NE 31st Avenue
Lighthouse
Point, FL 33064
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
William
Krause
57238
Scenic Hollow Drive
Washington,
MI 48094
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
A.
Joseph Mallette
1720
Macao Court
Marco
Island, FL 34145
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Joseph
Mattei
54352
Barryfield
Macomb
Township, MI 48044
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Michael
McCloy
1457
Ainsley
Ypsilanti,
MI 48197
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Kenneth
Miller
4900
32 Mile
Washington,
MI 48095
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Frank
Moscone
11782
19 Mile Road
Sterling
Heights, MI 48313
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Keith
Neely
61797
Romeo Plank
Ray,
MI 48096
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
James
and Christy Petschke
51541
Fairchild Road
Chesterfield,
MI 48051
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Steven
Petschke
25040
24 Mile Road
Chesterfield,
MI 48051
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Peter
Piazza
43401
Vinsetta Drive
Sterling
Heights, MI 48313
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Dominic
Pugliarisi
42624
Elizabeth Place
Clinton
Township, MI 48038
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Michael
Robosan
40482
Aynesley
Clinton
Township, MI 48038
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Kristin
Schlichte
22514
Blue Marlin Drive
Boca
Raton, FL 33428
|
2,500 | * | 2,500 | 0 | 0 |
33
Robert
Schultz
6935
Hillview Point
Washington
Township, MI 48094
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Kenneth
Spitler
17145
Nollar Lane
Manchester,
MI 48158
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
David
P. Tamulevich
43444
Hillcrest Drive
Sterling
Heights, MI 48313
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Angelo
Tedeso
2316
Oakcrest Road
Sterling
Heights, MI 48310-4279
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Lynn
Tyll
2265
McKinley Street
Ubly,
MI 48475
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Brian
VanderBeek
916
Tartan Trail
Bloomfield
Hills, MI 48304
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Peter
VanderBeek
916
Tartan Trail
Bloomfield
Hills, MI 48304
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Bryon
Vandermeer
11780
Forest Glen Lane
Shelby
Township, MI 48315
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Ralph
Weibel
6183
Rickett Drive
Washington,
MI 48094-2169
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
David
Eric Williams
1211
E. U.S. Highway 223
Adrian,
MI 49221
|
2,500 | * | 2,500 | 0 | 0 | |||||||||||||||
Warrant
and Option Holders
|
||||||||||||||||||||
Jeffrey
James Bartlett
|
1,100,000 | * | 0 | 0 | 0 | |||||||||||||||
Renee
Lynne Trout
|
25,000 | * | 0 | 0 | 0 | |||||||||||||||
Thomas
Bartlett
|
10,050 | * | 0 | 0 | 0 | |||||||||||||||
Renee
Wolfe
|
10,000 | * | 0 | 0 | 0 | |||||||||||||||
Nancy
Bonier
|
15,000 | * | 0 | 0 | 0 | |||||||||||||||
Nanette
Davis
|
100,000 | * | 0 | 0 | 0 | |||||||||||||||
Dale
Bartlett
|
100,000 | * | 0 | 0 | 0 | |||||||||||||||
Thomas
Randazzo
|
10,000 | * | 0 | 0 | 0 | |||||||||||||||
John
Barbarino
|
10,000 | * | 0 | 0 | 0 | |||||||||||||||
James
Vanderport
|
10,000 | * | 0 | 0 | 0 |
* Less
than 1%.
34
PLAN
OF DISTRIBUTION
The
selling stockholders and any of their respective pledgees, donees, assignees and
other successors-in-interest may, from time to time, sell any or all of their
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. The selling stockholders
will offer their shares at $0.20 per share until the shares are quoted on the
OTCBB and after that at prevailing market prices or privately negotiated prices.
The selling stockholders may use any one or more of the following methods when
selling shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits the purchaser;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as
principal;
|
|
·
|
facilitate
the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately-negotiated
transactions;
|
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number of such
shares at a stipulated price per
share;
|
|
·
|
through
the writing of options on the
shares;
|
|
·
|
a
combination of any such methods of sale;
and
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may also sell shares under Rule 144 of the Securities Act,
if available, rather than under this prospectus. The selling stockholders shall
have the sole and absolute discretion not to accept any purchase offer or make
any sale of shares if it deems the purchase price to be unsatisfactory at any
particular time.
The
selling stockholders or their respective pledgees, donees, transferees or other
successors in interest, may also sell the shares directly to market makers
acting as principals and/or broker-dealers acting as agents for themselves or
their customers. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the selling stockholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. It is possible that a selling stockholder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then existing market
price. We cannot assure that all or any of the shares offered in this prospectus
will be issued to, or sold by, the selling stockholders. The selling
stockholders and any brokers, dealers or agents, upon effecting the sale of any
of the shares offered in this prospectus, may be deemed to be “underwriters” as
that term is defined under the Securities Exchange Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
such acts. In such event, any commissions received by such 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.
We are
required to pay all fees and expenses incident to the registration of the
shares, including fees and disbursements of counsel to the selling stockholders,
but excluding brokerage commissions or underwriter discounts.
The
selling stockholders, alternatively, may sell all or any part of the shares
offered in this prospectus through an underwriter. The selling stockholders have
not entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into.
35
The
selling stockholders may pledge their shares to their brokers under the margin
provisions of customer agreements. If a selling stockholder defaults on a margin
loan, the broker may, from time to time, offer and sell the pledged shares. The
selling stockholders and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations under
such Act, including, without limitation, Regulation M. These provisions may
restrict certain activities of, and limit the timing of purchases and sales of
any of the shares by, the selling stockholders or any other such person. In the
event that any of the selling stockholders are deemed an affiliated purchaser or
distribution participant within the meaning of Regulation M, then the selling
stockholders will not be permitted to engage in short sales of common stock.
Furthermore, under Regulation M, persons engaged in a distribution of securities
are prohibited from simultaneously engaging in market making and certain other
activities with respect to such securities for a specified period of time prior
to the commencement of such distributions, subject to specified exceptions or
exemptions. In addition, if a short sale is deemed to be a stabilizing activity,
then the selling stockholders will not be permitted to engage in a short sale of
our common stock. All of these limitations may affect the marketability of the
shares.
If a
selling stockholder notifies us that it has a material arrangement with a
broker-dealer for the resale of the common stock, then we would be required to
amend the registration statement of which this prospectus is a part, and file a
prospectus supplement to describe the agreements between the selling stockholder
and the broker-dealer.
MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
OTC
Bulletin Board Considerations
As
discussed elsewhere in this registration statement, the Company’s common stock
is not currently included for quotation on the Over the Counter Bulletin Board
(“OTCBB”), and there is no public trading market. To be quoted on the OTCBB, a
market maker must file an application on our behalf in order to make a market
for our common stock. We have engaged in preliminary discussions with an NASD
Market Maker to file our application on Form 211 with the NASD, but as of the
date of this prospectus, no filing has been made.
Holders
As of the
date of this prospectus, there were 30,125,000 shares of Common Stock
outstanding. As of the date of this prospectus, the approximate number of
stockholders of record of the Common Stock of the Company was approximately 51
shareholders.
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our
Bylaws, as amended, provide to the fullest extent permitted by Florida law that
our directors or officers shall not be personally liable to us or our
shareholders for damages for breach of such director's or officer's fiduciary
duty. The effect of this provision of our Articles of Incorporation, as amended,
is to eliminate our rights and our shareholders (through shareholders'
derivative suits on behalf of our company) to recover damages against a director
or officer for breach of the fiduciary duty of care as a director or officer
(including breaches resulting from negligent or grossly negligent behavior),
except under certain situations defined by statute. We believe that the
indemnification provisions in our Articles of Incorporation, as amended, are
necessary to attract and retain qualified persons as directors and
officers.
The
Florida Business Corporation Act provides that a corporation may indemnify a
director, officer, employee or agent made a party to an action by reason of that
fact that he or she was a director, officer employee or agent of the corporation
or was serving at the request of the corporation against expenses actually and
reasonably incurred by him or her in connection with such action if he or she
acted in good faith and in a manner he or she reasonably believed to be in, or
not opposed to, the best interests of the corporation and with respect to any
criminal action, had no reasonable cause to believe his or her conduct was
unlawful.
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 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 and will be governed by the final
adjudication of such issue.
36
LEGAL
MATTERS
The
validity of our common stock offered hereby will be passed upon by Quintairos,
Prieto, Wood & Boyer, P.A., Fort Lauderdale, Florida.
EXPERTS
The
consolidated balance sheet of Lender to Lender Franchise, Inc. from inception
through July 31, 2010 and the related consolidated statement of operations,
changes in stockholders' deficit, and cash flows from inception (July 15, 2010)
to July 31, 2010 appearing in this prospectus and registration statement have
been so included in reliance on the Report of Silberstein Ungar, PLLC, an
independent registered public accounting firm, appearing elsewhere in this
prospectus, given on the authority of such firm as experts in accounting and
auditing.
The
consolidated balance sheet of Lender to Lender Financing, LLC for the fiscal
years ended December 31, 2008 and December 31, 2009 and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the years ended December 31, 2008 and December 31, 2008 appearing in
this prospectus and registration statement have been so included in reliance on
the Report of Silberstein Ungar, PLLC, an independent registered public
accounting firm, appearing elsewhere in this prospectus, given on the authority
of such firm as experts in accounting and auditing.
The
consolidated balance sheets of Lender to Lender Franchise System, LLC for the
fiscal years ended December 31, 2008 and December 31, 2009 and the related
consolidated statements of operations and member’s equity and cash flows for
period from inception (July 2, 2008) through December 31, 2009 and for the years
ended December 31, 2008 and 2009 appearing in this prospectus and registration
statement have been so included in reliance on the Report of Silberstein Ungar,
PLLC, an independent registered public accounting firm, appearing elsewhere in
this prospectus, given on the authority of such firm as experts in accounting
and auditing.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND
FINANCIAL DISCLOSURE
None.
WHERE
YOU CAN FIND MORE INFORMATION
This
prospectus does not contain all of the information in the registration statement
and the exhibits and schedules that were filed with the registration statement.
For further information with respect to the common stock and us, we refer you to
the registration statement and the exhibits and schedules that were filed with
the registration statement. Statements made in this prospectus regarding the
contents of any contract, agreement or other document that is filed as an
exhibit to the registration statement are not necessarily complete, and we refer
you to the full text of the contract or other document filed as an exhibit to
the registration statement. A copy of the registration statement and the
exhibits and schedules that were filed with the registration statement may be
inspected without charge at the public reference facilities maintained by the
SEC at 100 F Street, N.E., Washington, D.C. 20549 or via the Internet at
http://www.sec.gov.
37
LENDER
TO LENDER FRANCHISE, INC.
INDEX
TO FINANCIAL STATEMENTS
Lender
to Lender Franchise, Inc. and Subsidiaries Consolidated Financial Statements as
of and for the period ended September 30, 2010 (unaudited)
Lender
to Lender Franchise, Inc. Pro Forma Combined Financial Statements as of and for
the Period ended September 30, 2010 (unaudited)
Lender
to Lender Franchise, Inc. Financial Statements as of and for the Period Ended
July 31, 2010 (audited)
Lender
to Lender Franchise System, LLC Financial Statements as of and for the Periods
Ended December 31, 2009 and 2008 (audited)
Lender
to Lender Financing, LLC Financial Statements as of and for the Years Ending
December 31, 2009 and 2008 (audited)
Lender
to Lender Franchise, Inc. Pro Forma Combined Financial Statements as of and for
the Year Ended December 31, 2009 (unaudited)
Lender
to Lender Franchise, Inc. Pro Forma Combined Financial Statements as of and for
the Year Ended December 31, 2008 (unaudited)
LENDER
TO LENDER FRANCHISE, INC. AND SUBSIDIARIES
CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER
30, 2010
LENDER
TO LENDER FRANCHISE, INC. AND SUBSIDIARIES
TABLE
OF CONTENTS
SEPTEMBER
30, 2010
Consolidated
Balance Sheet (Unaudited) as of September 30, 2010
|
F
- 1
|
Consolidated
Statement of Operations (Unaudited) for the period from July
15, 2010 (Date of Inception) to September 30, 2010
|
F
- 2
|
Consolidated
Statement of Stockholders’ Equity (Unaudited) as of September
30, 2010
|
F
- 3
|
Consolidated
Statement of Cash Flows (Unaudited) for the period from July
15, 2010 (Date of Inception) to September 30, 2010
|
F
- 4
|
Notes
to Consolidated Financial Statements
|
F
- 5 – F - 10
|
LENDER
TO LENDER FRANCHISE, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEET (UNAUDITED)
AS
OF SEPTEMBER 30, 2010
September
30, 2010
|
||||
ASSETS
|
||||
Current
Assets
|
||||
Cash
and equivalents
|
$ | 201,829 | ||
Prepaid
expenses
|
3,224 | |||
Deferred
tax asset
|
11,730 | |||
Dealer
loans receivable – current portion
|
1,057,520 | |||
Note
receivable – related party – current portion
|
41,258 | |||
Total
Current Assets
|
1,315,561 | |||
Property
and equipment, net
|
92,476 | |||
Other
Assets
|
||||
Dealer
loans receivable, net
|
497,656 | |||
Note
receivable – related party
|
114,025 | |||
Total
Other Assets
|
611,681 | |||
TOTAL
ASSETS
|
$ | 2,019,718 | ||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||
Liabilities
|
||||
Current
Liabilities
|
||||
Accounts
payable
|
$ | 33,369 | ||
Accrued
expenses
|
17,088 | |||
Notes
payable – related parties
|
54,350 | |||
Line
of credit
|
1,702,383 | |||
Total
Liabilities
|
1,807,190 | |||
Stockholders’
Equity
|
||||
Common
Stock, $.0001 par value, 100,000,000 shares authorized, 30,125,000 shares
issued and outstanding
|
3,013 | |||
Preferred
Stock, no par value, 5,000,000 shares authorized, -0- shares issued
and outstanding
|
0 | |||
Additional
paid-in capital
|
227,912 | |||
Stock
options and warrants
|
4,373 | |||
Accumulated
Deficit
|
(22,770 | ) | ||
Total
Stockholders’ Equity
|
212,528 | |||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 2,019,718 |
See
accompanying notes to the consolidated financial statements.
