As filed with the Securities and Exchange Commission on March 23, 2010
Registration No. 333-_______
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
CIRALIGHT GLOBAL, INC.
(Exact name of registrant as specified in its charter)
Nevada 5030 26-4549003
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
670 E. Parkridge, Suite 112
Corona, CA 92879
(877) 520-5005
(Address and telephone number of principal executive offices
and principal place of business)
Jeffrey S. Bain, President and Chief Executive Officer
670 E. Parkridge, Suite 112
Corona, CA 92879
(877) 520-5005
(Name, address and telephone number of agent for service)
Copy to:
David E. Wise, Esq.
Attorney at Law
The Colonnade
9901 IH-10 West, Suite 800
San Antonio, Texas 78230
(210) 558-2858 (210) 570-1775 (facsimile)
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act Registration Statement number of the earlier effective
Registration Statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective Registration Statement
for the same offering. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company.
Large accelerated filer [ ] Accelerated Filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a Smaller reporting company)
CALCULATION OF REGISTRATION FEE
============================================================================================================
Title of Each Class Proposed Maximum Proposed Maximum
of Securities Amount to Be Offering Price Aggregate Amount of
to be Registered Registered (1) per Share (2) Offering Price Registration Fee (3)
- ------------------------------------------------------------------------------------------------------------
Common Stock, 966,049 $ .25 $241,512.25 $17.22
$.001 par value
- ------------------------------------------------------------------------------------------------------------
Totals 966,049 $ .25 $241,512.25 $17.22
============================================================================================================
(1) Represents shares of common stock offered for resale by shareholders of
record beginning when this Registration Statement becomes effective.
(2) This price was arbitrarily determined by us.
(3) Estimated solely for the purpose of calculating the registration fee under
Rule 457 (0) of the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED __________, 2010
PROSPECTUS
CIRALIGHT GLOBAL, INC.
966,049 Shares of Common Stock
Ciralight Global, Inc. is registering an aggregate of 966,049 shares of our
common stock to be sold, from time to time, by one or more of the selling
shareholders, none of whom is an officer or director of Ciralight Global, Inc.
The selling shareholders may only offer and sell, from time to time, common
stock using this prospectus in transactions at a fixed offering price of $.25
per share until a trading market develops in our common stock, at which time the
selling shareholders may sell shares at prevailing market prices, which may
vary, or they may sell shares at privately negotiated prices. The proceeds from
the sale of the selling shareholders' shares will go directly to the selling
shareholders and will not be available to us.
The selling shareholders and any broker/dealer executing sell orders on
behalf of the selling shareholders may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended.
Currently, no public market exists for our common stock. We will seek to
have a market maker publish quotations for our common stock on the OTC Bulletin
Board ("OTCBB"), which is maintained by the Financial Institutions National
Regulatory Authority. However, we have no agreement or understanding with any
potential market maker to do so. We cannot assure you that a public market for
our common stock will develop. Ownership of our common stock is likely to be an
illiquid investment.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. WE URGE YOU
TO READ THE "RISK FACTORS" BEGINNING ON PAGE 5.
Brokers or dealers effecting transactions in these shares should confirm
that the shares are registered under the applicable state law or that an
exemption from registration is available.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. If anyone
provides you with different or inconsistent information, you should not rely on
it. We are not making an offer to sell securities in any jurisdiction where an
offer or sale is not permitted. You should assume that the information appearing
in this prospectus is accurate as of the date on the front cover of this
prospectus only. Our business, financial condition, results of operations and
prospects may have changed since that date.
__________________, 2010
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION ACTING PURSUANT TO SAID
SECTION 8(A) MAY DETERMINE.
TABLE OF CONTENTS
Page
----
GENERAL 3
PROSPECTUS SUMMARY 3
RISK FACTORS 5
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS 13
TAX CONSIDERATIONS 13
USE OF PROCEEDS 13
DETERMINATION OF OFFERING PRICE 13
DILUTION 14
SELLING SHAREHOLDERS 14
PLAN OF DISTRIBUTION 16
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS 21
DESCRIPTION OF SECURITIES 22
INTERESTS OF NAMED EXPERTS AND COUNSEL 25
LEGAL REPRESENTATION 26
EXPERTS 26
TRANSFER AGENT 26
DESCRIPTION OF BUSINESS 26
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS 31
SUMMARY FINANCIAL DATA 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 33
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE 44
DIRECTORS AND EXECUTIVE OFFICERS 44
EXECUTIVE COMPENSATION 47
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 49
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 50
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES
ACT LIABILITIES 50
WHERE YOU CAN FIND ADDITIONAL INFORMATION 50
FINANCIAL STATEMENTS 50
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH
WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
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GENERAL
As used in this prospectus, references to "Ciralight Global," "Ciralight,"
"company," "we," "our," "ours" and "us" refer to Ciralight Global, Inc., a
Nevada corporation, unless the context otherwise requires. In addition, any
references to "financial statements" are to our financial statements contained
herein, except as the context otherwise requires and any references to "fiscal
year" refers to our fiscal year ending December 31. Unless otherwise indicated,
the terms "Common Stock," "common stock" and "shares" refer to shares of our
$.001 par value, common stock.
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE DETAILED
INFORMATION CONTAINED UNDER THE HEADING "RISK FACTORS," THE FINANCIAL STATEMENTS
AND THE ACCOMPANYING NOTES TO THOSE FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN
THIS PROSPECTUS.
THE COMPANY
WHERE YOU CAN FIND US
Our principal executive offices are located at 670 E. Parkridge, Suite 112,
Corona, CA 92879. Our telephone number is (877) 520-5005. Our website address is
http://www.ciralightglobal.com.
The information on our website is not a part of this prospectus.
CORPORATE BACKGROUND
We were incorporated in the state of Nevada on February 26, 2009, under the
name "Ciralight West, Inc." On March 13, 2009, we changed our name to "Ciralight
Global, Inc." We are a manufacturer and wholesaler of "advanced skylights" for
use in warehouses, schools, retail stores, airports, military installations and
residential buildings.
In April 2009, we entered into an Exchange of Stock for Assets Agreement
with Mr. George Adams, Sr. ("Adams Agreement") to acquire certain assets
including, but not limited to, a patent, a patent application and other patent
rights, artwork, trademarks, equipment, furniture, databases, technical
drawings, promotional materials, trade names and inventory parts and marketing
rights related to the Suntracker One(TM), Suntracker Two(TM) and other
daylighting products previously owned and distributed by Ciralight, Inc., a Utah
corporation, such assets having been foreclosed on by Mr. Adams, who was the
secured creditor of Ciralight, Inc. We did not acquire any equity securities of
Ciralight, Inc. We did not acquire any assets directly from Ciralight, Inc.
Ciralight, Inc. is not a predecessor to Ciralight Global, Inc. and we have no
affiliation, contractual or otherwise, with Ciralight, Inc. Ciralight, Inc.
ceased operations when Mr. Adams foreclosed on its assets in March 2009.
In April 2009, we acquired all of the above described assets from Mr.
Adams, except for the patent, the patent application and other patent rights, in
exchange for 3,200,000 shares of our common stock and 1,000,000 shares of our
Series A Preferred Stock. In December 2009, we acquired the patent, patent
application and other patent rights from Mr. Adams in exchange for the issuance
by us of an additional 400,000 shares of our common stock and a convertible
promissory note in the amount of $250,000. The promissory note we issued to Mr.
Adams is convertible into shares of our common stock at a conversion rate of one
share per $.25 of outstanding principal and interest. As a result of this
transaction, Mr. Adams is our largest shareholder and has voting control over
us.
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THE OFFERING
Securities Being Offered Up to 966,049 shares of common stock.
Initial Offering Price The selling shareholders will sell our shares
at $.25 per share until our shares are quoted
on the OTC Bulletin Board or Pink Sheets and
thereafter at prevailing market prices or
privately negotiated prices. This price was
arbitrarily determined by our board of
directors and may not be indicative of the
real value of a share of our common stock.
Terms of the Offering The selling shareholders will determine when
and how they will sell their common stock
offered in this prospectus.
Termination of the Offering The offering will conclude when all of the
966,049 shares of common stock have been sold
or we, in our sole discretion, decide to
terminate the registration of the shares. We
may decide to terminate the registration if
it is no longer necessary due to the
operation of the resale provisions of Rule
144 promulgated under the Securities Act of
1933. We also may terminate the offering for
no reason whatsoever.
Risk Factors The securities offered hereby involve a high
degree of risk and should not be purchased by
investors who cannot afford the loss of their
entire investment. See "Risk Factors"
beginning on page 5.
Common Stock Issued and
Outstanding Before Offering 11,312,446 shares of our common stock are
issued and outstanding as of the date of this
prospectus. All of the common stock to be
sold under this prospectus will be sold by
the selling shareholders.
Use of Proceeds We will not receive any proceeds from the
sale of the common stock by the selling
shareholders.
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RISK FACTORS
PLEASE CONSIDER THE FOLLOWING RISK FACTORS BEFORE DECIDING TO INVEST IN OUR
COMMON STOCK.
This offering and any investment in our common stock involves a high degree
of risk. You should carefully consider the risks and uncertainties described
below and all of the information contained in this prospectus before deciding
whether or not to purchase our common stock. The risks and uncertainties
described below are those that our management currently believes may
significantly affect us. If any of the following risks actually occurs, our
business, financial condition and results of operations could be harmed and
investors in our common stock could lose part or all of their investment in our
shares The numbers preceding the risk factors below are for ease of reference
only and are not intended as a ranking of such risk factors.
RISKS RELATED TO OUR BUSINESS
1. WE DO NOT HAVE AN INDEPENDENT AUDIT OR COMPENSATION COMMITTEE., THE ABSENCE
OF WHICH COULD LEAD TO CONFLICTS OF INTEREST OF OUR OFFICERS AND DIRECTORS
AND WORK AS A DETRIMENT TO OUR SHAREHOLDERS.
We do not have an independent audit or compensation committee. The absence
of an independent audit and compensation committee could lead to conflicts of
interest of our officers and directors, which could work as a detriment to our
shareholders.
2. WE HAVE A VERY LIMITED OPERATING HISTORY AND THERE IS NO ASSURANCE THAT OUR
FUTURE OPERATIONS WILL RESULT IN REVENUES OR PROFITS. IF WE CANNOT GENERATE
SUFFICIENT REVENUES TO OPERATE PROFITABLY, THEN WE MAY SUSPEND OR CEASE OUR
OPERATIONS AND YOU COULD EVEN LOSE YOUR ENTIRE INVESTMENT IN OUR COMMON
STOCK.
We were incorporated on February 26, 2009, and generated approximately
$640,425 in revenues through December 31, 2009. However, we have not generated
any cumulative profits. We also have very little operating history upon which an
evaluation of our future success or failure can be made. As of December 31,
2009, we had incurred a net loss of approximately $820,289. The success of our
future operations is dependent upon our ability to carry out our planned
marketing and sales activities, fund our operations and compete effectively with
other skylight manufacturers. Based on our current business plan, we expect to
incur operating losses into the second quarter of 2010 and possibly reach
breakeven by the end of the second quarter of 2010. We cannot guarantee that we
will ever be successful in generating revenues sufficient to cover our operating
costs and overhead or achieve profitability. Our failure to achieve
profitability may cause us to suspend or cease our operations.
3. AS A RESULT OF OUR INTENSELY COMPETITIVE INDUSTRY, WE MAY NOT GAIN ENOUGH
MARKET SHARE TO BE PROFITABLE.
The industrial lighting industry is intensely competitive. We have numerous
competitors in the United States and elsewhere. Several of these competitors
have already successfully marketed and commercialized products that compete with
our products.
Most of our competitors have greater financial resources, larger staffs and
more effective marketing and manufacturing organizations than ours.
Our competitors may succeed in developing or licensing products and
technologies that are more effective or less costly than our products and the
products that we are developing. If we are unable to compete successfully, we
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will not be able to sell enough products at a price sufficient to permit us to
generate profits.
4. OUR ABILITY TO ACHIEVE ANY SIGNIFICANT REVENUE WILL DEPEND ON OUR ABILITY
TO ESTABLISH EFFECTIVE SALES AND MARKETING CAPABILITIES.
Our success is dependent up our ability to effectively and profitably
produce, market and sell our products. If we fail to establish sufficient
marketing and sales forces or to make alternative arrangements to have our
products marketed and sold by others on attractive terms, our ability to enter
new or existing markets will be impaired. Our inability to effectively enter
these markets would materially and adversely affect our ability to generate
significant revenues.
5. WE DEPEND HEAVILY ON MANAGEMENT TEAM AND CONSULTANTS AND THE LOSS OF ANY OF
OUR EXECUTIVE OFFICERS COULD SIGNIFICANTLY WEAKEN OUR MANAGEMENT EXPERTISE
AND ABILITY TO RUN OUR BUSINESS.
Our business strategy and success is dependent on the skills and knowledge
of our management team and consultants. As of the date of this prospectus,
Jeffrey S. Bain is our President, Chief Executive Officer, Chief Financial
Officer and Chief Operating Officer. We also operate with a small number of
advisors and consultants and, therefore, have little backup capability for their
activities. The loss of services of one or more members of our management team
or advisors could weaken significantly our management expertise and our ability
to efficiently run our business. We do not maintain key man life insurance
policies on any of our officers.
6. THE MARKETABILITY AND PROFITABILITY OF OUR PRODUCTS IS SUBJECT TO UNKNOWN
ECONOMIC CONDITIONS, WHICH COULD SIGNIFICANTLY IMPACT OUR BUSINESS,
FINANCIAL CONDITION, THE MARKETABILITY OF OUR PRODUCTS AND OUR
PROFITABILITY.
The marketability and profitability of our products may be adversely
affected by local, regional, national and international economic conditions
beyond our control and/or the control of our management, which could
significantly impact our business, financial condition, the marketability of our
products and our ability to earn a profit. Favorable changes may not necessarily
enhance the marketability of our products or our profitability.
7. WE ARE VULNERABLE TO THE CURRENT ECONOMIC CRISIS WHICH MAY NEGATIVELY
AFFECT OUR PROFITABILITY.
Industrial spending is generally affected by a number of factors including
general economic conditions, inflation, interest rates, tax rates, gasoline and
other energy costs and consumer confidence, generally, all of which are beyond
our control. We are currently in a severe worldwide economic recession. Runaway
deficit spending by the United States government and other countries further
exacerbates the United States and worldwide economic climate and may delay or
possibly deepen the current recession. Currently, a lot of economic indicators
suggest rising energy costs, higher inflation, dwindling consumer confidence and
substantially higher taxes. Industrial purchases of our products tend to decline
during recessionary periods when disposable revenue is lower and may impact
sales of our products. In addition, sudden disruptions in business conditions as
a result of a terrorist attack similar to the events of September 11, 2001,
including further attacks, retaliation and the threat of further attacks or
retaliation, war, adverse weather conditions or other natural disasters, such as
Hurricane Katrina, pandemic situations or large scale power outages can have a
short term or, sometimes, long term impact on spending. Further downturn in the
economies in which we sell our products or a sudden disruption of business
conditions in those economies could adversely affect our business. The worldwide
6
recession is placing severe constraints on the ability of all companies,
particularly smaller ones, to raise capital, borrow money, operate effectively
and profitably and to plan for the future.
8. OUR SUCCESS DEPENDS, IN PART, ON THE QUALITY OF OUR PRODUCTS BECAUSE IF OUR
PRODUCTS ARE DEFECTIVE OR OTHERWISE FAIL TO MEET OUR CUSTOMERS' AND
DISTRIBUTORS STANDARDS, OUR CUSTOMER AND DISTRIBUTORSHIP RELATIONS COULD
SUFFER.
Our success depends, in part, on the quality of our products. If our
products are found to be defective or if they otherwise fail to meet our
customers' and distributors' standards, our relationships with our customers and
distributors could suffer, we could need to recall some of our products, our
reputation could be diminished and we could lose market share, any of which
could result in a material adverse effect on our business, results of operations
and financial condition.
9. OUR SUCCESS DEPENDS ON OUR ABILITY TO FULLY EXECUTE OUR BUSINESS STRATEGY.
Our ability to implement the key initiatives of our business strategy is
dependent upon a number of factors, including our ability to:
* increase our product sales and market share and strengthen our brand
image;
* implement appropriate product mixes and pricing strategies;
* implement enterprise resource planning and our strategic sourcing
initiative; and
* obtain new customers through a combination of new businesses, new
channels and pursuit of strategic opportunities such as acquisitions,
joint ventures and strategic alliances with other companies.
There can be no assurance that any of these initiatives will be
successfully and fully executed within the planned time periods. If we fail to
carry out our key business initiatives, then we may fail as a business.
RISKS RELATED TO OUR INTELLECTUAL PROPERTY
10. IF WE FAIL TO PROTECT OUR PROPRIETARY TECHNOLOGY, THEN OUR COMPETITIVE
POSITION WILL BE IMPAIRED.
We have obtained and are in the process of obtaining United States and
foreign patent applications and trademarks for our products. Our success will
depend in part on our ability to obtain additional United States and foreign
patent protection for our products and lighting solutions, preserve our trade
secrets and operate without infringing the proprietary rights of others. We
place considerable importance on obtaining patent protection for significant new
technologies, products and lighting solutions. Legal standards relating to the
validity of trademarks and patents covering products and inventions and the
scope of claims made under such patents are still developing. Past enforcement
of intellectual property rights in many foreign countries has been limited or
nonexistent. Future enforcement of patents and proprietary rights in many other
countries may be problematic or is unpredictable. Moreover, the issuance of a
patent in one country does not assure the issuance of a similar patent in
another country. Claim interpretation and infringement laws vary by nation, so
the extent of any patent protection is uncertain and may vary in different
jurisdictions. Our domestic patent position is also highly uncertain and
involves complex legal and factual questions. The applicants or inventors of
subject matter covered by patent applications or patents owned by us may not
have been the first to invent or the first to file patent applications for such
inventions. Existing or future patents owned by us may be challenged, infringed
upon, invalidated, found to be unenforceable or circumvented by others. Further,
7
any rights we may have under any issued patents may not provide us with
sufficient protection against competitive products or otherwise cover
commercially valuable products or processes. In the event that we do not obtain
legal title to all rights in our patents, then we may not be able to achieve our
business plan and investors could lose part or all of their investments in our
common stock.
11. LITIGATION OR OTHER DISPUTES REGARDING PATENTS AND OTHER PROPRIETARY RIGHTS
MAY BE EXPENSIVE, CAUSE DELAYS IN BRINGING PRODUCTS TO MARKET AND HARM OUR
ABILITY TO OPERATE.
The manufacture, use, marketing or sale of our products may infringe on the
patent or trademark rights of others. If we are unable to avoid infringement of
the patent rights of others, we may be required to seek a license, defend an
infringement action or challenge the validity of the patents in court. Patent
litigation is costly and time consuming. We may not have sufficient resources to
bring these actions to a successful conclusion. In addition, if we do not obtain
a license, develop or obtain non-infringing technology, or fail to successfully
defend an infringement action or have the patents we are alleged to infringe
declared invalid, we may incur substantial money damages and encounter
significant delays in bringing our products and technology to market.
In addition, if another party claims the same subject matter or subject
matter overlapping with the subject matter that we have claimed in a United
States patent application or patent, we may decide or be required to participate
in interference proceedings in the United States Patent and Trademark Office in
order to determine the priority of invention. Loss of such an interference
proceeding would deprive us of patent protection sought or previously obtained
and could prevent us from commercializing our products. Participation in such
proceedings could result in substantial costs, whether or not the eventual
outcome is favorable to us. These additional costs could adversely affect our
financial results.
12. CONFIDENTIALITY AGREEMENTS WITH EMPLOYEES AND OTHERS MAY NOT ADEQUATELY
PREVENT DISCLOSURE OF TRADE SECRETS AND OTHER PROPRIETARY INFORMATION.
In order to protect our proprietary technology and trade secrets, we also
rely in part on confidentiality agreements with our employees, consultants,
customers, dealers, distributors, suppliers and advisors. These agreements may
not effectively prevent disclosure of confidential information and may not
provide an adequate remedy in the event of unauthorized disclosure of
confidential information. In addition, others may independently discover trade
secrets and proprietary information. Costly and time-consuming litigation could
be necessary to enforce and determine the scope of our proprietary rights and
failure to obtain or maintain trade secret protection could adversely affect our
competitive business position.
RISKS RELATED TO AN INVESTMENT IN OUR SECURITIES
13. BECAUSE ONE OF OUR SHAREHOLDERS OWNS 3,600,000 SHARES OF OUR COMMON STOCK,
A PROMISSORY NOTE THAT IS CONVERTIBLE INTO 1,000,000 SHARES OF OUR COMMON
STOCK, ALL OF OUR SERIES A PREFERRED STOCK AND VOTING CONTROL OVER AT LEAST
51% OF ELIGIBLE VOTES, HE CAN EXERT SIGNIFICANT INFLUENCE OVER CORPORATE
DECISIONS THAT MAY BE DISADVANTAGEOUS TO OUR MINORITY SHAREHOLDERS.
Mr. George Adams, Sr. owns 3,600,000 shares of our common stock, a
promissory note that is convertible into 1,000,000 shares of our common stock
and all of our Series A Preferred Stock. The Series A Preferred Stock owned by
Mr. Adams insures that, when voted together with Mr. Adams' common stock, so
long as he owns 3,200,000 shares of our common stock, he will have the
8
equivalent of 51% of all eligible votes on matters brought up for vote of
shareholders related to the election of our directors and for any acquisition or
merger transaction involving the Company. Such control by Mr. Adams could be
disadvantageous to our minority shareholders, who would have little say in the
election of our directors and in any acquisition or merger transaction in which
we may become involved.
14. OUR COMMON STOCK IS NOT CURRENTLY TRADED ON ANY STOCK EXCHANGE OR QUOTED ON
THE OVER-THE-COUNTER BULLETIN BOARD OR THE PINK SHEETS. WHEN AND IF TRADED,
OUR COMMON STOCK WILL LIKELY BE CONSIDERED TO BE A "PENNY STOCK" AND, AS
SUCH, THE MARKET FOR OUR COMMON STOCK MAY BE LIMITED BY CERTAIN SEC RULES
APPLICABLE TO PENNY STOCKS.
As long as the price of our common stock remains below $5.00 per share, our
shares of common stock are likely to be subject to certain "penny stock" rules
promulgated by the SEC. Those rules impose certain sales practice requirements
on brokers who sell penny stock to persons other than established customers and
accredited investors (generally, an institution with assets in excess of
$5,000,000 or an individual with a net worth in excess of $1,000,000). For
transactions covered by the penny stock rules, the broker must make a special
suitability determination for the purchaser and receive the purchaser's written
consent to the transaction prior to the sale. Furthermore, the penny stock rules
generally require, among other things, that brokers engaged in secondary trading
of penny stocks provide customers with written disclosure documents, monthly
statements of the market value of penny stocks, disclosure of the bid and asked
prices of penny stocks and disclosure of the compensation to the brokerage firm
and disclosure of the sales person working for the brokerage firm. These rules
and regulations make it more difficult for brokers to sell shares of our common
stock and limit the liquidity of our shares.
15. TRADING IN OUR SECURITIES COULD BE SUBJECT TO EXTREME PRICE FLUCTUATIONS
THAT COULD ADVERSELY AFFECT YOUR INVESTMENT.
Historically speaking, the market prices for securities of small publicly
traded companies have been highly volatile. Publicized events and announcements
may have a significant impact on the market price of our common stock.
In addition, the stock market from time to time experiences extreme price
and volume fluctuations that particularly affect the market prices for small
publicly traded companies and which are often unrelated to the operating
performance of the affected companies.
16. SUBSTANTIAL SALES OF OUR COMMON STOCK MAY IMPACT THE MARKET PRICE OF OUR
COMMON STOCK.
Future sales of substantial amounts of our common stock, including shares
that we may issue upon exercise of options and warrants, and the resale of
shares by investors who have registration rights, could adversely affect the
market price of our common stock. Furthermore, if we raise additional funds
through the issuance of common stock or securities convertible into our common
stock, the percentage ownership of our shareholders will be reduced and the
price of our common stock may fall.
17. WE DO NOT EXPECT TO PAY DIVIDENDS FOR THE FORESEEABLE FUTURE.
We will use any earnings generated from our operations to finance our
business and will not pay any cash dividends to our shareholders in the
foreseeable future.
18. ISSUING PREFERRED STOCK WITH RIGHTS SENIOR TO THOSE OF OUR COMMON STOCK
COULD ADVERSELY AFFECT HOLDERS OF COMMON STOCK.
Our charter documents grant our board of directors the authority to issue
various series of preferred stock without a vote or action by our shareholders.
Our board also has the authority to determine the terms of preferred stock,
9
including price, preferences and voting rights. The rights granted to holders of
preferred stock may adversely affect the rights of holders of our common stock.
For example, a series of preferred stock may be granted the right to receive a
liquidation preference - a pre-set distribution in the event of a liquidation
that would reduce the amount available for distribution to holders of our common
stock. In addition, the issuance of preferred stock could make it more difficult
for a third party to acquire a majority of our outstanding voting stock. As a
result, common shareholders could be prevented from participating in
transactions that would offer an optimal price for their shares. We have issued
1,000,000 shares of our Series A Preferred Stock in exchange for certain assets
acquired for use in our business. The holder of the Series A Preferred Stock has
certain super-voting rights that enable the holder to control the outcome of all
shareholder votes related to the election of directors and for any acquisition
or merger transaction in which we may become involved while the Series A
Preferred Stock is outstanding. See "Description of Securities--Preferred
Stock."
19. WE MAY BE EXPOSED TO POTENTIAL RISKS RESULTING FROM NEW REQUIREMENTS UNDER
SECTION 404 OF THE SARBANES-OXLEY ACT OF 2002.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we will be
required, beginning with our fiscal year ended December 31, 2009, to include in
our annual report our assessment of the effectiveness of our internal control
over financial reporting as of the end of 2009. Furthermore, our independent
registered public accounting firm will be required to attest to whether our
assessment of the effectiveness of our internal controls over financial
reporting is fairly stated in all material respects and separately report on
whether it believes we have maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2009.
We do not have a sufficient number of employees to segregate
responsibilities and may be unable to afford increasing our staff or engaging
outside consultants or professionals to overcome our lack of employees. We have
not yet begun our assessment of the effectiveness of our internal control over
financial reporting and expect to incur additional expenses and diversion of
management's time as a result of performing the system and process evaluation,
testing and remediation required in order to comply with the management
certification and auditor attestation requirements. Further, implementing any
appropriate changes to our internal controls may distract our officers and
employees, entail substantial costs to modify our existing processes and take a
significant amount of time to complete. Also, during the course of our testing,
we may identify other deficiencies that we may not be able to remediate in time
to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the
requirements of Section 404.
In addition, if we fail to achieve and maintain the adequacy of our
internal controls, as such standards are modified, supplemented or amended from
time to time, we may not be able to insure that we can conclude on an ongoing
basis that we have effective internal controls over financial reporting in
accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective
internal controls, particularly those related to revenue recognition, are
necessary for us to produce reliable financial reports and are important to help
prevent financial fraud. If we cannot provide reliable financial reports or
prevent fraud, our business and operating results could be harmed, investors
could lose confidence in our reported financial information and the trading
price of our common stock, if a market ever develops, could drop significantly.
20. WE WILL BE SUBJECT TO THE PERIODIC REPORTING REQUIREMENTS OF THE SECURITIES
EXCHANGE ACT OF 1934 WHICH WILL REQUIRE US TO INCUR AUDIT FEES AND LEGAL
FEES IN CONNECTION WITH THE PREPARATION OF SUCH REPORTS. THESE COSTS COULD
REDUCE OR ELIMINATE OUR ABILITY TO EARN A PROFIT.
10
We will be required to file periodic reports with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder. In order to comply with these
regulations, our independent registered public accounting firm must review our
financial statements on a quarterly basis and audit our financial statements on
an annual basis. Moreover, our legal counsel has to review and assist in the
preparation of such reports. The costs charged by these professionals for such
services cannot be accurately predicted at this time because of factors such as
the number and type of transactions that we engage in and the complexity of our
reports cannot be determined at this time and will have a major effect on the
amount of time to be spent by our auditors and attorneys.
However, the incurrence of such costs will obviously be an expense to our
future operations and could have a negative effect on our ability to meet our
overhead requirements and earn a profit. We may be exposed to potential risks
resulting from new requirements under Section 404 of the Sarbanes-Oxley Act of
2002. If we cannot provide reliable financial reports or prevent fraud, our
business and operating results could be harmed, investors could lose confidence
in our reported financial information and the trading price of our common stock
could drop significantly.
21. HAVING ONLY TWO DIRECTORS LIMITS OUR ABILITY TO ESTABLISH EFFECTIVE
INDEPENDENT CORPORATE GOVERNANCE PROCEDURES AND INCREASES THE CONTROL OF
OUR MANAGEMENT.
Having only two directors, one of whom is our President and another one of
whom is our Corporate Secretary, limits our ability to establish effective
independent corporate governance procedures and increases the control of our
management. Accordingly, we cannot establish board committees comprised of
independent members to oversee functions like compensation or audit issues until
we are able to expand our board of directors to include independent directors.
Until we have a larger board of directors that would include some
independent members, if ever, there will be limited oversight of our
management's decisions and activities and little ability for minority
shareholders to challenge or reverse those activities and decisions, even if
they are not in the best interests of minority shareholders.
22. SHAREHOLDERS MAY BE DILUTED SIGNIFICANTLY THROUGH OUR EFFORTS TO OBTAIN
FINANCING AND SATISFY OBLIGATIONS THROUGH ISSUANCE OF ADDITIONAL SHARES OF
OUR COMMON STOCK.
