Attached files
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| EX-23.1 - CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM - Diverse Development Group Inc. | div_ex231.htm |
| EX-5.0 - OPINION - Diverse Development Group Inc. | div_ex50.htm |
As filed with the Securities and Exchange Commission on April 13 , 2017
Registration No. 333-216151
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2 to
FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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DIVERSE DEVELOPMENT GROUP, INC. |
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(Exact name of registrant as specified in its charter) |
TOPAZ ISLAND ACQUISITION CORPORATION
(Former name of registrant)
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Delaware |
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6531 |
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81-2338251 |
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(State or other jurisdiction |
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(Primary Standard Industrial |
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(I.R.S. Employer |
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incorporation or organization) |
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Classification Code Number) |
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Identification Number) |
4819 Wood Pointe Way
Sarasota, Florida 34233
+1 617-510-1777
(Address, including zip code, and telephone number, including area code
of registrant’s principal executive offices)
Inc. Plan
Trolley Square, Suite 20 C
Wilmington, Delaware 19806
+800 462-4633
(Name, address, including zip code, and telephone number,
Including area code, of agent for service)
With copy to
Cassidy & Associates
215 Apolena Avenue
Newport Beach, California 92662
949-673-4510
949-673-4525 (fax)
Approximate Date of Commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462Ó under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):
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The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission acting pursuant to said section 8(a), may determine.
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CALCULATION OF REGISTRATION FEE |
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Title of Each Class of Securities to be Registered |
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Amount to be Registered |
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Proposed |
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Amount of Registration |
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Common Stock |
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1,015,000 |
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$ | 0.15 |
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$ | 152,250 |
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$ | 17.65 |
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(1) |
There is no current market for the securities and the price at which the Shares are being offered has been arbitrarily determined by the Company and used for the purpose of computing the amount of the registration fee in accordance with Rule 457 under the Securities Act of 1933, as amended. |
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(2) |
Paid by electronic transfer. |
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EXPLANATORY NOTE
This registration statement and the prospectus therein cover the registration of 1,015,000 shares of common stock offered by the holders thereof.
The information contained in this prospectus is not complete and may be changed. A registration statement relating to these securities has been filed with the Securities and Exchange Commission and these securities may not be sold until that registration statement becomes effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
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PROSPECTUS |
Subject to Completion, Dated ________ |
Diverse Development Group, Inc.
1,015,000 shares of Common Stock offered by selling shareholders at $0.15 per share
This prospectus relates to the offer and sale of 1,015,000 shares of common stock (the “Shares”) of Diverse Development Group, Inc. ("DDG" or the “Company”), $.0001 par value per share, offered as follows: (a) 1,015,000 Shares offered by the holders thereof (the "Selling Shareholder Shares"), who are deemed to be statutory underwriters.
The selling shareholders will offer their shares at a price of $0.15 per share.
The maximum number of Shares that can be sold pursuant to the terms of this offering by the selling shareholders is (in aggregate) 1,015,000 Shares. Funds received by the selling shareholders will be immediately available to such selling shareholders for use by them. The Company will not receive any proceeds from the sale of the Selling Shareholder Shares.
The offering will terminate twenty-four (24) months from the date that the registration statement relating to the Shares is declared effective, unless earlier fully subscribed or terminated by the Company. The Company intends to maintain the current status and accuracy of this prospectus and to allow selling shareholders to offer and sell the Shares for a period of up to two (2) years, unless earlier completely sold, pursuant to Rule 415 of the General Rules and Regulations of the Securities and Exchange Commission. All costs incurred in the registration of the Shares are being borne by the Company.
Prior to this offering, there has been no public market for the Company’s common stock. No assurances can be given that a public market will develop following completion of this offering or that, if a market does develop, it will be sustained. The offering price for the Shares has been arbitrarily determined by the Company and does not necessarily bear any direct relationship to the assets, operations, book or other established criteria of value of the Company. The Shares will become tradable on the effective date of the registration statement of which this prospectus is a part.
Neither the Company nor any selling shareholders has any current arrangements nor entered into any agreements with any underwriters, broker-dealers or selling agents for the sale of the Shares. If the Company or selling shareholders can locate and enter into any such arrangement(s), the Shares will be sold through such licensed underwriter(s), broker-dealer(s) and/or selling agent(s).
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act.
These securities involve a high degree of risk. See “RISK FACTORS” contained in this prospectus beginning on page 6.
Diverse Development Group, Inc.
4819 Wood Pointe Way
Sarasota, Florida 34223
Prospectus dated __________________, 2017
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Security Ownership of Certain Beneficial Owners and Management |
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Disclosure of Commission Position of Indemnification for Securities Act Liabilities |
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This summary highlights some information from this prospectus, and it may not contain all the information important to making an investment decision. A potential investor should read the following summary together with the more detailed information regarding the Company and the common stock being sold in this offering, including “Risk Factors” and the financial statements and related notes, included elsewhere in this prospectus.
The Company
History
Diverse Development Group, Inc. (the "Company" or "DDG"), a Delaware corporation, is a company that is in the business of developing and purchasing real estate across all spectrums of the industry throughout the United States. The Company intends to focus on credit tenant development and acquisitions utilizing a strong balance of holding and selling projects. The Company is a real estate development and investment company that will build a strong portfolio of investment-grade retail and commercial leasing properties through acquisition and the pursuit of opportunistic ground up land developments. The Company intends to utilize market research to diversify its assets nationwide and responsibly optimize its portfolio against risk. Furthermore, the Company is seeking external capital from investors. The company will operate with little to no debt and hopes to be traded on the OTCQB.
The Company was incorporated in the State of Delaware in April 2016, and was formerly known as Topaz Island Acquisition Corporation. In May, 2016, Topaz Island Acquisition Corporation filed a registration statement with the Securities and Exchange Commission on Form 10 by which it became a public reporting company.
In December, 2016, the Company implemented a change of control by redeeming shares of existing shareholders, issuing shares to new shareholders, electing new officers and directors and accepting the resignations of its then existing officers and directors. In connection with the change of control, the shareholders of the Company and its board of directors unanimously approved the change of the Company’s name from Topaz Island Acquisition Corporation to Diverse Development Group, Inc.
Business
The Company's primary objective is to buy, sell and develop real estate assets located within the United States. However unlike traditional real estate investment groups, DDG intends to operate using cash and little to no debt or if debt is required, such debt will be short term, to be repaid within three years or less .
The Company's philosophy is that by using cash for the Company's endeavors and by utilizing a development and purchase model using a blend of existing assets with stabilized cash flows and ground-up development projects, DDG will be able to amass and sustain a strong cash flow with little to no debt all while maintaining significant assets on the Company's books. The Company also aims to keep overhead low and limit expenses, as they relate to soft costs.
The Company intends to utilize funds pooled from investors to directly invest in income-yielding properties. The Company will primarily invest in diversified credit tenant investment-grade NNN properties with long-term leases. The Company’s strategic roadmap includes it investing a portion of its capital for higher return ground-up land development projects. Income will be largely generated from rent and capital gains from ground up development projects. The Company will not have any debt other than an occasional short term loan that is project-specific.
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Risks and Uncertainties facing the Company
As a development stage company, the Company has limited operating history and has continuously experienced losses since its inception. The Company’s independent auditors have issued a report questioning the Company’s ability to continue as a going concern. That is, the Company needs to create a source of revenue or locate additional financing in order to continue its developmental plans. As a development stage company, management of the Company has no prior experience in building and selling projects similar to that planned by the Company and in marketing and distributing such projects on a broad scale.
One of the biggest challenges facing the Company is the ability to raise adequate capital to generate sufficient cash flows from operations to meet its obligations, which it had not been able to accomplish to the date of the report, and /or obtain additional financing from its stockholders and/or other third parties.
Due to financial constraints, the Company has to date conducted limited operations. If the Company were unable to develop strong and reliable sources of funding for continued operations, it is unlikely that the Company could develop its operations to return revenue sufficient to further develop its business plan. Moreover, the above assumes that the Company’s efforts are met with customer satisfaction in the marketplace and exhibit steady adoption of its solutions amongst the potential base of customers, neither of which are currently known or guaranteed.
Due to these and other factors, the Company’s need for additional capital, the Company’s independent auditors have issued a report raising substantial doubt of the Company’s ability to continue as a going concern.
Trading Market
Currently, there is no trading market for the securities of the Company. The Company intends to initially apply for admission to quotation of its securities on the OTC Bulletin Board as soon as possible which may be while this offering is still in process. There can be no assurance that the Company will qualify for quotation of its securities on the OTC Bulletin Board.
The Offering
The maximum number of Shares that can be sold pursuant to the terms of this offering is 1,015,000. The offering will terminate twenty-four (24) months from the date of this prospectus unless earlier terminated by the Company.
This prospectus relates to the offer and sale of 1,015,000 shares (“Shares”) of common stock of the Company, as follows: (a) 1,015,000 Shares offered by the holders thereof (the “Selling Shareholder Shares”), who are deemed to be statutory underwriters. The selling shareholders will offer their shares at a price of $0.15 per share.
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Common stock outstanding before the offering |
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7,115,000 | (1) |
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Common stock for sale by selling shareholders |
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1,015,000 |
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Common stock outstanding after the offering |
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7,115,000 |
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Offering Price |
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0.15 per share |
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Proceeds to the Company |
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(1) Based on number of shares outstanding as of the date of this prospectus.
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A purchase of any Shares is an investment in the Company's common stock and involves a high degree of risk. Investors should consider carefully the following information about these risks, together with the other information contained in the registration statement of which this prospectus is a part, before the purchase of any Shares. If any of the following risks actually occur, the business, financial condition or results of operations of the Company would likely suffer, the market price of the common stock would likely decline, and investors could lose all or a portion of their investment. The Company has listed the following risk factors which it believes to be that material to an investment decision in this offering.
The Company has limited operating history and as such an investor cannot assess its profitability or performance but must rely on the experience of its chief executive officer and other officers forming its management team.
The Company is a development stage company and has limited operating history and it is therefore difficult for an investor to assess prior performance or determine whether it likely that the Company will meet its projected business plan. An investor will be required to make an investment decision based primarily on recent developing operations, on management’s history and on projected operations in light of the risks, expenses and uncertainties that may be encountered. Management believes that it is has formulated a business model with sufficient detail, and associated expertise, to result in a highly successful business venture. However, there can be no assurance that the Company will succeed in its business plans and generate significant revenues.
An investment in the Company requires a long-term commitment with no certainty of return.
It is anticipated that there will be a significant period of time before the Company has completed its investments in ground up development projects and each investment may not be liquidated for one to two years after the initial purchase. Losses on unsuccessful investments may be realized before gains on successful investments are realized. Dispositions of such investments may require a lengthy time period. While it is the intention of the Company to achieve target returns over such period, other factors such as overall economic conditions, the competitive environment and the availability of potential acquirers may shorten or lengthen DDG's holding period. Therefore, it is unlikely that the Company will realize substantial gains during its early years.
Public Market Risk
It is impossible to predict the price at which Units of the Company will trade and there can be no assurance that an active trading market for the Units will be sustained. The Units will not necessarily trade at values determined solely by reference to the value of the Properties of the Company. Accordingly, the Units may trade at a premium or a discount to the value implied by the value of the properties of DDG. The market price for the Units may be affected by changes in general market conditions, fluctuations in the markets for equity securities and numerous other factors beyond the control of DDG.
The Company’s independent auditors have issued a report questioning the Company's ability to continue as a going concern.
In their audited financial report, the Company’s independent auditors have issued added an explanatory paragraph that unless the Company is able to generate sufficient cash flows from operations and/or obtain additional financing, there is a substantial doubt as to its ability to continue as a going concern. The Company anticipates that it would need substantial capital over the next 12 months to continue as a going concern to expand its operations in accordance with its current business plan.
The Company has accumulated deficit as of September 30, 2016 of $1,812.00.
As of September 30, 2016, the Company has an accumulated deficit of $1,812.00. This deficit may impact on the Company in various ways including, but not limited to, making it more difficult to borrow money, sell stock or to maintain a good market price.
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Prior Investments No Indication of Future Performance
The past investment performance of the Company, its Founder, and/or its officers cannot be relied upon as an indication of the Company's future performance or success. That information is solely intended to illustrate the experience of the Company and its management and the type of transactions the Company intends to pursue on behalf of DDG. Those transactions are not intended to be complete or representative of all the transactions in which the Company, its founder, and/or its officers have been involved.
Risk of Limited Number of Investments
Although the Company intends to achieve diversification of investments, the Company could deploy its capital in a relatively small number of investments. The Company may also be less diversified should it raise less capital than anticipated. Accordingly, unfavorable performance by a small number of investments could have a substantial adverse impact on the returns realized by investors in the Company.
Potential Difficulty Consummating Attractive Investments
The business of identifying and structuring projects of the nature contemplated by the Company is highly competitive. DDG will be competing for projects with other acquirers. There can be no assurance that the Company will be able to invest its capital on terms favorable to the Company or in comparison to its competitors. It is possible that the Company will never be fully invested if insufficient quality projects are available or identified.
General Risks Associated with Investment in Real Estate
The investments of the Company will be subject to the risks generally incident to ownership of real property, including, but not limited to uncertainty of cash flow to meet fixed and other obligations; adverse changes in local employment conditions, interest rates and real estate tax rates; changes in fiscal policies; and uninsured losses and other risks that are beyond the control of the Company. There can be no assurance of profitable operations because the cost of owning real estate assets may exceed the income produced, particularly since certain expenses related to real estate and its development and ownership, such as property taxes, utility costs, maintenance costs and insurance, tend to increase over time and are largely beyond the control of the owner.
Investments in Real Estate Development Projects
A decision to invest in land or buildings for development will be made based upon certain assumptions about the cost of development, time periods for completion of various phases of development, and the market value of the developed product. While there may be past development or operating history on which to base these assumptions, many factors may change resulting in such assumptions being untrue. Such conditions may contribute to reduced demand for the finished product due to competition, economic factors or default, or changes in the capital markets such as interest rates or the availability of capital. To the extent development costs are financed, an investment will be subject to real estate financing risks. Building construction or site development entails risk related to materials and labor cost increases, work stoppages or delays, regulatory delays, failure of performance or defective materials or workmanship by contractors and suppliers, unforeseen weather and unforeseen land conditions. Such risks can be mitigated to some extent by obtaining performance bonds, construction and development guaranties, letters of credit and/or liens on assets under construction. No assurance can be given, however, that any of the foregoing will be obtained or, if obtained, will be adequate to cover any loss resulting from any such risks.
