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EX-99.3 - EXHIBIT 99.3 - Upholstery International, Inc. | upholstery_s1a14ex99z3.htm |
EX-5.1 - EXHIBIT 5.1 - Upholstery International, Inc. | upholstery_s1a14ex5z1.htm |
EX-23.1 - EXHIBIT 23.1 - Upholstery International, Inc. | upholstery_s1a14ex23z1.htm |
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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 (2) |
Common Stock for sale by Upholstery International, Inc. | 450,200 | $2.50 | $1,125,500 | $3,864 |
All filing fees payable in connection with the registration of the shares being registered hereby were previously paid in connection with the filing of the Original Registration Statement.
-2- |
Prior to this Offering, no public market has existed for the common stock of Upholstery International, Inc. Upon completion of this Offering, we will attempt to have the shares quoted on the Over the Counter-Bulletin Board ("OTCBB"), operated by FINRA (Financial Industry Regulatory Authority). There is no assurance that the Shares will ever be quoted on the OTCBB. To be quoted on the OTCBB, a market maker must apply to make a market in our common stock. As of the date of this Prospectus, we have not made any arrangement with any market makers to quote our shares.
This is our initial public offering. We are registering a total of 450,200 shares of our common stock for sale by selling shareholders who are considered underwriters. No shares are being registered for sale by the Company. There is no guarantee that a public market will ever develop and you may be unable to sell your shares.
The selling shareholders will sell their shares at a fixed price per share of $2.50 for the duration of this Offering including after the shares become quoted on the OTC markets. We will not receive any proceeds from the sale of the 450,200 shares sold by the selling shareholders. Selling shareholders will receive proceeds of $2.50 per share sold. If all shares being offered by the selling shareholders are sold, selling shareholders will receive net proceeds of $1,125,000. The Company will not receive funds from the sale of shares being offered by selling shareholders. This secondary offering will terminate upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) 365 days from the effective date of this Prospectus.
The company currently has limited business operations. Any investment in the Shares offered herein involves a high degree of risk. You should only purchase Shares if you can afford a complete loss of your investment. Our independent auditors have issued an audit opinion which includes a statement expressing substantial doubt as to our ability to continue as a going concern.
We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") and, as such, may elect to comply with certain reduced public company reporting requirements for future filings.
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. BEFORE INVESTING, YOU SHOULD CAREFULLY READ THIS PROSPECTUS AND, PARTICULARLY, THE RISK FACTORS SECTION, BEGINNING ON PAGE 5.
Neither the U.S. Securities and Exchange Commission ("SEC") nor any state securities division has approved or disapproved these securities, or determined if this Prospectus is current, complete, truthful or accurate. Any representation to the contrary is a criminal offense.
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PART I - INFORMATION REQUIRED IN PROSPECTUS | ||
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Item 10.
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(a) Description of Property | 25 | |
(b) Legal Proceedings | 25 | |
(c) Financial Statements and Supplementary Data | 26 | |
(d) Management’s Discussion and Analysis | 27 | |
(e) Plan of Operations | 32 | |
(f) Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 32 | |
(g) Directors and Executive Officers | 32 | |
(h) Executive Compensation | 33 | |
(i) Security Ownership of Certain Beneficial Owners and Management | 35 | |
(j) Certain Relationships and Related Transactions | 36 | |
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PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
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Item 17. | Undertakings | 40 |
Signatures
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-4- |
Upholstery International, Inc. (the “Company”) through its wholly owned subsidiary Ken’s Custom Upholstery, Inc. (“Ken’s”) operates one retail upholstery store which specialize in the reupholstering of furniture. The company does not sell new furniture at this time but hopes to in the future. The Company was incorporated under the laws of the state of Delaware on November 21, 2013 and Ken’s was formed under the laws of the state of Illinois on January 16, 1986.
The company itself and its officers and directors have no plans to be used as a vehicle for a private company to become a reporting company.
As of December 31, 2014, the Company had $18,955 of cash on hand in the corporate bank account. The Company currently has total liabilities of $555,217. In addition, the Company anticipates incurring costs associated with this offering totaling approximately $35,000.
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- the last day of the fiscal year during which we have total annual gross revenues of $1 billion or more
- the last day of the fiscal year following the fifth anniversary of the completion of this offering
- the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt
- the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, or the Exchange Act.
Following is a brief summary of this Offering. Please see the Plan of Distribution and Terms of the Offering sections for a more detailed description of the terms of the Offering.
Offering
Securities being Offered | 450,200 shares of common stock: which are being offered by the selling shareholders. The selling shareholders offering will terminate upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) 365 days from the effective date of this prospectus. |
Price per share | The selling shareholders will sell their shares at a fixed price per share of $2.50 for the duration of this Offering, including after the shares become quoted on the OTC markets. |
Securities Issued | 19,880,200 shares of common stock are issued and outstanding. |
Offering Proceeds | We will not be receiving proceeds from the offering. |
-6- |
-7- |
UPHOLSTERY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 7,494 | $ | 18,955 | ||||
Barter credits receivable | 17,338 | 15,652 | ||||||
Prepaid expenses | — | — | ||||||
Deferred finance charges | — | — | ||||||
TOTAL CURRENT ASSETS | 24,832 | 34,607 | ||||||
Property and Equipment | 30,251 | 35,168 | ||||||
Security deposits | 3,330 | 3,330 | ||||||
TOTAL ASSETS | $ | 58,413 | $ | 73,105 | ||||
LIABILITIES AND STOCKHOLDERS' (DEFICIT) | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued expenses | $ | 51,043 | $ | 31,897 | ||||
Credit cards payable | 180,696 | 190,151 | ||||||
Customer deposits | 9,590 | 10,206 | ||||||
Loan payable - related party | 125,491 | 131,602 | ||||||
Note payable - related party | 70,000 | 70,000 | ||||||
Loan payable | 44,258 | 48,812 | ||||||
Financing loans | 57,265 | 63,918 | ||||||
Current portion of long-term debt | 8,942 | 8,879 | ||||||
TOTAL CURRENT LIABILITIES | 547,285 | 555,465 | ||||||
Long-term debt | 19,337 | 21,752 | ||||||
TOTAL LIABILITIES | 566,622 | 577,217 | ||||||
STOCKHOLDERS' DEFICIT | ||||||||
Preferred stock, $.0001 par value; 10,000,000 shares authorized | ||||||||
No shares issued and outstanding at December 31, 2013 and 2012 | — | — | ||||||
Common stock, $.0001 par value; 100,000,000 shares authorized | ||||||||
19,901,200 and 19,900,200 shares issued and outstanding at | ||||||||
March 31, 2015 and December 31, 2014 , respectively | 1,990 | 1,990 | ||||||
Additional paid-in capital | 47,460 | 44,960 | ||||||
Accumulated deficit | (557,659 | ) | (551,062 | ) | ||||
Stock subscription receivable | — | — | ||||||
TOTAL STOCKHOLDERS' DEFICIT | (508,209 | ) | (504,112 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 58,413 | $ | 73,105 |
The accompanying notes are an integral part of the financial statements
-8- |
UPHOLSTERY
INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended March 31, | ||||||||
2015 | 2014 | |||||||
REVENUE | $ | 175,628 | $ | 147,828 | ||||
COST OF REVENUE | 101,294 | 100,080 | ||||||
GROSS PROFIT | 74,334 | 47,748 | ||||||
OPERATING EXPENSES | ||||||||
General and administrative expenses | 48,371 | 40,669 | ||||||
Income from Operations | 25,963 | 7,079 | ||||||
Other expense (income): | ||||||||
Interest expense | 32,560 | 15,067 | ||||||
Income before provision for taxes | (6,597 | ) | (7,988 | ) | ||||
Income tax provision | — | — | ||||||
Net Income (Loss) | $ | (6,597 | ) | $ | (7,988 | ) | ||
Net Income (loss) per share - basic and diluted | (0.00 | ) | (0.00 | ) | ||||
Weighted average common shares outstanding - basic and diluted | 19,900,967 | 20,005,955 |
The accompanying notes are an integral part of the financial statements
-9- |
UPHOLSTERY
INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
2014 | 2013 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 18,955 | $ | 10,660 | ||||
Barter credits receivable | 15,652 | 18,480 | ||||||
Prepaid expenses | — | 15,000 | ||||||
Deferred finance charges | — | 8,750 | ||||||
TOTAL CURRENT ASSETS | 34,607 | 52,890 | ||||||
Property and Equipment | 35,168 | 55,938 | ||||||
Security deposits | 3,330 | 3,330 | ||||||
TOTAL ASSETS | $ | 73,105 | $ | 112,158 | ||||
LIABILITIES AND STOCKHOLDERS' (DEFICIT) | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued expenses | $ | 31,897 | $ | 8,823 | ||||
Credit cards payable | 190,151 | 229,571 | ||||||
Customer deposits | 10,206 | 31,573 | ||||||
Loan payable - related party | 131,602 | 67,558 | ||||||
Note payable - related party | 70,000 | 70,000 | ||||||
Loan payable | 48,812 | |||||||
Financing loans | 63,918 | 11,718 | ||||||
Current portion of long-term debt | 8,879 | 8,296 | ||||||
TOTAL CURRENT LIABILITIES | 555,465 | 427,539 | ||||||
Long-term debt | 21,752 | 30,215 | ||||||
TOTAL LIABILITIES | 577,217 | 457,754 | ||||||
STOCKHOLDERS' DEFICIT | ||||||||
Preferred stock, $.0001 par value; 10,000,000 shares authorized | ||||||||
No shares issued and outstanding at December 31, 2013 and 2012 | — | — | ||||||
Common stock, $.0001 par value; 100,000,000 shares authorized | ||||||||
19,900,200 and 20,000,000 shares issued and outstanding at | ||||||||
December 31, 2014 and 2013, respectively | 1,990 | 2,000 | ||||||
Additional paid-in capital | 44,960 | 9,650 | ||||||
Accumulated deficit | (551,062 | ) | (356,646 | ) | ||||
Stock subscription receivable | — | (600 | ) | |||||
TOTAL STOCKHOLDERS' DEFICIT | (504,112 | ) | (345,596 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 73,105 | $ | 112,158 |
The accompanying notes are an integral part of the financial statements
-10- |
UPHOLSTERY
INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31
Year ended December 31, | ||||||||
2014 | 2013 | |||||||
REVENUE | $ | 579,528 | $ | 559,159 | ||||
COST OF REVENUE | 416,690 | 386,858 | ||||||
GROSS PROFIT | 162,838 | 172,301 | ||||||
OPERATING EXPENSES (INCOME) | ||||||||
General and administrative expenses | 255,266 | 149,370 | ||||||
Income from Operations | (92,428 | ) | 22,931 | |||||
Other expense (income): | ||||||||
Interest expense | 101,988 | 44,687 | ||||||
Gain on settlement of credit card debt | — | (11,897 | ) | |||||
101,988 | 32,790 | |||||||
Loss before provision for income taxes | (194,416 | ) | (9,859 | ) | ||||
Provision for income taxes | — | — | ||||||
Net Loss | $ | (194,416 | ) | $ | (9,859 | ) | ||
Net Income (loss) per share - basic and diluted | (0.01 | ) | (0.00 | ) | ||||
Weighted average common shares outstanding - basic and diluted | 19,988,320 | 13,557,671 |
The accompanying notes are an integral part of the financial statements
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-13- |
The Company has 110,000,000 authorized shares, consisting of 100,000,000 common shares of which only 19,880,200 are currently issued and outstanding and 10,000,000 preferred shares none of which have been issued. The Company’s management could, without the consent of the existing shareholders, issue substantially more shares, causing a large dilution in the equity position of the Company’s current shareholders. Additionally, large share issuances would generally have a negative impact on the Company’s share price. It is possible that, due to additional share issuance, you could lose a substantial amount, or all, of your investment.
