UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
Forex365, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Nevada 85-0290243
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
190 Lakeview Way
Vero Beach, FL 32963
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(Address of Principal Executive Offices and Zip Code)
(772) 231-7544
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(Registrant's Telephone Number, including Area Code)
with a copy to:
Frederic M. Schweiger
2395 Woodglen Drive
Aurora, IL 60502
(630) 692-0647
Securities to be registered under Section 12(b) of the Act: None.
Name of Each Exchange on Which
Title of Each Class to be so Registered Each Class is to be Registered
- --------------------------------------- -------------------------------------
- --------------------------------------- -------------------------------------
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share
(Title of class)
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 of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
TABLE OF CONTENTS
Page
Item 1. Business. 1
Item 1A. Risk Factors. 4
Item 2. Financial Information. 10
Item 3. Properties. 14
Item 4. Security Ownership of Certain Beneficial Owners and Management. 15
Item 5. Directors and Executive Officers. 16
Item 6. Executive Compensation. 20
Item 7. Certain Relationships and Related Transactions, and Director
Independence. 22
Item 8. Legal Proceedings. 23
Item 9. Market Price of and Dividends on the Registrant's Common
Equity and Related Stockholder Matters. 23
Item 10. Recent Sales of Unregistered Securities. 25
Item 11. Description of Registrant's Securities to be Registered. 25
Item 12. Indemnification of Directors and Officers. 28
Item 13. Financial Statements and Supplementary Data. 29
Item 14. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure. 29
Item 15. Financial Statements and Exhibits. 30
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EXPLANATORY NOTE
Forex365, Inc. is filing this registration statement on Form 10 (the
"Registration Statement") under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") on a voluntary basis to provide current public information
to the investment community and to comply with applicable requirements for the
quotation or listing of its securities on a national securities exchange or
other public trading market. In this Registration Statement, the "Company,"
"we," "us," and "our" refer to Forex365, Inc.
Once this Registration Statement is deemed effective, we will be subject to
the requirements of Section 13(a) of the Exchange Act, including the rules and
regulations promulgated thereunder, which will require us to file annual reports
on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K,
and we will be required to comply with all other obligations of the Exchange Act
applicable to issuers filing registration statements pursuant to Section 12(g)
of the Exchange Act.
FORWARD LOOKING STATEMENTS
This Registration Statement contains forward-looking statements that
involve substantial risks and uncertainties. These forward-looking statements
are not historical facts, but rather are based on current expectations,
estimates and projections about us, our prospective portfolio investments, our
industry, our beliefs, and our assumptions. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates," "would,"
"should," "targets," "projects," and variations of these words and similar
expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to risks,
uncertainties, and other factors, some of which are beyond our control and
difficult to predict and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements including,
without limitation, the risks, uncertainties and other factors we identify in
"Risk Factors" and elsewhere in this Registration Statement and in our filings
with the SEC.
Although we believe that the assumptions on which these forward-looking
statements are based are reasonable, any of those assumptions could prove to be
inaccurate, and as a result, the forward-looking statements based on those
assumptions also could be inaccurate. In light of these and other uncertainties,
the inclusion of a projection or forward-looking statement in this prospectus
should not be regarded as a representation by us that our plans and objectives
will be achieved. These risks and uncertainties include those described or
identified in "Risk Factors" and elsewhere in this Registration Statement. You
should not place undue reliance on these forward-looking statements, which apply
only as of the date of this Registration Statement. We do not undertake any
obligation to update or revise any forward-looking statements.
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Item 1. Business.
Business History and Background
We were incorporated under the laws of the State of Nevada on February 8,
1984 under the name Solar Age Industries, Inc. The Company's principal business
activity was the manufacture and sale of solar air and water heating devices. As
of January 1986, the federal energy credits and most state energy credits
expired which severely impacted our ability to market our products, resulting in
a substantial loss for the first two calendar quarters of 1986. We attempted to
diversify our operation, but because of the continuing substantial financial
loses sustained by us, we were forced to file a Chapter 11 petition under the
Bankruptcy Code District of New Mexico. In late 1987, we filed our plan of
reorganization, which was approved by the Bankruptcy Court. Following
distribution to our creditors under the terms of the plan and consummation of
the plan, the bankruptcy case was subsequently closed. Although we continued to
market our products, we did not attain the commercial success for our products
and, subsequently, ceased operations.
In July 1998, pursuant to an Agreement and Plan of Reorganization and, as a
result of a reverse merger, we acquired through our wholly owned subsidiary, SGI
Capital, Inc., an Illinois corporation, a ninety percent interest in JSC NBM
Stroyservice ("NBM"), Russian limited liability company, which was a real estate
development and construction company based in Moscow, Russia. Shortly after the
merger, the Company was unable to develop its operations, due to deteriorating
economic conditions in Russia and the inability of NBM to provide audited
financial statements for the fiscal year ended as of June 30, 1999 in accordance
with the U.S. Generally Accepted Accounting Principles, and we were forced to
rescind the Agreement and Plan of Reorganization.
Reorganization and Change of Control
On November 14, 2007, we entered into a securities purchase agreement
("Purchase Agreement") with KIG Investors II, LLC ("KIG") pursuant to which KIG
agreed to purchase, subject to the satisfaction of certain conditions precedent,
newly issued shares of common stock from the Company for cash consideration.
Effective November 15, 2007, in accordance with the terms of the Purchase
Agreement, our then existing officers and directors resigned, and Kevin R.
Keating became our sole director. Kevin R. Keating appointed two additional
directors, Margie Blackwell and Jeff Andrews, to fill the vacancies on our board
of directors ("Board"). The Board then appointed Kevin R. Keating as our Chief
Executive Officer, Chief Financial Officer, President, Secretary and Treasurer.
Effective June 19, 2008, the Purchase Agreement was amended by the parties
and KIG thereafter assigned its rights thereunder to Kevin R. Keating and
Lionsridge Capital, LLC ("Lionsridge"), a limited liability company controlled
by Fredric M. Schweiger. Pursuant to the amended Purchase Agreement, on June 25,
2008, we issued 16,000,000 shares of common stock to Kevin R. Keating and
5,000,000 shares of common stock to Lionsridge. These shares were sold by us for
an aggregate purchase price of $210,000, or $0.01 per share. We also granted
Kevin R. Keating and Lionsridge certain demand and piggyback registration rights
with respect to these shares. The proceeds from the sale of these shares were
used by us to pay certain of our liabilities and obligations.
Effective August 14, 2008, we filed amended and restated articles of
incorporation ("Restated Articles of Incorporation") with the Nevada Scretary of
State. The Restated Articles of Incorporation amended our then current articles
of incorporation to, among other things, increase the number of authorized
shares of common stock from 50,000,000 to 200,000,000 and to reduce the par
value per share of our common and preferred stock from $0.01 to $0.001. The
amended and restated articles of incorporation were approved by the written
consent of the directors and a majoirty of the stockholders.
On August 20, 2008, Margie Blackwell and Jeff Andrews resigned as directors
of the Company. The resignation of these directors was not the result of any
disagreement with us on any matters relating to our operations, policies or
practices. Following these resignations, Kevin R. Keating, our sole remaining
director reduced the size of the Board to one director.
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Our principal place of business is located at 190 Lakeview Way, Vero Beach,
FL 32963. Our telephone number is (772) 231-7544.
Current Business of Issuer
We currently have no operations but are seeking to acquire an ongoing
business. Our principal business objective for the next 12 months and beyond
such time will be to achieve long-term growth potential through a combination
with an operating business rather than immediate, short-term earnings. We will
not restrict our potential candidate target companies to any specific business,
industry or geographical location and, thus, may acquire any type of business.
No assurance can be given that we will ever complete a business combination with
an operating company.
To date, we have made no efforts to identify a possible business
combination. As a result, we have not conducted negotiations or entered into a
letter of intent concerning any target business. We intend to commence search
for an operating business suitable for a business combination after this
Registration Statement becomes effective and we are a reporting company under
the Exchange Act.
Under SEC Rule 12b-2 under the Securities Act of 1933, as amended (the
"Securities Act"), we qualify as a "shell company," because we have no or
nominal assets (other than cash) and no or nominal operations. We intend to
comply with the periodic reporting requirements of the Exchange Act for so long
as we are subject to those requirements.
The analysis of new business opportunities will be undertaken by or under
the supervision of Kevin R. Keating, our sole officer and director. As of this
date, we have not entered into any definitive agreement with any party, nor have
there been any specific discussions with any potential business combination
candidate regarding business opportunities for us. We have unrestricted
flexibility in seeking, analyzing and participating in potential business
opportunities. In our efforts to analyze potential acquisition targets, we will
consider the following kinds of factors:
(i) Potential for growth, indicated by new technology, anticipated
market expansion or new products;
(ii) Competitive position as compared to other firms of similar size
and experience within the industry segment as well as within the industry
as a whole;
(iii) Strength and diversity of management, either in place or
scheduled for recruitment;
(iv) Capital requirements and anticipated availability of required
funds, to be provided by the Company or from operations, through the sale
of additional securities, through joint ventures or similar arrangements or
from other sources;
(v) The cost of participation by the Company as compared to the
perceived tangible and intangible values and potentials;
(vi) The extent to which the business opportunity can be advanced;
(vii) The accessibility of required management expertise, personnel,
raw materials, services, professional assistance and other required items;
and
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(viii) Other relevant factors.
In applying the foregoing criteria, no one of which will be controlling,
our management will attempt to analyze all factors and circumstances and make a
determination based upon reasonable investigative measures and available data.
Potentially available business opportunities may occur in many different
industries, and at various stages of development, all of which will make the
task of comparative investigation and analysis of such business opportunities
extremely difficult and complex. Due to our limited capital available for
investigation, we may not discover or adequately evaluate adverse facts about
the opportunity to be acquired.
Form of Potential Business Combination
The manner in which we participate in an opportunity will depend upon the
nature of the opportunity, the respective needs and desires of the Company and
the promoters of the opportunity, and the relative negotiating strength of the
Company and such promoters.
It is likely that the Company will acquire its participation in a business
opportunity through the issuance of common stock or other securities of the
Company. Although the terms of any such transaction cannot be predicted, it
should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code")
depends upon whether the owners of the acquired business own 80% or more of the
voting stock of the surviving entity. If a transaction were structured to take
advantage of these provisions rather than other "tax free" provisions provided
under the Code, all prior stockholders of the Company would in such
circumstances retain 20% or less of the total issued and outstanding shares of
the surviving entity. Under other circumstances, depending upon the relative
negotiating strength of the parties, prior stockholders of the Company may
retain substantially less than 20% of the total issued and outstanding shares of
the surviving entity. This could result in substantial additional dilution to
the equity of those who were stockholders of the Company prior to a business
combination with an operating entity.
The present stockholders of the Company will likely not have control of a
majority of the voting securities of the Company following a reorganization
transaction. As part of such a transaction, the Company's sole director may
resign and one or more new directors may be appointed without any vote by
stockholders.
In the case of a business combination, the transaction may be accomplished
upon the sole determination of management without any vote or approval by
stockholders. In the case of a statutory merger or consolidation directly
involving the Company, it will likely be necessary to call a stockholders'
meeting and obtain the approval of the holders of a majority of the outstanding
securities. The necessity to obtain such stockholder approval may result in
delay and additional expense in the consummation of any proposed transaction and
will also give rise to certain appraisal rights to dissenting stockholders. Most
likely, management will seek to structure any such transaction so as not to
require stockholder approval.
It is anticipated that the investigation of specific business opportunities
and the negotiation, drafting and execution of relevant agreements, disclosure
documents and other instruments will require substantial management time and
attention and substantial cost for accountants, attorneys and others. If a
decision is made not to participate in a specific business opportunity, the
costs theretofore incurred in the related investigation might not be
recoverable. Furthermore, even if an agreement is reached for the participation
in a specific business opportunity, the failure to consummate that transaction
may result in the loss to the Company of the related costs incurred.
We presently have no employees. Our sole officer and director is engaged in
outside business activities and anticipates that he will devote to our business
very limited time until the acquisition of a successful business opportunity has
been identified. We expect no significant changes in the number of our employees
other than such changes, if any, incident to a business combination.
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Reports to Security Holders
The Company is not required to deliver an annual report to security holders
and at this time does not anticipate the distribution of such a report. The
Company intends to file reports with the SEC as long as it is required to do so.
The Company will be a reporting company and intends to comply with the
requirements of the Exchange Act as long as it is required to do so.
The public may read and copy any materials the Company files with the SEC
in the SEC's Public Reference Section, Room 1580, 100 F Street N.E., Washington,
D.C. 20549. The public may obtain information on the operation of the Public
Reference Section by calling the SEC at 1-800-SEC-0330. Additionally, the SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC, which can be found at http://www.sec.gov.
Item 1A. Risk Factors.
An investment in the Company is highly speculative in nature and involves an
extremely high degree of risk. A prospective investor should consider the
possibility of the loss of an investor's entire investment and evaluate all
information about us and the risk factors discussed below in relation to his
financial circumstances before investing in us.
There may be conflicts of interest between our management and the stockholders
of the Company.
Conflicts of interest create the risk that management may have an incentive
to act adversely to the interests of the stockholders of the Company. A conflict
of interest may arise between our management's personal pecuniary interest and
its fiduciary duty to our stockholders. In addition, Kevin R. Keating, our sole
officer and director, is currently involved with other public shell companies
and conflicts in the pursuit of business combinations with such other public
shell companies with which he is, and may in the future be, affiliated with may
arise. If we and the other public shell companies that management is affiliated
with desire to take advantage of the same opportunity, then members of
management that are affiliated with both companies would abstain from voting
upon the opportunity. In the event of identical officers and directors, or
members of management, such individuals will arbitrarily determine the company
that will be entitled to proceed with the proposed transaction.
We have no current operating business.
