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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 1-A
REGULATION A OFFERING STATEMENT
UNDER THE SECURITIES ACT OF 1933
TOOL FLOOR, INC.
Corporate:
Tool Floor, Inc.
1727 Wildberry F
Glenview, Illinois 60025
Phone: (847) 728-2984
http://www.ToolFloor.com
Best Efforts Offering of 200,000 7% Convertible Preferred Stock Shares |
Offering Price per 7% Convertible Preferred Stock Share: $100 (USD) |
Minimum Offering: Five Thousand 7% Convertible Preferred Stock Shares |
DIVIDEND POLICY: Dividends on this 7% Convertible Preferred Stock will be payable on a cumulative basis, when and if declared by the Company’s Board of Directors, or an authorized committee of the Board of Directors, at an annual rate of 7.00% on the stated value of $100.00 per share. Interest is calculated and accrues daily.
The proposed sale will begin as soon as practicable after this Offering Circular has been qualified by the Securities and Exchange Commission. A maximum of 200,000 7% Convertible Preferred Stock Shares are being offered to the public at $100 per 7% Convertible Preferred Stock Unit. The minimum number of 7% Convertible Preferred Stock Shares that must be sold prior to the Company having access to the Investment Proceeds is FIVE THOUSAND. A maximum of $20,000,000,000 will be received from the offering. No Securities are being offered by any selling shareholders. The Company will receive all proceeds from the sale of Securities.
The Offering will commence promptly after the date of this Offering Circular and will close (terminate) upon the earlier of (1) the sale of 200,000 7% Convertible Preferred Stock Shares, (2) One Year from the date that this Offering is Qualified by the United States Securities and Exchange Commission, or (3) a date prior to the one year anniversary of this Offering being Qualified by the United States Securities and Exchange Commission as so determined by the Company’s Management (the “Offering Period”).
DATED: January 17th, 2017
pg. 1
THE COMPANY HAS NOT MADE ANY ARRANGEMENTS TO PLACE FUNDS RAISED THROUGH THIS OFFERING IN AN ESCROW, TRUST OR SIMILAR ACCOUNT. ANY INVESTOR WHO PURCHASES SECURITIES IN THIS OFFERING WILL HAVE NO ASSURANCE THAT OTHER PURCHASERS WILL INVEST IN THE OFFERING. ACCORDINGLY, IF THE COMPANY SHOULD FILE FOR BANKRUPTCY PROTECTION, OR A PETITION FOR INSOLVENCY BANKRUPTCY IS FILED BY CREDITORS AGAIN THE COMPANY, INVESTOR FUNDS WILL BECOME PART OF THE BANKRUPTCY ESTATE AND ADMINISTERED ACCORDING TO THE BANKRUPTCY LAWS.
THERE IS, AT THIS TIME, NO PUBLIC MARKET FOR THE SECURITIES.
THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE SECURITIES AND EXCHANGE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES BEING OFFERED ARE EXEMPT FROM REGISTRATION. THE SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SELLING LITERATURE.
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR APPLICABLE STATE SECURITIES LAWS, AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THESE LAWS. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE REGULATORY AUTHORITY NOR HAS THE COMMISSION OR ANY STATE REGULATORY AUTHORITY PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OR THE ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
REMAINDER OF PAGE LEFT BLANK INTENTIONALLY
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TABLE OF CONTENTS:
Item # | Description | Page # |
Item 2 | Distribution & Spread | 04 |
Item 3 | Summary Information & Risk Factors | 06 |
Item 4 | Dilution | 18 |
Item 5 | Plan for Distribution | 19 |
Item 6 | Use of Proceeds to the Issuer | 20 |
Item 7 | Description of Business | 22 |
Item 8 | Description of Company Property | 39 |
Item 9 | Management’s Discussion and Analysis of Financial Condition and Results of Operation | 39 |
Item 10 | Directors, Executive Officers, and Significant Employees | 41 |
Item 11 | Executive Compensation | 42 |
Item 12 | Security Ownership of Certain Beneficial Owners and Management | 43 |
Item 13 | Interest of Management and Others in Certain Transactions | 44 |
Item 14 | Securities Being Offered | 45 |
Item 15 | Additional Information Regarding Mandatory Shareholder Arbitration | 49 |
Financial | Financial Statements Section | 53 |
Invest | Subscription Agreement | 60 |
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ITEM 2: DISTRIBUTION SPREAD
| Number of Securities Offered | Offering Price | Selling Commissions | Proceeds to Company |
Per Security | ------- | $100.00 | $0.00 | $100.00 |
Total Minimum | 5,000 | $500,000 | $0.00 | $500,000 |
Total Maximum | 200,000 | $20,000,000.00 | $0.00 | $20,000,000.00 |
1)
The Company is offering a maximum of 200,000 7% Convertible Preferred Stock Shares at the price indicated
2)
Additional Fees for Legal Review and Opinion(s), Accounting Costs, and costs related to the drafting of this Registration Statement and Professional Services Fees should not exceed $75,000 USD. Any costs above $75,000 will be paid by the Executives of the Company.
3)
The Shares will be offered on a “best-efforts” basis by the Company’s Officers, Directors and Employees, and may be offered through Broker-Dealers who are registered with the Financial Industry Regulatory Authority (“FINRA”), or through other independent referral sources. As of the date of this Offering Circular, no selling agreements had been entered into by the Company with any Broker-Dealer firms. Selling commissions may be paid to Broker-Dealers who are members of FINRA with respect to sales of Shares made by them and compensation may be paid to consultants in connection with the Offering of Shares. The Company may also pay incentive compensation to Registered Broker-Dealers in the form of Common Stock or Stock Options with the Company. The Company will indemnify participating Broker-Dealers with respect to disclosures made in the Offering Circular.
4)
The Shares are being Offered pursuant to Regulation A of Section 3(b) of the Securities Act of 1933, as amended, for Tier 1 Offerings, with an option to amend the Offering to Regulation A Section 3(b) of the Securities Act of 1933, as amended, for Tier 2 Offerings. The Shares will only be issued to purchasers who satisfy the requirements set forth in Regulation A.
THIS OFFERING CIRCULAR CONTAINS ALL OF THE REPRESENTATIONS BY THE COMPANY CONCERNING THIS OFFERING, AND NO PERSON SHALL MAKE DIFFERENT OR BROADER STATEMENTS THAN THOSE CONTAINED HEREIN. INVESTORS ARE CAUTIONED NOT TO RELY UPON ANY INFORMATION NOT EXPRESSLY SET FORTH IN THIS OFFERING CIRCULAR.
THE U.S. SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OF ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR SELLING LITERATURE. THESE SECURITIES ARE OFFERED UNDER AN EXEMPTION FROM REGISTRATION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THESE SECURITIES ARE EXEMPT FROM REGISTRATION.
INVESTMENT IN SMALL BUSINESSES INVOLVES A HIGH DEGREE OF RISK, AND INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN AFFORD TO LOOSE THEIR ENTIRE INVESTMENT. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER MADE BY THIS OFFERING CIRCULAR, NOR HAS ANY PERSON BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS OFFERING CIRCULAR, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON. THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICIATION WOULD BE UNLAWFUL OR ANY PERSON TO WHO IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICIATION. NEITHER THE DELIVERY OF THIS OFFERING CIRCULAR NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE AS HAS BEEN NO CHANGE IN THE AFFAIRS OF OUR COMPANY SINCE THE DATE HEREOF.
THIS OFFERING CIRCULAR MAY NOT BE REPRODUCED IN WHOLE OR IN PART. THE USE OF THIS OFFERING CIRCULAR FOR ANY PURPOSE OHER THAN AN INVESTMENT IN SECURITIES DESCRIBED HEREIN IS NOT AUTHORIZED AND IS PROHIBITED.
pg. 4
THIS OFFERING IS SUBJECT TO WITHDRAWAL OR CANCELLATION BY THE COMPANY AT ANY TIME AND WITHOUT NOTICE. THE COMPANY RESERVES THE RIGHT IN ITS SOLE DISCRETION TO REJECT ANY SUBSCRIPTION IN WHOLE OR IN PART NOTWITHSTANDING TENDER OF PAYMENT OR TO ALLOT TO ANY PROSPECTIVE INVESTOR LESS THAN THE NUMBER OF SECURITIES SUBSCRIBED FOR BY SUCH INVESTOR.
THE OFFERING PRICE OF THE SECURITIES IN WHICH THIS OFFERING CIRCULAR RELATES HAS BEEN DETERMINED BY THE COMPANY AND DOES NOT NECESSARILY BEAR ANY SPECIFIC RELATION TO THE ASSETS, BOOK VALUE OR POTENTIAL EARNINGS OF THE COMPANY OR ANY OTHER RECOGNIZED CRITERIA OF VALUE.
NASAA UNIFORM LEGEND:
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY THE FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
FOR ALL RESIDENTS OF ALL STATES:
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF CERTAIN STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE INTERESTS ARE SUBJECT IN VARIOUS STATES TO RESTRICTION ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THE OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
pg. 5
ITEM 3. SUMMARY INFORMATION, RISK FACTORS AND DILUTION
Investing in the Company’s Securities is very risky. You should be able to bear a complete loss of your investment. You should carefully consider the following factors, including those listed in this Securities Offering.
Emerging Growth Company Status
The Company is an “emerging growth company” as defined in the Jumpstart our Business Startups Act (“JOBS Act”). For as long as the Company is an emerging growth company, the Company may take advantage of specified exemptions from reporting and other regulatory requirements that are otherwise applicable generally to other public companies. These exemptions include:
·
An exemption from providing an auditor’s attestation report on management’s assessment of the effectiveness of the Company’s systems of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002;
·
An exemption from compliance with any new requirements adopted by the Public Accounting Oversight Board (“PCAOB”), requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer;
·
An exemption from compliance with any other new auditing standards adopted by the PCAOB after April 5th, 2012, unless the United States Securities and Exchange Commission (“SEC”) determines otherwise; and
·
Reduced disclosure of executive compensation.
In addition, Section 107 of the JOBS Act provides that an emerging growth company can use the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. This permits an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, the Company has chosen to “opt out” of such extended transition period and, as a result, the Company will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. The Company’s decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
The Company will cease to be an “emerging growth company” upon the earlier of (i) when the Company has $1.0 Billion or more in annual revenues, (ii) when the Company has at least $700 Million in market value of the Company’s Common Units held by non-affiliates, (iii) when the Company issues more than $1.0 Billion of non-convertible debt over a three-year period, or (iv) the last day of the fiscal year following the fifth anniversary of the Company’s Initial Public Offering.
If the Company is Not Able to Acquire Customers in a Cost-Effective Manner, the Company May Not be Able to Achieve Profitability
The Company’s success depends on its ability to acquire customers in a cost-effective manner. In order to acquire its customer base, and expand its customer base, the Company must appeal to customers who have not historically used other means of commerce to purchase tools, and may prefer alternatives to the Company’s offerings, such as traditional brick and mortar retailers, the websites of the Company’s competitors or a supplier’s own website. The Company may have to make significant investments related to customer acquisition and expect to spend significant amounts of capital to acquire customers. For example, the Company many need to utilize national U.S. television branding and advertising campaigns to achieve market share and brand identity. Such campaigns may be expensive and may not result in cost-effective acquisition of customers. The Company cannot assure you that the net profit from new customers that the Company acquires will ultimately exceed the cost of acquiring those customers. If the Company fails to deliver a quality shopping experience, of if consumers do not perceive the products offered by the Company to be of high value and quality, the Company may not be able to acquire new customers. If the Company is unable to acquire new customers who purchase products in numbers sufficient to grow the Company’s business, the Company may not be able to generate the scale necessary to drive beneficial network effects with the Company’s suppliers, and the Company may not achieve positive revenues, and the Company’s business, financial condition and operating results may be materially adversely affected.