F-1
LENDER
TO LENDER FRANCHISE, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF OPERATIONS (UNAUDITED)
FOR
THE PERIOD FROM JULY 15, 2010 (INCEPTION) TO SEPTEMBER 30, 2010
REVENUES
|
||||
Interest
and fee collections
|
$ | 117,676 | ||
Dealer
administrative fees
|
7,041 | |||
TOTAL
NET REVENUES
|
124,717 | |||
EXPENSES
|
||||
Salaries
and wages
|
61,349 | |||
Professional
fees
|
52,452 | |||
Stock-based
compensation
|
4,373 | |||
General
and administrative expenses
|
28,306 | |||
TOTAL
EXPENSES
|
146,480 | |||
LOSS
FROM OPERATIONS
|
(21,763 | ) | ||
OTHER
INCOME (EXPENSE)
|
||||
Rental
income
|
500 | |||
Interest
expense
|
(13,237 | ) | ||
TOTAL
OTHER INCOME (EXPENSE)
|
(12,737 | ) | ||
LOSS
BEFORE BENEFIT FOR INCOME TAXES
|
(34,500 | ) | ||
BENEFIT
FOR INCOME TAXES
|
(11,730 | ) | ||
NET
LOSS
|
$ | (22,770 | ) | |
NET
LOSS PER SHARE: BASIC AND DILUTED
|
$ | (0.00 | ) | |
WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED
|
19,232,372 |
See
accompanying notes to the consolidated financial statements.
F-2
LENDER
TO LENDER FRANCHISE, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)
PERIOD
FROM JULY 15, 2010 (INCEPTION) TO SEPTEMBER 30, 2010
Common Stock
|
Additional
paid-in
|
Stock options
and
|
Deficit
accumulated
during the
development
|
|||||||||||||||||||||
Shares
|
Amount
|
capital
|
warrants
|
Stage
|
Total
|
|||||||||||||||||||
Inception,
July 15, 2010
|
0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||
Issuance
of founder shares for
business interests @ $0.0001 (par value)
|
30,000,000 | 3,000 | 202,925 | - | - | 205,925 | ||||||||||||||||||
Issuance
of shares for cash in private placement
|
125,000 | 13 | 24,987 | - | - | 25,000 | ||||||||||||||||||
Issuance
of warrants and options
|
- | - | - | 4,373 | - | 4,373 | ||||||||||||||||||
Net
loss for the period ended September 30, 2010
|
- | - | - | - | (22,770 | ) | (22,770 | ) | ||||||||||||||||
Balance,
September 30, 2010
|
30,125,000 | $ | 3,013 | $ | 227,912 | $ | 4,373 | $ | (22,770 | ) | $ | 212,528 |
See
accompanying notes to the consolidated financial statements.
F-3
LENDER
TO LENDER FRANCHISE, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENT OF CASH FLOWS (UNAUDITED)
PERIOD
FROM JULY 15, 2010 (INCEPTION) TO SEPTEMBER 30, 2010
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||
Net
loss for the period
|
$ | (22,770 | ) | |
Change
in non-cash working capital items
|
||||
Depreciation
|
7,454 | |||
Stock-based
compensation
|
4,373 | |||
Changes
in assets and liabilities:
|
||||
(Increase)
in prepaid expenses
|
118 | |||
(Increase)
in deferred tax asset
|
(11,730 | ) | ||
Increase
(decrease) in accounts payable
|
(28,305 | ) | ||
Increase
in accounts payable – related party
|
44,084 | |||
Increase
in accrued expenses
|
11,023 | |||
CASH
FLOWS USED BY OPERATING ACTIVITIES
|
4,247 | |||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||
Advances
on dealer loans
|
(45,210 | ) | ||
Payments
received on dealer loans
|
246,938 | |||
Payments
received on notes receivable – related party
|
28,862 | |||
Cash
acquired in acquisition of subsidiaries
|
106,992 | |||
CASH
FLOWS PROVIDED BY INVESTING ACTIVITIES
|
337,582 | |||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||
Proceeds
from issuance of common stock
|
25,000 | |||
Payments
on line of credit
|
(165,000 | ) | ||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
(140,000 | ) | ||
NET
INCREASE IN CASH
|
201,829 | |||
Cash,
beginning of period
|
0 | |||
Cash,
end of period
|
$ | 201,829 | ||
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
||||
Interest
paid
|
$ | 9,021 | ||
Income
taxes paid
|
$ | 0 | ||
SUPPLEMENTAL
NON-CASH INVESTING AND FINANCING INFORMATION:
|
||||
Shares
issued for acquisition of subsidiaries
|
$ | 205,925 |
See
accompanying notes to the consolidated financial
statements.
F-4
LENDER
TO LENDER FRANCHISE, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2010
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of
Business
Lender to
Lender Franchise, Inc. (“Lender”) was incorporated in Florida on July 15, 2010.
The articles of incorporation were amended on July 31, 2010. The
company acquired two entities Lender to Lender Franchise System, Inc. and Lender
to Lender Financing, Inc. on August 12, 2010. They primarily provide
auto loans to consumers through a network of automobile dealers (“dealers”) and
they sell and provide services to franchises that provide auto loans to
consumers through a network of dealers.
Basis of
Presentation
The
accompanying unaudited interim consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America and the rules of the Securities and Exchange Commission
(“SEC”), and should be read in conjunction with the audited financial statements
and notes thereto contained in the Company’s Form S-1 filed with the SEC as of
and for the period ended July 31, 2010. In the opinion of management,
all adjustments necessary for the financial statements to be not misleading for
the interim periods presented have been reflected herein. The results of
operations for interim periods are not necessarily indicative of the results to
be expected for the full year.
Accounting
Basis
The
Company uses the accrual basis of accounting and accounting principles generally
accepted in the United States of America (“GAAP” accounting). The
Company has adopted a December 31 fiscal year end.
Principles of
Combination
The
accompanying combined financial statements include the accounts of Lender to
Lender Financing, Inc. and Lender to Lender Franchise System,
Inc. All significant inter-company transactions and balances have
been eliminated in preparation of the combined financial
statements.
Cash and Cash
Equivalents
Lender
considers all highly liquid investments with maturities of three months or less
to be cash equivalents. At September 30, 2010, the Company had
$201,829 of cash.
Fair Value of Financial
Instruments
The
Company’s financial instruments consist of cash and cash equivalents, prepaid
expenses, accounts payable, accounts payable – related party, and accrued
expenses. The carrying amount of these financial instruments approximates fair
value due either to length of maturity or interest rates that approximate
prevailing market rates unless otherwise disclosed in these financial
statements.
Income
Taxes
Income
taxes are computed using the asset and liability method. Under the
asset and liability method, deferred income tax assets and liabilities are
determined based on the differences between the financial reporting and tax
bases of assets and liabilities and are measured using the currently enacted tax
rates and laws. A valuation allowance is provided for the amount of
deferred tax assets that, based on available evidence, are not expected to be
realized.
Use of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date the financial statements and the
reported amount of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
F-5
LENDER
TO LENDER FRANCHISE, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2010
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basic Income (Loss) Per
Share
Basic
income (loss) per share is calculated by dividing the Company’s net loss
applicable to common shareholders by the weighted average number of common
shares during the period. Diluted earnings per share is calculated by dividing
the Company’s net income available to common shareholders by the diluted
weighted average number of shares outstanding during the year. The diluted
weighted average number of shares outstanding is the basic weighted number of
shares adjusted for any potentially dilutive debt or equity. As of September 30,
2010 there are 330,550 stock warrants and 1,060,000 stock options that have been
issued.
Advertising and Promotional
Costs
Advertising
and promotional costs are expensed as incurred. Advertising and
promotional expenses were $1,924 for the period ended September 30,
2010.
Stock-Based
Compensation
Stock-based
compensation is accounted for at fair value in accordance with SFAS No. 123 and
123 (R) (ASC 718). The Company has adopted an Equity Incentive Plan
and issued 1,060,000 common stock options as of September 30,
2010. The Company has issued warrants to purchase up to 330,050
shares of common stock. See Note 10.
Recent Accounting
Pronouncements
Lender
does not expect the adoption of recently issued accounting pronouncements to
have a significant impact on the Company’s results of operations, financial
position or cash flow.
NOTE
2 – PREPAID EXPENSES
Prepaid
expenses consisted of the following as of September 30, 2010:
Prepaid
insurance
|
$ | 316 | ||
Prepaid
Michigan business tax
|
2,908 | |||
Total
Prepaid expenses
|
$ | 3 ,224 |
NOTE
3 – PROPERTY AND EQUIPMENT
The
Company owned property and equipment, recorded at cost, which consisted of the
following at September 30, 2010:
Computer
equipment
|
$ | 25,585 | ||
Automobiles
|
103,992 | |||
Furniture
and fixtures
|
1,700 | |||
Software
|
4,189 | |||
Machinery
and equipment
|
3,732 | |||
Office
equipment
|
2,380 | |||
Subtotal
|
141,578 | |||
Less:
Accumulated depreciation
|
(49,102 | ) | ||
Property
and equipment, net
|
$ | 92,476 |
Depreciation
is recorded using the straight-line method over the estimated useful lives of
the assets. The depreciation expense was $7,454 for the period ended
September 30, 2010.
F-6
LENDER
TO LENDER FRANCHISE, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2010
NOTE
4 – DEALER LOANS
The
Company has entered into multiple servicing agreements with dealers, where the
Company advances the dealer a percentage of the face amount of the loan the
dealer makes to its customers and takes assignment of the underlying loan as
collateral. The percentage of the face amount that is advanced is
computed by the Company’s proprietary web based software on a customer by
customer basis. The Company charges a 20% service fee on each payment
collected from the customer; the remaining payment in excess of the service fee
is applied to the loan’s outstanding principal balance. In the event
that collections on a loan exceed the original loan advance, the Company retains
its service fee and the excess balance is due back to the dealer. The
dealers guarantee the collection of the loan advances. Collections in
excess of the advances on one loan may be offset against unpaid advances within
that dealer’s loan pool.
The
Company follows an approach similar to ASC Topic 310 in determining its
allowance for credit losses. The allowance is maintained at an amount that
reduces the net asset value (dealer loan balance less the allowance) to the
discounted value of future cash flows. The allowance for credit
losses is comprised of estimated future collections on the loans to consumers,
less any estimated dealer holdback payments. In estimating future
collections and dealer holdback payments for each nonaffiliated dealer, the
Company considers a dealer’s actual collection and loss data on a static pool
basis and also considers the Company’s historical loss and collection
experience. The Company’s collection forecast for each dealer is
updated monthly and considers the most recent static pool data available for
each dealer.
Cash
flows from any individual dealer loan are often different than estimated cash
flows and dealer loan inception. If such a difference is favorable,
the difference is recognized into income over the life of the dealer loan
through a yield adjustment. If such a difference is unfavorable, a
provision for credit losses is recorded as a current period expense and a
corresponding allowance for credit loss is established. Because
differences between estimated cash flows at inceptions and actual cash flows can
occur often, an allowance is required for a significant portion of the Company’s
dealer loan portfolio. Allowance for credit loss does not necessarily
indicate that a dealer loan is unprofitable, and in recent years very seldom are
cash flows from a dealer loan portfolio insufficient to repay the initial
amounts advance to the dealer. If a positive revision occurs to the
estimated cash flows for a dealer loan pool that has an allowance for credit
loss recorded, the allowance is reversed up to the lesser of the amount of the
positive revision or allowance.