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SINCE OUR COMPANY’S OFFICERS AND DIRECTOR OWN 52% OF THE OUTSTANDING COMMON STOCK, INVESTORS MAY FIND THAT THEIR DECISIONS ARE CONTRARY TO THEIR INTERESTS.
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Our common stock is presently not traded on any market or securities exchange and we have not applied for listing or quotation on any public market. The selling shareholders will be offering the shares of common stock being covered by this prospectus at a price of $2.50 per share. Such offering price does not have any relationship to any established criteria of value, such as book value or earnings per share. No valuation or appraisal has been prepared for our business and potential business expansion.
-16- |
SELLING SECURITY HOLDERS
The selling shareholders named in this Prospectus are offering 450,200 shares of the common stock offered through this Prospectus. The shares were sold under offerings exempt from registration under the Securities Act of 1933 as provided and promulgated by the SEC and Regulation D, Rule 506(b) as detailed below.
Under Rule 506(b), a company can be assured it is within the Section 4(a)(2) exemption by satisfying the following standards:
- The company cannot use general solicitation or advertising to market the securities; the company did not use any general solicitation nor advertising to market the securities
- The company may sell its securities to an unlimited number of "accredited investors" and up to 35 other purchases
In connection with the above transactions, although some of the investors (5) are also accredited, we provided the following to all investors:
- Access to all our books and records.
- Access to all material contracts and documents relating to our operations.
- The opportunity to obtain any additional information, to the extent we possessed such information, necessary to verify the accuracy of the information to which the investors were given access.
Prospective investors were invited to review at our offices at any reasonable hour, after reasonable advance notice, any materials available to us concerning our business. Prospective Investors were also invited to visit our offices.
Thirty two (32) unaffiliated friends and family investors purchased 450,200 shares under an offering exempt from registration under the Securities Act of 1933 as provided in Regulation D, Rule 506 (b)
The following table provides as of December 31, 2014, information regarding the beneficial ownership of our common stock held by each of the selling shareholders, including:
- The number of shares owned by each prior to this Offering;
- The total number of shares that are to be offered for each;
- The total number of shares that will be owned by each upon completion of the Offering;
- The percentage owned by each; and
- The identity of the beneficial holder of any entity that owns the shares.
To the best of our knowledge, the named parties in the table that follows are the beneficial owners and have the sole voting and investment power over all shares or rights to the shares reported. None of the selling shareholders is a spouse or minor child of another shareholder. In addition, the table assumes that the selling shareholders do not sell shares of common stock not being offered through this Prospectus and do not purchase additional shares of common stock. The column reporting the percentage owned upon completion assumes that all shares offered are sold, and is calculated based on 19,880,200 shares outstanding as of the date of this prospectus.
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Shares | Total of | Total | Percent | |||||||||||||
Name of | Owned Prior | Shares | Shares | Owned | ||||||||||||
Selling | To This | Offered | After | After | ||||||||||||
Shareholder | Offering | For Sale | Offering | Offering | ||||||||||||
LAMBERT PRIVATE EQUITY (1) | 80,000 | 80,000 | 0 | 0 | ||||||||||||
JOYCE BRYANT | 100 | 100 | 0 | 0 | ||||||||||||
TOM EVOY | 100 | 100 | 0 | 0 | ||||||||||||
ANDREA KUBIDA | 1,500 | 1,500 | 0 | 0 | ||||||||||||
DONALD KUBIDA | 1,500 | 1,500 | 0 | 0 | ||||||||||||
JOHN R WALKER | 100 | 100 | 0 | 0 | ||||||||||||
CARIANNE SIEGEL | 500 | 500 | 0 | 0 | ||||||||||||
MARK J SIEGEL | 1100 | 500 | 0 | 0 | ||||||||||||
CAROL L KALBER | 1,000 | 1,000 | 0 | 0 | ||||||||||||
SCOTT K WALKER | 100 | 100 | 0 | 0 | ||||||||||||
LOIS O’SULLIVAN | 200 | 200 | 0 | 0 | ||||||||||||
ROBERT KUENSTER | 100 | 100 | 0 | 0 | ||||||||||||
JOSEPH LOMBARDO | 100 | 100 | 0 | 0 | ||||||||||||
ANNETTE & CHARLES WAGNER | 1000 | 500 | 0 | 0 | ||||||||||||
ANDREW KOPCZYK | 500 | 500 | 0 | 0 | ||||||||||||
ANNA KOPCZYK | 500 | 500 | 0 | 0 | ||||||||||||
LISA KOPCZYK | 500 | 500 | 0 | 0 | ||||||||||||
BRIAN WALKER | 100 | 100 | 0 | 0 | ||||||||||||
KEVIN WALKER | 100 | 100 | 0 | 0 | ||||||||||||
PETER KOPCZYK | 1,000 | 1,000 | 0 | 0 | ||||||||||||
MIKE LEVANOWSKI | 100 | 100 | 0 | 0 | ||||||||||||
ANTHONY GUARINO | 100 | 100 | 0 | 0 | ||||||||||||
KRISTY L KUBIDA | 1,000 | 1,000 | 0 | 0 | ||||||||||||
CAROL L KALBER | 1,000 | 1,000 | 0 | 0 | ||||||||||||
CARIANNE SIEGEL | 500 | 500 | 0 | 0 | ||||||||||||
ANDREA KUBIDA | 2,000 | 2,000 | 0 | 0 | ||||||||||||
JOHN & BETTY CORY | 1,000 | 1,000 | 0 | 0 | ||||||||||||
CONSTANCE R LOGAN | 1,000 | 1,000 | 0 | 0 | ||||||||||||
MICHAEL JANECZKO | 1,000 | 1,000 | 0 | 0 | ||||||||||||
KEN & MARY FARRIS | 1,000 | 1,000 | 0 | 0 | ||||||||||||
GREG & ELLEN DANIEL | 1,000 | 1,000 | 0 | 0 | ||||||||||||
GEORGIA PEACHES (2) | 350,000 | 350,000 | 0 | 0 |
To our knowledge, none of the selling shareholders:
- Has had a material relationship with the Company or any of its predecessors or affiliates, other than as a shareholder as noted above, at any time within the past three years; or
- Are broker-dealers or affiliates of broker dealers; or
- Has ever been an officer or director of Upholstery International, Inc.
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PLAN OF DISTRIBUTION
Shares Offered by the Selling Shareholders
The selling shareholders have not informed us of how they plan to sell their shares. However, they may sell some or all of their common stock in one or more transactions:
- on such public markets or exchanges as the common stock may from time to time be trading;
- in privately negotiated transactions; or
- in any combination of these methods of distribution.
The sales price to the public, of $2.50 per share, has been determined by the Company based on the price the shares were sold to the selling shareholders. The price of $2.50 per share is a fixed price for the duration of the offering including after the shares become quoted on the OTC markets. The selling shareholders offering will terminate upon the earliest of (i) such time as all of the common stock has been sold pursuant to the registration statement or (ii) 365 days from the effective date of this prospectus.
The selling shareholders may also sell their shares directly through market makers acting in their capacity as broker-dealers. The Company will apply to have its shares of common stock listed on the OTC Bulletin Board immediately after the date of this Prospectus. We anticipate once the shares are quoted on the OTC Bulletin Board, the selling shareholders are deemed underwriters will sell their shares directly into any market created. Selling shareholders will offer their shares at a fixed price of $2.50 per share for the duration of this Offering including after the shares become quoted on the OTC markets. We cannot predict the price at which shares may be sold or whether the common stock will ever trade on any market. The shares may be sold by the selling shareholders, as the case may be, from time to time, in one or more transactions.
Commissions and discounts paid in connection with the sale of the shares by the selling shareholders will be determined through negotiations between the shareholders and the broker-dealers through or to which the securities are to be sold, and may vary, depending on the broker-dealer's fee schedule, the size of the transaction and other factors. The separate costs of the selling shareholders will be borne by the shareholder. Any broker, broker-dealer or agent that participates with the selling shareholders in the sale of the shares by them will be deemed an "underwriter" within the meaning of the Securities Act, and any commissions or discounts received by them and any profits on the resale of shares purchased by them will be deemed to be underwriting commissions under the Securities Act. In the event any selling shareholder engages a broker-dealer to distribute their shares, and the broker-dealer is acting as underwriter, we will be required to file a post-effective amendment containing the name of the underwriter.
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The selling shareholders must comply with the requirements of the Securities Act of 1933 and the Securities Exchange Act of 1934 in the offer and sale of their common stock. In particular, during times that the selling shareholders are deemed to be engaged in a distribution of the common stock, and therefore be considered to be an underwriter, they must comply with applicable law.
Regulation M prohibits certain market activities by persons selling securities in a distribution. To demonstrate their understanding of those restrictions and others, selling shareholders will be required, prior to the release of unrestricted shares to themselves or any transferee, to represent as follows: that they have delivered a copy of this Prospectus, and if they are effecting sales on the Electronic Bulletin Board or inter-dealer quotation system or any electronic network, that neither they nor any affiliates or person acting on their behalf, directly or indirectly, has engaged in any short sale of our common stock; and for a period commencing at least 5 business days before his first sale and ending with the date of his last sale, bid for, purchase, or attempt to induce any person to bid for or purchase our common stock.
If the Company's common shares are quoted for trading on the OTC Electronic Bulletin Board the trading in our shares will be regulated by Securities and Exchange Commission Rule 15g-9 which established the definition of a "penny stock". For the purposes relevant to the Company, it is defined as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (a) that a broker or dealer approve a person's account for transactions in penny stocks; and (b) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must (a) obtain financial information and investment experience objectives of the person; and (b) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the broker/dealer relating to the penny stock market, which, in highlight form, (a) sets forth the basis on which the broker or dealer made the suitability determination; and (b) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Before you trade a penny stock your broker is required to tell you the offer and the bid on the stock, and the compensation the salesperson and the firm receive for the trade. The firm must also mail a monthly statement showing the market value of each penny stock held in your account.
We can provide no assurance that all or any of the common stock offered will be sold by the selling shareholders.
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The selling shareholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. 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. The selling shareholders have informed us that they do not have any agreement or understanding, directly or indirectly, with any person to distribute the common stock.
Because the selling shareholders may be deemed to be "underwriters" within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act. Federal securities laws, including Regulation M, may restrict the timing of purchases and sales of our common stock by the selling shareholders and any other persons who are involved in the distribution of the shares of common stock pursuant to this Prospectus.