We currently have no relevant operating business, revenues from operations
or assets. Our business plan is to seek a merger or business combination with an
operating business. We may not realize any revenue unless and until we
successfully combine with an operating business. We face all of the risks
inherent in the investigation, acquisition, or involvement in a new business
opportunity. An investor's purchase of any of our securities must be regarded as
placing funds at a high risk in a new or "start-up" venture with all of the
unforeseen costs, expenses, problems, and difficulties to which such ventures
are subject. We will, in all likelihood, sustain operating expenses without
corresponding revenues, at least until the consummation of a business
combination. This may result in our incurring a net operating loss that will
increase continuously until we can consummate a business combination with a
profitable business opportunity. We cannot assure you that we can identify a
suitable business opportunity and consummate a business combination.
There is competition for those private companies suitable for a business
combination of the type contemplated by management.
We are in a highly competitive market for a small number of business
opportunities which could reduce the likelihood of consummating a successful
business combination. We are and will continue to be an insignificant
participant in the business of seeking business combinations with operating
4
entities that desire to become public companies. A large number of established
and well-financed entities, including small public companies and venture capital
firms, are active in mergers and acquisitions of companies that may be desirable
target candidates for us. Nearly all these entities have significantly greater
financial resources, technical expertise and managerial capabilities than we do;
consequently, we will be at a competitive disadvantage in identifying possible
business opportunities and successfully completing a business combination. These
competitive factors may reduce the likelihood of our identifying and
consummating a successful business combination.
Our future success is highly dependent on the ability of management to locate
and attract a suitable acquisition.
The nature of our operations is highly speculative, and there is a
consequent risk of loss of your investment. The success of our plan of
operations will depend to a great extent on the operations, financial condition
and management of the identified business opportunity. While management intends
to seek business combination(s) with entities having established operating
histories, we cannot assure you that we will be successful in locating
candidates meeting that criterion. In the event we complete a business
combination, the success of our operations may be dependent upon management of
the successor firm or venture partner firm and numerous other factors beyond our
control. In addition, even if we complete a business combination, there is no
assurance that the business we acquire will generate revenues or profits, or
that the value of our common stock will increase as a result of the acquired
business opportunity.
We only intend to acquire a single business opportunity and thus your investment
will lack diversification.
Because of our limited financial resources, it is unlikely that we will be
able to diversify our acquisitions or operations. The inability to diversify our
activities into more than one area will subject our investors and stockholders
to economic fluctuations within a particular business or industry and therefore
increase the risks associated with the investment. We only intend to engage in a
business combination with one operating entity.
We have no existing agreement for a business combination or other transaction.
We have no arrangement, agreement or understanding with respect to engaging
in a business combination with an operating business. No assurances can be given
that we will successfully identify and evaluate suitable business opportunities
or that we will conclude a business combination. Management has not identified
any particular industry or specific business within an industry for evaluation.
We cannot guarantee that we will be able to negotiate a business combination on
favorable terms, and there is consequently a risk that funds allocated to the
purchase of our shares will not be invested in a company with active business
operations. Further, management will seek to structure any such business
combination so as not to require stockholder approval.
Management intends to devote only a limited amount of time to seeking a target
company which may adversely impact our ability to identify a suitable
acquisition candidate.
While seeking a business combination, management anticipates devoting very
limited time to the Company's affairs. Our sole officer has not entered into a
written employment agreement with us and is not expected to do so in the
foreseeable future. This limited commitment may adversely impact our ability to
identify and consummate a successful business combination. To supplement our
search activities, we may be required to employ accountants, technical experts,
appraisers, attorneys, or other consultants or advisors. Some of these outside
advisors may be our affiliates or their affiliated entities. The selection of
any such advisors will be made by our management without any input from
stockholders, and the engagement of such persons may reduce the value of your
investment.
5
The time and cost of preparing a private company to become a public reporting
company may preclude us from entering into a merger or acquisition with the most
attractive private companies.
Target companies that fail to comply with SEC reporting requirements may
delay or preclude acquisition. Sections 13 and 15(d) of the Exchange Act require
reporting companies to provide certain information about significant
acquisitions, including certified financial statements for the company acquired,
covering one, two, or three years, depending on the relative size of the
acquisition. The time and additional costs that may be incurred by some target
entities to prepare these statements may significantly delay or essentially
preclude consummation of an acquisition. Otherwise suitable acquisition
prospects that do not have or are unable to obtain the required audited
statements may be inappropriate for acquisition so long as the reporting
requirements of the Exchange Act are applicable. Further, the internal control
management assessment and auditor attestation requirements under Section 404 of
the Sarbanes-Oxley Act of 2002 may limit the number of suitable acquisition
prospects if they cannot, or are unwilling to, comply with these requirements.
The Company may be subject to further government regulation which would
adversely affect our operations.
Although we will be subject to the reporting requirements under the
Exchange Act, management believes we will not be subject to regulation under the
Investment Company Act of 1940, as amended (the "Investment Company Act"), since
we will not be engaged in the business of investing or trading in securities. If
we engage in business combinations which result in our holding passive
investment interests in a number of entities, we could be subject to regulation
under the Investment Company Act. If so, we would be required to register as an
investment company and could be expected to incur significant registration and
compliance costs. We have obtained no formal determination from the SEC as to
our status under the Investment Company Act and, consequently, violation of the
Investment Company Act could subject us to material adverse consequences.
Any potential acquisition or merger with a foreign company may subject us to
additional risks.
If we enter into a business combination with a foreign company, we will be
subject to risks inherent in business operations outside of the United States.
These risks include, for example, currency fluctuations, regulatory problems,
punitive tariffs, unstable local tax policies, trade embargoes, risks related to
shipment of raw materials and finished goods across national borders and
cultural and language differences. Foreign economies may differ favorably or
unfavorably from the United States economy in growth of gross national product,
rate of inflation, market development, rate of savings, and capital investment,
resource self-sufficiency and balance of payments positions, and in other
respects.
Shares of our common stock are currently very thinly traded, and liquidity of
shares of our common stock is limited.
Shares of our common stock are, and we expect will continue to be, very
thinly traded, and the price if traded may not reflect the value of the Company.
In connection with a future business combination, we may have to undertake a
reverse split of our shares, which split may not reflect the value of the
Company at that time. There can be no assurance that there will be an active
market for our shares either now or after we complete the business combination.
The market liquidity will be dependant on the perception of the operating
business and any steps that its management might take to bring the company to
the awareness of investors. There can be no assurance given that there will be
any awareness generated. Consequently investors may not be able to liquidate
their investment or liquidate it at a price that reflects the value of the
business. If a more active market should develop, the price of common stock may
be highly volatile.
Because there may be a low price for our securities, many brokerage firms
may not be willing to effect transactions in the securities. Even if an investor
finds a broker willing to effect a transaction in the securities, the
6
combination of brokerage commissions, transfer fees, taxes, if any, and any
other selling costs may exceed the selling price. Further, many lending
institutions will not permit the use of such securities as collateral for any
loans.
Our shares of common stock are currently quoted over-the-counter on the
Pink Sheets quotation system. Management intends to strongly consider
undertaking a business transaction with a private operating company which will
allow our shares to be quoted and traded on the Over-the-Counter Bulletin Board
("OTC BB"), NASDAQ Global Market, NASDAQ Capital Market or a national exchange.
However, there can be no assurance that, upon a business combination, we will
qualify our shares for quotation or listing on NASDAQ or a national exchange, or
be able to maintain the criteria necessary to insure continued quotation or
listing.
We also intend to seek to have our shares of common stock quoted on the OTC
BB prior to completion of the business combination. However, we will not be able
to obtain quotation for our common stock on the OTC BB until a number of
conditions have been satisfied including, without limitation, the following: (i)
this Registration Statement has become effective, (ii) we have satisfactorily
responded to any comments from the SEC with respect to this Registration
Statement, and (iii) we are in compliance with the periodic reporting
requirements under the Exchange Act. We cannot assure when, or if, these
conditions will be satisfied. In addition, we can give no assurance that we will
be able to find a market maker willing to make a market in our common stock and,
even if we are able to find a market maker, we can give no assurance that FINRA
will approve the OTC BB quotation of our common stock in a timely manner. In the
event we are unable to obtain an OTC BB quotation prior to the business
combination, the value of your investment may be reduced since certain
attractive target operating businesses may only consider a combination with an
OTC BB quoted company.
Even if our common stock is approved for quotation on the OTC BB, we are
not certain that any trading market will develop or, if it develops, whether
such trading market will be sustained. Investors should understand that there
may be no alternative exit strategy for them to recover or liquidate their
investments in our common stock. Accordingly, investors must be prepared to bear
the entire economic risk of an investment in our common stock for an indefinite
period of time.
In addition, we will be subject to an SEC rule (Rule 15c2-11) that imposes
various requirements on broker-dealers who sell securities governed by the rule
to persons other than established customers and accredited investors. The
requirement that broker-dealers comply with this rule will deter broker-dealers
from recommending or selling our common stock, thus further adversely affecting
the liquidity and share price of our common stock, as well as our ability to
raise additional capital.
The majority of our shares currently outstanding are "restricted
securities" within the meaning of Rule 144 under the Securities Act. As
restricted shares, these shares may be resold only pursuant to an effective
registration statement or under the requirements of Rule 144 or other applicable
exemption from registration under the Securities Act and as required under
applicable state securities laws. Rule 144 currently provides that a
non-affiliated person (and who has not been an affiliate during the prior three
months) may sell all of his restricted securities in a reporting company
beginning six months after purchase, provided the issuer remains current in its
reporting obligations during the next six months. However, an affiliated person
may sell his restricted securities beginning six months after purchase, provided
the following conditions are met: (i) the issuer is current in its reporting
obligations, (ii) all sales are in brokerage transactions, (iii) a Form 144 is
filed, and (iv) during every three months the number of shares sold that does
not exceed 1.0% of a company's outstanding common stock. A sale under Rule 144
or under any other exemption from the Securities Act, if available, or pursuant
to subsequent registrations of our shares, may have a depressive effect upon the
price of our shares in any market that may develop.
The availability of the exemption from registration provided by Rule 144
is, however, limited in the case of the resale of shares initially acquired when
the issuer was a shell company or former shell company. Rule 144(i) provides
that shares initially acquired when the issuer was a shell company or former
shell company may not be resold under Rule 144 until the following conditions
are satisfied: (i) the issuer has ceased to be a shell company, (ii) the issuer
7
is subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, (iii) the issuer has filed all reports required under the Exchange Act
(other than Form 8-K reports) during the preceding 12 months, and (iv) one year
has elapsed since the issuer filed Form 10 information reflecting it is no
longer a shell company. The Company currently has 24,857,647 shares of common
stock outstanding, of which 23,830,000 shares are subject to the limitation
under Rule 144(i).
Through the filing of this Registration Statement, we intend to become a
public reporting company subject to the information and reporting requirements
of the Exchange Act and other federal securities laws, including, without
limitation, compliance with the Sarbanes-Oxley Act.
Compliance with the criteria for securing exemptions under federal
securities laws and the securities laws of the various states is extremely
complex, especially in respect of those exemptions affording flexibility and the
elimination of trading restrictions in respect of securities received in exempt
transactions and subsequently disposed of without registration under the
Securities Act or state securities laws.
There are issues impacting liquidity of our securities with respect to the SEC's
review of a future resale registration statement.
A majority of our shares of common stock currently outstanding are
"restricted securities," and the holders thereof have certain registration
rights. As such, following the business combination, we will likely file a
resale registration statement on Form S-1, or some other available form, to
register for resale such shares of common stock. In some cases, we are obligated
to file a registration statement for certain restricted shares pursuant to
certain registration rights agreements. We cannot control this future
registration process in all respects as some matters are outside our control.
Even if we are successful in causing the effectiveness of the resale
registration statement, there can be no assurances that the occurrence of
subsequent events may not preclude our ability to maintain the effectiveness of
the registration statement. Any of the foregoing items could have adverse
effects on the liquidity of our shares of common stock. Further, a sale of our
shares pursuant to an effective registration may have a depressive effect upon
the price of our shares in any market that may develop.
In addition, the SEC has recently disclosed that it has developed internal
guidelines concerning the use of a resale registration statement to register the
securities issued to certain investors in private investment in public equity
(PIPE) transactions, where the issuer has a market capitalization of less than
$75 million and, in general, does not qualify to file a registration statement
on Form S-3 to register its securities. The SEC has taken the position that
these smaller issuers may not be able to rely on Rule 415 under the Securities
Act ("Rule 415"), which generally permits the offer and sale of securities on a
continued or delayed basis over a period of time, but instead would require that
the issuer offer and sell such securities in a direct or "primary" public
offering, at a fixed price, if the facts and circumstances are such that the SEC
believes the investors seeking to have their shares registered are underwriters
and/or affiliates of the issuer. It appears that the SEC in most cases will
permit a registration for resale of up to one third of the total number of
shares of common stock then currently owned by persons who are not affiliates of
such issuer and, in some cases, a larger percentage depending on the facts and
circumstances. Staff members also have indicated that an issuer in most cases
will have to wait until the later of six months after effectiveness of the first
registration or such time as substantially all securities registered in the
first registration are sold before filing a subsequent registration on behalf of
the same investors. Since, following a reverse merger or business combination,
we may have only a limited number of tradable shares of common stock, it is
unclear as to how many, if any, shares of common stock the SEC will permit us to
register for resale, but SEC staff members have indicated a willingness to
consider a higher percentage in connection with registrations following reverse
mergers with shell companies such as the Company. The SEC may require as a
condition to the declaration of effectiveness of a resale registration statement
that we reduce or "cut back" the number of shares of common stock to be
registered in such registration statement. The result of the foregoing is that a
stockholder's liquidity in our common stock may be adversely affected in the
event the SEC requires a cut back of the securities as a condition to allow the
Company to rely on Rule 415 with respect to a resale registration statement, or,
if the SEC requires us to file a primary registration statement.
8
We have never paid dividends on our common stock.