The
following is the detail of the dealer loans receivable as of September 30,
2010:
Gross
dealer loans receivable
|
$ | 1,628,344 | ||
Less:
Unearned fees
|
(47,800 | ) | ||
Less:
Allowance for credit losses
|
(25,368 | ) | ||
Dealer
loans receivable, net
|
$ | 1,555,176 |
NOTE
5 – NOTES RECEIVABLE – RELATED PARTY
As of
September 30, 2010, the Companies were due $155,283 from an employee and various
related entities. The employee note is secured with a term of 30
months at 1% interest. The remaining notes are classified as
long-term on the consolidated balance sheet, as management does not anticipate
repayment within one year.
NOTE
6 – ACCRUED EXPENSES
Accrued
expenses consisted of the following as of September 30, 2010:
Accrued
sales tax
|
$ | 6,711 | ||
Accrued
payroll
|
6,161 | |||
Accrued
interest
|
4,216 | |||
Total
Accrued expenses
|
$ | 17,088 |
F-7
LENDER
TO LENDER FRANCHISE, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2010
NOTE
7 – NOTES PAYABLE – RELATED PARTIES
Lender
has received loans from an officer or the Company to be used for working
capital. The loans are due upon demand, unsecured and non-interest bearing. The
total amount due to the officer was $44,083 as of September 30,
2010.
The
Company also has received loans from an entity under common
control. These amounts are also non-interest bearing, unsecured and
due upon demand. The total amount due to the entity under common
control was $10,267 as of September 30, 2010.
NOTE
8 – LINE OF CREDIT
At
September 30, 2010, the Company had a note payable in the amount of
$1,702,383. The note requires monthly payments of $100,000 plus
interest. The note bears interest at the thirty-day LIBOR plus 5.5%,
is secured by cash held at the bank, accounts receivable, life insurance and is
personally guaranteed by an officer of the Company. The note is
subject to various financial covenants.
NOTE
9 – STOCKHOLDER’S EQUITY
The
Company has 100,000,000 shares of $0.0001 par value common stock and 5,000,000
shares of no par value preferred stock authorized.
During
the period ended September 30, 2010 the Company issued 30,000,000 shares of
common stock to its founder in exchange for 100% interest in Lender to Lender
Financing, Inc. and Lender to Lender Franchise Systems, Inc. The
shares were valued $205,925, which was the equity of the acquired companies as
of August 12, 2010.
The
Company also sold shares of common stock through a private placement during the
period ended September 30, 2010. Lender sold 125,000 shares of common
stock at $0.20 per share for total cash proceeds of $25,000.
As of
September 30, 2010, Lender has 30,125,000 shares of common stock issued and
outstanding.
NOTE
10 – STOCK OPTIONS AND WARRANTS
The
Company issued 330,050 stock warrants and 1,060,000 stock options on August 12,
2010 as part of their Equity Incentive Plan. The Company has accounted for these
warrants and options as equity instruments in accordance with EITF 00-19 (ASC
815-40), Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company’s Own Stock, and as such, will be classified
in stockholders’ equity as they meet the definition of “…indexed to the issuer’s
stock” in EITF 01-06 (ASC 815-40) The Meaning of Indexed to a Company’s Own
Stock. The Company has estimated the fair value of the warrants issued at
$20,765 and the options issued at $66,690, as of the grant dates using the
Black-Scholes option pricing model.
The stock
price at the grant date was determined using the most recent private placement
value since the company’s stock is not currently trading. The volatility was
determined by using an average volatility from four similar companies who have
issued stock options recently. The risk free rate equals the rate currently
available on zero-coupon U.S. government issues with a term equal to the
expected life of the options and warrants.
F-8
LENDER
TO LENDER FRANCHISE, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2010
NOTE
10 – STOCK OPTIONS AND WARRANTS (CONTINUED)
Key
assumptions used by the Company are summarized as follows:
Stock warrants
|
Stock options
|
|||||||
Stock
price at grant date
|
$ | 0.20 | $ | 0.20 | ||||
Exercise
price
|
$ | 1.00 | $ | 1.00 | ||||
Expected
volatility
|
78 | % | 78 | % | ||||
Expected
dividend yield
|
0.00 | % | 0.00 | % | ||||
Risk-free
rate
|
1.48 | % | 1.48 | % | ||||
Expected
term (in years)
|
5.0 | 5.0 |
The
Company will record the expense quarterly over the next five year as the options
and warrants vest equally over a five year period. The amount to be
recorded each quarter will be approximately $4,373. The total amount
recorded as stock –based compensation for the period ended September 30, 2010
was $4,373.
NOTE
11 – INCOME TAXES
As of
September 30, 2010, the Company had a net operating loss of approximately
$34,500 before the benefit for income taxes that may be available to reduce
future years’ taxable income through 2030. Future tax benefits which may arise
as a result of these losses have not been recognized in these financial
statements, as their realization is determined not likely to occur and
accordingly, the Company has recorded a valuation allowance for the deferred tax
asset relating to these tax loss carry-forwards.
The
provision for Federal income tax for the period ended September 30, 2010
consists of the following:
Federal
income tax attributable to:
|
||||
Current
Operations
|
$ | (11,730 | ) | |
Less:
valuation allowance
|
0 | |||
Net
benefit for Federal income taxes
|
$ | (11,730 | ) |
The
cumulative tax effect at the expected rate of 34% of significant items
comprising our net deferred tax amount as of September 30, 2010 is as
follows:
Deferred
tax asset attributable to:
|
||||
Net
operating loss carryover
|
$ | 11,730 | ||
Less:
valuation allowance
|
0 | |||
Net
deferred tax asset
|
$ | 11,730 |
Due to
the change in ownership provisions of the Tax Reform Act of 1986, net operating
loss carry forwards of $34,500 before the benefit for income taxes for Federal
income tax reporting purposes are subject to annual limitations. Should a change
in ownership occur net operating loss carry forwards may be limited as to use in
future years.
NOTE
12 – LEASE COMMITMENT
During
the period ended September 30, 2010, the Company incurred rent expense of $2,600
for their office. The lease agreement requires monthly payments of
$2,600 and expires June 30, 2012. Future minimum payments under the
non-cancelable lease agreement total $54,600 for the period ending June 30,
2012.
F-9
LENDER
TO LENDER FRANCHISE, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2010
NOTE
13– SUBLEASE
During
the period ended September 30, 2010, the Company sublet a portion of their
office to an unrelated third party. The lease is month-to-month with
monthly payments of $500. Rental income totaled $500 for the period
ended September 30, 2010.
NOTE
14 – LIQUIDITY AND GOING CONCERN
Lender
has negative working capital, has incurred losses since inception, and has not
yet received revenues from sales of products or services. These
factors create substantial doubt about the Company’s ability to continue as a
going concern. The financial statements do not include any adjustment
that might be necessary if the Company is unable to continue as a going
concern.
The
ability of Lender to continue as a going concern is dependent on the Company
generating cash from the sale of its common stock and/or obtaining debt
financing and attaining future profitable operations. Management’s
plans include selling its equity securities and obtaining debt financing to fund
its capital requirement and ongoing operations; however, there can be no
assurance the Company will be successful in these efforts.
NOTE
15 – SUBSEQUENT EVENTS
Management
has evaluated subsequent events through November 17, 2010 and has determined it
does not have any material subsequent events to disclose beyond the events
described above.
F-10
UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION.
On August
12, 2010, Lender to Lender Franchise, Inc. completed its acquisition of Lender
to Lender Franchise System, Inc. (“LLFS”) and Lender to Lender Financing, Inc.
(“LLFI”). For accounting purposes, this business combination has been
treated as a stock acquisition with Lender to Lender Franchise, Inc. as the
acquirer. The following unaudited pro forma combined balance sheets
and income statements are based on historical financial statements of the
companies. The unaudited pro forma combined financial statements are
provided for information purposes only. The pro forma financial statements are
not necessarily indicative of what the financial position or results of
operations actually would have been had the acquisition been completed at the
dates indicated below. In addition, the unaudited pro forma combined
financial statements do not purport to project the future financial position or
operating results of the combined company. The unaudited pro forma
combined financial information has been prepared in accordance with the rules
and regulations of the Securities and Exchange Commission. For pro forma
purposes:
•
|
The
Unaudited Pro Forma Combined Balance Sheet as of September, 2010 combines
the historical balance sheets of the companies as of September 30, 2010,
giving effect to the acquisitions as if they had occurred on January 1,
2010.
|
•
|
The
Unaudited Pro Forma Combined Income Statements for the period from July
15, 2010 (Inception) to September 30, 2010 and for the nine months ended
September 30, 2010 combines the historical income statements of the
companies for the indicated periods, giving effect to the acquisitions as
if they had occurred on January 1,
2010.
|
LENDER
TO LENDER FRANCHISE, INC.
TABLE
OF CONTENTS
SEPTEMBER
30, 2010
Pro
Forma Combined Balance Sheets as of September, 2010
(unaudited)
|
2
|
Pro
Forma Combined Statements of Operations for the period from July 15, 2010
(Inception) to September 30, 2010 and for the nine months ended September
30, 2010 (unaudited)
|
3
|
Notes
to the Pro Forma Adjustments
|
4
|
LENDER
TO LENDER FRANCHISE, INC.
PRO
FORMA COMBINED BALANCE SHEETS (unaudited)
AS
OF SEPTEMBER 30, 2010
Lender to
Lender
Franchise, Inc.
(September 30,
2010)
|
Lender to
Lender
Financing, Inc.
(September 30,
2010)
|
Lender to
Lender
Franchise
System, Inc.
(September 30,
2010)
|
Eliminations
|
Total
|
||||||||||||||||
ASSETS
|
||||||||||||||||||||
Current
Assets
|
||||||||||||||||||||
Cash
and cash equivalents
|
$ | 61,478 | $ | 132,376 | $ | 7,975 | $ | 201,829 | ||||||||||||
Prepaid
expenses and taxes
|
0 | 3,224 | 0 | 3,224 | ||||||||||||||||
Investment
in Subsidiaries
|
125,576 | 0 | 0 | 125,576 | ||||||||||||||||
Total
Current Assets
|
187,054 | 135,600 | 7,975 | 330,629 | ||||||||||||||||
Property
and Equipment, Net
|
0 | 91,756 | 720 | 92,476 | ||||||||||||||||
Other
Assets
|
||||||||||||||||||||
Dealer
Loans
|
0 | 1,555,176 | 0 | 1,555,176 | ||||||||||||||||
Note
receivable – related party
|
0 | 240,339 | 0 | (85,144 | )a | 155,195 | ||||||||||||||
Total
Other Assets
|
0 | 1,795,515 | 0 | 1,710,371 | ||||||||||||||||
TOTAL
ASSETS
|
$ | 187,054 | $ | 2,022,871 | $ | 8,695 | $ | 2,133,476 | ||||||||||||
LIABILITIES
AND STOCKHOLDER’S EQUITY (DEFICIT)
|
||||||||||||||||||||
Current
Liabilities
|
||||||||||||||||||||
Accounts
payable
|
$ | 10,792 | $ | 18,577 | $ | 0 | $ | 29,369 | ||||||||||||
Accrued
expenses and taxes
|
4,000 | 17,088 | 0 | 21,088 | ||||||||||||||||
Notes
payable – related party
|
44,083 | 0 | 95,411 | (85,144 | )a | 54,350 | ||||||||||||||
Notes
payable – current portion
|
0 | 1,702,383 | 0 | 1,702,383 | ||||||||||||||||
Total
Current Liabilities
|
58,875 | 1,738,048 | 95,411 | 1,807,190 | ||||||||||||||||
STOCKHOLDER’S
EQUITY (DEFICIT)
|
||||||||||||||||||||
Common
stock
|
3,013 | 0 | 0 | 3,013 | ||||||||||||||||
Additional
paid in capital
|
147,563 | 0 | 0 | 183,189 | b | 330,752 | ||||||||||||||
(264,613 | )c | |||||||||||||||||||
Retained
earnings and Member’s equity
|
(22,397 | ) | 284,823 | (86,716 | ) | 81,424 | c | (7,479 | ) | |||||||||||
Total
Stockholder’s Equity (Deficit)
|
128,179 | 284,823 | (86,716 | ) | 326,286 | |||||||||||||||
TOTAL
LIABILITIES AND STOCKHOLDER’S EQUITY (DEFICIT)
|
$ | 187,054 | $ | 2,022,871 | $ | 8,695 | $ | 2,133,476 |
2
LENDER
TO LENDER FRANCHISE, INC.
PRO
FORMA COMBINED STATEMENTS OF OPERATIONS (unaudited)
FOR
THE PERIOD FROM JULY 15, 2010 (INCEPTION) TO SEPTEMBER 30, 2010
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2010
Lender to
Lender
Franchise,
Inc. (Inception
to September
30, 2010)
|
Lender to
Lender
Financing,
Inc. (Nine
months ended
September
30, 2010)
|
Lender to
Lender
Franchise
System, Inc.