The Company’s Business Depends on Its Ability to Build and Maintain Strong Brands. The Company May Not be Able to Maintain and Enhance Its Brand Relationships if the Company Receives Unfavorable Customer Complaints, Negative Publicity or Otherwise Fails to Live Up to Consumer’s Expectations, which Could Materially Adversely Affect the Company’s Business, Results of Operations and Grow Prospects
The Company plans to offer a select number of distinct brands to its customers, for which the Company has not operating history with these brands. Maintaining and enhancing these brands is critical to acquiring and expanding the Company’s customer base. A significant portion of the Company’s customer’s brand experience will depend on third parties outside of the Company’s control, including suppliers and logistics providers such as FedEx, UPS and the U.S. Postal Service. If these third parties do not meet the Company’s customer’s expectations, the Company’s brand may suffer irreparable damage. In addition, maintaining and enhancing these brands may require the Company to make substantial investments, and these investments may not be successful. If the Company fails to promote and maintain its brands, of if the Company incurs excessive expenses in this effort, the Company’s business, operating results and financial condition may be materially adversely affected. The Company anticipates, as its market becomes increasingly competitive, maintaining its brands may become increasingly difficult and expensive. Maintaining and enhancing its brands will depend largely on the Company’s ability to provide high quality products to its customers and a reliable, trustworthy and profitable sales channel to its suppliers, which the Company may not do successfully.
Customer complaints or negative publicity about the Company’s website(s), products, product delivery times, customer data handling and security practices or customer support, especially on blogs, social media websites and the Company’s website(s), could rapidly and severely diminish consumer use of the Company’s website(s) and consumer and supplier confidence in the Company and result in harm to the Company’s brands.
Our Ability to Succeed Depends on our Ability to Grow our Business and Achieve Profitability
The introduction of a new online eCommerce retailer will require the Company to develop new and innovative ways to market, sell and distribute brands in the rapidly changing eCommerce World, and continually looking and new cost effective wasy to expand its distribution in order to achieve and maintain growth, and to achieve and grow profitability. The Company’s future operational success and profitability will depend on a number of factors, including, but not limited to:
·
The Company’s ability to manage costs;
·
The increasing level of competition in the eCommerce Tool Industry;
·
The Company’s ability to continuously offer new and improved products / brands and services (delivery, warranty, customer loyalty programs, etc.);
·
The Company’s ability to maintain sufficient production capacity for its products / brands and services (delivery, warranty, customer loyalty programs, etc.);
·
The Company’s ability to maintain efficient, timely and cost-effective delivery of its products and services;
·
The efficiency and effectiveness of the Company’s sales and marketing efforts in building product and brand awareness;
·
The Company’s ability to identify and respond successfully to emerging trends in the eCommerce Tool Industry;
pg. 6
·
The level of consumer acceptance of the Company’s products / brands and services;
·
Regulatory compliance costs; and
·
General economic conditions and consumer confidence.
The Company may not be successful in executing its growth strategy, and even if the Company achieves targeted growth, the Company may not be able to sustain profitability. Failure to successfully execute any material part of the Company’s growth strategy would significantly impair the Company’s future growth and the Company’s ability to attract and sustain investments in its business.
If the Company Fails to Promote and Maintain its Brand in the Market, the Company’s Business, Operating Results, Financial Condition, and its Ability to Attract Customers will be Materially Adversely Affected
The Company’s success depends on its ability to create and maintain brand awareness for its products / brands and services offerings. This may require a significant amount of capital to allow the Company to market its products / brands and services, and to establish brand recognition and customer loyalty. Many of the Company’s competitors in this market are larger than the Company and may have substantially greater financial resources. Additionally, many of the companies offering similar products and services have already established their brand identity within the marketplace. The Company can offer no assurances that it will be successful in establishing awareness of the Company’s brand, allowing the Company to compete in this market. The importance of brand recognition will continue to increase because of low barriers of entry to the industries in which the Company operates may result in an increased number of direct competitors. To promote the Company’s products / brands and services, the Company may be required to continue to increase its financial commitment to creating and maintaining brand awareness. The Company may not generate a corresponding increase in revenue to justify these costs.
Risks Associated with the Suppliers from Whom the Company’s Brands / Products are Sourced Could Materially Adversely Affect the Company’s Financial Performance as well as the Company’s Reputation and Company’s Brand
The Company depends on its ability to provide its customers with a wide range of brands / products from qualified suppliers in a timely manner. Political and economic instability, the financial stability of suppliers, suppliers’ ability to meet the Company’s standards, labor problems experienced by suppliers, the availability of raw materials, merchandise quality issues, currency exchange rates, transport availability and cost, transport security, inflation, and other factors relation to the suppliers are beyond the control of the Company.
As a small eCommerce start-up company, the Company’s agreements with its suppliers typically will not provide for long-term availability of merchandise or the continuation of particular pricing practices, nor will they restrict such suppliers from selling products to other buyers. There can be no assurance that the Company’s current and future suppliers will continue to seek to sell the Company products on current terms or that the Company will be able to establish new or otherwise extend current supply relationships to ensure product acquisition in a timely manner and on acceptable commercial terms. The Company’s ability to develop and maintain relationships with reputable suppliers and offer high quality merchandise to its customers is critical to the Company’s success. If the Company is unable to develop and maintain relationships with suppliers that would allow it to offer a sufficient amount and variety of quality merchandise on acceptable commercial terms, the Company’s ability to satisfy its customers’ needs, and therefor the Company’s long-term growth prospects, would be materially adversely affected.
The Company is also unable to predict whether any of the countries in which its current or future suppliers’ products are manufactured, or may be manufactured in the future, will be subject to trade restrictions imposed by the United States, or foreign governments, or the likelihood, type or effect of any such restrictions. Any event causing a disruption or delay of imports from suppliers with international manufacturing operations, including the imposition of additional import restrictions, restriction on the transfer of funds or increased tariffs or quotas, could increase the cost or reduce the supply of merchandise available to the Company’s customers and materially adversely affect the Company’s financial performance, as well as the Company’s reputation and brand. Furthermore, some of the Company’s suppliers’ foreign operations may be adversely affected by political and financial instability, resulting in the disruption of trade from exporting countries, restriction on the transfer of funds or other trade disruptions.
In addition, the Company’s business with foreign suppliers, particularly with respect to the Company’s proposed international sales, may be affected by changes in the value of the United States Dollar relative to other foreign currencies. For example, any movement by any other foreign currency against the United States Dollar may result in higher costs to the Company for those goods. Declines in foreign currencies and currency exchange rates might negatively affect the profitability and business prospects of one or more of the Company’s foreign suppliers. This, in turn, might cause such foreign suppliers to demand higher prices for merchandise in their effort to offset any lost profits associated with any currency devaluation, delay merchandise shipments, or discontinue selling to the Company altogether, any of which could ultimately reduce the Company’s sales or increase the Company’s costs.
The Company Depends on its Suppliers to Perform Certain Services Regarding the Brands / Products that the Company Offers
As part of offering the supplier’s products for sale on the Company’s website(s), these suppliers generally will agree to conduct a number of traditional retail operations with respect to their respective products, including (but not limited to) maintaining inventory and preparing merchandise for shipment to the Company’s customers. The Company may be unable to ensure these suppliers will perform these services to the Company’s customer’s satisfaction, and in a manner that provides the Company’s customers with a unified brand experience, or on commercially reasonable terms. If the Company’s customers become dissatisfied with the services provided by the Company’s suppliers, the Company’s business, reputation and brands could suffer.
Significant Merchandise Returns Could Harm the Company
The Company shall allow its customers to return products, subject to the Company’s return policy. If merchandise returns are significant, the Company’s business, prospects, financial condition and results of operations could be harmed. Further, the Company may modify its policies relating to returns from time-to-time, which may result in customer dissatisfaction or an increase in the number of product returns. May of the Company’s products are large and required special handling and delivery. From time-to-time the Company’s products may become damaged in transit, which can increase return rates and harm the Company’s brand.
The Company is Subject to Risks Associated with Online Payment Methods
The Company accepts payments using a variety of methods, including credit cards, debit cards, PayPal and gift cards. As the Company offers new payment options to consumers, the Company may be subject to additional regulations, compliance requirements and fraud. For certain payment methods, including credit cards and debit cards, the Company may pay interchange and other fees, which may increase over time and raise the Company’s operating costs and lower profitability. The Company may also be subject to payment card association operating rules and certification requirements, including the Payment Card Industry Data Standard and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impose the Company to comply. As the Company’s business changes, the Company may also be subject to different rules under existing standards, which may require new assessments that involve costs above what the Company currently pays for compliance. If the Company fails to comply with the rules or requirements of any provider of a payment method that that the Company accepts, if the volume of fraud in the Company’s transactions limits or terminates the Company’s rights to use payment methods, or if a data breach occurs relating to the Company’s payment systems, the Company may, among other things, be subject to fines or higher transaction fees and may lose, or face restrictions placed upon the Company, or the Company’s ability to accept credit card and debit card payments from consumers or facilitate other types of online payments. If any of these were to occur, the Company’s business, financial condition and operating results could be materially adversely affected.
The Company may occasionally receive orders placed with fraudulent credit card data. The Company may suffer losses as a result of orders placed with fraudulent credit card data even if the associated financial institution approved payment of the orders. Under current credit card practices, the Company may be liable for fraudulent credit card transactions. If the Company is unable to detect or control credit card fraud, the Company’s liability for these transactions could harm the Company’s business, financial condition and results of operations.
System Interruptions that Impair Customer Access to the Company Website(s) or other Performance Failures in its Technology Infrastructure could Damage the Company’s Business, Reputation and Brand, Which Could Substantially Harm the Company’s Business and Results of Operations
The satisfactory performance, reliability and availability of the Company’s Website(s), transaction processing systems and technology infrastructure are critical to the Company’s reputation, and the Company’s ability to acquire and retain customers, as well as maintain adequate customer service levels.
The Company intends to utilize the services of third party data centers as well as its own facilities. If the Company’s facility or any of its third-party service providers facilities that house the Company’s computer and communications hardware is located fails, of if the Company suffers an interruption or degradation of services at any of its third party data center, the Company could lost customer data and miss order fulfillment deadlines, which could harm the Company’s business. The Company’s systems, and the systems of the Company’s third-party service providers, are vulnerable to damage or interruption from fire, flood, power loss, telecommunication failures, terrorist attacks, cyber-attacks, data losses, acts of war, break-ins, earthquakes and similar events. In the event of a failure of the Company’s facilities, or the facilities of one of the Company’s third-party service providers, the failover to the Company’s back-up facility, or facilities, could take substantial time, during which time the Company’s website(s) could be completely shut down. The Company’s back-up facility, or facilities, may be designed to support transaction volume at levels slightly above the average daily sales, but is not adequate to support spikes in demand. The back-up facility, or facilities, may not process effectively during time of higher traffic to the Company’s website(s) and may process transactions more slowly and may not support the Company’s website(s) functionality.
The Company’s Industry is Highly Competitive
The markets for the Company’s products and services is highly competitive. The Company seeks to distinguish itself from other suppliers of eCommerce Tools products and services, and to sustain its profitability through a business strategy focused on increasing sales through new and existing supply channels, selectively expanding its brands / products and services distribution and sales network, increasing sales through newly formed partnerships (traditional and non-traditional), working with new and developing innovative brands / products and services, and driving operational excellence by reducing costs and increasing customer service levels. The Company believes that competition in the industry is based on price, product quality, customer service and product features. Sustained increases in competitive pressures could have an adverse effect on results of operations and negatively impact sales and margins.
We May Face Risks Associated with International Operators that could Harm our Business
To be successful, the Company believes it must expand into international operations. Therefore, the Company may commit significant resources in the future to expand its international sales and marketing activities. However, the Company may not be able to develop or increase market demand for its eCommerce Tool brands / products and services which may harm the Company’s business. The Company may be subject to a number of risks associated with international business activities which may increase the Company’s costs, lengthen the Company’s sales cycle and require significant management attention. These risks include:
·
Increased expenses associated with marketing services in foreign countries;
·
General economic conditions in international markets;
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Currency exchange rate fluctuations;
·
Unexpected changes in regulatory requirements resulting in unanticipated costs and delays;
·
Tariffs, export controls and other trade barriers;
·
Longer accounts receivable payment cycles and difficulties in collecting accounts receivable; and
·
Potentially adverse tax consequences, including restrictions on the repatriation of earnings;
The Company is a Development Stage Business
Tool Floor, Inc. commenced operations in December of 2016 as a Delaware Stock Corporation. Accordingly, the Company has only a limited history upon which an evaluation of its prospects and future performance can be made. The Company’s proposed operations are subject to all business risks associated with new enterprises. The likelihood of the Company’s success
pg. 7
must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the expansion of a business, operation in a competitive industry, and the continued development of advertising, promotions and a corresponding customer base. There is a possibility that the Company could sustain losses in the future. There can be no assurances that Tool Floor, Inc. will operate profitably.