We have never paid dividends on our common stock and do not presently
intend to pay any dividends in the foreseeable future. We anticipate that any
funds available for payment of dividends will be re-invested into the Company to
further its business strategy.
The Company may be subject to certain tax consequences in our business, which
may increase our cost of doing business.
We may not be able to structure our acquisition to result in tax-free
treatment for the companies or their stockholders, which could deter third
parties from entering into certain business combinations with us or result in
being taxed on consideration received in a transaction. Currently, a transaction
may be structured so as to result in tax-free treatment to both companies, as
prescribed by various federal and state tax provisions. We intend to structure
any business combination so as to minimize the federal and state tax
consequences to both us and the target entity; however, we cannot guarantee that
the business combination will meet the statutory requirements of a tax-free
reorganization or that the parties will obtain the intended tax-free treatment
upon a transfer of stock or assets. A non-qualifying reorganization could result
in the imposition of both federal and state taxes that may have an adverse
effect on both parties to the transaction.
The Company intends to issue more shares in a business combination, which will
result in substantial dilution.
Our Restated Articles of Incorporation authorizes the issuance of a maximum
of 200,000,000 shares of common stock and a maximum of 10,000,000 shares of
preferred stock. Any business combination effected by us may result in the
issuance of additional securities without stockholder approval and may result in
substantial dilution in the percentage of our common stock held by our then
existing stockholders. Moreover, the common stock issued in any such business
combination transaction may be valued on an arbitrary or non-arm's-length basis
by our management, resulting in an additional reduction in the percentage of
common stock held by our then existing stockholders. Our Board of Directors has
the power to issue any or all of such authorized but unissued shares without
stockholder approval. To the extent that additional shares of common stock or
preferred stock are issued in connection with a business combination or
otherwise, dilution to the interests of our stockholders will occur and the
rights of the holders of common stock may be materially adversely affected.
Our principal stockholders may engage in a transaction to cause the Company to
repurchase its shares of common stock.
In order to provide an interest in the Company to third parties, our
principal stockholders may choose to cause the Company to sell Company
securities to one or more third parties, with the proceeds of such sale(s) being
utilized by the Company to repurchase shares of common stock held by them. As a
result of such transaction, our management, principal stockholder(s) and Board
of Directors may change.
The Company has conducted no market research or identification of business
opportunities, which may affect our ability to identify a business to merge with
or acquire.
The Company has not conducted market research concerning prospective
business opportunities, nor have others made the results of such market research
available to the Company. Therefore, we have no assurances that market demand
exists for a merger or acquisition as contemplated by us. Our management has not
identified any specific business combination or other transactions for formal
evaluation by us, such that it may be expected that any such target business or
transaction will present such a level of risk that conventional private or
public offerings of securities or conventional bank financing will not be
available. There is no assurance that we will be able to acquire a business
9
opportunity on terms favorable to us. Decisions as to which business opportunity
to participate in will be unilaterally made by our management, which may act
without the consent, vote or approval of our stockholders.
Because we may seek to complete a business combination through a "reverse
merger," following such a transaction we may not be able to attract the
attention of major brokerage firms.
Additional risks may exist since we will assist a privately held business
to become public through a "reverse merger." Securities analysts of major
brokerage firms may not provide coverage of our Company since there is no
incentive to brokerage firms to recommend the purchase of our common stock. No
assurance can be given that brokerage firms will want to conduct any secondary
offerings on behalf of our post-merger company in the future.
We cannot assure you that following a business combination with an operating
business, our common stock will be listed on NASDAQ or any other securities
exchange.
Following a business combination, we may seek the listing of our common
stock on NASDAQ or the American Stock Exchange. However, we cannot assure you
that following such a transaction, we will be able to meet the initial listing
standards of either of those or any other stock exchange, or that we will be
able to maintain a listing of our common stock on either of those or any other
stock exchange. After completing a business combination, until our common stock
is listed on the NASDAQ or another stock exchange, we expect that our common
stock would be eligible to trade on the OTC Bulletin Board, another
over-the-counter quotation system, or on the "pink sheets," where our
stockholders may find it more difficult to dispose of shares or obtain accurate
quotations as to the market value of our common stock. In addition, we would be
subject to an SEC rule that, if it failed to meet the criteria set forth in such
rule, imposes various practice requirements on broker-dealers who sell
securities governed by the rule to persons other than established customers and
accredited investors. Consequently, such rule may deter broker-dealers from
recommending or selling our common stock, which may further affect its
liquidity. This would also make it more difficult for us to raise additional
capital following a business combination.
Our Restated Articles of Incorporation authorizes the issuance of preferred
stock by our Board of Directors.
Our Restated Articles of Incorporation authorizes the issuance of up to
10,000,000 shares of preferred stock with designations, rights and preferences
determined from time to time by our Board of Directors. Accordingly, our Board
of Directors is empowered, without stockholder approval, to issue preferred
stock with dividend, liquidation, conversion, voting, or other rights which
could adversely affect the voting power or other rights of the holders of the
common stock. In the event of issuance, the preferred stock could be utilized,
under certain circumstances, as a method of discouraging, delaying or preventing
a change in control of the Company. Although we have no present intention to
issue any shares of its authorized preferred stock, there can be no assurance
that the Company will not do so in the future.
Item 2. Financial Information.
Our audited financial statements for the twelve months ended June 30, 2007
and 2008 are attached to this Registration Statement.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Reorganization
Pursuant to the amended Purchase Agreement, on June 25, 2008, we issued
16,000,000 shares of common stock to Kevin R. Keating and 5,000,000 shares of
common stock to Lionsridge. These shares were sold by us for an aggregate
purchase price of $210,000, or $0.01 per share. The proceeds from the sale of
these shares under the amended Purchase Agreement were used by us to pay certain
of our liabilities and obligations as described below.
10
On November 14, 2007, the Company entered into a Settlement and Release
Agreement ("Settlement Agreement") with Leon Leibovich, the former CEO and
director of the Company, which provided that for the partial payment, at the
closing of the sale of the shares by the Company under the Purchase Agreement,
of certain consulting fees earned by Leon Leibovich for consulting services
rendered to the Company from July 2004 to October 2007. As part of the
settlement of such consulting fees, Leon Leibovich agreed to accept $68,542
("Settlement Amount") in full and complete payment of $140,000 of unpaid
consulting fees. As part of the Settlement Agreement, Leon Leibovich also agreed
to release the Company from all claims and to indemnify the Company from any
loss, cost or expense incurred by the Company up to a maximum of $12,500 for a
period of 4 months following the closing of the sale of shares under the amended
Purchase Agreement. In accordance with the Settlement Agreement, the Company
paid $56,042 to Leon Leibovich at the closing of the sale of shares under the
amended Purchase Agreement and withheld $12,500 from the Settlement Amount
payable to Leon Leibovich, which withheld amount will be paid to Leon Leibovich
at the end of the 4-month period, subject to any claims for indemnity.
On November 17, 2007, the Company entered into a revolving loan agreement
with Keating Investments, LLC ("KI"). Pursuant to this agreement, the Company
borrowed $5,000 from KI on November 17, 2005. The Company was required to repay
the outstanding advances in full on or before June 30, 2008. The loan carried
interest at a rate of 6% per annum. The loan was used by the Company to pay
attorneys in connection with the Benchmark Action, more fully described in Item
8 hereof. The Company paid KI $5,000 in full payment of the loan on June 27,
2008 from the proceeds of the sale of shares under the amended Purchase
Agreement. KI waived any payment of accrued interest on the loan. KI was the
managing member of KIG. KIG assigned its rights to purchase shares under the
Purchase Agreement on June 20, 2008.
On March 10, 2008, Benchmark Capital, LLC ("Benchmark") agreed to settle
the Benchmark Action and to release the Company and other defendants from all
claims (including a $2,000 advance made in June 2006 by Benchmark to pay the
Company's corporate filing fees to the State of Nevada) in exchange for a cash
payment of $65,000 ("Benchmark Settlement Amount"). On June 25, 2008, the
Company paid the Benchmark Settlement Amount in full from the proceeds of the
sale of shares under the amended Purchase Agreement. On June 30, 2008, the
Benchmark Action was dismissed with prejudice.
On May 5, 2008, the Company entered into a revolving loan agreement with
Vero Management, L.L.C. ("Vero"). Pursuant to this agreement, the Company
borrowed $10,500 from Vero on May 5, 2008. The Company was required to repay the
outstanding advances in full on or before June 30, 2008. The loan carried
interest at a rate of 6% per annum. The loan was used by the Company to pay
professional fees. Kevin R. Keating, the Company's sole officer and director, is
the sole member and manager of Vero. The Company paid Vero $10,500 in full
payment of the loan on or about June 27, 2008 from the proceeds of the sale of
shares under the amended Purchase Agreement. Vero waived any payment of accrued
interest on the loan.
In connection with the closing of the transactions under the amended
Purchase Agreement, proceeds from the sale of shares thereunder were used by the
Company to pay transfer agent fees ($16,800), auditor fees ($3,600), legal fees
($30,000) and miscellaneous expenses ($2,129).
Results of Operation
For the twelve months ended June 30, 2007 and 2008, the Company had no
revenues from continuing operations.
For the twelve months ended June 30, 2008, the Company had a loss from
operations of $(55,394), as compared with a loss from operations of $(74,100)
for the twelve months ended June 30, 2007.
11
For the twelve months ended June 30, 2007, the Company recorded a
litigation loss for $(63,000) related to the settlement of the Benchmark Action.
For the twelve months ended June 30, 2008, the Company had income on discharge
of indebtedness of $71,731, primarily related to the settlement made with Leon
Leibovich for consulting fees owed to him.
For the twelve months ended June 30, 2008, the Company had net income of
$16,064, primarily related to discharge income of $71,731 for the period, as
compared with a net loss of $(137,100) for the twelve months ended June 30,
2007, which included a charge for litigation loss of $(63,000).
Liquidity and Capital Resources
As of June 30, 2008, the Company had assets equal to $21,429, comprised
exclusively of cash and cash equivalents. The Company's current liabilities as
of June 30, 2008 were $12,500, comprised exclusively of amounts owed to Leon
Leibovich as part of the Settlement Agreement which were withheld for potential
indemnity claims.
The following is a summary of the Company's cash flows provided by (used
in) operating, investing, and financing activities for the twelve months ended
June 30, 2008 and 2007:
Twelve months ended June, 30
2008 2007
--------- ---------
Operating activities $(186,571) --
Investing activities -- --
Financing activities $ 208,000 --
--------- ---------
Net effect on cash $ 21,429 $ --
========= =========
The Company currently has nominal assets, no active business operations and
no sources of revenues. The Company is dependent upon the receipt of capital
investment or other financing to fund its ongoing operations and to execute its
business plan of seeking a combination with a private operating company. In
addition, the Company is dependent upon certain related parties to provide
continued funding and capital resources. If continued funding and capital
resources are unavailable at reasonable terms, the Company may not be able to
implement its plan of operations. Our financial statements indicate that without
additional capital, there is substantial doubt as to our ability to continue as
a going concern.
Plan of Operations
The Company's current business strategy and plan of operation has been to
investigate and, if such investigation warrants, acquire a target operating
company or business seeking the perceived advantages of being a publicly held
corporation. Our principal business objective for the next 12 months and beyond
such time will be to achieve long-term growth potential through a combination
with a business rather than immediate, short-term earnings. The Company will not
restrict our potential candidate target companies to any specific business,
industry or geographical location and, thus, may acquire any type of business.
The Company does not currently engage in any business activities that
provide cash flow. The costs of investigating and analyzing business
combinations for the next 12 months and beyond such time will be paid with money
in our treasury or with additional amounts, as necessary, to be loaned to or
invested in us by our stockholders, management or other investors.
During the next 12 months we anticipate incurring costs related to the
filing of Exchange Act reports, and consummating a business combination.
12
We believe we will be able to meet these costs through use of funds in our
treasury and additional amounts to be loaned by or invested in us by our
stockholders, management or other investors. Currently, however, our ability to
continue as a going concern is dependent upon our ability to generate future
profitable operations and/or to obtain the necessary financing to meet our
obligations and repay our liabilities arising from normal business operations
when they come due. Our ability to continue as a going concern is also dependent
on our ability to find a suitable target operating company and enter into a
possible business combination with such operating company. Management's plan
includes obtaining additional funds by equity financing prior to or in
connection with a business combination and/or related party advances; however,
there is no assurance of additional funding being available.
The Company may consider an operating business which has recently commenced
operations, is a developing company in need of additional funds for expansion
into new products or markets, is seeking to develop a new product or service, or
is an established business which may be experiencing financial or operating
difficulties and is in need of additional capital. In the alternative, a
business combination may involve the acquisition of, or merger with, a company
which does not need substantial additional capital, but which desires to
establish a public trading market for its shares, while avoiding, among other
things, the time delays, significant expense, and loss of voting control which
may occur in a public offering.
Our sole officer and director has not had any preliminary contact or
discussions with any representative of any other entity regarding a business
combination with us. Any target business that is selected may be a financially
unstable company or an entity in its early stages of development or growth,
including entities without established records of sales or earnings. In that
event, we will be subject to numerous risks inherent in the business and
operations of financially unstable and early stage or potential emerging growth
companies. In addition, we may effect a business combination with an entity in
an industry characterized by a high level of risk, and, although our management
will endeavor to evaluate the risks inherent in a particular target business,
there can be no assurance that we will properly ascertain or assess all
significant risks.
Our management anticipates that it will likely be able to effect only one
business combination, due primarily to our limited financing and the dilution of
interest for present and prospective stockholders, which is likely to occur as a
result of our management's plan to offer a controlling interest to a target
business in order to achieve a tax-free reorganization. This lack of
diversification should be considered a substantial risk in investing in us,
because it will not permit us to offset potential losses from one venture
against gains from another.