We are bearing all costs relating to the registration of the common stock. While we have no formal agreement to provide funding with our directors, they have verbally agreed to advance additional funds in order to complete the registration statement process. Any commissions or other fees payable to brokers or dealers in connection with any sale of the common stock, however, will be borne by the selling shareholders or other party selling the common stock.
Terms of the Offering
This Offering will commence on the date the registration statement is declared effective (which also serves as the date of this prospectus) and continues for a period of 365 days.
Offering Proceeds
We will not receive any proceeds from the sale of any of the 450,200 shares by the selling shareholders.
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have equal ratable rights to dividends from funds legally available if and when declared by our Board of Directors;
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are entitled to share ratably in all of our assets available for distribution to holders of common stock upon liquidation, dissolution or winding up of our affairs;
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do not have preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights;
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and are entitled to one non-cumulative vote per share on all matters on which stockholders may vote.
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No Preferred shares have been issued and have not been designated.
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-22- |
Currently, we do not make or manufacture new furniture. We currently have two store locations that are running and operating at full capacity. Our Tinley Park, IL store front it utilized as a sales center that houses all the fabrics we sell to our customers. The second store front is utilized as a working shop, which is where we actually perform the reupholster work. Our plan is to continue and enhance our existing operations, while utilizing the capital we raise to grow into more store front sales centers as well as expand our work shop to allow us to increase production
-23- |
Our timeframe for implementation is immediate. We intend on utilizing the following steps pre and post IPO.
· | Send out mailers to a targeted group of qualified companies that meet our initial minimum financial requirements. We will be targeting furniture manufacturing facilities, fabric Manufacturing facilities as well as other upholstery specific businesses. At this time the financial requirements have not been determined since we don’t know how successful our funding activities will be and what our budget allows. |
· | Our Plan is to Initiate negotiations and on-board the newly acquired organization. |
Some issues that we may encounter might be the inability to close these acquisitions in a timely manner thus making it difficult to accomplish our business plan. We will face an acquisition cost that will be associated with finding these deals and bring them to the closing table. We intend to raise additional capital through utilizing our private equity partners if needed.
Our goal is to strategically acquire companies that fit within an aggressive model that will allow us to compete with our top competition. We are currently looking at many companies to acquire, however, we have not entered into any agreements with any yet as we are in the early stages of negotiations. Our business plan is based off of growing our existing company internally within the Upholstery related sector, while placing a focus on acquiring furniture manufacturing outlets as well. We are reaching out to a target list of potential companies that we feel will best suit our grow plans. We are and always will be in acquisition mode as this is our how we plan to grow.
Our timeframe for implementation is immediate. We intend on utilizing the following steps pre and post IPO.
- Send out mailers to a targeted group of qualified companies that meet our initial minimum financial requirements. We will be targeting furniture manufacturing facilities, fabric manufacturing facilities as well as other upholstery specific businesses.
- Our Plan is to Initiate negotiations and on-board the newly acquired organization.
-24- |
Suppliers
Active Foam Products, Chicago, IL, Charlotte Fabrics, Minneapolis, MN. Luxury Fabrics, Grand Rapids, MI.
We have a variety of competitors in our sector; Lazyboy, Ethan Allen and Walter E. Smith Furniture to name three.
Distribution Methods:
Currently we have and operate 3 delivery trucks for local orders, we utilize Fed-EX and UPS for local and long distance orders.
Upholstery International, Inc. has a total of 11 full-time employees
We own and operate equipment that is necessary to perform our daily jobs within our core business.
Website – Under construction
Number of employees
8 full time and 3 part time
-25- |
Page | ||
Consolidated Balance Sheets as of March 31, 2015 and December 31, 2014 (unaudited) | F-1 | |
Consolidated Statements of Operations for three months ended March 31, 2015 and 2014 (unaudited) | F-2 | |
Statements of Cash Flows for three months ended March 31, 2015 and 2014 (unaudited) | F-3 | |
Notes to Financial Statements for three months ended March 31, 2015 (unaudited) | F-4 | |
Independent Auditors' Report | F-12 | |
Consolidated Balance Sheets for years ended December 31, 2014 and 2013 | F-13 | |
Consolidated Statements of Operations for years ended December 31, 2014 and 2013 | F-14 | |
Consolidated Statement of Stockholder's' Deficiency for years ended December 31, 2014 and 2013 | F-15 | |
Consolidated Statements of Cash Flows for years ended December 31, 2014 and 2013 | F-16 | |
Notes to Financial Statements for years ended December 31, 2014 and 2013 | F-17 |
-26- |
UPHOLSTERY
INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, | December 31, | |||||||
2015 | 2014 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 7,494 | $ | 18,955 | ||||
Barter credits receivable | 17,338 | 15,652 | ||||||
Prepaid expenses | — | — | ||||||
Deferred finance charges | — | — | ||||||
TOTAL CURRENT ASSETS | 24,832 | 34,607 | ||||||
Property and Equipment | 30,251 | 35,168 | ||||||
Security deposits | 3,330 | 3,330 | ||||||
TOTAL ASSETS | $ | 58,413 | $ | 73,105 | ||||
LIABILITIES AND STOCKHOLDERS' (DEFICIT) | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued expenses | $ | 51,043 | $ | 31,897 | ||||
Credit cards payable | 180,696 | 190,151 | ||||||
Customer deposits | 9,590 | 10,206 | ||||||
Loan payable - related party | 125,491 | 131,602 | ||||||
Note payable - related party | 70,000 | 70,000 | ||||||
Loan payable | 44,258 | 48,812 | ||||||
Financing loans | 57,265 | 63,918 | ||||||
Current portion of long-term debt | 8,942 | 8,879 | ||||||
TOTAL CURRENT LIABILITIES | 547,285 | 555,465 | ||||||
Long-term debt | 19,337 | 21,752 | ||||||
TOTAL LIABILITIES | 566,622 | 577,217 | ||||||
STOCKHOLDERS' DEFICIT | ||||||||
Preferred stock, $.0001 par value; 10,000,000 shares authorized | ||||||||
No shares issued and outstanding at December 31, 2013 and 2012 | — | — | ||||||
Common stock, $.0001 par value; 100,000,000 shares authorized | ||||||||
19,901,200 and 19,900,200 shares issued and outstanding at | ||||||||
March 31, 2015 and December 31, 2014 , respectively | 1,990 | 1,990 | ||||||
Additional paid-in capital | 47,460 | 44,960 | ||||||
Accumulated deficit | (557,659 | ) | (551,062 | ) | ||||
Stock subscription receivable | — | — | ||||||
TOTAL STOCKHOLDERS' DEFICIT | (508,209 | ) | (504,112 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 58,413 | $ | 73,105 |
The accompanying notes are an integral part of the financial statements
F-1 |
UPHOLSTERY
INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended March 31, | ||||||||
2015 | 2014 | |||||||
REVENUE | $ | 175,628 | $ | 147,828 | ||||
COST OF REVENUE | 101,294 | 100,080 | ||||||
GROSS PROFIT | 74,334 | 47,748 | ||||||
OPERATING EXPENSES | ||||||||
General and administrative expenses | 48,371 | 40,669 | ||||||
Income from Operations | 25,963 | 7,079 | ||||||
Other expense (income): | ||||||||
Interest expense | 32,560 | 15,067 | ||||||
Income before provision for taxes | (6,597 | ) | (7,988 | ) | ||||
Income tax provision | — | — | ||||||
Net Income (Loss) | $ | (6,597 | ) | $ | (7,988 | ) | ||
Net Income (loss) per share - basic and diluted | (0.00 | ) | (0.00 | ) | ||||
Weighted average common shares outstanding - basic and diluted | 19,900,967 | 20,005,955 |
The accompanying notes are an integral part of the financial statements
F-2 |
Three months ended March 31, | ||||||||
2015 | 2014 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net income (loss) | $ | (6,597 | ) | $ | (10,488 | ) | ||
Adjustments to reconcile net income (loss) to net cash | ||||||||
provided by (used in) operating activities: | ||||||||
Depreciation expense | 4,917 | 4,500 | ||||||
Amortization of deferred finance charges | 2,500 | |||||||
Changes in operating assets and liabilities: | ||||||||
Barter credits receivable | (1,686 | ) | (687 | ) | ||||
Accounts payable and accrued expenses | 19,146 | (4,401 | ) | |||||
Credit cards payable | (9,455 | ) | (8,667 | ) | ||||
Customer deposits | (616 | ) | (29,350 | ) | ||||
Net cash provided by (used in) operating activities | 5,709 | (46,593 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of property and equipment | — | (4,739 | ) | |||||
Net cash used in financing activities | — | (4,739 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from issuance of debt | 21,500 | |||||||
Proceeds from issuance of common stock | 2,500 | 16,500 | ||||||
Proceeds from (Repayment of) related party loans | (6,111 | ) | 25,968 | |||||
Repayment of debt | (13,559 | ) | (11,070 | ) | ||||
Net cash provided by (used in) financing activities | (17,170 | ) | 52,898 | |||||
Increase in cash | (11,461 | ) | 1,566 | |||||
Cash - beginning of period | 18,955 | 10,661 | ||||||
Cash - end of period | $ | 7,494 | $ | 12,227 |
The accompanying notes are an integral part of the financial statements
F-3 |
Upholstery International, Inc.
Notes to the Consolidated Financial Statements
March 31, 2015
(Unaudited)
NOTE 1 – BASIS OF PRESENTATION and Business
The accompanying unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these interim consolidated financial statements be read in conjunction with the Company’s most recent audited consolidated financial statements and notes hereto as of December 31, 2014. Operating results for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015, or any other period.
Upholstery International, Inc. (the “Company”) through its wholly owned subsidiary, Ken’s Custom Upholstery, Inc. (“Ken’s”), operates a retail upholstery store which specializes in the reupholstering of furniture. The Company was incorporated under the laws of the state of Delaware on November 21, 2013 and Ken’s was formed under the laws of the state of Illinois on January 16, 1986.
On December 16, 2013 the Company completed a Share Exchange agreement with Ken’s, whereby the Company issued 13,450,000 shares of its common stock to the shareholders of Ken’s. The merger was accounted for as a reverse merger, whereby Ken’s being the accounting survivor and the Company being the legal acquirer. Accordingly, the historical financial statements presented herein are those of Ken’s Custom Upholstery, Inc. The stockholders’ equity section of Ken’s has been retroactively restated for all periods presented to reflect the accounting effect of the reverse merger transaction.
NOTE 2 – Significant Accounting Policies
Use of Estimates
The preparation of the financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) 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 dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and record adjustments when necessary.
Cash and Cash Equivalents
The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.
F-4 |
Revenue Recognition
The Company follows the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) 104 for revenue recognition and Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition.” Accordingly, revenue is recorded when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the selling price to the customer is fixed or determinable and collectability of the revenue is reasonably assured.
The Company’s source of revenue is derived from the reupholstering of furniture and revenue is recorded upon completion of the services upon pick up or delivery to the customer. The Company receives a deposit when the order is received and records the deposit as a customer deposit until the revenue is recognized.