We have no committed source of financing. Wherever possible, our board of
directors will attempt to use non-cash consideration to satisfy obligations. In
many instances, we believe that the non-cash consideration will consist of
restricted shares of our common stock. Our board of directors has authority,
without action or vote of the shareholders, to issue all or part of the
38,687,554 authorized, but unissued, shares of our common stock. Future
issuances of shares of our common stock will result in dilution of the ownership
interests of existing shareholders, may further dilute common stock book value
and that dilution may be material.
23. OUR ARTICLES OF INCORPORATION PROVIDE FOR INDEMNIFICATION OF OFFICERS AND
DIRECTORS AT OUR EXPENSE AND LIMIT THEIR LIABILITY, WHICH MAY RESULT IN A
MAJOR COST TO US AND HURT THE INTERESTS OF OUR SHAREHOLDERS BECAUSE
CORPORATE RESOURCES MAY BE EXPENDED FOR THE BENEFITS OF OFFICERS AND/OR
DIRECTORS.
Our articles of incorporation and applicable Nevada laws provide for the
indemnification of our directors, officers, employees and agents under certain
circumstances, against attorney's fees and other expenses incurred by them in
any litigation to which they become a party arising from their association with
or activities on our behalf. We will also bear the expenses of such litigation
for any of our directors, officers, employees or agents, upon such person's
11
written promise to repay us therefor, even if it is ultimately determined that
any such person shall not have been entitled to indemnification. This
indemnification policy could result in substantial expenditures by us that we
may be unable to recoup.
We have been advised that, in the opinion of the Securities and Exchange
Commission, indemnification for liabilities arising under federal securities
laws is against public policy and is, therefore, unenforceable. In the event
that a claim for indemnification for liabilities arising under federal
securities laws, other than the payment by us of expenses incurred or paid by a
director, officer or controlling person in the successful defense of any action,
suit or proceeding, is asserted by a director, officer or controlling person in
connection with the securities being registered, we will (unless in the opinion
of our counsel, the matter has been settled by controlling precedent) submit to
a court of appropriate jurisdiction, the question of whether indemnification by
us is against public policy as expressed by the Securities and Exchange
Commission and will be governed by the final adjudication of such issue. The
legal process relating to this matter, if it were to occur, is likely to be very
costly and may result is us receiving negative publicity, either of which
factors is likely to materially reduce the market price for our shares, if such
a market ever develops.
24. ALL 966,049 SHARES OF OUR COMMON STOCK BEING REGISTERED IN THIS OFFERING
MAY BE SOLD BY SELLING SHAREHOLDERS SUBSEQUENT TO THE EFFECTIVENESS OF OUR
REGISTRATION STATEMENT, OF WHICH THIS PROSPECTUS IS A PART. A SIGNIFICANT
VOLUME OF SALES OF THESE SHARES OVER A SHORT OR CONCENTRATED PERIOD OF TIME
IS LIKELY TO DEPRESS THE MARKET FOR AND PRICE OF OUR SHARES IN ANY MARKET
THAT MAY DEVELOP.
All 966,049 shares of our common stock held by the selling shareholders
that are being registered in this offering may be sold subsequent to the date of
this prospectus, either at once or over a period of time. See also "Selling
Shareholders" and "Plan of Distribution" elsewhere in this prospectus. The
ability to sell these shares of common stock and/or the sale thereof reduces the
likelihood of the establishment and/or maintenance of an orderly trading market
for our shares at any time in the near future.
25. THERE ARE RISKS ASSOCIATED WITH FORWARD LOOKING STATEMENTS
This prospectus contains certain forward looking statements regarding
management's plans and objectives for future operations including plans and
objectives relating to our planned marketing efforts and future economic
performance. The forward looking statements and associated risks set forth in
this prospectus include or relate to, among other things, (a) our projected
sales and profitability, (b) our growth strategies, (c) anticipated trends in
our industry, (d) our ability to obtain and retain sufficient capital for future
operations and (e) our anticipated needs for working capital. These statements
may be found under "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Description of Business," in this prospectus, as
well as in this prospectus, generally. Actual events or results may differ
materially from those discussed in forward looking statements as a result of
various factors, including, without limitation, the risks outlined under "Risk
Factors" and matters described in this prospectus, generally. In light of these
risks and uncertainties, there can be no assurance that the forward looking
statements contained in this prospectus will, in fact, occur.
FOR ALL OF THE FOREGOING REASONS AND OTHER REASONS SET FORTH HEREIN, AN
INVESTMENT IN OUR SECURITIES IN ANY MARKET THAT MAY DEVELOP IN THE FUTURE WILL
INVOLVE A HIGH DEGREE OF RISK.
12
CAUTIONARY STATEMENTS REGARDING FORWARD LOOKING STATEMENTS
This prospectus contains forward looking statements. These statements
relate to future events or future financial performance and involve known and
unknown risks, uncertainties and other factors that may cause Ciralight Global's
or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by the forward
looking statements.
In some cases, you can identify forward looking statements by terminology
such as "may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or the negative of these terms or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially. Although we believe that the expectations
reflected in the forward looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. We are under no
duty to update any of the forward looking statements after the date of this
prospectus to confirm our prior statements to actual results.
Further, this prospectus contains forward looking statements that involve
substantial risks and uncertainties. Such statements include, without
limitation, all statements as to expectation or belief and statements as to our
future results of operations, the progress of any product development, the need
for, and timing of, additional capital and capital expenditures, partnering
prospects, the protection of and the need for additional intellectual property
rights, effects of regulations, the need for additional facilities and potential
market opportunities.
TAX CONSIDERATIONS
We are not providing any tax advice as to the acquisition, holding or
disposition of the common stock offered herein. In making an investment
decision, investors are strongly encouraged to consult their own tax advisors to
determine the U.S. federal, state and any applicable foreign tax consequences
relating to their investment in our common stock.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock offered
through this prospectus by the selling shareholders. We have agreed to bear the
expenses relating to the registration of the common stock for the selling
shareholders.
DETERMINATION OF OFFERING PRICE
Since our common stock is not listed or quoted on any exchange or quotation
system, the offering price of the shares of common stock was arbitrarily
determined and does not necessarily bear any relationship to our book value,
assets, operating results, financial condition or any other established criteria
of value.
The selling shareholders will sell the shares offered at $.25 per share
until our shares are quoted on the OTC Bulletin Board or the Pink Sheets and
thereafter at prevailing market prices or privately negotiated prices. Our board
of directors determined the $.25 per share offering price based upon the price
of the last sale of our common stock to investors. There is no assurance of
when, if ever, our common stock will be listed on an exchange or quoted on the
OTC Bulletin Board.
13
DILUTION
The common stock to be sold by the selling shareholders in this offering is
common stock that is currently issued and outstanding. Accordingly, this
offering will not result in dilution to our existing shareholders.
SELLING SHAREHOLDERS
The selling shareholders purchased their common stock in a private
placement. The shares offered by this prospectus may be offered from time to
time by the selling shareholders listed in the following table. Each selling
shareholders will determine the number of shares to be sold and the timing for
the sales. Our registration of the shares does not necessarily mean that the
selling shareholders will sell all or any of their shares. Because the selling
shareholders may offer all, some or none of their shares, no definitive estimate
as to the number of shares thereof that will be held by the selling shareholders
after such offering can be provided, and the following table has been prepared
on the assumption that all shares of the common stock offered under this
prospectus will ultimately be sold. None of the selling shareholders are FINRA
registered broker-dealers or affiliates of FINRA broker-dealers. No selling
shareholder is an officer or director of the Company.
Total Shares to
be Offered for
Shares Owned Selling Total Shares to Percentage Owned
Prior to This Shareholder be Owned After Upon Completion of
Name Offering (1) Account (2) This Offering (3) This Offering (4)
---- ------------ ----------- ----------------- -----------------
Kenneth N. Atkins 40,000 16,000 24,000 *
Sandra J. Althaus 200,000 80,000 120,000 *
Billy R. Ahlstrom 4,000 4,000 0 *
Mike S. Ahlstrom 50,000 20,000 30,000 *
Rick G. Ahlstrom 6,000 6,000 0 *
Susan E. Atencio 10,000 4,000 6,000 *
D. Joan Balcome 40,000 16,000 24,000 *
Douglas J. Bassett 32,000 12,800 19,200 *
Mark A. Bishop 20,000 8,000 12,000 *
J. Panela P. Broderick Family
Protection Trust 68,000 27,200 40,800 *
Norman E. Butler 16,000 6,400 9,600 *
Shauna H. Carpenter 60,000 24,000 36,000 *
Joseph A. Clem 4,500 4,500 0 *
Steve Cox 25,000 10,000 15,000 *
Mary Lou Cunningham 1,400 1,400 1,200 *
Kathy D'Olimpo 20,000 8,000 12,000 *
Eugene J. Daunis 20,000 8,000 12,000 *
Nancy J. Davis 40,000 16,000 24,000 *
Brett J. Earl 40,000 16,000 24,000 *
Karie Eggleston 12,000 4,800 7,200 *
Richard J. Eisenreich 200,000 80,000 120,000 *
Garrett Emery 8,000 3,200 4,800 *
14
Cory Ericksen 10,000 4,000 6,000 *
Cyndi Feller 6,000 6,000 0 *
Hans Fuegi 20,000 8,000 12,000 *
Craig Fullmer 12,000 4,800 7,200 *
Bonita L. Greiner 20,000 8,000 12,000 *
Russell K. Groves 20,000 8,000 12,000 *
Robert W. Halverson 20,000 8,000 12,000 *
Jerry L. Hamblin 50,000 20,000 30,000 *
Bruce r. Hebdon 40,000 16,000 24,000 *
Charles C. Hislop 16,000 6,400 9,600 *
Sheryl A. Hodges 10,000 4,000 6,000 *
Jess Holyoak 10,000 4,000 6,000 *
John C. Jensen 20,000 8,000 12,000 *
John Johnson 4,000 4,000 0 *
Clyde R. Johnson 25,200 10,080 15,120 *
Duane D. Kearsley 2,000 2,000 0 *
Emma P. Kirkham 4,000 4,000 0 *
Laurel Kirkham 24,000 9,600 14,400 *
Steven S. & Michele L. Maughan 8,000 3,200 4,800 *
Edward Miner 10,000 4,000 6,000 *
Tonya Nemanic 12,000 4,800 7,200 *
Tim Pearson 72,000 28,800 43,200 *
Darwin G. Perry 4,000 4,000 0 *
Thad Peterson 2,448 2,448 0 *
L. Val Rollins 98,000 39,200 58,800 *
Bart A. Schroder 50,000 20,000 30,000 *
Rick Shapiro 4,000 4,000 0 *
Val S. Simmons 8,000 3,200 4,800 *
Arthur Lyn Simon & Helen I. Simon, JTWROS 112,000 44,800 67,200 *
Mary Jo Truman Stallcup 40,000 16,000 24,000 *
Joshua Taylor 16,000 6,400 9,600 *
Tew Investments, LLC 40,000 16,000 24,000 *
Randall K. Thunell 4,000 4,000 0 *
Bryce Tolman 180,000 72,000 108,000 *
Jeffrey Walters 80,000 32,000 48,000 *
Thaes Webb III 20,000 8,000 12,000 *
Adam Wells 21,052 8,421 12,631 *
M. Dunford Weston Family Partnership 132,080 52,832 79,248 *
Zoe Anne Watson 23,920 9,568 14,352 *
John Williamson 148,000 59,200 88,800 *
Kent A. Winegar 20,000 8,000 12,000 *
Sarah L. Wood Rodriquez 4,000 4,000 0 *
- ----------
Less than one percent (1%).
1. For purposes of this column only, we have included all shares of common
stock owned of record or beneficially owned by the respective selling
shareholders. Each selling shareholder's ownership in this column is based
on 11,312,446 shares of our common stock outstanding as of March 24, 2010.
2. Represents an aggregate of 966,049 shares of outstanding common stock.
15
3. Assumes that all securities registered will be sold.
4. The percentages set forth in this column are based on 11,312,446 shares of
common stock outstanding as of March 24, 2010. The number and percentage of
shares beneficially owned is determined in accordance with Rule 13d-3 of
the Securities Exchange Act of 1934, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rule,
beneficial ownership includes any shares as to which the selling security
holder has sole or shared voting power or investment power and also any
shares, which the selling security holder has the right to acquire within
60 days.
PLAN OF DISTRIBUTION
PLAN OF DISTRIBUTION
None of the selling shareholders are FINRA registered broker-dealers or
affiliates of FINRA broker-dealers. The selling shareholders may offer the
common stock at various times in one or more of the following transactions:
* on any market that might develop;
* in transactions other than market transactions;
* by pledge to secure debts or other obligations;
* purchases by a broker-dealer as principal and resale by the
broker-dealer for its account; or
* in a combination of any of the above
Our shares of common stock offered hereby by the selling shareholders may
be sold from time to time by such shareholders, or by their pledgees, donees,
transferees and other successors in interest thereto. These pledgees, donees,
transferees and other successors in interest will also be deemed "selling
shareholders" for the purposes of this prospectus.
The selling shareholders will sell at a fixed price of $.25 per share until
our common stock is quoted on the OTC Bulletin Board and thereafter at
prevailing market prices or at privately negotiated prices. In order to comply
with the securities laws of certain states, if applicable, the shares may be
sold only through registered or licensed brokers or dealers.
The selling shareholders may use broker-dealers to sell shares. If this
happens, broker-dealers will either receive discounts or commissions from the
selling shareholders, or they will receive commissions from purchasers of shares
from whom they have acted as agents. To date, no discussions have been held or
agreements reached with any broker-dealer.
The selling shareholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus. Rule 144
provides that any affiliate or other person who sells restricted securities of
an issuer for his own account, or any person who sells restricted or any other
securities for the account of an affiliate of the issuer of such securities,
shall be deemed not to be engaged in a distribution of such securities and,
therefore, not to be an underwriter thereof within the meaning of Section
2(a)(11) of the Securities Act, if all of the conditions of Rule 144 are met.
Conditions for sales under Rule 144 include:
a. adequate current public information with respect to the issuer must be
available;
16
b. restricted securities must meet a six month holding period if
purchased from a reporting company or a 12 month holding period if
purchased from a non-reporting entity (as is the case with Ciralight),
measured from the date of acquisition of the securities from the
issuer or from an affiliate of the issuer;
c. sales of restricted or other securities sold for the account of an
affiliate during any three month period, cannot exceed the greater of
1% of the securities of the class outstanding as shown by the most
recent statement of the issuer (There is no 1% limitation applied to
non-affiliate sales);
d. the securities must be sold in ordinary "broker's transactions" within
the meaning of section 4(4) of the Securities Act or in transactions
directly with a market maker, without solicitation by the selling
security holders and without the payment of any extraordinary
commissions or fees;
e. if the amount of securities to be sold pursuant to Rule 144 during any
three month period exceeds 5,000 shares/units or has an aggregate sale
price in excess of $50,000, the selling shareholder must file a notice
on Form 144 with the Commission.
The current information requirement listed in (a) above, the volume
limitation listed in (c) above, the requirement for sale pursuant to broker's
transactions listed in (d) above, and the Form 144 notice filing requirements
listed in (e) above, cease to apply to any restricted securities sold for the
account of a non-affiliate if at least six months has elapsed from the date the
securities were acquired from the issuer or from an affiliate, if purchased from
a reporting issuer or 12 months if purchased from a non-reporting issuer (as is
the case with Ciralight).
The selling shareholders shall have the sole and absolute discretion not to
accept any purchase offer or make any sale of shares if they deem the purchase
price to be unsatisfactory at any particular time.
The selling shareholders or their respective pledgees, donees, transferees
or other successors in interest, may also sell the shares directly to market
makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the selling shareholders
and/or the purchasers of shares for whom such broker-dealer may act as agents or
to whom they sell as principal or both, which compensation as to a particular
broker-dealer might be in excess of customary commissions. Market makers and
block purchasers purchasing the shares will do so for their own account and at
their own risk. It is possible that a selling shareholder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market price. The
selling shareholders cannot assure that all or any of the shares offered in this
prospectus will be sold by the selling shareholders.
The selling shareholders, alternatively, may sell all or part of the shares
offered in this prospectus through an underwriter. No selling shareholder has
entered into any agreement with a prospective underwriter and there is no
assurance that any such agreement will be entered into by a selling shareholder.
17
Selling shareholders and any purchasers of our securities should be aware
that any market that develops in our common stock will be subject to "penny
stock" restrictions.
We will pay all expenses incident to the registration, offering and sale of
the common stock other than commissions or discounts of underwriters,
broker-dealers or agents.
The selling shareholders must comply with the requirements of the
securities Act of 1933 and the Securities Exchange Act of 1934 in the offer and
sale of the common stock. In particular, during such times as the selling
shareholders may be deemed to be engaged in a distribution of the common stock,
and, therefore, be considered to be an underwriter, they must comply with
applicable law and we have informed them that they may not, among other things:
1. engage in any stabilization activities in connection with the shares;
2. effect any sale or distribution of the shares until after the
prospectus shall have been appropriately amended or supplemented, if
required, to describe the terms of the sale or distribution; and
3. bid for or purchase any of the shares or rights to acquire the shares
or attempt to induce any person to purchase any of the shares or
rights to acquire the shares, other than as permitted under the
Securities Exchange Act of 1934.
The offering will conclude when all of the 966,049 shares of common stock
have been sold or we, in our sole discretion, decide to terminate the
registration of the shares. We may decide to terminate the registration if it is
no longer necessary due to the operation of the resale provisions of Rule 144
promulgated under the Securities Act of 1933. We also may terminate the offering
for no reason whatsoever.
SELLING SHAREHOLDERS AND ANY PURCHASERS OF OUR SECURITIES SHOULD BE AWARE
THAT THE MARKET IN OUR STOCK WILL BE SUBJECT TO THE PENNY STOCK RESTRICTIONS.
The trading of our securities takes place in the over-the-counter markets,
which are commonly referred to as the OTCBB as maintained by FINRA. As a result,
an investor may find it difficult to dispose of, or to obtain accurate
quotations as to the price of, our securities.
OTCBB CONSIDERATIONS
The OTCBB is separate and distinct from the NASDAQ stock market. NASDAQ has
no business relationship with issuers of securities quoted on the OTCBB. The
SEC's order handling rules, which apply to NASDAQ-listed securities, do not
apply to securities quoted on the OTCBB.
Although the NASDAQ stock market has rigorous listing standards to ensure
the high quality of its issuers and can delist issuers for not meeting those
standards, the OTCBB has no listing standards. Rather, it is the market maker
who chooses to quote a security on the system, files the application and is
obligated to comply with keeping information about the issuer in its files.
FINRA cannot deny an application by a market maker to quote the stock of a
company assuming all FINRA questions relating to its Rule 211 process are
answered accurately and satisfactorily. The only requirement for ongoing
inclusion in the OTCBB is that the issuer be current in its reporting
requirements with the SEC.
18
Investors may have difficulty in getting orders filled because trading
activity on the OTCBB in general is not conducted as efficiently and effectively
as with NASDAQ-listed securities. As a result, investors' orders may be filled
at prices much different than expected when orders are placed.
Investors must contact a broker-dealer to trade OTCBB securities. Investors
do not have direct access to the bulletin board service. For bulletin board
securities, there only has to be one market maker.
OTCBB transactions are conducted almost entirely on a manual basis. Because
there are no automated systems for negotiating trades on the OTCBB, they are
conducted via telephone. In times of heavy market volume, the limitations of
this process may result in a significant increase in the time it takes to
execute investor orders. Therefore, when investors place market orders-- an
order to buy or sell a specific number of shares at the current market price--
it is possible for the prices of a stock to go up or down significantly during
the lapse of time between placing a market order and getting execution.
Because OTCBB stocks are usually not followed by analysts, there may be
lower trading volume than for NASDAQ-listed securities.
SECTION 15(g) OF THE SECURITIES EXCHANGE ACT OF 1934
Our shares are covered by Section 15(g) of the Securities Exchange Act of
1934 ("Exchange Act") and Rules 15g-1 through 15g-6 promulgated thereunder,
which impose additional sales practice requirements on broker-dealers who sell
our securities to persons other that established customers and accredited
investors (generally institutions with assets in excess of $5,000,000 or
individuals with net worths in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 jointly with their spouses).
Rule 15g-1 exempts a number of specific transactions from the scope of the
penny stock rules (but is not applicable to us).
Rule 15g-2 declares unlawful broker-dealer transactions in penny stocks
unless the broker-dealer has first provided to the customer a standardized
disclosure document.
Rule 15g-3 provides that it is unlawful for a broker-dealer to engage in a
penny stock transaction unless the broker-dealer first discloses and
subsequently confirms to its customers current quotation prices or similar
market information concerning the penny stock in question.
Rule 15g-4 prohibits broker-dealers from completing penny stock
transactions for a customer unless the broker-dealer first discloses to the
customer the amount of compensation or other remuneration received as a result
of the penny stock transaction.
Rule 15g-5 requires that a broker-dealer executing a penny stock
transaction, other than one exempt under Rule 15g-1, disclose to its customer,
at the time of or prior to the transaction, information about the sales person's
compensation and the compensation of any associated person of the broker-dealer.
Rule 15g-6 requires broker-dealers selling penny stocks to provide their
customers with monthly account statements.
Rule 3a51-1 of the Exchange Act establishes the definition of a "penny
stock" for purposes relevant to us, as any equity security that has a minimum
bid price of less than $5.00 per share, subject to a limited number of
19
exceptions. It is likely that our shares will be considered to be penny stocks
for the immediately foreseeable future. For any transaction involving a penny
stock, unless exempt, the penny stock rules require that a broker or dealer
approve a person's account for transactions in penny stocks and the broker or
dealer receive from the investor a written agreement to the transaction setting
forth the identity and quantity of the penny stock to be purchased.
In order to approve a person's account for transactions in penny stocks,
the broker or dealer must obtain financial information and investment experience
and objectives of the person and make a reasonable determination that the
transactions in penny stocks are suitable for that person and that that person
has sufficient knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny
stock, a disclosure schedule prepared by the SEC relating to the penny stock
market, which, in highlight form, sets forth:
* the basis on which the broker or dealer made the suitability
determination; and
* that the broker or dealer received a signed, written agreement from
the investor prior to the transaction.
Disclosure also has to be made about the risks of investing in penny stocks
in both public offerings and in secondary trading and commissions payable to
both the broker-dealer and the registered representative, current quotations for
the securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.
In addition, FINRA has recently imposed strict guidelines on deposited
securities which are having a chilling effect on clearing houses and
broker-dealers who accept physical delivery of stock certificates, resulting in
(i) special fees charged to customers when stock certificates are deposited into
their brokerage accounts and (ii) substantial delays in clearing the underlying
securities for resale.
The above-referenced requirements may create a lack of liquidity, making
trading difficult or impossible, and accordingly, shareholders may find it
difficult to dispose of our shares.
STATE SECURITIES-BLUE SKY LAWS
There is no established public market for our common stock and there can be
no assurances that any market will develop in the foreseeable future. Transfer
of our common stock may also be restricted under the securities laws or
securities regulations promulgated by various states, commonly referred to as
"blue sky" laws. Absent compliance with such individual state laws, our common
stock may not be traded in such jurisdiction. Because the common stock
registered hereunder has not been registered for resale under blue sky laws of
every state, the holders of such shares and persons who desire to purchase them
in any trading market that might develop in the future, should be aware that
there may be significant state blue sky law restrictions upon the ability of
investors to sell the common stock and of purchasers to purchase the common
stock. Accordingly, investors may not be able to liquidate their investments and
should be prepared to hold the common stock for an indefinite period of time.
Selling shareholders may contact us directly to ascertain procedures
necessary for compliance with blue sky laws in the applicable states relating to
sellers and/or purchasers of shares of our common stock.
We intend to apply for listing in Mergent, Inc., a leading provider of
business and financial information on publicly listed and quoted companies,
which, once published, will provide Ciralight Global with "manual" exemptions in
approximately 39 states, the District of Columbia, Guam, Puerto Rico and U.S.
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Virgin Islands, as indicated in CCH Blue Sky Law Desk Reference at Section 6301
entitled "STANDARD MANUALS EXEMPTIONS."
Thirty-nine states, certain U.S. Territories (Guam, Puerto Rico and U.S.
Virgin Islands) and the District of Columbia have what is commonly referred to
as a "manual exemption" for secondary trading of securities such as those to be
resold by selling shareholders under this prospectus. In these states,
territories and district, so long as we obtain and maintain a listing in
Mergent, Inc. or Standard and Poor's Corporate Manual, secondary trading of our
common stock can occur without filing, review or approval by state regulatory
authorities in these states, territories and district. These 39 states are:
Alaska, Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Hawaii,
Idaho, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan,
Minnesota, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Jersey,
New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island,
South Carolina, South Dakota, Texas, Utah, Vermont, Washington, West Virginia,
Wisconsin and Wyoming. We cannot secure this listing, and thus this
qualification, until after our registration statement is declared effective.
Once we secure this listing, secondary trading can occur in these states without
further action.
We currently do not intend to and may not be able to qualify securities for
resale in other states which require shares to be qualified before they can
resold by our shareholders.
LIMITATIONS IMPOSED BY REGULATION M
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the shares may not simultaneously engage in
market making activities with respect to our common stock for a period of two
business days prior to the commencement of such distribution. In addition and
without limiting the foregoing, each selling shareholder will be subject to
applicable provisions of the Exchange Act and the associated rules and
regulations thereunder, including, without limitation Regulation M, which
provisions may limit the timing of purchases and sales of shares of our common
stock by the selling shareholders. We will make copies of this prospectus
available to the selling shareholders and have informed them of the need for
delivery of copies of this prospectus to purchasers at or prior to the time of
any sale of the shares offered hereby. We assume no obligation to so deliver
copies of this prospectus or any related prospectus supplement.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of March 24, 2010, we had 11,312,446 shares of common stock and
1,000,000 shares of Series A preferred stock issued and outstanding.
There currently exists no public trading market for our common stock. We
do not expect a public trading market will develop until we become a reporting
company under the Securities Exchange Act of 1934, as amended. There can be no
assurance that a public trading market will develop at that time or be sustained
in the future. Without an active public trading market, investors in this
offering may be unable to liquidate their shares of our common stock without
considerable delay, if at all. If a market does develop, the price for our
shares may be highly volatile and may bear no relationship to our actual
financial condition or results of operations. Factors we discuss in this
prospectus, including the many risks factors associated with an investment in
Ciralight Global, may have a significant impact on the market price of our
common stock. Also, because of the relatively low price at which our common
stock will likely trade, many brokerage firms may not effect transactions in our
common stock.
At the present time, none of our shares of common stock are eligible for
sale under Rule 144 of the Securities and Exchange Commission and we do not
anticipate any Rule 144 eligibility for our shareholders until the third quarter
of 2010.
21
HOLDERS
As of March 24, 2010, there were approximately 116 shareholders of record
of our common stock and one holder of record of our Series A Preferred Stock.
DIVIDENDS
We have not paid cash dividends on any class of common equity since
formation and we do not anticipate paying any dividends on our outstanding
common stock in the foreseeable future. There are no material restrictions
limiting or that are likely to limit our ability to pay dividends on its
outstanding securities.
RULE 144 SHARES
As of the date of this prospectus, we do not have any shares of our common
stock that are currently available for sale to the public in accordance with the
volume and trading limitations of Rule 144.
DESCRIPTION OF SECURITIES
OUR CAPITALIZATION:
COMMON STOCK
We are authorized to issue 50,000,000 shares of common stock, $.001 par
value per share. We currently have 11,312,446 shares of our common stock issued
and outstanding.
The holders of our common stock:
* have equal ratable rights to dividends from funds legally available
for payment of dividends when, as and if declared by the board of the
directors;
* are entitled to share ratably in all of the assets available for
distribution to holders of common stock upon liquidation, dissolution
or winding up our affairs;
* do not have preemptive, subscription or conversion rights, or
redemption rights or access to any sinking fund; and
* are entitled to one non-cumulative vote per share on all matters
submitted to shareholders for a vote at any meeting of shareholders.
PREFERRED STOCK
We are authorized to issue 10,000,000 shares of preferred stock, par value
$0.001 per share. Currently, we have 1,000,000 shares of preferred stock issued
and outstanding. As part of the purchase contract for the acquisition of assets,
we issued 1,000,000 shares of Series A Preferred Stock to the seller of those
assets, Mr. George Adams, Sr. The Series A Preferred Stock has the following
rights and preferences:
22
Shares Issued: 1,000,000 shares have been issued to George Adams, Sr. So
long as the Series A Preferred Stock remains issued and outstanding, no other
shares of preferred stock shall be issued by the Company that would grant the
holder(s) equal or superior rights to the Series A Preferred Stock.
Voting Rights: As long as Mr. Adams is the beneficial owner of 3,200,000
shares of our common stock and is the holder of any shares of our Series A
Preferred Stock, he shall have the right to vote that number of shares (when
added to Mr. Adams' 3,200,000 shares of common stock) necessary to provide Mr.
Adams with the right to vote 51% of the total votes necessary for the election
of directors and for any acquisition or merger transaction.
Redemption Rights: The Company will have the right, but not the obligation,
to redeem shares of the Series A Preferred Stock by paying Mr. Adams $1.00 per
share. Such redemption may occur any time the Company has money legally
available for such redemption.