The Company anticipates that the selection of a business combination will
be complex and extremely risky. Because of general economic conditions, rapid
technological advances being made in some industries and shortages of available
capital, our management believes that there are numerous firms seeking even the
limited additional capital which we will have and/or the perceived benefits of
becoming a publicly traded corporation. Such perceived benefits of becoming a
publicly traded corporation include, among other things, facilitating or
improving the terms on which additional equity financing may be obtained,
providing liquidity for the principals of and investors in a business, creating
a means for providing incentive stock options or similar benefits to key
employees, and offering greater flexibility in structuring acquisitions, joint
ventures and the like through the issuance of stock. Potentially available
business combinations may occur in many different industries and at various
stages of development, all of which will make the task of comparative
investigation and analysis of such business opportunities extremely difficult
and complex.
We do not currently intend to retain any entity to act as a "finder" or a
consultant to identify and/or analyze the merits of potential target businesses.
However, we may elect to do so in the future.
13
Going Concern
We currently have no source of operating revenue, and have only limited
working capital with which to pursue our business plan, which contemplates the
completion of a business combination with an operating company. The amount of
capital required to sustain operations until the successful completion of a
business combination is subject to future events and uncertainties. It may be
necessary for us to secure additional working capital through loans or sales of
common stock, and there can be no assurance that such funding will be available
in the future. These conditions raise substantial doubt about our ability to
continue as a going concern. Our auditor has issued a "going concern"
qualification as part of his opinion in the Audit Report for the year ended June
30, 2008.
Critical Accounting Policies
The preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States
requires estimates and assumptions that affect the reported amounts of assets
and liabilities, revenues and expenses and related disclosures of contingent
assets and liabilities in the financial statements and accompanying notes. The
SEC has defined a company's critical accounting policies as the ones that are
most important to the portrayal of the company's financial condition and results
of operations, and which require the company to make its most difficult and
subjective judgments, often as a result of the need to make estimates of matters
that are inherently uncertain. We believe that our estimates and assumptions are
reasonable under the circumstances; however, actual results may vary from these
estimates and assumptions. We have identified in Note 2 - "Summary of Accounting
Policies" to the Financial Statements contained in Part F/S of this document
certain critical accounting policies that affect the more significant judgments
and estimates used in the preparation of the financial statements.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or
are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources and would be
considered material to investors.
Item 3. Properties.
We maintain our principal executive office at 190 Lakeview Way, Vero Beach,
FL 32963 in the offices of Vero. The Company neither rents nor owns any
properties. The Company utilizes the office space and equipment of Vero, which
is owned and managed by Kevin R. Keating, our sole officer and director.
14
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding the Company's
common stock beneficially owned on September 15, 2008, for (i) each shareholder
the Company knows to be the beneficial owner of 5% or more of its outstanding
common stock, (ii) each of the Company's executive officers and directors, and
(iii) all executive officers and directors as a group. In general, a person is
deemed to be a "beneficial owner" of a security if that person has or shares the
power to vote or direct the voting of such security, or the power to dispose or
to direct the disposition of such security. A person is also deemed to be a
beneficial owner of any securities of which the person has the right to acquire
beneficial ownership within 60 days. To the best of the Company's knowledge, all
persons named have sole voting and investment power with respect to such shares,
except as otherwise noted. At September 15, 2008, 24,857,647 shares of the
Company's common stock were outstanding.
Number of Shares
Name and Address Beneficially Owned Percent of Shares
---------------- ------------------ -----------------
Kevin R. Keating 16,630,000 66.90%
190 Lakeview Way
Vero Beach, Florida 32963
Frederic M. Schweiger (1) 7,200,000 28.96%
2395 Woodglen Drive
Aurora, Illinois 60502
Lionsridge Capital, LLC 5,000,000 20.11%
c/o Frederic M. Schweiger
2395 Woodglen Drive
Aurora, Illinois 60502
Garisch Financial, Inc. 2,200,000 8.85%
c/o Frederic M. Schweiger
2395 Woodglen Drive
Aurora, Illinois 60502
All Executive Officers and Directors 16,630,000 66.90%
as a group
(1) Represents 2,200,000 shares of common stock held directly by Garisch
Financial, Inc. over which Frederic M. Schweiger has voting and investment
control and therefore may be deemed a beneficial owner of such shares.
Represents 5,000,000 shares of common stock held directly by Lionsridge Capital,
LLC over which Frederic M. Schweiger has voting and investment control and
therefore may be deemed a beneficial owner of such shares.
15
Item 5. Directors and Executive Officers.
Directors and Executive Officers
Our sole officer and director and additional information concerning him is
as follows:
Name Age Position
- ---------------- ------------ -------------------------------------------
Kevin R. Keating 68 Chief Executive Officer, Chief Financial
Officer, President, Secretary and Treasurer
and Director
The term of office of each director expires at our annual meeting of
stockholders or until their successors are duly elected and qualified. Except as
set forth in Item 6 of this Registration Statement, the Directors are not
compensated for serving as such. Officers serve at the discretion of the Board
of Directors.
Kevin R. Keating has served as a director of the Company since November 15,
2007. Mr. Keating was appointed Chief Executive Officer, Chief Financial
Officer, President, Secretary and Treasurer effective November 16, 2007. Mr.
Keating is the Managing Member of Vero Management, LLC, which provides
managerial, administrative, and financial consulting services for micro-cap
public companies.
For more than 40 years he has been engaged in various aspects of the
investment business. Mr. Keating began his Wall Street career with the First
Boston Corporation in New York in 1965. From 1967 through 1974, he was employed
by several institutional research boutiques where he functioned as Vice
President Institutional Equity Sales. From 1974 until 1982, Mr. Keating was the
President and Chief Executive Officer of Douglas Stewart, Inc., a New York Stock
Exchange member firm. From 1982 through 2006, he was associated with a variety
of securities firms as a registered representative servicing the investment
needs of high net worth individual investors.
Additionally, Mr. Keating currently serves as director of the following
public companies: Blue Holdings, Inc. and DigitalFX International, Inc. Also, he
is the sole officer and director of Wentworth IV, Inc., Wentworth V, Inc.,
Wentworth VI, Inc., Wentworth VII, Inc., and Wentworth VIII, Inc., all of which
are publicly-reporting, non-trading, blank check, shell companies.
Mr. Keating serves as the sole officer and a director of Frezer, Inc. and
of Catalyst Lighting Group, Inc., each of which are public shell companies which
trade on the Over-the-Counter Bulletin Board under the symbols "FRZR" and
"CYSU", respectively.
16
The prior blank check company experience of Mr. Keating is set forth below:
Filing Date
Registration SEC File Pending Business
Name Statement Operating Status Number Combinations Additional Information
- -------------------- ----------------- ------------------------------ -------------- ------------------- ------------------------
AeroGrow March 7, 2006 Wentworth I, Inc. was a Rule 000-50888 None. Kevin R. Keating
International, 419 Blank Check company and served as officer,
Inc. (formerly completed a merger with and director and
Wentworth I, Inc.) into AeroGrow International shareholder since
Inc. on February 24, 2006. inception. Upon the
merger with AeroGrow
International, Inc.,
Mr. Keating ceased to
be an officer or
director. Mr. Keating
remains a shareholder.
- -------------------- ----------------- ------------------------------ -------------- ------------------- ------------------------
Wentworth II, Inc. June 9, 2006 Wentworth II, Inc. became a 000-52040 None. Kevin R. Keating
reporting company effective served as sole officer
August 10, 2006 and and director since
completed a merger with inception. Mr.
Omnia Luo Group Limited on Keating ceased to be
October 9, 2007. an officer or director
on October 9, 2007.
Mr. Keating remains a
shareholder.
- -------------------- ----------------- ------------------------------ -------------- ------------------- ------------------------
Catalyst Lighting December 13, Wentworth III, Inc. was a 333-75044 None. Kevin R. Keating
Group, Inc. 2001 Rule 419 Blank Check company served as director and
(formerly and was acquired by Catalyst shareholder from April
Wentworth III, Lighting Group, Inc. in 2001 until the
Inc.) August 2003. Catalyst present. He currently
Lighting Group, Inc. is also the sole
deregistered on December 27, officer.
2005 and subsequently filed
a Form 10 to become a
reporting company, which
became effective February 6,
2008.
- -------------------- ----------------- ------------------------------ -------------- ------------------- ------------------------
Wentworth IV, Inc. August 17, 2006 Effective October 16, 2006. 000-52189 None. Kevin R. Keating has
served as sole officer
and director since
inception.
- -------------------- ----------------- ------------------------------ -------------- ------------------- ------------------------
Wentworth V, Inc. August 17, 2006 Effective October 16, 2006. 000-52190 None. Kevin R. Keating has
served as sole officer
and director since
inception.
- -------------------- ----------------- ------------------------------ -------------- ------------------- ------------------------
Wentworth VI, Inc. September 20, Effective November 19, 2007. 000-52821 None. Kevin R. Keating has
2007 served as sole officer
and director since
inception.
- -------------------- ----------------- ------------------------------ -------------- ------------------- ------------------------
Wentworth VII, Inc. September 20, Effective November 19, 2007. 000-52820 None. Kevin R. Keating has
2007 served as sole officer
and director since
inception.
- -------------------- ----------------- ------------------------------ -------------- ------------------- ------------------------
Wentworth VIII, September 20, Effective November 19, 2007. 000-52819 None. Kevin R. Keating has
Inc. 2007 served as sole officer
and director since
inception.
- -------------------- ----------------- ------------------------------ -------------- ------------------- ------------------------
17
Audit Committee and Audit Committee Financial Expert
The Company is not a "listed company" under SEC rules and is therefore not
required to have an audit committee comprised of independent directors. The
Company does not currently have an audit committee, however, for certain
purposes of the rules and regulations of the SEC and in accordance with the
Sarbanes-Oxley Act of 2002, the Company's board of directors is deemed to be its
audit committee and as such functions as an audit committee and performs some of
the same functions as an audit committee including: (1) selection and oversight
of the Company's independent accountant; (2) establishing procedures for the
receipt, retention and treatment of complaints regarding accounting, internal
controls and auditing matters; and (3) engaging outside advisors. The Company's
board of directors has determined that its members do not include a person who
is an "audit committee financial expert" within the meaning of the rules and
regulations of the SEC. The board of directors has determined that each of its
members is able to read and understand fundamental financial statements and has
substantial business experience that results in that member's financial
sophistication. Accordingly, the board of directors believes that each of its
members have the sufficient knowledge and experience necessary to fulfill the
duties and obligations that an audit committee would have.
Code of Ethics
A code of ethics relates to written standards that are reasonably designed
to deter wrongdoing and to promote:
o Honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
o Full, fair, accurate, timely and understandable disclosure in reports
and documents that are filed with, or submitted to, the SEC and in
other public communications made by an issuer;
o Compliance with applicable governmental laws, rules and regulations;
o The prompt internal reporting of violations of the code to an
appropriate person or persons identified in the code; and
o Accountability for adherence to the code.
Due to the limited scope of the Company's current operations, the Company
has not adopted a corporate code of ethics that applies to its executive
officers.
Conflicts of Interest
Certain conflicts of interest exist and may continue to exist between the
Company and its officers and directors due to the fact that each has other
business interests to which they devote their primary attention. Each officer
and director may continue to do so notwithstanding the fact that management time
should be devoted to the business of the Company.
Certain conflicts of interest may exist between the Company and its
management, and conflicts may develop in the future. The Company has not
established policies or procedures for the resolution of current or potential
conflicts of interest between the Company, its officers and directors or
18
affiliated entities. There can be no assurance that management will resolve all
conflicts of interest in favor of the Company, and conflicts of interest may
arise that can be resolved only through the exercise by management their best
judgment as may be consistent with their fiduciary duties. Management will try
to resolve conflicts to the best advantage of all concerned.
Board Meetings; Nominating and Compensation Committees
The Board of Directors took a number of actions by written consent of all
of the directors during the fiscal year ended June 30, 2008. Such actions by the
written consent of all directors are, according to Nevada corporate law and the
Company's bylaws, as valid and effective as if they had been passed at a meeting
of the directors duly called and held. The Company's directors and officers do
not receive remuneration from the Company unless approved by the Board of
Directors or pursuant to an employment contract. No compensation has been paid
to the Company's directors for attendance at any meetings during the last fiscal
year.
The Company does not have standing nominating or compensation committees,
or committees performing similar functions. The Company's board of directors
believes that it is not necessary to have a compensation committee at this time
because the functions of such committee are adequately performed by the board of
directors. The board of directors also is of the view that it is appropriate for
the Company not to have a standing nominating committee because the board of
directors has performed and will perform adequately the functions of a
nominating committee. The Company is not a "listed company" under SEC rules and
is therefore not required to have a compensation committee or a nominating
committee.
Shareholder Communications
There has not been any defined policy or procedure requirements for
stockholders to submit recommendations or nomination for directors. The board of
directors does not believe that a defined policy with regard to the
consideration of candidates recommended by stockholders is necessary at this
time because it believes that, given the limited scope of the Company's
operations, a specific nominating policy would be premature and of little
assistance until the Company's business operations are at a more advanced level.
There are no specific, minimum qualifications that the board of directors
believes must be met by a candidate recommended by the board of directors.
Currently, the entire board of directors decides on nominees, on the
recommendation of any member of the board of directors followed by the board's
review of the candidates' resumes and interview of candidates. Based on the
information gathered, the board of directors then makes a decision on whether to
recommend the candidates as nominees for director. The Company does not pay any
fee to any third party or parties to identify or evaluate or assist in
identifying or evaluating potential nominee.
The Company does not have any restrictions on shareholder nominations under
its certificate of incorporation or bylaws. The only restrictions are those
applicable generally under Nevada corporate law and the federal proxy rules, to
the extent such rules are or become applicable. The board of directors will
consider suggestions from individual shareholders, subject to evaluation of the
person's merits. Stockholders may communicate nominee suggestions directly to
the board of directors, accompanied by biographical details and a statement of
support for the nominees. The suggested nominee must also provide a statement of
consent to being considered for nomination. There are no formal criteria for
nominees.