The Offering will be Conducted on a Best Efforts Basis, there can be No Assurance that the Company can Raise the Capital it Needs
The 7% Convertible Preferred Stock Shares are being offered by the Company on a “Best Efforts” basis without the benefit of a Placement Agent. The Company can provide no assurance that this Offering will be completely sold out. If less than the maximum proceeds are available, the Company’s business plans and prospects for the current fiscal year could be adversely affected.
The Company needs at least $500,000 to continue operations for the next twelve months; investors bear the complete risk of losing their entire investment if the Company is unable to raise enough proceeds from this Offering to continue operations. If the Company is not able to raise the entire $20,000,000, the Company will have to limit or eliminate important expenditures, such as the purchase of certain materials and supplies, and the hiring of essential labor, lease space costs, and marking activities, all of which will hinder the Company’s ability to generate significant revenues and cause a delay in the implementation of the Company’s business plan. Moreover, the less money that the Company is able to raise through this Offering, the more risk that Investors may lose their entire investment.
The Company has not made any arrangements to place funds raised in this Offering in an escrow, trust or similar account. Any investor who purchases securities in this Offering will have no assurance that other purchasers will invest in this Offering. Accordingly, if the Company should file for bankruptcy protection or a petition for insolvency bankruptcy is filed by creditors against the Company, Investor funds may become part of the bankruptcy estate and administered according to the bankruptcy laws. The Company has the right to terminate this offering of Securities at any time, regardless of the number of Securities that have sold. If the Offering terminates before the offering minimum is achieved, or if any prospective Investor’s subscription is rejected, all funds received from such Investors will be returned without interest or deduction.
The Company is Dependent on Current Management
In the early stages of development, the Company’s business will be significantly dependent on Mr. Rodney Mikesell, the Company’s Founder & Chairman of the Board of Directors; and Mr. Pinaki Saha, the Company’s Chief Executive Officer.
The Company Could Potentially Face Risks Associated with Borrowing
Although the Company does not intend to incur any additional debt from the investment commitments provided in this offering, should the company obtain secure bank debt in the future, possible risks could arise. If the Company incurs additional indebtedness, a portion of the Company’s cash flow will have to be dedicated to the payment of principal and interest on such new indebtedness. Typical loan agreements also might contain restrictive covenants, which may impair the Company’s operating flexibility. Such loan agreements would also provide for default under certain circumstances, such as failure to meet certain financial covenants. A default under a loan agreement could result in the loan becoming immediately due and payable and, if unpaid, a judgment in favor of such lender which would be senior to the rights of shareholders of the Company. A judgment creditor would have the right to foreclose on any of the Company’s assets resulting in a material adverse effect on the Company’s business, operating results or financial condition.
Unanticipated Obstacles to Execution of the Business Plan
The Company’s business plans may change significantly. Many of the Company’s potential business endeavors are capital intensive and may be subject to statutory or regulatory requirements. Management believes that the Company’s chosen activities and strategies are achievable in light of current economic and legal conditions with the skills, background, and knowledge of the Company’s principals and advisors. Management reserves the right to make significant modifications to the Company’s stated strategies depending on future events.
Management Discretion as to Use of Proceeds
The net proceeds from this Offering will be used for the purposes described under “Use of Proceeds.” The Company reserves the right to use the funds obtained from this Offering for other similar purposes not presently contemplated which it deems to be in the best interests of the Company and its Investors in order to address changed circumstances or opportunities. As a result of the
pg. 8
foregoing, the success of the Company will be substantially dependent upon the discretion and judgment of Management with respect to application and allocation of the net proceeds of this Offering. Investors for the Shares offered hereby will be entrusting their funds to the Company’s Management, upon whose judgment and discretion the investors must depend.
Control by Management
As of January 1st, 2017 the Company’s Managers owned approximately 100% of the Company’s outstanding Common Stock Shares and 0% of the Company's Preferred Stock Shares. Upon completion of this Offering, The Company’s Management will own approximately 100% of the outstanding Common Stock Shares of the Company and 0% of the outstanding Preferred Stock Shares of the Company. Investors will not have the ability to control either a vote of the Company’s Managers or any appointed officers. See “COMPANY MANAGERS” section.
Return of Profits
The Company has never declared or paid any cash dividends on its Common Stock. The Company currently intends to retain future earnings, if any, to finance the expansion of the Company’s Operations and Holdings. As a result, the Company does not anticipate paying any cash dividends to its Common Stock Holders for the foreseeable future.
No Assurances of Protection for Proprietary Rights; Reliance on Trade Secrets
In certain cases, the Company may rely on trade secrets to protect intellectual property, proprietary technology and processes, which the Company has acquired, developed or may develop in the future. There can be no assurances that secrecy obligations will be honored or that others will not independently develop similar or superior products or technology. The protection of intellectual property and/or proprietary technology through claims of trade secret status has been the subject of increasing claims and litigation by various companies both in order to protect proprietary rights as well as for competitive reasons even where proprietary claims are unsubstantiated. The prosecution of proprietary claims or the defense of such claims is costly and uncertain given the uncertainty and rapid development of the principles of law pertaining to this area. The Company may also be subject to claims by other parties with regard to the use of intellectual property, technology information and data, which may be deemed proprietary to others.
The Company’s Continuing as a Going Concern Depends Upon Financing
If the Company does not raise sufficient working capital and continues to experience pre-operating losses, there will most likely be substantial doubt as to its ability to continue as a going concern. Because the Company has generated no revenue, all expenditures during the development stage have been recorded as pre-operating losses. Revenue operations have not commenced because the Company has not raised the necessary capital.
Raising Additional Capital by Issuing Securities May Cause Dilution to the Company’s Shareholders
The Company may need to, or desire to, raise substantial additional capital in the future. The Company’s future capital requirements will depend on many factors, including, among others:
·
The Company’s degree of success in capturing a larger portion of the eCommerce Tool market;
·
The costs of establishing or acquiring sales, marketing, and distribution capabilities for the Company’s brands / products and services;
·
The extent to which the Company acquires or invests in businesses, products, or technologies, and other strategic relationships; and
·
The costs of financing unanticipated working capital requirements and responding to competitive pressures.
If the Company raises additional funds by issuing equity or convertible debt securities, the Company will reduce the percentage of ownership of the then-existing shareholders, and the holders of those newly-issued equity or convertible debt securities may have rights, preferences, or privileges senior to those possessed by the Company’s then-existing shareholders. Additionally, future sales of a substantial number of shares of the Company’s Common Stock, or other equity-related securities in the public market could depress the market price of the Company’s Common Stock and impair the Company’s ability to raise capital through the sale of additional equity or equity-linked securities. The Company cannot predict the effect that future sales of the Company’s Common Stock, or other equity-related securities would have on the market price of the Company’s Common Stock.
pg. 9
The Company’s Preferred Stock is Equity and is Subordinate to all of The Company’s Existing and Future Indebtedness; Its ability to Declare Annual Dividends on the Preferred Stock may be Limited
The Company’s Preferred Stock Shares are equity interest in the Company and do not constitute indebtedness. As such, the Preferred Stock will rank junior to all indebtedness and other non-equity claims on the Company with respect to assets available to satisfy claims on the Company, including in a liquidation of the Company. Additionally, unlike indebtedness, where principal and interest would be customarily be payable on specified due dates, in the case of preferred stock, like the Preferred Stock being offering through this Offering, (1) dividends are payable only when, as and if authorized and declared by the Company’s Board of Directors and (2) as an early stage company, our ability to declare and pay dividends is subject to the Company’s ability to earn net income and to meet certain financial regulatory requirements.
Dividends on the Company’s Preferred Stock is Cumulative
Dividends on the Company’s Preferred Stock is Cumulative. If the Company’s Board of Directors does not authorize and declare a dividend for any dividend period, holder of the Company’s Preferred Stock will not be entitled to receive a dividend cash payment for such period, and such undeclared dividend will accrue and become payable at a later dividend payment date. The Company’s Board of Directors may determine that it would be in the Company’s best interest to pay less than the full amount of the stated dividend on our Preferred Stock, at which time the undeclared portion of the dividend will accrue and become payable at a later dividend payment date. Factors that would be considered by the Company’s Board of Directors in making this determination are the Company’s financial condition and capital needs, the impact of current and pending legislation and regulations, economic conditions, tax considerations, and such other factors as our Board of Directors may deem relevant.
Certain Factors Related to Our Common Stock
Because the Company’s Common Stock may be considered a "penny stock," and a shareholder may have difficulty selling shares in the secondary trading market.
The Company’s Common Stock Securities may be subject to certain rules and regulations relating to "penny stock" (generally defined as any equity security that has a price less than $5.00 per share, subject to certain exemptions). Broker-dealers who sell penny stocks are subject to certain "sales practice requirements" for sales in certain nonexempt transactions (i.e., sales to persons other than established customers and institutional "qualified investors"), including requiring delivery of a risk disclosure document relating to the penny stock market and monthly statements disclosing recent price information for the penny stocks held in the account, and certain other restrictions. For as long as the Company’s Common Stock is subject to the rules on penny stocks, the market liquidity for such securities could be significantly limited. This lack of liquidity may also make it more difficult for the Company to raise capital in the future through sales of equity in the public or private markets.
The price of the Company’s Common Stock may be volatile, and a shareholder's investment in the Company’s Common Stock could suffer a decline in value.
There could be significant volatility in the volume and market price of the Company’s Common Stock, and this volatility may continue in the future. The Company’s Common Stock will be listed on the OTC Markets “OTCQB” or “OTCQX”, where there is a great chance for market volatility for securities that trade on these markets as opposed to a national exchange or quotation system. This volatility may be caused by a variety of factors, including the lack of readily available quotations, the absence of consistent administrative supervision of "bid" and "ask" quotations and generally lower trading volume. In addition, factors such as quarterly variations in our operating results, changes in financial estimates by securities analysts or our failure to meet our or their projected financial and operating results, litigation involving us, general trends relating to the Building Energy Analytics Markets, actions by governmental agencies, national economic and stock market considerations as well as other events and circumstances beyond our control could have a significant impact on the future market price of our Common Stock and the relative volatility of such market price.
Secondary Market
Prior to this offering, there has been no public market for the Company’s Preferred Stock. There are no assurances that the Company’s Preferred Stock will ever be listed on any regulated securities exchange. There can be no assurance that an active trading market for the Company’s Preferred Stock will develop, or, if developed, that an active trading market will be maintained. If an active market is not developed or sustained, the market price and liquidity of the Company’s Preferred Stock may be adversely affected.
The Company is not currently preparing any application for the Company's Securities to be admitted to listing and trading on the OTC Market or Regulated Market. There can be no assurance that a liquid market for the Securities will develop or, if it does develop, that it will continue. If a market does develop, it may not be liquid. Therefore, investors may not be able to sell their
pg. 10
Securities easily or at prices that will provide them with yield comparable to similar investments that have a developed secondary market. Illiquidity may have a severely adverse effect on the market value of the Securities and investors wishing to sell the Securities might therefore suffer losses.
The Company’s Securities initially may be listed for trade on a Closed Trading System with Limited Volume and Liquidity
The Company’s securities may not be freely quoted for trading on any stock exchange or through any other traditional trading platform. The Company’s securities may be issued, available for purchase and may be traded exclusively on a specific trading system that is registered with the United States Securities and Exchange Commission as an “Alternative Trading System” or an “ATS”. The Company does not have any plans to trade its securities on a specific ATS as of the date of this filing. Any disruptions to the operations of an ATS or a Broker Dealer’s Customer Interface with an ATS would materially disrupt trading in, or potentially result in a complete halt in the trading.