Dividend Rights: None
Our board of directors may issue one or more series of preferred stock. If
we decide to issue any additional preferred stock in the future, our board of
directors will determine the number of shares and the rights, preferences and
limitations of each series. These rights, preferences and limitations may
include specific designations, number of shares, dividend, liquidation,
redemption and voting rights. However, as long as the Series A Preferred Stock
is outstanding, we will not be able to issue additional preferred stock with
rights and preferences equal to or greater than those granted to the Series A
Preferred Stock.
CONVERTIBLE NOTES
On December 15, 2009, we issued a Prime Rate Plus 2% Convertible Note Due
2012 ("Convertible Note") to Mr. George Adams, Sr. as partial consideration for
our acquisition of assets under the Adams Agreement. The principal amount of the
Convertible Note is $250,000. The interest rate is prime rate (as quoted in the
Wall Street Journal) plus 2%. The Convertible Note is convertible into shares of
our common stock at a conversion price of $.25 per share, at the option of Mr.
Adams.
On October 1, 2009, we issued a Prime Rate Plus 2% Convertible Note to Mr.
Frederick Feck (one of our directors) in the amount of $48,507.29 to evidence
our indebtedness to Mr. Feck for his payment of $48,507.29 of the Company's
expenses. Mr. Feck paid these Company expenses between March 13, 2009, until
September 15, 2009. These expenses included salaries, consulting fees, labor,
legal fees for formation of the Company, legal and filing fees related to
patents, travel expenses and the electric bills on our Corona, California
warehouse facility. On December 1, 2009, Mr. Feck elected to convert this note
into 200,000 shares of our common stock. Therefore, this debt to Mr. Feck has
been paid in full.
On November 5, 2009, we issued a Convertible Note in the principal amount
of $73,788 to Terry Adams, the son of George Adams, Sr., to evidence monies
loaned to us. The Convertible Note is due on or before December 15, 2012, bears
interest at the rate of Prime Rate (as quoted in the Wall Street Journal) plus
2% per annum and is convertible into shares of our common stock at a conversion
rate of one share per $.25 of outstanding principal and interest.
See "Certain Relationships and Related Transactions."
23
WARRANTS AND OPTIONS
We have no outstanding warrants. We have 75,900 outstanding stock options
held by a non-affiliate. These options are exercisable at a price of $.75 per
share and expire on December 31, 2014, or one year after the Company's common
stock is publicly traded. However, we anticipate implementing a stock option and
compensation plan in the future to provide for the issuance of common stock our
officers, key personnel and consultants.
REGISTRATION RIGHTS
We have not granted registration rights to the selling shareholders or to
any other person.
REPORTS TO SHAREHOLDERS
We intend to furnish our shareholders with annual reports that will
describe the nature and scope of our business and operations for the prior year
and will contain a copy of our audited financial statements for our most recent
fiscal year.
LIABILITY OF DIRECTORS AND OFFICERS
Article 9 of the Company's Articles of Incorporation provides that our
directors and officers shall not be personally liable to the Company or our
stockholders for damages for breach of fiduciary duty. However, Article 9 does
not eliminate or limit the liability of a director or officer for (1) acts or
omissions which involve intentional misconduct, fraud or knowing violation of
law or (2) the unlawful payment of dividends.
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 10 of the Company's Articles of Incorporation entitle any present
and future director or executive officer to be indemnified and held harmless
from any action, suite or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he, or a person of whom he is the
legal representative, is or was a director or officer of the corporation, to the
fullest extent legally permissible under the laws of the State of Nevada.
The Nevada Revised Statutes allow us to indemnify our officers, directors,
employees, and agents from any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, or investigative, except
under certain circumstances. Indemnification may only occur if a determination
has been made that the officer, director, employee, or agent acted in good faith
and in a manner, which such person believed to be in the best interests of the
corporation. A determination may be made by the shareholders; by a majority of
the directors who were not parties to the action, suit, or proceeding confirmed
by opinion of independent legal counsel; or by opinion of independent legal
counsel in the event a quorum of directors who were not a party to such action,
suit, or proceeding does not exist.
The expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding must be paid by us as they are incurred and
in advance of the final disposition of the action, suit or proceeding, if and
only if the officer or director undertakes to repay said expenses to us if it is
ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by us.
The indemnification and advancement of expenses may not be made to or on
behalf of any officer or director if a final adjudication establishes that the
officer's or director's acts or omission involved intentional misconduct, fraud
or a knowing violation of the law and was material to the cause of action.
24
Article 10 of the our Articles of Incorporation and Article VII of our
By-Laws entitle any director or executive officer to be indemnified and held
harmless from any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he, or a person of
whom he is the legal representative, is or was a director or officer of the
corporation, to the fullest extent legally permissible under the laws of the
State of Nevada.
The Nevada Revised Statutes allow a company to indemnify our officers,
directors, employees, and agents from any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, except under certain circumstances. Indemnification may only
occur if a determination has been made that the officer, director, employee, or
agent acted in good faith and in a manner, which such person believed to be in
the best interests of the corporation. A determination may be made by the
stockholders; by a majority of the directors who were not parties to the action,
suit, or proceeding confirmed by opinion of independent legal counsel; or by
opinion of independent legal counsel in the event a quorum of directors who were
not a party to such action, suit, or proceeding does not exist.
AUTHORIZED BUT UNISSUED CAPITAL STOCK
Nevada law does not require shareholder approval for any issuance of
authorized shares. However, the marketplace rules of the NASDAQ, which would
apply only if our common stock were ever listed on the NASDAQ, which is unlikely
for the foreseeable future, require shareholders approval of certain issuances
of common stock equal to or exceeding 20% of the then outstanding voting power
or then outstanding number of shares of common stock, including in connection
with a change of control of Ciralight, the acquisition of the stock or assets of
another company or the sale or issuance of common stock below the book or market
value price of such stock. These additional shares may be used for a variety of
corporate purposes, including future public offerings to raise additional
capital or to facilitate corporate acquisitions.
One of the effects of the existence of unissued and unreserved common stock
may be to enable our board of directors to issue shares to persons friendly to
current management, which issuance could render more difficult or discourage an
attempt to obtain control of our board by means of a merger, tender offer, proxy
contest or otherwise, and thereby protect the continuity and entrenchment of our
management and possibly deprive the shareholders of opportunities to sell their
shares of our common stock at prices higher then prevailing market prices.
SHAREHOLDER MATTERS
As an issuer of "penny stock," the protection provided by the federal
securities laws relating to forward-looking statements does not apply to us if
our shares are considered to be penny stocks. Although the federal securities
laws provide a safe harbor for forward-looking statements made by a public
company that files reports under the federal securities laws, this safe harbor
is not available to issuers of penny stocks. As a result, we will not have the
benefit of this safe harbor protection in the event of any claim that the
material provided by us, including this prospectus, contained a material
misstatement of fact or was misleading in any material respect because of our
failure to include any statements necessary to make the statements not
misleading.
INTERESTS OF NAMED EXPERTS AND COUNSEL
Except for David E. Wise, Esq., no expert or counsel named in this
prospectus as having prepared or certified any part of this prospectus or having
given an opinion upon the validity of the securities being registered or upon
other legal matters in connection with the registration or offering of the
25
common stock was employed on a contingency basis, or had, or is to receive, in
connection with the offering, a substantial interest, direct or indirect, in the
registrant. Nor was any such person connected with the registrant as a promoter,
managing or principal underwriter, voting trustee, director, officer or
employee. David E. Wise, Esq., our securities counsel, owns 310,558 shares of
our common stock. Mr. Wise acquired 240,000 shares in April 2009 for an
aggregate purchase price of $330 in exchange for legal services rendered. As a
result of such purchase price, Mr. Wise may be deemed to be a founder of the
Company. Mr. Wise acquired an additional 70,588 shares of common stock in
January 2010 for an aggregate purchase price of $17,647 ($.25 per share) in
exchange for legal services rendered. The shares issued to Mr. Wise were not
issued on a contingency basis. In addition, Mr. Wise owns a 50% equity interest
in one of our dealers, Chaparral Green Energy Solutions, LLC. See "Certain
Relationships and Related Transactions."
LEGAL REPRESENTATION
The validity of the common stock offered by this prospectus was passed upon
for us by David E. Wise, Esq., Attorney at Law, San Antonio, Texas.
EXPERTS
Our financial statements as of December 31, 2009, December 31, 2008, and
December 31 2007, and for the fiscal years ended December 31, 2009, December 31,
2008 and December 31, 2007, included in this prospectus have been audited by
independent registered public accountants and have been so included in reliance
upon the report of HJ Associates & Consultants, LLP given on the authority of
such firm as experts in accounting and auditing.
TRANSFER AGENT
Our transfer agent is Transfer Online, Inc. Their address is 317 SW Alder
Street, 2nd Floor, Portland, Oregon 97204. Their telephone number is (503)
227-2950 and their facsimile number is (503) 227-6874.
DESCRIPTION OF BUSINESS
CORPORATE BACKGROUND
We were incorporated in the state of Nevada on February 26, 2009, under the
name "Ciralight West, Inc." On March 13, 2009, we changed our name to Ciralight
Global, Inc. As a result of the acquisition described below, we are a
manufacturer and wholesaler of "advanced skylights" for use in warehouses,
schools, retail stores, airports and military installations.
In April 2009, we entered into an Exchange of Stock for Assets Agreement
with Mr. George Adams, Sr. ("Adams Agreement") to acquire certain assets
including, but not limited to, a patent, a patent application and other patent
rights, artwork, trademarks, equipment, furniture, databases, technical
drawings, promotional materials, trade names and inventory parts and marketing
rights related to the Suntracker One(TM), Suntracker Two(TM) and other
daylighting products previously owned and distributed by Ciralight, Inc., a Utah
corporation, such assets having been foreclosed on by Mr. Adams, who was the
secured creditor of Ciralight, Inc. Ciralight, Inc. is not a predecessor to
Ciralight Global, Inc. and we have no affiliation, contractual or otherwise,
with Ciralight, Inc.
In April 2009, we acquired all of the above described assets from Mr.
Adams, except for the patent, the patent application and other patent rights, in
exchange for 3,200,000 shares of our common stock and 1,000,000 shares of our
Series A Preferred Stock. In December 2009, we acquired the patent, patent
application and other patent rights from Mr. Adams in exchange for the issuance
by us of an additional 400,000 shares of our common stock and a convertible
promissory note in the amount of $250,000. The note is convertible into shares
of our common stock at a conversion rate of one share per $.25 of outstanding
principal and interest. As a result of this transaction, Mr. Adams is our
largest shareholder.
26
The Adams Agreement also granted Mr. Adams a royalty fee of $20.00 for each
Suntracker One(TM) and Suntracker Two(TM) unit or any future units that are
based on the patent rights we acquired from him. The maximum royalty fees
payable under the Adams Agreement is $2,000,000 based on the sale of 100,000
units. From February 26, 2009 through December 31, 2009, we accrued $15,260 in
royalties due to Mr. Adams related to our sale of 763 units.
WHAT ARE "ADVANCED SKYLIGHTS?"
Standard skylights are typically either shaped plastic skylights or flat
glass skylights with a light well and a diffuser used to bring daylight into
buildings. Flat skylights typically provide the most light at high sun angles
and the least at low sun angles. Domed skylights perform better than flat
skylights because they have the ability to refract light and redirect it into
the building owing to its dome profile. Advanced skylights include two features
that distinguish them from standard skylights:
1. The capability to intersect and redirect sunlight at low solar
altitude angles; and
2. The capability to differentially reject more high-angle sun, which
also typically has the highest solar radiation intensity (i.e., heat
content).
Admitting low angle sun substantially increases daylit hours for daylight
harvesting and rejecting high angle, high intensity sun reduces solar heat gain
at peak cooling periods.
Advanced skylights are defined as skylights incorporating technology which
enables optical redirection of low-angle sunlight into a building and high-angle
sunlight away from a building. Advanced skylights use either "active" or
"passive" technology. An advanced skylight with active technology employs use of
moving parts such as rotating mirrors inside the skylight dome, while one with
passive technology has no moving parts and uses advanced optics on the skylight
dome surface. Both types of advanced skylights claim better overall daylighting
performance by increasing the amount of daylight during hours with low sun angle
and reducing HVAC cooling loads during the hours with high angle sun.
OUR PRODUCTS AND TECHNOLOGY
Using the basic design and technology of the Suntracker One(TM) and
Suntracker Two(TM) units, we have made significant improvements to the design
and functionality of those units and we are currently marketing our advanced
daylighting system under the name "Smart Skylight(TM)." Our Smart Skylight(TM)
products use active technology and are considered to be advanced skylights. We
believe our Smart Skylight(TM) product is unique in the following ways:
* GPS Controller - Each unit includes a fully self-contained solar
powered Global Positioning System ("GPS") controller that tracks the
position of the sun and insures maximum light up to three times
greater than the light from typical skylights.
* Diffusion and Thermal Barrier - Each unit includes (i) a
state-of-the-art prismatic lens that helps provide evenly dispersed
light and (ii) a dual panel thermal barrier that prevents heat gain
into the lighted space resulting in less than one-half the heat of a
common fluorescent light fixture.
* Mirror Array - Each unit contains either a single or triple mirror
dynamic tracking array. The mirrors continuously track the sun across
the sky even in winter's low sun angles and provide an abundant source
of free light with no flickering or humming of electricity. The mirror
27
array and GPS controller create a solar array that directs the
sunlight through a special lighting diffuser lens and through the
lightwell designed to produce even, clean lighting (with minimal heat
transference) into a building.
* Acrylic Dome - Each Unit contains a clear, thermally formed, high
impact resistant acrylic dome that provides superior strength and UV
resistance and is easy to install.
In addition, our Smart Skylight(TM) products provide natural daylighting
that is a key component in building to United States Green Building Council
("USGBC") standards and for receiving Leadership in Energy and Environmental
Design ("LEED") certification. Smart Skylights(TM) are maintenance free, powered
by the sun and completely self-contained.
MANUFACTURING
At the present time, we do not directly manufacture our Smart Skylight(TM)
products, as all manufacturing is outsourced to companies in the United States.
Our domes and lenses are currently manufactured in southern California and
Arizona and shipped to our Corona, California warehouse for storage and
distribution. Our mirrors and GPS controllers are manufactured in Texas and
shipped to our Corona warehouse. The manufacturers and suppliers we use are
standard fabrication and assembly companies capable of meeting large volume
product demand. Although we are dependent on our manufacturers and suppliers, we
have alternative firms who could provide the same services to us on short
notice.
MARKETS AND MARKETING
We are currently marketing our Smart Skylight(TM) products to warehouse
owners, roofing companies, shopping centers, schools and military installations
in the United States. We are working on establishing sales in Canada, Mexico and
overseas. The market for advanced skylights is growing year over year due to
pressures on building owners, tenants, schools and government agencies to reduce
energy consumption and expense. The "green" movement, carbon footprint ideology
and other environmental initiatives should further growth in our market segment.
We currently market our products through direct sales by company personnel
and through a network of dealers. We currently have nine dealers in the United
States and three distributorships (one in the United States, one in Israel and
one in Turkey) selling our products on a non-exclusive basis. In the future, we
will explore utilizing large distributors who will purchase and house our
products for redistribution to consumers and dealers in their geographical
areas.
Due to the ramp up time we needed to improve certain components and
functionality of our Smart Skylight(TM) products, we have not kicked off a major
marketing campaign. However, we intend to increase our marketing efforts in the
next month or so by recruiting more dealers, some distributors and through
directed advertising. We will also actively participate in trade shows and
"green" initiatives.
During our limited operating history, we have sold and installed our Smart
Skylight(TM) products to such brand name retailers as Ace Hardware, Office
Depot, IKEA, Whole Foods and Fresh and Easy. We have also sold our products to
Patagonia Clothing, Boeing, Johnson & Johnson and the Phoenix Sky Harbor
Airport. We have also sold our products to the U.S. Navy and U.S. Army.
We are also educating our dealers and customers on the various tax
incentive programs available to them on local, state and national levels.
28
COMPETITION
Our major competitors in the active skylight market are Solar Tracking
Skylights, Inc., Natural Lighting, Inc. and Sundolier. Our major competitors in
the passive skylight market are Solatube, Inc. and Monodraught Skylights.
Therefore, our markets are highly competitive and many of our competitors have
greater financial and human resources that we have. We will compete with these
competitors by offering better products at competitive pricing. If we fail to
effectively compete with our competitors, then we may not be able to stay in
business.
OUR INTELLECTUAL PROPERTY
Our success depends on the skills of our employees and third-party
consultants and their ability to continue to innovate and improve our
intellectual property. We rely on a combination of copyright, trademark, patent
and design laws, trade secrets, confidentiality procedures and contractual
provisions to protect our intellectual property rights and proprietary
methodologies. We enter into confidentiality agreements with our employees and
consultants and we generally control access to and distribution of proprietary
information. These agreements generally provide that any confidential
information developed by us or on our behalf be kept confidential. Further, we
require all employees to execute written agreements assigning to us all rights
in all inventions, developments, technologies and other intellectual property
created by our employees.
We currently own United States Letters Patent No. 7,430,077 for "Solar
Tracking Reflector System for Structure Lighting," which issued on September 30,
2008, and which we acquired in December 2009. We also own United States Patent
Application No. 12/323,935 for "Solar Tracking Reflector System for Structure
Lighting," which was filed on November 26, 2008, and acquired by us in December
2009. In addition, we are in the process of registering various trademarks for
which we have common law rights. We also own certain trade secrets and formulae.
GOVERNMENTAL REGULATIONS
We are subject primarily to local rules and regulations in the form of
building codes, which apply mostly to structures and roofing materials, and are
not currently regulated by federal or state governments. The limited rules and
regulations to which we are subjected will not have any material impact on our
products, business or profitability.
BUSINESS AND LEGAL DEVELOPMENTS REGARDING CLIMATE CHANGE
Since our products result in energy cost savings from the delivery and
distribution of daylight to the facilities who utilize our products and actually
reduce the level of greenhouse gas emissions, we are not negatively impacted by
existing laws and regulations regarding climate change. We feel that legal,
technological, political and scientific developments regarding climate change
will actually enhance the demand for our products, which should translate into
higher revenues and, hopefully, higher profits.
DESCRIPTION OF PROPERTY
We are currently subleasing our office and warehouse facility in Corona,
California for $3,000 a month. The property is owned by one of our Directors,
Frederick Feck. This is a verbal lease and runs month to month. The space
consists of approximately 3,500 square feet. We occupied this warehouse facility
from March 1, 2009 until September 30, 2009 on a rent free basis. Our board of
directors believes this new rental arrangement is fair to the Company. See
"Certain Relationships and Related Transactions."
29
SUBSIDIARIES
We have no subsidiaries.
EMPLOYEES
The Company has adopted a business model based on an efficient, lean and
small operations office with most of the emphasis and focus on directing and
managing the sales activities out in the field. The Company currently has four
(4) employees, none of whom is represented by a labor union. The full time paid
employees are Jeffrey Brain, our President and Chief Executive Officer, one
Warehouse Manager and two Executive Assistants. The Company believes it has an
excellent relationship with its employees. Our sales people will work for
distributors and dealers and not be employees of the Company. They will be
compensated on commission only basis.
Currently, we do not have any employment agreements with any of our
officers, directors or employees. We may offer employment agreements to our
executive officers in the future.
LEGAL PROCEEDINGS
On October 15, 2009, we filed a lawsuit in the Superior Court of the State
of California for the County of Orange, Central Justice Center (Case No.
30-2009, 00314998) ("Complaint") against Jacque Stevens, Rex Miller, Greg
Schmalz, A-1 Daylighting, Consultech, Daylight Specialist and DOES 1-25. The
Complaint includes five causes of action by us against the defendants: Tortious
Interference with Contract, Commercial Disparagement, Conspiracy, Breach of
Contract, Unfair Business Practices and Libel. The Complaint alleges that we
entered into a nondisclosure agreement as part of an agreement to work toward
completing a joint venture/private label of our solar lighting systems with
Firestone Building Products and that defendants attempted to interfere with our
business relationship with Firestone Building Products by disparaging our
products (misrepresentations regarding prior sales, installations and quality of
service and that we provided or substituted defective or improper parts in our
products). We are seeking general, special and punitive or exemplary damages and
injunctive relief against the defendants.
While some of the defendants have answered the Complaint, none of them has
filed a counterclaim against us in this case. We are in settlement negotiations
with various defendants in this case. We do not believe we have any legal
exposure in this case.
On January 14, 2010, we were served with process in two lawsuits, which we
deemed to be frivolous. Both of these lawsuits were filed in the Superior Court
of the State of California for the County of Orange, Central Justice Center
(Case
30
No. 30-2010, 00334139) ("Lawsuit A"). Lawsuit A is styled First Team Marketing
and Communications vs. Ciralight Global, Inc., Ciralight, Inc. and DOES 1-25.
Lawsuit A is a suit on an open book account in the amount of approximately
$62,000. We believe that this suit should have been brought against Ciralight,
Inc., a defunct corporation, with whom we have no affiliation or relationship.
The second of these lawsuits (Case No. 30-2010, 003344479) ("Lawuist B") is
styled Greg Schmalz Consultants LLC vs. Ciralight Global, Inc., Ciralight, Inc.
and DOES 1-25. Lawsuit B is a suit on an open book account in the amount of
approximately $34,000. We believe this suit should have been brought against
Ciralight, Inc., a defunct corporation, with whom we have no affiliation or
relationship. We do not believe we have any exposure in either Lawsuit A or B.
Our legal counsel is in the process of filing demurrers and motions to strike
against both lawsuits.
CAUTIONARY STATEMENTS REGARDING FORWARD LOOKING STATEMENTS
This prospectus contains forward looking statements. These statements
relate to future events or future financial performance and involve known and
unknown risks, uncertainties and other factors that may cause Ciralight Global
or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by the forward
looking statements.
In some cases, you can identify forward looking statements by terminology
such as "may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or the negative of these terms or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially. Although we believe that the expectations
reflected in the forward looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements. We are under no
duty to update any of the forward looking statements after the date of this
prospectus to confirm our prior statements to actual results.
Further, this prospectus contains forward looking statements that involve
substantial risks and uncertainties. Such statements include, without
limitation, all statements as to expectation or belief and statements as to our
future results of operations, the progress of any research, product development
and clinical programs, the need for, and timing of, additional capital and
capital expenditures, partnering prospects, the protection of and the need for
additional intellectual property rights, effects of regulations, the need for
additional facilities and potential market opportunities. Our actual results may
vary materially from those contained in such forward looking statements because
of risks to which we are subject, such as lack of available funding, competition
from third parties, intellectual property rights of third parties, litigation
and other risks to which we are subject.
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SUMMARY FINANCIAL DATA
The summary financial data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and the related notes included
elsewhere in this prospectus. We derived the financial data as of December 31,
2009, 2008 and 2007, and for the period from February 26, 2009 (inception) to
December 31, 2009 and the years ended December 31, 2008 and 2007 from our
financial statements and from the financial statements of the prior company
included in this prospectus. The historical results are not necessarily
indicative of the results to be expected for any future period.
For the period from
February 26, 2009 Years Ended
(inception) to December 31,
December 31, ---------------------------------
2009 2008 2007
----------- ----------- -----------
STATEMENT OF OPERATIONS DATA:
Sales $ 640,425 $ 1,592,263 $ 666,626
Cost of Sales 549,812 1,342,191 522,404
Gross Profit 90,613 250,072 144,222
Total Operating Expenses 910,938 3,112,984 4,806,272
Loss from Operations (820,325) (2,862,912) (4,662,050)
Total Other Income (Expense) 36 (929,360) (834,492)
Net Loss (820,289) (3,792,272) (5,496,542)
Basic and Diluted Loss per share $ (0.11) $ (0.15) $ (0.23)
Weighted average shares outstanding 7,543,444 24,577,743 23,597,143
As of December 31,
-------------------------------------------------------
2009 2008 2007
----------- ----------- -----------
BALANCE SHEET DATA:
Cash and Cash Equivalents $ 265,753 $ 14,163 $ 69,544
Working Capital (Deficit) $ 365,884 $(2,928,847) $(2,337,114)
Total Assets $ 998,937 $ 759,611 $ 598,747
Total Liabilities $ 582,193 $ 3,516,369 $ 2,633,168
Total Stockholders' Equity (Deficit) $ 416,744 $(2,756,758) $(2,034,421)
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL
CONDITION OF CIRALIGHT GLOBAL, INC. FOR THE PERIOD FROM FEBRUARY 26, 2009
(INCEPTION) TO DECEMBER 31, 2009 AND OF THE PRIOR COMPANY CONDUCTING BUSINESS
FOR THE FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007, SHOULD BE READ IN
CONJUNCTION WITH THE FINANCIAL STATEMENTS, AND THE NOTES TO THOSE FINANCIAL
STATEMENTS THAT ARE INCLUDED ELSEWHERE IN THIS PROSPECTUS. REFERENCES TO "WE,"
"OUR," OR "US" IN THIS SECTION REFERS TO THE COMPANY AND ITS SUBSIDIARIES. OUR
DISCUSSION INCLUDES FORWARD-LOOKING STATEMENTS BASED UPON CURRENT EXPECTATIONS
THAT INVOLVE RISKS AND UNCERTAINTIES, SUCH AS OUR PLANS, OBJECTIVES,
EXPECTATIONS AND INTENTIONS. ACTUAL RESULTS AND THE TIMING OF EVENTS COULD
DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS
A RESULT OF A NUMBER OF FACTORS, INCLUDING THOSE SET FORTH UNDER THE RISK
FACTORS, FORWARD-LOOKING STATEMENTS AND BUSINESS SECTIONS IN THIS PROSPECTUS. WE
USE WORDS SUCH AS "ANTICIPATE," "ESTIMATE," "PLAN," "PROJECT," "CONTINUING,"
"ONGOING," "EXPECT," "BELIEVE," "INTEND," "MAY," "WILL," "SHOULD," "COULD," AND
SIMILAR EXPRESSIONS TO IDENTIFY FORWARD-LOOKING STATEMENTS.
OVERVIEW
We are a manufacturer and wholesaler of "advanced skylights" for use in
warehouses, schools, retail stores, airports, military installations and
residential buildings. We develop, market and sell the Suntracker One(TM) and
Suntracker Two(TM) units and we are currently marketing our advanced daylighting
system under the name Smart Skylight(TM).
We were incorporated in the state of Nevada on February 26, 2009, under the
name "Ciralight West, Inc." On March 13, 2009, we changed our name to "Ciralight
Global, Inc." In April 2009, we entered into an Exchange of Stock for Assets
Agreement with Mr. George Adams, Sr. to acquire certain assets including, but
not limited to, a patent, a patent application and other patent rights, artwork,
trademarks, equipment, furniture, databases, technical drawings, promotional
materials, trade names and inventory parts and marketing rights related to the
Suntracker One, Suntracker Two and other daylighting products previously owned
and distributed by Ciralight, Inc., a Utah corporation, such assets having been
foreclosed on by Mr. Adams, who was the secured creditor of Ciralight, Inc. We
did not acquire any equity securities, debts, liabilities or financial
obligations of Ciralight, Inc., the prior company. Ciralight, Inc. is not a
predecessor to Ciralight Global, Inc. and we have no affiliation, contractual or
otherwise, with Ciralight, Inc. or any of its employees, officers or directors.
Ciralight, Inc. ceased operations when Mr. Adams foreclosed on its assets in
March 2009.
In April 2009, we acquired all of the above described assets from Mr.
Adams, except for the title to the patent, in exchange for 3,200,000 shares of
our common stock and 1,000,000 shares of our Series A Preferred Stock. In
December 2009, we acquired the title to the patent from Mr. Adams in exchange
for the issuance by us of an additional 400,000 shares of our common stock and a
convertible promissory note in the amount of $250,000. The promissory note we
issued to Mr. Adams is convertible into shares of our common stock at a
conversion rate of one share per $.25 of outstanding principal and interest. As
a result of this transaction, Mr. Adams is our largest shareholder and has
voting control over us.
In order to raise working capital, we commenced a Private Placement
Offering in the amount of $800,000 in April 2009. Our common stock was offered
at a fixed price of $.25 per share. We raised the $800,000 by mid October 2009
and the investors purchased a 40% stake in the company for a total of 3,200,000
shares.
In October 2009, the Company elected to extend the private offering in
order to raise an additional $500,000 in working capital by offering 2,000,000
additional shares at $.25 per share. We raised the additional $500,000 by mid
January 2010, at which time the offering was closed.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our management's discussion and analysis of our financial condition and
results of operations are based on our condensed financial statements, which
have been prepared in accordance with accounting principles generally accepted
33
in the United States. The preparation of these financial statements requires us
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements as well as the reported net sales and expenses
during the reporting periods. On an ongoing basis, we evaluate our estimates and
assumptions. We base our estimates on historical experience and on various other
factors that we believe are reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.
While our significant accounting policies are more fully described in Note
3 to our financial statements, we believe that the following accounting policies
are the most critical to aid the reader in fully understanding and evaluating
this discussion and analysis:
BASIS OF PRESENTATION - The accompanying financial statements have been
prepared in accordance with generally accepted accounting principles for
financial information and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission for smaller reporting
companies. In the opinion of management, all adjustments, consisting of normal
recurring accruals, necessary for a fair presentation of the results of
operations for the period from February 26, 2009 (inception) to December 31,
2009 have been reflected herein. The results of operations for the period from
February 26, 2009 (inception) to December 31, 2009 are not necessarily
indicative of the results to be expected for the entire year. These statements
should be read in conjunction with the accompanying audited financial statements
for the years ended December 31, 2008 and 2007.
The accompanying audited financial statements for the years ended December
31, 2008 and 2007 reflect the activity of Ciralight, Inc., the company whose
assets were foreclosed on by Mr. Adams, a secured creditor, on March 14, 2009.