Because the management and directors of the Company are the same persons,
the Board of Directors has determined not to adopt a formal methodology for
communications from shareholders on the belief that any communication would be
brought to the board of directors' attention by virtue of the co-extensive
capacities served by Kevin R. Keating.
19
Indemnification
Under Nevada corporate law and pursuant to our restated articles of
incorporation and bylaws, the Company may indemnify its officers and directors
for various expenses and damages resulting from their acting in these
capacities. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to the Company's officers or directors pursuant
to the foregoing provisions, the Company has been informed that, in the opinion
of the SEC, this indemnification is against public policy as expressed in the
Securities Act, and is therefore unenforceable.
Item 6. Executive Compensation.
Compensation Discussion and Analysis
The Company currently is a shell company with nominal assets, no employees
and no active business operations. The Company's business plans are to identify
an operating company with which to merge or to complete a business combination
in a reverse merger transaction. As such, the Company currently has no formal
compensation program for its executive officers, directors or employees.
The Company is not a "listed company" under SEC rules and is therefore not
required to have a compensation committee. Accordingly, the Company has no
compensation committee.
Except as set forth in the summary compensation table below, during the
fiscal years ended June 30, 2007 and 2008, the Company has not provided any
salary, bonus, annual or long-term equity or non-equity based incentive
programs, health benefits, life insurance, tax-qualified savings plans, special
employee benefits or perquisites, supplemental life insurance benefits, pension
or other retirement benefits or any type of nonqualified deferred compensation
programs for its executive officers or employees.
On June 26, 2008, the Company issued Kevin R. Keating 630,000 shares of the
Company's common stock valued at $6,300 for consulting services provided by Mr.
Keating. Please see Item 7, Certain Relationships and Related Transactions, and
Director Independence, below for a full discussion of a certain agreement
between the Company and Vero Management, L.L.C., a limited liability company for
which Mr. Keating is the sole member and manager. Mr. Keating intends to devote
very limited time to our affairs.
It is possible that, after the Company successfully consummates a business
combination with an unaffiliated entity, that entity may desire to employ or
retain Mr. Keating for the purposes of providing services to the surviving
entity. However, the Company has adopted a policy whereby the offer of any
post-transaction employment or services to members of management will not be a
consideration in our decision whether to undertake any proposed transaction.
No retirement, pension, profit sharing, stock option or insurance programs
or other similar programs are currently in place for the benefit of the
Company's employees.
As of September 15, 2008, there were no outstanding shares of preferred
stock, no outstanding securities convertible into our common stock and no
outstanding options or warrants to acquire our common stock.
There are no understandings or agreements regarding compensation our
management will receive after a business combination that is required to be
included in this table, or otherwise.
20
Summary Compensation Table
The following table summarizes the total compensation paid to or earned by
each of the Company's named executive officers who served as executive officers
during all or a portion of the fiscal years ended June 30, 2007 and 2008.
- ---------------- -------- ---------- -------- ---------- ---------- ------------ ----------- ------------------ ----------------
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
- ---------------- -------- ---------- -------- ---------- ---------- ------------ ----------- ------------------ ----------------
Non-equity Non-qualified
Incentive Deferred
Name and Stock Option Plan Compensation All Other Total
Principal Bonus Salary Awards Awards Compensation Earnings Compensation Compensation
Position Year ($) ($) ($) ($) ($) ($) ($) ($)
- ---------------- -------- ---------- -------- ---------- ---------- ------------ ----------- ------------------ ----------------
Leon Leibovich 2008 $0 $0 $0 $0 $0 $0 $13,500 $13,500
(former CEO)(1) 2007 $0 $0 $0 $0 $0 $0 $42,000 $42,000
- ---------------- -------- ---------- -------- ---------- ---------- ------------ ----------- ------------------ ----------------
Kevin R. 2008 $0 $0 $6,300 $0 $0 $0 $0 $6,300
Keating (CEO, 2007 $0 $0 $0 $0 $0 $0 $0 $0
Pres., CFO,
Tres. and
Secry.)(2)
- ---------------- -------- ---------- -------- ---------- ---------- ------------ ----------- ------------------ ----------------
(1) Commencing July 1, 2004, the Company's Board of Directors approved a
consulting fee of $3,500 per month payable to its former director and Chief
Executive Officer, Leon Leibovich, for consulting services rendered to the
Company for financial and administrative matters and for assisting the Company
in identifying an operating company for a potential business combination. The
Company recorded expenses for these consulting services of $13,500 and $42,000
during the fiscal years ended June 30, 2008 and 2007, respectively. On November
14, 2007, the Company entered into a Settlement and Release Agreement with Leon
Leibovich, which provided for the partial payment of certain consulting fees
earned by Leon Leibovich for consulting services rendered to the Company from
July 2004 to October 2007. As part of the settlement of such consulting fees,
Leon Leibovich agreed to accept $68,542 in full and complete payment of $140,000
of unpaid consulting fees.
(2) On June 26, 2008, the Company issued Kevin R. Keating 630,000 shares of
the Company's common stock valued at $6,300 for consulting services provided by
Mr. Keating.
Employment and Other Agreements
The Company has no employment agreements or other agreements with any of
its executive officers. The Company currently has no employees.
Compensation of Directors
During the fiscal years ended June 30, 2007 and 2008, Messrs. Leibovich and
Keating did not receive separate compensation for their services as a director.
21
Item 7. Certain Relationships and Related Transactions, and Director
Independence.
Transactions with Management and Others
Commencing July 1, 2004, the Company's Board of Directors approved a
consulting fee of $3,500 per month payable to its former director and Chief
Executive Officer, Leon Leibovich, for consulting services rendered to the
Company for financial and administrative matters and for assisting the Company
in identifying an operating company for a potential business combination.
On November 14, 2007, we entered into a securities purchase agreement
("Purchase Agreement") with KIG Investors II, LLC ("KIG") pursuant to which KIG
agreed to purchase, subject to the satisfaction of certain conditions precedent,
newly issued shares of common stock from the Company for cash consideration.
Effective November 15, 2007, in accordance with the terms of the Purchase
Agreement, our then existing officers and directors resigned, and Kevin R.
Keating became our sole director. Kevin R. Keating appointed two additional
directors, Margie Blackwell and Jeff Andrews, to fill the vacancies on our board
of directors ("Board"). The Board then appointed Kevin R. Keating as our Chief
Executive Officer, Chief Financial Officer, President, Secretary and Treasurer.
Effective June 19, 2008, the Purchase Agreement was amended by the parties
and KIG thereafter assigned its rights thereunder to Kevin R. Keating and
Lionsridge. Pursuant to the amended Purchase Agreement, on June 25, 2008, we
issued 16,000,000 shares of common stock to Kevin R. Keating and 5,000,000
shares of common stock to Lionsridge. These shares were sold by us for an
aggregate purchase price of $210,000, or $0.01 per share.
On November 14, 2007, the Company entered into a Settlement and Release
Agreement with Leon Leibovich, which provided for the partial payment, at the
closing of the sale of shares by the Company under the Purchase Agreement, of
certain consulting fees earned by Leon Leibovich for consulting services
rendered to the Company from July 2004 to October 2007. As part of the
settlement of such consulting fees, Leon Leibovich agreed to accept $68,542 in
full and complete payment of $140,000 of unpaid consulting fees. As part of the
Settlement Agreement, Leon Leibovich also agreed to release the Company from all
claims and to indemnify the Company from any loss, cost or expense incurred by
the Company up to a maximum of $12,500 for a period of 4 months following the
closing of the sale of shares under the amended Purchase Agreement. In
accordance with the Settlement Agreement, the Company paid $56,042 to Leon
Leibovich at the closing of the sale of shares under the amended Purchase
Agreement and withheld $12,500 from the Settlement Amount payable to Leon
Leibovich, which withheld amount will be paid to Leon Leibovich at the end of
the 4-month period, subject to any claims for indemnity.
On May 5, 2008, the Company entered into a revolving loan agreement with
Vero Management, L.L.C. ("Vero"). Pursuant to this agreement, the Company
borrowed $10,500 from Vero on May 5, 2008. The Company was required to repay the
outstanding advances in full on or before June 30, 2008. The loan carried
interest at a rate of 6% per annum. The loan was used by the Company to pay
professional fees. Kevin R. Keating, the Company's Chief Executive Officer,
Chief Financial Officer, President, Secretary and Treasurer and a director is
the sole member and manager of Vero. The Company paid Vero $10,500 on or about
June 27, 2008 in full payment of the Vero loan. Vero waived any payment of
accrued interest on the loan.
On June 25, 2008, the Company issued 16,000,000 shares of common stock to
Kevin R. Keating, a director of the Company and the Company's sole officer, for
a purchase price of $160,000, or $0.01 per share. On June 26, 2008, the Company
issued 630,000 shares of common stock to Kevin R. Keating for consulting
services rendered to the Company, which services were valued at $6,300, or $0.01
per share.
On June 26, 2008, the Company issued 2,200,000 shares of common stock to
Garisch Financial, Inc. ("GFI"), a consulting firm controlled by Frederic M.
Schweiger, for consulting services rendered to the Company, which services were
valued at $22,000, or $0.01 per share. The payment of these shares for
22
consulting services was made pursuant to an agreement between the Company and
GFI. Mr. Schweiger also controls Lionsridge which purchased 5,000,000 shares of
common stock for $50,000 on June 25, 2008 pursuant to the amended Purchase
Agreement.
Effective July 1, 2008, the Company entered into a management agreement
("Management Agreement") with Vero under which Vero had agreed to provide a
broad range of managerial and administrative services to the Company including,
but not limited to, assistance in the preparation and maintenance of the
Company's financial books and records, the filing of various reports with the
appropriate regulatory agencies as are required by State and Federal rules and
regulations, the administration of matters relating to the Company's
shareholders including responding to various information requests from
shareholders as well as the preparation and distribution to shareholders of
relevant Company materials, and to provide office space, corporate identity,
telephone and fax services, mailing, postage and courier services for a fixed
fee of $3,000 per month, for an initial period of twelve months. The agreement
may be terminated by either party in writing during the initial twelve months.
At the end of the initial twelve month term, the agreement will continue to
remain in effect until terminated in writing by either party. Kevin R. Keating,
the Company's Chief Executive Officer, Chief Financial Officer, President,
Secretary and Treasurer and a director is the sole member and manager of Vero.
Item 8. Legal Proceedings.
We are not currently subject to any material legal proceedings, nor, to our
knowledge, is any material legal proceeding threatened against us. From time to
time, we may be a party to certain legal proceedings in the ordinary course of
business. While the outcome of these legal proceedings cannot be predicted with
certainty, we do not expect that these proceedings will have a material effect
upon our financial condition or results of operations.
The Company was named in a civil action filed in Nevada District Court,
Clark County on August 7, 2007 captioned Benchmark Capital, LLC vs. Forex365,
Inc., formerly known as Solar Group, Inc., Leon Leibovich and Does I-XV (the
"Benchmark Action"). The lawsuit alleged a number of causes of action related to
Benchmark's attempts to acquire a controlling interest in the Company from
certain stockholders ("Controlling Interest") during the period from April 2005
to May 2007. During this time period, Benchmark alleged it advanced monies to
the Company to pay certain expenses and costs of the Company. Benchmark alleged
certain other defendants breached a verbal agreement to sell it the Controlling
Interest. Generally, Benchmark demanded that the Company repay these advances in
and/or to issue its common stock to Benchmark in lieu of cash repayment of the
advances. Benchmark also sought specific performance to have the Controlling
Interest transferred to it. On November 1, 2007, the Company was advised that a
default judgment had been entered against the Company on October 31, 2007. The
default judgment provided that the Company pay Benchmark the sum of $41,670.88
plus interest at 10.25% per annum from August 7, 2007 until paid, plus costs of
$447.98 and attorney fees of $5,420. On January 8, 2008, the Court vacated the
default judgment against the Company. The Company timely filed its answer to
complaint. On March 10, 2008, Benchmark Capital, LLC ("Benchmark") agreed to
settle the Benchmark Action and to release the Company and other defendants from
all claims (including a $2,000 advance made in June 2006 by Benchmark to pay the
Company's corporate filing fees to the State of Nevada) in exchange for a cash
payment of $65,000 ("Benchmark Settlement Amount"). On June 25, 2008, the
Company paid the Benchmark Settlement Amount in full from the proceeds of the
sale of shares under the amended Purchase Agreement. On June 30, 2008, the
Benchmark Action was dismissed with prejudice.
Item 9. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.
Market Information
Our Common Stock traded on the Over-the-Counter Bulletin Board from January
4, 1999 through April 6, 2000 under the symbol "SLGK." From April 6, 2000
through the filing of this Registration Statement, we have traded on the Pink
23
Sheets. We initially traded on the Pink Sheets under the symbol "SLGK." On June
18, 2001, our symbol was changed to "SLRG." Effective August 28, 2008, our
symbol on the Pink Sheets was changed to "FRXT."
The table below sets forth the reported high and low bid prices for the
periods indicated. The bid prices shown reflect quotations between dealers,
without adjustment for markups, markdowns or commissions, and may not represent
actual transactions in our securities. Shares of our common stock are very
thinly traded, and the price if traded may be highly volatile and may not
reflect the value of the Company.
Per Share Common Stock Bid Prices by Quarter*
For the Fiscal Year Ended on June 30, 2007
- ------------------------------------------
High Low
---- ---
Quarter Ended September 30, 2006 $0.290 $0.160
Quarter Ended December 31, 2006 $0.350 $0.160
Quarter Ended March 31, 2007 $0.350 $0.170
Quarter Ended June 30, 2007 $0.200 $0.085
For the Fiscal Year Ended on June 30, 2008
- ------------------------------------------
High Low
---- ---
Quarter Ended September 30, 2007 $0.250 $0.085
Quarter Ended December 31, 2007 $0.160 $0.090
Quarter Ended March 31, 2008 $0.450 $0.130
Quarter Ended June 30, 2008 $0.450 $0.200
* Prices obtained from www.bigcharts.com, a service of Market Watch, Inc.