(Nine months
ended
September
30, 2010)
|
Totals
|
|||||||||||||
GROSS
REVENUES
|
$ | 0 | $ | 1,074,164 | $ | 0 | $ | 1,074,164 | ||||||||
COST
OF GOODS SOLD
|
0 | 90 | 0 | 90 | ||||||||||||
GROSS
PROFIT
|
0 | 1,074,074 | 0 | 1,074,074 | ||||||||||||
OPERATING
EXPENSES
|
22,397 | 934,715 | 4,052 | 961,164 | ||||||||||||
INCOME
(LOSS) FROM OPERATIONS
|
(22,397 | ) | 139,359 | (4,052 | ) | 112,910 | ||||||||||
OTHER
INCOME (EXPENSE)
|
0 | 4,500 | (1,240 | ) | 3,260 | |||||||||||
INCOME
(LOSS) BEFORE PROVISION FOR INCOME TAXES
|
(22,397 | ) | 143,859 | (5,292 | ) | 116,170 | ||||||||||
PROVISION
FOR INCOME TAXES
|
0 | (11,885 | ) | 0 | (11,885 | ) | ||||||||||
NET
PROFIT (LOSS)
|
$ | (22,397 | ) | $ | 131,974 | $ | (5,292 | ) | $ | 104,285 |
3
LENDER
TO LENDER FRANCHISE, INC.
NOTES
TO THE PRO FORMA ADJUSTMENTS (unaudited)
SEPTEMBER
30, 2010
(a) Elimination of
intercompany notes receivable and payable
(b) Issuance of 30,000,000
shares of $.0001 par value common stock of Lender to Lender Franchise, Inc. in
exchange for 100% ownership of Lender to Lender Financing, Inc. and Lender to
Lender Franchise System, Inc as of January 1, 2010.
(c) Elimination of Lender to
Lender Financing, Inc. and Lender to Lender Franchise System, Inc. shareholder’s
and member’s equity (deficit) in exchange for shares of Lender to Lender
Franchise, Inc as of January 1, 2010.
4
LENDER
TO LENDER FRANCHISE, INC.
(A
DEVELOPMENT STAGE COMPANY)
FINANCIAL
STATEMENTS
JULY
31, 2010
LENDER
TO LENDER FRANCHISE, INC.
(A
DEVELOPMENT STAGE COMPANY)
TABLE
OF CONTENTS
JULY
31, 2010
Report
of Independent Registered Public Accounting Firm
|
F
- 1
|
Balance
Sheet as of July 31, 2010
|
F
- 2
|
Statement
of Operations for the period from July 15, 2010 (Date of Inception) to
July 31, 2010
|
F
- 3
|
Statement
of Stockholder’s Deficit as of July 31, 2010
|
F
- 4
|
Statement
of Cash Flows for the period from July 15, 2010 (Date of Inception) to
July 31, 2010
|
F
- 5
|
Notes
to Financial Statements
|
F
- 6 – F - 9
|
Silberstein Ungar, PLLC CPAs and Business
Advisors
Phone
(248) 203-0080
Fax (248)
281-0940
30600
Telegraph Road, Suite 2175
Bingham
Farms, MI 48025-4586
www.sucpas.com
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Boards of Directors
Lender to
Lender Franchise, Inc.
Chesterfield
Township, MI
We have
audited the accompanying balance sheet of Lender to Lender Franchise, Inc., as
of July 31, 2010, and the related statements of operations, stockholder’s
deficit, and cash flows for the period July 15, 2010 (date of inception) to July
31, 2010. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audit.
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 has determined that it 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 includes examining on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Lender to Lender Franchise, Inc.,
as of July 31, 2010 and the results of their operations and cash flows for the
period from July 15, 2010 (date of inception) to July 31, 2010, in conformity
with accounting principles generally accepted in the United States.
The
accompanying financial statements have been prepared assuming that Lender to
Lender Franchise, Inc. will continue as a going concern. As discussed
in Note 6 to the financial statements, the Company has incurred losses from
operations, has negative working capital and is in need of additional capital to
grow its operations so that it can become profitable. These factors
raise substantial doubt about the Company’s ability to continue as a going
concern. Management’s plans with regard to these matters are
described in Note 6. The accompanying financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Silberstein Ungar, PLLC
|
|
Silberstein
Ungar, PLLC
|
|
Bingham
Farms, Michigan
|
|
August
31, 2010
|
F-1
LENDER
TO LENDER FRANCHISE, INC.
(A
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEET
AS
OF JULY 31, 2010
July 31, 2010
|
||||
ASSETS
|
||||
Current
Assets
|
||||
Cash
and equivalents
|
$ | 0 | ||
Prepaid
expenses
|
6,262 | |||
Stock
subscription receivable
|
3,000 | |||
TOTAL
ASSETS
|
$ | 9,262 | ||
LIABILITIES
AND STOCKHOLDER’S DEFICIT
|
||||
Liabilities
|
||||
Current
Liabilities
|
||||
Accrued
expenses
|
$ | 4,000 | ||
Loan
payable - related party
|
7,570 | |||
Total
Liabilities
|
11,570 | |||
Stockholder’s
Deficit
|
||||
Common
Stock, $.0001 par value, 100,000,000 shares authorized, 30,000,000 shares
issued and outstanding
|
3,000 | |||
Preferred
Stock, no par value, 5,000,000 shares authorized, -0- shares issued and
outstanding
|
0 | |||
Additional
paid-in capital
|
0 | |||
Deficit
accumulated during the development stage
|
(5,308 | ) | ||
Total
Stockholder’s Deficit
|
(2,308 | ) | ||
TOTAL
LIABILITIES AND STOCKHOLDER’S DEFICIT
|
$ | 9,262 |
See
accompanying notes to financial statements.
F-2
LENDER
TO LENDER FRANCHISE, INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF OPERATIONS
PERIOD
FROM JULY 15, 2010 (INCEPTION) TO JULY 31, 2010
Period from
July 15, 2010
(Inception)
to July 31,
2010
|
||||
REVENUES
|
$ | 0 | ||
EXPENSES
|
||||
Incorporation
costs
|
70 | |||
Professional
fees
|
5,238 | |||
TOTAL
EXPENSES
|
5,308 | |||
LOSS
FROM OPERATIONS
|
(5,308 | ) | ||
PROVISION
FOR INCOME TAXES
|
0 | |||
NET
LOSS
|
$ | (5,308 | ) | |
NET
LOSS PER SHARE: BASIC AND DILUTED
|
$ | (0.00 | ) | |
WEIGHTED
AVERAGE NUMBER OF SHARES OUTSTANDING: BASIC AND DILUTED
|
30,000,000 |
See
accompanying notes to financial statements.
F-3
LENDER
TO LENDER FRANCHISE, INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF STOCKHOLDER’S DEFICIT
PERIOD
FROM JULY 15, 2010 (INCEPTION) TO JULY 31, 2010
Common Stock
|
Additional
paid-in
|
Deficit
accumulated
during the
development
|
||||||||||||||||||
Shares
|
Amount
|
capital
|
stage
|
Total
|
||||||||||||||||
Inception,
July 15, 2010
|
0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||
Issuance
of founder shares for
cash @ $0.0001 (par value)
|
30,000,000 | 3,000 | - | - | 3,000 | |||||||||||||||
Net
loss for the period ended July 31, 2010
|
- | - | - | (5,308 | ) | (5,308 | ) | |||||||||||||
Balance,
July 31, 2010
|
30,000,000 | $ | 3,000 | $ | 0 | $ | (5,308 | ) | $ | (2,308 | ) |
See
accompanying notes to financial statements.
F-4
LENDER
TO LENDER FRANCHISE, INC.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENT
OF CASH FLOWS
PERIOD
FROM JULY 15, 2010 (INCEPTION) TO JULY 31, 2010
Period from
July 15, 2010
(Inception) to
July 31, 2010
|
||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||
Net
loss for the period
|
$ | (5,308 | ) | |
Change
in non-cash working capital items
|
||||
Changes
in assets and liabilities:
|
||||
(Increase)
in prepaid expenses
|
(6,262 | ) | ||
Increase
in accrued expenses
|
4,000 | |||
CASH
FLOWS USED BY OPERATING ACTIVITIES
|
(7,570 | ) | ||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||
Loan
received from related party
|
7,570 | |||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
7,570 | |||
NET
INCREASE (DECREASE) IN CASH
|
0 | |||
Cash,
beginning of period
|
0 | |||
Cash,
end of period
|
$ | 0 | ||
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
||||
Interest
paid
|
$ | 0 | ||
Income
taxes paid
|
$ | 0 | ||
SUPPLEMENTAL
NON-CASH INVESTING AND FINANCING INFORMATION:
|
||||
Shares
issued for subscription receivable
|
$ | 3,000 |
See
accompanying notes to financial statements.
F-5
LENDER
TO LENDER FRANCHISE, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO THE FINANCIAL STATEMENTS
JULY
31, 2010
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of
Business
Lender to
Lender Franchise, Inc. (“Lender”) is a development stage company and was
incorporated in Florida on July 15, 2010. The articles of incorporation were
amended on July 31, 2010. The company intends to acquire two entities
currently controlled by its sole shareholder that primarily provide auto loans
to consumers through a network of automobile dealers and that sell and provide
services to franchises that provide auto loans to consumers through a network of
dealers.
Development Stage
Company
The
accompanying financial statements have been prepared in accordance with
generally accepted accounting principles related to development-stage
companies. A development-stage company is one in which planned
principal operations have not commenced or if its operations have commenced,
there has been no significant revenues there from.
Basis of
Presentation
The
financial statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States of America and are
presented in US dollars.
Accounting
Basis
The
Company uses the accrual basis of accounting and accounting principles generally
accepted in the United States of America
(“GAAP” accounting). The Company has adopted a December 31
fiscal year end.
Cash and Cash
Equivalents
Lender
considers all highly liquid investments with maturities of three months or less
to be cash equivalents. At July 31, 2010, the Company had $0 of
cash.
Fair Value of Financial
Instruments
The
Company’s financial instruments consist of cash and cash equivalents, stock
subscriptions receivable, accrued expenses and loans payable to a related party.
The carrying amount of these financial instruments approximates fair value due
either to length of maturity or interest rates that approximate prevailing
market rates unless otherwise disclosed in these financial
statements.
Income
Taxes
Income
taxes are computed using the asset and liability method. Under the
asset and liability method, deferred income tax assets and liabilities are
determined based on the differences between the financial reporting and tax
bases of assets and liabilities and are measured using the currently enacted tax
rates and laws. A valuation allowance is provided for the amount of
deferred tax assets that, based on available evidence, are not expected to be
realized.
Revenue
Recognition
The
Company recognizes revenue when products are fully delivered or services have
been provided and collection is reasonably assured.
F-6
LENDER
TO LENDER FRANCHISE, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO THE FINANCIAL STATEMENTS
JULY
31, 2010
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date the financial statements and the
reported amount of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Basic Income (Loss) Per
Share
Basic
income (loss) per share is calculated by dividing the Company’s net loss
applicable to common shareholders by the weighted average number of common
shares during the period. Diluted earnings per share is calculated by dividing
the Company’s net income available to common shareholders by the diluted
weighted average number of shares outstanding during the year. The diluted
weighted average number of shares outstanding is the basic weighted number of
shares adjusted for any potentially dilutive debt or equity. There are no such
common stock equivalents outstanding as of July 31, 2010.
Stock-Based
Compensation
Stock-based
compensation is accounted for at fair value in accordance with SFAS No. 123 and
123 (R) (ASC 718). To date, the Company has not adopted a stock
option plan and has not granted any stock options. As of July 31, 2010, the
Company has not issued any stock-based payments to its employees.
Recent Accounting
Pronouncements
Lender
does not expect the adoption of recently issued accounting pronouncements to
have a significant impact on the Company’s results of operations, financial
position or cash flow.
NOTE
2 – PREPAID EXPENSES
Prepaid
expenses consisted of the balance of a retainer paid for legal services during
the period ended July 31, 2010.
NOTE
2 – ACCRUED EXPENSES
Accrued
expenses at July 31, 2010 consisted of amounts owed to the Company’s outside
independent auditors.
NOTE
3 – LOAN PAYABLE – RELATED PARTY
The
Company has received a loan from a related party to be used for working
capital. The loans are due upon demand, non-interest bearing, and
unsecured. The balance due on the loan was $7,570 as of July 31,
2010.
F-7
LENDER
TO LENDER FRANCHISE, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO THE FINANCIAL STATEMENTS
JULY
31, 2010
NOTE
4 – STOCKHOLDER’S EQUITY
The
Company has 100,000,000 shares of $0.0001 par value common stock and 5,000,000
shares of no par value preferred stock authorized.