Ciralight Global, Inc. subsequently acquired such assets from Mr. Adams on April
1, 2009. We did not acquire any equity securities, debt, liabilities or
financial obligations of Ciralight, Inc. and Ciralight, Inc. is not a
predecessor to Ciralight Global, Inc. Pursuant to the rules and regulations of
the Securities and Exchange Commission regarding a lesser component of an entity
constituting a business, management has evaluated the facts and circumstances
relating to our transactions with Mr. Adams and considers that the attributes
and the continuity of the revenue-producing activity we acquired are sufficient
to warrant disclosure of the financial information of the prior company, as if a
business was acquired. The accompanying financial statements are presented in
order to comply with regulatory requirements and to inform you of the financial
condition and operations of our Company and of the prior company, Ciralight,
Inc., that conducted the revenue-producing activity we acquired.
The accompanying December 31, 2009 audited financial statements reflect the
operations of Ciralight Global, Inc. for the period February 26, 2009
(inception) through December 31, 2009 and the financial condition as of December
31, 2009. The accompanying notes include pro forma presentation, which
consolidates and presents individually the activity of Ciralight, Inc. for the
period January 1, 2009 through March 14, 2009 (date operations ceased) and the
activity of Ciralight Global, Inc. for the period February 26, 2009 (inception)
through December 31, 2009.
The accompanying December 31, 2008 and 2007 audited financial statements
reflect the operations of Ciralight, Inc. for the years ended December 31, 2008
and 2007 and the financial condition as of the years then ended.
INVENTORIES - Inventories, consisting primarily of finished skylight units
and parts for sale, are recorded using the average cost method. Inventory
acquired from the prior company was booked at the historical cost of the prior
company.
REVENUE RECOGNITION - Revenue on our skylights and parts are recognized
when the units or parts ship to the customer.
EARNINGS PER SHARE - Earnings per share is computed in accordance with the
provisions of Financial Accounting Standards (FASB) Accounting Standards
Codification (ASC) Topic 260 (SFAS No. 128, "EARNINGS PER Share"). Basic net
income (loss) per share is computed using the weighted-average number of common
shares outstanding during the period. Diluted earnings per share is computed
using the weighted-average number of common shares outstanding during the
period, as adjusted for the dilutive effect of the Company's outstanding
convertible preferred shares using the "if converted" method and dilutive
potential common shares. Potentially dilutive securities include warrants,
convertible preferred stock, restricted shares, and contingently issuable
shares.
34
STOCK-BASED COMPENSATION - The Company accounts for stock-based
compensation under the provisions of FASB ASC 718 (Statement of Financial
Accounting Standards No. 123 (revised 2004), "SHARE-BASED PAYMENT"), which
requires the Company to measure the stock-based compensation costs of
share-based compensation arrangements based on the grant date fair value and
generally recognizes the costs in the financial statements over the employee's
requisite service period. Stock-based compensation expense for all stock-based
compensation awards granted was based on the grant date fair value estimated in
accordance with the provisions of FASB ASC 718.
PRODUCT WARRANTIES - Commencing April 1, 2009, the Company provided a
five-year warranty covering the labor and materials associated with its
installations. Effective September 1, 2009, the Company changed the coverage to
ten years in California and generally five to ten years elsewhere in the U.S.,
depending upon each state's specific requirements. The Company's "advanced
skylights" are warranted by the manufacturer for 10 years, generally.
COMPREHENSIVE INCOME (LOSS) - FASB ASC Topic 220 (Statement of Financial
Accounting Standards No. 130, "REPORTING COMPREHENSIVE INCOME") establishes
standards for reporting comprehensive income (loss) and its components in a
financial statement that is displayed with the same prominence as other
financial statements. Comprehensive income (loss), as defined, includes all
changes in equity during the period from non-owner sources, such as foreign
currency translation adjustments.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 2007, the FASB issued FASB ASC 805 (FAS No. 141(R), "BUSINESS
COMBINATIONS" ("FAS 141(R)")), which requires the acquiring entity in a business
combination to recognize all (and only) the assets acquired and liabilities
assumed in the transaction, establishes the acquisition date fair value as the
measurement objective for all assets acquired and liabilities assumed, and
requires the acquirer to disclose to investors and other users all of the
information they need to evaluate and understand the nature and financial effect
of the business combination. FASB ASC 805 is prospectively effective to business
combinations for which the acquisition is on or after the beginning of the first
annual reporting period beginning on or after December 15, 2008. The impact of
FASB ASC 805 on the Company's financial statements will be determined in part by
the nature and timing of any future acquisitions completed.
In March 2008, the Financial Accounting Standards Board ("FASB") issued
FASB ASC 815-40 (SFAS No. 161, "DISCLOSURES ABOUT DERIVATIVES INSTRUMENTS AND
HEDGING ACTIVITIES, AN AMENDMENT OF FASB STATEMENT NO. 133"). FASB ASC 815-40
requires enhanced disclosures about a company's derivative and hedging
activities. ASC 815-40 is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008. The adoption of
FASB ASC 815-40 did not have a material impact on results of operations, cash
flows, or financial position.
In April 2008, the FASB issued FASB ASC 350-30 (FASB Staff Position (FSP)
FAS No. 142-3, "DETERMINATION OF THE USEFUL LIFE OF INTANGIBLE ASSETS"). FASB
ASC 350-30 amends the factors an entity should consider in developing renewal or
extension assumptions used in determining the useful life of recognized
intangible assets under FASB ASC 350-30 (SFAS No. 142, "GOODWILL AND OTHER
INTANGIBLE ASSETS"). FASB ASC 350-30 must be applied prospectively to intangible
assets acquired after the effective date. The Company applied the guidance of
the FASB ASC 350-30 to intangible assets acquired after January 1, 2009. The
Company's adoption of FASB ASC 350-30 did not have a material impact on its
financial position, results of operations, or cash flows.
In June 2008, the FASB ratified FASB ASC 815-40 (EITF Issue 07-5 (EITF
07-5), "DETERMINING WHETHER AN INSTRUMENT (OR AN EMBEDDED FEATURE) IS INDEXED TO
AN ENTITY'S OWN STOCK"). FASB ASC 815-40 provides that an entity should use a
two step approach to evaluate whether an equity-linked financial instrument (or
embedded feature) is indexed to its own stock, including evaluating the
instrument's contingent exercise and settlement provisions. It also clarifies on
the impact of foreign currency denominated strike prices and market-based
employee stock option valuation instruments. FASB ASC 815-40 is effective for
fiscal years beginning after December 15, 2008 and interim periods within those
years. On April 1, 2009, the Company adopted this pronouncement.
In April 2009, the FASB issued FASB ASC 825-10-50 and FASB ASC 270 ("FSP
107-1 AND APB 28-1 INTERIM DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL
INSTRUMENTS"), which increases the frequency of fair value disclosures to a
35
quarterly basis instead of on an annual basis. The guidance relates to fair
value disclosures for any financial instruments that are not currently reflected
on an entity's balance sheet at fair value. FASB ASC 825-10-50 and FASB ASC 270
are effective for interim and annual periods ending after June 15, 2009. The
adoption of FASB ASC 825-10-50 and FASB ASC 270 did not have a material impact
on results of operations, cash flows, or financial position
In May 2009, the FASB issued FASB ASC 470 (Staff Position No. APB 14-1
"ACCOUNTING FOR CONVERTIBLE DEBT INSTRUMENTS THAT MAY BE SETTLED IN CASH UPON
CONVERSION (INCLUDING PARTIAL CASH SETTLEMENT)"). FASB ASC 470 clarifies that
convertible debt instruments that may be settled in cash upon conversion
(including partial cash settlement) are not addressed by FASB ASC 470-20-65-1
(paragraph 12 of APB Opinion No. 14, "ACCOUNTING FOR CONVERTIBLE DEBT AND DEBT
ISSUED WITH STOCK PURCHASE WARRANTS"). Additionally, FASB ASC 470 specifies that
issuers of such instruments should separately account for the liability and
equity components in a manner that will reflect the entity's nonconvertible debt
borrowing rate when interest cost is recognized in subsequent periods. FASB ASC
470 is effective for financial statements issued for fiscal years beginning
after December 15, 2008 and interim periods within those fiscal years. The
adoption of FASB ASC 470 did not have a material effect on our consolidated
financial statements.
In May 2009, the FASB issued FASB ASC 855 (SFAS No. 165, "SUBSEQUENT
EVENTS"), which establishes general standards of accounting for and disclosure
of events that occur after the balance sheet date but before financial
statements are issued or are available to be issued. In particular, FASB ASC 855
sets forth (a) the period after the balance sheet date during which management
of a reporting entity should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements, (b) the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements, and (c) the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. FASB ASC 855 is effective for interim or
annual financial reporting periods ending after June 15, 2009. The adoption of
FASB ASC 855 did not have a material impact on results of operations, cash
flows, or financial position.
In June 2009, the FASB issued FASB ASC 810 (SFAS No. 167, "AMENDMENTS TO
FASB INTERPRETATION NO. 46(R)"). FASB ASC 810 applies to FASB ASC 105 entities
and is effective for annual financial periods beginning after November 15, 2009
and for interim periods within those years. Earlier application is prohibited. A
calendar year-end company must adopt this statement as of January 1, 2010. The
Company does not anticipate the adoption of FASB ASC 810 to have a material
impact on results of operations, cash flows, or financial position.
In June 2009, the FASB issued FASB ASC 860 (SFAS No. 166, "ACCOUNTING FOR
TRANSFERS OF FINANCIAL ASSETS-AN AMENDMENT OF FASB STATEMENT NO. 140"). FASB ASC
860 applies to all entities and is effective for annual financial periods
beginning after November 15, 2009 and for interim periods within those years.
Earlier application is prohibited. A calendar year-end company must adopt this
statement as of January 1, 2010. This statement retains many of the criteria of
FASB ASC 860 (FASB 140, "ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL
ASSETS AND EXTINGUISHMENTS OF LIABILITIES") to determine whether a transfer of
financial assets qualifies for sale accounting, but there are some significant
changes as discussed in the statement. Its disclosure and measurement
requirements apply to all transfers of financial assets occurring on or after
the effective date. Its disclosure requirements, however, apply to transfers
that occurred BOTH before and after the effective date. In addition, because
FASB ASC 860 eliminates the consolidation exemption for Qualifying Special
Purpose Entities, a company will have to analyze all existing QSPEs to determine
whether they must be consolidated under FASB ASC 810. The Company does not
anticipate the adoption of FASB ASC 860 to have a material impact on results of
operations, cash flows, or financial position.
In August 2009, the FASB issued ASU 2009-05, "MEASURING LIABILITIES AT FAIR
VALUE." ASU 2009-05 applies to all entities that measure liabilities at fair
value within the scope of FASB ASC 820, "FAIR VALUE MEASUREMENTS AND
DISCLOSURES." ASU 2009-05 is effective for the first reporting period (including
interim periods) beginning after issuance, October 1, 2009, for the Company. The
Company does not anticipate the adoption of ASU 2009-05 to have a material
impact on results of operations, cash flows, or financial position.
In October 2009, the FASB ratified FASB ASC 605-25 (the EITF's final
consensus on Issue 08-1, "REVENUE ARRANGEMENTS WITH MULTIPLE DELIVERABLES").
FASB ASC 605-25 is effective for fiscal years beginning on or after June 15,
2010. Earlier adoption is permitted on a prospective or retrospective basis. The
Company is currently evaluating the impact of this pronouncement on its
consolidated financial statements.
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RESULTS OF OPERATIONS
FOR THE PERIOD FROM FEBRUARY 26, 2009 (INCEPTION) TO DECEMBER 31, 2009
NET SALES. Net sales for the period from February 26, 2009 (inception) to
December 31, 2009 were $640,425.
Reduced sales were attributable to the transition time required for our
Company to move, setup and commence the new operations, set up our sales force,
as well as address former company customer, investor and supplier issues, raise
our working capital, and a self-imposed 60 day period, during which we refrained
from making new sales while product improvements were being completed. As a
result of the efficiencies we implemented, our gross profit was $90,613 for the
period ended December 31, 2009.
COST OF SALES. Cost of sales for the period from February 26, 2009
(inception) to December 31, 2009 was $549,812 on net revenue of $640,425,
representing 86%, and providing a gross profit of 14%.
Reducing cost of sales was achieved by implementing a number of changes in
the business operations. These included strict controls over the movement of
inventory to reduce losses, damage, and waste, making improvements to the
products in order to reduce warranty work, implement cost effective shipping
options available through better pre-planning and scheduling, managing inventory
levels by scheduling production to match demand forecasts, change to more
quality oriented suppliers, negotiate more favorable manufacturing agreements,
and implementing cost reducing design changes.
GROSS PROFIT. Gross profit for period from February 26, 2009 (inception) to
December 31, 2009 was $90,613, providing a gross profit margin of 14%.
During 2009, in an effort to address issues experienced by customers that
purchased product from the prior company, Ciralight, Inc., we sold replacement
parts or parts that had been purchased, but never shipped to old customers, at
our cost. Our gross profit increased, even though we sold product at cost in
order to resolve past issues from the prior company. All of the open issues and
problems reported by former customers have been resolved. With the elimination
of resolution of past issues, continued product enhancements and refinements to
our production process, we anticipate higher gross profit margins in the future.
OPERATING EXPENSES. Our operating expenses consist of research and
development expenses, selling and marketing expenses and general and
administrative expenses. For the period from February 26, 2009 (inception) to
December 31, 2009, total operating expenses were $910,938. As a percentage of
sales, operating expenses were approximately 142% for the period from February
26, 2009 (inception) to December 31, 2009.
Reducing operating expenses was the result of a number of changes in the
manner in which the business was operated. In 2009 our Company operated with
only four employees and outsourced required additional services on an as needed
basis. No employees from the prior company were employed or brought over to our
Company. They were not part of the rights we acquired and this has created a
culture of efficiency and accountability. We eliminated the practice of having
consultants and sales people on retainers. Compensation is tied to work
completed. We elected not to directly hire sales personnel and instead require
that they work for third party dealers and distributors, thus reducing the
overhead cost of carrying and supporting an extended staff.
Additional expense reductions are attributable to our occupancy expenses.
During the period from February 26, 2009 (inception) to December 31, 2009, our
occupancy expenses were $54,450 for our offices and warehouse.
INCOME TAXES. For the period from February 26, 2009 (inception) to December
31, 2009, management has decided not to record the tax benefit.
COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
NET SALES. During the 2008 fiscal year, net sales were $1,592,263 as
compared to $666,626 during the 2007 fiscal year, an increase of 139%. The
increase was attributable to strong sales growth and increased commercial sales
in the U.S. Commercial sales increased due to sales efforts in those markets.
There was also continued growth in the U.S. residential market as a result of a
new Southern California residential sales office that opened during 2008.
37
COST OF SALES. Cost of sales for the 2008 fiscal year was $1,342,191 as
compared to $522,404 for the 2007 fiscal year, an increase of approximately
157%. The increase in cost of sales is attributable to the growth in commercial
sales as commercial projects carry a higher cost of sales relative to net sales.
During 2008, the prior company was awarded and completed a large commercial
project performing only installation services, which did not involve the high
level of integration that is normally provided.
GROSS PROFIT. Gross profit for the 2008 fiscal year was $250,072 as
compared to gross profit of $144,222 for the 2007 fiscal year, representing
gross margins of approximately 16 % and 22%, respectively. The decrease in gross
profit percent is directly related to the decision to increase commercial
contracts, which generally have lower gross profit margins.
OPERATING EXPENSES. Operating expenses consist of research and development
expenses, sales and marketing expenses and general and administrative expenses.
During the 2008 fiscal year, operating expenses were $3,112,984 while operating
expenses for the 2007 fiscal year were $4,806,272. As a percentage of sales,
operating expenses were 196% and 721% for the twelve months ended December 31,
2008 and 2007, respectively. The decrease in operating expenses from 2007 to
2008 is due to decreases in both selling expenses and professional costs.
OTHER EXPENSE. Other expenses were $929,360 for the 2008 fiscal year as
compared to $834,492 for the 2007 fiscal year.
NET LOSS. The prior company had a net loss of $3,792,272 for the 2008
fiscal year as compared to a net loss of $5,496,542 for the 2007 fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS - FOR THE PERIOD FROM FEBRUARY 26, 2009 (INCEPTION) TO DECEMBER 31,
2009.
Net cash used in operating activities was $1,085,168 for the period from
February 26, 2009 (inception) to December 31, 2009 and is attributable to the
increase in operating assets related to asset acquisitions and the net loss for
the period.
Net cash used in investing activities was $3,500 for the period from
February 26, 2009 (inception) to December 31, 2009 and is attributable to the
acquisition of property, equipment and intangibles associated with our asset
acquisitions and the related costs of the acquisitions.
Net cash provided by financing activities was $1,354,421 for the period
from February 26, 2009 (inception) to December 31, 2009 and is primarily
attributable to sales of the Company's common stock through a private offering
and proceeds from convertible notes payable.
CASH FLOWS - COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 2008 AND 2007
Net cash used in operating activities was $2,291,290 and $3,346,765 for the
2008 and 2007 fiscal years, respectively.
Net cash used in investing activities was $14,683 and $99,031 for the 2008
and 2007 fiscal years, respectively.
Net cash provided by financing activities was $2,250,592 and $3,041,882 for
the 2008 and 2007 fiscal years, respectively.
MATERIAL IMPACT OF KNOWN EVENTS ON LIQUIDITY
The disruption in the credit markets has had a significant adverse impact
on a number of financial institutions. As of December 31, 2009, however, our
liquidity and capital investments have not been materially adversely impacted,
and we believe that they will not be materially adversely impacted in the near
future. We will continue to closely monitor our liquidity and the credit
markets. We cannot, however, predict with any certainty the impact to us of any
further disruption in the credit environment.
There are no other known events that are expected to have a material impact
on our short-term or long-term liquidity.
38
CAPITAL RESOURCES
We have financed our operations primarily through cash flows from
operations and debt and equity financings. We commenced a Private Placement
Offering in the amount of $800,000 in April 2009. Our common stock was offered
at a fixed price of $.25 per share. We raised the $800,000 by mid October 2009
and the investors purchased a 40% stake in the company for a total of 3,200,000
shares.
In October 2009, the Company elected to extend the private offering in
order to raise an additional $500,000 in working capital by offering 2,000,000
additional shares at $.25 per share. We raised the additional $500,000 by mid
January 2010, at which time the offering was closed.
Thus, we believe that our current cash and cash equivalents, anticipated
cash flow from operations and net proceeds from the private placement financings
will be sufficient to meet our anticipated cash needs, including our cash needs
for working capital and capital expenditures for at least the next 12 months.
The proceeds from the private placement financings are being used for general
working capital purposes.
Notwithstanding the above, we may seek to raise additional cash to fund
future investments or acquisitions we may decide to pursue. To the extent it
becomes necessary to raise additional cash in the future, we may seek to raise
it through the sale of debt or equity securities, funding from joint-venture or
strategic partners, debt financing or loans, issuance of common stock, or a
combination of the foregoing. Other than our lines of credit, we currently do
not have any binding commitments for, or readily available sources of,
additional financing. We cannot provide any assurances that we will be able to
secure the additional cash or working capital we may require to continue our
operations.
CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
CONTRACTUAL OBLIGATIONS
We have certain fixed contractual obligations and commitments that include
future estimated payments. Changes in our business needs, cancellation
provisions, changing interest rates, and other factors may result in actual
payments differing from the estimates. We cannot provide certainty regarding the
timing and amounts of payments. We have presented below a summary of the most
significant assumptions used in our determination of amounts presented in the
tables, in order to assist in the review of this information within the context
of our consolidated financial position, results of operations, and cash flows.
The following table summarizes our contractual obligations as of December
31, 2009, and the effect these obligations are expected to have on our liquidity
and cash flows in future periods.
Payments Due by Period
------------------------------------------------------------------------
Total Less than 1 year 1-3 Years 3-5 Years 5 years +
----- ---------------- --------- --------- ---------
Contractual Obligations:
Notes payable $323,788 $323,788 $ -- $ -- $ --
Operating Leases 72,000 72,000 -- -- --
Commitments to
Purchase inventory 65,645 65,645 -- -- --
-------- -------- -------- -------- --------
Totals: $461,433 $461,433 $ -- $ -- $ --
======== ======== ======== ======== ========
OFF-BALANCE SHEET ARRANGEMENTS
We have not entered into any other financial guarantees or other
commitments to guarantee the payment obligations of any third parties. We have
not entered into any derivative contracts that are indexed to our shares and
classified as stockholders' equity or that are not reflected in our financial
statements. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. We do not have any variable interest in
any unconsolidated entity that provides financing, liquidity, market risk or
credit support to us or engages in leasing, hedging or research and development
services with us.
39
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
We have not had changes in or disagreements with our accountants on
accounting and financial disclosure.
DIRECTORS AND EXECUTIVE OFFICERS
Our executive officers are elected by the board of directors and serve at
the discretion of the board. All of the current directors serve until the next
annual shareholders' meeting or until their successors have been duly elected
and qualified. The following table sets forth certain information regarding our
current directors and executive officers:
Name Age Position Director Since
---- --- -------- --------------
Jeffrey S. Brain 50 President, Chief Executive Officer, April 2009
Chief Financial Officer, Chief
Operating Officer, Treasurer
and Director
Frederick Feck 79 Corporate Secretary and Director April 2009
Certain biographical information of our directors and officers is set forth
below.
JEFFREY BRAIN, PRESIDENT, CHIEF EXECUTIVE OFFICER, CHIEF FINANCIAL OFFICER,
CHIEF OPERATING OFFICER AND A DIRECTOR
Since March 15, 2009, until the present time, Jeff has been involved in the
formation and operation of the Company and currently serves us in the capacities
of President, Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer and as a director. Jeff is a successful entrepreneur, recognized civic
leader and government strategist. Jeff served as Chief Operating Officer of the
Smokey Robinson Food Company from October 2003 until November 2008. Jeff took
the company from startup to national distribution in just 18 months. Prior to
joining Smokey Robinson Food Company, Jeff was the Founder and President of
Valley Vote, Inc., one of the largest government reform organizations in U.S.
history. Jeff presided over a Board of Directors of 100 of Los Angeles' top
community and business leaders, directed 2,000 volunteers and a team of
professional consultants and attorneys.
As President of Valley Vote, Inc., Jeff was responsible for preparing a
$1.1 billion dollar budget and a public service plan to provide police, fire,
transportation, parks, utilities, etc. for a city that would be the sixth
largest city in the U.S. He also managed all the business functions, including
media relations, public speaking, community outreach, budgeting, government
structure and public service planning, message development, legislative
development and he oversaw the day-to-day administrative staff and operations.
40
Prior to forming Valley Vote, Jeff founded Jeff Brain's Real Estate
Network, a full service real-estate brokerage and consulting firm based in Los
Angeles. Before launching his entrepreneurial ventures, Jeff held the position
of Assistant Vice President at Eastern Pacific, a real estate development
company. In this role, Jeff was responsible for analyzing, budgeting and
syndicating multi-million dollar real estate development projects and managed
the Accounting Department. Jeff also served as the Director of Acquisition and
Finance at Triangle Investments, Inc., where he was responsible for real estate
acquisitions, project analysis, syndications and management.
Jeff has a Bachelor of Science degree in Finance as well as a Bachelor of
Science Degree in Accounting, both from the California State University of
Northridge.
FREDERICK FECK, CORPORATE SECRETARY AND A DIRECTOR
Mr. Feck, age 77, is a Director of the Company and our Corporate Secretary.
Mr. Feck has been in the real estate development and construction industry from
1960 until the present time. Mr. Feck developed the first true condominium with
Fee Title to cubical air space in California. After the passage of the Medicare
bill in late 1965, Mr. Feck entered the health care field syndicating and
developing convalescent hospitals. Mr. Feck acted as a general partner in the
syndication of a 204 bed convalescent hospital known as The Rio Hondo
Convalescent Hospital in Montebello, California. In 1970, Mr. Feck co-founded
Environmental Communities, Inc., to manufacture mobile and modular homes from a
facility in Corona, California. Mr. Feck sold his interest in 1972 and moved to
San Diego County. Mr. Feck formed Calco West, Inc. and was engaged in the
development and construction of single family tract homes. Mr. Feck also formed
Calco West Realty, Inc. in 1976, a general real estate operation with six
offices and a Real Estate School in the North San Diego County area. The company
was sold to its employees in 1981. Mr. Feck then formed Calco West Financial
Corporation in 1981 for the management of commercial and residential real
estate, primarily his own. Mr. Feck was also one of the original founders of the
San Marcos National Bank in 1981 and served on its Board of Directors for a
period of 14 years. Mr. Feck was born in Maine, attended the University of Maine
for two years, moved to California in 1950 and attended Northrop Aeronautical
Institute in Los Angeles from which he graduated in 1952 as an aeronautical
engineer. He worked for Northrop Aircraft Company on the N-69 Guided Missile
Program for two years before going into the service. Mr. Feck served as a pilot
in the United States Air Force for five years. Mr. Feck is licensed in
California as a general contractor and a real estate broker and also holds a
commercial pilot's license.
COMMITTEES OF THE BOARD OF DIRECTORS
We do not currently have an audit committee or a compensation committee.
COMPENSATION OF DIRECTORS
Our directors do not receive any direct compensation for their service on
our board of directors. Any future director compensation will be determined by
our compensation committee, once it is chartered.
DIRECTORSHIPS
None of our directors or persons nominated or chosen to become directors
hold any other directorship in any company with a class of securities registered
pursuant to Section 12 of the 1934 Act or subject to the requirements of Section
15(d) of such Act or any other company registered as an investment company under
the Investment Company Act of 1940.
OTHER SIGNIFICANT EMPLOYEES
No other significant employees exist.
FAMILY RELATIONSHIPS
No family relationship exists between or among any of our officers and
directors. However, one of our directors, Frederick Feck, is the brother-in-law
of George Adams, Sr., our largest shareholder.
41
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
Except as described below, during the past five years, no present director,
executive officer or person nominated to become a director or an executive
officer of Ciralight:
(1) had a petition under the federal bankruptcy laws or any state
insolvency law filed by or against, or a receiver, fiscal agent or
similar officer appointed by a court for the business or property of
such person, or any partnership in which he was a general partner at
or within two years before the time of such filing, or any corporation
or business association of which he was an executive officer at or
within two years before the time of such filing;
(2) was convicted in a criminal proceeding or subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
(3) was subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from or
otherwise limiting his involvement in any of the following activities:
(i) acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, any other person regulated by the
Commodity Futures Trading Commission, or an associated person of
any of the foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated person,
director or employee of any investment company, bank, savings and
loan association or insurance company, or engaging in or
continuing any conduct or practice in connection with such
activity;
(ii) engaging in any type of business practice; or
(iii)engaging in any activity in connection with the purchase or sale
of any security or commodity or in connection with any violation
of federal or state securities laws or federal commodities laws;
or
(4) was the subject of any order, judgment or decree, not subsequently
reversed, suspended or vacated, of an federal or state authority
barring, suspending or otherwise limiting for more than 60 days the
right of such person to engage in any activity described in paragraph
(3) (i), above, or to be associated with persons engaged in any such
activity; or
(5) was found by a court of competent jurisdiction (in a civil action),
the Securities and Exchange Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or
commodities law, and for which the judgment has not been reversed,
suspended or vacated.
Jeffrey Brain, our Chief Operating Officer, Chief Financial Officer and a
member of our board of directors, filed for protection under Chapter 7 of the
Federal Bankruptcy Code on October 7, 2005, and was discharged from bankruptcy
on February 3, 2006. The reason for the bankruptcy was that Mr. Brain had worked
as President of Valley Voters Organized Toward Empowerment ("Valley Vote") for
five years and was owed approximately $253,000 by Valley Vote, which had
continuously promised to pay him, but did not. In the meantime, Mr. Brain owed
approximately $60,000 in income and payroll taxes, which he could not pay
because of the money owed to him by Valley Vote. Our board of directors believes
that Mr. Brain is an excellent and dedicated officer, director and employee of
the Company and that his earlier bankruptcy is not reflective of his business
acumen or his value to the Company.
42
CODE OF BUSINESS CONDUCT AND ETHICS
On December 14, 2009, we adopted a Code of Business Conduct and Ethics
applicable to our officers, including our principal executive officer, principal
financial officer, principal accounting officer or controller and any other
persons performing similar functions. Our Code of Business Conduct and Ethics
was designed to deter wrongdoing and promote honest and ethical conduct, full,
fair and accurate disclosure, compliance with laws, prompt internal reporting
and accountability to adherence to our Code of Business Conduct and Ethics. Our
Code of Business Conduct and Ethics is posted on our website at
http://www.ciralightglobal.com. Our Code of Business Conduct and Ethics will be
provided free of charge by us to interested parties upon request. Requests
should be made in writing and directed to the Ciralight at the following
address: 670 E. Parkridge, Suite 112, Corona, California 92879
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid by the
Company to our executive officers and directors of the Company for services
rendered during the periods indicated. Randall Letcavage resigned from his
offices of President, Chief Executive Officer and Director on March 18 2010.
Jeffrey Bain was appointed President and Chief Executive Officer on March 19,
2010.