Investments in Industrial or Commercial Assets
Investments in industrial or other commercial office properties involve certain risks in addition to those which exist for real estate properties generally (including certain environmental risks). The financial failure and resulting lease default of a tenant which occupies a material amount of space at a commercial property would cause a reduction in the cash flow to the Company. Moreover, such reduction could have the effect of decreasing the value of the property. In the event of such a termination, there can be no assurance that the Company would be able to find a replacement tenant to occupy the space on similar terms, and it is probable that the costs incurred to renovate and prepare the space to meet the needs of a replacement tenant would be significant. It is also possible that such reductions in cash flow could result in the Company to default on the mortgage financing secured by the property. Industrial and commercial office properties are also subject to competition from providers of similar or alternative space. Competitors may be able to supply space of similar or superior value at prices equal to or lower than those charged by the Company or the entity that owns the industrial or other commercial property. Such space is also subject to obsolescence as trends, styles, and technologies change, thereby requiring significant infusions of capital to remain competitive and viable in the marketplace.
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Financing of Real Estate Projects
Although it is contemplated that the acquisition and development of assets will be financed by utilizing minimal or no debt, if the Company were to acquire debt to finance operations, this aspect would increase DDG's exposure to loss. Principal and interest payments on indebtedness (including mortgages having “balloon” payments) will have to be made regardless of the sufficiency of cash flow from the assets. Mortgages requiring “balloon” payments may involve greater risks than mortgages where the principal amount is fully amortized over the term of the loan since the ability to repay the outstanding principal amount of the “balloon” loan may be dependent upon the ability to obtain adequate replacement financing, which will, in turn, be dependent upon interest rates and lenders’ policies at the time of refinancing, economic conditions in general and the value of the underlying assets in particular. There is no assurance that replacement financing will be available to make “balloon” payments or that, if available, any replacement financing will be on favorable terms. Depending on the level of leverage and decline in value, if mortgage payments are not made when due, one or more of the assets may be lost (and the investment therein rendered valueless) as a result of foreclosure by the mortgagee.
Risks on Disposition of Certain Investments
In connection with the disposition of a project, the Company may be required to make representations about the project typical of those made in connection with the sale of any business or real estate interest. The Company may also be required to indemnify the purchasers of such investment to the extent that any such representations turn out to be inaccurate, incorrect or misleading.
Volatile market conditions for mortgages and mortgage-related assets.
The Company’s results of operations are materially affected by conditions in the markets for mortgages and mortgage-related assets, including commercial mortgage-backed securities ("CMBS"), as well as the broader financial markets and the economy generally. Beginning in the summer of 2007, significant adverse changes in financial market conditions resulted in a deleveraging of the entire global financial system and the forced sale of large quantities of mortgage-related and other financial assets. Concerns over economic recession, geopolitical issues, unemployment, the availability and cost of financing, the mortgage market and a declining real estate market contributed to increased volatility and diminished expectations for the economy and markets. As a result of these conditions, many traditional mortgage investors suffered severe losses in their residential mortgage portfolios and several major market participants failed or have been impaired, resulting in a significant contraction in market liquidity for mortgage-related assets. This illiquidity negatively affected both the terms and availability of financing for all mortgage-related assets. Increased volatility and deterioration in the markets for mortgages and mortgage-related assets as well as the broader financial markets may adversely affect the performance and market value of any CMBS holdings the Company may own at the time. If these conditions occur, institutions from which the Company seeks financing for the Company’s investments may tighten their lending standards or become insolvent, which could make it more difficult for the Company to obtain financing on favorable terms or at all. Adverse developments in the broader residential mortgage market may adversely affect the value of the assets in which the Company invests.
Since the summer of 2007, the residential mortgage market in the United States experienced a variety of difficulties and changed economic conditions, including defaults, credit losses and liquidity concerns. Certain commercial banks, investment banks and insurance companies have announced extensive losses from exposure to the residential mortgage market. These losses have reduced financial industry capital, leading to reduced liquidity for some institutions. These factors have impacted investor perception of the risk associated with CMBS in which the Company intends to invest. As a result, values for CMBS in which the Company may invest may experience a certain amount of volatility. Further increased volatility and deterioration in the broader mortgage-backed securities markets may adversely affect the performance and market value of the Company's investments.
Actions of the U.S. government, Federal Reserve and Treasury to stabilize financial markets.
In response to the financial issues affecting the banking system and the financial markets and going concern threats to investment banks and other financial institutions, the U.S. government, the Federal Reserve, the Treasury and other governmental and regulatory bodies have taken action to attempt to stabilize the financial markets. It is not possible to predict how future U.S. government actions will impact the financial markets, including current significant levels of volatility, or the Company's current or future investments. In addition, the U.S. government, Federal Reserve, Treasury and other governmental and regulatory bodies have taken or are considering taking other actions to address causes of the financial crisis. The Company cannot predict whether or when such actions may occur, and such actions could have a dramatic impact on the Company's business, results of operations and financial condition.
Congress has enacted sweeping financial legislation, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), signed into law by President Obama on July 21, 2010, regarding, among other areas, the operation of financial institutions. Many provisions of the Dodd-Frank Act will be implemented through regulatory rulemakings and similar processes over several years and many of these rules have not been issued in final form. Therefore, the impact of the Dodd-Frank Act, and of follow-on regulation, on trading strategies and operations is impossible to predict, and may be adverse. Practices and areas of operation subject to significant change based on the impact, direct or indirect, of the Dodd-Frank Act and follow-on regulation, may change in manners that are unforeseeable, with uncertain effects. By way of example and not limitation, direct and indirect changes from the Dodd-Frank Act and follow-on regulation may occur to a significant degree with regard to, among other areas, the trading and use of many derivative instruments, including swaps and strengthening the oversight and supervision of securities and capital market activities by the U.S. Securities and Exchange Commission (“SEC”). There can be no assurance that such legislation or regulation will not have a material adverse effect on the Company. In addition, Congress may address tax policy, which also could have uncertain direct and indirect impact on trading and operations.
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Further, the Dodd-Frank Act created the Financial Stability Oversight Council (“FSOC”), an interagency body charged with identifying and monitoring systemic risks to financial markets. The FSOC has the authority to require that non-bank financial companies that are “predominantly engaged in financial activities” whose failure it determines would pose systemic risk, be placed under the supervision of the Federal Reserve and subject to enhanced prudential standards. The FSOC has the authority to recommend that the Federal Reserve adopt more stringent prudential standards and reporting and disclosure requirements for non-bank financial companies supervised by the Federal Reserve, but the Federal Reserve is expected to establish the prudential standards applicable to such companies. The FSOC also has the authority to make recommendations to the Federal Reserve on various other matters that may affect the Company. The FSOC may also recommend that other federal financial regulators impose more stringent regulation upon, or ban altogether, financial activities of any financial firm that poses what it determines are significant risks to the financial system.
The implementation of the Dodd-Frank Act could also adversely affect the Company by increasing transaction and/or regulatory compliance costs. In addition, greater regulatory scrutiny and the implementation of enhanced and new regulatory requirements may increase the Company's exposure to potential liabilities, and in particular liabilities arising from violating any such enhanced and/or new regulatory requirements. Increased regulatory oversight could also impose administrative burdens on the Company, including, without limitation, responding to investigations and implementing new policies and procedures. The ultimate impact of the Dodd-Frank Act, and any resulting regulation, is not yet certain and the Company d may be affected by the new legislation and regulation in ways that are currently unforeseeable.
General Economic and Market Conditions
The Company’s investments will be affected by general economic conditions and local market conditions. Economic conditions could affect interest rates, the extent and timing of the Company’s investment activities and the availability of investments. Economic conditions could negatively impact the Company’s ability to carry out its business or cause it to incur losses.
The Company’s stock may be considered a penny stock and any investment in the Company’s stock will be considered a high-risk investment and subject to restrictions on marketability.
If the Shares commence trading, the trading price of the Company's common stock may be below $5.00 per Share. If the price of the common stock is below such level, trading in its common stock would be subject to the requirements of certain rules promulgated under the Securities Exchange Act of 1934, as amended. These rules require additional disclosure by broker-dealers in connection with any trades generally involving any non-NASDAQ equity security that has a market price of less than $5.00 per Share, subject to certain exceptions. Such rules require the delivery, before any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith, and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors (generally institutions). For these types of transactions, the broker-dealer must determine the suitability of the penny stock for the purchaser and receive the purchaser’s written consent to the transactions before sale. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in the Company’s common stock which could impact the liquidity of the Company’s common stock.
Little Experience in Being a Public Company
The Company is an early-stage company and as such has little experience in managing a public company. Such lack of experience may result in the Company experiencing difficulty in adequately operating and growing its business. Further, the Company may be hampered by lack of experience in addressing the issues and considerations which are common to growing companies. If the Company’s operating or management abilities consistently perform below expectations, the Company’s business is unlikely to thrive.
The Company is an early-stage company with limited developed finance and accounting organization and the rigorous demands of being a public company require a structured and developed finance and accounting group. As a reporting company, the Company is already subject to the reporting requirements of the Securities Exchange Act of 1934. However, the requirements of these laws and the rules and regulations promulgated thereunder entail significant accounting, legal and financial compliance costs which may be prohibitive to the Company as it develops its business plan, services and scope. These costs have made, and will continue to make, some activities more difficult, time consuming or costly and may place significant strain on its personnel, systems and resources.
The Securities Exchange Act requires, among other things, that companies maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain the requisite disclosure controls and procedures and internal control over financial reporting, significant resources and management oversight are required. As a result, management’s attention may be diverted from other business concerns, which could have a material adverse effect on the development of the Company's business, financial condition and results of operations.
These rules and regulations may also make it difficult and expensive for the Company to obtain director and officer liability insurance. If the Company is unable to obtain adequate director and officer insurance, its ability to recruit and retain qualified officers and directors, especially those directors who may be deemed independent, will be significantly curtailed.
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The Board of Directors could use the issuance or designation of preferred stock to impede or discourage an acquisition of the Company that may otherwise be beneficial to some shareholders.
The Company is authorized to issue up to 10,000,000 shares of preferred stock. The issuance of shares of preferred stock, or the issuance of rights to purchase such shares, could be used to discourage an unsolicited acquisition proposal. For instance, the issuance of a series of preferred stock might impede a business combination by including class voting rights that would enable the holder to block such a transaction, or facilitate a business combination by including voting rights that would provide a required percentage vote of the stockholders. In addition, under certain circumstances, the issuance of preferred stock could adversely affect the voting power of the holders of the common stock. Although the Company’s board of directors is required to make any determination to issue such preferred stock based on its judgment as to the best interests of the stockholders of the Company, the board of directors could act in a manner that would discourage an acquisition attempt or other transaction that some, or a majority, of the stockholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over the then market price of such stock. The board of directors does not intend to seek stockholder approval prior to any issuance of currently authorized stock, unless otherwise required by law or otherwise.
Potential need for additional capital even beyond that offered herein
The Company does not presently have sufficient operating capital to implement its existing business model and is dependent upon receipt of proceeds from this Offering or elsewhere to expand and develop its business as intended. The Company believes that the proceeds to the Company from the sale of the Shares (assuming that all Shares offered are sold) will provide the Company with sufficient capital to develop and market the Company’s business until it can begin generating enough profits from operations to fund future expansion. Many factors may, however, affect the Company’s cash needs, including the Company’s possible failure to generate sufficient revenues from operation. If less than all Shares are sold, the Company may not have sufficient capital to fund expansion until sufficient revenues are generated from operations or elsewhere and may be unable to find suitable financing on terms acceptable to the Company. This event would significantly increase the risk to those persons who invest in this Offering.
No Assurance of Investment Return
The Company's investment portfolio will consist primarily of investments in real estate development projects and operating results in a specified period will be difficult to predict. There is no assurance that DDG will be able to generate returns for its investors. Even if one or more of the projects are successful, there can be no guarantee that the shareholders will receive distributions from the Company in an amount equal to their investment or at all. The returns generated by investors will also be affected by the amount of capital successfully raised by the Company.
Use of any invested funds are immediately available to the Company
The Offering is being conducted on a "best efforts" basis, and the proceeds from the Shares offered hereby will not be subject to escrow and will be made available to the Company for its immediate use. No assurance can be given as to what number of Shares, if any, will be subscribed or what amount of proceeds, if any, will be raised and available to the Company. Should the Company receive an amount less than offered hereby, no assurance can be given as to the Company's ability to finance its intended business objectives.
The offering price of the Shares has been arbitrarily determined by the Company and such price should not be used by an investor as an indicator of the fair market value of the Shares.
Currently there is no public market for the Company's common stock. The offering price for the Shares has been arbitrarily determined by the Company and does not necessarily bear any direct relationship to the assets, operations, book or other established criteria of value of the Company. Thus an investor should be aware that the offering price does not reflect the fair market price of the Shares.
Investors in the Offering may experience immediate dilution of the value of their shares
Purchasers of the Shares may experience immediate dilution in the value of their Shares. Dilution represents the difference between the initial offering price per share paid by investors and the net tangible book value per share immediately after completion of the offering. Net tangible book value per share is the net tangible assets of the Company (total assets less total liabilities less intangible assets), divided by the number of shares of common stock outstanding. Thus if at some other time, shares had been sold by the Company at a price less than the price paid by purchasers of the Shares or had been issued by the Company for services or as other non-cash consideration, then the value of such investor Shares immediately after purchase would be less than the purchase price.
There has been no prior public market for the Company's common stock and the lack of such a market may make resale of the Shares difficult.
No prior public market has existed for the Company's securities and the Company cannot assure any purchaser that a market will develop subsequent to this Offering. The Company’s common stock is not presently included for trading on any exchange, and there can be no assurances that the Company will ultimately be registered on any exchange. No assurance can be given that the Shares of the Company will ever qualify for inclusion on any trading market.
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Restrictions on transferability
The Shares offered herein are restricted securities and, unless registered with the Securities and Exchange Commission, can only be sold in compliance with Rule 144 which provides that such securities cannot be sold or transferred for one year. The Rule 144 transferability requirements continue after one year for officers, directors and greater 10% percent shareholders who may thereafter sell such securities every three months in an amount equal to the greater of 1% of the Company’s outstanding common stock or the weekly average trading volume over the preceding four weeks. To satisfy the requirements of such exemptions from registration under the Securities Act and to conform to applicable state securities laws, each investor must acquire his Shares for investment purposes only and not with a view towards distribution.