During
the period ended July 31, 2010 the Company issued 30,000,000 shares of common
stock to its founder at $0.0001 per share for a subscription receivable of
$3,000. The funds were collected in August 2010.
As of
July 31, 2010, Lender has 30,000,000 shares of common stock issued and
outstanding.
NOTE
5 – INCOME TAXES
As of
July 31, 2010, the Company had net operating loss carry forwards of
approximately $5,308 that may be available to reduce future years’ taxable
income through 2030. Future tax benefits which may arise as a result of these
losses have not been recognized in these financial statements, as their
realization is determined not likely to occur and accordingly, the Company has
recorded a valuation allowance for the deferred tax asset relating to these tax
loss carry-forwards.
The
provision for Federal income tax consists of the following:
July 31, 2010
|
||||
Refundable
Federal income tax attributable to:
|
||||
Current
Operations
|
$ | 1,802 | ||
Less:
valuation allowance
|
(1,802 | ) | ||
Net
provision for Federal income taxes
|
$ | 0 |
The
cumulative tax effect at the expected rate of 34% of significant items
comprising our net deferred tax amount is as follows:
July 31, 2010
|
||||
Deferred
tax asset attributable to:
|
||||
Net
operating loss carryover
|
$ | 1,802 | ||
Less:
valuation allowance
|
(1,802 | ) | ||
Net
deferred tax asset
|
$ | 0 |
Due to
the change in ownership provisions of the Tax Reform Act of 1986, net operating
loss carry forwards of $5,308 for Federal income tax reporting purposes are
subject to annual limitations. Should a change in ownership occur net operating
loss carry forwards may be limited as to use in future years.
F-8
LENDER
TO LENDER FRANCHISE, INC.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO THE FINANCIAL STATEMENTS
JULY
31, 2010
NOTE
6 – LIQUIDITY AND GOING CONCERN
Lender
has negative working capital, has incurred losses since inception, and has not
yet received revenues from sales of products or services. These
factors create substantial doubt about the Company’s ability to continue as a
going concern. The financial statements do not include any adjustment
that might be necessary if the Company is unable to continue as a going
concern.
The
ability of Lender to continue as a going concern is dependent on the Company
generating cash from the sale of its common stock and/or obtaining debt
financing and attaining future profitable operations. Management’s
plans include selling its equity securities and obtaining debt financing to fund
its capital requirement and ongoing operations; however, there can be no
assurance the Company will be successful in these efforts.
NOTE
7 – COMMITMENTS AND CONTINGENCIES
Lender
neither owns nor leases any real or personal property. A related party has
provided office services without charge. There is no obligation for
this arrangement to continue. Such costs are immaterial to the
financial statements and accordingly are not reflected herein. The
officers and directors are involved in other business activities and most likely
will become involved in other business activities in the future.
NOTE
8 – SUBSEQUENT EVENTS
On August
12, 2010, the Company acquired 100% of Lender to Lender Finance, Inc. and 100%
of Lender to Lender Franchise Systems, Inc. in exchange for 30,000,000 shares of
common stock.
Additionally,
on August 12, 2010, the Company adopted the 2010 Equity Incentive Plan which
created a stock option plan for employees. The Equity Incentive Plan
grants 330,050 warrants of the company’s common stock that will vest in equal
installments over five years with an exercise price of $1.00 per
share.
Additionally,
the Equity Incentive Plan grants 1,060,000 stock options with an exercise price
of $1.00 to various employees.
Management
has evaluated subsequent events through August 31, 2010 and has determined it
does not have any material subsequent events to disclose beyond the events
described above.
F-9
UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION.
On August
12, 2010, Lender to Lender Franchise, Inc. completed its acquisition of Lender
to Lender Franchise System, LLC (“LLFS”) and Lender to Lender
Financing, LLC (“LLFI”). For accounting purposes, this business
combination has been treated as a stock acquisition with Lender to Lender
Franchise, Inc. as the acquirer. The following unaudited pro forma
combined balance sheets and income statements are based on historical financial
statements of the companies. The unaudited pro forma combined financial
statements are provided for information purposes only. The pro forma financial
statements are not necessarily indicative of what the financial position or
results of operations actually would have been had the acquisition been
completed at the dates indicated below. In addition, the unaudited pro
forma combined financial statements do not purport to project the future
financial position or operating results of the combined company. The
unaudited pro forma combined financial information has been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission. For pro forma purposes:
•
|
The
Unaudited Pro Forma Combined Balance Sheet as of July 31, 2010 combines
the historical balance sheets of the companies as of July 31, 2010 and
June 30, 2010, giving effect to the acquisitions/mergers as if they had
occurred on January 1, 2010.
|
•
|
The
Unaudited Pro Forma Combined Income Statements for the period from July
15, 2010 (Inception) to July 31, 2010 and for the six months ended June
30, 2010 combines the historical income statements of the companies for
the indicated periods, giving effect to the acquisitions/mergers as if
they had occurred on January 1,
2010.
|
LENDER
TO LENDER FRANCHISE SYSTEM, L.L.C.
(A
DEVELOPMENT STAGE COMPANY)
FINANCIAL
STATEMENTS
DECEMBER
31, 2009 AND 2008
LENDER
TO LENDER FRANCHISE SYSTEM, L.L.C.
(A
DEVELOPMENT STAGE COMPANY)
TABLE
OF CONTENTS
DECEMBER
31, 2009 and 2008
Auditor’s
Report Letter
|
F
- 1
|
|
Balance
Sheets as of December 31, 2009 and 2008
|
F
- 2
|
|
Statements
of Operations and Member’s Equity (Deficit) for the periods ended December
31, 2009 and 2008 and for the period from July 2, 2008 (inception) to
December 31, 2009
|
F
- 3
|
|
Statements
of Cash Flows for the periods ended December 31, 2009 and 2008 and for the
period from July 2, 2008 (inception) to December 31, 2009
|
F
- 4
|
|
Notes
to Financial Statements
|
F
- 5 – F -
6
|
Silberstein Ungar, PLLC CPAs and Business
Advisors
Phone
(248) 203-0080
Fax (248)
281-0940
30600
Telegraph Road, Suite 2175
Bingham
Farms, MI 48025-4586
www.sucpas.com
To the
Board of Directors
Lender to
Lender Franchise System, L.L.C.
We have audited the accompanying
balance sheets of Lender to Lender Franchise System, L.L.C. as of December 31,
2009 and 2008, and the related statements of operations and member’s equity
(deficit) and cash flows for the periods then ended and for the period from July
2, 2008 (date of inception) through December 31, 2009. These
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance
with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial
statements referred to above presents fairly, in all material respects, the
financial position of Lender to Lender Franchise System, L.L.C., as of December
31, 2009 and 2008, and the results of its operations and its cash flows for the
periods then ended and for the period from July 2, 2008 (date of inception)
through December 31, 2009 in conformity with accounting principles generally
accepted in the United States of America.
/s/ Silberstein Ungar, PLLC
|
|
Silberstein
Ungar, PLLC
|
|
Bingham
Farms, Michigan
|
|
December
14, 2010
|
F-1
LENDER
TO LENDER FRANCHISE SYSTEM, L.L.C.
(A
DEVELOPMENT STAGE COMPANY)
BALANCE
SHEETS
AS
OF DECEMBER 31, 2009 AND 2008
December 31,
2009
|
December 31,
2008
|
|||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
and equivalents
|
$ | 10,007 | $ | 10,002 | ||||
Property
and equipment, net
|
763 | 848 | ||||||
TOTAL
ASSETS
|
$ | 10,770 | $ | 10,850 | ||||
LIABILITIES
AND MEMBER’S EQUITY (DEFICIT)
|
||||||||
Liabilities
|
||||||||
Current
Liabilities
|
||||||||
Notes
payable – related party
|
$ | 90,993 | $ | 0 | ||||
Accrued
interest – related party
|
1,201 | 0 | ||||||
Total
current liabilities
|
92,194 | 0 | ||||||
Member’s
equity (deficit)
|
(81,424 | ) | 10,850 | |||||
TOTAL
LIABILITIES AND MEMBER’S EQUITY (DEFICIT)
|
$ | 10,770 | $ | 10,850 |
See
accompanying notes to the financial statements.
F-2
LENDER
TO LENDER FRANCHISE SYSTEM, L.L.C.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF OPERATIONS AND MEMBER’S EQUITY (DEFICIT)
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
FOR
THE PERIOD FROM JULY 2, 2008 (INCEPTION) TO DECEMBER 31, 2009
From July 2,
2008
|
||||||||||||
(Inception)
|
||||||||||||
December 31,
|
December 31,
|
December 31,
|
||||||||||
2009
|
2008
|
2009
|
||||||||||
GROSS
REVENUES
|
$ | 0 | $ | 0 | $ | 0 | ||||||
OPERATING
EXPENSES
|
18,859 | 61,361 | 80,230 | |||||||||
INCOME
FROM OPERATIONS
|
18,869 | (61,361 | ) | (80,230 | ) | |||||||
OTHER
INCOME (EXPENSE)
|
(1,196 | ) | 2 | (1,194 | ) | |||||||
NET
LOSS
|
(20,065 | ) | (61,359 | ) | (81,424 | ) | ||||||
MEMBER’S
EQUITY (DEFICIT) - BEGINNING OF PERIOD
|
10,850 | 0 | 0 | |||||||||
CONTRIBUTIONS
BY MEMBER
|
0 | 72,209 | 72,209 | |||||||||
DISTRIBUTIONS
TO MEMBER
|
(72,209 | ) | 0 | (72,209 | ) | |||||||
MEMBER’S
EQUITY (DEFICIT) - END OF PERIOD
|
$ | (81,424 | ) | $ | 10,850 | $ | (81,424 | ) |
See
accompanying notes to the financial statements.
F-3
LENDER
TO LENDER FRANCHISE SYSTEM, L.L.C.
(A
DEVELOPMENT STAGE COMPANY)
STATEMENTS
OF CASH FLOWS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
FOR
THE PERIOD FROM JULY 2, 2008 (INCEPTION) TO DECEMBER 31, 2009
From July 2,
2008
|
||||||||||||
(Inception)
|
||||||||||||
December 31,
|
December 31,
|
December 31,
|
||||||||||
2009
|
2008
|
2009
|
||||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
Net
loss for the period
|
$ | (20,065 | ) | $ | (61,359 | ) | $ | (81,424 | ) | |||
Change
in non-cash working capital items
|
||||||||||||
Depreciation
|
85 | 0 | 85 | |||||||||
Change
in assets and liabilities
|
||||||||||||
Increase
in accrued interest – related party
|
1,201 | 0 | 1,201 | |||||||||
CASH
FLOWS USED BY OPERATING ACTIVITIES
|
(18,779 | ) | (61,359 | ) | (80,138 | ) | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||||||
Cash
paid for office equipment
|
0 | (848 | ) | (848 | ) | |||||||
CASH
FLOWS USED IN INVESTING ACTIVITIES
|
0 | (848 | ) | (848 | ) | |||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
Loans
received from related party
|
90,993 | 0 | 90,993 | |||||||||
Contributions
by member
|
0 | 72,209 | 72,209 | |||||||||
Distributions
to member
|
(72,209 | ) | 0 | (72,209 | ) | |||||||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
18,784 | 72,209 | 90,993 | |||||||||
NET
INCREASE IN CASH
|
5 | 10,002 | 10,007 | |||||||||
Cash,
beginning of period
|
10,002 | 0 | 0 | |||||||||
Cash,
end of period
|
$ | 10,007 | $ | 10,002 | $ | 10,007 | ||||||
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
||||||||||||
Interest
paid
|
$ | 0 | $ | 0 | ||||||||
Income
taxes paid
|
$ | 0 | $ | 0 |
See
accompanying notes to the financial statements.
F-4
LENDER
TO LENDER FRANCHISE SYSTEM, L.L.C.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO THE FINANCIAL STATEMENTS
DECEMBER
31, 2009
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of
Business
Lender to
Lender Franchise System, L.L.C. (“Lender” and the “Company”) was organized in
Michigan on July 2, 2008 to offer franchise businesses throughout the United
States of America. The franchises will provide financial services to automobile
dealerships that will assist the dealerships in providing automobile loans to
persons that may not otherwise qualify for auto loans.
Accounting
Basis
The
Company uses the accrual basis of accounting and accounting principles generally
accepted in the United States of America (“GAAP” accounting). The
Company has adopted a December 31 fiscal year end.
Development Stage
Company
The
Company’s planned principle operations have commenced, but there have not been
revenues from operations as of December 31, 2009. Current operations
have been devoted to obtaining franchisees, advertising, developing markets and
administrative functions. The Company is therefore considered a
development stage company under generally accepted accounting
principles. Accordingly, cumulative amounts from the Company’s
inception through December 31, 2009, are shown on the statements of operations
and cash flows.
Cash and Cash
Equivalents
Lender
considers all highly liquid investments with maturities of three months or less
to be cash equivalents. At December 31, 2009 and 2008, respectively,
the Company had $10,007 and $10,002 of cash.