Because the Company’s Securities may be traded exclusively on a closed trading system, it is a possibility that there will be a limited number of holders of the Company’s Securities. In addition, an ATS is likely to experience limited trading volume with a relatively small number of securities trading on the ATS platform as compared to securities trading on traditional securities exchanges or trading platforms. As a result, this novel trading system may have limited liquidity, resulting in a lower or higher price, or greater volatility than would be the case with greater liquidity. Investors may not be able to resell their securities on a timely basis, or at all.
The Number of Securities Traded on an ATS May be Very Small, Making the Market Price More Easily Manipulated
While the Company understands that many ATS platforms have adopted policies and procedures such that security holders are not free to manipulate the trading of securities contrary to applicable law, and while the risk of market manipulation exists in connection with the trading of any securities, the risk may be greater for the Company’s Securities because the ATS the Company chooses may be a closed system that does not have the same breath of market and liquidity as the national market system. There can be no assurance that the efforts by an ATS to prevent such behavior will be sufficient to prevent such market manipulation.
An ATS is Not a Stock Exchange and has Limited Quoting Requirements for Issuers, of for the Securities Held
Unlike the more expansive listing requirements, policies and procedures of the NASDAQ Global Market or other NMS Trading Platforms, there are no minimum price requirements and limited listing requirements for securities to be traded on an ATS. As a result, trades of the Company’s Securities may not be at prices that represent the national best bid or offer prices that could be considered similar securities.
Shares of the Company’s Preferred Stock and Common Stock may in the future be Subject to the Penny Stock Rules
The Company plans to list its securities on the OTC Markets Group’s OTCQB or OTCQB in 12 to 36 months of the completion of this Offering. Company’s Common Stock and Preferred Stock may in the future if traded on the OTC Market Group’s “OTCQB”, which may well make it difficult for a purchaser of Shares of the Company’s Common Stock or Preferred Stock to sell all, or a part of the Common Stock or Preferred Stock Shares when the purchasers wish, or, if the Common Stock or Preferred Stock Shares can be sold, to get what the purchaser may consider to be an adequate price for the Common Stock or Preferred Stock Shares. The Shares of the Company’s Common Stock may trade at prices which make them subject to the United States Securities and Exchange Commission’s “Penny Stock Rules”, which may also limit the liquidity of the Common Stock Shares, or adversely affect the price at which the Common Stock Shares can be sold, or both.
The Company Cannot Assure Investors that the Market for the Company’s Common Stock will Continue at any Trading Volume, or that the Market Price of Shares of the Company’s Common Stock Will Not Decline Following Conversion
The Company cannot predict the prices at which the Company’s Common Stock will trade. The offering price for the Shares being sold in this Offering has been determined by the Company based largely on the Company’s perception of the amount of money in which the Company needs to raise at this time to grow the Company. The Company cannot assure you that the Offering price per Share will bear any relationship on the market price of the Company’s Common Stock may trade after converting of the 7% Convertible Preferred Stock Shares.
pg. 11
The Market Price for the Company’s Common Stock May Fluctuate Significantly
The market price and liquidity of the market for the Company’s Shares of Common Stock that will prevail in the market after an investor converts from the 7% Convertible Preferred Stock Shares to the Company’s Common Stock Shares may be higher or lower than the price that Investors of the Company’s Common Stock pay for the Common Stock at the time the Investors purchase the 7% Convertible Preferred Stock Shares, and may be significantly affected by numerous factors, some of which are beyond the control of the Company, and may not be directly related to the Company’s operating performance. These factors include, but are not limited to:
·
Significant volatility in the market price and trading volume of securities of companies in the Company’s Market Sector, which is not necessarily related to the operating performance of these companies;
·
The mix of products and services that the Company provides during any period;
·
Delays between the Company’s expenditures to develop and market the Company’s products and services, and the generation of sales from those marketing efforts;
·
Changes in the amount that the Company spends to expand its products to new areas, or to develop new products and services;
·
Changes in the Company’s expenditures to promote its products and services;
·
Announcements of acquisitions by the Company, or one of the Company’s competitors;
·
Changes in regulatory policies or tax guidelines;
·
Changes or perceived changes in earnings, or variations in operating results;
·
Any shortfall in revenue, or net income, or any increase in losses from levels expected by Investors or securities analysts; and
·
General economic trends and other external factors.
If Equity Research Analysts Do Not Publish Research Reports about the Company, of if the Research Analysts Issue Unfavorable Commentary or Downgrade the Company’s Common Stock Shares, the Price of the Company’s Common Stock Shares Could Decline
The trading market for the Company’s Common Stock Shares will rely in part on the research and reports that equity research analysts publish about the Company, and the Company’s business. The Company does not have control over research analysts, and the Company does not have commitments from research analysts to write research reports about the Company. The price of the Company’s Common Stock Shares could decline if one or more equity research analysts downgrades the Company’s Common Stock Shares, issues an unfavorable commentary, or ceases publishing reports about the Company.
Future Sales of the Company’s Shares Could Reduce the Market Price of the Company’s Common Stock Shares
The price of the Company’s Common Stock could decline if there are substantial sales of the Company’s Common Stock, particularly by the Company’s Directors or its Executive Officer(s), or when there is a large number of Shares of the Company’s Common Stock available for sale. The perception in the public market that the Company’s Stockholders might sell the Company Shares could also depress the market price of the Company’s Shares. If this occurs, or continues to occur, it could impair the Company’s ability to raise additional capital through the sale of securities should the Company desire to do so.
Offering Price
The price of the Securities offered has been arbitrarily established by our current Managers, considering such matters as the state of the Company’s business development and the general condition of the industry in which it operates. The Offering price bears little relationship to the assets, net worth, or any other objective criteria.
Compliance with Securities Laws
The Company’s Securities are being offered for sale in reliance upon certain exemptions from the registration requirements of the Securities Act, and applicable state securities laws. If the sale of Securities were to fail to qualify for these exemptions, purchasers may seek rescission of their purchases of Securities. If a number of purchasers were to obtain rescission, we would
pg. 12
face significant financial demands, which could adversely affect the Company as a whole, as well as any non-rescinding purchasers.
NOTICE REGARDING AGREEMENT TO ARBITRATE
THIS OFFERING MEMORANDUM REQUIRES THAT ALL INVESTORS ARBITRATE ANY DISPUTE ARISING OUT OF THEIR INVESTMENT IN THE COMPANY. ALL INVESTORS FURTHER AGREE THAT THE ARBITRATION WILL BE BINDING AND HELD IN THE STATE OF ILLINOIS IN THE COUNTY OF COOK. EACH INVESTOR ALSO AGREES TO WAIVE ANY RIGHTS TO A JURY TRIAL. OUT OF STATE ARBITRATION MAY FORCE AN INVESTOR TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. OUT OF STATE ARBITRATION MAY ALSO COST AN INVESTOR MORE TO ARBITRATE A SETTLEMENT OF A DISPUTE.
Projections: Forward Looking Information
Management has prepared projections regarding anticipated financial performance. The Company’s projections are hypothetical and based upon a presumed financial performance of the Company, the addition of a sophisticated and well funded marketing plan, and other factors influencing the business. The projections are based on Management’s best estimate of the probable results of operations of the Company and the investments made by management, based on present circumstances, and have not been reviewed by independent accountants and/or auditing counsel. These projections are based on several assumptions, set forth therein, which Management believes are reasonable. Some assumptions, upon which the projections are based, however, invariably will not materialize due the inevitable occurrence of unanticipated events and circumstances beyond Management’s control. Therefore, actual results of operations will vary from the projections, and such variances may be material. Assumptions regarding future changes in sales and revenues are necessarily speculative in nature. In addition, projections do not and cannot take into account such factors as general economic conditions, unforeseen regulatory changes, the entry into a market of additional competitors, the terms and conditions of future capitalization, and other risks inherent to the Company’s business. While Management believes that the projections accurately reflect possible future results of operations, those results cannot be guaranteed.
pg. 13
ITEM 4. DILUTION
An early-stage company typically sells its shares (or grants options over its shares) to its founders and early employees at a very low cash cost, because they are, in effect, putting their “sweat equity” into the company. When the company seeks cash from outside investors, the new investors typically pay a much larger sum for their shares than the founders or earlier investors, which means that the cash value of the new investors stake is diluted because each share of the same type is worth the same amount, and the new investor has paid more for the shares than earlier investors did for theirs.
The Company has not had any stock sales within the last year. The Company currently has TEN MILLION Shares of Common Stock issued to a total of FOUR Shareholders:
Name & Address | Amount Owned Prior to Offering | Amount Owned After Offering |
Mr. Rodney Mikesell Chairman of the Board of Directors 1727 F Wildberry Drive Glenview, IL 60025 | Common Stock: 7,000,000 Shares (70%) Preferred Stock: No Shares | Common Stock: 7,000,000 Shares (70%) Preferred Stock: No Shares |
Mr. Pinaki Saha Chief Executive Officer Tool Floor, Inc. 6251 Pine Tree Drive Long Grove, Illinois 60047 | Common Stock: 2,100,000 Shares (21%) Preferred Stock: No Shares | Common Stock: 2,100,000 Shares (21%) Preferred Stock: No Shares |
Wrexwrothium Marketing Shareholder 90210 National Aveue Morton Grove, Illinois 60053 | Common Stock: 500,000 Shares (5%) Preferred Stock: No Shares | Common Stock: 500,000 Shares (5%) Preferred Stock: No Shares |
Mr. Marc Troop Shareholder 1238 North Brummitt Road. Chesterton, IN 46305 | Common Stock: 400,000 Shares (4%) Preferred Stock: No Shares | Common Stock: 400,000 Shares (4%) Preferred Stock: No Shares |
Future Dilution
The Company, for business purposes, may from time to time issue additional shares, which may result in dilution of existing shareholders. Dilution is a reduction in the percentage of a stock caused by the issuance of new stock. Dilution can also occur when holders of stock options (such as company employees) or holders of other optionable securities exercise their options. When the number of shares outstanding increases, each existing stockholder will own a smaller, or diluted, percentage of the Company, making each share less valuable. Dilution may also reduce the value of existing shares by reducing the stock’s earnings per share. There is no guarantee that dilution of the Common Stock will not occur in the future.
pg. 14
pg. 15
ITEM 5. PLAN OF DISTRIBUTION
The Offering will commence promptly after the date of this Offering Circular and will close (terminate) upon the earlier of (1) the sale of 200,000 7% Convertible Preferred Stock Shares, (2) One Year from the date of Qualification of this Offering by the United States Securities and Exchange Commission, or (3) a date prior to the one year anniversary date of the Qualification of this Offering by the United States Securities and Exchange Commission that is so determined by the Company’s Management (the “Offering Period”).
The 7% Convertible Preferred Stock Shares are being offered by the Company on a “Best Efforts” basis without the benefit of a Placement Agent. The minimum number of Shares of Preferred Stock to be sold prior to the Company having access to the Investor Funds is FIVE THOUSAND SHARES OF PREFERRED STOCK. The Company can provide no assurance that this Offering will be completely sold out. If less than the maximum proceeds are available, the Company’s business plans and prospects for the current fiscal year could be adversely affected.
The Company has not made any arrangements to place funds raised in this Offering in an escrow, trust or similar account. Any investor who purchases securities in this Offering will have no assurance that other purchasers will invest in this Offering. Accordingly, if the Company should file for bankruptcy protection or a petition for insolvency bankruptcy is filed by creditors against the Company, Investor funds may become part of the bankruptcy estate and administered according to the bankruptcy laws. The Company has the right to terminate this offering of Securities at any time, regardless of the number of Securities that have sold. If the Offering terminates before the offering minimum is achieved, or if any prospective Investor’s subscription is rejected, all funds received from such Investors will be returned without interest or deduction.