Consequently, certain conditions of the Securities Act may need to be satisfied prior to any sale, transfer, or other disposition of the Shares. Some of these conditions may include, but are not limited to, a minimum holding period, availability of certain reports, including financial statements and limitations on the percentage of Shares sold and the manner in which they are sold. The Company can prohibit any sale, transfer or disposition unless it receives an opinion of counsel provided at the holder’s expense, in a form satisfactory to the Company stating that the proposed sale, transfer or other disposition will not result in a violation of applicable federal or state securities laws and regulations. No public market exists for the Shares, no market is expected to develop for the foreseeable future, and no market may ever develop at all. Consequently, owners of the Shares may have to hold their investment indefinitely and may not be able to liquidate their investments or pledge them as collateral for a loan in the event of an emergency.
Purchase of the Shares Is a Long Term Investment
An investment in the Shares may be long term and illiquid. As discussed above, the offer and sale of the Shares will not be registered under the Securities Act or any foreign or state securities laws by reason of exemptions from such registration, which depends in part on the investment intent of the investors. Prospective investors will be required to represent in writing that they are purchasing the Shares for their own account for long-term investment and not with a view towards resale or distribution. Accordingly, purchasers of Shares must be willing and able to bear the economic risk of their investment for an indefinite period of time. It is likely that investors will not be able to liquidate their investment in the event of an emergency.
No Dividends
The Company does not currently pay cash dividends on its common stock and does not anticipate paying such dividends at any time in the immediate future. At present, the Company will follow a policy of retaining all of its earnings, if any, to finance development and expansion of its business.
Arbitration
By execution of the Subscription Agreement for purchase of the Shares, investors in this Offering agree to submit to arbitration for all claims arising from their investment. Arbitration may not afford investors all the relief they might obtain outside arbitration. Arbitration narrows procedural and other steps available to claimants (such as discovery, broad choice of venue and scope of appellate review) and is, in general, a more informal process than court action. On the other hand, arbitration is normally a less expensive process for a claimant than court action and normally results in a quicker final decision. However, investors may find that as a result of arbitration they are more restricted in the resolution of claims, if any, arising from this investment.
Limited Liability of Management
The Company has provisions in its Certificate of Incorporation and Bylaws which limit the liability of its officers and directors, and provide for indemnification by the Company of its officers and directors to the full extent permitted by Delaware corporate law. Such provisions may substantially limit a shareholder's ability to hold officers and directors liable for breaches of fiduciary duty.
Lack of Firm Underwriter May Impact the Sale of the Shares
The Shares are offered on a “best efforts” basis by the Management and Board of Directors without compensation and on a “best efforts” basis through certain FINRA registered broker-dealers, which enter into Participating Broker-Dealer Agreements with the Company. Accordingly, there is no assurance that the Company or any FINRA broker-dealer will sell the minimum number or maximum number of Shares offered.
This prospectus contains, in addition to historical information, certain information, assumptions and discussions that may constitute forward-looking statements. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially than those projected or anticipated. Actual results could differ materially from those projected in the forward-looking statements. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, the Company cannot assure an investor that the forward-looking statements set out in this prospectus will prove to be accurate.
Such “forward-looking statements” can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “should” or “anticipates”, or the negative thereof, or other variations thereon or comparable terminology, or by discussion of strategy. No assurance can be given that the future results covered by the forward-looking statements will be achieved. The following matters constitute cautionary statements identifying important factors with respect to such forward-looking statements, including certain risks and uncertainties, which could cause actual results to vary materially from the future results covered in such forward-looking statements.
An investor should not rely on forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. The Company is not under a duty to update any of these forward-looking statements after the date of this prospectus or to conform these statements to actual results or revised expectations.
DETERMINATION OF OFFERING PRICE
There is no public market for the Company’s common stock and the $0.15 price at which the Shares are being offered has been arbitrarily determined by the Company.
The Shares offered by the selling shareholders may be offered and sold, from time to time, by the selling shareholders described in this prospectus under the heading “Selling Shareholders” at an offering price of $0.15 per share until such time as the Shares are quoted on the OTC Bulletin Board and only thereafter may be offered at prevailing market or privately negotiated prices. The selling shareholders may sell the Shares by any means described in this prospectus under “Plan of Distribution.”
The Company does not anticipate that it will declare dividends in the foreseeable future but rather intends to use any future earnings for the development of its business.
This prospectus relates to the sale of 1,015,000 outstanding shares of the Company’s common stock by the holders of those shares. The selling shareholders, who are deemed to be statutory underwriters, will offer their shares at a price of $0.15 per share.
Usual and customary or specifically negotiated brokerage fees or commissions may be paid by the selling shareholders in connection with sales of the common stock. The selling shareholders may from time to time offer their shares through underwriters, brokers-dealers, agents or other intermediaries. The distribution of the common stock by the selling shareholders may be effected in one or more transactions that may take place through customary brokerage channels, in privately negotiated sales; by a combination of these methods; or by other means. The Company will not directly receive any portion or percentage of any of the proceeds from the sale of the Selling Shareholders’ Shares (i.e. all Selling Shareholders’ Shares will be sold by the Selling Shareholder, respectively, and not by or on account of the Company).
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The Company and the selling shareholders are seeking an underwriter, broker-dealer or selling agent to sell the Shares. Neither the Company nor the selling shareholders have entered into any arrangements with any underwriter, broker-dealer or selling agent as of the date of this prospectus. At the time of this prospectus, neither the Company nor the selling shareholders has located a broker-dealer or selling agent to sell the Shares.
The Company intends to maintain the currency and accuracy of this prospectus and to permit offers and sales of the Shares for a period of up to two (2) years, unless earlier completely sold, pursuant to Rule 415 of the General Rules and Regulations of the Securities and Exchange Commission.
Pursuant to the provisions of Rule 3a4-1 of the Securities Exchange Act of 1934, none of the officers or directors offering the Shares is considered to be a broker of such securities as (i) no officer or director is subject to any statutory disqualification, (ii) no officer or director is nor will be compensated by commissions for sales of the securities, (iii) no officer or director is associated with a broker or dealer, (iv) all officers and directors are primarily employed on behalf of the Company in substantial duties and (v) no officer or director participates in offering and selling securities more than once every 12 months.
The offering will terminate 24 months following the date of the initial effectiveness of the registration statement to which this prospectus relates, unless earlier closed.
Resales of the Securities under State Securities Laws
The National Securities Market Improvement Act of 1996 ("NSMIA") limits the authority of states to impose restrictions upon resales of securities made pursuant to Sections 4(1) and 4(3) of the Securities Act of companies which file reports under Sections 13 or 15(d) of the Securities Exchange Act. Resales of the Shares in the secondary market will be made pursuant to Section 4(1) of the Securities Act (sales other than by an issuer, underwriter or broker). The resale of such Shares may be subject to the holding period and other requirements of Rule 144 of the General Rules and Regulations of the Securities and Exchange Commission.
Selling Shareholders
The selling shareholders will offer their shares at a price of $0.15 per share. The distribution of the Selling Shareholder Shares may be effected in one or more transactions that may take place through customary brokerage channels, in privately-negotiated sales, by a combination of these methods or by other means. The selling shareholders may from time to time offer their shares through underwriters, brokers-dealers, agents or other intermediaries. Usual and customary or specifically negotiated brokerage fees or commissions may be paid by the selling shareholders in connection with sales of the Shares. The Company will not receive any portion or percentage of any of the proceeds from the sale of the Selling Shareholders’ Shares. Of the 1,015,000 Selling Shareholder Shares included in the registration statement of which this prospectus is a part, no Selling Shareholder Shares are held by officers or directors of the Company.
The Company is authorized to issue 100,000,000 shares of common stock, par value $0.0001, of which 7,115,000 shares are outstanding as of the date of the registration statement, of which this prospectus is a part. The Company is also authorized to issue 20,000,000 shares of preferred stock, par value $0.0001, of which no shares were outstanding as of the date of the registration statement, of which this prospectus is a part.
The following statements relating to the capital stock set forth the material terms of the securities of the Company. Reference is also made to the more detailed provisions of the certificate of incorporation and the by-laws, copies of which are filed as exhibits to this registration statement.
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Common Stock
The Company is registering up to 1,015,000 shares of common stock, as follows: (i) 1,015,000 shares for sale to the public by the holders thereof at a price of $0.15 per share.
Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of common stock do not have cumulative voting rights.
Subject to preferences that may be applicable to any outstanding shares of preferred stock, the holders of common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the board of directors in its discretion from funds legally available therefore.
Holders of common stock have no preemptive rights to purchase the Company’s common stock. There are no conversion or redemption rights or sinking fund provisions with respect to the common stock. The Company may issue additional shares of common stock which could dilute its current shareholder's share value.
Preferred Stock
Shares of preferred stock may be issued from time to time in one or more series as may be determined by the board of directors. The board of directors may fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof without any further vote or action by the stockholders of the Company, except that no holder of preferred stock shall have preemptive rights. Any shares of preferred stock so issued would typically have priority over the common stock with respect to dividend or liquidation rights. Any future issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of the Company without further action by the stockholders and may adversely affect the voting and other rights of the holders of common stock.
At present, the Company has plans to issue preferred stock and adopt a series, preferences or other classification of preferred stock. The Company plans to issue shares of preferred stock to its sole officer and director, Christopher Kiritsis, in the near future. The shares of preferred stock are expected to have 100 to 1 voting rights in comparison to the shares of common stock in the Company.
The issuance of shares of preferred stock, or the issuance of rights to purchase such shares, could be used to discourage an unsolicited acquisition proposal. For instance, the issuance of a series of preferred stock might impede a business combination by including class voting rights that would enable the holder to block such a transaction, or facilitate a business combination by including voting rights that would provide a required percentage vote of the stockholders. In addition, under certain circumstances, the issuance of preferred stock could adversely affect the voting power of the holders of the common stock.
Although the Company’s board of directors is required to make any determination to issue such preferred stock based on its judgment as to the best interests of the stockholders of the Company, the board of directors could act in a manner that would discourage an acquisition attempt or other transaction that some, or a majority, of the stockholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over the then market price of such stock. The board of directors does not at present intend to seek stockholder approval prior to any issuance of currently authorized stock, unless otherwise required by law or otherwise.
Admission to Quotation on the OTC Bulletin Board
If the Company meets the qualifications, it intends to apply for quotation of its securities on the OTC Bulletin Board. The OTC Bulletin Board differs from national and regional stock exchanges in that it (1) is not situated in a single location but operates through communication of bids, offers and confirmations between broker-dealers and (2) securities admitted to quotation are offered by one or more broker-dealers rather than the "specialist" common to stock exchanges. To qualify for quotation on the OTC Bulletin Board, an equity security must have one registered broker-dealer, known as the market maker, willing to list bid or sale quotations and to sponsor the company listing. In addition, the Company must make available adequate current public information as required by applicable rules and regulations.
In certain cases the Company may elect to have its securities initially quoted in the Pink Sheets published by Pink OTC Markets Inc. In general there is greater liquidity for traded securities on the OTC Bulletin Board, and less through quotation on the Pink Sheets. It is not possible to predict where, if at all, the securities of the Company will be traded following the effectiveness of this registration statement.
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Transfer Agent
It is anticipated that Manhattan Transfer Company, of Erie, Colorado will act as transfer agent for the common stock of the Company.
Penny Stock Regulation
Penny stocks generally are equity securities with a price of less than $5.00 per share other than securities registered on national securities exchanges or listed on the Nasdaq Stock Market, provided that current price and volume information with respect to transactions in such securities are provided by the exchange or system. The penny stock rules impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a disclosure schedule prescribed by the SEC relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market in penny stocks. Because of these penny stock rules, broker-dealers may be restricted in their ability to sell the Company’s common stock. The foregoing required penny stock restrictions will not apply to the Company’s common stock if such stock reaches and maintains a market price of $5.00 per share or greater.
Dividends
The Company has not paid any dividends to date. The Company intends to employ all available funds for the growth and development of its business, and accordingly, does not intend to declare or pay any dividends in the foreseeable future.
Background
The Company has only recently commenced operations as a development-stage company, and it has limited operating history and is expected to experience losses in the near term. The Company’s independent auditors have issued a report raising substantial doubt about the Company’s ability to continue as a going concern.
Summary
The Company plans to purchase and develop numerous real estate properties across all spectrums of the industry throughout the United States. The Company also intends to focus on credit tenant development and acquisitions utilizing a strong balance of holding and selling projects.
At the outset of the business, the Company intends to utilize the expertise of its founder to develop 7 Eleven properties in Florida. These developments are ground-up build-to-suite developments that, after build, the Company will collect rent from 7- Eleven Corporate and subsequently sell the property on the market .
As of the date of this prospectus, the Company has identified a project that is entitled for 688 units and 85,000 square feet of retail (the “Development Project”) as well as several single tenant developments with an S&P rating of AA- (the “Ground Up Developments”). Presently the Company’s President and CEO Mr. Kiritsis controls the Development Project and the Ground Up Developments pursuant to certain free-standing leases and deeds that are held by one of two separate single-member Florida Limited Liability Companies , each of which Mr. Kiritsis is the sole member (the “LLC Group”) . The LLC Group consists of Potomac Group LA1, LLC, a Florida Limited Liability Company (“PG LA1”) and Sered Joel, LLC, a Florida Limited Liability Company ( “Sered”).
As part of the Company’s plan, the LLC Group shall assign all development projects to the Company to generate operational capital . T hese projects include a 7-Eleven ground up development and a 92 unit patio villa development that is fully entitled and shovel ready on land that is owned outright by PG LA1 (part of the Development Project). PG LA1 also will assign rights to development of 18 acres in Placida, F lorida, a development located on the water w hich includes a restaurant and existing boat docks (the “Placida Development”) . The Company’s intent is to rezone the Placida Develompent to a Plan n ed Development of Medium Density to allow 150 to 180 condominiums , restaurant improvements and ad dition of retail space. The Company anticipates that these projects will be assigned to The Company within the first year of its operation to implement its business plan.