Fair Value of Financial
Instruments
The
Company’s financial instruments consist of cash and cash equivalents, notes
payable – related party, and accrued interest – related party. The carrying
amount of these financial instruments approximates fair value due either to
length of maturity or interest rates that approximate prevailing market rates
unless otherwise disclosed in these financial statements.
Income
Taxes
The
Company is not a tax paying entity for Federal income tax purposes and its
income, losses, and tax credits are reported by its member on his individual
income tax return.
Use of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date the financial statements and the
reported amount of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Advertising and Promotional
Costs
Advertising
and promotional costs are expensed as incurred. Advertising and
promotional expenses were $7,279 for the year ended December 31,
2009.
Revenue
Recognition
Royalty
fees and advertising fees will be a percentage of franchisees monthly gross
receipts, as defined in the franchise agreement. In accordance with ASC
952-605-25, the Company will not recognize income from sales of franchises until
after all material services or conditions relating to the sale have been
substantially performed or satisfied by the Company, substantially all of the
initial services of the Company required by the franchise agreement have been
performed, and no other material conditions or obligations relating to the
determination of substantial performance exist. After both parties
sign the contract, the fee is non-refundable. At December 31, 2009,
the Company had 0 franchises in operation.
F-5
LENDER
TO LENDER FRANCHISE SYSTEM, L.L.C.
(A
DEVELOPMENT STAGE COMPANY)
NOTES
TO THE FINANCIAL STATEMENTS
DECEMBER
31, 2009
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting
Pronouncements
Lender
does not expect the adoption of recently issued accounting pronouncements to
have a significant impact on the Company’s results of operations, financial
position or cash flow.
NOTE
2 – PROPERTY AND EQUIPMENT
The
Company owned property and equipment, recorded at cost, which consisted of the
following at December 31, 2009 and 2008:
2009
|
2008
|
|||||||
Office
furniture
|
$ | 848 | $ | 848 | ||||
Less:
Accumulated depreciation
|
(85 | ) | 0 | |||||
Property
and equipment, net
|
$ | 763 | $ | 848 |
Depreciation
is recorded using the straight-line method over the estimated useful lives of
the assets. The depreciation expense was $85 for the year ended
December 31, 2009.
NOTE
3 – NOTES PAYABLE – RELATED PARTIES
Lender
has received loans from an officer of the Company to be used for working
capital. The loans are due upon demand, unsecured and bear interest at the
mid-term applicable federal rate (2.64% at December 31, 2009). The total amount
due to the officer was $90,993 as of December 31, 2009. Accrued interest payable
as of December 31, 2009 was $1,201.
NOTE
4 – OTHER INCOME (EXPENSE)
Other
income (expense) was comprised of the following:
2009
|
2008
|
|||||||
Interest
income
|
$ | 5 | $ | 2 | ||||
Interest
expense-related party
|
(1,201 | ) | 0 | |||||
Total
other income (expense)
|
$ | (1,196 | ) | $ | 2 |
NOTE
5 – SUBSEQUENT EVENTS
On August
12, 2010, 100% of the outstanding member interest was acquired by Lender to
Lender Franchise, Inc., a related party due to common ownership.
Management
has evaluated subsequent events through December 14, 2010 and has determined it
does not have any material subsequent events to disclose beyond the events
described above.
F-6
LENDER
TO LENDER FINANCING, L.L.C.
FINANCIAL
STATEMENTS
DECEMBER
31, 2009 AND 2008
LENDER
TO LENDER FINANCING, L.L.C.
TABLE
OF CONTENTS
DECEMBER
31, 2009 and 2008
Report
of Independent Registered Public Accounting Firm
|
F
- 1
|
|
Balance
Sheets as of December 31, 2009 and 2008
|
F
- 2
|
|
Statements
of Operations for the years ended December 31, 2009 and
2008
|
F
- 3
|
|
Statement
of Member’s Equity as of December 31, 2009
|
F
- 4
|
|
Statements
of Cash Flows for the years ended December 31, 2009 and
2008
|
F
- 5
|
|
Notes
to Financial Statements
|
|
F
- 6 – F - 9
|
Silberstein Ungar, PLLC CPAs and Business
Advisors
Phone
(248) 203-0080
Fax (248)
281-0940
30600
Telegraph Road, Suite 2175
Bingham
Farms, MI 48025-4586
www.sucpas.com
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors
Lender to
Lender Financing, L.L.C.
27322 23
Mile Rd., Suite 5
Chesterfield
Township, MI 48051
We have
audited the accompanying balance sheets of Lender to Lender Financing, L.L.C.,
as of December 31, 2009 and 2008, and the related statements of operations,
member’s equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The
Company has determined that it is not required to have, nor were we engaged to
perform, an audit of its internal control over financial
reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An
audit includes examining on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Lender to Lender Financing, L.L.C.
as of December 31, 2009 and 2008, and the results of its operations and cash
flows for the years then ended, in conformity with accounting principles
generally accepted in the United States.
/s/ Silberstein Ungar, PLLC
|
|
Silberstein
Ungar, PLLC
|
|
Bingham
Farms, Michigan
|
|
December
14, 2010
|
F-1
LENDER
TO LENDER FINANCING, L.L.C.
BALANCE
SHEETS
AS
OF DECEMBER 31, 2009 AND 2008
December 31,
2009
|
December 31,
2008
|
|||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
and equivalents
|
$ | 179,214 | $ | 155,036 | ||||
Prepaid
expenses
|
12,490 | 0 | ||||||
Dealer
loans receivable – current portion
|
1,090,534 | 487,455 | ||||||
Note
receivable – related party – current portion
|
445,092 | 802,644 | ||||||
Total
Current Assets
|
1,727,330 | 1,445,135 | ||||||
Property
and equipment, net
|
99,290 | 8,351 | ||||||
Other
Assets
|
||||||||
Dealer
loans receivable, net
|
1,207,233 | 2,297,767 | ||||||
Note
receivable – related party
|
226,782 | 524,331 | ||||||
Total
Other Assets
|
1,434,015 | 2,822,098 | ||||||
TOTAL
ASSETS
|
$ | 3,260,635 | $ | 4,275,584 | ||||
LIABILITIES
AND MEMBER’S EQUITY
|
||||||||
Liabilities
|
||||||||
Current
Liabilities
|
||||||||
Accounts
payable
|
$ | 108,037 | $ | 107,760 | ||||
Accrued
expenses
|
15,830 | 26,919 | ||||||
Line
of credit
|
2,967,383 | 4,138,383 | ||||||
Total
Liabilities
|
3,091,250 | 4,273,062 | ||||||
Member’s
Equity
|
169,385 | 2,522 | ||||||
TOTAL
LIABILITIES AND MEMBER’S EQUITY
|
$ | 3,260,635 | $ | 4,275,584 |
See
accompanying notes to the financial statements.
F-2
LENDER
TO LENDER FINANCING, L.L.C.
STATEMENTS
OF OPERATIONS
FOR
THE YEARS ENDED DECEMBER 31, 2009 AND 2008
2009
|
2008
|
|||||||
GROSS
REVENUES
|
$ | 1,161,885 | $ | 481,560 | ||||
COST
OF GOODS SOLD
|
9,234 | 215,664 | ||||||
GROSS
PROFIT
|
1,152,651 | 265,896 | ||||||
OPERATING
EXPENSES
|
900,573 | 1,125,905 | ||||||
INCOME
FROM OPERATIONS
|
252,078 | (860,009 | ) | |||||
OTHER
INCOME
|
6,000 | 0 | ||||||
INCOME
BEFORE INCOME TAX BENEFIT
|
258,078 | (860,009 | ) | |||||
STATE
INCOME TAX BENEFIT
|
4,013 | 0 | ||||||
NET
INCOME
|
$ | 262,091 | $ | (860,009 | ) |
See
accompanying notes to the financial statements.
F-3
LENDER
TO LENDER FINANCING, L.L.C.
STATEMENT
OF MEMBER’S EQUITY
AS
OFDECEMBER 31, 2009
Balance,
January 1, 2008
|
$ | 1,173,972 | ||
Less: Distributions
to member
|
(311,441 | ) | ||
Net
loss for the year ended December 31, 2008
|
(860,009 | ) | ||
Balance,
December 31, 2008
|
2,522 | |||
Less: Distributions
to member
|
(95,228 | ) | ||
Net
income for the year ended December 31, 2009
|
262,091 | |||
Balance,
December 31, 2009
|
$ | 169,385 |
See
accompanying notes to the financial statements.
F-4
LENDER
TO LENDER FINANCING, L.L.C.
STATEMENTS
OF CASH FLOWS
YEARSENDED
DECEMBER 31, 2009 AND 2008
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
income (loss) for the period
|
$ | 262,091 | $ | (860,009 | ) | |||
Change
in non-cash working capital items
|
||||||||
Depreciation
|
675 | 10,261 | ||||||
Changes
in assets and liabilities:
|
||||||||
(Increase)
decrease in prepaid expenses
|
(12,490 | ) | 20,986 | |||||
Increase
in accounts payable
|
277 | 100,796 | ||||||
Increase
(decrease) in accrued expenses
|
(11,089 | ) | 16,085 | |||||
NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
239,464 | (711,881 | ) | |||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Advances
on dealer loans
|
(2,036,445 | ) | (3,114,675 | ) | ||||
Payments
received on dealer loans
|
2,523,901 | 1,554,820 | ||||||
Advances
on notes receivable-related party
|
(480,336 | ) | (934,143 | ) | ||||
Payments
received on notes receivable-related party
|
1,135,436 | 1,290,808 | ||||||
Purchase
of property and equipment
|
(91,614 | ) | (7,341 | ) | ||||
NET
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
1,050,942 | (1,210,531 | ) | |||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Member
draws
|
(95,228 | ) | (311,441 | ) | ||||
Capital
Contributions
|
0 | |||||||
Proceeds
from line of credit
|
0 | 2,312,895 | ||||||
Payments
on line of credit
|
(1,171,000 | ) | 0 | |||||
NET
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
(1,266,228 | ) | 2,001,454 | |||||
NET
INCREASE IN CASH
|
24,178 | 79,042 | ||||||
Cash,
beginning of period
|
155,036 | 75,994 | ||||||
Cash,
end of period
|
$ | 179,214 | $ | 155,036 | ||||
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
||||||||
Interest
paid
|
$ | 178,320 | $ | 197,186 | ||||
Income
taxes paid
|
$ | 0 | $ | 0 |
See
accompanying notes to the financial statements.
F-5
LENDER
TO LENDER FINANCING, L.L.C.
NOTES
TO THE FINANCIAL STATEMENTS
DECEMBER
31, 2009
NOTE
1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of
Business
Lender to
Lender Financing, LLC “the Company” or “Lender” provides auto financing to
consumers. These financing arrangements are offered to a non-affiliated network
of dealerships, which allows consumers, regardless of their credit history, to
purchase a vehicle from the dealership and finance the vehicle through the
Company. These financing arrangements are referred to as “dealer loans”. The
Company’s primary market is Michigan.
Basis of
Presentation
The
financial statements of the Company have been prepared in accordance with
generally accepted accounting principles in the United States of America and are
presented in US dollars.
Accounting
Basis
The
Company uses the accrual basis of accounting and accounting principles generally
accepted in the United States of America (“GAAP” accounting). The
Company has adopted a December 31 fiscal year end.
Cash and Cash
Equivalents
Lender
considers all highly liquid investments with maturities of three months or less
to be cash equivalents. At December 31, 2009 and 2008, the Company
had $179,214 and $155,036 of cash, respectively.
Fair Value of Financial
Instruments
The
Company’s financial instruments consist of cash and cash equivalents, prepaid
expenses, accounts payable and accrued expenses. The carrying amount of these
financial instruments approximates fair value due either to length of maturity
or interest rates that approximate prevailing market rates unless otherwise
disclosed in these financial statements.
Income
Taxes
A
provision for federal income taxes has not been included in the financial
statements since income or loss of the Company is required to be reported by the
member on its income tax return.
Use of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date the financial statements and the
reported amount of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Advertising and Promotional
Costs
Advertising
and promotional costs are expensed as incurred. Advertising and
promotional expenses were $10,971 and $29,713 for the years ended December 31,
2009 and 2008, respectively.
Recent Accounting
Pronouncements
Lender
does not expect the adoption of recently issued accounting pronouncements to
have a significant impact on the Company’s results of operations, financial
position or cash flow.
NOTE
2 – PREPAID EXPENSES
Prepaid
expenses consisted of the following as of December 31, 2009 and
2008:
2009
|
2008
|
|||||||
Prepaid
insurance
|
$ | 197 | $ | 0 | ||||
Prepaid
Michigan business tax
|
12,293 | 0 | ||||||
Total
Prepaid expenses
|
$ | 12,490 | $ | 0 |
F-6
LENDER
TO LENDER FINANCING, L.L.C.