SUMMARY COMPENSATION TABLE
Non-Equity Nonqualified
Name and Incentive Deferred
Principal Stock Option Plan Compensation All Other
Position Year(1) Salary($) Bonus($) Awards($) Awards($) Compensation($) Earnings($) Compensation($) Total($)
-------- ---- --------- -------- --------- --------- --------------- ----------- --------------- --------
Randall 2009 $202,177 (2) $ 0 $77,699 (3) $ 0 $ 0 $ 0 $27,000 (4) $306,876
Letcavage, 2008 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
President, 2007 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Chief
Executive
Officer and
Director
Jeffrey Brain, 2009 $ 95,500 $ 0 $83,726 (5) $ 0 $ 0 $ 0 $ 0 $179,226
Chief 2008 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Financial 2007 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Officer and
Director
Frederick 2009 $ 0 $ 0 $ 400 (6) $ 0 $ 0 $ 0 $ 9,000 (7) $ 9,400
Feck, 2008 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Corporate 2007 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Secretary and
Director
- ----------
(1) The compensation covered in 2009 includes the period from the Company's
inception on February 26, 2009, through December 31, 2009.
(2) During the period from the Company's inception on February 26, 2009,
through December 31, 2009, the Company paid iCapital Finance, Inc.
consulting fees in the amount of $202,177. Mr. Letcavage is the majority
owner of iCapital Finance, Inc.
43
(3) Includes (i) $240 as the value of 240,000 founder's shares of the Company's
common stock issued at par value of $.001 per share to Mr. Letcavage in
April 2009 for services rendered; (ii) $400 as the value of 400,000
founder's shares of common stock issued at par value of $.001 per share to
iCapital Finance, Inc. in April 2009 for services rendered; (iii) $29,412
as the value of 117,647 anti-dilution shares of common stock issued to Mr.
Letcavage; (iv) $30,000 as the value of 120,000 shares issued at $.25 per
share to Mr. Letcavage for services rendered, accrued at $3,000 per month
from March through December 2009; (v) $17,647 as the value of 70,588
anti-dilution shares of common stock issued to iCapital Finance, Inc. As
the majority owner of iCapital Finance, Inc., Mr. Letcavage has sold
dispositive and voting power over the shares held of record by iCapital
Finance, Inc.
(4) Represents rental payments to iCapital, Inc. in the amount of $3,000 per
month for use of our former executive offices at 2603 Main Street, Suite
1150, Irvine, California 92614. This rental agreement is no longer in
effect.
(5) Includes (i) $320 as the value of 320,000 founder's shares issued at $.001
par value to Mr. Brain in April 2009 for services rendered; (ii) $30,000 as
the value of 120,000 shares issued at $.25 per share to Mr. Brain for
services rendered, accrued at $3,000 per month from March through December
2009; (iii) $23,350 as the value of 94,118 shares issued to Mr. Brain; and
(iv) $29,876 as the value of 119,505 shares of common stock issued to Mr.
Brain as bonus compensation. All of the above shares of the Company's
common stock are beneficially owned by Mr. Brain, but held of record by
Bayport Holding Company, LLC, Mr. Brain's personal holding company, and Mr.
Brain has sole dispositive and voting control over such shares.
(6) Represents $400 as the value of 400,000 founder's shares of common stock
issued at par value of $.001 per share to Mr. Feck in April 2009 for
services rendered.
(7) Represents rental payments to Mr. Feck in the amount of $3,000 per month
for the lease of our Corona, California warehouse facility. Mr. Feck
allowed us to use this warehouse facility from March through September 2009
on a rent free basis.
DIRECTOR COMPENSATION
We do not have a formal compensation plan for our directors.
EMPLOYMENT CONTRACTS
We do not have any employment agreements with our employees or officers.
COMPENSATION DISCUSSION AND ANALYSIS
We have prepared the following Compensation Discussion and Analysis to
provide you with information that we believe is necessary to understand our
executive compensation policies and decisions as they relate to the compensation
of our named executive officers.
We have only three members on our board of directors and do not currently
have a compensation committee. However, we intend to expand our board of
directors in the near future by appointing or electing at least two new
directors who will be deemed to be independent directors. The presence of
independent directors on our board of directors will allow us to form and
constitute a compensation committee of our board of directors.
44
The primary objectives of the compensation committee with respect to
executive compensation will be to (i) attract and retain the best possible
executive talent available to us; (ii) motivate our executive officers to
enhance our growth and profitability and increase shareholder value; and (iii)
reward superior performance and contributions to the achievement of corporate
objectives.
The focus of our executive pay strategy will be to tie short-term and
long-term cash and equity incentives to the achievement of measurable corporate
and individual performance objectives or benchmarks and to align executive
compensation with the creation and enhancement of shareholder value. In order to
achieve these objectives, our compensation committee will be tasked with
developing and maintaining a transparent compensation plan that will tie a
substantial portion of our executives' overall compensation to our sales,
operational efficiencies and profitability.
Our board of directors has not set any performance objectives or benchmarks
for 2010, as it intends for those objectives and benchmarks to be determined by
the compensation committee once it is constituted and then approved by the
board. However, we anticipate that compensation benefits will include
competitive salaries, bonuses (cash and equity based), health insurance and
stock option plans.
Our compensation committee will meet at least quarterly to assess the cost
and effectiveness of each executive benefit and the performance of our executive
officers in light of our revenues, expenses and profits.
OPTION/SAR GRANTS TABLE
There were been no stock options/SARS granted under our stock option plans
to executive officers and directors, since we have no such plans in effect.
AGGREGATE OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
There have been no exercises of stock options/SAR by executive officers.
LONG-TERM INCENTIVE PLAN AWARDS
There were been no long-term incentive plan awards made by the company.
REPRICING OPTIONS
We have not repriced any stock options.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To our knowledge, the following table sets forth, as of March 24, 2010,
information regarding the ownership of our common stock by:
* Persons who own more than 5% of our common stock
* each of our directors and each of our executive officers; and
* all directors and executive officers as a group.
45
Each person has sole voting and investment power with respect to the shares
shown, except as otherwise noted.
Amount and Nature
of Beneficial Ownership
Name and Address ------------------------------
of Beneficial Owner Number (1) Percent (1)
------------------- ---------- -----------
George Adams, Sr. (2) 4,600,000 37.36%
670 E. Parkridge, Suite 112
Corona, California 92879
Frederick Feck 600,000 5.30%
670 E. Parkridge, Suite 112
Corona, California 92879
Randall M. Letcavage (3) 760,235 6.72%
2603 Main Street, Suite 1150
Irvine, California 92614
Jeffrey S. Brain (4)(5) 611,815 5.41%
670 E. Parkridge, Suite 112
Corona, California 92879
All officers and directors
as a group (2 persons) 1,211,815 10.71%
Bayport Holding Company, LLC (4)(5) 611,815 5.41%
670 E. Parkridge, Suite 112
Corona, California 92879
- ----------
(1) The numbers and percentages set forth in these columns are based on
11,312,446 shares of common stock outstanding as of February 9, 2010.
The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and
the information is not necessarily indicative of beneficial ownership
for any other purpose. Under such rule, beneficial ownership includes
any shares as to which the selling security holder has sole or shared
voting power or investment power and also any shares, which the selling
security holder has the right to acquire within 60 days.
(2) In addition to the 3,600,000 shares owned of record and beneficially by
Mr. Adams, Mr. Adams is the beneficial owner of 1,000,000 additional
shares of our common stock since he holds a $250,000 Convertible
Promissory Note issued by us and the Convertible Promissory Note is
immediately convertible into 1,000,000 shares of common stock. These
3,600,000 shares of common stock together with the 1,000,000 shares of
Series A Preferred Stock owned by Mr. Adams result in Mr. Adams having
the right to cast 51% of all votes in the election of our directors and
on any acquisition or merger transaction in which we may become
involved in the future.
(3) In addition to the 449,647 shares of this common stock owned of record
and beneficially by Randall Letcavage, Mr. Letcavage is the beneficial
owner of the 310,588 shares owned of record by iCapital Finance, Inc.,
over which Mr. Letcavage has sole dispositive and voting powers.
(4)(5) Mr. Brain is the beneficial owner of these 611,815 shares of our common
stock, which are owned of record by Bayport Holding Company, LLC, Mr.
Brain's personal holding company. Mr. Brain has sole dispositive and
voting power over these shares.
46
There are no arrangements or understandings among the entities and
individuals referenced above or their respective associates concerning election
of directors or other any other matters which may require shareholder approval.
CHANGES IN CONTROL
We are not aware of any arrangements that may result in a change in control
of the Company.
By virtue of his ownership of majority voting rights over our common stock,
Mr. George Adams, Sr. will continue to control the Company after this offering
and investors in our common stock will be unable to change control of our board
of directors and of our Company. Therefore, the shares being offered for sale by
the selling shareholders lack the value normally attributable to voting rights.
This could result in a reduction in the value of the shares you own because of
their ineffective voting power.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Although we have not adopted formal procedures for the review, approval or
ratification of transactions with related persons, we adhere to a general policy
that such transactions should only be entered into if they are on terms that, on
the whole, are no more favorable, or no less favorable, than those available
from unaffiliated third parties and their approval is in accordance with
applicable law. Such transactions require the approval of our board of
directors.
ANTI-DILUTION SHARES
Our board of directors granted anti-dilution rights to Jeffrey Brain,
iCapital Finance, Inc. (a company owned by Randall Letcavage, our former Chief
Executive Officer, and his business partner, Rosemary Nguyen), Randall Letcavage
and David E. Wise, our securities counsel. These anti-dilution rights entitled
Jeffrey Brain, iCapital Finance, Inc., Randall Letcavage and David E. Wise to
acquire additional shares of our common stock at $.25 per share in order to
maintain their original percentage ownership in the our common stock.
Consequently, we issued as compensation and for services rendered the following
anti-dilution shares in January 2010:
Name of Recipient Number of Shares Value of Shares
----------------- ---------------- ---------------
Jeffrey Brain 94,118 $23,530
iCapital Finance, Inc. 70,588 $17,647
Randall Letcavage 117,647 $29,412
David E. Wise 70,588 $17,647
47
TRANSACTIONS WITH OUR EXECUTIVE OFFICERS
During 2009 through March 2010, we subleased our office facilities for
$3,000 a month from iCapital Finance, Inc., a company owned by our former Chief
Executive Officer and his business partner, Rosemary Nguyen. This was a verbal
lease and ran from month to month. This monthly fee was to share a portion of
the rent, the utilities and the time of one staff person to assist us by
handling some of our business, including answering telephones, processing
telephone and internet leads, coordinating and communicating with the customers,
dealers, distributors and general administrative activities. This lease
arrangement was deemed the most cost efficient and time saving approach as it
saved us from the expense of setting up our own offices, which would have
required searching for and negotiating a lease, purchasing furniture, equipment,
phones and hiring our own office personnel. Our board of directors believes this
rental arrangement was fair to the Company.
During 2009, Randall Letcavage, our President and Chief Executive Officer,
received various non-compensatory advances from the Company totaling $69,865.
Mr. Letcavage has executed a secured promissory note to us for the total amount
of such advances, that bears an interest rate of eight percent (8%) per annum
and is due and payable on November 1, 2010, and is secured by a lien on 329,647
shares of the Company's common stock owned by Mr. Letcavage.
Our board of directors is aware of the prohibition in Section 13.k of the
Securities Exchange Act of 1934, as amended, against SEC reporting companies
making personal loans to their directors or executive officers. However, Section
13.k does not currently apply to us since we are not a reporting company. Once
the registration statement of which this prospectus is a part is declared
effective by the SEC and our securities are registered under Section 12 of that
Act, we will not extend credit or arrange for the extension of credit, in the
form of a personal loan, to or for any of our directors or executive officers.
In January 2010, we entered into a nonexclusive distributor agreement with
Globalight Energy Solutions, LLC, a minority owned entity in which Randall
Letcavage, our former Chief Executive Officer, and Jeffrey Brain, our current
Chief Executive Officer, each own a 16.25% beneficial ownership interest. The
majority owners of Globalight Energy Solutions, LLC are the entertainer William
"Smokey" Robinson, Jr. and his wife. In lieu of Globalight Energy Solutions, LLC
paying the standard distributorship fee of $15,000 to the Company, Smokey
Robinson agreed to use his name, contacts and likeness to promote the Company
products. Our board of directors believes that the value to the Company of Mr.
Robinson's promotion of our products is greater than the $15,000 distributorship
fee.
Aside from the arrangement with Smokey Robinson to promote the Company's
products in lieu of Globalight Energy Solutions, LLC paying the distributorship
fee to the Company, its distributorship agreement does not contain preferential
or more favorable terms or conditions than agreements with our other
distributorships.
Jeffrey Brain, Randall Letcavage and iCapital Finance, Inc., a company
controlled by Mr. Letcavage, acquired certain anti-dilution shares of our common
stock as described above.
TRANSACTIONS WITH GEORGE ADAMS, SR. AND TERRY ADAMS
In April 2009, we entered into an Exchange of Stock for Assets Agreement
with Mr. George Adams, Sr. ("Adams Agreement") to acquire certain assets
including, but not limited to, a patent, a patent application and other patent
rights, artwork, trademarks, equipment, furniture, databases, technical
48
drawings, promotional materials, trade names and inventory parts and marketing
rights related to the Suntracker One(TM), Suntracker Two(TM) and other
daylighting products previously owned and distributed by Ciralight, Inc., a Utah
corporation, such assets having been foreclosed on by Mr. Adams, who was the
secured creditor of Ciralight, Inc. Ciralight, Inc. is not a predecessor to
Ciralight Global, Inc. and we have no affiliation, contractual or otherwise,
with Ciralight, Inc. or any of its employees, officers or directors.
In April 2009, we acquired all of the above described assets from Mr.
Adams, except for the patent, the patent application and other patent rights, in
exchange for 3,200,000 shares of our common stock and 1,000,000 shares of our
Series A Preferred Stock. In December 2009, we acquired the patent, patent
application and other patent rights from Mr. Adams in exchange for the issuance
by us of an additional 400,000 shares of our common stock and a convertible
promissory note in the amount of $250,000. The note is convertible into shares
of our common stock at a conversion rate of one share per $.25 of outstanding
principal and interest. As a result of this transaction, Mr. Adams is our
largest shareholder.
The Adams Agreement also granted Mr. Adams a royalty fee of $20.00 for each
Suntracker One(TM) and Suntracker Two(TM) unit or any future units that are
based on the patent rights we acquired from him. The maximum royalty fees
payable under the Adams Agreement is $2,000,000 based on the sale of 100,000
units. From February 26, 2009 through December 31, 2009, we accrued $15,260 in
royalties due to Mr. Adams related to our sale of 763 units.
On March 29, 2009, Mr. Adams advanced $107,168 on our behalf to Microsun,
the prior manufacturer of our products. Since that time, we repaid Mr. Adams the
total $107,168. Mr. Adams did not ask or require us to pay him interest on the
money advanced and we never issued a promissory note to Mr. Adams related to
such advance.
On November 5, 2009, we issued a Convertible Note in the principal amount
of $73,788 to Terry Adams, the son of George Adams, Sr., to evidence monies
loaned to us. The Convertible Note is due on or before December 15, 2012, bears
interest at the rate of Prime Rate (as quoted in the Wall Street Journal) plus
2% per annum and is convertible into shares of our common stock at a conversion
rate of one share per $.25 of outstanding principal and interest.
TRANSACTIONS WITH FREDERICK FECK, ONE OF OUR DIRECTORS AND CORPORATE SECRETARY
We are currently subleasing our warehouse facility in Corona, California
for $3,000 a month. The property is owned by one of our Directors, Frederick
Feck. This is a verbal lease and runs month to month. The space consists of
approximately 3,500 square feet. We occupied this warehouse facility from March
1, 2009, until September 30, 2009, on a rent free basis at the courtesy of Mr.
Feck. Our board of directors believes this new rental arrangement is fair to the
Company.
On October 1, 2009, we issued a Convertible Note to Mr. Frederick Feck (one
of our directors) in the amount of $48,507.29 to evidence the our indebtedness
to Mr. Feck for his payment of $48,507.29 of the Company's expenses. Mr. Feck
paid these Company expenses between March 13, 2009 until September 15, 2009.
These expenses included salaries, consulting fees, labor, legal fees for
formation of the Company, legal and filing fees related to patents, travel
expenses and the electric bills on our Corona, California warehouse facility.
The Convertible Note issued to Mr. Feck had an interest rate of Prime Rate (as
quoted in the Wall Street Journal) plus 2% per annum. On December 1, 2009, Mr.
Feck elected to convert this note into 200,000 shares of our common stock.
Therefore, this debt to Mr. Feck has been paid in full.
49
TRANSACTIONS WITH DAVID E. WISE, ESQ., OUR SECURITIES ATTORNEY
In January 2010, we entered into a nonexclusive dealer agreement with
Chaparral Green Energy Solutions, LLC, an entity in which our securities
attorney, David E. Wise, Esq., owns a 50% equity interest. The terms and
conditions of the dealer agreements with Chaparral Green Energy Solutions, LLC
are the same as for our other dealer agreements. Mr. Wise also acquired certain
anti-dilution shares of our common stock as described above.
Our board of directors determined that the above agreements, arrangements
and transactions were fair to the Company.
SECURITIES AND EXCHANGE COMMISSION POSITION ON INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the company, we have been advised by our special securities counsel
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy and is, therefore, unenforceable.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1, including exhibits, schedules and amendments, under the
Securities Act of 1933, as amended, with respect to the common stock to be sold
in this offering. This prospectus does not contain all of the information
contained in the registration statement. For further information about us and
the common stock to be sold in this offering, please refer to our registration
statement.
As of the effective date of our registration statement on Form S-1,
Ciralight Global became subject to the informational requirements of the
Securities Exchange Act of 1934, as amended. Accordingly, we will file annual,
quarterly and special reports, proxy statements and other information with the
SEC. You may read and copy any document we file with the SEC at the SEC's Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You should call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
Our SEC filings will also be available to the public at the SEC's web site at
http://www.sec.gov.
You may request, and we will voluntarily provide, a copy of our filings,
including our annual report, which will contain audited financial statements, at
no cost to you, by writing or telephoning us at the following address and
telephone number:
Ciralight Global, Inc., 670 E. Parkridge, Suite 112, Corona, California 92879
(877) 520-5005
FINANCIAL STATEMENTS
Our audited financial statements for the fiscal years ending December 31,
2009, 2008 and 2007, follow, commencing on page F-1.
50
We have not authorized any dealer, salesperson or other person to provide
any information or make any representations about Ciralight Global, Inc., except
the information or representations contained in this prospectus. You should not
rely on any additional information or representations if made.
This prospectus does not constitute an offer to sell, or a solicitation of
an offer to buy any securities:
* except the common stock covered by this prospectus
* in any jurisdiction in which the distribution, offer or solicitation
is not authorized
* in any jurisdiction where the dealer or other salesperson is not
qualified to make the offer or solicitation;
* to any person who is not a United States resident or who is outside
the jurisdiction of the United States
The delivery of this prospectus or any accompanying sale does not imply
that:
* there have been no changes in the affairs of Ciralight Global, Inc.
after the date of this prospectus; or
* the information contained in this prospectus is correct after the date
of this prospectus.
During the 150 days following the date of this prospectus, all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters.
PROSPECTUS
966,049 SHARES OF COMMON STOCK
CIRALIGHT GLOBAL, INC.
__________, 2010
INDEX TO FINANCIAL STATEMENTS
Page
Number
------
Audited Financial Statements of Ciralight, Inc.
Report of Independent Registered Public Accounting Firm F-2
Balance Sheets as of December 31, 2008 and 2007 F-3
Statements of Operations for the Years Ended December 31, 2008
and 2007 F-4
Statement of Changes in Stockholder's Equity (Deficit) for the
Period From December 31, 2006 to December 31, 2008 F-5
Statements of Cash Flows for the Years Ended December 31, 2008
and 2007 F-6
Notes to Financial Statements F-7
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
Ciralight Global, Inc.
Irvine, California
We have audited the accompanying balance sheets of Ciralight, Inc. as of
December 31, 2008 and 2007, and the related statements of operations,
stockholders' deficit, and cash flows for each of the two years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ciralight, Inc. as of December
31, 2008 and 2007, and the results of its operations and its cash flows for each
of the two years then ended, in conformity with U.S. generally accepted
accounting principles.
We were not engaged to examine management's assessment of the effectiveness of
Ciralight, Inc.'s internal control over financial reporting as of December 31,
2008 and 2007 and, accordingly, we do not express an opinion thereon.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses, has negative
working capital, and subsequent to year end all assets were foreclosed on, which
raises substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to those matters are also described in
Note 2 to the financial statements. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ HJ Associates & Consultants, LLP
- ---------------------------------------------
HJ Associates & Consultants, LLP
Salt Lake City, Utah
February 10, 2010
F-2
CIRALIGHT, INC.
BALANCE SHEETS
December 31,
-----------------------------------
2008 2007
------------ ------------
ASSETS
Current assets
Cash & cash equivalents $ 14,163 $ 69,544
Accounts receivable, net of allowance of $52,083 and 0, respectively 108,439 28,419
Inventory 341,595 140,336
Prepaid expenses and other current assets 123,325 57,755
------------ ------------
Total current assets 587,522 296,054
Property and equipment, net 137,379 249,785
Intangible assets, net 34,710 52,908
------------ ------------
Total assets 759,611 $ 598,747
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable $ 1,200,874 $ 347,598
Accrued expenses 370,958 814,136
Notes payable, related party 1,500,000 29,211
Convertible notes, net of debt discount of $196,560 and $592,532, respectively 444,537 1,442,223
------------ ------------
Total current liabilities 3,516,369 2,633,168
------------ ------------
Commitments and contingencies (Note 10)
Stockholders' deficit
Redeeemable preferred stock - $.01 par value; 100,000,000 shares authorized,
0 and 425,000 shares issued and outstanding, respectively -- 4,251
Common stock - no par value; 100,000,000 shares authorized,
25,061,137 and 23,953,673 shares issued and outstanding, respectively 8,984,328 5,701,843
Additional paid-in capital -- 208,299
Accumulated deficit (11,741,086) (7,948,814)
------------ ------------
Total stockholders' deficit (2,756,758) (2,034,421)
------------ ------------
Total liabilities and stockholders' deficit $ 759,611 $ 598,747
============ ============
The accompanying notes are an integral part of these financial statements.
F-3
CIRALIGHT, INC.
STATEMENTS OF OPERATIONS
For the years ended December 31,
---------------------------------
2008 2007
----------- -----------
Sales $ 1,592,263 $ 666,626
Cost of goods sold 1,342,191 522,404
----------- -----------
Gross profit 250,072 144,222
Operating expenses
Research and development expenses 5,521 58,544
Selling and marketing expenses 171,051 324,603
General and administrative expenses 2,936,412 4,423,125
----------- -----------
Total operating expenses 3,112,984 4,806,272
----------- -----------
Loss from operations (2,862,912) (4,662,050)
Other income (expense)
Interest income (expense), net (931,342) (835,946)
Other income (expense), net 1,982 1,454
----------- -----------
Total other expenses (929,360) (834,492)
----------- -----------
Net loss $(3,792,272) $(5,496,542)
=========== ===========
Basic and diluted loss per share $ (0.15) $ (0.23)
=========== ===========
Weighted average shares used in per share calculation 24,577,743 23,597,143
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-4
CIRALIGHT, INC
STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
For the period from December 31, 2006 to December 31, 2008
No Par Common Stock Preferred Stock Additional Total
---------------------- ---------------- Paid in Accumulated Equity /
Shares Value Shares Par Capital Deficit Deficit
------ ----- ------ --- ------- ------- -------
BALANCE DECEMBER 31, 2006 23,015,401 $3,263,052 -- $ -- $ -- $ (2,452,272) $ 810,779
Common Stock Issued For Cash 938,272 790,531 790,531
Preferred Stock For Cash 4,251 4,251 208,299 212,550
Options Issued For Services 351,714 351,714
SAR's Issued For Services 2,831 2,831
Convertible Note Discount
& Warrants 1,292,860 1,292,860
Warrants 855 855
Net Loss (5,496,542) (5,496,541)
---------- ---------- ------- ------- --------- ------------ -----------
BALANCE DECEMBER 31, 2007 23,953,673 5,701,843 4,251 4,251 208,299 (7,948,814) (2,034,421)
Common Stock Issued For Cash
& Preferred Stock Conversion 1,107,464 448,732 448,732
Preferred Stock Converted
Into Common Stock 212,550 (4,251) (4,251) (208,299) 0
Options Issued For Services 337,767 337,767
Vesting SAR's 4,354 4,354
Notes Payable & Interest
Converted into Common Stock 1,883,109 1,883,109
Amortization of Debt
Discount & Warrants 395,973 395,973
Net Loss (3,792,272) (3,792,272)
---------- ---------- ------- ------- --------- ------------ -----------
BALANCE DECEMBER 31, 2008 25,061,137 $8,984,328 -- $ -- $ -- $(11,741,086) $(2,756,758)
========== ========== ======= ======= ========= ============ ===========
The accompanying notes are an integral part of these financial statements.
F-5
CIRALIGHT, INC.
STATEMENTS OF CASH FLOWS
For the years ended December 31,
---------------------------------
2008 2007
----------- -----------
Cash flows from operating activities:
Net Loss $(3,792,272) $(5,496,542)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 145,287 137,869
Amortization of discount on convertible note 800,669 700,328
Warrants granted -- 855
Options issued 337,767 351,714
Stock Appreciation Rights issuance 4,354 2,831
Issuance of common stock for services 26,558 --
Changes in operating assets and liabilities
(Increase) decrease in inventory (201,259) 49,471
(Increase) decrease in accounts receivable (80,020) 5,256
Decrease (increase) in prepaid expenses and other current assets 14,104 (39,713)
Increase in accounts payable 853,276 219,275
(Decrease) increase in accrued expenses (399,754) 721,891
----------- -----------
Net cash used in operating activities (2,291,290) (3,346,765)
----------- -----------
Cash flows from investing activities:
Purchases of equipment (14,683) (65,778)
Acquisition of intangibles -- (33,253)
----------- -----------
Net cash used in investing activities (14,683) (99,031)
----------- -----------
Cash flows from financing activities:
Proceeds from notes payable 2,583,367 2,136,301
Repayments of notes payable (675,275) (97,500)
Proceeds from issuance of common stock 342,500 790,531
Proceeds from issuance of preferred stock -- 212,550
----------- -----------
Net cash provided by financing activities 2,250,592 3,041,882
----------- -----------
Net decrease in cash (55,381) (403,914)
Cash, beginning of period 69,544 473,458
----------- -----------
Cash, end of period $ 14,163 $ 69,544
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-6
CIRALIGHT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007
1. Background and Basis of Presentation:
Ciralight, Inc. (the "Company") was incorporated in the State of Delaware
on September 15, 2005. The Company is in the business of designing,
developing, and distributing proprietary advanced daylighting systems for
traditional non-residential markets that benefit from natural lighting.
2. Going Concern:
The accompanying financial statements have been prepared on the basis of
accounting principles applicable to a going concern, which contemplates the
realization of assets and extinguishment of liabilities in the normal
course of business.
The Company had a net loss of $3,792,272 in fiscal 2008 and a net loss of
$5,496,542 in fiscal 2007. At December 31, 2008 and 2007, working capital
deficits were $2,928,847 and $2,337,114, respectively and the accumulated
deficits were $2,756,758 and $2,034,421, respectively. The company covered
the deficits primarily from issuing short term convertable notes and
selling stock of the Company. Additional funding will be required to
continue to market its product and finance continuing research and
development, production and general and administrative activities and
ultimately achieve profitable operations. The Company ceased operations in
March of 2009 and is now defunct, as a result of a secured creditor
foreclosing on the Company's assets. See Subsequent Events Note 13, below.
3. Summary of Significant Accounting Policies:
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid debt
instruments with original maturities of three months or less to be cash
equivalents.
The Company maintains its cash accounts primarily with banks located in
Utah. The total cash balances are insured by the FDIC up to $250,000 per
bank. At times, the amount of the Company's cash and cash equivalent
exceeds the balance insured by the FDIC.
ACCOUNTS RECEIVABLE - The Company's accounts receivable are unsecured and
the Company is at risk to the extent such amounts become uncollectible.
Management continually monitors accounts receivable balances and provides
for an allowance for doubtful accounts at the time collection becomes
questionable based on payment history or age of the receivable. The Company
sells products and services generally on net 30 day terms. The Company does
not normally charge financing fees on late payments. Accounts receivable
are charged to the allowance for bad debts when the Company has exhausted
all reasonable means of collection.
INVENTORY - Inventory consists of raw materials and is stated at lower of
cost or market on a first-in first-out method. Management will establish a
reserve for damaged and discontinued inventory when determined necessary.
At December 31, 2008 and 2007, no reserve was required.
F-7
CIRALIGHT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007
3. Summary of Significant Accounting Policies: (continued)
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is computed over the estimated useful lives of the assets
using the straight-line method generally over a 3 to 5 year period.
Leasehold improvements are amortized over the straight-line method over the
life of the related lease. Expenditures for ordinary maintenance and
repairs are charged to expense as incurred. Upon retirement or disposal of
assets, the cost and accumulated depreciation are eliminated from the
account and any gain or loss is reflected in the statement of operations.
INTANGIBLE ASSETS - Intangible assets with definite useful lives are
amortized over such useful lives, which management determined to be three
years, and are subject to tests for impairment whenever events or changes
in circumstances indicate that impairment may exist. There was no
impairment recorded in the fiscal years of 2008 and 2007 and amortization
of $18,198 and $17,528 was recorded in the respective years.