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The Business: Real Estate Development
Diverse Development Group, Inc. (also referred to as “DDG” or “the Company”) is a real estate development and investment company that will build a strong portfolio of investment-grade retail and commercial leasing properties through acquisition and the pursuit of opportunistic land developments. The Company is managed by an outstanding leadership team that holds a track record for outperforming the market. The Company intends to intelligently diversify its assets nationwide and responsibly optimize its portfolio against risk. Furthermore, the Company is seeking external capital from investors. The company will operate with little to no debt and hopes to be traded on the OTCQB.
The Company has no plans or intention at this time to be acquired or merge with an operating business entity nor does the Company or any of its shareholders have any plans to enter into a change of control or similar type transaction. The Company may, as previously represented in the Form 8-K previously filed December 22, 2016, by merger or acquisition seek suitable real estate properties to acquire and thereafter develop in conjunction with the Company’s plan.
Business Model
The Company intends to utilize funds pooled from investors as well as its development projects to directly invest in income-yielding properties. The Company will primarily invest in diversified credit tenant investment-grade NNN properties with long-term leases. The Company’s strategic roadmap includes it investing a portion of its capital for higher return ground-up land development projects. Income will be generated from rent and capital gains from ground up development projects. The Company aims to incur little to no debt, with the exception being certain short term loans incurred from time to time on a project-specific basis.
The Company anticipates purchase of existing investment-grade credit tenant properties within the first two quarters of total capitalization. Upon purchase of these properties, the Company anticipates generating the cash flow and liquidity needed to continue profitable operations, as the Company projects that the vast majority of these property leases will experience a 10% increase in rent every five years.
Current Projects
As of the date of this prospectus, the Company has identified a project that is entitled for 688 units and 85,000 square feet of retail (the “Development Project”) as well as several single tenant developments with an S&P rating of AA- (the “Ground Up Developments”). Presently the Company’s President and CEO Mr. Kiritsis controls the Development Project and the Ground Up Developments pursuant to certain free-standing leases and deeds that are held by one of two separate single-member Florida Limited Liability Companies, each of which Mr. Kiritsis is the sole member (the “LLC Group”). The LLC Group consists of Potomac Group LA1, LLC, a Florida Limited Liability Company (“PG LA1”) and Sered Joel, LLC, a Florida Limited Liability Company (“Sered”).
As part of the Company’s plan, the LLC Group shall assign all development projects to the Company to generate operational capital. These projects include a 7- Eleven ground up development and a 92 unit patio villa development that is fully entitled and shovel ready on land that is owned outright by PG LA1 (part of the Development Project). PG LA1 also will assign rights to development of 18 acres in Placida, Florida, a development located on the water which includes a restaurant and existing boat docks (the “Placida Development”). The Company’s intent is to rezone the Placida Develompent to a Planned Development of Medium Density to allow 150 to 180 condominiums, restaurant improvements and addition of retail space. The Company anticipates that these projects will be assigned to The Company within the first year of its operation to implement its business plan.
Market Assessment
Based on a study conducted by the Board of Governors Federal Reserve, JLL Research Real Capital Analytics ("2016 JLL Research Study") for transactions larger than $5M, investor demand has risen and is projected to continue to rise and diversify for the net lease sector, with an increased desirability for single-asset product types. This projection is denoted by an increase in single-asset sales, which have reached the highest of the cycle – up 3.5 percent year over - year across sectors. It should be noted however that net lease portfolio transactions have been constrained throughout 2016 following a peak year in 2015; factor in overall net lease volume declines of 20.5 percent year-over-year.
Institutions drive one-third of primary market acquisitions. Primary market competition drives developers and high-net-worth individuals deeper into secondary markets. Assessing net lease cap rates, the 2016 JLL Research Study has indicated that office sector cap rates have stabilized, while industrial and retail continue year-over-year compression. As of October 2016, 10-year treasury is noted by a 1.6% cap rate, while retail net lease cap rate is at 5.6%, industrial net lease cap rate at 6.3%, and office net lease cap rate at 6.8%.
The 2016 JLL Research Study further notes that after increased financial market volatility in the first half of 2016, the quality of assets closed and brought to market during the third quarter has increased, evidenced by many assets having stronger lease quality with greater than ten years of remaining lease term. For instance, in the third quarter of 2016, 13 headquarters assets sold for a combined $2-billion in aggregate value, indicating that industrial acquisitions are demonstrating a strong connection between market liquidity and leasehold quality, with risk appetites higher in the primary markets.
The 2016 JLL Research Study further concluded that institutional, equity fund and offshore capital have of late been sustaining the competitive primary market environment. The basis of this conclusion stems from the following analysis of recent market trends: that as cap rates continue to compress and deployment pressures increase for select buyer types, the pricing environment in turn has depended on the transfer of buyers between primary and secondary markets. Real Estate Investment Trusts ("REITs") have been noted to experience a continued difficulty buying accretive assets that fit their acquisition profiles, as seen with a steady shift from primary to tertiary markets since 2014. With this, primary market acquisitions have shifted further to institutional investors and equity funds, as private buyers struggle to compete. Institutional buyers have consistently increased participation in acquisition across primary markets since 2014 – notably in the office sector – and have acquired over one-third of all primary assets year-to-date, an increase of 86.1%. Equity funds are also increasing primary and secondary acquisitions, nearly doubling since 2015. Foreign acquisitions of net lease office assets are up 27.2% year over year. Primary markets received the most foreign capital in the third quarter of 2016 as a result of four large transactions, three of which were office headquarters. South Korean and German investors are leading foreign acquisition, driving 65% of all inbound capital and totaling $1.8 billion of total net lease acquisitions year to date in aggregate. German capital led with the largest acquisition of the quarter, with Allianz Insurance’s purchase of the Coach Headquarters condo sale-leaseback in Manhattan for $707 million.
Germany and South Korea lead foreign activity with 65 percent of year-to-date acquisitions, accounting for $1.8 billion of activity in aggregate.
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Commercial Leasing Industry
Over the five years to 2016, revenue for the commercial leasing industry is expected to increase at an average annual rate of 3.1% to $195.6 billion.
Market Outlook
Revenue for the Commercial Leasing industry is expected by the Company to continue increasing through 2017, with revenue estimated to grow 1.7% over the year. During the five years to 2021, the Company projects that industry operators shall benefit from improvements in the global economy as unemployment continues to decline and as the need for real estate space begins to increase. As the economy continues to recover and businesses and retailers expand operations, demand for commercial leasing is projected to grow steadily. Industry revenue is projected to rise at an average annual rate of 1.5% to $210.6 billion by 2021. Despite this continuing anticipated recovery, operators are projected to continue to run relatively leaner operations. Consequently, industry profit margins are forecast to rise from 52.7% in 2016 to 53.9% in 2021.
Market Trends
Per IBIS World analysis and projections, over the next five years the continued economic recovery is projected to drive industry growth, as the need for commercial space shall be aligned with business development and corporate expansion. At the same time, industry operators are expected to benefit from improvements in the lending conditions that changed during the five years to 2016. Over the five-year period, operators with sufficient means purchased properties below market values as banks and competitors desperately tried to unload real estate assets to generate capital. Meanwhile, tight lending conditions forced many operators to consolidate with larger, better-capitalized companies in 2011. IBISWorld expects that newly consolidated companies with strong balance sheets will be better equipped to take advantage of increased commercial leasing demand over the five years to 2021.
Segmentation
The retail sector can be divided into shopping centers and non-shopping centers. According to the US Census, a shopping center is defined as “a group of architecturally unified commercial establishments built on a site that is planned, developed, owned and managed as an operating unit related to its location, size and type of shops to the trade area that it services.” Under this definition, shopping centers account for roughly half of the total retail gross leasable area in the United States, according to the Global Commercial Real Estate industry, as noted by IBISWorld report K6111-GL. Furthermore, International Council of Shopping Centers estimates there are about 114,653 shopping centers in the United States (both general-purpose and specialized). Similar to office buildings, regional shopping malls can be categorized by property class. However, classes are determined by sales per square foot. The three property classes are: Class A, with tenant sales of at least $400 per square foot, Class B, with tenant sales of less than $400 per square foot but more than $250 per square foot, and Class C, with tenant sales less than $250 per square foot. Simon Property Group and General Growth Properties are the two largest Class A shopping center owners in the country.
Rental Income: According to IBIS World estimates, about 90.0% of industry revenue comes from rental income, while property sales account for only 10.0%. Therefore, revenue fluctuates in line with rental rates and occupancy levels. Rental rates are traditionally based on the value of the underlying property, which is often affected by economic cycles and interest rate fluctuations. Additionally, the elasticity of supply and property types determines real estate prices. In metropolitan areas, where land is scarce, rental rates tend to be higher because of limited capacity to meet demand. Furthermore, premium properties generally command higher incomes than lower-class commercial spaces.
Home Builders Industry
Over the five years following 2016, the Home Builders industry is expected to grow an annualized 10.7% to $87.2 billion, a level not seen since before the 2007 financial crisis. Such growth comes in the wake of increasing per capita disposable income, accommodative interest rates and projected improvement of overall macroeconomic conditions. Due to rising home prices and renewed construction activity, industry profit margins have swelled. In the five years to 2016, the value of residential construction is expected to grow an annualized 9.5%, while housing starts are expected to increase an annualized 14.2%. In 2016, industry profit, measured as earnings before income and taxes, is estimated to account for 5.5% of total revenue, up from 3.1% in 2011.
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Home Builders Industry Outlook
The Home Builders industry is expected to continue its expansion over the next five years, albeit at a slower pace, as the housing market normalizes. Over the five years to 2021, the industry is expected to grow an annualized 5.1% to $112.1 billion, including a projected increase of 5.9% in 2017 alone. The industry typically follows the cyclical pattern of the general economy; consequently, the current upswing in the US economy is expected to drive industry growth. Even as the Federal Reserve continues to tighten monetary policy over the next five years, relatively low interest rates and rising per capita incomes are expected to support individual investment in new homes. Meanwhile, expanding corporate profit is projected to stimulate new investment from property developers. Taken together, these factors will provide ample opportunity for industry growth over the next five years. The bulk of industry growth is expected to occur in the beginning of the five-year period to 2021, as the housing market continues to make up lost growth from the 2008 recession. Later in the period, more subdued growth is expected, as pent-up demand is satiated.
Cap Rates
Per Calkain Research Cap Rate Report of third quarter 2016, the third quarter of 2016 saw cap rates follow a similar pattern from the beginning of the year. There has been a gradual decrease of 7.5 bps drop from the last quarter and a 20 bps drop year-to-date. The low interest rates and attractive cap rates have brought capital into commercial real estate, especially in net lease. Global economic and political uncertainties have attracted foreign capital into U.S. real estate, which is viewed as a safe haven. The changing political landscape following the 2016 elections and further possible interest rate hikes will be watched carefully in the commercial real estate sector. Any rapid increases in interest rates may shrink the cap rate spread. Anticipated increases in the interest rates are minor with a nominal impact.
Competition
Any business that operates with a similar model serves as a direct or indirect competitor to the Company. Below are the leading industry competitors:
| · | Simon Property Group Inc. -- Estimated market share: 2.9% |
Simon Property Group Inc. is the largest public real estate company in the United States with 239.2 million square feet of leasable space in 308 properties across the country. Its portfolio is largely comprised of retail centers, which consist of both anchor department stores and smaller retailers. Since Simon’s holdings are mainly retail properties, consumer shopping habits have a major effect on the company. This is especially true of the smaller retail store tenants at Simon’s malls since many of these establishments have shorter-term leases than anchor stores. Short-term leases generally range from several months to a few years, while longterm leases are often five to 10 years long for the company. Simon’s industry-relevant revenue is expected to increase to $5.7 billion in 2016. Simon has been able to increase revenue during this period due to its aggressive expansion strategy. The company’s revenue skyrocketed 13.3% in 2012 due to improved economic conditions as businesses and retailers finally began to resume expansions.
| · | Brookfield Property Partners -- Estimated market share: 1.7% |
Brookfield Office Properties has a portfolio comprised of 108 commercial properties and 78.0 million square feet in the downtown areas of New York City, Boston, Washington, DC, Los Angeles, Houston, Denver, San Francisco, Toronto, Calgary, Vancouver, and Ottawa. The company rapidly expanded into London and Australia in 2010; in 2011, Brookfield Properties Corporation officially changed its named to Brookfield Office Properties and merged its residential division with Brookfield Homes Corporation to form Brookfield Residential Properties, which does not operate in this industry. In 2014, the company was acquired by Brookfield Property Partners, complete with the company’s delisting from the New York Stock Exchange on June 20, 2014. Under its current ownership, the company generates over 65.0% of its revenue from its US properties. According to the latest financial information, Brookfield’s US-specific revenue totaled $3.2 billion in 2015, as reported by Brookfield Property Partners. Revenue is estimated to have climbed in 2014 due to Brookfield’s growing number of commercial properties. In 2012, the company acquired three office towers, two of which are in Seattle and one is in Washington, DC, for a total of $316.0 million, which helped boost company revenue over 2013. In 2016, IBISWorld estimates industry-relevant revenue will total $3.3 billion.
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| · | Vornado Realty Trust -- Estimated market share: 1.3% |
Vornado Realty Trust has a portfolio of 68.4 million square feet of leasable property in the New York and Washington, DC areas. After a series of changes in business operations, name, and ownership, Vornado Realty Trust was incorporated in 1993. Vornado employs 4,369 workers, 3,244 of which are located in New York City. The New York-based company primarily generates revenue by developing, renting and selling real estate. Unlike Simon and General Growth Properties, however, the company does not concentrate on a particular real estate market or sector. Instead, Vornado holds a diverse portfolio of commercial properties, including office, retail, warehouse and industrial buildings. In 2016, company revenue is estimated to have increased to $2.5 billion. Prior to 2012, cash flows generated from the New York and Washington, DC segments increased every year in terms of total dollars.
Competitive Advantages
The following is a listing of the primary competitive advantages of the Company upon entering the market:
| · | Industry with growth potential |
| · | Access to highly skilled human resources |
| · | Experience and knowledge of owners |
| · | Strong relationships with real estate industry players |
| · | Cash buyer |
| · | Fast closing allowing for a better purchase price |
SWOT Analysis
The Company's strengths are denoted by the experience and knowledge of the leadership team, access to highly skilled human resources, management with strong ties to retail properties, an existing current pool of investors, owner’s past success rate, owner's established credibility in the industry, projected income increase based on rent escalation, and the ability to shift the Company's development strategy as market conditions change.