Holders
As of June 30, 2008, there were approximately 539 record holders of our
common stock and an unknown number of beneficial holders who held our common
stock in street name.
Dividends
The Company has not paid any cash dividends to date and does not anticipate
or contemplate paying dividends in the foreseeable future. It is the present
intention of management to utilize all available funds to complete a business
combination with an operating entity.
Penny Stock Regulations
Our securities are subject to the SEC's "penny stock" rules. The penny
stock rules may affect the ability of owners of our shares to sell them. There
may be a limited market for penny stocks due to the regulatory burdens on
broker-dealers. The market among dealers may not be active. Investments in penny
stocks often are unable to sell stock back to the dealer that sold them the
stock. The mark-ups or commissions charged by the broker-dealers might be
greater than any profit an investor may make. Because of large spreads that
market makers quote, investors may be unable to sell the stock immediately back
to the dealer at the same price the dealer sold the stock to the investor.
24
Our securities are also subject to the SEC's rule that imposes special
sales practice requirements upon broker-dealers that sell such securities to
other than established customers or accredited investors. For purposes of the
rule, the phrase "accredited investor" means, in general terms, institutions
with assets exceeding $5,000,000 or individuals having net worth in excess of
$1,000,000 or having an annual income that exceeds $200,000 (or that, combined
with a spouse's income, exceeds $300,000). For transactions covered by the rule,
the broker-dealer must make a special suitability determination for the
purchaser and receive the purchaser's written agreement to the transaction prior
to the sale. Consequently, the rule may affect the ability of purchasers of our
securities to buy or sell in any market.
Item 10. Recent Sales of Unregistered Securities.
On November 14, 2007, we entered into a securities purchase agreement
("Purchase Agreement") with KIG Investors II, LLC ("KIG") pursuant to which KIG
agreed to purchase, subject to the satisfaction of certain conditions precedent,
newly issued shares of common stock from the Company for cash consideration.
Effective June 19, 2008, the Purchase Agreement was amended by the parties and
KIG thereafter assigned its rights thereunder to Kevin R. Keating and
Lionsridge. Pursuant to the amended Purchase Agreement, on June 25, 2008, we
issued 16,000,000 shares of common stock to Kevin R. Keating and 5,000,000
shares of common stock to Lionsridge. These shares were sold by us for an
aggregate purchase price of $210,000, or $0.01 per share.
On June 26, 2008, the Company issued 630,000 shares of common stock to
Kevin R. Keating for consulting services rendered to the Company, which services
were valued at $6,300, or $0.01 per share.
On June 26, 2008, the Company issued 2,200,000 shares of common stock to
Garisch Financial, Inc. ("GFI"), a consulting firm controlled by Frederic M.
Schweiger, for consulting services rendered to the Company, which services were
valued at $22,000, or $0.01 per share. The payment of these shares for
consulting services was made pursuant to an agreement between the Company and
GFI.
In consideration of the above stock issuances, the Company granted certain
registration rights to the holders thereof.
In connection with the above stock issuance, we did not pay any
underwriting discounts or commissions. None of the sales of securities described
or referred to above was registered under the Securities Act. Each of the
purchasers fell into one or more of the categories that follow: an existing
shareholder, a creditor, a current or former officer or director, a service
provider, or an accredited investor with whom we or an affiliate of ours had a
prior business relationship. As a result, no general solicitation or advertising
was used in connection with the sales. In making the sales without registration
under the Securities Act, we relied upon one or more of the exemptions from
registration including those contained in Sections 4(2) of the Securities Act.
The purchasers represented in writing that they acquired the securities for
their own accounts. A legend was placed on the stock certificates stating that
the securities have not been registered under the Securities Act and cannot be
sold or otherwise transferred without an effective registration or an exemption
therefrom.
Item 11. Description of Registrant's Securities to be Registered.
The following description is based on relevant portions of the Nevada
General Corporation Law and on our charter and bylaws. This summary is not
necessarily complete, and we refer you to the Nevada General Corporation Law and
our charter and bylaws for a more detailed description of the provisions
summarized below.
Capital Stock
The Company is authorized by its articles of incorporation, as amended and
restated, to issue an aggregate of 210,000,000 shares of capital stock, of which
200,000,000 are shares of common stock, par value $0.001 per share (the "Common
Stock") and 10,000,000 are shares of preferred stock, par value $0.001 per share
(the "Preferred Stock").
25
As of September 15, 2008, there are 24,857,647 shares of common stock
outstanding. There are no outstanding shares of preferred stock, and there are
no outstanding options or warrants to purchase our stock. No stock has been
authorized for issuance under any equity compensation plans.
Common Stock
------------
All shares of our common stock have equal rights as to earnings, assets,
dividends and voting privileges and, when they are issued, will be duly
authorized, validly issued, fully paid and nonassessable. Distributions may be
paid to the holders of our common stock if, as and when authorized by our Board
of Directors and declared by us out of assets legally available therefor. Shares
of our common stock have no preemptive, conversion or redemption rights and are
freely transferable, except where their transfer is restricted by federal and
state securities laws or by contract. In the event of a liquidation, dissolution
or winding up of us, each share of our common stock would be entitled to share
ratably in all of our assets that are legally available for distribution after
we pay all debts and other liabilities and subject to any preferential rights of
holders of our preferred stock, if any preferred stock is outstanding at such
time. Each share of our common stock is entitled to one vote on all matters
submitted to a vote of stockholders, including the election of directors. Except
as provided with respect to any other class or series of stock, the holders of
our common stock will possess exclusive voting power. There is no cumulative
voting in the election of directors, which means that holders of a majority of
the outstanding shares of common stock will be able to elect all of our
directors, and holders of less than a majority of such shares will be unable to
elect any director.
Preferred Stock
---------------
Our articles of incorporation authorize the issuance of up to 10,000,000
shares of Preferred Stock with designations, rights and preferences determined
from time to time by our Board of Directors. Accordingly, our Board of Directors
is empowered, without stockholder approval, to issue Preferred Stock with
dividend, liquidation, conversion, voting, or other rights which could adversely
affect the voting power or other rights of the holders of the Common Stock. In
the event of issuance, the Preferred Stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although we have no present intention to issue any
shares of our authorized Preferred Stock, there can be no assurance that the
Company will not do so in the future.
Registration Rights
The Company granted certain registration rights to Kevin R. Keating,
Garisch Financial, Inc. and Lionsridge Capital, LLC in connection with the
issuance to each of them of shares of the Company's common stock, pursuant to
the terms and conditions contained in certain registration rights agreements
("Registration Rights Agreements"). The terms and conditions of the each of the
Registration Rights Agreements are substantially similar. The number of shares
subject to registration rights for each of the above holders is as follows:
Number of Shares Subject to
Stockholder Registration Rights
----------- -------------------
Kevin R. Keating 16,630,000
Lionsridge Capital, LLC 5,000,000
Garisch Financial, Inc. 2,200,000
Pursuant to the Registration Rights Agreements, commencing on the date that
is thirty (30) days after the date the Company completes a business combination
with a private company in a reverse merger or reverse take-over transaction (a
26
"Reverse Merger"), the stockholders shall each have a separate one-time right to
request the Company to register for resale the shares of Common Stock held by
such persons. The Company is required to cause the registration statement filed
as a result of such requests to be declared effective under the Securities Act
as promptly as possible after the filing thereof and shall keep the demand
registration statement continuously effective under the Securities Act until the
earlier of (i) two years after its effective date, (ii) such time as all of the
shares of Common Stock covered by such registration statement have been publicly
sold by the stockholders, or (iii) such time as all of the shares of Common
Stock covered by such registration statement may be sold by the stockholders
pursuant to Rule 144. Further, if all of the shares of Common Stock to be
included in the registration statement filed cannot be so included due to
certain comments from the SEC, and there is not an effective registration
statement otherwise covering the shares of Common Stock, then the Company is
obligated to prepare and file such registration statement(s) for such number of
additional registration statements as may be necessary in order to ensure that
all shares of Common Stock are covered by an existing and effective registration
statement.
Additionally, the Registration Rights Agreement provides the stockholders
with "piggyback" registration rights such that at any time there is not an
effective registration statement covering the shares of Common Stock, and the
Company files a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company is required to send written notice to the
stockholders of such intended filings at least twenty (20) days prior thereto
and is required to automatically include in such registration statement all
shares of Common Stock held by the stockholders for resale and offer on a
continuous basis pursuant to Rule 415; provided, however, that (i) if, at any
time after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company determines for any reason not to proceed
with such registration, the Company will be relieved of its obligation to
register any shares of Common Stock in connection with such registration, (ii)
in case of a determination by the Company to delay registration of its
securities, the Company will be permitted to delay the registration of shares of
Common Stock for the same period as the delay in registering such other
securities, (iii) each stockholder is subject to confidentiality obligations
with respect to any information gained in this process or any other material
non-public information he, she or it obtains, (iv) each stockholder is subject
to all applicable laws relating to insider trading or similar restrictions; and
(v) if all of the shares of Common Stock of the stockholders cannot be so
included due to certain comments from the SEC, then the Company may reduce the
number of each stockholders' shares of Common Stock covered by such registration
statement to the maximum number which would enable the Company to conduct such
offering in accordance with the provisions of Rule 415.
The stockholders shall be entitled to include all shares of Common Stock
for resale in the registration statement filed by the Company in connection with
a public offering of equity securities by the Company, pursuant to Rule 415, so
long as (1) such shares shall not be included as part of the underwritten
offering of primary shares by the Company, unless the Company and underwriter
agree to allow the inclusion of such shares of Common Stock as part of the
underwritten offering and, in such event, the stockholders elect to include the
shares of Common Stock in the underwriting subject to an allocation among all
stockholders of registration rights in the manner set forth in the Registration
Rights Agreement, (2) the underwriter approves the inclusion of such shares of
Common Stock in such registration statement, subject to customary underwriter
cutbacks applicable to all stockholders of registration rights, (3) the
stockholders shall enter into the underwriters' form of lockup agreement as and
to the extent requested by the underwriters, which may require that all of the
shares of Common Stock held by the stockholders not be sold or otherwise
transferred without the consent of the underwriters for a period not to exceed
180 days from the closing of the offering contemplated by the registration
statement, and (4) if all of the shares of Common Stock of the stockholders
cannot be so included due to certain comments from the SEC, then the Company may
reduce the number of each stockholders' shares of Common Stock covered by such
registration statement to the maximum number which would enable the Company to
conduct such offering in accordance with the provisions of Rule 415.
27
The Registration Rights Agreement contains a cut-back provision, whereby,
in the event all of the all of the shares of Common Stock held by the
stockholders cannot be included in a registration statement due to certain
comments by the SEC or underwriter cutbacks, then the Company, unless otherwise
prohibited by the SEC, shall cause the shares of Common Stock of the
stockholders to be included in such registration statement to be reduced pro
rata based on the number of shares of Common Stock held by all holders of
registration rights as of the date preceding the Reverse Merger.
The registration rights afforded to the stockholders shall terminate on the
earliest date when all shares of Common Stock of the stockholders either: (i)
have been publicly sold by the stockholders pursuant to a registration
statement, (ii) have been covered by an effective registration statement which
has been effective for an aggregate period of twelve (12) months (whether or not
consecutive), or (iii) may be sold by the stockholders pursuant to Rule 144
without regard to the volume limitations for sales as provided in that
regulation, as determined by the counsel to the Company pursuant to a written
opinion letter to such effect, addressed and acceptable to the Company's
transfer agent and the affected stockholders.
Each stockholder shall also indemnify the Company, each of its directors,
each of its officers who signs the Registration Statement and each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act against damages arising out of or based upon: (i) such
stockholder's provision of any untrue or alleged untrue statement of a material
fact to be contained in any registration statement or prospectus or in
connection with the qualification of the offering under the securities or other
"blue sky" laws of any jurisdiction, or arising out of or relating to any such
stockholder's omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements contained in such
registration statement or prospectus not misleading or (ii) such stockholder's
violation or alleged violation by the Company of the Securities Act or the
Exchange Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
shares of Common Stock pursuant to a registration statement or (iii) such
stockholder's violation of the Registration Rights Agreement.
Item 12. Indemnification of Directors and Officers
Section 78.7502 of the Nevada General Corporation Law ("NGCL") provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the corporation, by reason of the fact
that he is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding if he: (i) is not liable pursuant
to Section 78.138 of the NGCL; or (ii) acted in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person is liable pursuant to Section 78.138 of the NGCL or
did not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the corporation, or that, with respect
to any criminal action or proceeding, he had reasonable cause to believe that
his conduct was unlawful.
Section 78.7502 of the NGCL further provides that a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses, including amounts paid in settlement and attorneys'
fees actually and reasonably incurred by him in connection with the defense or
28
settlement of the action or suit if he: (i) is not liable pursuant to Section
78.138 of the NGCL; or (ii) acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter as
to which such a person has been adjudged by a court of competent jurisdiction,
after exhaustion of all appeals therefrom, to be liable to the corporation or
for amounts paid in settlement to the corporation, unless and only to the extent
that the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for such expenses as the court deems proper.
Section 78.7502 of the NGCL provides, to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in the
preceding paragraphs, or in defense of any claim, issue or matter therein, the
corporation shall indemnify him against expenses, including attorneys' fees,
actually and reasonably incurred by him in connection with the defense.
Section 78.138 of the NGCL provides that a director or officer is not
individually liable to the corporation or its stockholders or creditors for any
damages as a result of any act or failure to act in his capacity as a director
or officer unless it is proven that: (i) his act or failure to act constituted a
breach of his fiduciary duties as a director or officer; and (ii) his breach of
those duties involved intentional misconduct, fraud or a knowing violation of
law.