Barter Transactions
The Company periodically enters into barter transactions for goods and services. The Company uses a third party to facilitate the exchange. The barter transactions are accounted for in accordance with ASC 845-10 in which the fair value of the nonmonetary assets exchanged is more clearly evident than the fair value of the barter credits received and that the barter credits shall be reported at the fair value of the nonmonetary asset exchanged. A loss on barter credits will be recognized if it subsequently becomes apparent that the fair value of any remaining credits is less that the carrying value of the credits or it is probable that all remaining credits will not be used. The Company did not recognize any losses on barter credits during the three months ended March 31, 2015 and 2014. The Company evaluates the recoverability of the credits on a quarterly basis.
Deferred Financing Costs
Deferred financing costs represent commitment fees, legal and other third party costs associated with obtaining commitments for financing which result in a closing of such financings. These costs are amortized, using the effective interest method, into earnings through interest expense over the terms of the respective agreements. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the three year useful lives of the assets. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.
Advertising
Advertising and marketing expenses are charged to operations as incurred.
Fair Value Measurements
The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of the Company’s short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
F-5 |
Level 1 — quoted prices in active markets for identical assets or liabilities
Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented.
F-6 |
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has a stockholders’ deficit of $508,209, an accumulated deficit of $557,659, and a working capital deficit of $522,453 at March 31, 2015. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company’s continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue receiving capital from third parties. The company is currently in the process of implementing a strategic growth plan through acquiring a number of industry related businesses. By acquiring additional revenue sources and launching our internal growth plans, we feel as a company, we will be able to reach our profitability marks efficiently. No assurance can be given that the Company will be successful in these efforts.
NOTE 4 – NOTE PAYABLE – RELATED PARTY
On November 15, 2013 the Company issued a promissory note in the amount of $70,000 to related party. The note bears interest at 11% per annum and matures on November 15, 2014, or within seven days after the Company is listed on a national stock exchange, whichever is earlier. The note is payable in monthly installments of interest only until the maturity date, and is personally guaranteed by the president of the Company. The note has been extended for an additional six months and is due May 15, 2015. The note has subsequently been extended for an additional six months and is now due November 15, 2015 with the same terms as the original note. The Company has been making the current monthly interest payments of $641 per month.
NOTE 5 – LOAN PAYABLE
In May, 2014 the Company entered into a business loan and security agreement, whereby it borrowed $75,000 from an unrelated third party. The amount outstanding at March 31, 2015 was $44,258. The loan is repayable in 378 payments of $288 due each business day beginning May 1, 2014. The loan is collateralized by substantially all assets of the Company and is personally guaranteed by the president of the Company. Through January 27, 2015, the Company had made all required payments of $288 due each business day. From January 28, 2015 to February 8, 2015 the Company did not make any payments toward this loan. From February 9, 2015 to March 2, 2015 the Company made 16 payments of $145 toward the loan and did not make any payments from March 3, 2015 to March 31, 2015.
From April 1, 2015 to the date of this filing the Company did not make any payments to the lender referred to in Note 5. On May 31, 2015, the lender offered a settlement of a one-time payment of $8,006 to settle the debt in full. The offer expires on July 31, 2015 and the Company is currently seeking funding to make the settlement payment, but as of this date has not yet agreed to the settlement. The lender has not taken any action toward its recourse regarding the collateral and guarantees on the loan.
F-7 |
NOTE 6 – FINANCING LOANS
In July, September, and December 2014, the Company entered into three separate Purchase agreements with Continental Capital Advance, Inc. (“Continental”), an unrelated finance company, in the aggregate amount of $132,800 less an original discount of $32,800 for net proceeds to the company of $100,000 (less repayments under the previous agreement still outstanding upon consummation of new agreement). Under the terms of the agreement the Company sells, assigns, and transfers to Continental all of its interests in each of its future credit card receivables due to the Company from its credit card processor, until the collection of the amount of future receivables have been collected by Continental. As stated in the agreement, Continental is to be paid an undefined percentage of the Company’s future credit card receipts. In lieu of the collection of the percentage of credit card receipts, the Company and Continental have agreed that the payment of the purchase amount will be repaid by the Company in 110 payments of $516 due each business day beginning on the first day after the loan was disbursed, until the full amount due under the agreement is paid. The Company has granted to Continental a lien on and security interest in all of the future receivables, as defined in the agreement. The Company and the president of the Company have granted a lien and security interest in all personal and real property owned by them. The agreement is personally guaranteed by the president of the Company. The Company’s involvement with the receivable during the term of the agreement is the undefined percentage of credit card receipts not applicable to Continental, although due to the daily payments being made toward the agreement, the Company has been collecting the full amount of credit card receipts. On December 29, 2014 the Company entered into the third agreement with Continental whereby it received $40,000 less amounts owed under the previous existing agreements (in which the Company did not make all the required daily payments) of $21,867 for proceeds of $18,133. The total repayment of the third agreement is $56,800, which is currently being repaid in the same 110 payments of $516 due each business day until the full amount due under the agreement is paid. The Company has recorded the amount of the total repayment as a financing debt, with the difference between the proceeds received and the total repayment amount as a discount, which is being amortized as imputed interest (at an effective rate of 246%) over the life of the agreement which is the date that the total repayments will be made assuming the Company is timely in all of its payments. Through January 27, 2015, the Company had made all required payments of $516 due each business. From January 28, 2015 to February 10, 2015 the Company did not make any payments toward this loan. From February 11, 2015 to March 3, 2015 the Company made 14 payments of $285 toward the loan and did not make any payments from March 4, 2015 to April 19, 2015. On April 20, 2015 Continental agreed to modify the contracted daily payments. Beginning April 20, 2015 the Company is required to make a weekly payment of $285, until the full amount of required payments are made. The Company has made all required weekly payments of $285 from April 20, 2015 to the date of these financial statements.
On October 27, 2014 the Company entered into a Payment Rights Purchase and Sale Agreement with EBF Partners, LLC (“EBF”) an unrelated finance company in the amount of $28,000 less an original discount of $8,000 for net proceeds to the company of $20,000. Under the terms of the agreement the Company sells, assigns, and transfers to EBF, without recourse, the specified percentage (defined as 15% under the agreement) of the proceeds of each future sale (as defined by the agreement) made by the Company until the purchased amount has been paid to EBF. The agreement also defines a daily payment amount of $280, which is being paid to EBF each business day as payment of the specified percentage, which amount has been intended to represent the specified percentage of the Company’s future receipts. The Company has granted to EBF a lien on and security interest in all of the future receipts, as defined in the agreement. The Company and the president of the Company have granted a lien and security interest in all personal and real property, owned by them. The agreement is personally guaranteed by the president of the Company. The Company’s involvement with the receivable during the term of the agreement is the percentage future receipts not applicable to EBF. The Company has recorded the amount of the total repayment as a financing debt, with the
F-8 |
difference between the proceeds received and the total repayment amount as a discount, which is being amortized as imputed interest (at an effective rate of 259%) over the life of the agreement which is the date that the total repayments will be made assuming the Company is timely in all of its payments. Through January 27, 2015, the Company had made all required payments of $280 due each business. From January 28, 2015 to February 8, 2015 the Company did not make any payments toward this loan. From February 9, 2015 to March 2, 2015 the Company made 16 payments of $145 toward the loan and did not make any payments from March 3, 2015 to March 31, 2015. On April 10, 2015 the Company and EBF verbally agreed that payments in the amount of $250 would be made weekly begin on that date until the balance of the required payments was made. The company has made all the weekly payments of $250 from April 10, 2015 to the date of these financial statements.
On November 11, 2014 the Company entered into a Purchase and Sale of Future Receivables with PIRS Capital, LLC (“PIRS”) an unrelated finance company in the amount of $22,350 less an original discount of $7,350 for net proceeds to the company of $15,000. Under the terms of the agreement the Company sells, assigns, and transfers to PIRS all of the Company’s future accounts, contract rights and other obligations arising from or relating to the payment of monies from the Company’s customers and/or other third party payers for the payment of the Company’s sale of goods and services until the purchased amount has been paid to PIRS. Under the terms of the agreement, the purchased amount shall be paid to PIRS as a percentage (defined as 20% under the agreement) of the Company’s settlement amounts due from each transaction. The agreement also defines a daily payment amount of $248, which is being paid to EBF each business day as payment of the specified percentage, which amount has been intended to represent the specified percentage of the Company’s future receipts. The Company has granted to PIRS a lien on and security interest in all of the future receipts, as defined in the agreement. The Company and the president of the Company have granted a lien and security interest in all personal and real property, owned by them. The agreement is personally guaranteed by the president of the Company. The Company’s involvement with the receivable during the term of the agreement is the percentage future receipts not applicable to PIRS. The Company has recorded the amount of the total repayment as a financing debt, with the difference between the proceeds received and the total repayment amount as a discount, which is being amortized as imputed interest (at an effective rate of 344%) over the life of the agreement which is the date that the total repayments will be made assuming the Company is timely in all of its payments. Through January 27, 2015, the Company had made all required payments of $248 due each business. From January 28, 2015 to March 24, 2015 the Company did not make any payments toward this loan. On March 25, 2015, the Company and PIRS entered into a settlement agreement whereby the Company will pay PIRS $12,000 payable in weekly payments of $230.76 due each Friday until the balance has been paid. The Company has imputed interest (at an effective rate of 466%) which is being amortized of the life of the agreement which is the date that the total repayments will be made assuming the Company is timely in all of its payments. The Company has made all the required payments relating to the settlement agreement as of the date of these financial statements.
As of the date of these financial statements the Company has made all the required payments for the financing loans above in accordance with the modifications to the original agreements as described above. The finance companies disclosed above have not taken any action toward its recourse regarding the collateral and guarantees on the agreements.
The following table summarizes the future amounts due under the above agreements
Amount of daily payments payable under the agreement at March 31, 2015:
Continental | $ | 44,407 | ||
EBF | 15,960 | |||
PIRS | 11,769 | |||
Total | $ | 72,136 | ||
Less: Unamortized discount | 14,871 | |||
Financing Loans | 57,265 |
F-9 |
NOTE 8 – LONG-TERM DEBT
Long-term debt consists of two automobile loans which are payable in monthly installments of $897, including interest at rates of 5.6% and 8.0%. These loans are collateralized by the specific automobile owned by the company and mature as follows:
Year ended December 31, 2015 | 6,527 | ||
2016 | 9,467 | ||
2017 | 5,349 | ||
2018 | 4,790 | ||
2019 | 2,146 | ||
NOTE 9 – LOAN PAYABLE – RELATED PARTY
As of March 31, 2015 and December 31, 2014, the Company was obligated to a director, who is also an officer and a stockholder, for a non-interest bearing demand loan in the amounts of$125,491 and $131,602, respectively. The Company plans to pay the loan back as cash flows become available.
NOTE 10 – CREDIT CARDS PAYABLE
The Company utilized several major credit cards during the normal course of its operations. Interest rates on the credit cards range from 11% to 30%. The Company also utilizes the services of a third party to negotiate settlements with the credit card companies. The Company currently has total available credit card financing of approximately $50,000 to finance its ongoing operations. The total of credit card payable on the accompanying balance sheet exceeds this amount due to existing credit cards in which no additional credit has been extended to the Company, which the Company is currently making payments towards the outstanding balances. The Company is not currently in default under payment arrangements on any of the credit cards. The credit cards are all personally guaranteed by the president of the Company.