IMPAIRMENT OF LONG LIVED ASSETS - The Company evaluates its long-lived
assets for impairment, in accordance with SFAS No. 144, when events or
changes in circumstances indicate that the related carrying amount may not
be recoverable. Impairment is considered to exist if the total estimated
future cash flow on an undiscounted basis is less than the carrying amount
of the related assets. An impairment loss is measured and recorded based on
the discounted estimated future cash flows. Changes in significant
assumptions underlying future cash flow estimates or fair values of assets
may have a material effect on the Company's financial position and results
of operations. No such impairment was indicated at December 31, 2008 or
2007.
REVENUE RECOGNITION - The Company recognizes revenue from product sales
when persuasive evidence of an arrangement exists, delivery has occurred,
the seller's price to the buyer is fixed or determinable and collectability
is reasonably assured.
ADVERTISING COSTS - Costs associated with advertising are expensed as
incurred. Advertising expense was $171,051 for the year ended December 31,
2008 and $324,603 for the year ended December 31, 2007.
RESEARCH AND DEVELOPMENT COSTS - Research and development costs are charged
to operations in the period incurred. The amounts expensed for the years
ended December 31, 2008 and 2007 were $5,521 and $58,544, respectively.
CONCENTRATIONS OF CREDIT RISK - Credit risk represents the accounting loss
that would be recognized at the reporting date if counterparties failed
completely to perform as contracted. Concentrations of credit risk (whether
on or off balance sheet) that arise from financial instruments exist for
groups of customers or counterparties when they have similar economic
characteristics that would cause their ability to meet contractual
obligations to be similarly effected by changes in economic or other
conditions.
F-8
CIRALIGHT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007
3. Summary of Significant Accounting Policies: (continued)
Financial instruments potentially subjecting the Company to concentrations
of credit risk consist principally of accounts receivable. As of December
31, 2008, the accounts receivable total was $160,522 with a allowance for
doubtful accounts of $52,083 and as of December 31, 2007, four customers
had balances representing 10% or more of the Company's accounts receivable
USE OF ESTIMATES - The preparation of the financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the balance sheet and
the reported amounts of revenue and expenses during the reporting period.
Significant estimates include the Company's debt discount, and share-based
compensation expense. Actual results could differ from these estimates.
SHARE-BASED COMPENSATION - On January 1, 2006, the Company adopted the
provisions of FAS No. 123R "Share-Based Payment" ("FAS 123R") which
requires recognition of stock-based compensation expense for all
share-based payments based on fair value. Prior to January 1, 2006, the
Company measured compensation expense for all of its share-based
compensation using the intrinsic value method prescribed by Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related interpretations. The Company has provided
pro forma disclosure amounts in accordance with FAS No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure - an amendment of
FASB Statement No. 123" ("FAS 148"), as if the fair value method defined by
FAS No. 123, "Accounting for Stock Based Compensation" ("FAS 123") had been
applied to its stock-based compensation.
The Company measures compensation expense for its non-employee stock-based
compensation under the Financial Accounting Standards Board (FASB) 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". The fair value of the option
issued is used to measure the transaction, as this is more reliable than
the fair value of the services received. The fair value is measured at the
value of the Company's common stock on the date that the commitment for
performance by the counterparty has been reached or the counterparty's
performance is complete. The fair value of the equity instrument is charged
directly to compensation expense and additional paid-in capital.
INCOME TAXES - The Company accounts for its income taxes under the
provisions of SFAS No. 109 "Accounting for Income Taxes." This statement
requires the use of the asset and liability method of accounting for
deferred income taxes. Deferred income taxes reflect the net tax effects of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for
income tax reporting purposes, at the applicable enacted tax rates. The
Company provides a valuation allowance against its deferred tax assets when
the future realizability of the assets is no longer considered to be more
likely than not.
The Company accounts for uncertain tax positions in accordance with
Financial Accounting Standards Board ("FASB") Interpretation No. 48 ("FIN
48"), "Accounting for Uncertainty in Income Taxes -- an interpretation of
FASB Statement No. 109." The application of income tax law is inherently
complex. As such, the Company is required to make certain assumptions and
judgments regarding its income tax positions and the likelihood whether
such tax positions would be sustained if challenged. Interest and penalties
F-9
CIRALIGHT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007
3. Summary of Significant Accounting Policies: (continued)
related to uncertain tax provisions are recorded as a component of the
provision for income taxes. Interpretations and guidance surrounding income
tax laws and regulations change over time. As such, changes in the
Company's assumptions and judgments can materially affect amounts
recognized in the Company's consolidated balance sheets and statement of
operations.
4. Inventory:
Inventory consisted of the following at December 31,
2008 2007
-------- --------
Inventory:
Inventory raw materials $341,595 $140,336
-------- --------
$341,595 $140,336
======== ========
5. Property and Equipment:
Property and Equipment consisted of the following at December 31,
2008 2007
-------- --------
Property and Equipment $ 417,671 $ 402,988
Accumulated depreciation (280,292) (153,203)
--------- ---------
Net property and equipment $ 137,379 $ 249,785
========= =========
Depreciation expense for property and equipment totaled $127,089 and
$120,341, respectively, for the years ended December 31, 2008 and 2007.
6. Notes Payable:
Notes Payable activity for the year ended December 31, 2007:
CONVERTIBLE NOTES - From March 2007 to April 2007, the Company received
aggregate proceeds of $1,000,000 in exchange for convertible notes issued
to five investors. Under the terms of the convertible notes, the notes
accrue simple interest at an annual rate of 12%, with principal and
interest due in one year from the date of the notes. The notes are secured
by the assets of the Company. The note holders will also receive warrants
to purchase 29,026 shares per $50,000 note that were issued with an
exercise price equal to the 80% of the price per share of common stock
issued by the Company with an expiration date of five years from the date
of the notes. The notes are automatically convertible in the event that the
Company subscribes $3 million of additional debt and equity (separate and
apart from debt and equity raised under the convertible note subscription
agreement) with the conversion price equal to 80% of the price per share of
common stock issued by the Company in the transaction. The Company
accounted for the beneficial conversion feature under EITF 00-27,
APPLICATION OF ISSUE NO. 98-5, ACCOUNTING/OR CONVERTIBLE SECURITIES WITH
BENEFICIAL CONVERSION FEATURES, TO CERTAIN CONVERTIBLE INSTRUMENTS. After
consideration of the allocation of the proceeds to the convertible notes
($768,833) and warrants ($231,167) in accordance with APB 14, the Company
F-10
CIRALIGHT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007
6. Notes Payable: (continued)
calculated that the convertible notes have an effective conversion price of
$0.52 per share. This resulted in a beneficial conversion of $0.33 per
share or $481,167. The beneficial conversion feature and allocation of
proceeds to the warrants was recorded as a debt discount and an increase in
additional paid-in capital. The debt discount is amortized over the term of
the convertible notes and accordingly the Company recognized $543,155
within interest expense related to this amortization during the twelve
months ended December 31, 2007.
From July 2007 to November 2007, the Company received aggregate proceeds of
$875,000 in exchange for convertible notes issued to twelve investors.
Under the terms of the convertible notes, the notes accrue simple interest
at an annual rate of 12%, with principal and interest due in one year from
the date of the note. The notes are secured by the assets of the Company.
The note holders will also receive warrants to purchase 29,026 shares per
$50,000 note that were issued with an exercise price equal to the 80% of
the price per share of common stock issued by the Company with an
expiration date of five years from the date of the notes. The notes are
automatically convertible in the event that the Company subscribes $4
million of additional debt and equity the "transaction") (separate and
apart from debt and equity raised under the convertible note subscription
agreement) with the conversion price equal to 80% of the price per share of
common stock issued by the Company in the transaction. The Company
accounted for the beneficial conversion feature under EITF 00-27,
APPLICATION OF ISSUE NO. 98-5, ACCOUNTING/OR CONVERTIBLE SECURITIES WITH
BENEFICIAL CONVERSION FEATURES, TO CERTAIN CONVERTIBLE INSTRUMENTS. After
consideration of the allocation of the proceeds to the convertible notes
($745,502) and warrants ($128,498) in accordance with APB 14, the Company
calculated that the convertible notes have an effective conversion price of
$0.34 per share. This resulted in a beneficial conversion of $0.16 per
share or $347,248. The beneficial conversion feature and allocation of
proceeds to the warrants was recorded as a debt discount and an increase in
additional paid-in capital. The debt discount is amortized over the term of
the convertible notes and accordingly the Company recognized $126,865
within interest expense related to this amortization during the twelve
months ended December 31, 2007.
PROMISSORY NOTE - RELATED PARTY - On December 19, 2007, the Company issued
a $125,000 promissory note payable to management (see Note 12). Under the
terms of this agreement, the note accrues simple interest at an annual rate
of 15%. The outstanding principal balance, plus all accrued and unpaid
interest shall be due and payable upon maturity of March 1, 2008. Total
interest expense related to this note in fiscal 2007 was $565. The Company
also issued 3,125 warrants and the relative fair value of the warrants of
$850, which was determined using the Black-Scholes option-pricing model,
was recorded as common stock and recorded as an expense.
NOTE PAYABLE - RELATED PARTY - Throughout the 2007 fiscal year, the Company
received $76,711 from management (see Note 12). The Company repaid $47,500
during the year. The outstanding balance due to related parties at December
31, 2007 was $29,211, which was recorded as a short-term liability. Total
interest expense related to this note was $0 in fiscal 2007.
F-11
CIRALIGHT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007
6. Notes Payable: (continued)
All of the above notes payable, totaling $2,029,211 (before debt discount)
were due in fiscal 2008. The above notes payable, excluding the note
payable - related party, have warrants that entitle the holders to purchase
up to 1,088,475 of the Company's common stock at a price of $0.40 per
share. The weighted average fair-value of warrants granted during fiscal
2007 was $0.30. All warrants were outstanding at December 31, 2007 and have
terms ending on various dates through 2012.
Notes Payable activity for the year ended December 31, 2008:
CONVERTIBLE NOTES - At December 31, 2007, the principal balance of the
convertible notes payable was $1,875,000, held by fifteen investors.
From January 2008 to March 2008, the Company received aggregate proceeds of
$225,000 in exchange for convertible notes issued to four investors, two
current convertible note holders and two additional investors. Under the
terms of the convertible notes, the notes accrue simple interest at an
annual rate of 12%, with principal and interest due in one year from the
date of the notes. The notes are secured by the assets of the Company. The
note holders will also receive warrants to purchase 29,026 shares per
$50,000 note that were issued with an exercise price equal to the 80% of
the price per share of common stock issued by the Company with an
expiration date of five years from the date of the notes. The notes are
automatically convertible in the event that the Company subscribes $3
million of additional debt and equity (separate and apart from debt and
equity raised under the convertible note subscription agreement) with the
conversion price equal to 80% of the price per share of common stock issued
by the Company in the transaction. The Company accounted for the beneficial
conversion feature under EITF 00-27, APPLICATION OF ISSUE NO. 98-5,
ACCOUNTING/OR CONVERTIBLE SECURITIES WITH BENEFICIAL CONVERSION FEATURES,
TO CERTAIN CONVERTIBLE INSTRUMENTS. After consideration of the allocation
of the proceeds to the convertible notes ($191,627) and warrants ($33,373)
in accordance with APB 14, the Company calculated that the convertible
notes have an effective conversion price of $0.34 per share. This resulted
in a beneficial conversion of $0.16 per share or $89,623. The beneficial
conversion feature and allocation of proceeds to the warrants was recorded
as a debt discount and an increase in additional paid-in capital. The debt
discount is amortized over the term of the convertible notes and
accordingly the Company recognized $25,760 within interest expense related
to this amortization during the twelve months ended December 31, 2008.
At March 31, 2008, the principal balance of the convertible notes payable
was $2,100,000. During the second fiscal quarter of 2008, $1,300,000 of the
convertible notes payable balance was satisfied and $200,000 of the balance
was paid in cash, upon the request of one investor.
At June 30, 2008, the principal balance of the convertible notes payable
was $600,000. During the third fiscal quarter of 2008, $500,000 of the
convertible notes payable balance was converted into shares of common stock
upon the election by two of the investors and $86,698 of the balance was
paid in cash, upon the request of two investors, which consisted of a
portion of the two investors' balances.
F-12
CIRALIGHT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007
6. Notes Payable: (continued)
The principal balance of the convertible notes payable of $13,302 at
September 30, 2008, was disbursed to the remaining two investors during the
fourth fiscal quarter of 2008.
PROMISSORY NOTE - RELATED PARTY - On January 1, 2008, the balance in the
promissory note payable to management account was $125,000. During 2008,
the Company issued promissory notes payable to management for a total of
$793,303 (see Note 12). Under the terms of the promissory notes, the notes
accrue simple interest at an annual rate of 15%. The outstanding principal
balance, plus all accrued and unpaid interest shall be due and payable upon
maturity on March 1, 2008. During 2008, payments made to pay down the
promissory notes totaled $288,303, leaving a balance at December 31, 2008
of $630,000. At December 31, 2008, accrued interest relating to the
promissory notes totaled $225,897.
NOTE PAYABLE - RELATED PARTY - Throughout the 2008 fiscal year, the Company
received $65,062 from management (see Note 12). The Company repaid $94,275
during the year, leaving a zero balance in the Note Payable to Related
Party account at December 31, 2008.
NOTE PAYABLE - RELATED PARTY /SECURED CREDITOR -- During 2008, George
Adams, Sr., became a secured creditor and related party of the Company (see
Note 12). During 2008, Mr. Adams loaned an aggregate total of $1,500,000 to
the Company, at an annual interest rate of 7%, to be paid upon maturity at
March 1, 2009. Upon default by the Company, Mr. Adams would have the right
to foreclose on the Company's assets and become the sole owner. See
Subsequent Events Note 13, below.
Below is a summary of Notes Payable activity, including debt discount, for
fiscal 2008:
Balance at Net Increase Balance at
December 31, (Decrease) for December 31,
Description 2007 fiscal year 2008 2008
----------- ----------- ---------------- -----------
Notes Payable $ 2,000,000 $(1,625,000) $ 375,000
Notes Payable - Related Party 29,211 1,725,789 1,755,000
----------- ----------- -----------
Total $ 2,029,211 $ 100,789 $ 2,130,000
=========== =========== ===========
7. Income Taxes:
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences and operating
loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and
their tax bases. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax
laws and rates on the date of enactment.
Net deferred tax liabilities consist of the following components as of
December 31, 2008 and 2007:
F-13
CIRALIGHT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007
7. Income Taxes: (continued)
2008 2007
----------- -----------
Deferred tax assets:
NOL Carryover $ 3,140,752 $ 2,529,486
Accrued Expenses 585,000
Section 263(A) Capitalization -- 145,768
Allowance for Doubtful A/R 20,312
Deferred tax liabilities
Depreciation -- --
Valuation allowance (3,746,064) (2,675,254)
----------- -----------
Net deferred tax asset $ -- $ --
=========== ===========
The income tax provision differs from the amount of income tax determined
by applying the U.S. federal income tax rate to pretax income from
continuing operations for the years ended December 31, 2008 and 2007 due to
the following:
2008 2007
----------- -----------
Book Income $(1,478,986) $(2,143,651)
Options 139,232 138,273
Meals & Entertainment 41,036 52,813
Interest Expense 239,260 273,128
Accrued Expenses 593,959
Section 263(A) Capitalization (145,678) 98,009
Valuation allowance 611,177 1,581,428
----------- -----------
$ -- $ --
=========== ===========
At December 31, 2008, the Company had net operating loss carryforwards of
approximately $8,000,000 that may be offset against future taxable income
from the year 2008 through 2028. No tax benefit has been reported in the
December 31, 2008 consolidated financial statements since the potential tax
benefit is offset by a valuation allowance of the same amount.
Due to the change in ownership provisions of the Tax Reform Act of 1986,
net operating loss carryforwards for Federal income tax reporting purposes
are subject to annual limitations. Should a change in ownership occur, net
operating loss carryforwards may be limited as to use in future years.
8. Stockholders' Equity:
The Company is authorized to issue up to 100,000,000 shares of common stock
and 100,000,000 shares of preferred stock with no par value and $0.01 par
value, respectively, under terms and conditions established by the Board of
Directors.
Prior to fiscal year 2007, the Company has issued a total of 23,953,673
shares of common stock. A total of 15,000,000 of these shares were issued
to the Company's founders pursuant to director consent resolutions entered
into upon the formation of the Company. The remaining 8,953,673 shares of
common stock were issued to investors through private placements at
offering prices varying from $0.20 to $0.75 per share.
During fiscal year 2007, the Company has issued 938,272 shares of common
stock to investors through private placements at offering prices varying
from $0.50 to $0.85. Net proceeds on these shares issued totaled $790,531.
F-14
CIRALIGHT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007
8. Stockholders' Equity: (continued)
During September 2007, the Company issued 425,000 of cumulative 12% Series
A Preferred Stock with a $0.01 par value and $0.50 face value. Proceeds on
this issuance totaled $212,550. The preferred stock was initially
convertible into 425,100 shares of the Company's common stock at a
conversion price of $0.50 per share.
The holders of the Series A Preferred may require the Company to redeem its
shares at any time after December 31, 2012 at face value plus dividends in
arrears. In addition, the Company may call for redemption of these shares
after December 31, 2012.
During 2008, the Company issued 1,107,464 common shares, with total value
of $ 448,732. Thus, at December 31, 2008, the cumulative number of common
shares issued totaled 25,061,137.
During 2008, all holders of the Series A Preferred stock redeemed their
shares and converted them into common stock. A total of 425,000 Series A
Preferred shares were converted into 425,000 shares of common stock at the
same value of $212,550.
9. Stock Options and Warrants:
STOCK OPTION PLAN -- The Company has adopted a 2007 Stock Option Plan. The
maximum number of shares of common stock that may be issued pursuant to
exercise of options are 5 million and the Board of Directors, or a
designated committee, is to determine the exercise price of options. The
options either vest immediately or at scheduled periods over approximately
3 or 4 years and have a life of 5 or 10 years.
Share-based compensation expense resulted in $337,767 and $351,714,
respectively, for the years ended December 31, 2008 and 2007..
The Black-Scholes option-pricing model was used to estimate the option fair
values. This option-pricing model requires a number of assumptions, of
which the most significant are, expected stock price volatility, the
expected pre-vesting forfeiture rate and the expected option term (the
amount of time from the grant date until the options are exercised or
expire). Expected volatility was estimated utilizing a weighted average of
comparable published volatilities based on industry comparables. Expected
pre-vesting forfeitures were estimated based on actual historical and
expected employee turnover. The expected option term was calculated using
the "simplified" method permitted by SEC Staff Accounting Bulletin 107. The
fair value of options granted during the years ended December 31, 2008 and
2007 were estimated as of the grant date using the Black-Scholes option
pricing model with the following assumptions:
2008 & 2007
-----------
Expected volatility 58 - 62%
Risk-free interest rate 3.7 - 4.9%
Expected dividends --
Expected terms (in years) 5-8
Estimated forfeiture rate 30%
F-15
CIRALIGHT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007
9. Stock Options and Warrants: (continued)
The following tables summarize stock options outstanding and activity as of
and for the years ended December 31, 2008 and 2007:
Weighted Remaining
Average Contractual
Exercise Term
Shares Price (in years)
------ ----- ----------
Outstanding at January 1, 2007
Granted 4,775,000 $0.73 8.7
Exercised -- $ -- --
Forfeited (2,400,000) $0.76 9.0
Outstanding at December 31, 2007 2,375,000 $0.70 8.3
Exercisable at December 31, 2007 450,000 $0.64 4.5
Outstanding at January 1, 2008 2,375,000 $ -- --
Granted 818,333 $0.48 9.13
Exercised -- $ -- --
Forfeited (375,000) $0.05 8.18
Outstanding at December 31, 2008 2,818,333 $0.96 8.72
Exercisable at December 31, 2008 1,598,332 $1.15 4.06
If not previously exercised, options expire as follows:
Weighted Average Range of
Number of Options Exercise Price Exercise Price
----------------- -------------- --------------
2011 200,000 .12 $.50 - .75
2012 450,000 .31 $.50 - .75
2013 518,333 .35 $.50 - .50
2017 1,550,000 .36 $.50 - .85
2018 100,000 -- $.50 - .50
Total 2,818,333
The weighted average fair value of options granted during fiscal 2008 and
2007 was $0.27 and $0.33, respectively. The exercise price of options
granted during fiscal years 2008 and 2007 equaled the estimated fair market
value of the stock at the time of grant, except the exercise price for
250,000 options granted in 2007. These options have an exercise price of
$0.75 when the estimated fair market value of the stock was $0.85. No
options were exercised during the fiscal years 2008 and 2007. Accordingly,
the Company did not realize any tax deductions related to the intrinsic
value of exercised options.
F-16
CIRALIGHT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007
9. Stock Options and Warrants: (continued)
Total unrecognized share-based compensation expense from unvested stock
options granted in the year ended December 31, 2007 was $487,577.
WARRANTS -- See Note 5 for description of warrants.
The following tables summarize stock warrants outstanding and activity as
of and for the years ended December 31, 2008 and 2007:
Weighted Remaining
Average Contractual
Number of Exercise Term
Warrants Price (in years)
-------- ----- ----------
Outstanding at January 1, 2007 -- $ -- --
Granted 1,088,475 $0.58 4.44
Exercised -- $ -- --
Forfeited -- $ -- --
Outstanding at December 31, 2007 2,375,000 $0.58 4.44
Exercisable at December 31, 2007 1,088,475 $0.58 4.44
Outstanding at January 1, 2008 1,088,475 $ -- -
Granted 130,617 $0.05 5.14
Exercised -- $ -- --
Forfeited -- $ -- --
Outstanding at December 31, 2008 1,219,092 $0.05 5.14
Exercisable at December 31, 2008 1,219,092 $0.05 5.14
The weighted average fair value of warrants granted during fiscal 2008 and
2007 was $0.05 and $0.49, respectively.
F-17
CIRALIGHT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007
10. Stock Appreciation Rights:
On March 30, 2007 the Board of Directors adopted a Stock Appreciation
Rights Plan (SARs) allowing for the issuance of up to 500,000 SARs to
employees of the Company. Each SAR entitles the holder of the grant, if
exercised, to participate in the appreciation of the common stock of the
Company above the strike price of the grant. Exercised grants may, at the
sole discretion of the Company, be settled in cash or shares of common
stock.
At December 31, 2008 and 2007, the Company had issued 0 and 90,000 SARs,
respectively, under the plan. The grants vest over a period of three years
and have a life of 10 years. The Black-Scholes option-pricing model was
used to estimate the fair value of the grants. See Note 9, Stock Options,
for the critical assumptions used in the Black-Scholes model.
The following tables summarizes SARs outstanding and activity as of and for
the years ended December 31, 2008 and 2007:
Weighted
Average Weighted Average
Exercise Remaining Term
SAR Price (In Years)
--- ----- ----------
Outstanding at January 1, 2007 -- $ -- --
Granted 90,000 $ .85 4.3 yrs
Exercised -- $ 0 --
Forfeited (40,000) $ .85 4.3 yrs
Outstanding at December 31, 2007 50,000 $ .85 4.3 yrs
Exercisable at December 31, 2007 -- $ -- --
Outstanding at January 1, 2008 50,000 -- --
Granted -- -- --
Exercised -- -- --
Forfeited -- -- --
Outstanding at December 31, 2008 50,000 $ .85 3.35 yrs
Exercisable at December 31, 2008 -- --
All outstanding SARs at December 31, 2008 and 2007 expire during 2012 if
not previously exercised. There were no SARS granted during fiscal 2008 and
the weighted average fair value of SARs granted during fiscal 2007 was
$0.37.
F-18
CIRALIGHT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007
11. Commitments and Contingencies:
OPERATING LEASES -- The Company leases office space pursuant to a
non-cancelable operating lease agreement. Future minimum lease payments
pursuant to the lease as of December 31, 2008 and 2007 were as follows:
Years Ended December 31,
------------------------
2008 $144,595
2009 56,043
2010 38,935
2011 39,690
2012 20,222
--------
$299,485
========
Rent expense totaled $185,417 and $134,721, respectively, for the years
ended December 31, 2008 and 2007.
CAPITAL LEASES - During 2007, the Company entered into capital lease
agreements with vendors whereby the Company received assets with a fair
value of $26,323 in exchange for capital leases. Under the terms of the
capital leases, the Company makes monthly payments totaling $2,345 with
implied interest rates ranging from 17.2% to 21.6% through March 2010 and
the capital leases are depreciated in accordance with property and
equipment policy. The following sets forth future minimum lease payments
under the capital lease:
As of December 31,
-----------------------
Years Ended December 31, 2007 2008
------------------------ ------- -------
2008 $28,134 $ --
2009 11,247 11,247
2010 1,731 1,731
------- -------
41,112 12,978
------- -------
Less: imputed interest (6,356) (1,881)
------- -------
$34,756 $11,097
======= =======
12. Related Party Transactions:
During fiscal 2007, the Company borrowed money from management to repay
vendors. The total borrowed was $76,711 (see Note 6).
On December 19, 2007, the Company issued a $125,000 promissory note to a
related party (see Note 6).
F-19
CIRALIGHT, INC.
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2008 and 2007
12. Related Party Transactions: (continued)
During the 2007 fiscal year, the Company paid an entity, which is owned by
a member of the Board of Directors, $115,002 for goods and services and at
year end owed $21,052. The Company also received payments totaling $45,845
from this related party and at year end the Company recorded $ 1,248 in
accounts receivable.
During fiscal 2008, the Company repaid the $76,711 borrowed from management
in 2007, the Company paid off the $125,000 promissory note issued to a
related party in 2007 and the Company collected the $1,248 due from the
entity as of December 31, 2007.
In addition, during fiscal 2008, George Adams, Sr., became a secured
creditor and related party of the Company (see Note 6). During 2008, Mr.
Adams loaned a total of $1,500,000 to the Company to be paid upon maturity
at March 1, 2009. Upon default by the Company, Mr. Adams would have the
right to foreclose on the Company's assets and become the sole owner. See
Subsequent Events Note 13, below.
13. Subsequent Events:
DISCONTINUATION OF CIRALIGHT INC.
In the first quarter of 2009, the Company defaulted on the loan from George
Adams Sr. and Mr. Adams initiated a foreclosure action against the Company.
Mr. Adam's loan was secured by the Company's assets including the product
patents, assets, accounts receivable and inventory. The Board of Directors
of Ciralight Inc. on January 27, 2009 assigned all manufacturing rights to
Mr. Adams and instructed that the Company's inventory be moved from the
Company warehouse in Salt Lake City Utah to Mr. Adams' facility in Anaheim
California. On March 15, 2009 the Ciralight Inc. offices in Salt Lake City
were closed and all the files, remaining inventory, as well as computers
and equipment were moved to Southern California.
The Company has evaluated events subsequent to the balance sheet date
(December 31, 2008) through February 10, 2010 and concluded that no
additional subsequent events have occurred that require recognition in the
Financial Statements or disclosure in the Notes to the Financial
Statements.
F-20
INDEX TO FINANCIAL STATEMENTS
Audited Financial Statements of Ciralight Global, Inc.
For the period from February 26, 2009 (inception) to December 31, 2009
Page Number
-----------
Report of Independent Registered Public Accounting Firm F-22
Balance Sheet as of December 31, 2009 F-23
Statement of Operations for the period from
February 26, 2009 (inception) to December 31, 2009 F-24
Statement of Changes in Stockholder's Equity for the period from
February 26, 2009 (inception) to December 31, 2009 F-25
Statement of Cash Flows for the period from February 26, 2009
(inception) to December 31, 2009 F-26
Notes to Financial Statements F-27
F-21
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors of
Ciralight Global, Inc.
Irvine, California
We have audited the accompanying balance sheet of Ciralight Global, Inc. as of
December 31, 2009, and the related statement of operations, stockholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
We were not engaged to examine management's assessment of the effectiveness of
Ciralight, Global Inc.'s internal control over financial reporting as of
December 31, 2009, and accordingly, we do not express an opinion thereon.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ciralight Global, Inc. as of
December 31, 2009, and the results of its operations and its cash flows for the
year then ended, in conformity with U.S. generally accepted accounting
principles.
/s/ HJ Associates & Consultants, LLP
- -------------------------------------------
HJ Associates & Consultants, LLP
Salt Lake City, Utah
February 23, 2010
F-22
CIRALIGHT GLOBAL, INC
BALANCE SHEET
As of December 31, 2009
ASSETS
Current assets:
Cash & cash equivalents $ 265,753
Accounts receivable 300,547
Notes receivable - related party 69,865
Inventory 176,521
Prepaid expenses and other current assets 135,391
-----------
Total current assets 948,077
-----------
Property and equipment, net 20,337
Intangible assets, net 30,523
-----------
Total assets $ 998,937
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 54,419
Convertible notes payable - related parties 324,927
Other payables 202,847
-----------
Total current liabilities 582,193
-----------
Stockholders' equity
Preferred stock - $.001 par value; 10,000,000 shares authorized,
1,000,000 Redeemable Series A Preferred shares issued and outstanding 1,000
Common stock - $.001 par value; 50,000,000 shares authorized,
10,368,000 shares issued and outstanding 10,368
Additional paid-in capital 1,225,665
Accumulated deficit (820,289)
-----------
Total stockholders' equity 416,744
-----------
Total liabilities and stockholders' equity $ 998,937
===========
The accompanying notes are an integral part of these financial statements.
F-23
CIRALIGHT GLOBAL, INC.
STATEMENT OF OPERATIONS
For the period from February 26, 2009 (inception) to December 31, 2009
Sales $ 640,425
Cost of goods sold (exclusive of depreciation expense) 549,812
----------
Gross profit 90,613
----------
Operating expenses
Research and development expenses 22,229
Selling and marketing expenses 72,847
General and administrative expenses 815,862
----------
Total operating expenses 910,938
----------
Loss from operations (820,325)
Interest income 36
----------
Net loss $ (820,289)
==========
Basic and diluted loss per share $ (0.11)
==========
Weighted average shares used in per share calculation 7,543,444
==========
The accompanying notes are an integral part of these financial statements.