The Company's weaknesses are denoted by substantial capital and working capital needs to have successful launch.
The opportunities presented to the Company are denoted by an increasing popularity of the industry, growth and creativity to reuse the space by retailers, opportunity to add more revenue streams, ground up development, diversified development strategies, and Development joint ventures.
An unstable US economy or policy fluctuations represent threats that face the Company.
Revenue
The Company is in its development stage, and as of September 30, 2016 has had no revenue. The Company anticipates revenue to be generated through NNN Rental Income and through assignment of rents and subsequent sale of Ground-Up Development s currently under the control of the Company’s founder, Mr. Kiritsis, through single-member Florida Limited Liability Companies. Revenue will also be generated through NNN property investments and developments .
Description of Property
The Company owns no real estate. Currently the Company uses the offices of its president at 4819 Wood Pointe Way, Sarasota, Florida 34233.
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Employees
The Company currently has no employees other than its sole officer but it expects that it will hire personnel upon raising additional capital and as the Company implements its business plan.
At present, the president is the sole officer, director and employee of the Company and does not receive any salary or other compensation (and no salaries or compensation have been accrued). No compensation will be paid until, and if, the Company raises or procures adequate capital (through operations, private financings, a primary public offering or otherwise) to pay any such compensation.
Change of Control
The Company was incorporated in the State of Delaware in April, 2016 and was formerly known as Topaz Island Acquisition Corporation. In December 2016, the Company implemented a change of control by issuing shares to new shareholders, redeeming shares of existing shareholders, electing new officers and directors and accepting the resignations of its then existing officers and directors. In connection with the change of control, the shareholders of the Company and its board of directors unanimously approved the change of the Company’s name from Topaz Island Acquisition Corporation to Diverse Development Group, Inc. in December 2016.
Relationship with Tiber Creek Corporation
In November 2016, the Company entered into an engagement agreement with Tiber Creek Corporation, a Delaware corporation (“Tiber Creek”), whereby Tiber Creek would provide assistance to the Company in effecting transactions for the Company to combine with a public reporting company, including: transferring control of such reporting company to the Company; preparing the business combination agreement; effecting the business combination; causing the preparation and filing of forms, including a registration statement, with the Securities and Exchange Commission; assist in listing its securities on a trading exchange; and assist in establishing and maintaining relationships with market makers and broker-dealers.
Under the agreement, Tiber Creek is entitled to receive cash fees of $85,000 from the Company at the time the engagement agreement was signed. In addition, the Company’s then-current shareholders, Tiber Creek and MB Americus, LLC, a California limited liability company (“MB Americus”), were permitted to retain the aggregate total of 600,000 shares (300,000 of these shares are restricted from transfer for a period of one (1) year following the effective date of this registration statement).
In general, Tiber Creek holds interests in inactive Delaware corporations which may be used by issuers (such as the Company) to reincorporate their business in the State of Delaware and capitalize the issuer at a level and in a manner (i.e. the number of authorized shares and rights and preferences of shareholders) that is appropriate for a public company. Otherwise, these corporations are inactive, and Tiber Creek does not conduct any business in such corporations.
James Cassidy and James McKillop (who is the sole owner of MB Americus) serve only as interim officers and directors of these corporations (such as Topaz Island Acquisition Corporation) until such time as the changes of control in such corporations are effectuated to the ultimate registering issuers. As the role of Tiber Creek is essentially limited to preparing the corporate structure and organizing the Company for becoming a public company, the roles of Mr. Cassidy and Mr. McKillop are generally limited to facilitating such change of control and securities registration transactions.
Intellectual Property
At present, the Company does not possess any intellectual property protection. The Company may decide in the future to pursue efforts to protect its intellectual property, trade secrets and proprietary methods and processes.
Research and Development
The Company has not to date undertaken, and does not currently plan to undertake, any material research and development activities.
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Employees
Currently, the Company has no employees other than its officer who has agreed to assist the Company without pay until the Company is more stable and has recurring cash flow from operations.
Subsidiaries
The Company has no subsidiaries.
Jumpstart Our Business Startups Act
In April, 2012, the Jumpstart Our Business Startups Act ("JOBS Act") was enacted into law. The JOBS Act provides, among other things:
Exemptions for emerging growth companies from certain financial disclosure and governance requirements for up to five years and provides a new form of financing to small companies;
Amendments to certain provisions of the federal securities laws to simplify the sale of securities and increase the threshold number of record holders required to trigger the reporting requirements of the Securities Exchange Act of 1934;
Relaxation of the general solicitation and general advertising prohibition for Rule 506 offerings;
Adoption of a new exemption for public offerings of securities in amounts not exceeding $50 million; and
Exemption from registration by a non-reporting company of offers and sales of securities of up to $1,000,000 that comply with rules to be adopted by the SEC pursuant to Section 4(6) of the Securities Act and exemption of such sales from state law registration, documentation or offering requirements.
In general, under the JOBS Act a company is an emerging growth company if its initial public offering ("IPO") of common equity securities was effected after December 8, 2011 and the company had less than $1 billion of total annual gross revenues during its last completed fiscal year. A company will no longer qualify as an emerging growth company after the earliest of
| (i) | the completion of the fiscal year in which the company has total annual gross revenues of $1 billion or more, |
| (ii) | the completion of the fiscal year of the fifth anniversary of the company's IPO; |
| (iii) | the company's issuance of more than $1 billion in nonconvertible debt in the prior three-year period, or |
| (iv) | the company becoming a "larger accelerated filer" as defined under the Securities Exchange Act of 1934. |
The JOBS Act provides additional new guidelines and exemptions for non-reporting companies and for non-public offerings. Those exemptions that impact the Company are discussed below.
Financial Disclosure. The financial disclosure in a registration statement filed by an emerging growth company pursuant to the Securities Act of 1933 will differ from registration statements filed by other companies as follows:
| (i) | audited financial statements required for only two fiscal years; |
| (ii) | selected financial data required for only the fiscal years that were audited; |
| (iii) | executive compensation only needs to be presented in the limited format now required for smaller reporting companies. |
(A smaller reporting company is one with a public float of less than $75 million as of the last day of its most recently completed second fiscal quarter)
However, the requirements for financial disclosure provided by Regulation S-K promulgated by the Rules and Regulations of the SEC already provide certain of these exemptions for smaller reporting companies. The Company is a smaller reporting company. Currently a smaller reporting company is not required to file as part of its registration statement selected financial data and only needs audited financial statements for its two most current fiscal years and no tabular disclosure of contractual obligations.
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The JOBS Act also exempts the Company's independent registered public accounting firm from complying with any rules adopted by the Public Company Accounting Oversight Board ("PCAOB") after the date of the JOBS Act's enactment, except as otherwise required by SEC rule.
The JOBS Act also exempts an emerging growth company from any requirement adopted by the PCAOB for mandatory rotation of the Company's accounting firm or for a supplemental auditor report about the audit.
Internal Control Attestation. The JOBS Act also provides an exemption from the requirement of the Company's independent registered public accounting firm to file a report on the Company's internal control over financial reporting, although management of the Company is still required to file its report on the adequacy of the Company's internal control over financial reporting.
Section 102(a) of the JOBS Act exempts emerging growth companies from the requirements in §14A(e) of the Securities Exchange Act of 1934 for companies with a class of securities registered under the 1934 Act to hold shareholder votes for executive compensation and golden parachutes.
Other Items of the JOBS Act. The JOBS Act also provides that an emerging growth company can communicate with potential investors that are qualified institutional buyers or institutions that are accredited to determine interest in a contemplated offering either prior to or after the date of filing the respective registration statement. The Act also permits research reports by a broker or dealer about an emerging growth company regardless if such report provides sufficient information for an investment decision. In addition the JOBS Act precludes the SEC and FINRA from adopting certain restrictive rules or regulations regarding brokers, dealers and potential investors, communications with management and distribution of a research reports on the emerging growth company IPO.
Section 106 of the JOBS Act permits emerging growth companies to submit 1933 Act registration statements on a confidential basis provided that the registration statement and all amendments are publicly filed at least 21 days before the issuer conducts any road show. This is intended to allow the emerging growth company to explore the IPO option without disclosing to the market the fact that it is seeking to go public or disclosing the information contained in its registration statement until the company is ready to conduct a roadshow.
Election to Opt Out of Transition Period. Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a 1933 Act registration statement declared effective or do not have a class of securities registered under the 1934 Act) are required to comply with the new or revised financial accounting standard.
The JOBS Act provides a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of the transition period.
Reports to Security Holders
In May 2016, the Company (as Topaz Island Acquisition Corporation) filed a Form 10-12G general registration of securities pursuant to the Securities Exchange Act of 1934 and is a reporting company pursuant such Act and files with the Securities and Exchange Commission quarterly and annual reports and management shareholding information. The Company intends to deliver a copy of its annual report to its security holders, and will voluntarily send a copy of the annual report, including audited financial statements, to any registered shareholder who requests the same.
The Company's documents filed with the Securities and Exchange Commission may be inspected at the Commission's principal office in Washington, D.C. Copies of all or any part of the registration statement may be obtained from the Public Reference Section of the Securities and Exchange Commission, 100 F Street N.E., Washington, D.C. 20549. Call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. The Securities and Exchange Commission also maintains a web site at http://www.sec.gov that contains reports, proxy statements and information regarding registrants that file electronically with the Commission. All of the Company’s filings may be located under the CIK number 0001672897.
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Business Plan
The Company is an early-stage company that plans to purchase and develop numerous real estate properties across all spectrums of the industry throughout the United States. The Company also intends to focus on credit tenant development and acquisitions utilizing a strong balance of holding and selling projects.
In the future, the Company plans to raise capital to support its plan of operations. The Company would raise capital and use the proceeds of its offering to acquire various real estate properties and to expand its operations. In addition, the Company would use proceeds for purposes of working capital operations, hiring management personnel, and potential acquisition of other credit-worthy properties to accelerate growth.
Potential Revenue
The Company intends to earn revenue from rental income derived from NNN property holdings. In year two and beyond the Company intends to earn additional revenue resulting from ground-up development.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
The Company is an early-stage company and was incorporated in the State of Delaware in April 2016. As of the periods from April 4, 2016 (inception) through September 30, 2016 the Company did not generate any revenue and incurred minimal expenses and operating losses, as part of its operating activities.
The Company anticipates that it would need substantial working capital over the next 12 months to continue as a going concern and to maintain current level of operations.
The Company’s independent auditors have expressed substantial doubt as to the ability of the Company to continue as a going concern. Unless the Company is able to generate sufficient cash flow from operations and/or obtain additional financing, there is a substantial doubt as to the ability of the company to continue as a going concern.
Revenues and Losses
Since its inception, the Company has focused its efforts on conducting market research, planning and development, and has devoted little attention or resources to sales and marketing or generating near-term revenues and profits. The Company has no revenues to date and has not realized any profits as of yet. In order to succeed, the Company needs to develop a viable strategy to generate revenue through income from NNN properties and other holdings.
The Company has posted no revenues and net losses of $250 during the three months ended September 30, 2016, and posted no revenues and losses of $1,812 during the period from April 4, 2016 (inception) to September 30, 2016.
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Alternative Financial Planning
The Company has no alternative financial plans at the moment. If the Company is not able to successfully raise monies as needed through a private placement or other securities offering (including, but not limited to, a primary public offering of securities), the Company’s ability to survive as a going concern and implement any part of its business plan or strategy will be severely jeopardized.
Critical Accounting Policies
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires making estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Early Stage of the Company and Capital Resources
Since its inception, the Company has devoted substantially all of its efforts to business planning. Accordingly, the Company is considered to be in the development stage. The Company has not generated revenues from its operations, and there is no assurance of future revenues.
There is no assurance that the Company’s activities will generate sufficient revenues to sustain its operations without additional capital, or if additional capital is needed, that such funds, if available, will be obtainable on terms satisfactory to the Company. Accordingly, given the Company’s limited cash and cash equivalents on hand, the Company will be unable to implement its business plans and proposed operations unless it obtains additional financing or otherwise is able to generate revenues and profits. The Company may raise additional capital through sales of debt or equity, obtain loan financing or develop and consummate other alternative financial plans.
Discussion of the Three Months Ending September 30, 2016
The Company did not generate revenues during the three months ended September 30, 2016.
The Company posted operating expenses of $250 during the three months ended September 30, 2016.
Operating loss and net loss for the Company were each, respectively, $250 and $250, for the three month period ended September 30, 2016.
The Company does not anticipate that it will generate revenue sufficient to cover its planned operating expenses in the foreseeable future, and the Company must obtain additional financing in order to develop and implement its business plan and proposed operations. If the Company is not successful in generating sufficient revenues and/or obtaining additional funding to develop its business plan and proposed operations, this could have a material adverse effect on its business, results of operations liquidity and financial condition.
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Discussion of the Period from April 4, 2016 (inception) through September 30, 2016
The Company did not generate revenues during the period from April 4, 2016 (inception) through September 30, 2016.
The Company posted operating expenses of $1,812 during the period from April 4, 2016 (inception) through September 30, 2016.
Operating loss and net loss for the Company were each, respectively, $1,812 and $1,812, for the period from April 4, 2016 (inception) through September 30, 2016.
During the period from April 4, 2016 (inception) through September 30, 2016., the Company did not generate or use any net cash in operating activities nor did the Company have any capital expenditures during such period. The Company had a cash balance of $0 as of September 30, 2016.
As of September, 2016, the Company has posted only operating losses since its inception in April 4, 2016 (inception). It has an accumulated deficit since inception and no material cash balance nor any material assets on hand as of September 30, 2016. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able to accomplish to date, and /or obtain additional financing from its stockholders and/or other third parties.
The Company does not anticipate that it will generate revenue sufficient to cover its planned operating expenses in the foreseeable future, and the Company must obtain additional financing in order to develop and implement its business plan and proposed operations. If the Company is not successful in generating sufficient revenues and/or obtaining additional funding to develop its business plan and proposed operations, this could have a material adverse effect on its business, results of operations liquidity and financial condition.