F-10 |
NOTE 11 - INCOME TAXES
The reconciliation of income tax benefit at the U.S. statutory rate of 34% for the period ended March 31, 2015 and 2014 to the Company’s effective tax rate is as follows:
2015 | 2014 | |||||||
Income tax (benefit) at statutory rate | $ | (2,200 | ) | $ | (2,700 | ) | ||
Change in valuation all | $ | 2,200 | $ | 2,700 | ||||
Income tax expense per books | $ | — | — |
The tax effects of temporary differences that give rise to the Company’s net deferred tax assets as of March 31, 2015 and
December 31, 2014 are as follows:
Net Operating Loss | $ | 193,000 | $ | 191,000 | ||||
Valuation allowance | (193,000 | ) | (191,000 | ) | ||||
Net deferred tax asset | $ | — | $ | — |
The Company has approximately $560,000 of net operating losses (“NOL”) carried forward to offset taxable income in future years which expire commencing in fiscal 2028. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized
NOTE 12 – STOCKHOLDERS’ DEFICIENCY
Authorized Stock
The Company has authorized 100,000,000 common shares and 10,000,000 preferred shares, both with a par value of $0.0001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.
On December 26, 2013 the Company issued 6.000,000 shares in association with a subscription agreement for $600. The subscription receivable was paid to the Company on March 17, 2014.
On December 26, 2013 the Company issued 550,000 shares for consulting services. The Company valued these shares at the price per share issued with the subscription agreement referred to above. In October 2014, 200,000 of these shares were cancelled and 80,000 reissued pursuant to the original contract with the service provider.
During the year ended December 31, 2014, the company issued 20,200 shares of common stock to private investors for gross proceeds of $35,300.
On January 21, 2015, the company issued 1,000 shares of common stock to a private investor for proceeds of $2,500
NOTE 13 – SUBSEQUENT EVENTS
Management has evaluated subsequent events through July 20, 2015, the date which the financial statements were available to be issued.
See notes 4, 5, and 6 regarding status of the notes, loans, and financing as of the date these financial statements were available to be issued.
F-11 |
We have audited the accompanying consolidated balance sheets of Upholstery International, Inc. (the “Company”) as of December 31, 2014 and 2013 , and the related consolidated statements of operations, changes in stockholders’ deficit and cash flows for the years ended December 31, 2014 and 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
F-12 |
2014 | 2013 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 18,955 | $ | 10,660 | ||||
Barter credits receivable | 15,652 | 18,480 | ||||||
Prepaid expenses | — | 15,000 | ||||||
Deferred finance charges | — | 8,750 | ||||||
TOTAL CURRENT ASSETS | 34,607 | 52,890 | ||||||
Property and Equipment | 35,168 | 55,938 | ||||||
Security deposits | 3,330 | 3,330 | ||||||
TOTAL ASSETS | $ | 73,105 | $ | 112,158 | ||||
LIABILITIES AND STOCKHOLDERS' (DEFICIT) | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued expenses | $ | 31,897 | $ | 8,823 | ||||
Credit cards payable | 190,151 | 229,571 | ||||||
Customer deposits | 10,206 | 31,573 | ||||||
Loan payable - related party | 131,602 | 67,558 | ||||||
Note payable - related party | 70,000 | 70,000 | ||||||
Loan payable | 48,812 | |||||||
Financing loans | 63,918 | 11,718 | ||||||
Current portion of long-term debt | 8,879 | 8,296 | ||||||
TOTAL CURRENT LIABILITIES | 555,465 | 427,539 | ||||||
Long-term debt | 21,752 | 30,215 | ||||||
TOTAL LIABILITIES | 577,217 | 457,754 | ||||||
STOCKHOLDERS' DEFICIT | ||||||||
Preferred stock, $.0001 par value; 10,000,000 shares authorized | ||||||||
No shares issued and outstanding at December 31, 2013 and 2012 | — | — | ||||||
Common stock, $.0001 par value; 100,000,000 shares authorized | ||||||||
19,900,200 and 20,000,000 shares issued and outstanding at | ||||||||
December 31, 2014 and 2013, respectively | 1,990 | 2,000 | ||||||
Additional paid-in capital | 44,960 | 9,650 | ||||||
Accumulated deficit | (551,062 | ) | (356,646 | ) | ||||
Stock subscription receivable | — | (600 | ) | |||||
TOTAL STOCKHOLDERS' DEFICIT | (504,112 | ) | (345,596 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 73,105 | $ | 112,158 |
F-13 |
Year ended December 31, | ||||||||
2014 | 2013 | |||||||
REVENUE | $ | 579,528 | $ | 559,159 | ||||
COST OF REVENUE | 416,690 | 386,858 | ||||||
GROSS PROFIT | 162,838 | 172,301 | ||||||
OPERATING EXPENSES (INCOME) | ||||||||
General and administrative expenses | 255,266 | 149,370 | ||||||
Income from Operations | (92,428 | ) | 22,931 | |||||
Other expense (income): | ||||||||
Interest expense | 101,988 | 44,687 | ||||||
Gain on settlement of credit card debt | — | (11,897 | ) | |||||
101,988 | 32,790 | |||||||
Loss before provision for income taxes | (194,416 | ) | (9,859 | ) | ||||
Provision for income taxes | — | — | ||||||
Net Loss | $ | (194,416 | ) | $ | (9,859 | ) | ||
Net Income (loss) per share - basic and diluted | (0.01 | ) | (0.00 | ) | ||||
Weighted average common shares outstanding - basic and diluted | 19,988,320 | 13,557,671 |
F-14 |
Additional | Stock | |||||||||||||||||||||||
Common Stock | Paid-in | Accumulated | Subscription | |||||||||||||||||||||
Shares | Amount | Capital | (Deficit) | Receivable | Total | |||||||||||||||||||
Balance, January 1, 2013 | 13,450,000 | $ | 1,345 | $ | 9,650 | $ | (346,787 | ) | $ | — | $ | (335,792 | ) | |||||||||||
Stock issued on subscription | 6,000,000 | 600 | — | (600 | ) | — | ||||||||||||||||||
Stock issued for services | 550,000 | 55 | — | 55 | ||||||||||||||||||||
Net loss for the year ended December 31, 2013 | (9,859 | ) | (9,859 | ) | ||||||||||||||||||||
Balance, December 31, 2013 | 20,000,000 | $ | 2,000 | $ | 9,650 | $ | (356,646 | ) | $ | (600 | ) | $ | (345,596 | ) | ||||||||||
Proceeds from subscription receivable | $ | 600 | 600 | |||||||||||||||||||||
Cancellation of shares issued for services, net of re-issuance | (120,000 | ) | (12 | ) | 12 | — | ||||||||||||||||||
Proceeds from issuance of common stock | 20,200 | 2 | 35,298 | 35,300 | ||||||||||||||||||||
Net loss for the year ended December 31, 2014 | (194,416 | ) | (194,416 | ) | ||||||||||||||||||||
Balance, December 31, 2014 | 19,900,200 | 1,990 | 44,960 | (551,062 | ) | — | (504,112 | ) |
F-15 |
2014 | 2013 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
Net loss | $ | (194,416 | ) | $ | (9,859 | ) | ||
Adjustments to reconcile net loss to net cash | ||||||||
used in operating activities: | ||||||||
Depreciation expense | 20,771 | 18,077 | ||||||
Amortization of deferred finance charges | 8,750 | 1,250 | ||||||
Stock based compensation | — | 55 | ||||||
Changes in operating assets and liabilities: | ||||||||
Barter credits receivable | 2,828 | (18,345 | ) | |||||
Prepaid expenses | 15,000 | (12,035 | ) | |||||
Accounts payable and accrued expenses | 23,073 | 1,568 | ||||||
Credit cards payable | (39,420 | ) | (33,054 | ) | ||||
Customer deposits | (21,367 | ) | 17,297 | |||||
Net cash used in operating activities | (184,781 | ) | (35,046 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
Purchase of property and equipment | — | (1,885 | ) | |||||
Net cash used in financing activities | — | (1,885 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
Proceeds from issuance of debt | 195,800 | 90,000 | ||||||
Payment of finance costs | — | (10,000 | ) | |||||
Proceeds from issuance of common stock | 35,900 | — | ||||||
Proceeds from (Repayment of) related party loans | 64,044 | (22,221 | ) | |||||
Repayment of long-term debt | (102,668 | ) | (17,397 | ) | ||||
Net cash provided by financing activities | 193,076 | 40,382 | ||||||
Increase in cash | 8,295 | 3,451 | ||||||
Cash - beginning of year | 10,660 | 7,209 | ||||||
Cash - end of year | $ | 18,955 | $ | 10,660 |
F-16 |
UPHOLSTERY INTERNATIONAL, INC.
Notes to the Consolidated Financial Statements
For the Years Ended December 31, 2014 and 2013
NOTE 1 – Organization and Business
Upholstery International, Inc. (the “Company”) through its wholly owned subsidiary Ken’s Custom Upholstery, Inc. (“Ken’s”) operates a retail upholstery store which specializes in the reupholstering of furniture. The Company was incorporated under the laws of the state of Delaware on November 21, 2013 and Ken’s was formed under the laws of the state of Illinois on January 16, 1986.
On December 16, 2013 the Company completed a Share Exchange agreement with Ken’s, whereby the Company issued 13,450,000 shares of its common stock to the shareholders of Ken’s. The merger was accounted for as a reverse merger, whereby Ken’s being the accounting survivor and the Company being the legal acquirer. Accordingly, the historical financial statements presented herein are those of Ken’s Custom Upholstery, Inc. The stockholders’ equity section of Ken’s has been retroactively restated for all periods presented to reflect the accounting effect of the reverse merger transaction.
NOTE 2 – Significant Accounting Policies
Use of Estimates
The preparation of the financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) 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 dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and record adjustments when necessary.
Cash and Cash Equivalents
The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.
Revenue Recognition
The Company follows the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) 104 for revenue recognition and Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition.” Accordingly, revenue is recorded when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the selling price to the customer is fixed or determinable and collectability of the revenue is reasonably assured.
The Company’s source of revenue is derived from the reupholstering of furniture and revenue is recorded upon completion of the services upon pick up or delivery to the customer. The Company receives a deposit when the order is received and records the deposit as a customer deposit until the revenue is recognized.
F-17 |
Barter Transactions
The Company periodically enters into barter transactions for goods and services. The Company uses a third party to facilitate the exchange. The barter transactions are accounted for in accordance with ASC 845-10 in which the fair value of the nonmonetary assets exchanged is more clearly evident than the fair value of the barter credits received and that the barter credits shall be reported at the fair value of the nonmonetary asset exchanged. A loss on barter credits will be recognized if it subsequently becomes apparent that the fair value of any remaining credits is less that the carrying value of the credits or it is probable that all remaining credits will not be used. The Company did not recognize any losses on barter credits during the years ended December 31, 2014 and 2013. The Company evaluates the recoverability of the credits on a quarterly basis.
Deferred Financing Costs
Deferred financing costs represent commitment fees, legal and other third party costs associated with obtaining commitments for financing which result in a closing of such financings. These costs are amortized, using the effective interest method, into earnings through interest expense over the terms of the respective agreements. Unamortized deferred financing costs are expensed when the associated debt is refinanced or repaid before maturity.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the three year useful lives of the assets. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.