The Securities to be offered with this proposed offering shall be initially offered by Mr. Rodney Midesell, the Company’s Founder, Chairman of the Board of Directors; and Mr. Pinaki Saha, the Company’s Chief Executive Officer. The Company anticipates engaging members of the Financial Regulatory Authority (“FINRA”) to sell the Securities for the Company, though the Company has not yet engaged the Services of any FINRA Broker Dealers. The Company intends to engage a FINRA Broke Dealer to offer the Securities to prospective investors on a “best efforts” basis, and the Company’s Broker Dealers will have the right to engage such other FINRA Broker Dealer member firms as it determines to assist in the Offering. The Company will update this Registration Statement via an amendment to this Registration Statement upon any engagement of a FINRA Broker Dealer to offer the securities.
The Company anticipates that any FINRA Broker Dealer Manager will receive selling commissions of FIVE TO TEN PERCENT of the Offering Proceeds, which it may re-allow and pay to participating FINRA Broker Dealers who sell the Company’s Securities. The Company’s FINRA Broker Dealer Manager may also sell the Securities as part of a selling group, thereby becoming entitled to retain a greater portion of the selling commissions. Any portion of the selling commissions retained by the FINRA Broker Dealer Manager would be included within the amount of selling commissions payable by the Company and not in addition to.
The Company anticipates that that its FINRA Broker Dealer Manager may enter into an agreement with the Company to purchase “Underwriter Warrants”. Should the Company enter into an Underwriter Warrants Agreement with its FINRA Broker Dealer Manager, a copy of the agreement will be filed with the United States Securities and Exchange Commission as an Exhibit to an amended Registration Statement of which this Offering is part.
The Company anticipates that the Company and any FINRA Broker Dealer will each enter into a Broker Dealer Manager Agreement, which will be filed with the United States Securities and Exchange Commission as an Exhibit to an amended Registration Statement of which this Offering is part, for the sale of the Company’s Securities. FINRA Broker Dealers desiring to become members of a Selling Group will be required to execute a Participating Broker Dealer Agreement with the Company’s FINRA Broker Dealer, either before or after the date of this Registration Statement.
In order to subscribe to purchase the Securities, a prospective Investor must complete, sign and deliver the executed Subscription Agreement, Investor Questionnaire and Form W-9 to Tool Floor, Inc. and either mail or wire funds for its subscription amount in accordance with the instructions included in the Subscription Package.
The Company reserves the right to reject any Investor’s subscription in whole or in part for any reason. If the Offering terminates or if any prospective Investor’s subscription is rejected, all funds received from such Investors will be returned without interest or deduction.
In addition to this Offering Circular, subject to limitations imposed by applicable securities laws, we expect to use additional advertising, sales and other promotional materials in connection with this Offering. These materials may include public advertisements and audio-visual materials, in each case only as authorized by the Company. Although these materials will not contain information in conflict with the information provided by this Offering and will be prepared with a view to presenting a balanced discussion of risk and reward with respect to the Securities, these materials will not give a complete understanding of this Offering, the Company or the Securities and are not to be considered part of this Offering Circular. This Offering is made only by means of this Offering Circular and prospective Investors must read and rely on the information provided in this Offering Circular in connection with their decision to invest in the Securities.
pg. 16
ITEM 6. USE OF PROCEEDS TO ISSUER
The Company seeks to raise maximum gross proceeds of $2,500,000 from the sale of Securities in this Offering. The Company intends to apply these proceeds substantially as set forth herein, subject only to reallocation by Company Management in the best interests of the Company.
C.
Sale of Company 7% Convertible Preferred Stock Shares
Category | Maximum Proceeds | Percentage of Total Proceeds | Minimum Proceeds | Percentage of Proceeds |
Proceeds from Sale of Securities | $2,425,000 | 97% | $425,000 | 85% |
D.
Offering Expenses
Category | Maximum Proceeds | Percentage of Total Proceeds | Minimum Proceeds | Percentage of Proceeds |
Offering Expenses | $75,000 | 3% | $75,000 | 15% |
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Footnotes:
1)
The Company is offering a maximum of 25,000 7% Convertible Preferred Stock Shares at the price indicated
2)
Additional Fees for Legal Review and Opinion(s), Accounting Costs, and costs related to the drafting of this Registration Statement and Professional Services Fees should not exceed $75,000 USD. Any costs above $75,000 will be paid by the Executives of the Company.
3)
The Shares will be offered on a “best-efforts” basis by the Company’s Officers, Directors and Employees, and may be offered through Broker-Dealers who are registered with the Financial Industry Regulatory Authority (“FINRA”), or through other independent referral sources. As of the date of this Offering Circular, no selling agreements had been entered into by the Company with any Broker-Dealer firms. Selling commissions may be paid to Broker-Dealers who are members of FINRA with respect to sales of Shares made by them and compensation may be paid to consultants in connection with the Offering of Shares. The Company may also pay incentive compensation to Registered Broker-Dealers in the form of Common Stock or Stock Options with the Company. The Company will indemnify participating Broker-Dealers with respect to disclosures made in the Offering Circular.
4)
The Shares are being Offered pursuant to Regulation A of Section 3(b) of the Securities Act of 1933, as amended, for Tier 1 Offerings, with an option to amend the Offering to Regulation A Section 3(b) of the Securities Act of 1933, as amended, for Tier 2 Offerings. The Shares will only be issued to purchasers who satisfy the requirements set forth in Regulation A.
pg. 17
Tool Floor, Inc. - Use of Investment Proceeds
ASSUMPTIONS:
1.
$2,500,000 raised through equity offering.
2.
Percentages will be commensurate to actual funds received.
3.
Monthly expenditures may vary.
| Maximum Offering $20,000,000 | Maximum Offering Percentage | Minimum Offering $500,000 | Minimum Offering Percentage |
Product Development | $12,000,000 | 60% | $250,000 | 50% |
Operations | $3,000,000 | 15% | $150,000 | 30% |
Marketing | $4,000,000 | 20% | $25,000 | 5% |
Reserve | $925,000 | 0.5% | $0.00 | 00% |
Cost of Offering | $75,000 | 1.5% | $75,000 | 15% |
Total | $20,000,000 | 100% | $500,000 | 100% |
The above allocation of Funds Table provides above provides the use of funds based on raising $20,000,000 USD. If the total offering is not met, management will distribute the funds on a percentage weighted basis according to the Allocation of Funds Table provided above.
pg. 18
ITEM 7. DESCRIPTION OF BUSINESS
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B.
The Offering
The Company is offering a maximum of 200,000 7% Convertible Preferred Stock Shares at a price of $100.00 per Share, with all Shares having a value of $100.00.
C.
Risk Factors
See “RISK FACTORS” section of this Registration for certain factors that could adversely affect an investment in the Securities Offered. Those factors include, but are not limited to unanticipated obstacles to execution of the Business Plan, General Economic Factors, the Management’s Inability to Foresee Exuberant Market Downturns and other unforeseen events.
D.
Use of Proceeds
Proceeds from the sale of Securities will be used to invest in the development and growth of the Company’s eCommerce Tool business. See “USE OF PROCEEDS” section.
E.
Minimum Offering Proceeds - Escrow of Subscription Proceeds
The Company has set a minimum offering proceeds figure (the “minimum offering proceeds”) for this Offering of FIVE THOUSAND 7% CONVERTIBLE PREFERRED STOCK SHARES before the Company shall have access to the investment proceeds. The Company has not made any arrangements to place funds raised in this Offering in an escrow, trust or similar account. Any investor who purchases securities in this Offering will have no assurance that other purchasers will invest in this Offering. Accordingly, if the Company should file for bankruptcy protection or a petition for insolvency bankruptcy is filed by creditors against the Company, Investor funds may become part of the bankruptcy estate and administered according to the bankruptcy laws. The Company has the right to terminate this offering of Securities at any time, regardless of the number of Securities that have sold. If the Offering terminates before the offering minimum is achieved, or if any prospective Investor’s subscription is rejected, all funds received from such Investors will be returned without interest or deduction.
F.
Preferred & Common Stock Shares
Upon the sale of the maximum number of 7% Convertible Preferred Stock Shares from this Offering, the number of issued and outstanding Preferred Stock Shares of the Company’s Preferred stock will be held as follows:
o
Company Founders
& Current Shareholders
0%
o
New Shareholders
100%
Upon the sale of the maximum number of 7% Convertible Preferred Stock Shares from this Offering, the number of issued and outstanding Common Stock Shares of the Company’s Common Stock will be held as follows:
o
Company Founders
& Current Shareholders
100%
o
New Shareholders
0%
G.
Company Dividend Policy
The Company has never declared or paid any cash dividends on its common stock. The Company currently intends to retain future earnings, if any, to finance the expansion of the Company. As a result, the Company does not anticipate paying any cash dividends in the foreseeable future to Common Stock Holders.
H.
Company Share Purchase Warrants
The Company has no outstanding Share Purchase Warrants issued.
pg. 20
I.
Company Stock Options
The Company has no outstanding Stock Options issued.
J.
Company Convertible Securities
The Company, at the completion of this Offering will have 200,000 7% Convertible Preferred Stock Shares Issued.
·
Terms of Conversion or Repurchase by the Company:
o
All 7% Convertible Preferred Stock Shares must be Converted to Company Common Stock either in the 3rd, 4th or 5th year under the following terms and conditions at the Shareholders’ Option:
§
YEAR 3: (Shareholder Conversion Option)
·
At anytime during the third year of the investment, the Shareholder may choose on the First Business Day of Each Month to convert each Unit of the Company’s 7% Convertible Preferred Stock for Common Stock of the Company at market price minus 5% of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock Closing Price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.
·
The Shareholder can sell the 7% Convertible Preferred Stock Shares back to the Company at any time after two years for the full face value of the Shares plus any accrued interest, though the Company has no obligation to purchase the Shares.
·
Dividends on this 7% Convertible Preferred Stock will be payable on a cumulative basis, when and if declared by the Board of Directors, or an authorized committee of the Board of Directors, at an annual rate of 7.00% of the state value of $100.00
·
Should the Company not be listed on any Regulated Stock Exchange or OTC Market (“Over-the-Counter inter-dealer quotation system”), the shares shall convert to Common Stock in the Company at the “per share value” of the Company’s Common Stock as determined by an Independent Third Party Valuations Firm that is chosen by the Company’s Board of Directors.
pg. 21
§
YEAR 4: (Optional Conversion Option)
·
At anytime during the fourth year of the investment, the Shareholder may choose on the First Business Day of Each Month to convert each unit of the Company’s 7% Convertible Preferred Stock for Common Stock of the Company at market price minus 10% of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock Closing Price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.
·
The Shareholder can sell the 7% Convertible Preferred Stock Shares back to the Company at any time after two years for the full face value of the Shares plus any accrued interest, though the Company has no obligation to purchase the Shares.
·
Dividends on this 7% Convertible Preferred Stock will be payable on a cumulative basis, when and if declared by the Board of Directors, or an authorized committee of the Board of Directors, at an annual rate of 7.00% of the state value of $100.00
·
Should the Company not be listed on any Regulated Stock Exchange or OTC Market (“Over-the-Counter inter-dealer quotation system”), the shares shall convert to Common Stock in the Company at the “per share value” (minus any discounts) of the Company’s Common Stock as determined by an Independent Third Party Valuations Firm that is chosen by the Company’s Board of Directors.
§
YEAR 5: (Optional & Mandatory Conversion Options)
·
Optional: At anytime during the fifth year of the investment, the Shareholder may choose on the First Day of Each Month to convert each unit of the Company’s Convertible 7% Preferred Stock for Common Stock of the Company at market price minus 15% of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock Closing Price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.
·
The Shareholder can sell the 7% Convertible Preferred Stock Shares back to the Company at any time after two years for the full face value of the Shares plus any accrued interest, though the Company has no obligation to purchase the Shares.
·
Dividends on this 7% Convertible Preferred Stock will be payable on a cumulative basis, when and if declared by the Board of Directors, or an authorized committee of the Board of Directors, at an annual rate of 7.00% of the state value of $100.00
·
Mandatory: On the last business day of the 5th year of the investment, the Shareholder MUST convert each Unit of the Company’s 7% Convertible Preferred Stock for Common Stock of the Company at market price minus 15% of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock Closing Price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.