The following table sets forth information regarding the members of the Company’s board of directors and its executive officers:
|
Name |
Age |
Position |
Year Commenced | |||
|
Christopher Kiritsis |
50 |
President, CEO |
2016 |
Christopher Kiritsis -- President, CEO
Mr. Kiritsis is the Chief Executive Officer of Diverse Development Group, Inc., and holds more than 30 years of experience in the real estate industry. Mr. Kiritsis founded the Potomac Group in 1998, a firm that specialized in real estate sales, development and consulting. Mr. Kiritsis initiated the Group’s largest project – a half-million square foot commercial development in the New Hampshire seacoast area. Subsequently Mr. Kiritsis formed a joint venture with Developers Diversified Realty. He has also been retained by other national companies and developers to assist in negotiating and furthering their development projects. Over the years, Mr. Kiritsis has become a seasoned residential and commercial developer, having accumulated a diverse portfolio of completed development projects from the ground up as well as consulting for various national retail corporate clients.
Director Independence
Pursuant to Rule 4200 of The NASDAQ Stock Market one of the definitions of an independent director is a person other than an executive officer or employee of a company. The Company's board of directors has reviewed the materiality of any relationship that each of the directors has with the Company, either directly or indirectly. Based on this review, the board has determined that there are no independent directors.
Committees and Terms
The Board of Directors (the “Board”) has not established any committees.
Legal Proceedings
There are currently no pending, threatened or actual legal proceedings of a material nature in which the Company is a party.
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Remuneration of Officers: Summary Compensation Table
Description of Compensation Table
|
Name/Position |
|
Year |
|
Salary |
|
|
Bonus |
|
|
Stock Awards |
|
|
Option Awards |
|
|
Non-equity Incentive plan Compensation |
|
|
Change in Pension Value and Recognized Deferred Compensation Earnings |
|
|
All Other Compensation (2) |
|
|
Total |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
Christopher Kiritsis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
President; Director |
|
2016 |
|
$ | 0 |
|
|
$ | 0 |
|
|
$ | 0 |
|
|
$ | 0 |
|
|
$ | 0 |
|
|
$ | 0 |
|
|
$ | 0 |
|
|
$ | 0 |
|
As of December 31, 2016, there was no accrued compensation that was due to the Company’s employees or officers. Upon successful completion by the Company of a primary public offering in the future (or the completion of other financing or funding), however, the Company may compensate officers and employees as is discussed below in “Anticipated Officer and Director Remuneration.”
Each of the officers has received certain shares of common stock in the Company in connection with the change of control of the Company. Accordingly, the Company has not recorded any compensation expense in respect of any shares issued to the officers as such shares do not represent compensation that was paid to any officer.
There are no current plans to pay or distribute any cash or non-cash bonus compensation to officers of the Company, until such time as the Company is profitable, experiences positive cash flow or obtains additional financing. However, the Board of Directors may allocate salaries and benefits to the officers in its sole discretion. No officer is subject to a compensation plan or arrangement that results from his or her resignation, retirement, or any other termination of employment with the Company or from a change in control of the company or a change in his or her responsibilities following a change in control. The members of the Board of Directors may receive, if the Board so decides, a fixed fee and reimbursement of expenses, for attendance at each regular or special meeting of the Board, although no such program has been adopted to date. The Company currently has no retirement, pension, or profit-sharing plan covering its officers and directors; however, the Company plans to implement certain such benefits after sufficient funds are realized or raised by the Company (see “Anticipated Officer and Director Remuneration” below.)
Employment Agreements
The Company has not entered into employment agreements with any of its employees.
Anticipated Officer and Director Remuneration
The Company pays no compensation to its officers or directors at present. The Company intends to pay regular, competitive annual salaries to all its officers and directors and will pay an annual stipend to its directors when, and if, it completes a primary public offering for the sale of securities and/or the Company reaches greater profitability, experiences larger and more sustained positive cash flow and/or obtains additional funding. At such time, the Company anticipates offering additional cash and non-cash compensation to officers and directors. In addition, the Company anticipates that its officers and directors will be provided with additional fringe benefits and perquisites at subsidizes rates, or at the sole expense of the Company, as may be determined on a case-by-case basis by the Company in its sole discretion. In addition, the Company may plan to offer retirement benefits at a later time in its sole discretion.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of the date of this prospectus regarding the beneficial ownership of the Company’s common stock by each of its executive officers and directors, individually and as a group and by each person who beneficially owns in excess of five percent of the common stock after giving effect to any exercise of warrants or options held by that person.
|
Name and Address of Beneficial Owner |
|
Position |
|
Amount of Shares Beneficial Owned |
|
|
Percent of class before offering (1) |
|
|
Percent of class after offering |
| |||
|
Christopher Kiritsis |
|
President, Director, CEO |
|
|
6,100,000 |
|
|
|
85.73 | % |
|
|
85.73 | % |
|
Total owned by officers and directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_____________
(1) Based upon 7,115,000 shares outstanding as of the date of this offering.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
James Cassidy is the sole owner and director of Tiber Creek Corporation which owns 300,000 shares of the Company's common stock. Tiber Creek has received significant consulting fees from the Company and also holds shares in the Company. Tiber Creek and MB Americus LLC, a California limited liability company, each currently hold 300,000 shares in the Company.
James Cassidy and James McKillop, who is the sole officer and owner of MB Americus, LLC, were both formerly officers and directors of the Company. As the organizers and developers of Topaz Island Acquisition Corporation, Mr. Cassidy and Mr. McKillop were involved with the Company prior to the Acquisition. In particular, Mr. Cassidy provided services to the Company without charge, including preparation and filing of the charter corporate documents and preparation of the instant registration statement.
The following shares were issued to, and are currently held by, persons related to Christopher Kiritsis (an officer and director of the Company): (a) Paul Kiritsis: 10,000 shares; (b) Tom Pappas: 10,000 shares; (c) Paul Pappas: 10,000 shares; (d) Nick Strong: 10,000 shares; (e) Kelsey Strong: 10,000 shares; (f) Olga Nikolaidis: 10,000 shares; (g) Ria Voiras: 10,000 shares; (h) Joyce Skaperdas; 10,000 shares; (i) Kimberly Lawlor; 10,000 shares. Paul Kiritsis is the brother of Christopher Kiritsis. Tom Pappas and Paul Pappas are the uncles of Christopher Kiritsis. Nick Strong and Kelsey Strong are nephew and niece of Chistopher Kiritsis. Olga Nikolaidis and Ria Voiras are the aunts of Christohper Kiritsis. Joyce Skaperdas is the ex-wife of Christopher Kiritsis and Kimberly Lawlor is the wife of Christopher Kiritsis.
The Company is registering for offer and sale by existing holders thereof 1,015,000 shares of common stock held by such shareholders. The Company will not receive any proceeds from the sale of the Selling Shareholder Shares. The selling shareholders have no agreement with any underwriters with respect to the sale of the Selling Shareholder Shares. The selling shareholders, who are deemed to be statutory underwriters, will offer their shares at a price of $0.15 per share.
The selling shareholders may from time to time offer the Selling Shareholder Shares through underwriters, dealers or agents, which may receive compensation in the form of underwriting discounts, concessions or commissions from them and/or the purchasers of the Selling Shareholder Shares for whom they may act as agents. Any agents, dealers or underwriters that participate in the distribution of the Selling Shareholder Shares may be deemed to be "underwriters" under the Securities Act and any discounts, commissions or concessions received by any such underwriters, dealers or agents might be deemed to be underwriting discounts and commissions under the Securities Act.
James Cassidy, who is the principal officer and sole shareholder of Tiber Creek Corporation, and James McKillop, who is the sole officer and owner of MB Americus, LLC, were both formerly officers and directors of the Company. As the organizers and developers of Topaz Island Acquisition Corporation , Mr. Cassidy and Mr. McKillop were involved with the Company prior to the change of control whereby Mr. Kiritsis became the principal officer of the Company. In particular, Mr. Cassidy provided services to the Company without charge, including preparation and filing of the charter corporate documents and preparation of the instant registration statement. Both Mr. Cassidy and Mr. McKillop also formerly served as officers and directors of the Company prior to the change of control whereby Mr. Kiritsis became an officer and director of the Company.
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The following table sets forth ownership of shares held by each person who is a selling shareholder.
|
|
|
Before Offering |
|
|
After Offering |
| |||||||||
|
Name of Selling Shareholder |
|
# Shares |
|
|
Percent(1) |
|
|
# Shares |
|
|
Percent |
| |||
|
PHIL CURY |
|
|
20,000 |
|
|
* |
|
|
0 |
|
|
|
0 | % | |
|
FRANK S. PAPPAS |
|
|
20,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
NICK PAPPAS |
|
|
20,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
SCOTT TREFETHEN |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
PATRICIA LEVY |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
STEVEN SOUTHWELL |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
PAUL KIRITSIS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
TOM PAPPAS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
PAUL PAPPAS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
FRANK VORIAS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
CHRISTOPHER CHEKOURAS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
ALEXANDRA CHEKOURAS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
KYRA CHEKOURAS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
MONICA STRONG |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
NICK STRONG |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
KELSEY STRONG |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
RON BROWN |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
RANDY FRANCESE |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
MICHAEL OZMAN |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
DAN FREEMAN |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
T.J. ANTHONY |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
MATTHEW LAWLOR |
|
|
20,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
ROY MIDDLETON |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
PETER VORIAS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
DON CARON |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
JONATHAN WOOD |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
PETER WOOD |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
DEAN WOOD |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
JEFFREY HANNER |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
MATTHEW KHALILI |
|
|
15,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
OLGA NIKOLAIDIS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
RIA VOIRAS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
JOYCE SKAPERDAS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
KIMBERLY LAWLOR |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
JAMES GLUVNA |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
JOSEPH LOMBARDO |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
JOHN STEWART |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
JAMES CASSIDY |
|
|
300,000 |
|
|
4.22 |
% |
|
|
0 |
|
|
|
0 | % |
|
JAMES MCKILLOP |
|
|
300,000 |
|
|
4.22 |
% |
|
|
0 |
|
|
|
0 | % |
|
|
|
|
1,015,000 |
|
|
|
|
|
|
|
|
|
|
|
|
___________
*Less than 1%.
(1) Based on 7,115,000 shares outstanding as of the date of this prospectus.
| 30 |
| Table of Contents |
SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this prospectus, there are 7,115,000 shares of common stock outstanding of which 6,100,000 shares are owned by officers and directors of the Company. There will be a total of 7,115,000 shares outstanding if the maximum number of Shares offered herein is sold, of which 6,100,000 would be owned by officers and directors of the Company.
The shares of common stock held by current shareholders are considered “restricted securities” subject to the limitations of Rule 144 under the Securities Act. In general, securities may be sold pursuant to Rule 144 after being fully-paid and held for more than 12 months. While affiliates of the Company are subject to certain limits in the amount of restricted securities they can sell under Rule 144, there are no such limitations on sales by persons who are not affiliates of the Company. In the event non-affiliated holders elect to sell such shares in the public market, there is likely to be a negative effect on the market price of the Company's securities.
However, at present, due to the Company’s previous status as a shell company, shareholders cannot currently rely upon Rule 144 for resales of the Company’s securities (pursuant to Rule 144(i)).
Rule 144 establishes specific criteria for determining whether a person is not engaged in a distribution of securities. Among other things, Rule 144 creates a safe harbor whereby a person satisfying the applicable conditions of the Rule 144 safe harbor is deemed not to be engaged in a distribution of the securities and therefore not an underwriter of the securities. If a purchaser of securities is unable to rely upon Rule 144 to sell securities (due to Rule 144(i)), then the securities must be registered or another exemption from registration must be found in order for the distribution of securities to be made. In the event that the securities are not registered or another exemption is not found, a purchaser of securities cannot sell or transfer the shares of common stock in the Company since the Company does not meet the requirements of Rule 144(i)(2).
Pursuant to Rule 144(i), reliance upon Rule 144 is typically available for the resale of restricted or unrestricted securities that were initially issued by a reporting or non-reporting shell company (or an issuer that has been at any time previously a reporting or non-reporting shell company) only if the following conditions are met:
|
|
· |
The issuer of the securities that was formerly a reporting or non-reporting shell company has ceased to be a shell company; |
|
|
· |
The issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934; |
|
|
· |
The issuer of the securities has filed all reports and material required to be filed under Section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months (or for such shorter period that the issuer was required to file such reports and materials), other than Form 8-K reports; and |
|
|
· |
At least one year has elapsed from the time that the issuer filed current Form 10 type information with the Commission reflecting its status as an entity that is not a shell company. |
| 31 |
| Table of Contents |
Cassidy & Associates, Beverly Hills, California (“Cassidy & Associates”), has given its opinion as attorneys-at-law regarding the validity of the issuance of the Shares offered by the Company. A member of the law firm of Cassidy & Associates is an officer and director of Tiber Creek Corporation and may be considered the beneficial owner of the 300,000 shares of common stock of the Company owned by Tiber Creek Corporation.
Interest of Counsel
Cassidy & Associates, counsel for the Company, who has given an opinion upon the validity of the securities being registered and upon other legal matters in connection with the registration or offering of such securities, had, or is to receive in connection with the offering, a substantial interest in the Company and was connected with the Company through Topaz Island Acquisition Corporation. James Cassidy, a partner of Cassidy & Associates, was a director and officer of Topaz Island Acquisition Corporation prior to its change of control.
EXPERTS
KCCW Accountancy Corp., an independent registered public accounting firm, has audited the balance sheet of Diverse Development Group, Inc. (formerly known as Topaz Island Acquisition Corporation) as of April 20, 2016 and the related statements of operations, changes in stockholders’ equity (deficit), and cash flows for the period from April 4, 2016 (inception) through April 20, 2016. The Company has included such financial statements in the prospectus and elsewhere in the registration statement in reliance on the report of May 2, 2016, given their authority as experts in accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
The Company’s certificate of incorporation includes an indemnification provision that provides that the Company shall indemnify directors against monetary damages to the Company or any of its shareholders or others by reason of a breach of the director’s fiduciary duty or otherwise, except under certain limited circumstances.
The certificate of incorporation does not specifically indemnify the officers or directors or controlling persons against liability under the Securities Act. However, the indemnification provided in the certificate of incorporation is broad and should be considered to be of a broad scope and wide extent.