NOTES
TO THE FINANCIAL STATEMENTS
DECEMBER
31, 2009
NOTE
3 – PROPERTY AND EQUIPMENT
The
Company owned property and equipment, recorded at cost, which consisted of the
following at December 31, 2009 and 2008:
2009
|
2008
|
|||||||
Computer
equipment
|
$ | 26,248 | $ | 26,248 | ||||
Automobiles
|
91,614 | 0 | ||||||
Furniture
and fixtures
|
1,700 | 1,700 | ||||||
Software
|
4,189 | 4,189 | ||||||
Machinery
and equipment
|
7,311 | 7,311 | ||||||
Office
equipment
|
5,944 | 5,944 | ||||||
Subtotal
|
137,006 | 45,392 | ||||||
Less:
Accumulated depreciation
|
(37,716 | ) | (37,041 | ) | ||||
Property
and equipment, net
|
$ | 99,290 | $ | 8,351 |
Depreciation
is recorded using the straight-line method over the estimated useful lives of
the assets. The depreciation expense was $675 and $10,261 for the
years ended December 31, 2009 and 2008.
NOTE
4 – DEALER LOANS
The
Company has entered into multiple servicing agreements with dealers, where the
Company advances the dealer a percentage of the face amount of the loan the
dealer makes to its customers and takes assignment of the underlying loan as
collateral. The percentage of the face amount that is advanced is
computed by the Company’s proprietary web based software on a customer by
customer basis. The Company charges a 20% service fee on each payment
collected from the customer; the remaining payment in excess of the service fee
is applied to the loan’s outstanding principal balance. In the event
that collections on a loan exceed the original loan advance, the Company retains
its service fee and the excess balance is due back to the dealer. The
dealers guarantee the collection of the loan advances. Collections in
excess of the advances on one loan may be offset against unpaid advances within
that dealer’s loan pool.
The
Company follows an approach similar to ASC Topic 310 in determining itsallowance
for credit losses. The allowance is maintained at an amount that reduces the net
asset value (dealer loan balance less the allowance) to the discounted value of
future cash flows. The allowance for credit losses is comprised of
estimated future collections on the loans to consumers, less any estimated
dealer holdback payments. In estimating future collections and dealer
holdback payments for each nonaffiliated dealer, the Company considers a
dealer’s actual collection and loss data on a static pool basis and also
considers the Company’s historical loss and collection
experience. The Company’s collection forecast for each dealer is
updated monthly and considers the most recent static pool data available for
each dealer.
Cash
flows from any individual dealer loan are often different than estimated cash
flows and dealer loan inception. If such a difference is favorable,
the difference is recognized into income over the life of the dealer loan
through a yield adjustment. If such a difference is unfavorable, a
provision for credit losses is recorded as a current period expense and a
corresponding allowance for credit loss is established. Because
differences between estimated cash flows at inceptions and actual cash flows can
occur often, an allowance is required for a significant portion of the Company’s
dealer loan portfolio. Allowance for credit loss does not necessarily
indicate that a dealer loan is unprofitable, and in recent years very seldom are
cash flows from a dealer loan portfolio insufficient to repay the initial
amounts advance to the dealer. If a positive revision occurs to the
estimated cash flows for a dealer loan pool that has an allowance for credit
loss recorded, the allowance is reversed up to the lesser of the amount of the
positive revision or allowance.
F-7
LENDER
TO LENDER FINANCING, L.L.C.
NOTES
TO THE FINANCIAL STATEMENTS
DECEMBER
31, 2009
NOTE
4 – DEALER LOANS (CONTINUED)
Dealer
loans at December 31, 2009 and 2008 were comprised of the
following:
2009
|
2008
|
|||||||
Gross
dealer loans receivable
|
$ | 2,526,330 | $ | 3,249,161 | ||||
Less:
Unearned fees
|
(122,894 | ) | (266,859 | ) | ||||
Less:
Allowance for credit losses
|
(105,669 | ) | (197,080 | ) | ||||
Dealer
loans receivable, net
|
$ | 2,297,767 | $ | 2,785,222 |
NOTE
5 – NOTES RECEIVABLE – RELATED PARTY
As of
December 31, 2009, the Company was due $671,874 from various related
entities. The notes for $445,092 are non-interest bearing and secured
by loan receivables. The remaining note of $226,782 is classified as
long-term on the balance sheet, as management does not anticipate repayment
within one year. As of December 31, 2008, the Company was due
$1,326,974 from various related entities. The notes are non-interest bearing and
secured by loan receivables.
NOTE
6 – ACCRUED EXPENSES
Accrued
expenses consisted of the following as of December 31, 2009 and
2008:
2009
|
2008
|
|||||||
Accrued
sales tax
|
$ | 8,785 | $ | 13,259 | ||||
Accrued
payroll
|
7,045 | 4,886 | ||||||
Accrued
interest
|
0 | 8,774 | ||||||
Total
Accrued expenses
|
$ | 15,830 | $ | 26,919 |
NOTE
7 – LINE OF CREDIT
At
December 31, 2009 and 2008, the Company had a note payable in the amount of
$2,967,383 and $4,138,383. In 2009, the note required monthly
payments of $100,000 plus interest. The note bears interest at the
thirty-day LIBOR plus 5.5%, is secured by cash held at the bank, accounts
receivable, life insurance and is personally guaranteed by an officer of the
Company. The note is subject to various financial
covenants. In 2008, borrowings were limited to formulas based on the
Company’s loans receivable. Interest was payable monthly at a rate of
1 percent above the prime rate (3.25% at December 31, 2008). There
were no principal repayments in 2008.
NOTE
8 – LEASE COMMITMENT
During
the years ended December 31, 2009 and 2008, the Company incurred rent expense of
$31,200 and $25,190, respectively, for their office. The lease
agreement requires monthly payments of $2,600 and expires June 30,
2012. Future minimum payments under the non-cancelable lease
agreement total $78,000 through the period ending June 30, 2012.
NOTE
9 – SUBLEASE
During
the year ended December 31, 2009, the Company sublet a portion of their office
to an unrelated third party. The lease is month-to-month with monthly
payments of $500. Rental income totaled $6,000 for the year ended
December 31, 2009.
F-8
LENDER
TO LENDER FINANCING, L.L.C.
NOTES
TO THE FINANCIAL STATEMENTS
DECEMBER
31, 2009
NOTE
10 – SUBSEQUENT EVENTS
Management
has evaluated subsequent events through December 20, 2010 and has determined it
does not have any material subsequent events to disclose beyond the events
described above.
F-9
UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION.
On August
12, 2010, Lender to Lender Franchise, Inc. completed its acquisition of Lender
to Lender Franchise System, LLC (“LLFS”) and Lender to Lender
Financing, LLC (“LLFI”). For accounting purposes, this business
combination has been treated as a stock acquisition with Lender to Lender
Franchise, Inc. as the acquirer. The following unaudited pro forma
combined balance sheets and income statements are based on historical financial
statements of the companies. The unaudited pro forma combined financial
statements are provided for information purposes only. The pro forma financial
statements are not necessarily indicative of what the financial position or
results of operations actually would have been had the acquisition been
completed at the dates indicated below. In addition, the unaudited pro
forma combined financial statements do not purport to project the future
financial position or operating results of the combined company. The
unaudited pro forma combined financial information has been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission. For pro forma purposes:
•
|
The
Unaudited Pro Forma Combined Balance Sheet as of December 31, 2009
combines the historical balance sheets of the companies as of December 31,
2009, giving effect to the acquisitions as if they had occurred on January
1, 2009.
|
•
|
The
Unaudited Pro Forma Combined Income Statements as of December
31, 2009 combines the historical income statements of the companies as of
December 31, 2009, giving effect to the acquisitions as if they had
occurred on January 1, 2009.
|
LENDER
TO LENDER FRANCHISE, INC.
TABLE
OF CONTENTS
DECEMBER
31, 2009
Pro
Forma Combined Balance Sheets as of December 31, 2009
(unaudited)
|
2
|
Pro
Forma Combined Statements of Operations as of December 31, 2009
(unaudited)
|
3
|
Notes
to the Pro Forma Adjustments
|
4
|
LENDER
TO LENDER FRANCHISE, INC.
PRO
FORMA COMBINED BALANCE SHEETS (unaudited)
AS
OF DECEMBER 31, 2009
Lender to
Lender
Franchise, Inc.
|
Lender to
Lender
Financing, LLC
|
Lender to
Lender
Franchise
System, LLC
|
Eliminations
|
Total
|
||||||||||||||||
ASSETS
|
||||||||||||||||||||
Current
Assets
|
||||||||||||||||||||
Cash
and cash equivalents
|
$ | 0 | $ | 179,214 | $ | 10,007 | $ | 189,221 | ||||||||||||
Prepaid
expenses and taxes
|
0 | 12,490 | 0 | 12,490 | ||||||||||||||||
Total
Current Assets
|
0 | 191,704 | 10,007 | 201,711 | ||||||||||||||||
Property
and Equipment, Net
|
0 | 99,290 | 763 | 100,053 | ||||||||||||||||
Other
Assets
|
||||||||||||||||||||
Dealer
Loans
|
0 | 2,297,767 | 0 | 2,297,767 | ||||||||||||||||
Note
receivable – related party
|
0 | 671,874 | 0 | (82,062 | )a | 589,812 | ||||||||||||||
Total
Other Assets
|
0 | 2,969,641 | 0 | 2,887,579 | ||||||||||||||||
TOTAL
ASSETS
|
$ | 0 | $ | 3,260,635 | $ | 10,770 | $ | 3,189,343 | ||||||||||||
LIABILITIES
AND EQUITY (DEFICIT)
|
||||||||||||||||||||
Current
Liabilities
|
||||||||||||||||||||
Accounts
payable
|
$ | 0 | $ | 108,037 | $ | 0 | $ | 108,037 | ||||||||||||
Accrued
expenses and taxes
|
0 | 15,830 | 0 | 15,830 | ||||||||||||||||
Notes
payable – related party
|
0 | 0 | 92,194 | (82,062 | )a | 10,132 | ||||||||||||||
Notes
payable – current portion
|
0 | 2,967,383 | 0 | 2,967,383 | ||||||||||||||||
Total
Current Liabilities
|
0 | 3,091,250 | 92,194 | 3,101,382 | ||||||||||||||||
EQUITY
(DEFICIT)
|
||||||||||||||||||||
Common
stock
|
0 | 0 | 0 | 3,000 | b | 3,000 | ||||||||||||||
Additional
paid in capital
|
0 | 0 | 0 | 84,961 | b | 84,961 | ||||||||||||||
Member’s
equity (deficit)
|
0 | 169,385 | (81,424 | ) | (87,961 | )c | 0 | |||||||||||||
Total
Equity (Deficit)
|
0 | 169,385 | (81,424 | ) | 87,961 | |||||||||||||||
TOTAL
LIABILITIES AND EQUITY (DEFICIT)
|
$ | 0 | $ | 3,260,635 | $ | 10,770 | $ | 3,189,343 |
2
LENDER
TO LENDER FRANCHISE, INC.
PRO
FORMA COMBINED STATEMENTS OF OPERATIONS (unaudited)
FOR
THE YEAR ENDED DECEMBER 31, 2009
Lender to
Lender
Franchise,
Inc.
|
Lender to
Lender
Financing,
LLC
|
Lender to
Lender
Franchise
System, LLC
|
Totals
|
|||||||||||||
GROSS
REVENUES
|
$ | 0 | $ | 1,161,885 | $ | 0 | $ | 1,161,885 | ||||||||
COST
OF GOODS SOLD
|
0 | 9,234 | 0 | 9,234 | ||||||||||||
GROSS
PROFIT
|
0 | 1,152,651 | 0 | 1,152,651 | ||||||||||||
OPERATING
EXPENSES
|
0 | (968,268 | ) | (20,070 | ) | (988,338 | ) | |||||||||
INCOME
(LOSS) FROM OPERATIONS
|
0 | 184,383 | (20,070 | ) | 164,313 | |||||||||||
OTHER
INCOME (EXPENSE)
|
0 | 6,000 | 5 | 6,005 | ||||||||||||
INCOME
(LOSS) BEFORE PROVISION FOR INCOME TAXES
|
0 | 190,383 | (20,065 | ) | 170,318 | |||||||||||
(PROVISION)
BENEFIT FOR INCOME TAXES
|
0 | 4,013 | 0 | 4,013 | ||||||||||||
NET
INCOME (LOSS)
|
$ | 0 | $ | 194,396 | $ | (20,065 | ) | $ | 174,331 |
3
LENDER
TO LENDER FRANCHISE, INC.
NOTES
TO THE PRO FORMA ADJUSTMENTS (unaudited)
DECEMBER
31, 2009
(a) Elimination of
intercompany notes receivable and payable
(b) Issuance of 30,000,000
shares of $.0001 par value common stock of Lender to Lender Franchise, Inc. in
exchange for 100% ownership of Lender to Lender Financing, Inc. and Lender to
Lender Franchise System, Inc.