·
Should the Company not be listed on any Regulated Stock Exchange or OTC Market (“Over-the-Counter inter-dealer quotation system”), the shares shall convert to Common Stock in the Company at the “per share value” (minus any discounts) of the Company’s Common Stock as determined by an Independent Third Party Valuations Firm that is chosen by the Company’s Board of Directors.
The Company has the Right to convert the 7% Convertible Preferred Stock Shares to Common Shares of the Company should the Company be acquired or merged with another company (where the Company has less than 50% controlling interest). The Company has the Right to “Call In” all 7% Convertible Preferred Stock Shares at the value of the Common Stock Shares, less the appropriate percentage discount in the Year that the acquisition or merger occurs.
The Company has not issued any additional Convertible Securities other than those listed and detailed above.
pg. 22
K.
Stock Option Plan
The Board has not adopted a stock option plan. If a plan is adopted in the future, the plan will be administered by the Board of Directors or a committee appointed by the board (the “committee”). The committee will have the authority to modify, extend or renew outstanding options and to authorize the grant of new options in substitution therefore, provided that any such action may not, without the written consent of the optionee, impair any rights under any option previously granted.
L.
Reporting
For tax and accounting purposes, the Company’s fiscal year will end on December 31st of each year, and all financial information will be prepared in accordance with the accrual method of accounting. The books and records of account will be kept at the Company’s Address. The Company will furnish each Shareholder, within 120 days after the end of each fiscal year, the Company’s Audited Financial Statements in an Annual Report on SEC Form 1-K, which is filed with the United States Securities and Exchange Commission, and within 30 days after the 30th of June of each fiscal year, the Company’s shall provide its unaudited financial statements in a semi-Annual Report on SEC Form 1-S, which is also filed with the Securities and Exchange Commission. The reports will be filed electronically. You may read copies of any materials the Company files with the SEC at www.sec.gov, or at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet Site that will contain copies of the reports that the Company files electronically. The address for the Internet site is www.sec.gov.
M.
Stock Transfer Agent
VStock Transfer, LLC
18 Lafayette Place
Woodmere, New York 11598
Phone: (212) 828-8436
Email: Info@VStockTransfer.com
http://www.VStockTransfer.com
N.
Subscription Period
The Offering will commence promptly after the date of this Offering Circular and will close (terminate) upon the earlier of (1) the sale of 200,000 7% Convertible Preferred Stock Shares, (2) One Year from the date of Qualification of this Offering by the United States Securities and Exchange Commission, or (3) a date prior to the one year anniversary date of the Qualification of this Offering by the United States Securities and Exchange Commission that is so determined by the Company’s Management (the “Offering Period”).
The 7% Convertible Preferred Stock Shares are being offered by the Company on a “Best Efforts” basis without the benefit of a Placement Agent. The minimum number of Shares of Preferred Stock to be sold prior to the Company having access to the Investor Funds is FIVE THOUSAND SHARES OF PREFERRED STOCK. The Company can provide no assurance that this Offering will be completely sold out. If less than the maximum proceeds are available, the Company’s business plans and prospects for the current fiscal year could be adversely affected.
The Company has not made any arrangements to place funds raised in this Offering in an escrow, trust or similar account. Any investor who purchases securities in this Offering will have no assurance that other purchasers will invest in this Offering. Accordingly, if the Company should file for bankruptcy protection or a petition for insolvency bankruptcy is filed by creditors against the Company, Investor funds may become part of the bankruptcy estate and administered according to the bankruptcy laws. The Company has the right to terminate this offering of Securities at any time, regardless of the number of Securities that have sold. If the Offering terminates before the offering minimum is achieved, or if any prospective Investor’s subscription is rejected, all funds received from such Investors will be returned without interest or deduction.
pg. 23
Q.
TERMS AND CONDITIONS
The following is a summary of the certain principal terms of Stock Ownership in Tool Floor, Inc.
The Company | Tool Floor, Inc. is a Delaware Stock Corporation. |
Company Managers | Biographies of all Managers can be found starting on Page 41 of this Offering. |
|
|
Minimum Capital Commitment | Each investor will be required to make an investment of a minimum of one 7% Convertible Preferred Stock Shares. |
The Offering Term of the Offering | The Company is seeking capital commitments of $20,000,000 from Investors. The securities being offered hereby consists of up to 200,000 7% Convertible Preferred Stock Shares of the Company, priced at $100.00 per Unit subject to the Company’s discretion to increase the size of the offering. The purchase price for the stock interests is to be paid in cash as called by the Company. The Offering will commence promptly after the date of this Offering Circular and will close (terminate) upon the earlier of (1) the sale of 200,000 7% Convertible Preferred Stock Shares, (2) One Year from the date of Qualification of this Offering by the United States Securities and Exchange Commission, or (3) a date prior to the one year anniversary date of the Qualification of this Offering by the United States Securities and Exchange Commission that is so determined by the Company’s Management (the “Offering Period”). The 7% Convertible Preferred Stock Shares are being offered by the Company on a “Best Efforts” basis without the benefit of a Placement Agent. The minimum number of Shares of Preferred Stock to be sold prior to the Company having access to the Investor Funds is FIVE THOUSAND SHARES OF PREFERRED STOCK. The Company can provide no assurance that this Offering will be completely sold out. If less than the maximum proceeds are available, the Company’s business plans and prospects for the current fiscal year could be adversely affected. The Company has not made any arrangements to place funds raised in this Offering in an escrow, trust or similar account. Any investor who purchases securities in this Offering will have no assurance that other purchasers will invest in this Offering. Accordingly, if the Company should file for bankruptcy protection or a petition for insolvency bankruptcy is filed by creditors against the Company, Investor funds may become part of the bankruptcy estate and administered according to the bankruptcy laws. The Company has the right to terminate this offering of Securities at any time, regardless of the number of Securities that have sold. If the Offering terminates before the offering minimum is achieved, or if any prospective Investor’s subscription is rejected, all funds received from such Investors will be returned without interest or deduction. |
Conversion Option / Mandatory Conversion | All 7% Convertible Preferred Stock Shares must be converted to Company Common Stock, either in the third, fourth or fifth year under the following terms and conditions at the Shareholder’s Option: · Year 3: (Shareholder Conversion Option) Shareholder Option: At anytime during the third year of the investment, the Shareholder may choose on the First Business Day of Each Month to convert each unit of the Company’s 7% Convertible Preferred Stock for Common Stock of the Company at market price minus 5% of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock closing price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash. Dividends on this 7% Convertible Preferred Stock will be payable on a cumulative basis when, and if declared by the Board of Directors, or an authorized committee of the Board of Directors, at an annual rate of 7.00% on the stated value of $100.00 The Shareholder can sell the 7% Convertible Preferred Stock Shares back to the Company at any time after two years for the full face value of the Shares plus any accrued interest, though the Company has no obligation to purchase the Shares. · Year 4: (Shareholder Conversion Option) Shareholder Option: At anytime during the fourth year of the investment, the Shareholder may choose on the First Business Day of Each Month to convert each unit of the Company’s 7% Convertible Preferred Stock for Common Stock of the Company at market price minus 10% of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock closing price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash. Dividends on this 7% Convertible Preferred Stock will be payable on a cumulative basis when, and if declared by the Board of Directors, or an authorized committee of the Board of Directors, at an annual rate of 7.00% on the stated value of $100.00 The Shareholder can sell the 7% Convertible Preferred Stock Shares back to the Company at any time after two years for the full face value of the Shares plus any accrued interest, though the Company has no obligation to purchase the Shares. · Year 5: (Optional & Mandatory Conversion Option) Shareholder Option: At anytime during the fifth year of the investment, the Shareholder may choose on the First Business Day of Each Month to convert each unit of the Company’s 7% Convertible Preferred Stock for Common Stock of the Company at market price minus 15% of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock closing price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash. Dividends on this 7% Convertible Preferred Stock will be payable on a cumulative basis when, and if declared by the Board of Directors, or an authorized committee of the Board of Directors, at an annual rate of 7.00% on the stated value of $100.00 The Shareholder can sell the 7% Convertible Preferred Stock Shares back to the Company at any time after two years for the full face value of the Shares plus any accrued interest, though the Company has no obligation to purchase the Shares. Mandatory Conversion: On the last business day of the 5th year of the investment, the Shareholder MUST convert each unit of the Company’s 7% Convertible Preferred Stock for Common Stock of the Company at market price minus 15% of the Company’s Common Stock at time of conversion / closing. NOTE: The Company has the Right to convert the 7% Convertible Preferred Stock Shares of the Company should the Company be acquired or merged with another company (where the Company has less than 50% controlling interest). The Company has the Right to “Call In” all 7% Convertible Preferred Stock Shares, less the appropriate percentage discount in the year that the acquisition or merger occurs. |
|
|
Voting Rights | Preferred Stock Holders have No Voting Rights |
Reports to Investors | For tax and accounting purposes, the Company’s fiscal year will end on December 31st of each year, and all financial information will be prepared in accordance with the accrual method of accounting. The books and records of account will be kept at the Company’s Address. The Company will furnish each Shareholder, within 120 days after the end of each fiscal year, the Company’s Audited Financial Statements in an Annual Report on SEC Form 1-K, which is filed with the United States Securities and Exchange Commission, and within 30 days after the 30th of June of each fiscal year, the Company’s shall provide its unaudited financial statements in a semi-Annual Report on SEC Form 1-S, which is also filed with the Securities and Exchange Commission. The reports will be filed electronically. You may read copies of any materials the Company files with the SEC at www.sec.gov, or at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet Site that will contain copies of the reports that the Company files electronically. The address for the Internet site is www.sec.gov.
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pg. 26
ITEM 8. DESCRIPTION OF PROPERTY.
The Company does not own any real estate. The Company’s address is 1727 Wildberry F, Glenview, Illinois 60025. The Company currently has no policy with respect to investments or interests in real estate, real estate mortgages or securities of, or interests in, persons primarily engaged in real estate activities.
ITEM 9. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
The following discussion and analysis of the Company’s Financial Condition and results of operations should be read in conjunction with the Company’s consolidated financial statements. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The Company’s actual results and timing may differ from those anticipated in these forward-looking statements and planning as a result of many factors, including those discussed under “Risk Factors” and elsewhere in the prospectus.
The Company is a Developmental Stage Company with limited operating history:
Tool Floor, Inc. commenced operations in December of 2016 as a Delaware Stock Corporation. Accordingly, the Company has only a limited history upon which an evaluation of its prospects and future performance can be made. The Company’s proposed operations are subject to all business risks associated with new enterprises. The likelihood of the Company’s success must be considered in light of the problems, expenses, difficulties, complications, and delays frequently encountered in connection with the expansion of a business, operation in a competitive industry, and the continued development of advertising, promotions and a corresponding customer base. There is a possibility that the Company could sustain losses in the future. There can be no assurances that Tool Floor, Inc. will operate profitably.
Overview:
pg. 27
TOOLFLOOR.COM plans to deliver to both consumers and tool sellers. Consumers go to a destination site for thousands of products from hundreds of manufacturers and distributors of power and hand tools. Unparalleled online & mobile interfaces with a hassle free single point of return and customer support provide a purchase experience unavailable today. Sellers meanwhile get access to a marketplace with outstanding technical features, inventory capabilities, transaction tracking, and sales analytics for a service fee. Ability to host entire SKU listings with branding delivers the private label identity in a niche category.
The Company plans to target small to midsize tool manufacturers and distributors that lack the capability to host online and drive eCommerce. While the Company intends to revolutionize the power & hand tools category by bringing these sellers online, the Company’s platform strategy enables onboarding of hundreds of distributors of popular brands as well. Specialty tools along with branded products empower a marketplace with unlimited choice.
Currently, the $10.9B US Power and Hand Tool industry severely lacks online and mobile presence. While a few large retail outlets such as homedepot.com, lowes.com, and ebay.com address the general tools market, hundreds of specialty tool manufacturers with thousands of products are unable to showcase in an open marketplace. A combined B2B and B2C platform with targeted search & discovery, recommendation engine, advanced analytics and responsive customer support will facilitate a whole new untapped tools market.