The Company's Articles of Incorporation provides that, to the fullest
extent permitted by applicable law, none of our directors will be personally
liable to us or our stockholders for monetary damages for breach of fiduciary
duty as a director. Any repeal or modification of this provision will be
prospective only and will not adversely affect any limitation, right or
protection of a director of our company existing at the time of such repeal or
modification. The Company's Articles of Incorporation further provide that the
Company shall, to the full extent permitted by Section 78.7502 of the NGCL,
indemnity each person that such Section grants the Company the power to
indemnify.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to the Company's officers or directors pursuant to the
foregoing provisions, the Company has been informed that, in the opinion of the
SEC, this indemnification is against public policy as expressed in the
Securities Act, and is therefore unenforceable.
Item 13. Financial Statements and Supplementary Data.
Our audited financial statements for the twelve months ended June 30, 2007
and 2008 are included in Item 15.
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
On July 2, 2008, the Company engaged Chisholm, Bierwolf & Nilson, LLC
("CBN") as its independent registered public accounting firm for the fiscal
years ended June 30, 2007 and 2008.
29
Item 15. Financial Statements and Exhibits.
This Space Left Intentionally Blank
30
Forex365, Inc.
(formerly known as Solar Group, Inc.)
Financial Statements
For the Twelve Months Ended June 30, 2007 and 2008
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm........................2
Balance Sheets - As of June 30, 2008 and 2007..................................3
Statements of Operations - For the Twelve Months Ended June 30, 2008
and 2007......................................................................4
Statements of Stockholders' Equity (Deficit) - For the Period July 1,
2006 through June 30, 2008....................................................5
Statements of Cash Flows - For the Twelve Months Ended June 30, 2008
and 2007......................................................................6
Notes to Financial Statements..................................................7
-1-
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and shareholders
Forex 365, Inc.
Vero Beach, FL
We have audited the accompanying balance sheet of Forex 365, Inc. (the Company)
as of June 30, 2008, and the related statements of operations, stockholders'
deficit and cash flows for the years ended June 30, 2008 and 2007. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the PCAOB (United
States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to
perform, audits of its internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Forex 365, Inc. as of June 30,
2008, and the results of their operations and their cash flows for the years
ended June 30,2008 and 2007, in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has a working capital deficit and has suffered recurring
operating losses, which raises substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
/s/ Chisholm, Bierwolf & Nilson LLC
Chisholm, Bierwolf & Nilson LLC
Bountiful, Utah
July 28, 2008
-2-
FOREX365, INC.
(formerly known as Solar Group, Inc.)
BALANCE SHEETS
June 30, 2008 June 30, 2007
------------ -------------
ASSETS
Current Assets:
Cash $ 21,429 $ --
----------- -----------
Total current assets 21,429 --
----------- -----------
Total assets $ 21,429 $ --
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable - related parties 12,500 126,000
Advances -- 2,000
Litigation obligation -- 63,000
Other accrued liabilities and payables 265 54,700
----------- -----------
Total current liabilities 12,765 245,700
----------- -----------
Stockholders' equity (deficit):
Preferred stock - $.01 par value; authorized 1,000,000 shares, none issued -- --
Common stock - $.01 par value; authorized 50,000,000 shares,
24,857,647 and 1,027,647 shares issued and outstanding, respectively 248,576 10,276
Additional paid-in capital 1,667,597 1,667,597
Accumulated deficit (1,907,509) (1,923,573)
----------- -----------
Total stockholders' equity (deficit) 8,664 (245,700)
----------- -----------
Total liabilities and stockholders' equity (deficit) $ 21,429 $ --
=========== ===========
The accompanying notes are an integral part of these financial statements.
-3-
FOREX365, INC.
(formerly known as Solar Group, Inc.)
STATEMENTS OF OPERATIONS
For the Twelve Months Ended June 30
-----------------------------------
2008 2007
----------- -----------
Revenues $ -- $ --
General and administrative expenses 55,394 74,100
----------- -----------
Income (loss) from operations (55,394) (74,100)
Other income (expense):
Litigation loss -- (63,000)
Income on discharge of indebtedness 71,731 --
Interest expense (273) --
----------- -----------
Income (loss) before provision for income taxes 16,064 (137,100)
Income tax expense -- --
----------- -----------
Net income (loss) $ 16,064 $ (137,100)
=========== ===========
Net income (loss) per common share:
Basic $ 0.01 ($ 0.13)
=========== ===========
Diluted $ 0.01 ($ 0.13)
=========== ===========
Weighted average number of shares outstanding:
Basic 1,403,866 1,027,647
=========== ===========
Diluted 1,403,866 1,027,647
=========== ===========
The accompanying notes are an integral part of these financial statements.
-4-
FOREX365, INC.
(formerly known as Solar Group, Inc.)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD JULY 1, 2006 THROUGH JUNE 30, 2008
Preferred Stock Common Stock Additional Stockholders'
------------------- ------------------------- Paid-In Accumulated Equity
Shares Amount Shares Amount Capital Deficit (Deficit)
-------- -------- ----------- ----------- ----------- ----------- -----------
Balance June 30, 2006 -- $ -- 1,027,647 $ 10,276 $ 1,667,597 $(1,786,473) $ (108,600)
Net loss -- -- -- -- -- (137,100) (137,100)
-------- -------- ----------- ----------- ----------- ----------- -----------
Balance June 30, 2007 -- -- 1,027,647 10,276 1,667,597 (1,923,573) (245,700)
Issuance of common stock for cash -- -- 21,000,000 210,000 -- -- 210,000
Issuance of common stock for services -- -- 2,830,000 28,300 -- -- 28,300
Net income -- -- -- -- -- 16,064 16,064
-------- -------- ----------- ----------- ----------- ----------- -----------
Balance June 30, 2008 -- $ -- 24,857,647 $ 248,576 $ 1,667,597 $(1,907,509) $ 8,664
======== ======== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
-5-
FOREX365, INC.
(formerly known as Solar Group, Inc.)
STATEMENTS OF CASH FLOWS
For the Twelve For the Twelve
Months Ended Months Ended
June 30, June 30,
2008 2007
--------- ---------
Cash Flows from Operating Activities:
Net income (loss) $ 16,064 $(137,100)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Income on discharge of indebtedness (71,731) --
Common stock issued for services 28,300 --
Change in operating assets and liabilities:
Litigation obligation (63,000) 63,000
Accounts payable - related parties (42,042) 42,000
Accrued liabilities (54,162) 32,100
--------- ---------
Net cash used in operating activities (186,571) --
--------- ---------
Cash Flows from Investing Activities:
--------- ---------
Net cash provided by (used in) investing activities -- --
--------- ---------
Cash Flows from Financing Activities:
Payments on advances (2,000) --
Common stock issuance for cash 210,000 --
--------- ---------
Net cash provided by (used in) financing activities 208,000 --
--------- ---------
Net Change in Cash 21,429 --
Cash, at beginning of period -- --
--------- ---------
Cash, at end of period $ 21,429 $ --
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest $ -- $ --
========= =========
Cash paid during the year for taxes $ -- $ --
========= =========
The accompanying notes are an integral part of these financial statements.
-6-
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION:
---------------------------------------
Organization and Business
Forex365, Inc. (the "Company") was incorporated under the laws of the State
of Nevada on February 8, 1984 under the name Solar Age Industries, Inc. The
Company's principal business activity was the manufacture and sale of solar
air and water heating devices. As of January 1986, the federal energy credits
and most state energy credits expired which severely impacted on the
Company's ability to market its products, resulting in a substantial loss to
the Company for the first two calendar quarters of 1986. The Company
attempted to diversify its operation, but because of the continuing
substantial financial loses sustained by the Company, it was forced to file a
Chapter 11 petition under the Bankruptcy Code District of New Mexico. In late
1987, the Company filed its plan of reorganization, which was approved by the
Bankruptcy Court. Following distribution to its creditors under the terms of
the plan and consummation of the plan, the bankruptcy case was subsequently
closed. Although the Company continued to market its products, the Company
did not attain the commercial success for its products and, subsequently,
ceased operations.
In July 1998, pursuant to an Agreement and Plan of Reorganization and, as a
result of a reverse merger, the Company acquired through its wholly owned
subsidiary, SGI Capital, Inc., an Illinois corporation, a ninety percent
interest in JSC NBM Stroyservice ("NBM"), Russian limited liability company,
which was a real estate development and construction company based in Moscow,
Russia. Shortly after the merger, the Company was unable to develop its
operations, due to deteriorating economic conditions in Russia and the
inability of NBM to provide audited financial statements for the fiscal year
ended as of June 30, 1999 in accordance with the U.S. General Accepted
Accounting Principles, and the Company was forced to rescind the Agreement
and Plan of Reorganization.
Effective November 15, 2007, the then existing officers and directors of the
Company resigned, and Kevin R. Keating became the sole director. Kevin R.
Keating appointed two additional directors to fill the vacancies on the
Company's board of directors ("Board"). The Board then appointed Kevin R.
Keating as the Chief Executive Officer, Chief Financial Officer, President,
Secretary and Treasurer of the Company.
On June 25, 2008, the Company issued an aggregate of 21,000,000 shares of
common stock (the "Shares") to Kevin R. Keating and an investor controlled by
Fredric M. Schweiger ("Investor"). The Shares were sold by the Company for an
aggregate purchase price of $210,000, or $0.01 per share. The Shares have
certain registration rights. Immediately following the issuance of the
Shares, Kevin R. Keating and the Investor owned approximately 95.3% of the
Company's outstanding common stock. The proceeds from the sale of the Shares
were used by the Company to pay certain liabilities and obligations of the
Company.
The Company currently has no operations but is seeking to acquire an ongoing
business. The Company's principal business objective for the next 12 months
and beyond such time will be to achieve long-term growth potential through a
-7-
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
combination with an operating business rather than immediate, short-term
earnings. The Company will not restrict its potential candidate target
companies to any specific business, industry or geographical location and,
thus, may acquire any type of business. No assurance can be given that the
Company will ever complete a business combination with an operating company.
Basis of Presentation
The accompanying financial statements include the accounts of the Company.
The Company has no subsidiaries.
Going Concern
Since inception, the Company had a cumulative net loss of $1,907,509 and
$1,923,573 as of June 30, 2008 and June 30, 2007, respectively. Since
inception, the Company has been dependent upon the receipt of capital
investment or other financing to fund its operations. The Company currently
has no source of operating revenue, and has only limited working capital with
which to pursue its business plan, which contemplates the completion of a
business combination with an operating company. The amount of capital
required to sustain operations until the successful completion of a business
combination is subject to future events and uncertainties. It may be
necessary for the Company to secure additional working capital through loans
or sales of common stock, and there can be no assurance that such funding
will be available in the future. These conditions raise substantial doubt
about the Company's ability to continue as a going concern.
The accompanying financial statements have been presented on the basis of the
continuation of the Company as a going concern and do not include any
adjustments relating to the recoverability and classification of recorded
asset amounts or the amounts and classifications of liabilities that might be
necessary should the Company be unable to continue as a going concern.
2. SUMMARY OF ACCOUNTING POLICIES:
-------------------------------
Income Taxes
The Company accounts for income taxes in accordance with the Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes, which
requires the recognition of deferred tax liabilities and assets at currently
enacted tax rates for the expected future tax consequences of events that
have been included in the financial statements or tax returns. A valuation
allowance is recognized to reduce the net deferred tax asset to an amount
that is more likely than not to be realized.
Use of Estimates
In preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from these
estimates.
-8-
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less to be cash
equivalents. There were no cash equivalents at June 30, 2008 or June 30,
2007.
Fair Value of Financial Instruments
The estimated fair values for financial instruments are determined at
discrete points in time based on relevant market information. These estimates
involve uncertainties and cannot be determined with precision. The carrying
amounts of accounts payable and accrued liabilities approximate fair value
because of the short-term maturities of these instruments.
Stock Compensation for Services Rendered
The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS No. 123R and Emerging Issues Task
Force ("EITF") Issue No. 96-18, "Accounting for Equity Instruments That Are
Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
Goods or Services." All transactions in which goods or services are the
consideration received for the issuance of equity instruments are accounted
for based on the fair value of the consideration received or the fair value
of the equity instrument issued, whichever is more reliably measurable. The
measurement date of the fair value of the equity instrument issued is the
earlier of the date on which the counterparty's performance is complete or
the date on which it is probable that performance will occur. The Company had
no common stock options or warrants outstanding at June 30, 2008 and 2007.
Revenue Recognition
The Company recognizes revenue in accordance with SEC Staff Accounting
Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB 101"), as
amended by SAB 101A and 101B. SAB 101 requires that four basic criteria must
be met before revenue can be recognized: (1) persuasive evidence of an
arrangement exists; (2) delivery has occurred or services rendered; (3) the
fee is fixed and determinable; and (4) collectibility is reasonably assured.
The Company had no operations and no revenue for the years ended June 30,
2008 and June 30, 2007.
Earnings (Loss) per Share
Basic earnings per (loss) share (EPS) is calculated by dividing the income or
loss available to common shareholders by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue common
stock were exercised or converted into common stock. Since there are no
potentially dilutive securities for the years ended June 30, 2008 and 2007,
dilutive EPS calculations are not included.
Recent Pronouncements
In September 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 157, Fair Value Measurements
("FAS 157"). The purpose of FAS 157 is to provide users of financial
statements with better information about the extent to which fair value is
-9-
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
used to measure recognized assets and liabilities, the inputs used to develop
the measurements, and the effect of certain of the measurements on earnings
for the period. FAS 157 also provides guidance on the definition of fair
value, the methods used to measure fair value, and the expanded disclosures
about fair value measurements. This changes the definition of fair value to
be the price that would be received to sell an asset or paid to transfer a
liability, an exit price, as opposed to the price that would be paid to
acquire the asset or received to assume the liability, an entry price. FAS
157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods with those fiscal years (e.g.,
January 1, 2008, for calendar year-end entities).
In February 2007, the FASB issued Statement of Financial Accounting Standards
No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities, including an amendment of FASB Statement No. 115 ("FAS 159").