The Securities and Exchange Commission’s position on indemnification of officers, directors and control persons under the Securities Act by the Company is as follows:
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933 MAY BE PERMITTED TO DIRECTORS, OFFICERS AND CONTROLLING PERSONS OF THE SMALL BUSINESS ISSUER PURSUANT TO THE RULES OF THE COMMISSION, OR OTHERWISE, THE SMALL BUSINESS ISSUER HAS BEEN ADVISED THAT IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS, THEREFORE, UNENFORCEABLE.
| 32 |
| Table of Contents |
|
F-2 |
||
|
|
||
|
F-3 |
||
|
|
||
|
F-4 |
||
|
|
||
|
F-5 |
|
F-1 |
| Table of Contents |
TOPAZ ISLAND ACQUISITION CORPORATION
|
|
|
September 30, |
| |
|
|
|
2016 |
| |
|
|
|
(Unaudited) |
| |
|
|
|
|
| |
|
ASSETS |
|
|
| |
|
|
|
|
| |
|
Current assets |
|
|
| |
|
|
|
|
| |
|
Cash |
|
$ | - |
|
|
Total assets |
|
$ | - |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Accrued liabilities |
|
$ |
500 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
500 |
|
|
|
|
|
|
|
|
Stockholders' Equity |
|
|
|
|
|
Preferred stock, $0.0001 par value 20,000,000 shares authorized; none issued and outstanding |
|
|
- |
|
|
Common Stock, $0.0001 par value, 100,000,000 shares authorized; 20,000,000 shares issued and outstanding September 30, 2016 |
|
|
2,000 |
|
|
Discount on Common Stock |
|
|
(2,000 | ) |
|
Additional paid-in capital |
|
|
1,312 |
|
|
Accumulated deficit |
|
|
(1,812 | ) |
|
|
|
|
|
|
|
Total stockholders' deficit |
|
|
(500 | ) |
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit |
|
$ | - |
|
The accompanying notes are an integral part of these unaudited financial statements.
| F-2 |
| Table of Contents |
TOPAZ ISLAND ACQUISITION CORPORATION
(UNAUDITED)
|
|
|
For the three months ended September 30, |
|
|
For the period from April 4, 2016 (Inception) to Sept. 30, |
| ||
|
|
|
|
|
|
|
| ||
|
Revenue |
|
$ | - |
|
|
$ | - |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
250 |
|
|
|
1,812 |
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(250 | ) |
|
|
(1,812 | ) |
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ | (250 | ) |
|
$ | (1,812 | ) |
|
|
|
|
|
|
|
|
|
|
|
Loss per share - |
|
|
|
|
|
|
|
|
|
basic and diluted |
|
$ | - |
|
|
$ | - |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares - |
|
|
|
|
|
| ||
|
basic and diluted |
|
|
20,000,000 |
|
|
|
20,000,000 |
|
The accompanying notes are an integral part of these unaudited financial statements.
| F-3 |
| Table of Contents |
TOPAZ ISLAND ACQUISITION CORPORATION
(UNAUDITED)
|
|
|
For the period from April 4, 2016 (Inception) to September 30, |
| |
|
|
|
|
| |
|
OPERATING ACTIVITIES |
|
|
| |
|
|
|
|
| |
|
Net loss |
|
$ | (1,812 | ) |
|
|
|
|
|
|
|
Non-cash adjustments to reconcile net loss to net cash: |
|
|
|
|
|
Expenses paid for by stockholder and contributed as capital |
|
|
1,312 |
|
|
|
|
|
|
|
|
Changes in Operating Assets and Liabilities: |
|
|
|
|
|
Accrued liability |
|
|
500 |
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
- |
|
|
|
|
|
|
|
|
Net increase in cash |
|
|
- |
|
|
|
|
|
|
|
|
Cash, beginning of period |
|
|
- |
|
|
|
|
|
|
|
|
Cash, end of period |
|
$ | - |
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES: |
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
Income tax |
|
$ | - |
|
|
|
|
|
|
|
|
Interest |
|
$ | - |
|
The accompanying notes are an integral part of these unaudited financial statements.
| F-4 |
| Table of Contents |
TOPAZ ISLAND ACQUISITION CORPORATION
Notes to Unaudited Condensed Financial Statements
NOTE 1 NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Topaz Island Acquisition Corporation (the "Company") was incorporated on April 4, 2016 under the laws of the state of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. The Company has been in the developmental stage since inception and its operations to date have been limited to issuing shares to its original shareholders. The Company will attempt to locate and negotiate with a business entity for the combination of that target company with Topaz Island. The combination will normally take the form of a merger, stock-for-stock exchange or stock-for-assets exchange. In most instances the target company will wish to structure the business combination to be within the definition of a tax-free reorganization under Section 351 or Section 368 of the Internal Revenue Code of 1986, as amended. No assurances can be given that the Company will be successful in locating or negotiating with any target company. The Company has been formed to provide a method for a foreign or domestic private company to become a reporting company with a class of securities registered under the Securities Exchange Act of 1934.
BASIS OF PRESENTATION
The summary of significant accounting policies presented below is designed to assist in understanding the Company's unaudited condensed financial statements. Such unaudited condensed financial statements and accompanying notes are the representations of the Company's management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America ("GAAP") in all material respects, and have been consistently applied in preparing the accompanying unaudited condensed financial statements.
Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") were omitted pursuant to such rules and regulations. The results for the period from April 4, 2016 (Inception) to September 30, 2016, are not necessarily indicative of the results to be expected for the year ending December 31, 2016.
USE OF ESTIMATES
The preparation of unaudited condensed financial statements in conformity with 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 date of the condensed financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
CASH
Cash and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term investments with original maturities of 90 days or less. The Company did not have cash equivalents as of September 30, 2016.
| F-5 |
| Table of Contents |
CONCENTRATION OF RISK
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality banking institutions. The Company did not have cash balances in excess of the Federal Deposit Insurance Corporation limit as of September 30, 2016.
INCOME TAXES
Under ASC 740, "Income Taxes," deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. 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. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized. As of September 30, 2016, there were no deferred taxes due to the uncertainty of the realization of net operating loss or carry forward prior to expiration.
LOSS PER COMMON SHARE
Basic loss per common share excludes dilution and is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss per common share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the loss of the entity. As of September 30, 2016, there are no outstanding dilutive securities.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows guidance for accounting for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the unaudited condensed financial statements on a recurring basis. Additionally, the Company adopted guidance for fair value measurement related to nonfinancial items that are recognized and disclosed at fair value in the unaudited condensed financial statements on a nonrecurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for the asset or liability. The carrying amounts of financial assets such as cash approximate their fair values because of the short maturity of these instruments.
| F-6 |
| Table of Contents |
RECENT ACCOUNTING PRONOUNCEMENTS
On November 20, 2015, FASB issued ASU-2015-17-Income Taxes. The Board is issuing this Update as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. Current GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. To simplify the presentation of deferred income taxes, the amendments in this Update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Update apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this Update. For public business entities, the amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The Company is still in the process of evaluating future impact of adopting this standard.
On June 12, 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) No. 2015-10-Technical Corrections and Improvements. The amendments in this Update cover a wide range of Topics in the Codification. The amendments in this Update represent changes to make minor corrections or minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2014-240-Technical Corrections and Improvements, which has been deleted.
Transition guidance varies based on the amendments in this Update. The amendments in this Update that require transition guidance are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. All other amendments will be effective upon the issuance of this Update. Management is in the process of assessing the impact of this ASU on the Company's financial statements.
On April 30, 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) No. 2015-06 Earnings Per Share (Topic 260): Effects on Historical Earnings per Units of Master Limited Partnership Dropdown Transactions. Under Topic 260, Earnings Per Share, master limited partnerships(MLPs) apply the two-class method to calculate earnings per unit (EPU) because the general partner, limited partners, and incentive distribution rights holders each participate differently in the distribution of available cash. When a general partner transfers (or "drops down") net assets to a master limited partnership and that transaction is accounted for as a transaction between entities under common control, the statements of operations of the master limited partnership are adjusted retrospectively to reflect the dropdown transaction as if it occurred on the earliest date during which the entities were under common control. The amendments in this Update specify that for purposes of calculating historical EPU under the two-class method, the earnings (losses) of a transferred business before the date of a dropdown transaction should be allocated entirely to the general partner interest, and previously reported EPU of the limited partners would not change as a result of a dropdown transaction. Qualitative disclosures about how the rights to the earnings (losses) differ before and after the dropdown transaction occurs also are required. This Accounting Standards Update is the final version of Proposed Accounting Standards Update EITF-14A Earnings Per Share Effects on Historical Earnings per Unit of Master Limited Partnership Dropdown Transactions (Topic 260), which has been deleted. Effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Earlier application is permitted. The amendments in this Update should be applied retrospectively for all financial statements presented. Management is in the process of assessing the impact of this ASU on the Company's financial statements.
In January 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) No. 2015-01 Income Statement Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. The objective of this Update is to simplify the income statement presentation requirements in Subtopic 225-20 by eliminating the concept of extraordinary items. Extraordinary items are events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. Eliminating the extraordinary classification simplifies income statement presentation by altogether removing the concept of extraordinary items from consideration. This Accounting Standards Update is the final version of Proposed Accounting Standards Update 2014-220 Income Statement Extraordinary Items (Subtopic 225-20), which has been deleted. Effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The effective date is the same for both public business entities and all other entities. Management is in the process of assessing the impact of this ASU on the Company's financial statements.
| F-7 |
| Table of Contents |
NOTE 2 - GOING CONCERN
The Company has not yet generated any revenue since inception to date and has sustained operating loss of $1,812 during the period from April 4, 2016 (Inception) to September 30, 2016. The Company had a working capital deficit of $500 and an accumulated deficit of $1,812 as of September 30, 2016. The Company's continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations and/or obtaining additional financing from its members or other sources, as may be required.
The accompanying unaudited condensed financial statements have been prepared assuming that the Company will continue as a going concern; however, the above condition raises substantial doubt about the Company's ability to do so. The unaudited condensed financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
In order to maintain its current level of operations, the Company will require additional working capital from either cash flow from operations or from the sale of its equity. However, the Company currently has no commitments from any third parties for the purchase of its equity. If the Company is unable to acquire additional working capital, it will be required to significantly reduce its current level of operations.
NOTE 3 - ACCRUED LIABILITIES
As of September 30, 2016, the Company had an accrued professional fee of $500.
NOTE 4 - STOCKHOLDERS' DEFICIT
On April 4, 2016, the Company issued 20,000,000 founders common stock to two directors and officers. The Company is authorized to issue 100,000,000 shares of common stock and 20,000,000 shares of preferred stock. As of September 30, 2016, 20,000,000 shares of common stock and no preferred stock were issued and outstanding.
NOTE 5 - SUBSEQUENT EVENT
Management has evaluated subsequent events through November 14, 2016, the date which the financial statements were available to be issued. All subsequent events requiring recognition as of September 30, 2016 have been incorporated into these financial statements and there are no subsequent events that require disclosure in accordance with FASB ASC Topic 855, "Subsequent Events."
| F-8 |
| Table of Contents |
|
F-10 |
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F-11 |
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|
F-15 |
| F-9 |
| Table of Contents |
| KCCW Accountancy Corp. | CERTIFIED PUBLIC ACCOUNTANTS |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Topaz Island Acquisition Corporation
We have audited the accompanying balance sheet of Topaz Island Acquisition Corporation (the "Company") as of April 20, 2016, and the related statement of operations, changes in stockholders' deficit and cash flows for the Period from April 4, 2016 (Inception) to April 20, 2016. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company was not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of April 20, 2016 and the results of its operations and its cash flows from April 4, 2016 (Inception) to April 20, 2016 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has had no revenues and income since inception. These conditions, among others, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans concerning these matters are also described in Note 2, which includes the raising of additional equity financing or merger with another entity. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ KCCW Accountancy Corp.
Diamond Bar, California
May 2, 2016
| F-10 |
| Table of Contents |
TOPAZ ISLAND ACQUISITION CORPORATION
|
April 20, 2016 |
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||||
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ASSETS | ||||
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Current assets |
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|
| |
|
Cash |
|
$ | - |
|
|
|
|
|
|
|
|
Total assets |
|
$ | - |
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' DEFICIT | ||||
|
Current liabilities |
|
|
|
|
|
Accrued liabilities |
|
$ | 1,000 |
|
|
Total liabilities |
|
|
1,000 |
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|
Stockholders' deficit |
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|
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|
Preferred stock, $0.0001 par value, 20,000,000 shares authorized; none outstanding |
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|
|
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|
|
Common stock, $0.0001 par value, 100,000,000 shares authorized; 20,000,000 shares issued and outstanding |
|
|
2,000 |
|
|
|
|
|
|
|
|
Discount on Common Stock |
|
|
(2,000 | ) |
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
312 |
|
|
|
|
|
|
|
|
Deficit accumulated during the development stage |
|
|
(1,312 | ) |
|
|
|
|
|
|
|
Total stockholders' deficit |
|
|
(1,000 | ) |
|
|
|
|
|
|
|
Total liabilities and stockholders' deficit |
|
$ | - |
|
The accompanying notes are an integral part of these financial statements.
| F-11 |
| Table of Contents |
TOPAZ ISLAND ACQUISITION CORPORATION
STATEMENT OF OPERATIONS
|
|
|
For the period from |
| |
|
|
|
April 4, 2016 |
| |
|
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(Inception) to |
| |
|
|
|
April 20, 2016 |
| |
|
|
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|
| |
|
|
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|
| |
|
Revenue |
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- |
| |
|
Cost of revenue |
|
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- |
|
|
Gross profit |
|
|
- |
|
|
|
|
|
|
|
|
Operating expenses |
|
|
1,312 |
|
|
|
|
|
|
|
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Loss before income taxes |
|
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(1,312 | ) |
|
Income tax expense |
|
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- |
|
|
|
|
|
|
|
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Net loss |
|
$ | (1,312 | ) |
|
|
|
|
|
|
|
Loss per share - basic and diluted |
|
$ | (0.00 | ) |
|
|
|
|
|
|
|
Weighted average shares-basic and diluted |
|
|
20,000,000 |
|
The accompanying notes are an integral part of these financial statements.
| F-12 |
| Table of Contents |
TOPAZ ISLAND ACQUISITION CORPORATION
STATEMENT OF STOCKHOLDERS' DEFICIT
|
|
|
Common Stock |
|
|
Discount |
|
|
Additional Paid-in |
|
|
|
|
Total Stockholders' |
| ||||||||||
|
|
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Shares |
|
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Amount |
|
|
Stock |
|
|
Capital |
|
|
Deficit |
|
|
Deficit |
| ||||||
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|
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|
|
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|
|
|
|
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|
|
|
| ||||||
|
Balance, April 4, 2016 (Inception) |
|
|
- |
|
|
$ | - |
|
|
$ | - |
|
|
$ | - |
|
|
$ | - |
|
|
$ | - |
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock |
|
|
20,000,000 |
|
|
|
2,000 |
|
|
|
(2,000 | ) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
312 |
|
|
|
- |
|
|
|
312 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,312 | ) |
|
|
(1,312 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, April 20, 2016 |
|
|
20,000,000 |
|
|
$ | 2,000 |
|
|
$ | (2,000 | ) |
|
$ | 312 |
|
|
$ | (1,312 | ) |
|
$ | (1,000 | ) |
The accompanying notes are an integral part of these financial statements.