Advertising
Advertising and marketing expenses are charged to operations as incurred.
Fair Value Measurements
The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of the Company’s short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.
F-18 |
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 — quoted prices in active markets for identical assets or liabilities
Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The company has no material uncertain tax positions for any of the reporting periods presented.
NOTE 3 - GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has a stockholders' deficit of $504,112, an accumulated deficit of $551,062, and a working capital deficit of $520,858 at December 31, 2014. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company's continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue receiving capital from third parties. The company is currently in the process of implementing a strategic growth plan through acquiring a number of industry related businesses. By acquiring additional revenue sources and launching our internal growth plans, we feel as a company, we will be able to reach our profitability marks efficiently. No assurance can be given that the Company will be successful in these efforts.
NOTE 4 – PROPERTY AND EQUIPMENT
A summary of property and equipment and the estimated useful lives used in the computation of depreciation is as follows:
--------December 31,--------- | ||||||
2014 | 2013 | |||||
------------Amount------------ | Useful Life | |||||
Transportation equipment | $ 94,827 | $ 94,827 | 5 years | |||
Equipment | 13,075 | 13,075 | 5 years | |||
Furniture and fixtures | 9,180 | 9,180 | 7 years | |||
Leasehold improvements | 29,766 | 29,766 | 10 years | |||
146,848 | 144,711 | |||||
Less accumulated depreciation | 111,680 | 90,910 | ||||
$ 35,168 | $ 55,938 |
F-19 |
NOTE 5 – NOTES PAYABLE
On November 15, 2013 the Company issued a promissory note in the amount of $70,000 to related party. The note bears interest at 11% per annum and matures on November 15, 2014, or within seven days after the Company is listed on a national stock exchange, whichever is earlier. The note is payable in monthly installments of interest only until the maturity date, and is personally guaranteed by the president of the Company. The note has been extended for an additional six months and is due November 15, 2015.
NOTE 6 – LOAN PAYABLE
In May, 2014 the Company entered into a business loan and security agreement, whereby it borrowed $75,000 from an unrelated third party. The amount outstanding at December 31, 2014 was $48,812, net of discount. The loan is repayable in 378 payments of $288 due each business day beginning May 1, 2014. The loan is collateralized by substantially all assets of the Company and is personally guaranteed by the president of the Company. As of December 31, 2014, the Company has made all required payments of $288 due each business, and is not delinquent in its obligation.
.
NOTE 7 – FINANCING LOANS
In August 2013, the Company entered into a funding agreement for the sale of future credit card receivables pursuant to which the purchaser acquired $27,600 of future credit card receivables for a purchase price of $20,000 which amount is payable at the rate of 20% of the amount of credit card receivables collected. In addition, on February 25, 2014 the Company entered into another funding agreement in which the purchase acquired $28,380 of future credit card receivables for a purchase price of $21,500. The Company is amortizing the original discount as interest expense proportionally to the collection of the credit card receivables. This liability was fully paid as of December 31, 2014 from the proceeds of the loan referred to in the next paragraph.
In July, September, and December 2014, the Company entered into three separate Purchase agreements with Continental Capital Advance, Inc. (“Continental”), an unrelated finance company, in the aggregate amount of $142,800 less an original discount of $42,800 for net proceeds to the company of $100,000 (less repayments under the previous agreement still outstanding upon consummation of new agreement). Under the terms of the agreement the Company sells, assigns, and transfers to Continental all of its interests in each of its future credit card receivables due to the Company from its credit card processor, until the collection of the amount of future receivables have been collected by Continental. As stated in the agreement, Continental is to be paid an undefined percentage of the Company’s future credit card receipts. In lieu of the collection of the percentage of credit card receipts, the Company and Continental have agreed that the payment of the purchase amount will be repaid by the Company in 110 payments of $516 due each business day beginning on the first day after the loan was disbursed, until the full amount due under the agreement is paid. The Company has granted to Continental a lien on and security interest in all of the future receivables, as defined in the agreement. The Company and the president of the Company have granted a lien and security interest in all personal and real property owned by them. The agreement is personally guaranteed by the president of the Company. The Company’s involvement with the receivable during the term of the agreement is the undefined percentage of credit card receipts not applicable to Continental, although due to the daily payments being made toward the agreement, the Company has been collecting the full amount of credit card receipts. On December 29, 2014 the Company entered into the third agreement with Continental whereby it received $40,000 less amounts owed under the previous existing agreements (in which the Company did not make all the required daily payments) of $21,867 for proceeds of $18,133. The total repayment of the third agreement is $56,800, which is currently being repaid in the same 110 payments of $516 due each business day until the full amount due under the agreement is paid. The Company has recorded the amount of the total repayment as a financing debt, with the difference between the proceeds received and the total repayment amount as a discount, which is being amortized as imputed interest (at an effective rate of 246%) over the life of the agreement which is the date that the total repayments will be made assuming the Company is timely in all of its payments.
On October 27, 2014 the Company entered into a Payment Rights Purchase and Sale Agreement with EBF Partners, LLC (“EBF”) an unrelated finance company in the amount of $28,000 less an original discount of $8,000 for net proceeds to the company of $20,000. Under the terms of the agreement the Company sells, assigns, and transfers to EBF, without recourse, the specified percentage (defined as 15% under the agreement) of the proceeds of each future sale (as defined by the agreement) made by the Company until the purchased amount has been paid to EBF. The agreement also defines a daily payment amount of $280, which is being paid to EBF each business day as payment of the specified percentage, which amount has been intended to represent the specified percentage of the Company’s future receipts. The Company has granted to EBF a lien on and security interest in all of the future receipts, as defined in the agreement. The Company and the president of the Company have granted a lien and security interest in all personal and real property, owned by them. The agreement is personally guaranteed by the president of the Company. The Company’s involvement with the receivable during the term of the agreement is the percentage future receipts not applicable to EBF. The Company has recorded the amount of the total repayment as a financing debt, with the difference between the proceeds received and the total repayment amount as a discount, which is being amortized as imputed interest (at an effective rate of 259%)over the life of the agreement which is the date that the total repayments will be made assuming the Company is timely in all of its payments.
On November 11, 2014 the Company entered into a Purchase and Sale of Future Receivables with PIRS Capital, LLC (“PIRS”) an unrelated finance company in the amount of $22,350 less an original discount of $7,350 for net proceeds to the company of $15,000. Under the terms of the agreement the Company sells, assigns, and transfers to PIRS all of the Company’s future accounts, contract rights and other obligations arising from or relating to the payment of monies from the Company’s customers and/or other third party payers for the payment of the Company’s sale of goods and services until the purchased amount has been paid to PIRS. Under the terms of the agreement, the purchased amount shall be paid to PIRS as a percentage (defined as 20% under the agreement) of the Company’s settlement amounts due from each transaction. The agreement also defines a daily payment amount of $248, which is being paid to EBF each business day as payment of the specified percentage, which amount has been intended to represent the specified percentage of the Company’s future receipts. The Company has granted to PIRS a lien on and security interest in all of the future receipts, as defined in the agreement. The Company and the president of the Company have granted a lien and security interest in all personal and real property, owned by them. The agreement is personally guaranteed by the president of the Company. The Company’s involvement with the receivable during the term of the agreement is the percentage future receipts not applicable to PIRS. The Company has recorded the amount of the total repayment as a financing debt, with the difference between the proceeds received and the total repayment amount as a discount, which is being amortized as imputed interest (at an effective rate of 344%) over the life of the agreement which is the date that the total repayments will be made assuming the Company is timely in all of its payments.
As of December 31, 2014 the Company was current in making the required daily payments for the above agreements. On January 28, 2015, the Company stopped making the required daily payments and are currently in communication with the finance companies to negotiate different terms than were required under the agreement. As of the date of the financial statements the finance companies have not taken any action against the Company for the delinquent payments.
The following table summarizes the future amounts due under the above agreements
Amount of daily payment payable under the agreement at December 31, 2014:
Continental | $ | 55,767 | ||
EBF | 15,960 | |||
PIRS | 14,880 | |||
Total | $ | 86,607 | ||
Less: Unamortized discount | 22,689 | |||
Financing Loans | 63,918 |
NOTE 8 – LONG-TERM DEBT
Long-term debt consists of two automobile loans which are payable in monthly installments of $897, including interest at rates of 5.6% and 8.0%. These loans are collateralized by the specific automobile owned by the company and mature as follows:
Year ended December 31, 2015 | 8,879 | ||
2016 | 9,467 | ||
2017 | 5,349 | ||
2018 | 4,790 | ||
2019 | 2,146 |
NOTE 9 – LOAN PAYABLE - RELATED PARTY
As of December 31, 2014 and 2013, the Company was obligated to a director, who is also an officer and a stockholder, for a non-interest bearing demand loan in the amounts of $131,602 and $67,558, respectively. The Company plans to pay the loan back as cash flows become available.
F-20 |
NOTE 10 - CREDIT CARDS PAYABLE
NOTE 11 - INCOME TAXES
The reconciliation of income tax benefit at the U.S. statutory rate of 34% for the period ended December 31 2014 and 2013 to the Company's effective tax rate is as follows:
2014 | 2013 | |||||||
Income tax (benefit) at statutory rate | $ | (66,000 | ) | $ | (3,450) | |||
Change in valuation all | $ | 66,000 | 3,450 | |||||
Income tax expense per books | $ | — | — |
The tax effects of temporary differences that give rise to the Company’s net deferred tax assets as of December 31, 2013 and 2012 are as follows:
Net Operating Loss | $ | 191,000 | $ | 125,000 | ||||
Valuation allowance | (191,000 | ) | (125,000 | ) | ||||
Net deferred tax asset | $ | — | $ | — |
The Company has approximately $550,000 of net operating losses ("NOL") carried forward to offset taxable income in future years which expire commencing in fiscal 2028. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.
NOTE 12 – STOCKHOLDERS’ DEFICIENCY
Authorized Stock
The Company has authorized 100,000,000 common shares and 10,000,000 preferred shares, both with a par value of $0.0001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.
On December 26, 2013 the Company issued 6.000,000 shares in association with a subscription agreement for $600. The subscription receivable was paid to the Company on March 17, 2014.
On December 26, 2013 the Company issued 550,000 shares for consulting services. The Company valued these shares at the price per share issued with the subscription agreement referred to above. In October 2014, 200,000 of these shares were cancelled and 80,000 reissued pursuant to the original contract with the service provider.
During the year ended December 31, 2014, the company issued 20,200 shares of common stock to private investors for gross proceeds of $35,300.
NOTE 13 – SUBSEQUENT EVENTS
Management has evaluated subsequent events through March 31, 2015, the date which the financial statements were available to be issued.
On January 28, 2015, the Company stopped making the required daily payments for the financing loans referred to in Note 7 and are currently in communication with the finance companies to negotiate different terms than were required under the agreement. As of the date of the financial statements the finance companies have not taken any action against the Company for the delinquent payments. See Note 7.
F-21 |
On December 17th, 2013 Upholstery International, Inc. signed an agreement with Lambert Private Equity, LLC., which is a voluntary agreement on the part of Upholstery International, Inc. The agreement was later terminated by both parties effective December 5, 2014.