Businesses pay onetime setup fee followed by a monthly license OR a per transaction fee for using the back-end software to onboard and manage products, track sales, and support customers. TOOLFLOOR.com tracks a huge set of user engagement data from search, sales, and buyer’s interest and shares premium analytics for an additional fee. A Pay-for-Performance model charges sellers to advertise across the site and on the mobile app based on search keywords.
Liquidity and Capital Reserves
As of January 1st, 2017, the Company had $125,000 USD in cash and total liabilities of $60,000. As of January 1stt, 2017, the Company has incurred total expenses of $75,000 in association with this Offering. In Management’s opinion, the Company’s cash position is insufficient to maintain its operations at the current level for the next twelve months. The Company is attempting to raise capital to proceed with its plan of operation as detailed in the Description of Business Section of this Offering. The Company hopes to raise a minimum of $500,000, and a maximum of $20,000,000 through this Offering. The Company believes that such funds will be sufficient to fund the Company’s expenses over the next twelve months.
The Company is highly dependent upon the success of this Offering, as described herein. Therefore, the failure thereof would result in the need to seek capital from other sources such as taking loans, which would likely not even be possible for the Company. However, if such financing were available, because the Company is a development stage company with no operations to date, the Company would likely have to pay additional costs associated with high risk loans and be subject to an above market interest rate. At such time these funds are required, management would evaluate the terms of such debt financing. If the Company cannot raise additional proceeds via a private placement of its equity or debt securities, or secure a loan, the Company would be required to cease business operations. As a result, investors would lose all of their investment.
pg. 28
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT EMPLOYEES
(a) Directors and Executive Officers.
A. Directors and Executive Officers. The current officer and director will serve for one year or until his respective successor(s) are elected and qualified.
Name
Position
Mr. Rodney Mikesell
Founder, Chairman of the Board of Directors
Mr. Rodney Miksell (age: 61) began building condos in Chicago beginning in 1979. He has been at home in construction during his career as an owner of and consultant to U. S. companies building globally. He has traveled within and through the red tape of 90 countries, across every continent preforming specialty construction, building infrastructure and distributing products and services. His leadership strength comes from a blend of visionary planning and strong management experience which spans over 35 years. That includes a wide range of industry sectors.
Mr. Pinaki Saha
Chief Executive Officer
Mr. Pinaki Saha (age: 43), a creative mercenary and a solutions architect, has been in the high tech industry for 18 years. A Nuclear & Environmental Physicist by training, Pinaki’s skills in high-end algorithms led him to tech. He played a leadership role in Priceline.com and built enterprise systems with Lockheed and the Federal Government. After 8 years stint at JPMorgan Chase, Pinaki co-founded 4 startups in consumer Internet space involving video streaming, games and IoT. He helped to raise millions in seed funding and created prototypes for Disney, Samsung, Kraft Foods and many more. His work and thoughts have been published in highly coveted media such as TIME, FOX, NBC5, CASSANDRA DAILY (a CAA company publication) and TECHCRUNCH.
B. Significant Employees. All Members of Tool Floor, Inc. as listed above are each considered "Significant Employees", and are each "Executive Officers" of the Company. The Company would be materially adversely affected if it were to lose the services of any member of Tool Floor, Inc. listed above as each he has provided significant leadership and direction to the Company.
C. Family Relationships. None.
D. Involvement in Certain Legal Proceedings. There have been no events under any bankruptcy act, any criminal proceedings and any judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any director, executive officer, promoter or control person of Registrant during the past five years.
E. Legal proceedings. There are not presently any material pending legal proceedings to which the Registrant is a party or as to which any of its property is subject, and no such proceedings are known to the Registrant to be threatened or contemplated against it.
pg. 29
ITEM 11. EXECUTIVE COMPENSATION.
In December of 2016, the Company adopted a compensation program for Company Management. Accordingly, Management of Tool Floor, Inc. will be entitled to receive an annual salary of:
Mr. Rodney Mikesell
Chairman of the Board
$0.00
Mr. Pinaki Saha
Chief Executive Officer
$0.00
NOTE: No compensation has been accrued nor will any compensation be accrued or paid until the Company has satisfactorily raised the minimum capital within the terms of this Regulation A Offering. The Company’s Executive Management and extended team have elected to have all salaries deferred and not-accrued to this Offering. Therefore, the Company does not intend to distribute any funds related to past performance.
Officer Compensation
The Company does not currently pay any cash fees to any Officer of the Company beyond those listed above.
Directors and Advisors Compensation
The Company currently does not pay any cash fees to an Advisor of the Company.
Significant Employees
The Company has no significant employees other than the Company Managers named in this prospectus.
pg. 30
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) Security ownership of certain beneficial owners.
The following table sets forth, as of the date of this Registration Statement, the number of shares of Preferred Stock and Common Stock owned of record and beneficially by executive officers, directors and persons who hold 5% or more of the outstanding Common Stock of the Company. Also included are the shares held by all executive officers and directors as a group.
The Company has not had any stock sales within the last year. The Company currently has TEN MILLION Shares of Common Stock issued to a total of FOUR Shareholders:
Name & Address | Amount Owned Prior to Offering | Amount Owned After Offering |
Mr. Rodney Mikesell Chairman of the Board of Directors 1727 F Wildberry Drive Glenview, IL 60025 | Common Stock: 7,000,000 Shares (70%) Preferred Stock: No Shares | Common Stock: 7,000,000 Shares (70%) Preferred Stock: No Shares |
Mr. Pinaki Saha Chief Executive Officer Tool Floor, Inc. 6251 Pine Tree Drive Long Grove, Illinois 60047 | Common Stock: 2,100,000 Shares (21%) Preferred Stock: No Shares | Common Stock: 2,100,000 Shares (21%) Preferred Stock: No Shares |
Wrexwrothium Marketing Shareholder 90210 National Aveue Morton Grove, Illinois 60053 | Common Stock: 500,000 Shares (5%) Preferred Stock: No Shares | Common Stock: 500,000 Shares (5%) Preferred Stock: No Shares |
Mr. Marc Troop Shareholder 1238 North Brummitt Road. Chesterton, IN 46305 | Common Stock: 400,000 Shares (4%) Preferred Stock: No Shares | Common Stock: 400,000 Shares (4%) Preferred Stock: No Shares |
pg. 31
ITEM 13. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.
Related Party Transactions
Our majority stockholder is Mr. Rodney Mikesell, the Company’s Founder, Chairman of the Board of Directors & Chief Executive Officer. This sole shareholder currently owns the majority of the issued and outstanding controlling Common Stock Shares of Tool Floor, Inc. Consequently, this sole shareholder controls the operations of the Company and will have the ability to control all matters submitted to Stockholders for approval, including:
·
Election of the board of directors;
·
Removal of any directors;
·
Amendment of the Company’s certificate of incorporation or bylaws; and
·
Adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination.
Mr. Rodney Mikesell will have complete control over the Company’s management and affairs. Accordingly, this ownership may have the effect of impeding a merger, consolidation, takeover or other business consolidation, or discouraging a potential acquirer from making a tender offer for the Common Stock. This registration statement contains forward-looking statements and information relating to the Company, the industry and to other businesses.
Except as otherwise indicated herein, there have been no related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 11 of Form 1-A, Model B.
pg. 32
ITEM 14. SECURITIES BEING OFFERED.
7% Convertible Preferred Stock Shares
A maximum of TWO HUNDRED THOUSAND 7% Convertible Preferred Stock Shares are being offered to the public at $100.00 per 7% Convertible Preferred Stock Unit.
o
All 7% Convertible Preferred Stock Shares must be Converted to Company Common Stock either in the 3rd, 4th or 5th year under the following terms and conditions at the Shareholders’ Option:
§
YEAR 3: (Shareholder Conversion Option)
·
At anytime during the third year of the investment, the Shareholder may choose on the First Business Day of Each Month to convert each Unit of the Company’s 7% Convertible Preferred Stock for Common Stock of the Company at market price minus 5% of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock Closing Price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.
·
The Shareholder can sell the 7% Convertible Preferred Stock Shares back to the Company at any time after two years for the full face value of the Shares plus any accrued interest, though the Company has no obligation to purchase the Shares.
·
Dividends on this 7% Convertible Preferred Stock will be payable on a cumulative basis when, as and if declared by the Board of Directors, or an authorized committee of the Board of Directors, at an annual rate of 7.00% on the stated value of $100.00 per share.
·
Should the Company not be listed on any Regulated Stock Exchange or OTC Market (“Over-the-Counter inter-dealer quotation system”), the shares shall convert to Common Stock in the Company at the “per share value” of the Company’s Common Stock as determined by an Independent Third Party Valuations Firm that is chosen by the Company’s Board of Directors.
§
YEAR 4: (Optional Conversion Option)
·
At anytime during the fourth year of the investment, the Shareholder may choose on the First Business Day of Each Month to convert each unit of the Company’s 7% Convertible Preferred Stock for Common Stock of the Company at market price minus 10% of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock Closing Price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.
·
The Shareholder can sell the 7% Convertible Preferred Stock Shares back to the Company at any time after two years for the full face value of the Shares plus any accrued interest, though the Company has no obligation to purchase the Shares.
·
Dividends on this 7% Convertible Preferred Stock will be payable on a cumulative basis when, as and if declared by the Board of Directors, or an authorized committee of the Board of Directors, at an annual rate of 7.00% on the stated value of $100.00 per share.
·
Should the Company not be listed on any Regulated Stock Exchange or OTC Market (“Over-the-Counter inter-dealer quotation system”), the shares shall convert to Common Stock in the Company at the “per share value” (minus any discounts) of the Company’s Common Stock as determined by an Independent Third Party Valuations Firm that is chosen by the Company’s Board of Directors.
§
YEAR 5: (Optional & Mandatory Conversion Options)
·
Optional: At anytime during the fifth year of the investment, the Shareholder may choose on the First Day of Each Month to convert each unit of the Company’s Convertible 7% Preferred Stock for Common Stock of the Company at market price minus 15% of the Company’s Common Stock at time of conversion / closing. The closing price will be the
pg. 33
weighted average price of the Common Stock Closing Price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.
·
The Shareholder can sell the 7% Convertible Preferred Stock Shares back to the Company at any time after two years for the full face value of the Shares plus any accrued interest, though the Company has no obligation to purchase the Shares.
·
Dividends on this 7% Convertible Preferred Stock will be payable on a cumulative basis when, as and if declared by the Board of Directors, or an authorized committee of the Board of Directors, at an annual rate of 7.00% on the stated value of $100.00 per share.
·
Mandatory: On the last business day of the 5th year of the investment, the Shareholder MUST convert each Unit of the Company’s 7% Convertible Preferred Stock for Common Stock of the Company at market price minus 15% of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock Closing Price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.
·
Should the Company not be listed on any Regulated Stock Exchange or OTC Market (“Over-the-Counter inter-dealer quotation system”), the shares shall convert to Common Stock in the Company at the “per share value” (minus any discounts) of the Company’s Common Stock as determined by an Independent Third Party Valuations Firm that is chosen by the Company’s Board of Directors.
The Company has the Right to convert the 7% Convertible Preferred Stock Shares to Common Shares of the Company should the Company be acquired or merged with another company (where the Company has less than 50% controlling interest). The Company has the Right to “Call In” all 7% Convertible Preferred Stock Shares at the value of the Common Stock Shares, less the appropriate percentage discount in the Year that the acquisition or merger occurs.
The Offering will commence promptly after the date of this Offering Circular and will close (terminate) upon the earlier of (1) the sale of 200,000 7% Convertible Preferred Stock Shares, (2) One Year from the date of Qualification of this Offering by the United States Securities and Exchange Commission, or (3) a date prior to the one year anniversary date of the Qualification of this Offering by the United States Securities and Exchange Commission that is so determined by the Company’s Management (the “Offering Period”).
The 7% Convertible Preferred Stock Shares are being offered by the Company on a “Best Efforts” basis without the benefit of a Placement Agent. The minimum number of Shares of Preferred Stock to be sold prior to the Company having access to the Investor Funds is FIVE THOUSAND SHARES OF PREFERRED STOCK. The Company can provide no assurance that this Offering will be completely sold out. If less than the maximum proceeds are available, the Company’s business plans and prospects for the current fiscal year could be adversely affected.