| F-13 |
| Table of Contents |
TOPAZ ISLAND ACQUISITION CORPORATION
STATEMENT OF CASH FLOWS
|
|
|
For the period from |
| |
|
|
|
April 4, 2016 |
| |
|
|
|
(Inception) to |
| |
|
|
|
April 20, 2016 |
| |
|
OPERATING ACTIVITIES |
|
|
| |
|
|
|
|
| |
|
Net loss |
|
$ | (1,312 | ) |
|
|
|
|
|
|
|
Non-cash adjustments to reconcile net loss to net cash: |
|
|
|
|
|
|
|
|
| |
|
Expenses paid for by stockholder and contributed as capital |
|
|
312 |
|
|
|
|
|
|
|
|
Changes in Operating Assets and Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Accrued liability |
|
|
1,000 |
|
|
Net cash (used in) operating activities |
|
|
- |
|
|
|
|
|
|
|
|
Net increase in cash |
|
|
- |
|
|
|
|
|
|
|
|
Cash, beginning of period |
|
|
- |
|
|
Cash, end of period |
|
$ |
- |
|
|
|
|
|
|
|
|
Income tax paid |
|
$ |
- |
|
|
Interest expense paid |
|
$ |
- |
|
The accompanying notes are an integral part of these financial statements.
| F-14 |
| Table of Contents |
TOPAZ ISLAND ACQUISITION CORPORATION
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Topaz Island Acquisition Corporation ("Topaz Island" or "the Company") was incorporated on April 4, 2016 under the laws of the state of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. The Company has been in the developmental stage since inception and its operations to date have been limited to issuing shares to its original shareholders. The Company will attempt to locate and negotiate with a business entity for the combination of that target company with Topaz Island. The combination will normally take the form of a merger, stock-for-stock exchange or stock-for-assets exchange. In most instances the target company will wish to structure the business combination to be within the definition of a tax-free reorganization under Section 351 or Section 368 of the Internal Revenue Code of 1986, as amended. No assurances can be given that the Company will be successful in locating or negotiating with any target company. The Company has been formed to provide a method for a foreign or domestic private company to become a reporting company with a class of securities registered under the Securities Exchange Act of 1934.
BASIS OF PRESENTATION
The summary of significant accounting policies presented below is designed to assist in understanding the Company's financial statements. Such financial statements and accompanying notes are the representations of the Company's management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America ("GAAP") in all material respects, and have been consistently applied in preparing the accompanying financial statements. The Company has not earned any revenue from operations since inception. Accordingly, the Company's activities have been accounted for as those of a "Development Stage Enterprise" as set forth in ASC 915, "Development Stage Entities." Among the disclosures required by ASC 915, are that the Company's financial statements be identified as those of a development stage company, and that the statements of operations, stockholders' equity and cash flows disclose activity since the date of the Company's inception. The Company chose December 31 as its fiscal year end.
USE OF ESTIMATES
The preparation of financial statements in conformity with 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 date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term investments with original
maturities of 90 days or less. The Company did not have cash equivalents as of April 20, 2016.
CONCENTRATION OF RISK
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high quality banking institutions. The Company did not have cash balances in excess of the Federal Deposit Insurance Corporation limit as of April 20, 2016.
| F-15 |
| Table of Contents |
TOPAZ ISLAND ACQUISITION CORPORATION
Notes to Financial Statements
INCOME TAXES
Under ASC 740, "Income Taxes," deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. 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. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized. As of April 20, 2016 there were no deferred taxes due to the uncertainty of the realization of net operating loss or carry forward prior to expiration.
LOSS PER COMMON SHARE
Basic loss per common share excludes dilution and is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted loss per common share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the loss of the entity. As of April 20, 2016, there are no outstanding dilutive securities.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows guidance for accounting for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Additionally, the Company adopted guidance for fair value measurement related to nonfinancial items that are recognized and disclosed at fair value in the financial statements on a nonrecurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for the asset or liability. The carrying amounts of financial assets such as cash approximate their fair values because of the short maturity of these instruments.
NOTE 2 - GOING CONCERN
The Company has not yet generated any revenue since inception to date and has sustained operating losses during the period ended April 20, 2016. The Company had a working capital deficit of $1,000 and an accumulated deficit of $1,312 as of April 20, 2016. The Company's continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations and/or obtaining additional financing from its members or other sources, as may be required.
| F-16 |
| Table of Contents |
TOPAZ ISLAND ACQUISITION CORPORATION
Notes to Financial Statements
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern; however, the above condition raises substantial doubt about the Company's ability to do so. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.
In order to maintain its current level of operations, the Company will require additional working capital from either cash flow from operations or from the sale of its equity. However, the Company currently has no commitments from any third parties for the purchase of its equity. If the Company is unable to acquire additional working capital, it will be required to significantly reduce its current level of operations.
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
Adopted
On June 10, 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915). The amendments in this update remove the definition of a development stage entity from Topic 915, thereby removing the distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information on the statements of income, cash flows, and shareholder's equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. Early adoption is permitted. The Company has adopted this accounting standard. The accounting pronouncement does not have a material effect on the financial statements.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force) and the United States Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.
NOTE 4 - ACCRUED LIABILITIES
As of April 20, 2016, the Company had an accrued professional fee of $1,000.
NOTE 5 - STOCKHOLDERS' DEFICIT
On April 4, 2016, the Company issued 20,000,000 founders common stock to two directors and officers. The Company is authorized to issue 100,000,000 shares of common stock and 20,000,000 shares of preferred stock. As of April 20, 2016, 20,000,000 shares of common stock and no preferred stock were issued and outstanding.
| F-17 |
| Table of Contents |
PART II
Item 13. Other expenses of Issuance and Distribution
The following table sets forth the Company’s expenses in connection with this registration statement. All of the listed expenses are estimates, other than the filing fees payable to the Securities and Exchange Commission.
|
Registration Fees |
|
$ |
| |
|
Edgarizing fees |
|
$ |
| |
|
Transfer agent fees |
|
$ |
| |
|
Accounting fee |
|
$ |
| |
|
Legal fees |
|
$ |
|
Item 14. Indemnification of Directors and Officers
The Company's Certificate of Incorporation, By-Laws and other contracts provide for indemnification of its officers, directors, agents, fiduciaries and employees. These provisions allow the Company to pay for the expenses of these persons in connection with legal proceedings brought because of the person's position with the Company, if the person is not ultimately adjudged liable to the Company for misconduct in the action. Generally, no indemnification may be made where the person has been determined to have intentionally, fraudulently or knowingly violated the law.
The Company does not believe that such indemnification affects the capacity of such person acting as officer, director or control person of the Company.
Item 15. Recent Sales of Unregistered Securities
The Company has issued the following securities in the last three (3) years. Such securities were issued pursuant to exemptions from registration under Section 4(2) of the Securities Act of 1933, as amended, as transactions by an issuer not involving any public offering, as noted below. Each of these transactions was issued as part of a private placement of securities by the Company in which (i) no general advertising or solicitation was used, and (ii) the investors purchasing securities were acquiring the same for investment purposes only, without a view to resale.
Since inception, the Company has issued the following shares of common stock:
The Company issued 10,000,000 shares on its formation in January 2015 to each of James Cassidy and James McKillop of which all but 600,000 shares were redeemed pro rata.
As part of a change in control of the Company, on December 18, 2016 the Company issued 6,100,000 shares of its common stock to
|
Christopher Kiritsis |
|
|
6,100,000 |
|
| 34 |
| Table of Contents |
The following table sets forth ownership of shares held by each investor person who is a selling shareholder.
|
|
|
Before Offering |
|
|
After Offering |
| |||||||||
|
Name of Selling Shareholder |
|
# Shares |
|
|
Percent(1) |
|
|
# Shares |
|
|
Percent |
| |||
|
PHIL CURY |
|
|
20,000 |
|
|
* |
|
|
0 |
|
|
|
0 | % | |
|
FRANK S. PAPPAS |
|
|
20,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
NICK PAPPAS |
|
|
20,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
SCOTT TREFETHEN |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
PATRICIA LEVY |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
STEVEN SOUTHWELL |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
PAUL KIRITSIS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
TOM PAPPAS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
PAUL PAPPAS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
FRANK VORIAS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
CHRISTOPHER CHEKOURAS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
ALEXANDRA CHEKOURAS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
KYRA CHEKOURAS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
MONICA STRONG |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
NICK STRONG |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
KELSEY STRONG |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
RON BROWN |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
RANDY FRANCESE |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
MICHAEL OZMAN |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
DAN FREEMAN |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
T.J. ANTHONY |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
MATTHEW LAWLOR |
|
|
20,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
ROY MIDDLETON |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
PETER VORIAS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
DON CARON |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
JONATHAN WOOD |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
PETER WOOD |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
DEAN WOOD |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
JEFFREY HANNER |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
MATTHEW KHALILI |
|
|
15,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
OLGA NIKOLAIDIS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
RIA VOIRAS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
JOYCE SKAPERDAS |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
KIMBERLY LAWLOR |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
JAMES GLUVNA |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
JOSEPH LOMBARDO |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
JOHN STEWART |
|
|
10,000 |
|
|
* |
|
|
|
0 |
|
|
|
0 | % |
|
JAMES CASSIDY |
|
|
300,000 |
|
|
4.22 |
% |
|
|
0 |
|
|
|
0 | % |
|
JAMES MCKILLOP |
|
|
300,000 |
|
|
4.22 |
% |
|
|
0 |
|
|
|
0 | % |
|
|
|
|
1,015,000 |
|
|
|
|
|
|
|
|
|
|
|
|
____________
*Less than 1%.
(1) Based on 7,115,000 shares outstanding as of the date of this prospectus.
| 35 |
| Table of Contents |
The offer and sale of all shares of our common stock listed above were affected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Regulation S promulgated under the Securities Act. The investors acknowledged the following: the investor is not a United States Person, nor is the investor acquiring the shares directly or indirectly for the account or benefit of a United States Person. None of the funds used by the investor to purchase the shares have been obtained from United States Persons. “ United States Person ” within the meaning of U.S. tax laws, means a citizen or resident of the United States, any former U.S. citizen subject to Section 877 of the Internal Revenue Code, any corporation, or partnership organized or existing under the laws of the United States of America or any state, jurisdiction, territory or possession thereof and any estate or trust the income of which is subject to U.S. federal income tax irrespective of its source, and within the meaning of U.S. securities laws, as defined in Rule 902(o) of Regulation S, means:
(i) any natural person resident in the United States; (ii) any partnership or corporation organized or incorporated under the laws of the United States; (iii) any estate of which any executor or administrator is a U.S. person; (iv) any trust of which any trustee is a U.S. person; (v) any agency or branch of a foreign entity located in the United States; (vi) any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person; (vii) any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and (viii) any partnership or corporation if organized under the laws of any foreign jurisdiction, and formed by a U.S. person principally for the purpose of investing in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a)) who are not natural persons, estates or trusts.
Each of the individuals or entities had access to information about our business and financial condition and was deemed capable of protecting their own interests. The securities were issued pursuant to the private placement exemption provided by Regulation S and/or Rule 506 of the Securities Act. These are deemed to be “restricted securities” as defined in Rule 144 under the Securities Act and the stock certificates bear a legend limiting the resale thereof.
| 36 |
| Table of Contents |
Item 16. Exhibits and Financial Statement Schedules.
EXHIBITS
Certain exhibits listed below are incorporated by reference as so marked with the date and filing with which such exhibits were filed with the Securities and Exchange Commission)
|
3.1* |
Certificate of Incorporation (exhibit to Form 10-12G filed March 2, 2015) | |
|
3.2* |
By-laws (exhibit to Form 10-12G filed March 2, 2015) | |
|
3.3* |
Sample stock certificate (exhibit to Form 10-12G filed March 2, 2015) | |
|
10.1* |
Licensing Agreement dated February 26, 2016 (exhibit to Form S-1 filed March 30, 2016) | |
_______
* Previously filed
Item 17. Undertakings
Pursuant to Rule 415 under the Securities Act of 1933 (as amended and updated from time to time)
The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sales securities, a post-effective amendment to this registration statement;
i. To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
ii. To reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
iii. To include any additional material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
| 37 |
| Table of Contents |
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment, any of the securities that remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser in the initial distribution of securities:
Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to this offering, other than registration statements relying on Rule 403B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5) That for the purpose of determining liability under the Securities Act of 1933 to any purchaser in the initial distribution of securities:
The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser.:
i. Any preliminary prospectus or prospectus of the undersigned registrant relating to this offering required to be filed pursuant to Rule 424;
ii. Any free writing prospectus relating to this offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
iii. The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
iv. Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
Undertaking Request for acceleration of effective date or filing of registration statement becoming effective upon filing.
The undersigned registrant hereby undertakes:
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
| 38 |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in Sarasota, Florida United States of America on April 13, 2017.
|
|
DIVERSE DEVELOPMENT GROUP, INC. |
||
|
|
By: |
/s/ Christopher Kiritsis |
|
|
|
Christopher Kiritsis |
||
|
|
President and Chief Executive Officer (Principal Executive Officer) |
||
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.
|
Signature |
|
Capacity |
|
Date |
|
| ||||
|
/s/ Christopher Kiritsis |
|
Principal Executive Officer |
|
April 13, 2017 |
|
Christopher Kiritsis |
||||
|
| ||||
|
/s/ Christopher Kiritsis |
|
Principal Financial Officer |
|
April 13, 2017 |
|
Christopher Kiritsis |
||||
|
| ||||
|
/s/ Christopher Kiritsis |
|
Principal Accounting Officer |
|
April 13, 2017 |
|
Christopher Kiritsis |
||||
|
| ||||
|
/s/ Christopher Kiritsis |
|
Director |
|
April 13, 2017 |
|
Christopher Kiritsis |
|
39 |