Upholstery International, Inc. reissued a stock certificate to Lambert Private Equity, LLC in the amount of 80,000 shares, which was the original commitment fee of 2%.
In May, 2014 the Company entered into a business loan and security agreement, whereby it borrowed $75,000 from an unrelated third party. The amount outstanding at December 31, 2014 was $48,812, net of discount. The loan is repayable in 378 payments of $288 due each business day beginning May 1, 2014. The loan is collateralized by substantially all assets of the Company and is personally guaranteed by the president of the Company. As of December 31, 2014, the Company has made all required payments of $288 due each business, and is not delinquent in its obligation.
On November 15, 2013 the Company issued a promissory note in the amount of $70,000 to Georgia Peaches a related party. The note bears interest at 11% per annum. The note is payable in monthly installments of interest only until the maturity date, and is personally guaranteed by the president of the Company. The $70,000 loan is between Ken's Custom Upholstery, Inc. and Georgia Peaches, LLC; Ken's Custom Upholstery received net proceeds of $60,000 pursuant to the loan agreement with Georgia Peaches due to the requirement to immediately pay Georgia Peaches' legal counsel $10,000 from the loan proceeds; The loan is due the earlier of November 15, 2014 or seven calendar days after "Borrower has been issued a ticker symbol on an over-the-counter exchange in connection with Borrower's initial public offering." The loan is guaranteed by Ken Kovie. The loan has been extended to November 15, 2015.
The company will need to seek capital from other resources such as private placements in the Company’s common stock or debt financing, which may not even be available to the Company. However, if such financing were available it would likely have to pay additional costs associated with such financing and in the case of high risk loans be subject to an above market interest rate. At such time these funds are required, management would evaluate the terms of such financing. If the company cannot raise additional proceeds via such financing, it would be required to cease business operations.
-27- |
The company has used these funds for operational expenses such as fabric and other materials necessary for refurbishing furniture.
Business credit cards are used to purchase materials needed to complete the reupholstery of furniture, to operate and maintain the business vehicles, as well as general office supplies, and business maintenance.
In August 2013, the Company entered into a funding agreement for the sale of future credit card receivables pursuant to which the purchaser acquired $27,600 of future credit card receivables for a purchase price of $20,000 which amount is payable at the rate of 20% of the amount of credit card receivables collected. In addition, on February 25, 2014 the Company entered into another funding agreement in which the purchase acquired $28,380 of future credit card receivables for a purchase price of $21,500. The Company is amortizing the original discount as interest expense proportionally to the collection of the credit card receivables. This liability was fully paid as of December 31, 2014 from the proceeds of the loan referred to in the next paragraph.
FINANCING LOANS
In July, September, and December 2014, the Company entered into three separate Purchase agreements with Continental Capital Advance, Inc. (“Continental”), an unrelated finance company, in the aggregate amount of $132,800 less an original discount of $32,800 for net proceeds to the company of $100,000 (less repayments under the previous agreement still outstanding upon consummation of new agreement). Under the terms of the agreement the Company sells, assigns, and transfers to Continental all of its interests in each of its future credit card receivables due to the Company from its credit card processor, until the collection of the amount of future receivables have been collected by Continental. As stated in the agreement, Continental is to be paid an undefined percentage of the Company’s future credit card receipts. In lieu of the collection of the percentage of credit card receipts, the Company and Continental have agreed that the payment of the purchase amount will be repaid by the Company in 110 payments of $516 due each business day beginning on the first day after the loan was disbursed, until the full amount due under the agreement is paid. The Company has granted to Continental a lien on and security interest in all of the future receivables, as defined in the agreement. The Company and the president of the Company have granted a lien and security interest in all personal and real property owned by them. The agreement is personally guaranteed by the president of the Company. The Company’s involvement with the receivable during the term of the agreement is the undefined percentage of credit card receipts not applicable to Continental, although due to the daily payments being made toward the agreement, the Company has been collecting the full amount of credit card receipts. On December 29, 2014 the Company entered into the third agreement with Continental whereby it received $40,000 less amounts owed under the previous existing agreements (in which the Company did not make all the required daily payments) of $21,867 for proceeds of $18,133. The total repayment of the third agreement is $56,800, which is currently being repaid in the same 110 payments of $516 due each business day until the full amount due under the agreement is paid. The Company has recorded the amount of the total repayment as a financing debt, with the difference between the proceeds received and the total repayment amount as a discount, which is being amortized as imputed interest (at an effective rate of 246%) over the life of the agreement which is the date that the total repayments will be made assuming the Company is timely in all of its payments. Through January 27, 2015, the Company had made all required payments of $516 due each business. From January 28, 2015 to February 10, 2015 the Company did not make any payments toward this loan. From February 11, 2015 to March 3, 2015 the Company made 14 payments of $285 toward the loan and did not make any payments from March 4, 2015 to April 19, 2015. On April 20, 2015 Continental agreed to modify the contracted daily payments. Beginning April 20, 2015 the Company is required to make a weekly payment of $285, until the full amount of required payments are made. The Company has made all required weekly payments of $285 from April 20, 2015 to the date of these financial statements.
-28- |
On October 27, 2014 the Company entered into a Payment Rights Purchase and Sale Agreement with EBF Partners, LLC (“EBF”) an unrelated finance company in the amount of $28,000 less an original discount of $8,000 for net proceeds to the company of $20,000. Under the terms of the agreement the Company sells, assigns, and transfers to EBF, without recourse, the specified percentage (defined as 15% under the agreement) of the proceeds of each future sale (as defined by the agreement) made by the Company until the purchased amount has been paid to EBF. The agreement also defines a daily payment amount of $280, which is being paid to EBF each business day as payment of the specified percentage, which amount has been intended to represent the specified percentage of the Company’s future receipts. The Company has granted to EBF a lien on and security interest in all of the future receipts, as defined in the agreement. The Company and the president of the Company have granted a lien and security interest in all personal and real property, owned by them. The agreement is personally guaranteed by the president of the Company. The Company’s involvement with the receivable during the term of the agreement is the percentage future receipts not applicable to EBF. The Company has recorded the amount of the total repayment as a financing debt, with the difference between the proceeds received and the total repayment amount as a discount, which is being amortized as imputed interest (at an effective rate of 259%)over the life of the agreement which is the date that the total repayments will be made assuming the Company is timely in all of its payments. Through January 27, 2015, the Company had made all required payments of $280 due each business. From January 28, 2015 to February 8, 2015 the Company did not make any payments toward this loan. From February 9, 2015 to March 2, 2015 the Company made 16 payments of $145 toward the loan and did not make any payments from March 3, 2015 to March 31, 2015. On April 10, 2015 the Company and EBF verbally agreed that payments in the amount of $250 would be made weekly begin on that date until the balance of the required payments was made. The company has made all the weekly payments of $250 from April 10, 2015 to the date of these financial statements.
On November 11, 2014 the Company entered into a Purchase and Sale of Future Receivables with PIRS Capital, LLC (“PIRS”) an unrelated finance company in the amount of $22,350 less an original discount of $7,350 for net proceeds to the company of $15,000. Under the terms of the agreement the Company sells, assigns, and transfers to PIRS all of the Company’s future accounts, contract rights and other obligations arising from or relating to the payment of monies from the Company’s customers and/or other third party payers for the payment of the Company’s sale of goods and services until the purchased amount has been paid to PIRS. Under the terms of the agreement, the purchased amount shall be paid to PIRS as a percentage (defined as 20% under the agreement) of the Company’s settlement amounts due from each transaction. The agreement also defines a daily payment amount of $248, which is being paid to EBF each business day as payment of the specified percentage, which amount has been intended to represent the specified percentage of the Company’s future receipts. The Company has granted to PIRS a lien on and security interest in all of the future receipts, as defined in the agreement. The Company and the president of the Company have granted a lien and security interest in all personal and real property, owned by them. The agreement is personally guaranteed by the president of the Company. The Company’s involvement with the receivable during the term of the agreement is the percentage future receipts not applicable to PIRS. The Company has recorded the amount of the total repayment as a financing debt, with the difference between the proceeds received and the total repayment amount as a discount, which is being amortized as imputed interest (at an effective rate of 344%) over the life of the agreement which is the date that the total repayments will be made assuming the Company is timely in all of its payments. Through January 27, 2015, the Company had made all required payments of $248 due each business. From January 28, 2015 to March 24, 2015 the Company did not make any payments toward this loan. On March 25, 2015, the Company and PIRS entered into a settlement agreement whereby the Company will pay PIRS $12,000 payable in weekly payments of $230.76 due each Friday until the balance has been paid. The Company has imputed interest (at an effective rate of 466%) which is being amortized of the life of the agreement which is the date that the total repayments will be made assuming the Company is timely in all of its payments. The Company has made all the required payments relating to the settlement agreement as of the date of these financial statements.
-29- |
As of the date of these financial statements the Company has made all the required payments for the financing loans above in accordance with the modifications to the original agreements as described above. The finance companies disclosed above have not taken any action toward its recourse regarding the collateral and guarantees on the agreements.
The following table summarizes the future amounts due under the above agreements
Amount of daily payments payable under the agreement at March 31, 2015:
Continental | $ | 44,407 | ||
EBF | 15,960 | |||
PIRS | 11,769 | |||
Total | $ | 72,136 | ||
Less: Unamortized discount | 14,871 | |||
Financing Loans | 57,265 |
As of March 31, 2015 we had $7,494 in cash as compared to $18,955 in December 31, 2014. As of the date of this registration statement, the Company's sole officer and director, Mr. Kovie has secured a loan with Georgia Peaches, LLC in order to fund the entire process of going public and all associated expenses that pertain to this process. Currently, Mr. Kovie has enough capital to fund the final stages of reaching the OTCBB. This Promissory Note is dated November 30, 2013,and in the amount of Seventy Thousand and 00/100 Dollars ($70,000), payable to the Lender (the "Term Note") over a period of twelve (12) months at a rate of eleven percent (11%) per annum, which is attached as Exhibit A to this Agreement.
-30- |
For the three months ended March 31, 2015 as compared to the three months ended March 31, 2014.
Sales
Sales for the three months ended March 31, 2015 were $175,628 as compared to $147,828 for the three months ended March 31, 2014. The increase in revenue of $27,800 was primarily attributable to an increase in customer orders.
Cost of Sales and Gross Profit
Cost of sales for the three months ended March 31, 2015 was $101,294 with a gross profit of $74,334 as compared to $100,080 and a gross profit of $47,748 for the three months ended March 31, 2014.
Operating Expenses
We had total general administrative expenses of $48,371 for the three months ended March 31, 2015 as compared to $40,669 for the three months ended March 31, 2014. The increase in general administrative expenses of $7,702 is due to an increase in general and administrative expenses primarily due to an increase in employees as well as increases in various other accounts and an increase in professional fees associated with the S-1 filing.
Interest Expense
We incurred interest expense of $32,560 for the three months ended March 31, 2015 as compared to $15,067 for the three months ended March 31, 2014. The increase in interest expense of $17,493 is due primarily to increased borrowing.
Net Loss / Income
As a result of the foregoing, we realized a net loss of $6,597 for the three months ended March 31, 2015 as compared to a net loss of $7,988 for the three months ended March 31, 2014.