(c) Elimination of Lender to
Lender Financing, Inc. and Lender to Lender Franchise System, Inc. shareholder’s
and member’s equity (deficit) in exchange for shares of Lender to Lender
Franchise, Inc.
4
UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION.
On August
12, 2010, Lender to Lender Franchise, Inc. completed its acquisition of Lender
to Lender Franchise System, LLC (“LLFS”) and Lender to Lender
Financing, LLC (“LLFI”). For accounting purposes, this business
combination has been treated as a stock acquisition with Lender to Lender
Franchise, Inc. as the acquirer. The following unaudited pro forma
combined balance sheets and income statements are based on historical financial
statements of the companies. The unaudited pro forma combined financial
statements are provided for information purposes only. The pro forma financial
statements are not necessarily indicative of what the financial position or
results of operations actually would have been had the acquisition been
completed at the dates indicated below. In addition, the unaudited pro
forma combined financial statements do not purport to project the future
financial position or operating results of the combined company. The
unaudited pro forma combined financial information has been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission. For pro forma purposes:
•
|
The
Unaudited Pro Forma Combined Balance Sheet as of December 31, 2008
combines the historical balance sheets of the companies as of December 31,
2008, giving effect to the acquisitions as if they had occurred on January
1, 2008.
|
•
|
The
Unaudited Pro Forma Combined Income Statements as of December 31,
2008 combines the historical income statements of the companies as of
December 31, 2008, giving effect to the acquisitions as if they had
occurred on January 1, 2008.
|
LENDER
TO LENDER FRANCHISE, INC.
TABLE
OF CONTENTS
DECEMBER
31, 2008
Pro
Forma Combined Balance Sheets as of December 31, 2008
(unaudited)
|
2
|
Pro
Forma Combined Statements of Operations as of December 31, 2008
(unaudited)
|
3
|
Notes
to the Pro Forma Adjustments
|
4
|
LENDER
TO LENDER FRANCHISE, INC.
PRO
FORMA COMBINED BALANCE SHEETS (unaudited)
AS
OF DECEMBER 31, 2008
Lender to
Lender
Franchise, Inc.
|
Lender to
Lender
Financing, LLC
|
Lender to
Lender
Franchise
System, LLC
|
Eliminations
|
Total
|
||||||||||||||||
ASSETS
|
||||||||||||||||||||
Current
Assets
|
||||||||||||||||||||
Cash
and cash equivalents
|
$ | 0 | $ | 155,036 | $ | 10,002 | $ | 165,038 | ||||||||||||
Prepaid
expenses and taxes
|
0 | 0 | 0 | 0 | ||||||||||||||||
Stock
Subscription Receivable
|
0 | 0 | 0 | 0 | ||||||||||||||||
Total
Current Assets
|
0 | 155,036 | 10,002 | 165,038 | ||||||||||||||||
Property
and Equipment, Net
|
0 | 6,820 | 848 | 7,668 | ||||||||||||||||
Other
Assets
|
||||||||||||||||||||
Dealer
Loans
|
0 | 2,732,468 | 0 | 2,732,468 | ||||||||||||||||
Note
receivable – related party
|
0 | 1,326,974 | 0 | 1,326,974 | ||||||||||||||||
Total
Other Assets
|
0 | 4,059,442 | 0 | 4,059,442 | ||||||||||||||||
TOTAL
ASSETS
|
$ | 0 | $ | 4,221,298 | $ | 10,850 | $ | 4,232,148 | ||||||||||||
LIABILITIES
AND EQUITY (DEFICIT)
|
||||||||||||||||||||
Current
Liabilities
|
||||||||||||||||||||
Accounts
payable
|
$ | 0 | $ | 107,760 | $ | 0 | $ | 107,760 | ||||||||||||
Accrued
expenses and taxes
|
0 | 26,919 | 0 | 26,919 | ||||||||||||||||
Notes
payable – related party
|
0 | 0 | 0 | 0 | ||||||||||||||||
Notes
payable – current portion
|
0 | 4,138,383 | 0 | 4,138,383 | ||||||||||||||||
Total
Current Liabilities
|
0 | 4,273,062 | 0 | 4,273,062 | ||||||||||||||||
EQUITY
(DEFICIT)
|
||||||||||||||||||||
Common
stock
|
0 | 0 | 0 | 3,000 | a | 3,000 | ||||||||||||||
Additional
paid in capital
|
0 | 0 | 0 | 0 | ||||||||||||||||
(3,000 | )b | |||||||||||||||||||
40,914 | b | |||||||||||||||||||
Member’s
equity (deficit)
|
0 | (51,764 | ) | 10,850 | (40,914 | )b | (43,914 | ) | ||||||||||||
Total
Equity (Deficit)
|
0 | (51,764 | ) | 10,850 | (40,914 | ) | ||||||||||||||
TOTAL
LIABILITIES AND EQUITY (DEFICIT)
|
$ | 0 | $ | 4,221,298 | $ | 10,850 | $ | 4,232,148 |
2
LENDER
TO LENDER FRANCHISE, INC.
PRO
FORMA COMBINED STATEMENTS OF OPERATIONS (unaudited)
FOR
THE YEAR ENDED DECEMBER 31, 2008
Lender to
Lender
Franchise,
Inc.
|
Lender to
Lender
Financing,
LLC
|
Lender to
Lender
Franchise
System, LLC
|
Totals
|
|||||||||||||
GROSS
REVENUES
|
$ | 0 | $ | 481,560 | $ | 0 | $ | 481,560 | ||||||||
COST
OF GOODS SOLD
|
0 | 215,664 | 0 | 215,664 | ||||||||||||
GROSS
PROFIT
|
0 | 265,896 | 0 | 265,896 | ||||||||||||
OPERATING
EXPENSES
|
0 | (1,058,209 | ) | (61,361 | ) | (1,119,570 | ) | |||||||||
(LOSS)
FROM OPERATIONS
|
0 | (792,313 | ) | (61,361 | ) | (853,674 | ) | |||||||||
OTHER
INCOME (EXPENSE)
|
0 | 0 | 2 | 2 | ||||||||||||
(LOSS)
BEFORE PROVISION FOR INCOME TAXES
|
0 | (792,313 | ) | (61,359 | ) | (853,672 | ) | |||||||||
PROVISION
FOR INCOME TAXES
|
0 | 0 | 0 | 0 | ||||||||||||
NET
(LOSS)
|
$ | 0 | $ | (792,313 | ) | $ | (61,359 | ) | $ | (853,672 | ) |
3
LENDER
TO LENDER FRANCHISE, INC.
NOTES
TO THE PRO FORMA ADJUSTMENTS (unaudited)
DECEMBER
31, 2008
(a) Issuance of 30,000,000
shares of $.0001 par value common stock of Lender to Lender Franchise, Inc. in
exchange for 100% ownership of Lender to Lender Financing, Inc. and Lender to
Lender Franchise System, Inc.
(b) Elimination of Lender to
Lender Financing, Inc. and Lender to Lender Franchise System, Inc. shareholder’s
and member’s equity (deficit) via dividend distribution in exchange for shares
of Lender to Lender Franchise, Inc.
4
INFORMATION NOT REQUIRED IN
PROSPECTUS
Item
24. Indemnification of Directors and Officers
Our
Bylaws, as amended, provide to the fullest extent permitted by Florida law that
our directors or officers shall not be personally liable to us or our
shareholders for damages for breach of such director's or officer's fiduciary
duty. The effect of this provision of our Articles of Incorporation, as amended,
is to eliminate our rights and our shareholders (through shareholders'
derivative suits on behalf of our company) to recover damages against a director
or officer for breach of the fiduciary duty of care as a director or officer
(including breaches resulting from negligent or grossly negligent behavior),
except under certain situations defined by statute. We believe that the
indemnification provisions in our Articles of Incorporation, as amended, are
necessary to attract and retain qualified persons as directors and
officers.
The
Florida Business Corporation Act provides that a corporation may indemnify a
director, officer, employee or agent made a party to an action by reason of that
fact that he or she was a director, officer employee or agent of the corporation
or was serving at the request of the corporation against expenses actually and
reasonably incurred by him or her in connection with such action if he or she
acted in good faith and in a manner he or she reasonably believed to be in, or
not opposed to, the best interests of the corporation and with respect to any
criminal action, had no reasonable cause to believe his or her conduct was
unlawful.
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 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 and will be governed by the final
adjudication of such issue.
The
following table sets forth an itemization of all estimated expenses, all of
which we will pay, in connection with the issuance and distribution of the
securities being registered:
Amount
|
||||
SEC
registration fee
|
$
|
100.89
|
||
Accounting
fees and expenses
|
$
|
10,000.00
|
||
Legal
fees and expenses
|
$
|
15,000.00
|
||
TOTAL
*
|
$
|
25,100.89
|
*
Estimated
Item
26. Recent Sales of Unregistered Securities
On August
12, 2010, the Company issued an aggregate of 30,000,000 shares of its common
stock to its founder and chief executive officer in exchange for his wholly
owned interests in LLFS and LLFI pursuant to a stock purchase agreement. The
shares were issued pursuant to the exemption from registration provided by
Section 4(2) under the Securities Act. The shares contain a legend restricting
their transferability absent registration or applicable exemption.
On August
12, 2010, the Company issued options and warrants to purchase up to 1,330,050
shares of common stock to nine individuals. These individuals received
information concerning the Company and had the opportunity to ask questions
about the Company. The warrants and options were issued pursuant to an exemption
from registration provided by Section 4(2) of the Securities Act. The warrants
and options contain a legend restricting their transferability absent
registration or applicable exemption.
II-1
During
September 2010, the Company accepted an aggregate of $25,000 from 50 investors
to subscribe for 125,000 of our common shares under a private placement
memorandum. The Company netted $25,000 in proceeds from the
subscription. The shares were issued under the exemption from registration
provided by Section 4(2) under the Securities Act of 1933, as amended.
Twenty-three of the investors were accredited and twenty-seven were
otherwise qualified investors. Each investor received information concerning the
Company prior to making their investment decision. The certificates
representing the shares contain legends restricting transferability absent
registration or applicable exemption.
Purchases
of Equity Securities by the Issuer and Affiliated Purchasers
None.
Number
|
Description
|
|
2.1
|
Stock
Purchase Agreement dated August 12, 2010
|
|
3.1
|
Amended
and Restated Articles of Incorporation of Lender to Lender Franchise,
Inc., dated July 15, 2010
|
|
3.2
|
Bylaws
of Lender to Lender Franchise, Inc.
|
|
5.1
|
Legality
Opinion of Quintairos, Prieto, Wood & Boyer, P.A. (to be filed by
amendment)
|
|
10.1
|
2010
Lender to Lender Franchise, Inc. Equity Incentive Plan
|
|
10.2
|
Chesterfield
Lease Agreement (to be filed by amendment)
|
|
10.3
|
Form
of Option Agreement dated August 12, 2010
|
|
10.4
|
Form
of Warrant Agreement dated August 12, 2010
|
|
10.5
|
Form
of Dealer Service Stand Alone Agreement
|
|
10.6
|
Form
of Dealer Service Pooling Agreement
|
|
10.7
|
Form
of Section 4(2) Subscription Agreement
|
|
14.1
|
Code
of Ethics
|
|
21.1
|
List
of subsidiaries of the Company
|
|
23.1
|
Consent
of Silberstein Ungar, PLLC
|
|
23.2
|
Consent
of Quintairos, Prieto, Wood & Boyer, P.A. (included in Exhibit
5.1)
|
II-2
Item
28. Undertakings
The
undersigned Registrant hereby undertakes:
|
(1)
|
to
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
|
|
(i)
|
to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933 (the "Securities Act");
|
|
(ii)
|
to
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 together, 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 the 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) under the Securities Act if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
and
|
|
(iii)
|
to
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.
|
|
(3)
|
File
a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the
offering.
|
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 Act 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 Act and will be governed by the final adjudication of
such issue.
II-3
In
accordance with the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing on Form S-1 and authorized this registration statement to
be signed on its behalf by the undersigned, in Chesterfield, Michigan on
December 30, 2010.
LENDER TO LENDER FRANCHISE,
INC.
|
|||
By:
|
/s/
Richard Vanderport
|
||
Richard
Vanderport
|
|||
Chief
Executive Officer and
|
|||
Principal
Executive Officer
|
By:
|
/s/
Richard Vanderport
|
||
Richard
Vanderport
|
|||
Principal
Financial Officer and
|
|||
Principal
Accounting Officer
|
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
Signature
|
Title
|
Date
|
||
/s/
Richard Vanderport
|
Principal
Executive Officer,
|
December
30, 2010
|
||
Richard
Vanderport
|
Principal
Financial Officer,
Principal
Accounting Officer and
Director
|
|
II-4