F-24
CIRALIGHT GLOBAL, INC
STATEMENT OF STOCKHOLDER'S EQUITY
For the period from February 26, 2009 (inception) to December 31, 2009
Common Stock Preferred Stock
------------------- ------------------- Additional
Par Par Paid in Accumulated Total
Shares Value Shares Value Capital Deficit Equity
------ ----- ------ ----- ------- ------- ------
BALANCE AT INCEPTION FEBRUARY 26, 2009 -- $ -- -- $ -- $ -- $ -- $ --
Issuance of Founder's Shares 1,600,000 1,600 -- -- (1,600) -- --
Common Stock Issued For Asset
Acquisition at predecessor cost
of $0.09 (Note 5) 3,200,000 3,200 -- -- 224,282 -- 227,482
Preferred Stock Issued For Asset
Acquisition at $0.01 (Note 5) -- -- 1,000,000 1,000 -- -- 1,000
Common Stock Issued For Private
Placement at $0.25 4,968,000 4,968 -- -- 1,237,032 -- 1,242,000
Stock Offering Costs -- -- -- -- (9,874) -- (9,874)
Common Stock Issued For Asset
Acquisition at predecessor cost
(Note 5) 400,000 400 -- -- (291,975) -- (291,575)
Common Stock Issued For Conversion
of Note Payable and Interest at $0.25 200,000 200 -- -- 49,800 -- 50,000
Rent Donation By Related Party -- -- -- -- 18,000 -- 18,000
Net Loss -- -- -- -- -- (820,289) (820,289)
---------- ------- --------- ------ ---------- --------- ----------
BALANCE DECEMBER 31, 2009 10,368,000 $10,368 1,000,000 $1,000 $1,225,665 $(820,289) $ 416,744
========== ======= ========= ====== ========== ========= ==========
The accompanying notes are an integral part of these financial statements.
F-25
CIRALIGHT GLOBAL, INC
STATEMENT OF CASH FLOWS
For the period from February 26, 2009 (inception) to December 31, 2009
Cash flows from operating activities:
Net Loss $ (820,289)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 15,254
Bad debt expense 30
Contribution of rent from a related party 18,000
Changes in operating assets and liabilities
Increase in inventory (17,425)
Increase in accounts receivable (270,817)
Increase in notes receivable (69,865)
Increase in prepayments and deposits (135,391)
Increase in accounts payable 54,419
Increase in other payables 140,916
-----------
Net cash used in operating activities (1,085,168)
-----------
Cash flows from investing activities:
Acquisition of business assets (3,500)
-----------
Net cash used in investing activities (3,500)
-----------
Cash flows from financing activities:
Cash from sale of common stock 1,242,000
Stock offering costs (9,874)
Proceeds from notes payable 122,295
-----------
Net cash provided by financing activities 1,354,421
-----------
Net increase in cash 265,753
Cash, beginning of period --
-----------
Cash, end of period $ 265,753
===========
Supplemental cash flow information:
Interest paid $ --
===========
Income taxes paid $ --
===========
Non-cash investing and financing activities
Conversion of note payable to common stock $ 50,000
===========
The accompanying notes are an integral part of these financial statements.
F-26
CIRALIGHT GLOBAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2009
1. Background and Basis of Presentation:
Ciralight Global, Inc. (the "Company") was incorporated in the State of Nevada
on February 26, 2009. The Company is in the business of designing, developing,
and distributing proprietary advanced day lighting systems for traditional
non-residential markets that benefit from natural lighting.
In April 2009, we entered into an Exchange of Stock for Assets Agreement with
Mr. George Adams, Sr. ("Adams Agreement") to acquire certain assets including,
but not limited to, a patent, a patent application and other patent rights,
artwork, trademarks, equipment, furniture, databases, technical drawings,
promotional materials, trade names and inventory parts and marketing rights
related to the Suntracker One(TM), Suntracker Two(TM) and other daylighting
products previously owned and distributed by Ciralight, Inc., a Utah
corporation, such assets having been foreclosed on by Mr. Adams, who was the
secured creditor of Ciralight, Inc. Ciralight, Inc. is not a predecessor to the
Company and we have no affiliation, contractual or otherwise, with Ciralight,
Inc. or any of its employees, officers or directors.
Ciralight, Inc., the company whose assets were foreclosed on by Mr. Adams, was
also in the business of designing, developing, and distributing proprietary
advanced day lighting systems for traditional non-residential markets that
benefit from natural lighting. Ciralight, Inc. ceased operations on March 14,
2009, following the foreclosure by Mr. Adams. Since the acquisition of the
assets was through a foreclosure, the former company and its officers remain
liable for the Ciralight Inc.'s debts and the Company has no financial
responsibility for those debts. None of the employees or management of Ciralight
Inc. are involved in the Company. The business operations of our Company are
located in Irvine, California and the Company operates with four employees, the
Chief Executive Officer, the Chief Financial Officer / Chief Operations Officer,
a warehouse manager and an executive assistant.
In April 2009, we acquired all of the above described assets from Mr. Adams,
except for the patent, the patent application and other patent rights, in
exchange for 3,200,000 shares of our common stock and 1,000,000 shares of our
Series A Preferred Stock. On December 15, 2009, we acquired the patent, patent
application and other patent rights from Mr. Adams in exchange for the issuance
by us of an additional 400,000 shares of our common stock and a convertible
promissory note in the amount of $250,000. The note is convertible into shares
of our common stock at a conversion rate of one share per $.25 of outstanding
principal and interest. As a result of this transaction, Mr. Adams is our
largest shareholder.
Since Mr. Adams is considered a related party, as described in Note 8, the
assets acquired from Mr. Adams, by the Company, were valued at the historical
value in which they were carried on the prior company's books. In this
transaction, the Securities and Exchange Commission considers the assets
acquired by the Company to meet the same criteria as if we had acquired the
business.
In order to provide working capital, Ciralight Global, Inc. sold common stock
through a private placement that raised $1,300,000 with the sale of 5,200,000
shares at a price of $.25 per share. As of December 31, 2009, the date of the
annual financial statements, $1,242,000 worth of shares had been purchased.
Subsequent to the date of the financial statements, the full $1,300,000 of the
offering was sold to investors. Collectively the investors own 45.97% of the
outstanding shares in the company.
The financial statements of which these Notes are a part reflect the operating
results and financial condition of Ciralight Global, Inc. for the period from
February 26, 2009 (inception) to December 31, 2009.
F-27
CIRALIGHT GLOBAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2009
2. Liquidity and Operations:
The Company had a net loss of $820,289 for the period from February 26, 2009
(inception) to December 31, 2009.
The following unaudited pro forma combined results of operations for the year
ended December 31, 2009 presents the operations of the Company and Ciralight
Inc. as if our acquisition of the assets formerly owned by Ciralight Inc.
occurred on March 15, 2009, the day after Ciralight Inc. ceased operations. The
pro forma results are not necessarily indicative of the actual results that
would have occurred had our acquisition been completed as of the beginning of
the periods presented, nor are they necessarily indicative of combined results.
Ciralight Inc. Ciralight Global, Inc. Pro forma Consolidated
------------------- ---------------------- ----------------------
For the period from For the period from For the
January 1, 2009 to March 15, 2009 to year ended
March 14, December 31, December 31,
2009 2009 2009
----------- ----------- -----------
Statement of Operations Data:
Sales $ 179,894 $ 640,425 $ 820,319
Cost of Sales 123,339 549,812 673,151
----------- ----------- -----------
Gross Profit 56,555 90,613 147,168
----------- ----------- -----------
Total Operating Expenses 147,158 910,938 1,058,096
Loss from Operations (90,603) (820,325) (910,928)
----------- ----------- -----------
Interest Income (Expense) (77) 36 (41)
----------- ----------- -----------
Net Loss $ (90,680) $ (820,289) $ (910,969)
=========== =========== ===========
As of December 31, 2009, the Company had cash and cash equivalents of $265,753.
As of December 31, 2009, the company had raised $1,242,000 of the $1,300,000
Private Placement Offering and raised the remaining balance by January 2010. In
addition, the Company had accounts receivable of approximately $300,000,
inventory on hand at a cost valuation of approximately $177,000, with a market
valuation of over $370,000, all fully paid for, and accounts payable of
approximately $54,000.
3. Summary of Significant Accounting Policies:
Cash and Cash Equivalents - The Company considers all highly liquid debt
instruments with original maturities of three months or less to be cash
equivalents.
The Company maintains its cash accounts primarily with banks located in Utah.
The total cash balances are insured by the FDIC up to $250,000 per bank. At
times, the amount of the Company's cash and cash equivalent exceeds the balance
insured by the FDIC.
F-28
CIRALIGHT GLOBAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2009
3. Summary of Significant Accounting Policies: (continued)
Accounts Receivable - The Company's accounts receivable are unsecured and the
Company is at risk to the extent such amounts become uncollectible. Management
continually monitors accounts receivable balances and provides for an allowance
for doubtful accounts at the time collection becomes questionable based on
payment history or age of the receivable. The Company sells products and
services generally on terms of receiving a 50% deposit prior to shipment and the
remaining 50% within 21 days of date of shipment. The Company charges nominal
financing fees on late payments. Accounts receivable are charged to the
allowance for bad debts when the Company has exhausted all reasonable means of
collection. At December 31, 2009, management deemed that all accounts receivable
were fully collectible and that no bad debt reserve was required.
Inventory - Inventory consists of finished units, parts and packaging materials
and is stated at lower of historical cost or current cost. Management will
establish a reserve for damaged and discontinued inventory when determined
necessary. At December 31, 2009 no reserve was required.
Property and Equipment - Property and equipment are stated at historical cost,
which consists of the net book value of the assets carried on the prior
company's books. Depreciation is computed over the estimated useful lives of the
assets using the straight-line method generally over a 3- to 5-year period.
Leasehold improvements will be amortized on the straight-line method over the
life of the related lease. Expenditures for ordinary maintenance and repairs are
charged to expense as incurred. Upon retirement or disposal of assets, the cost
and accumulated depreciation are eliminated from the account and any gain or
loss is reflected in the statement of operations.
Stock Offering Costs - During 2009, the Company recorded the organizational
costs associated with the private placement offering as additional paid in
capital and expensed the costs associated with taking the company public.
Impairment of Long Lived Assets - The Company evaluates its long-lived assets
for impairment, in accordance with FASB ASC 360-10, when events or changes in
circumstances indicate that the related carrying amount may not be recoverable.
Impairment is considered to exist if the total estimated future cash flow on an
undiscounted basis is less than the carrying amount of the related assets. An
impairment loss is measured and recorded based on the discounted estimated
future cash flows. Changes in significant assumptions underlying future cash
flow estimates or fair values of assets may have a material effect on the
Company's financial position and results of operations. No such impairment was
indicated at December 31, 2009.
Revenue Recognition - The Company recognizes revenue from product sales when
persuasive evidence of an arrangement exists, shipment has occurred, the
seller's price to the buyer is fixed or determinable and collectability is
reasonably assured. Commencing April 1, 2009, the Company provided a five-year
warranty covering the labor and materials associated with its installations.
Effective September 1, 2009, the Company changed the coverage to ten years in
California and generally five to ten years elsewhere in the U.S., depending upon
each state's specific requirements. The Company's "advanced skylights" are
warranted by the manufacturer for 10 years, generally.
Research and Development Expenses - Research and development expenses are
charged to operations in the period incurred. The amount expensed for the period
from February 26, 2009 (inception) to December 31, 2009 was $22,229.
F-29
CIRALIGHT GLOBAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2009
3. Summary of Significant Accounting Policies: (continued)
Selling and Marketing Expenses - Selling and marketing expenses are expensed as
incurred. These expenses were $72,847 for the period from February 26, 2009
(inception) to December 31, 2009 and consisted of the following:
Booth rental fees $ 16,570
Event staffing, travel and shipping 22,193
Marketing consultants and materials 10,665
Royalty fees 15,260
Commissions 6,736
Sales support, recruitment and travel 1,423
--------
Total Selling and Marketing Expenses $ 72,847
========
The Adams Agreement described in Note 1 above, also granted Mr. Adams a royalty
fee of $20.00 for each Suntracker One(TM) and Suntracker Two(TM) unit or any
future units that are based on the patent rights we acquired from him. The
maximum royalty fees payable under the Adams Agreement is $2,000,000 based on
the sale of 100,000 units. From February 26, 2009 through December 31, 2009, we
accrued $15,260 in royalties due to Mr. Adams related to our sale of 763 units.
General and Administrative Expenses - General and administrative expenses are
expensed as incurred. These expenses were $815,862 for the period from February
26, 2009 (inception) to December 31, 2009 and consisted of the following:
Depreciation and amortization $ 15,254
Computer and internet 9,567
Insurance 4,811
Membership fees 4,260
Payroll and compensation 385,240
Accounting fees 61,204
Legal fees 74,012
Consulting fees 171,573
Rent expense 54,450
Warehouse expenses 11,083
Travel expenses 10,195
Interest expense 2,631
Office expenses 11,552
Bad debt expense 30
--------
Total General and Administrative Expenses $815,862
========
Concentrations of Credit Risk - Credit risk represents the accounting loss that
would be recognized at the reporting date if counterparties failed completely to
perform as contracted. Concentrations of credit risk (whether on or off balance
sheet) that arise from financial instruments exist for groups of customers or
counterparties when they have similar economic characteristics that would cause
their ability to meet contractual obligations to be similarly affected by
changes in economic or other conditions.
F-30
CIRALIGHT GLOBAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2009
3. Summary of Significant Accounting Policies: (continued)
Financial instruments potentially subjecting the Company to concentrations of
credit risk consist principally of accounts receivable. As of December 31, 2009
one distributor had balances representing 30% or more of the Company's accounts
receivable.
Use of Estimates - The preparation of the financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the balance sheet and the reported amounts of revenue
and expenses during the reporting period. Significant estimates include the
Company's debt discount, and share-based compensation expense. Actual results
could differ from these estimates.
Share-Based Compensation - On April 1, 2009, the Company adopted the provisions
of FASB ASC 718-10 "Share-Based Payment" which requires recognition of
stock-based compensation expense for all share-based payments based on fair
value.
The Company measures compensation expense for its non-employee stock-based
compensation under FASB ASC 505-10 and 50, "Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services". The fair value of the option issued is used to
measure the transaction, as this is more reliable than the fair value of the
services received. The fair value is measured at the value of the Company's
common stock on the date that the commitment for performance by the counterparty
has been reached or the counterparty's performance is complete. The fair value
of the equity instrument is charged directly to compensation expense and
additional paid-in capital.
Income Taxes - The Company accounts for its income taxes under the provisions of
FASB-ASC-10 "Accounting for Income Taxes." This statement requires the use of
the asset and liability method of accounting for deferred income taxes. Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax reporting purposes, at the applicable enacted
tax rates. The Company provides a valuation allowance against its deferred tax
assets when the future realizability of the assets is no longer considered to be
more likely than not.
Convertible Notes Payable - The Company accounts for its convertible notes
payable under the provisions of FASB ASC 470 (Staff Position No. APB 14-1
"Accounting for Convertible Debt Instruments that may be Settled in Cash upon
Conversion (including partial cash settlement"). FASB ASC 470 clarifies that
convertible debt instruments that may be settled in cash upon conversion
(including partial cash settlement) are not addressed by FASB ASC 470-20-65-1
(paragraph 12 of APB Opinion No. 14, "Accounting for Convertible Debt and Debt
Issued with Stock Purchase Warrants"). Additionally, FASB ASC 470 specifies that
issuers of such instruments should separately account for the liability and
equity components in a manner that will reflect the entity's nonconvertible debt
borrowing rate when interest cost is recognized in subsequent periods.
Commencing January 1, 2010, management will separately account for the liability
and equity components in a manner that will reflect the Company's nonconvertible
debt borrowing rate when interest cost is recognized in subsequent periods.
The Company accounts for uncertain tax positions in accordance with FASB ASC
740-10, 30 and 270, "Accounting for Uncertainty in Income Taxes." The
application of income tax law is inherently complex. As such, the Company is
required to make certain assumptions and judgments regarding its income tax
positions and the likelihood whether such tax positions would be sustained if
challenged. Interest and penalties related to uncertain tax provisions are
recorded as a component of the provision for income taxes. Interpretations and
guidance surrounding income tax laws and regulations change over time. As such,
changes in the Company's assumptions and judgments can materially affect amounts
recognized in the Company's consolidated balance sheets and statement of
operations.
F-31
CIRALIGHT GLOBAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2009
4. Balance Sheet Information:
Cash and Cash Equivalents consisted of the following at December 31, 2009:
Checking account $265,583
Savings accounts 76
Petty cash 94
--------
Total Cash and cash equivalents $265,753
========
Notes receivable - related party - As of December 31, 2009, the Company holds a
note receivable from the President and Chief Executive Officer of the Company,
Randall Letcavage, with an outstanding balance of $69,865 (see Note 11). This
unsecured note accrues interest at an annual rate of 8% from the effective date
of January 15, 2010. The outstanding principal balance, plus all accrued and
unpaid interest, is due on July 15, 2010. As described in Note 11, below,
certain terms of this note receivable were amended and replaced on March 18,
2010, with the following terms: The Company was granted a security interest in
and to 329,647 shares of Company common stock owned by Randall Letcavage as
collateral for the repayment of the note receivable and the note receivable is
due and payable on November 1, 2010.
Inventory consisted of the following at December 31, 2009:
Finished units and components $153,916
Packaging crates and materials 22,605
--------
Total Inventory $176,521
========
Prepaid expenses and other current assets consist of the following at December
31, 2009:
Purchase order prepaid deposits $ 98,468
Private offering costs 33,823
Deposits on account 3,000
Employee advances 100
--------
Total Prepayments and deposits $135,391
========
Purchase order prepaid deposits represent the prepayment required under
the agreements with several suppliers of our inventory components.
Property and equipment are stated at cost, net of accumulated depreciation.
Expenditures for maintenance and repairs are expensed as incurred; additions,
renewals and betterments are capitalized. Depreciation of property and equipment
is provided using the straight-line method with estimated lives ranging from 3
to 5 years as follows:
Furniture and equipment $ 7,950
Vehicles 2,771
Tooling costs 22,983
Convention display 1,817
--------
Property and equipment 35,521
--------
Less Accumulated depreciation (15,184)
--------
Total Property and equipment, net $ 20,337
========
Depreciation expense for the annual period ended December 31, 2009 was $15,184.
F-32
CIRALIGHT GLOBAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2009
4. Balance Sheet Information: (continued)
Intangible assets are stated at cost, net of accumulated amortization.
Amortization of intangible assets is provided using the straight-line method
with estimated lives of 20 years as follows:
Patent and patent application $ 30,593
Less Accumulated amortization (70)
--------
Total Intangible assets, net $ 30,523
========
Amortization expense for the annual period ended December 31, 2009 was $70.
Organizational Costs - The Company's startup and organizational expenses in the
amount of $34,429, for the period from February 26, 2009 (inception) to December
31, 2009, were expensed as legal and accounting fees, as shown in Note 3 above,
under general and administrative expenses.
Convertible Notes Payable - Related Parties - As of December 31, 2009, the
Company had Convertible Notes Payable - Related Parties consisting of the
following:
Note payable - George Adams, Sr $250,547
Note payable - Terry Adams 74,380
--------
Total Convertible notes payable - related parties $324,927
========
Notes Payable - As of December 31, 2009, the Company had issued two Notes
Payable to related parties. On December 15, 2009, the Company secured the title
to the one patent and a patent application as provided in the Adams Agreement,
described in Note 1, above. As required in the Adams Agreement, as amended, on
December 15, 2009, the Company executed a Convertible Promissory Note in the
amount of $250,000 to Mr. Adams and issued to Mr. Adams an additional 400,000
shares of common stock in consideration of Mr. Adams' transfer of ownership of
the patent and patent application to the Company. The $250,000 note with Mr.
Adams bears interest at the prime rate plus 2%, is due on December 15, 2012 and
Mr. Adams has the right to convert the principal amount of the note into shares
of the Company's common stock at $.25 per share. The balance of the note,
including accrued interest, at December 31, 2009 was $250,547. In addition,
Terry Adams, the son of Mr. George Adams, Sr., loaned the Company $73,788 on
November 5, 2009 in exchange for a Convertible Promissory Note for the amount
loaned. The $73,788 note with Terry Adams bears interest at the prime rate plus
2%, is due on December 15, 2012 and Terry Adams has the right to convert the
principal amount of the note into shares of the Company's common stock at $.25
per share. The balance of the note, including accrued interest, at December 31,
2009 was $74,380. Upon conversion of a note payable, the principal amount of the
note would be converted into common stock shares of the Company at $.25 per
share. Commencing January 1, 2010, management will separately account for the
liability and equity components in a manner that will reflect the Company's
nonconvertible debt borrowing rate when interest cost is recognized in
subsequent periods.
Other Payables - As of December 31, 2009, the Company had Other Payables
consisting of the following:
Royalty fees payable $ 15,260
Stock payable 178,111
Accrued warranty expense 9,476
--------
Total Other payables $202,847
========
Royalty Fees Payable - The Adams Agreement described in Note 1 above, granted
Mr. Adams a royalty fee of $20.00 for each Suntracker One(TM) and Suntracker
Two(TM) unit or any future units that are based on the patent rights we acquired
from him. The maximum royalty fees payable under the Adams Agreement is
$2,000,000 based on the sale of 100,000 units. From February 26, 2009 through
December 31, 2009, we accrued $15,260 in royalties due to Mr. Adams related to
our sale of 763 units during the period.
F-33
CIRALIGHT GLOBAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2009
4. Balance Sheet Information: (continued)
Stock Payable - Anti-dilution rights were granted to three individuals and one
entity which entitled them to acquire additional shares of our common stock at
$.25 per share in order to maintain their original percentage ownership in our
common stock. In January 2010, 352,941 common stock shares at $.25 per share,
with an aggregate value of $88,235, were issued as compensation and for services
rendered in order to satisfy the anti-dilution rights. The Chief Executive
Officer and Chief Financial Officer of the Company were each due $30,000 in
aggregate compensation resulting from $3,000 per month accrued for each of them
from March through December 2009. In January 2010, a total of 240,000 common
stock shares at $.25 per share, with an aggregate value of $60,000, were issued
to compensate both officers for 2009. In addition, the Chief Financial Officer
was due additional compensation of $29,876 for the period from February 26, 2009
(inception) to December 31, 2009. In January 2010, a total of 119,505 common
stock shares at $.25 per share, with a value of $29,876, was issued to
compensate the Chief Financial Officer for the additional compensation due as of
December 31, 2009.
5. Stockholders' Equity:
Common stock:
The Company is authorized to issue up to 50,000,000 shares of common stock with
a par value of $0.001, under terms and conditions established by the Board of
Directors.
The Company had 10,368,000 issued and outstanding common stock shares as of
December 31, 2009. Details of the issued and outstanding common stock shares are
shown below. Adams receives a royalty of $20 per Suntracker unit sold on a
quarterly basis. Additional shares of common stock are beneficially owned by
Randall Letcavage, our Chief Executive Officer, Jeffrey Brain, our Chief
Financial Officer and Chief Operating Officer, and David Wise, our securities
attorney.
Common stock shares issued as of December 31, 2009 are as follows:
Amount of
Description shares issued
----------- -------------
Stock issued for acquisition of assets 3,600,000
Stock issued for legal services (founder's shares) 240,000
Stock issued for consulting services (founder's shares) 240,000
Stock issued as compensation (founder's shares) 1,120,000
Stock issued to private offering subscribers 4,968,000
Stock issued for conversion of note payable 200,000
----------
Total common stock shares issued 10,368,000
==========
On April 1, 2009, 3,200,000 shares of common stock were issued, at a value of
$.01 per share, as a result of the Adams Agreement, described in Note 1, above.
On April 1, 2009, 1,600,000 shares of common stock were issued as founder's
shares, at a value of $.00 per share, for compensation expense and legal and
consulting services rendered in the formation of the Company and for
developmental work on our business plan. During the period from April 1, 2009 to
December 31, 2009, 4,968,000 shares of common stock were issued, at a value of
$.25 per share, resulting from sales of our stock through a Private Placement
Offering. On December 1, 2009, 200,000 shares of common stock were issued, at a
value of $.25 per share, resulting from the conversion of a $50,000 note
payable, discussed in Note 8. In addition, also a result of the Adams Agreement,
described in Notes 1 and 4, above, 400,000 shares of common stock were issued.
F-34
CIRALIGHT GLOBAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2009
5. Stockholders' Equity: (continued)
The assets acquired, as a result of the Adams Agreement, described in Notes 1
and 4, above, were in exchange for consideration of $354,200. The consideration
consisted of 3,200,000 shares of common stock at par value equaling $3,200;
400,000 shares of common stock at $.25 equaling $100,000; 1,000,000 shares of
preferred stock at par value equaling $1,000 and a note payable of $250,000. The
assets acquired consisted of inventory, accounts receivable, property and
equipment, a patent and a patent application at a value of $274,076. The assets
acquired were valued at their predecessor values, since George Adams was a
related party of the predecessor company. Management recognized additional paid
in capital for the difference of $80,124 between the predecessor value of the
assets acquired and the value of the consideration paid, as additional
acquisition costs, in order to properly recognize the predecessor cost of the
assets involved and for other costs associated with this transaction.
The following table summarizes the predecessor values of the assets acquired
relating to the Adams Agreement:
Asset Description Predecessor Value
----------------- -----------------
Inventory $159,096
Accounts receivable 29,760
Packaging crates and materials 22,605
Property and equipment 32,022
Patent and patent application 30,593
--------
Total predecessor value of assets $274,076
========
Preferred stock:
The Company is authorized to issue 10,000,000 shares of preferred stock, par
value $0.001 per share. Currently, we have 1,000,000 shares of preferred stock
issued and outstanding. As part of the purchase contract for the acquisition of
assets, we issued 1,000,000 shares of Series A Preferred Stock to the seller of
those assets, Mr. George Adams, Sr. The Series A Preferred Stock has the
following rights and preferences:
Shares Issued: 1,000,000 shares have been issued to George Adams, Sr. No other
shares of preferred stock shall be issued by the Company that would grant the
holder(s) equal or superior rights to the Series A Preferred Stock.
Voting Rights: As long as Mr. Adams is the beneficial owner of 3,200,000 shares
of our common stock and is the holder of any shares of our Series A Preferred
Stock, he shall have the right to vote that number of shares (when added to Mr.
Adams' 3,200,000 shares of common stock) necessary to provide Mr. Adams with the
right to vote 51% of the total votes necessary for the election of directors and
for any acquisition or merger transaction.
Redemption Rights: The Company will have the right to redeem shares of the
Series A Preferred Stock by paying Mr. Adams $1.00 per share. Such redemption
may occur any time the Company has money legally available for such redemption.
6. Stock Options and Warrants:
Stock Options and Warrants -- As of December 31, 2009, the Company had not
issued any stock options or warrants.
F-35
CIRALIGHT GLOBAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2009
7. Commitments and Contingencies:
Operating Leases -- The Company has not entered into any long term leases. The
Company is currently leasing approximately 3,500 square feet of warehouse space
in Corona, California, on a verbal month to month basis from one of our
Directors, Frederick Feck. The Company leased the space rent-free from April 1,
2009 through September 30, 2009. Rent expense of $18,000 was recorded for the
six month rent-free period, based on a monthly value of $3,000, with an offset
to additional paid in capital. Commencing October 1, 2009, the Company paid
$3,000 per month for the Corona, California warehouse space. For business office
space, the Company has chosen to share space with iCapital to reduce its
administrative cost by sharing costs, avoiding setup costs for phones, internet,
furnishings, etc as well as office staffing. The Company pays $3,000 per month
for the office space which is located in Irvine, California on a verbal month to
month lease.
The company as of December 31, 2009 has no additional financial commitments that
would represent long term commitments on behalf of the Company.
Capital Leases - The Company has not entered into any kind of capital leases for
furnishings, equipment or for any other purposes.
Prepaid Inventory - Our agreements with several of our inventory component
suppliers generally provide that between 50% and 60% of the purchase order price
is due upon the placement of an order, with the remaining balance due upon
completion and shipment of the order, normally within 30 days. Purchase order
prepaid deposits are included in the balance sheet as Prepaid expenses and other
current assets. As of December 31, 2009, purchase order prepaid deposits totaled
$98,468 and consisted of 60% of the total purchase order price of an order with
one of our suppliers. The remaining 40% balance of the purchase order price will
be due upon completion and shipment of the order.
8. Related Party Transactions:
During fiscal 2009, the Company acquired assets through the Adams Agreement
described in Note 1, above. Mr. Adams is considered a related party, since he
was the largest secured creditor of Ciralight Inc., the company from which he
acquired certain assets in foreclosure and subsequently sold the assets to the
Company, and he is the largest shareholder in the Company. These assets were
valued at their predecessor values. As described in Note 4 above, the Company
borrowed money from Terry Adams, the son of Mr. George Adams, Sr., in exchange
for a Convertible Promissory Note.
As described in Note 4, above, and Note 11, below, on December 31, 2009, the
Company holds a note receivable from the President and Chief Executive Officer
of the Company, Randall Letcavage.