-31- |
Over the next twelve months we plan to execute the following:
1) to expand our sales force by a minimum of 2 people
2) to open at least one new showroom in another area of Chicago
3) to hire a minimum of 2 new upholsterers to increase our production
4) to increase our advertising budget
5) to expand our market share by acquiring another upholstery shop
6) to initiate a campaign to encourage people to recycle their old furniture
7) to purchase a fabric manufacturing company to help cut the cost of buying fabric elsewhere
The failure to raise additional funding thereof would result in need to seek capital from other resources such as private placements in the Company’s common stock or debt financing, which may not even be available to the Company. However, if such financing were available, it would likely have to pay additional costs associated with such financing and in the case of high risk loans be subject to an above market interest rate. At such time these funds are required, management would evaluate the terms of such financing. If the company cannot raise additional proceeds via such financing, it would be required to cease business operations.
-32- |
Name | Age | Position(s) | ||
Ken Kovie1 | 56 | President, Treasurer, Chief Financial Officer and Chairman of the Board of Directors. | ||
Secretary |
Ken Kovie
SUMMARY COMPENSATION TABLE | ||||||||||||||||||||||||||||||||||||
Name and principal position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||||||||||||
Ken Kovie,President | 2014 | 54,416 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
-33- |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END | |||||||||
OPTION AWARDS | STOCK AWARDS | ||||||||
Name |
Number of Securities Underlying Unexercised Options (#) Exercisable |
Number of Securities Underlying Unexercised Options (#) Unexercisable |
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
Option Exercise Price ($) |
Option Expiration Date |
Number of Shares or Units of Stock That Have Not Vested (#) |
Market Value of Shares or Units of Stock That Have Not Vested ($) |
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Ken Kovie | - | - | - | - | - | - | - | - | - |
-34- |
DIRECTOR
COMPENSATION
|
|||||||
Name
|
Fees
Earned or
Paid
in
Cash
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Non-Qualified
Deferred
Compensation
Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
Ken
Kovie
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Title of Class | Name and Address Beneficial Owner [1] | Amount and Nature of Beneficial Owner | Percent of Class | |||
Common Stock | Ken Kovie | 10,440,000 | 52% | |||
Common Stock | All Officers as a Group | 10,440,000 | 52% | |||
Common Stock | Rose M. Gallagher Family Trust [3] | 3,000,000 | 15% | |||
Common Stock | Synergistic [4] | 3,000,000 | 15% | |||
[1]
|
The
person named above may be deemed to be a “parent” and “promoter” of our company, within the meaning of
such terms under the Securities Act of 1933, as amended, by virtue of his direct and indirect stock holdings. Mr. Kovie is the
only “promoter” of our company.
|
[2]
|
Beneficial
ownership is determined in accordance with the Rule 13d-3(d)(1) of the Exchange Act, as amended and generally includes voting
or investment power with respect to securities. Pursuant to the rules and regulations of the Securities and Exchange Commission,
shares of common stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or
warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or group and includes
shares that could be obtained by the named individual within the next 60 days.
|
[3] | Daniel Gallagher has investment/voting control for the Trust |
[4] | Geoffrey Thompson has investment/voting control for Synergistic |
-35- |
- no established public market for the Company’s shares;
- our lack of operating capital and,
- the risk associated with our lack of profitable operating history.
As of December 31, 2014 and 2013, the Company was obligated to a director, Ken Kovie who is also an officer and a stockholder, for a non-interest bearing demand loan in the amounts of $67,558 and $89,779, respectively. The Company plans to pay the loan back as cash flows become available.
Mr. Kovie has personally loaned money to the company. No reference to the loan from Georgia Peaches nor the May 2014 loan is intended.
-36- |
Disclosure of Commission Position on Indemnification for Securities
Act Liabilities.
|
Legal
and Accounting
|
$ | 30,000 | ||
SEC
Filing Fee
|
$ | 3,864 | ||
Printing
|
$ | 200 | ||
Transfer
Agent
|
$ | 1,000 | ||
TOTAL
|
$ | 35,064 |
The Company has authorized 100,000,000 common shares and 10,000,000 preferred shares, both with a par value of $0.0001 per share. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholders of the corporation is sought.
On December 26, 2013 the Company issued 6.000,000 shares to Pathways Financial LLC in association with a subscription agreement for $600.
On December 26, 2013 the Company issued 350,000 shares to Georgia Peaches for consulting services. The Company valued these shares at the price per share issued with the subscription agreement referred to above.
In October, 2014 the company issued 80,000 shares to Lambert Equity LLC as an incentive to reach said agreement in their stock purchase agreement.
-37- |
During the nine months ended September 30, 2014, we sold 20,200 shares of common stock to 27 investors listed in the below table, at a price per share of $1.50 for an aggregate offering price of $30,300. All sold securities were paid for in cash. The Common Stock issued in this offering was issued in a transaction not involving a public offering in reliance upon an exemption from registration provided by Rule 506(b) of Regulation D of the Securities Act of 1933.
Date | Name | # of Shares | Total Price | |||||||||||
2 | /12/2014 | Joyce Bryant | 100 | $ | 150.00 | |||||||||
2 | /12/2014 | Tom Evoy | 100 | $ | 150.00 | |||||||||
2 | /12/2014 | Andrea Kubida | 1500 | $ | 2,250.00 | |||||||||
2 | /12/2014 | Donald Kubida | 1500 | $ | 2,250.00 | |||||||||
2 | /12/2014 | John R. Walker | 100 | $ | 150.00 | |||||||||
2 | /14/2014 | Benjamin Carlson | 100 | $ | 150.00 | |||||||||
2 | /14/2014 | Gavin Carlson | 100 | $ | 150.00 | |||||||||
2 | /14/2014 | Carianne Siegel | 500 | $ | 750.00 | |||||||||
2 | /14/2014 | Mark J. Siegel | 500 | $ | 750.00 | |||||||||
2 | /14/2014 | Carol L. Kalber | 1000 | $ | 1,500.00 | |||||||||
3 | /3/2014 | Scott K. Walker | 100 | $ | 150.00 | |||||||||
2 | /24/2014 | Lois O'Sullivan | 100 | $ | 150.00 | |||||||||
2 | /24/2014 | Robert Kuenster | 100 | $ | 150.00 | |||||||||
2 | /24/2014 | Joseph Lombardo | 100 | $ | 150.00 | |||||||||
3 | /3/2014 | Annette & Charles Wagner | 500 | $ | 750.00 | |||||||||
3 | /11/2014 | Andrew Kopczyk | 500 | $ | 750.00 | |||||||||
3 | /11/2014 | Anna Kopczyk | 500 | $ | 750.00 | |||||||||
3 | /11/2014 | Lisa Kopczyk | 500 | $ | 750.00 | |||||||||
3 | /17/2014 | Brian Walker | 100 | $ | 150.00 | |||||||||
3 | /17/2014 | Kevin Walker | 100 | $ | 150.00 | |||||||||
3 | /17/2014 | Peter Kopczyk | 1000 | $ | 1,500.00 | |||||||||
3 | /25/2014 | Mike Levanowski | 100 | $ | 150.00 | |||||||||
3 | /28/2014 | Anthony Guarino | 100 | $ | 150.00 | |||||||||
6 | /16/2014 | Kristy L Kubida | 1000 | $ | 1,500.00 | |||||||||
6 | /16/2014 | Carol L Kalber | 1000 | $ | 1,500.00 | |||||||||
6 | /16/2014 | Carianne Siegel | 500 | $ | 750.00 | |||||||||
6 | /16/2014 | Andrea Kubida | 2000 | $ | 3,000.00 | |||||||||
7 | /30/2014 | Lois O'Sullivan | 100 | $ | 150.00 |
On July 30, 2014 we sold 5,000 shares of common stock to five (5) investors listed in the below table, at a price per share of $2.50 for an aggregate offering price of $12,500. All sold securities were paid for in cash. The Common Stock issued in this offering was issued in a transaction not involving a public offering in reliance upon an exemption from registration provided by Rule 506(b) of Regulation D of the Securities Act of 1933.
Date | Name | # of Shares | Total Price | |||||||||
7 | /30/2014 | John R. & Betty L Cory | 1000 | $ | 2,500.00 | |||||||
7 | /30/2014 | Constance R. Logan | 1000 | $ | 2,500.00 | |||||||
7 | /30/2014 | Michael W. Janeczko | 1000 | $ | 2,500.00 | |||||||
7 | /30/2014 | Ken & Mary Farris | 1000 | $ | 2,500.00 | |||||||
7 | /30/2014 | Greg & Ellen Daniel | 1000 | $ | 2,500.00 |
-38- |
Exhibit No. | Description of Exhibits |
---|---|
3.1(1) | Articles of Incorporation of Upholstery International, Inc. |
3.2(1) | Bylaws of Upholstery International, Inc. |
5.1 | Opinion of Novi & Wilkin regarding the legality of the securities being registered. |
10.4(1) | Subscription Agreement |
12(1) | Loan Documents |
23.1 | Auditor Consent |
23.2 | Consent of council,(council’s consent is located in the legal opinion filed as Exhibit 5 to this registration statement). |
99.2(1) | Lambert Agreement |
99.3 | Georgia Peaches Agreement |
99.4(1) | Lambert cancellation executed by Upholstery International, Inc. |
99.5(1) | Lambert cancellation executed by Lambert Financial, LLC |
99.6(1) | Georgia Peaches Loan Extension Agreement |
99.7(1) | Credit Facility Agreement with Continental Capital Advance, Inc. dated July 2, 2014 |
99.8(1) | Credit Facility Agreement with Continental Capital Advance, Inc. dated September 10, 2014 |
-39- |
1. | To file, during any period in which it offers or sells securities, a post- effective amendment to this Registration Statement to: | |
a. | include any Prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
|
|
b. | reflect in the Prospectus any facts or events which, individually or
together, represent a fundamental change in the information set forth in this Registration Statement; and notwithstanding the
forgoing, any increase or decrease in volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of Prospectus filed with the commission pursuant
to Rule 424(b) if, in the aggregate, the changes in the 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
|
|
c. | include any additional or changed material information on the plan
of distribution.
|
|
2. | That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
|
|
3. | To remove from registration by means of a post-effective amendment any of the securities being registered hereby which remain unsold at the termination of the offering. | |
4. | That, for determining our liability under the
Securities Act to any purchaser in the initial distribution of the securities, we undertake that in a
primary offering of our securities pursuant to this Registration Statement, regardless of
the underwriting method used to sell the securities to the purchaser, if the securities
are offered or sold to such purchaser by means of any of the following communications, we will be a seller to
the purchaser and will be considered to offer or sell such securities to such purchaser:
|
|
a. | any preliminary Prospectus or Prospectus that we file relating to the
offering required to be filed pursuant to Rule 424 (Section 230.424 of this chapter);
|
|
b. | any free writing Prospectus relating to the offering prepared by or
on our behalf or used or referred to by us;
|
|
c. | the portion of any other free writing Prospectus relating to the offering
containing material information about us or our securities provided by or on behalf of us;
|
|
d. | and any other communication that is an offer in the offering made by
us to the purchaser.
|
-40- |
-41- |