FAS 159 permits companies to choose to measure many financial instruments and
certain other items at fair value that are not currently required to be
measured at fair value and establishes presentation and disclosure
requirements designed to facilitate comparisons between companies that choose
different measurement attributes for similar types of assets and liabilities.
The provisions of FAS 159 will become effective as of the beginning of our
2009 fiscal year.
In December 2007, the FASB issued Statement of Financial Accounting Standards
No. 141(R), Business Combinations ("FAS 141(R)"). FAS 141(R) establishes
principles and requirements for how an acquirer recognizes and measures in
its financial statements the identifiable assets acquired, the liabilities
assumed, and any non-controlling interest in the acquiree and recognizes and
measures the goodwill acquired in the business combination or a gain from a
bargain purchase. FAS 141(R) also sets forth the disclosures required to be
made in the financial statements to evaluate the nature and financial effects
of the business combination. FAS 141(R) applies prospectively to business
combinations for which the acquisition date is on or after the beginning of
the first annual reporting period beginning on or after December 15, 2008.
The provisions of FAS 141(R) will become effective as of the beginning of our
2009 fiscal year.
In December 2007, the FASB issued Statement of Financial Accounting Standards
No. 160, Non-controlling Interests in Consolidated Financial Statements, an
amendment of ARB No. 51 ("FAS 160"). FAS 160 will change the accounting and
reporting for minority interests, which will be recharacterized as
non-controlling interests (NCI) and classified as a component of equity. This
new consolidation method will significantly change the accounting for
transactions with minority interest holders. FAS 160 requires retroactive
adoption of the presentation and disclosure requirements for existing
minority interests. All other requirements of FAS 160 shall be applied
prospectively. FAS 160 is effective for fiscal years beginning after December
15, 2008 and, as such, the Company will adopt this standard in fiscal 2009.
In March 2008, the FASB issued Statement of Financial Accounting Standards
No. 161, Disclosures about Derivative Instruments and Hedging Activities
("FAS 161"). FAS 161 is intended to improve financial reporting about
-10-
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
derivative instruments and hedging activities by requiring enhanced
disclosures to enable investors to better understand their effects on an
entity's financial position, financial performance, and cash flows. The
provisions of FAS 161 are effective for the quarter ending March 31, 2009.
The adoption of these new Statements is not expected to have a material
effect on the Company's financial position, results of operations, or cash
flows.
3. STOCKHOLDERS' EQUITY:
---------------------
As of June 30, 2007, the Company had 1,027,647 shares of common stock, $0.01
par value per share, outstanding.
On June 25, 2008, the Company issued 16,000,000 shares of common stock to
Kevin R. Keating, a director of the Company and the Company's sole officer,
for a purchase price of $160,000, or $0.01 per share.
On June 25, 2008, the Company issued 5,000,000 shares of common stock to the
Investor for a purchase price of $50,000, or $0.01 per share.
On June 26, 2008, the Company issued 630,000 shares of common stock to Kevin
R. Keating for services rendered as a director of the Company, which services
were valued at $6,300, or $0.01 per share.
On June 26, 2008, the Company issued 2,200,000 shares of common stock to a
consulting firm controlled Frederic M. Schweiger ("Consultant"), which
consulting services were valued at $22,000, or $0.01 per share.
As of June 30, 2008, the Company had 24,857,647 shares of common stock, $0.01
par value per share, outstanding. As of June 30, 2008, there were no
outstanding options or warrants to purchase shares of the Company's common
stock.
4. RELATED PARTY TRANSACTIONS:
---------------------------
Commencing July 1, 2004, the Company's Board of Directors approved a
consulting fee of $3,500 per month payable to its former director and Chief
Executive Officer, Leon Leibovich, for consulting services rendered to the
Company for financial and administrative matters and for assisting the
Company in identifying an operating company for a potential business
combination. The Company recorded expenses for these consulting services of
$13,500 and $42,000 during the fiscal years ended June 30, 2008 and 2007,
respectively. On November 14, 2007, the Company entered into a Settlement and
Release Agreement with Leon Leibovich, which provided that for the partial
payment, at the closing of the sale of the Shares by the Company, of certain
consulting fees earned by Leon Leibovich for consulting services rendered to
-11-
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
the Company from July 2004 to October 2007. As part of the settlement of such
consulting fees, Leon Leibovich agreed to accept $68,542 ("Settlement
Amount") in full and complete payment of $140,000 of unpaid consulting fees.
As part of the Settlement Agreement, Leon Leibovich also agreed to release
the Company from all claims and to indemnify the Company from any loss, cost
or expense incurred by the Company up to a maximum of $12,500 for a period of
4 months following the closing of the sale of the Shares. In accordance with
the Settlement Agreement, the Company paid $56,042 to Leon Leibovich at the
closing of the sale of the Shares and withheld $12,500 from the Settlement
Amount payable to Leon Leibovich, which withheld amount will be paid to Leon
Leibovich at the end of the 4-month period, subject to any claims for
indemnity. As of the June 30, 2008 and 2007, the Company had unpaid
consulting fees owed to Leon Leibovich of $12,000 and $126,000, respectively,
which have been recorded as accounts payable - related parties.
On May 5, 2008, the Company entered into a revolving loan agreement with Vero
Management, L.L.C. ("Vero"). Pursuant to this agreement, the Company borrowed
$10,500 from Vero on May 5, 2008. The Company is required to repay the
outstanding advances in full on or before June 30, 2008. The loan bears
interest at a rate of 6% per annum. The loan was used by the Company to pay
professional fees. Kevin R. Keating, the Company's Chief Executive Officer,
Chief Financial Officer, President, Secretary and Treasurer and a director is
the sole member and manager of Vero. The Company paid the Vero loan on June
27, 2008 from the proceeds of the sale of Shares. Vero waived any payment of
accrued interest on the loan.
On June 25, 2008, the Company issued 16,000,000 shares of common stock to
Kevin R. Keating, a director of the Company and the Company's sole officer,
for a purchase price of $160,000, or $0.01 per share. On June 26, 2008, the
Company issued 630,000 shares of common stock to Kevin R. Keating for
services rendered as a director of the Company, which services were valued at
$6,300, or $0.01 per share.
5. REVOLVING LOAN
--------------
On November 17, 2007, the Company entered into a revolving loan agreement
with Keating Investments, LLC ("Lender"). Pursuant to this agreement, the
Company borrowed $5,000 from the Lender on November 17, 2005. The Company is
required to repay the outstanding advances in full on or before June 30,
2008. The loan bears interest at a rate of 6% per annum. The loan was used by
the Company to pay attorneys in connection with certain litigation. See note
6. The Company paid the Keating Investments loan on June 27, 2008 from the
proceeds of the sale of Shares. Keating Investments waived any payment of
accrued interest on the loan. Keating Investments, LLC is the managing member
of KIG Investors II, LLC ("KIG"). KIG assigned its rights to purchase the
Shares to Kevin R. Keating and the Investor on June 20, 2008.
-12-
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
6. LITIGATION
----------
The Company was named in a civil action filed in Nevada District Court, Clark
County on August 7, 2007 captioned Benchmark Capital, LLC vs. Forex365, Inc.,
formerly known as Solar Group, Inc., Leon Leibovich and Does I-XV (the
"Benchmark Action"). The lawsuit alleges a number of causes of action related
to Benchmark's attempts to acquire a controlling interest in the Company from
certain stockholders ("Controlling Interest") during the period from April
2005 to May 2007. During this time period, Benchmark alleges it advanced
monies to the Company to pay certain expenses and costs of the Company.
Benchmark alleges certain other defendants breached a verbal agreement to
sell it the Controlling Interest. Generally, Benchmark is demanding the
Company to repay these advances in and/or to issue its common stock to
Benchmark in lieu of cash repayment of the advances. Benchmark is also
seeking specific performance to have the Controlling Interest transferred to
it.
On November 1, 2007, the Company was advised that a default judgment had been
entered against the Company on October 31, 2007. The default judgment
provides that the Company pay Benchmark the sum of $41,670.88 plus interest
at 10.25% per annum from August 7, 2007 until paid, plus costs of $447.98 and
attorney fees of $5,420. On January 8, 2008, the Court vacated the default
judgment against the Company. The Company has timely filed its answer to
complaint.
On March 10, 2008, Benchmark agreed to settle the Benchmark Action and to
release the Company and other defendants from all claims (including a $2,000
advance made in June 2006 by Benchmark to pay the Company's corporate filing
fees to the State of Nevada) in exchange for a cash payment of $65,000
("Benchmark Settlement Amount"). Pursuant to AICPA Statement on Auditing
Standards No. 1, Subsequent Events ("SAS 1"), the Company recorded a
litigation loss for $63,000 related to the settlement of the Benchmark Action
in fiscal year ended June 30, 2007 since the events that gave raise to the
claim occurred during the fiscal year ended June 30, 2007.
On June 25, 2008, the Company paid the Benchmark Settlement Amount in full
from the proceeds of the sale of the Shares. On June 30, 2008, the Benchmark
Action was dismissed with prejudice.
7. INCOME TAXES:
-------------
The Company recognizes the amount of income taxes payable or refundable for
the current year and recognizes deferred tax assets and liabilities for the
future tax consequences attributable to differences between the financial
statement amounts of certain assets and liabilities and their respective tax
bases. Deferred tax assets and deferred liabilities are measured using
enacted tax rates expected to apply to taxable income in the years those
temporary differences are expected to be recovered or settled. Deferred tax
assets are reduced by a valuation allowance to the extent that uncertainty
exists as to whether the deferred tax assets will ultimately be realized.
As of June 30, 2008, the Company had net operating losses approximating
$1,907,509 which began to expire in the year 2003 and will continue to expire
throughout the year 2023. Since the Company has yet to prove the ability to
generate taxable income, a valuation account has been recognized to eliminate
the deferred tax asset.
-13-
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
Deferred tax assets and the valuation account are as follows at June 30, 2008
and 2007:
2008 2007
--------- ---------
Deferred tax asset
NOL Carryforward $ 286,100 $ 288,600
Valuation Allowance (286,100) (288,600)
--------- ---------
$ -- $ --
========= =========
The components of income tax expense are as follows:
For the Twelve Months Ended
June 30,
----------------------
2008 2007
-------- --------
Current federal tax $ -- $ --
Current state tax -- --
Change in NOL benefit 2,500 (20,600)
Change in valuation allowance (2,500) 20,600
-------- --------
$ -- $ --
======== ========
8. INCOME (LOSS) PER SHARE
-----------------------
The following data show the amounts used in computing income (loss) per
share:
For the Twelve Months Ended
June 30,
---------------------------
2008 2007
----------- -----------
Income (loss) from operations available
to common stockholders (numerator) $ 16,064 $ (137,100)
----------- -----------
Weighted average number of common shares
outstanding used in income (loss) per
share during the period (denominator) 1,403,866 1,027,647
----------- -----------
Net income (loss) per common share $ 0.01 ($ 0.13)
-14-
FOREX365, INC.
(formerly known as Solar Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
Dilutive income (loss) per share were not presented, as the Company had no
common equivalent shares for all periods presented that would effect the
computation of diluted income (loss) per share.
9. SUBSEQUENT EVENTS:
------------------
Effective July 1, 2008, the Company entered into a management agreement
("Management Agreement") with Vero under which Vero had agreed to provide a
broad range of managerial and administrative services to the Company
including, but not limited to, assistance in the preparation and maintenance
of the Company's financial books and records, the filing of various reports
with the appropriate regulatory agencies as are required by State and Federal
rules and regulations, the administration of matters relating to the
Company's shareholders including responding to various information requests
from shareholders as well as the preparation and distribution to shareholders
of relevant Company materials, and to provide office space, corporate
identity, telephone and fax services, mailing, postage and courier services
for a fixed fee of $3,000 per month, for an initial period of twelve months.
The agreement may be terminated by either party in writing during the initial
twelve months. At the end of the initial twelve month term, the agreement
will continue to remain in effect until terminated in writing by either
party. Kevin R. Keating, the Company's Chief Executive Officer, Chief
Financial Officer, President, Secretary and Treasurer and a director is the
sole member and manager of Vero.
-15-
Exhibits
INDEX TO EXHIBITS
Exhibit Number Exhibit Description
- -------------- -------------------
3.1 Amended and Restated Articles of Incorporation filed with
the State of Nevada on August 14, 2008
3.2 Amended and Restated By-laws adopted August 12, 2008
10.1 Securities Purchase Agreement between KIG Investors II, LLC
and the Company dated November 14, 2007
10.2 First Amendment to Securities Purchase Agreement between KIG
Investors II, LLC and the Company dated June 19, 2008
10.3 Assignment of Amended Securities Purchase Agreement by KIG
Investors II, LLC to Lionsridge Capital, LLC dated June 20,
2008
10.4 Assignment of Amended Securities Purchase Agreement by KIG
Investors II, LLC to Kevin R. Keating dated June 20, 2008
10.5 Registration Rights Agreement between Kevin R. Keating and
the Company dated June 23, 2008
10.6 Registration Rights Agreement between Lionsridge Capital,
LLC and the Company dated June 23, 2008
10.7 Registration Rights Agreement between Garisch Financial,
Inc. and the Company dated June 26, 2008
10.8 Settlement and Release Agreement between Leon Leibovich and
the Company dated November 14, 2007
10.9 Revolving Loan Agreement between Keating Investments, LLC
and the Company dated November 17, 2007
10.10 Revolving Loan Agreement between Vero Management L.L.C. and
the Company dated May 5, 2008
10.11 Consulting Agreement between Garisch Financial, Inc. and the
Company dated June 26, 2008
10.12 Agreement between the Company and Vero Management, L.L.C.,
dated as of July 1, 2008
16.1 Consent of Independent Registered Public Accounting Firm
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: September 22, 2008 Forex365, Inc.
By: /s/ Kevin R. Keating
------------------------
Name: Kevin R. Keating
Title: Chief Executive Officer