As described in Note 7, above, the Company leases warehouse space from one of
our directors, Frederick Feck. In addition, at September 30, 2009, the Company
had a loan payable to Mr. Feck in the amount of $48,507, relating to his
payments of certain Company expenses between March 13, 2009 and September 15,
2009. On October 1, 2009 the loan was converted into a convertible note, which
was issued to Mr. Feck. On December 1, 2009, Mr. Feck elected to convert this
note into 200,000 shares of our common stock.
The Company anticipates entering into a distribution agreement with Globalight
Energy Solutions LLC, which is partly owned by Smokey Robinson, the legendary
entertainer, Randall Letcavage, our Chief Executive Officer, Jeffrey Brain, our
Chief Financial Officer and Chief Operating Officer, and some other persons not
associated with the Company. Smokey Robinson will be the single largest
shareholder in the distribution company and has agreed to assist the Company in
promotions and media relations to promote the company products. Randall
Letcavage and Jeff Brain have had a business relationship with Smokey Robinson
and secured his participation in the distribution company to help promote
products. The value of having an icon celebrity involved is countless dollars in
potential free media and promotions and, therefore, it was deemed a valuable
arrangement for the Company. The distribution company will be a minority
certified company that can assist in securing certain contracts. The
F-36
CIRALIGHT GLOBAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2009
8. Related Party Transactions: (continued)
distribution company will be non-exclusive and operate under the same terms,
conditions and pricing as the other distribution companies and, therefore, will
not receive any beneficial or special treatment over our other dealers or
distributors.
One of the attorneys for the Company, David Wise, along with a business
associate will be entering a non-exclusive dealer agreement with the Company to
sell products in Texas. This dealer agreement will be on the same terms,
conditions and pricing as other dealer agreements and thus Mr. Wise's company
will not receive any beneficial or special treatment over our other dealers or
distributors.
9. Income Taxes:
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
Net deferred tax liabilities consist of the following components as of December
31, 2009:
2009
---------
Deferred tax assets:
NOL
Carryover $ 246,468
Related party note payable 444
Deferred tax liabilities
Due to related
parties
Valuation allowance (246,912)
---------
Net deferred tax asset $ --
=========
The income tax provision differs from the amount of income tax determined by
applying the U.S. federal income tax rate to pretax income from continuing
operations for the years ended December 31, 2008 and 2007 due to the following:
F-37
CIRALIGHT GLOBAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2009
9. Income Taxes: (continued)
2009
---------
Book Income $(316,008)
Related party note payable 444
Stock for Service 69,465
Meals & Entertainment 1,985
Unrealized Loss
Valuation allowance 244,114
---------
$ --
=========
At December 31, 2009, the Company had net operating loss carryforwards of
approximately $630,000 that may be offset against future taxable income from the
year 2010 through 2029. No tax benefit has been reported in the December 31,
2009 consolidated financial statements since the potential tax benefit is offset
by a valuation allowance of the same amount.
Due to the change in ownership provisions of the Tax Reform Act of 1986, net
operating loss carryforwards for Federal income tax reporting purposes are
subject to annual limitations. Should a change in ownership occur, net operating
loss carryforwards may be limited as to use in future years.
The Financial Accounting Standards Board ("FASB") has issued Financial
Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an
Interpretation of FASB Statement No. 109 (FIN 48). FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an enterprise's
financial statements in accordance with FASB Statement No. 109, Accounting for
Income Taxes. FIN 48 requires a company to determine whether it is more likely
than not that a tax position will be sustained upon examination based upon the
technical merits of the position. If the more-like1y-than-not threshold is met,
a company must measure the tax position to determine the amount to recognize in
the financial statements. As a result of the implementation of FIN 48, the
Company performed a review of its material tax positions in accordance with
recognition and measurement standards established by FIN 48. At the adoption
date of April 1, 2009, the Company had no unrecognized tax benefit which would
affect the effective tax rate if recognized.
10. Legal Matters:
On October 15, 2009, we filed a lawsuit in the Superior Court of the State of
California for the County of Orange, Central Justice Center (Case No. 30-2009,
00314998) ("Complaint") against Jacque Stevens, Rex Miller, Greg Schmalz, A-1
Daylighting, Consultech, Daylight Specialist and DOES 1-25. The Complaint
includes five causes of action by us against the defendants: Tortious
Interference with Contract, Commercial Disparagement, Conspiracy, Breach of
F-38
CIRALIGHT GLOBAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2009
10. Legal Matters: (continued)
Contract, Unfair Business Practices and Libel. The Complaint alleges that we
entered into a nondisclosure agreement as part of an agreement to work toward
completing a joint venture/private label of our solar lighting systems with
Firestone Building Products and that defendants attempted to interfere with our
business relationship with Firestone Building Products by disparaging our
products (misrepresentations regarding prior sales, installations and quality of
service and that we provided or substituted defective or improper parts in our
products). We are seeking general, special and punitive or exemplary damages and
injunctive relief against the defendants.
While some of the defendants have answered the Complaint, none of them has filed
a counterclaim against us in this case. We are in settlement negotiations with
various defendants in this case. We do not believe we have any legal exposure in
this case.
11. Subsequent Events:
LEGAL ISSUES -
On January 14, 2010, we were served with process in two lawsuits, which we
deemed to frivolous. Both of these lawsuits was filed in the Superior Court of
the State of California for the County of Orange, Central Justice Center (Case
No. 30-2010, 00334139) ("Lawsuit A"). Lawsuit A is styled First Team Marketing
and Communications vs. Ciralight Global, Inc., Ciralight, Inc. and DOES 1-25.
Lawsuit A is a suit on an open book account in the amount of approximately
$62,000. We believe that this suit should have been brought against Ciralight,
Inc., a defunct corporation, with whom we have no affiliation or relationship.
The second of these lawsuits (Case No. 30-2010, 003344479) ("Lawsuit B") is
styled Greg Schmalz Consultants LLC vs. Ciralight Global, Inc., Ciralight, Inc.
and DOES 1-25. Lawsuit B is a suit on an open book account in the amount of
approximately $34,000. We believe this suit should have been brought against
Ciralight, Inc., a defunct corporation, with whom we have no affiliation or
relationship. We do not believe we have any exposure in either Lawsuit A or B.
Our legal counsel is in the process of filing demurrers and motions to strike
against both lawsuits.
AGREEMENTS -
In January 2010, we entered into a nonexclusive distributorship agreement with
Chaparral Green Energy Solutions, LLC, an entity in which our securities
attorney, David E. Wise, Esq., owns a 50% equity interest.
In January 2010, we entered into a nonexclusive dealer agreement with Globalight
Energy Solutions, LLC, an entity in which Randall Letcavage, our Chief Executive
Officer, and Jeffrey Brain, our Chief Financial Officer, each own a 16.25%
beneficial ownership interest.
The terms and conditions of the dealer agreement with Chaparral Green Energy
Solutions, LLC and the distributorship agreement with Globalight Energy
Solutions, LLC are the same as for the other dealer and distributorship
agreements. Therefore, these two agreements do not contain preferential or more
favorable terms or conditions than agreements with our other dealers or
distributors, except for the fact that the Company did not require Globalight
Energy Solutions, LLC to pay the standard distributorship fee of $15,000. In
lieu of Globalight Energy Solutions, LLC paying the standard distributorship fee
of $15,000, Smokey Robinson agreed to use his name, contacts and likeness to
promote the Company products. Our board of directors believes that the value to
the Company of Mr. Robinson's promotion of our products is greater than the
$15,000 distributorship fee to the Company.
F-39
CIRALIGHT GLOBAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2009
11. Subsequent Events: (continued)
In January 2010, we also entered into nonexclusive dealer agreements with both
Green Tech Design-Build, Inc., an entity located in Salt lake City, Utah, and
Eco-Smart, Inc., an entity located in Sarasota, Florida. In addition, we entered
into an exclusive international distribution agreement with Zeev Shimon & Sons,
Ltd., an entity located in Petah-Tikva, Israel.
In January 2010, we entered into a stock option agreement with an individual in
recognition of his past activities in the development of the products
manufactured by the Company. The individual has the option to purchase up to
75,900 shares of common stock at $.75 per share. The option expires the sooner
of one year after the effective date of the Company's registration statement or
five years from the date of the stock option agreement.
In February 2010, we entered into an eighteen month services agreement with a
construction data company regarding Smart BIM; the construction and maintenance
of databases relating to customers, sales leads and marketing strategies.
On March 20, 2010, the note receivable with Randall Letcavage, see Notes 4 and
8, above, was amended from an unsecured note to a secured note, since the
Company was granted a security interest in and to 329,647 shares of Company
common stock owned by Randall Letcavage as collateral for the repayment of the
note receivable and the note was amended to be due and payable on November 1,
2010.
CHANGE IN OFFICERS AND DIRECTORS -
On March 18, 2010, Randall Letcavage resigned as Chief Executive Officer,
President and a director of the Company in order to continue and concentrate on
his other businesses. Going forward, Mr. Letcavage will be available to assist
and contribute to the Company in a less demanding role.
On March 19, 2010, a majority of Company directors resolved to accept Randall
Letcavage's resignation as of March 18, 2010, appointed Jeffrey Brain to serve
as the Company's Chief Executive Officer and President in addition to his
existing positions of Chief Operating officer and Chief Financial Officer and
appointed Terry Adams a member of the Board of Directors of the Company at such
time as the Company obtains Director and Officer liability insurance. As of
March 23, 2009, Terry Adams is not a Director, since the insurance coverage has
not been obtained
The Company has evaluated events subsequent to the balance sheet date of
December 31, 2009 through March 23, 2010, the date which the financial
statements were issued, and concluded that no additional subsequent events have
occurred that require recognition in the Financial Statements or disclosure in
the Notes to the Financial Statements.
F-40
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
We are bearing all expenses in connection with this registration statement
other than sales commissions. Estimated expenses payable by us in connection
with the registration and distribution of the common stock registered hereby are
as follows.
SEC Registration Fee $ 17.22
Printing Expenses $ *
Legal Fees and Expenses $ *
Accounting Fees and Expenses $ *
Blue Sky Fees and Expenses $ *
Transfer Agent Fees and Expenses $ *
Miscellaneous Expenses $ *
Mergent, Inc. $ *
-------
Total $ *
=======
- ----------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
LIABILITY OF DIRECTORS AND OFFICERS
Article 9 of the Company's Articles of Incorporation provides that our
directors and officers shall not be personally liable to the Company or our
stockholders for damages for breach of fiduciary duty. However, Article 9 does
not eliminate or limit the liability of a director or officer for (1) acts or
omissions which involve intentional misconduct, fraud or knowing violation of
law or (2) the unlawful payment of dividends.
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 10 of the Company's Articles of Incorporation entitle any present
and future director or executive officer to be indemnified and held harmless
from any action, suite or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he, or a person of whom he is the
legal representative, is or was a director or officer of the corporation, to the
fullest extent legally permissible under the laws of the State of Nevada.
The Nevada Revised Statutes allow us to indemnify our officers, directors,
employees, and agents from any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, or investigative, except
under certain circumstances. Indemnification may only occur if a determination
II-1
has been made that the officer, director, employee, or agent acted in good faith
and in a manner, which such person believed to be in the best interests of the
corporation. A determination may be made by the shareholders; by a majority of
the directors who were not parties to the action, suit, or proceeding confirmed
by opinion of independent legal counsel; or by opinion of independent legal
counsel in the event a quorum of directors who were not a party to such action,
suit, or proceeding does not exist.
The expenses of officers and directors incurred in defending a civil or
criminal action, suit or proceeding must be paid by us as they are incurred and
in advance of the final disposition of the action, suit or proceeding, if and
only if the officer or director undertakes to repay said expenses to us if it is
ultimately determined by a court of competent jurisdiction that he is not
entitled to be indemnified by us.
The indemnification and advancement of expenses may not be made to or on
behalf of any officer or director if a final adjudication establishes that the
officer's or director's acts or omission involved intentional misconduct, fraud
or a knowing violation of the law and was material to the cause of action.
Article 10 of the our Articles of Incorporation and Article VII of our
By-Laws entitle any director or executive officer to be indemnified and held
harmless from any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he, or a person of
whom he is the legal representative, is or was a director or officer of the
corporation, to the fullest extent legally permissible under the laws of the
State of Nevada.
The Nevada Revised Statutes allow a company to indemnify our officers,
directors, employees, and agents from any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, except under certain circumstances. Indemnification may only
occur if a determination has been made that the officer, director, employee, or
agent acted in good faith and in a manner, which such person believed to be in
the best interests of the corporation. A determination may be made by the
stockholders; by a majority of the directors who were not parties to the action,
suit, or proceeding confirmed by opinion of independent legal counsel; or by
opinion of independent legal counsel in the event a quorum of directors who were
not a party to such action, suit, or proceeding does not exist.
ITEM 15. SALES OF UNREGISTERED SECURITIES
RECENT ISSUANCES OF UNREGISTERED SECURITIES
Since its incorporation on February 26, 2009, we have issued the following
securities without registration under the Securities Act of 1933:
In April 2009, we issued the following shares of our common stock at par
value to our founders for services rendered in the formation of the Company and
for developmental work on our business plan:
Name of Shareholder Number of Shares Issued Aggregate Consideration
- ------------------- ----------------------- -----------------------
Jeffrey Brain 320,000 $320
Frederick Feck 400,000 $400
iCapital Finance, Inc. 240,000 $240
Randall Letcavage 400,000 $400
SUB-TOTAL: 1,360,000 shares of common stock outstanding after this issuance.
II-2
In April 2009, we issued 240,000 shares of our common stock at par value
for an aggregate consideration of $330 to David E. Wise, our securities counsel,
as payment for legal services previously rendered. The fair value of the
services rendered slightly exceeded the amount of stock issued at par value.
SUB-TOTAL: 1,600,000 shares of common stock outstanding after this issuance.
In April 2009, we entered into an Exchange of Stock for Assets Agreement
with Mr. George Adams, Sr. ("Adams Agreement") to acquire certain assets
including, but not limited to, a patent, a patent application and other patent
rights, artwork, trademarks, equipment, furniture, databases, technical
drawings, promotional materials, trade names and inventory parts and marketing
rights related to the Suntracker One(TM), Suntracker Two(TM) and other
daylighting products previously owned and distributed by Ciralight, Inc., a Utah
corporation, such assets having been foreclosed on by Mr. Adams, who was the
secured creditor of Ciralight, Inc. Ciralight, Inc. is not a predecessor to
Ciralight Global, Inc. and we have no affiliation, contractual or otherwise,
with Ciralight, Inc. or any of its employees, officers or directors.
In April 2009, we acquired all of the above described assets from Mr.
Adams, except for the patent, the patent application and other patent rights, in
exchange for 3,200,000 shares of our common stock and 1,000,000 shares of our
Series A Preferred Stock. In December 2009, we acquired the patent, patent
application and other patent rights from Mr. Adams in exchange for the issuance
by us of an additional 400,000 shares of our common stock and a convertible
promissory note in the amount of $250,000. The note is convertible into shares
of our common stock at a conversion rate of one share per $.25 of outstanding
principal and interest. As a result of this transaction, Mr. Adams is our
largest shareholder.
SUB-TOTAL: 5,200,000 shares of common stock and 1,000,000 shares of preferred
stock outstanding after this issuance.
On October 1, 2009, we issued a Convertible Note to Mr. Frederick Feck (one
of our directors) in the amount of $48,507.29 to evidence the our indebtedness
to Mr. Feck for his payment of $48,507.29 of the Company's expenses. Mr. Feck
paid these Company expenses between March 13, 2009 until September 15, 2009.
These expenses included salaries, consulting fees, labor, legal fees for
formation of the Company, legal and filing fees related to patents, travel
expenses and the electric bills on our Corona, California warehouse facility.
The Convertible Note issued to Mr. Feck had an interest rate of Prime Rate (as
quoted in the Wall Street Journal) plus 2% per annum. On December 1, 2009, Mr.
Feck elected to convert this note into 200,000 shares of our common stock.
SUB-TOTAL: 5,400,000 shares of common stock and 1,000,000 shares of preferred
stock outstanding after this issuance.
On November 5, 2009, we issued a Convertible Note in the principal amount
of $73,788 to Terry Adams, the son of George Adams, Sr., to evidence monies
loaned to us. The Convertible Note is due on or before December 15, 2012, bears
interest at the rate of Prime Rate (as quoted in the Wall Street Journal) plus
2% per annum and is convertible into shares of our common stock at a conversion
rate of one share per $.25 of outstanding principal and interest. No portion of
the Convertible Note has been converted into shares of our common stock.
SUB-TOTAL: 5,400,000 shares of common stock and 1,000,000 shares of preferred
stock outstanding after this issuance.
Our board of directors granted anti-dilution rights to Jeffrey Brain,
iCapital Finance, Inc. (a company owned by Randall Letcavage, our Chief
Executive Officer, and his business partner, Rosemary Nguyen), Randall Letcavage
II-3
and David E. Wise, our securities counsel. These anti-dilution rights entitled
Jeffrey Brain, iCapital Finance, Inc., Randall Letcavage and David E. Wise to
acquire additional shares of our common stock at $.25 per share in order to
maintain their original percentage ownership in the our common stock.
Consequently, we issued as compensation and for services rendered the following
anti-dilution shares in January 2010:
Name of Recipient Number of Shares Value of Shares
- ----------------- ---------------- ---------------
Jeffry Brain 94,118 $23,530
iCapital Finance, Inc. 70,588 $17,647
Randall Letcavage 117,647 $29,412
David E. Wise 70,588 $17,647
SUB-TOTAL: 5,752,941 shares of common stock and 1,000,000 shares of preferred
stock outstanding after this issuance.
In January 2010, we issued (i) 120,000 shares of our common stock to
Bayport Holding Company, LLC, the personal holding company of Jeffrey Brain, our
Chief Financial Officer, as $30,000 in aggregate compensation (at $.25 per
share) accrued $3,000 per month from March through December 2009; and (ii)
119,505 shares of our common stock to Bayport Holding Company, LLC as bonus
compensation due to Mr. Brain in the amount of $29,876.
SUB-TOTAL: 5,992,446 shares of common stock and 1,000,000 shares of preferred
stock outstanding after this issuance.
In January 2010, we issued 120,000 shares of our common stock to Randall
Letcavage, our Chief Executive Officer, as $30,000 in aggregate compensation (at
$.25 per share) accrued $3,000 per month from March through December 2009.
SUB-TOTAL: 6,112,446 shares of common stock and 1,000,000 shares of preferred
stock outstanding after this issuance.
The above shares were issued in reliance of the exemption from registration
requirements of the Securities Act of 1933, as amended ("33 Act"), provided by
Section 4(2) promulgated thereunder, as the issuance of the stock did not
involve a public offering of securities. In connection with the above stock
issuances, the offers and sales were made to a limited number of persons, all of
whom were accredited investors, friends, family or business associates of the
Company and its management and shareholders; transfer of the securities was
restricted by the Company within the requirements of the 33 Act, since all
certificates representing such securities bear a restrictive legend and
appropriate stop transfer instructions are maintained in the stock records of
the Company; there was no general solicitation of investors or advertising
associated with the above offers and sales; and no underwriters were involved in
such offers and sales. In addition to various representations made to us by such
persons, we have made independent determinations that such persons were
accredited or sophisticated investors and that they were capable of analyzing
the merits and risks of their investment in our securities and that they
understood that the speculative nature of their investment.
Between April 30, 2009, and January 15, 2010, we issued an aggregate
5,200,000 shares of our common stock for an aggregate cash consideration of
$1,300,000 (or $.25 per share) to 110 investors.
SUB-TOTAL: 11,312,446 shares of common stock and 1,000,000 shares of preferred
stock outstanding after this issuance.
II-4
The above shares were issued in reliance of the exemption from registration
requirements of the 33 Act provided by Regulation D, Rule 506 promulgated
thereunder, as the issuance of the stock did not involve a public offering of
securities based on the following:
* the investors represented to us that they were acquiring the
securities for their own account for investment and not for the
account of any other person and not with a view to or for
distribution, assignment or resale in connection with any distribution
within the meaning of the 33 Act;
* we provided each investor with written disclosure prior to sale that
the securities have not been registered under the 33 Act and,
therefore, cannot be resold unless they are registered under the 33
Act or unless an exemption from registration is available;
* the investors agreed not to sell or otherwise transfer the purchased
securities unless they are registered under the 33 Act and any
applicable state laws, or an exemption or exemptions from such
registration are available;
* each investor had knowledge and experience in financial and other
business matters such that he, she or it was capable of evaluating the
merits and risks of an investment in us;
* each investor was given information and access to all of our
documents, records, books, officers and directors, our executive
offices in Irvine, California and our warehouse facility in Corona,
California, pertaining to the investment and was provided the
opportunity to ask questions and receive answers regarding the terms
and conditions of the offering and to obtain any additional
information that we possesses or were able to acquire without
unreasonable effort and expense;
* each investor had no need for liquidity in their investment in us and
could afford the complete loss of their investment in us;
* we did not employ any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio;
* we did not conduct, hold or participate in any seminar or meeting
whose attendees had been invited by any general solicitation or
general advertising;
* we placed a legend on each certificate or other document that
evidences the securities stating that the securities have not been
registered under the 33 Act and setting forth or referring to the
restrictions on transferability and sale of the securities;
* we placed stop transfer instructions in our stock transfer records;
* we sold securities to less than 35 individuals who were not
"accredited investors" as defined in Rule 501 of Regulation D
promulgated under the 33 Act;
* no underwriter was involved in the offering and the only registered
broker-dealer involved in the offering was Marquis Financial Services
to whom we paid commissions in the amount of $6,500 (equal to 10% of
the $65,000 raised by Marquis Financial Services in the offering); and
* we made independent determinations that such persons were
sophisticated or accredited investors and that they were capable of
analyzing the merits and risks of their investment in us, that they
understood the speculative nature of their investment in us and that
they could lose their entire investment in us.
II-5
ITEM 16. EXHIBITS
Exhibit No. Description
- ----------- -----------
3(i).1 Articles of Incorporation of Ciralight West, Inc. filed February
26, 2009, with the Secretary of State of Nevada
3(i).2 Certificate of Amendment to the Articles of Incorporation filed
on March 13, 2009, with the Secretary of State of Nevada
(changing name to Ciralight Global, Inc.).
3(i).3 Certificate of Amendment to the Articles of Incorporation filed
on April 22, 2009, with the Secretary of State of Nevada.
3(ii) By-Laws of Ciralight Global, Inc.
4.1 $250,000 Prime Rate Plus 2% Convertible Note Due 2012 payable to
George Adams, Sr.
4.2 Certificate of Designation of Series A Preferred Stock filed on
July 22, 2009, with the Secretary of State of Nevada
4.3* Ciralight Global, Inc. Certificate of Common Stock (Specimen)
4.4 $48,507.29 Prime Rate Plus 2% Convertible Note Due 2012 payable
to Frederick Feck
4.5 $73,788.00 Prime Rate Plus 2% Convertible Note Due 2012 payable
to Terry Adams
4.6 Stock Subscription Agreement (unsigned and undated prototype)
5.1 Opinion of David E. Wise, Esq., Attorney at Law
10.1 Exchange of Stock for Assets Agreement dated as of April 1, 2009,
by and between Ciralight Global, Inc. and George Adams, Sr.
10.2 Amendment to Exchange of Stock for Assets Agreement by and
between Ciralight Global, Inc. and George Adams, Sr. dated
December 15, 2009.
10.3 Assignment of Issued United States Patent and Pending United
States Patent Application dated December 17, 2009
10.4 Domestic Non-Exclusive Dealer Agreement (undated and unsigned
prototype)
10.5 Domestic Non-Exclusive Distribution Agreement (undated and
unsigned prototype)
10.6 Domestic Non-Exclusive Dealer Agreement by and between Ciralight
Global, Inc. and Globalight Energy Solutions, LLC dated as of
December 1, 2009
10.7 Domestic Non-Exclusive Dealer Agreement by and between Ciralight
Global, Inc. and Chaparral Green Energy Solutions, LLC dated as
of January 1, 2010
II-6
10.8 Promissory Note in the principal amount of $69,865.00 dated
January 15, 2010 from Randall Letcavage payable to Ciralight
Global, Inc.
10.9 Assumption of the Financial Consulting Agreement - Memorandum of
Understanding by and between Ciralight Global, Inc. and iCapital
Finace, Inc. dated April 20,2009
10.10 Promissory Note and Security Agreement in the principal amount of
$69,865 dated March 20, 2010 from Randall Letcavage payable to
Ciralight Global, Inc. (in replacement of Promissory Note
attached as Exhbit 10.8).
14 Code of Business Conduct and Ethics
21 Subsidiaries.
23.1 Consent of David E. Wise, Esq. (contained in Exhibit 5.1)
23.2 Consent of HJ Associates & Consultants, LLP
23.3 Consent of HJ Associates & Consultants, LLP
24.1 Power of Attorney (included in signature page).
- ----------
* To be filed in Amendment No.1 (once a CUSIP Number is assigned).
Except for Exhibit 4.3, all of the above listed exhibits are being filed
herewith.
The exhibits are not part of the prospectus and will not be distributed
with the prospectus, unless requested by the selling shareholders.
ITEM 17. UNDERTAKINGS
We hereby undertake the following:
1. Insofar as indemnification for liabilities arising under the Securities
Act may be available to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
and paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereby, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
2. a. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
II-7
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of the securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of a
prospectus filed with the Commission pursuant to Rule 424(b) under the
Securities Act if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement
or any material change to such information in the registration
statement.
3. That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona fide offering
thereof.
4. File a post-effective amendment to remove from registration any of the
securities being registered that remain unsold at the end of the offering.
5. Each prospectus filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering shall be deemed to be part of and included in
the registration statement as of the date it is first used after effectiveness,
provided, however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such first use, supersede or modify any
statement that was made in the registrations statement or prospectus that was
part of the registration statement or made in any such document immediately
prior to such date of first use.
II-8
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements of filing on Form S-1 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Corona, State of California, on the 23rd day of
March, 2010.
Ciralight Global, Inc.
By: /s/ Jeffrey S. Brain
-----------------------------------
Jeffrey S. Brain
President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jeff Brain and Frederick Feck, each or either of
them, his true and lawful attorneys-in-fact, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this registration statement and to sign a registration statement pursuant to
Section 462 (b) of the Securities Act of 1933, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact, full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Jeffrey S. Brain President March 23, 2010
- ------------------------------ Chief Executive Officer
Jeffrey S. Brain (Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
/s/ Frederick Feck Corporate Secretary and Director March 23, 2010
- ------------------------------
Frederick Feck
II-9
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
3(i).1 Articles of Incorporation of Ciralight West, Inc. filed February
26, 2009, with the Secretary of State of Nevada
3(i).2 Certificate of Amendment to the Articles of Incorporation filed
on March 13, 2009, with the Secretary of State of Nevada
(changing name to Ciralight Global, Inc.).
3(i).3 Certificate of Amendment to the Articles of Incorporation filed
on April 22, 2009, with the Secretary of State of Nevada.
3(ii) By-Laws of Ciralight Global, Inc.
4.1 $250,000 Prime Rate Plus 2% Convertible Note Due 2012 payable to
George Adams, Sr.
4.2 Certificate of Designation of Series A Preferred Stock filed on
July 22, 2009, with the Secretary of State of Nevada
4.3* Ciralight Global, Inc. Certificate of Common Stock (Specimen)
4.4 $48,507.29 Prime Rate Plus 2% Convertible Note Due 2012 payable
to Frederick Feck
4.5 $73,788.00 Prime Rate Plus 2% Convertible Note Due 2012 payable
to Terry Adams
4.6 Stock Subscription Agreement (unsigned and undated prototype)
5.1 Opinion of David E. Wise, Esq., Attorney at Law
10.1 Exchange of Stock for Assets Agreement dated as of April 1, 2009,
by and between Ciralight Global, Inc. and George Adams, Sr.
10.2 Amendment to Exchange of Stock for Assets Agreement by and
between Ciralight Global, Inc. and George Adams, Sr. dated
December 15, 2009.
10.3 Assignment of Issued United States Patent and Pending United
States Patent Application dated December 17, 2009
10.4 Domestic Non-Exclusive Dealer Agreement (undated and unsigned
prototype)
10.5 Domestic Non-Exclusive Distribution Agreement (undated and
unsigned prototype)
10.6 Domestic Non-Exclusive Dealer Agreement by and between Ciralight
Global, Inc. and Globalight Energy Solutions, LLC dated as of
December 1, 2009
10.7 Domestic Non-Exclusive Dealer Agreement by and between Ciralight
Global, Inc. and Chaparral Green Energy Solutions, LLC dated as
of January 1, 2010
10.8 Promissory Note in the principal amount of $69,865.00 dated
January 15, 2010 from Randall Letcavage payable to Ciralight
Global, Inc.
10.9 Assumption of the Financial Consulting Agreement - Memorandum of
Understanding by and between Ciralight Global, Inc. and iCapital
Finace, Inc. dated April 20,2009
10.10 Promissory Note and Security Agreement in the principal amount of
$69,865 dated March 20, 2010 from Randall Letcavage payable to
Ciralight Global, Inc. (in replacement of Promissory Note
attached as Exhbit 10.8).
14 Code of Business Conduct and Ethics
21 Subsidiaries.
23.1 Consent of David E. Wise, Esq. (contained in Exhibit 5.1)
23.2 Consent of HJ Associates & Consultants, LLC
23.3 Consent of HJ Associates & Consultants, LLC
24.1 Power of Attorney (included in signature page).
- ----------
* To be filed in Amendment No.1 (once a CUSIP Number is assigned).
Except for Exhibit 4.3, all of the above listed exhibits are being filed
herewith.
The exhibits are not part of the prospectus and will not be distributed
with the prospectus, unless requested by the selling shareholders.