The Company has not made any arrangements to place funds raised in this Offering in an escrow, trust or similar account. Any investor who purchases securities in this Offering will have no assurance that other purchasers will invest in this Offering. Accordingly, if the Company should file for bankruptcy protection or a petition for insolvency bankruptcy is filed by creditors against the Company, Investor funds may become part of the bankruptcy estate and administered according to the bankruptcy laws. The Company has the right to terminate this offering of Securities at any time, regardless of the number of Securities that have sold. If the Offering terminates before the offering minimum is achieved, or if any prospective Investor’s subscription is rejected, all funds received from such Investors will be returned without interest or deduction.
The Securities to be offered with this proposed offering shall be initially offered by Mr. Rodney Mikesell, the Company’s Founder & Chairman of the Board of Directors; and Mr. Pinaki Saha, the Company’s Chief Executive Officer. The Company anticipates engaging members of the Financial Regulatory Authority (“FINRA”) to sell the Securities for the Company, though the Company has not yet engaged the Services of any FINRA Broker Dealers. The Company intends to engage a FINRA Broke Dealer to offer the Securities to prospective investors on a “best efforts” basis, and the Company’s Broker Dealers will have the right to engage such other FINRA Broker Dealer member firms as it determines to assist in the Offering. The Company will update this Registration Statement via an amendment to this Registration Statement upon any engagement of a FINRA Broker Dealer to offer the securities.
The Company anticipates that any FINRA Broker Dealer Manager will receive selling commissions of FIVE TO TEN PERCENT of the Offering Proceeds, which it may re-allow and pay to participating FINRA Broker Dealers who sell the Company’s Securities. The Company’s FINRA Broker Dealer Manager may also sell the Securities as part of a selling group, thereby becoming entitled to retain a greater portion of the selling commissions. Any portion of the selling commissions retained by the FINRA Broker Dealer Manager would be included within the amount of selling commissions payable by the Company and not in addition to.
pg. 34
The Company anticipates that that its FINRA Broker Dealer Manager may enter into an agreement with the Company to purchase “Underwriter Warrants”. Should the Company enter into an Underwriter Warrants Agreement with its FINRA Broker Dealer Manager, a copy of the agreement will be filed with the United States Securities and Exchange Commission as an Exhibit to an amended Registration Statement of which this Offering is part.
The Company anticipates that the Company and any FINRA Broker Dealer will each enter into a Broker Dealer Manager Agreement, which will be filed with the United States Securities and Exchange Commission as an Exhibit to an amended Registration Statement of which this Offering is part, for the sale of the Company’s Securities. FINRA Broker Dealers desiring to become members of a Selling Group will be required to execute a Participating Broker Dealer Agreement with the Company’s FINRA Broker Dealer, either before or after the date of this Registration Statement.
In order to subscribe to purchase the Securities, a prospective Investor must complete, sign and deliver the executed Subscription Agreement, Investor Questionnaire and Form W-9 to Tool Floor, Inc. and either mail or wire funds for its subscription amount in accordance with the instructions included in the Subscription Package.
Except as expressly provided in this Offering, any dispute, claim or controversy between or among any of the Investors or between any Investor or his/her/its Affiliates and the Company arising out of or relating to this Offering, or any subscription by any Investor to purchase Securities, or any termination, alleged breach, enforcement, interpretation or validity of any of those agreements (including the determination of the scope or applicability of this agreement to arbitrate), or otherwise involving the Company, will be submitted to arbitration in the county and state in which the Company maintains its principal office at the time the request for arbitration is made, before a sole arbitrator, in accordance with the laws of the state of Illinois for agreements made in and to be performed in the state of Illinois. Such arbitration will be administered by the Judicial Arbitration and Mediation Services (“JAMS”) and conducted under the provisions of its Comprehensive Arbitration Rules and Procedures. Arbitration must be commenced by service upon the other party of a written demand for arbitration or a written notice of intention to arbitrate, therein electing the arbitration tribunal. Judgment upon any award rendered by the arbitrator shall be final and may be entered in any court having jurisdiction thereof. No party to any such controversy will be entitled to any punitive damages. Notwithstanding the rules of JAMS, no arbitration proceeding will be consolidated with any other arbitration proceeding without all parties’ consent. The arbitrator shall, in the award, allocate all of the costs of the arbitration, including the fees of the arbitrator and the reasonable attorneys’ fees of the prevailing party, against the party who did not prevail.
NOTICE: By executing a Subscription Agreement for this Offering, Subscriber is agreeing to have all disputes, claims, or controversies arising out of or relating to this Agreement decided by neutral binding arbitration, and Subscriber is giving up any rights he, she or it may possess to have those matters litigated in a court or jury trial. By executing this Subscription Agreement, Subscriber is giving up his, her or its judicial rights to discovery and appeal except to the extent that they are specifically provided for in this Subscription Agreement. If Subscriber refuses to submit to arbitration after agreeing to this provision, Subscriber may be compelled to arbitrate under federal or state law. Subscriber confirms that his, her or its agreement to this arbitration provision is voluntary.
The description of certain matters relating to the securities of the Company is a summary and is qualified in its entirety by the provisions of the Company’s Certificate of Incorporation and By-Laws, copies of which have been filed as exhibits to this Form 1-A. No Common Stock is being offered in the Offering Circular.
(a) Description of Company Common Stock.
The Company is authorized by its Amended and Restated Articles of Incorporation to issue an aggregate of 130,000,000 shares of Common stock, no par value per share (the "Common Stock"). As of January 1st, 2017 – TEN MILLION shares of Common Stock were issued and outstanding.
All outstanding shares of Common Stock are of the same class and have equal rights and attributes. The holders of Common Stock are entitled to one vote per share on all matters submitted to a vote of stockholders of the Company. All stockholders are entitled to share equally in dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available. In the event of liquidation, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of all liabilities. The stockholders do not have cumulative or preemptive rights except for the voting rights for the election of Directors.
(b) Background Information on the Preferred Stock.
The Company is authorized by its Amended and Restated Articles of Incorporation to issue an aggregate of 50,000 shares of Preferred Stock, no par value per share (the "Preferred Stock"). As of January 1st, 2017 – NO Preferred Stock Shares were issued and outstanding. Upon the completion of this Offering, TWO HUNDRED THOUSAND shares of Preferred Stock will be issued and outstanding.
pg. 35
(c) Other Debt Securities. None
(d) Other Securities to Be Registered. None.
Security Holders
As of January 1st, 2017, there were TEN MILLION shares of our Common Stock outstanding, which were held of record by approximately FOUR stockholders, not including persons or entities that hold the stock in nominee or “street” name through various brokerage firms.
As of January 1st, 2017, there were NO shares of our Preferred Stock outstanding, which were held of record by approximately 0 stockholders, not including persons or entities that hold the stock in nominee or “street” name through various brokerage firms.
Indemnification of Directors and Officers:
The Company is incorporated under the laws of Delaware. Delaware General Corporation Law provides that a corporation may indemnify directors and officers as well as other employees and individuals against expenses including attorneys’ fees, judgments, fines and amounts paid in settlement in connection with various actions, suits or proceedings, whether civil, criminal, administrative or investigative other than an action by or in the right of the corporation, a derivative action, if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, if they had no reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the case of derivative actions, except that indemnification only extends to expenses including attorneys’ fees incurred in connection with the defense or settlement of such actions and the statute requires court approval before there can be any indemnification where the person seeking indemnification has been found liable to the corporation. The statute provides that it is not exclusive of other indemnification that may be granted by a corporation’s certificate of incorporation, bylaws, agreement, and a vote of stockholders or disinterested directors or otherwise.
The Company’s Certificate of Incorporation provides that it will indemnify and hold harmless, to the fullest extent permitted by Delaware’s General Corporation Law, as amended from time to time, each person that such section grants us the power to indemnify.
pg. 36
Delaware’s General Corporation Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for:
a.
any breach of the director’s duty of loyalty to the corporation or its stockholders;
·
acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
·
payments of unlawful dividends or unlawful stock repurchases or redemptions; or
·
any transaction from which the director derived an improper personal benefit.
The Company’s Certificate of Incorporation provides that, to the fullest extent permitted by applicable law, none of our directors will be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director. Any repeal or modification of this provision will be prospective only and will not adversely affect any limitation, right or protection of a director of our company existing at the time of such repeal or modification.
pg. 37
ITEM 15. ADDITIONAL INFORMATION REGARDING MANDATORY SHAREHOLDER ARBITRATION
Except as expressly provided in this Offering, any dispute, claim or controversy between or among any of the Investors or between any Investor or his/her/its Affiliates and the Company arising out of or relating to this Offering, or any subscription by any Investor to purchase Securities, or any termination, alleged breach, enforcement, interpretation or validity of any of those agreements (including the determination of the scope or applicability of this agreement to arbitrate), or otherwise involving the Company, will be submitted to arbitration in the county and state in which the Company maintains its principal office at the time the request for arbitration is made, before a sole arbitrator, in accordance with the laws of the state of Illinois for agreements made in and to be performed in the state of Illinois. Such arbitration will be administered by the Judicial Arbitration and Mediation Services (“JAMS”) and conducted under the provisions of its Comprehensive Arbitration Rules and Procedures. Arbitration must be commenced by service upon the other party of a written demand for arbitration or a written notice of intention to arbitrate, therein electing the arbitration tribunal. Judgment upon any award rendered by the arbitrator shall be final and may be entered in any court having jurisdiction thereof. No party to any such controversy will be entitled to any punitive damages. Notwithstanding the rules of JAMS, no arbitration proceeding will be consolidated with any other arbitration proceeding without all parties’ consent. The arbitrator shall, in the award, allocate all of the costs of the arbitration, including the fees of the arbitrator and the reasonable attorneys’ fees of the prevailing party, against the party who did not prevail.
NOTICE: By executing a Subscription Agreement for this Offering, Subscriber is agreeing to have all disputes, claims, or controversies arising out of or relating to this Agreement decided by neutral binding arbitration, and Subscriber is giving up any rights he, she or it may possess to have those matters litigated in a court or jury trial. By executing this Subscription Agreement, Subscriber is giving up his, her or its judicial rights to discovery and appeal except to the extent that they are specifically provided for in this Subscription Agreement. If Subscriber refuses to submit to arbitration after agreeing to this provision, Subscriber may be compelled to arbitrate under federal or state law. Subscriber confirms that his, her or its agreement to this arbitration provision is voluntary.
NOTICE REGARDING AGREEMENT TO ARBITRATE
THIS OFFERING MEMORANDUM REQUIRES THAT ALL INVESTORS ARBITRATE ANY DISPUTE ARISING OUT OF THEIR INVESTMENT IN THE COMPANY. ALL INVESTORS FURTHER AGREE THAT THE ARBITRATION WILL BE BINDING AND HELD IN THE STATE OF ILLINOIS, IN THE COUNTY OF COOK. EACH INVESTOR ALSO AGREES TO WAIVE ANY RIGHTS TO A JURY TRIAL. OUT OF STATE ARBITRATION MAY FORCE AN INVESTOR TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. OUT OF STATE ARBITRATION MAY ALSO COST AN INVESTOR MORE TO ARBITRATE A SETTLEMENT OF A DISPUTE.
Enforceability of Mandatory Shareholder Arbitration:
A recent U.S. Supreme Court decision in AT&T Mobility, LLC vs. Concepcion, the Supreme Court upheld the enforcement of contractual arbitration clauses that waive a consumer’s right to bring a class action. While the effect of the Court’s ruling was more a landmark decision on consumer class actions, its importance was also on the more current state of “shareholder class action”, or essentially can corporations also prevent future securities class actions by adding arbitration and class-action waiver clauses in the Company’s Charter, By-laws and Securities Offering?
This issue has been debated in the past, and most recently when the Committee on Capital Markets Regulation recommended that shareholders have the Right “TO ADOPT ALTERNATIVES TO TRADITIONAL LITIGATION BY INSTITUTING ALTERNATIVES SUCH AS ARBITRATION (WITH OR WITHOUT CLASS ACTIONS).”
Conception’s pro-arbitration holding makes it clear that arbitration and class-action waiver clauses can be enforced, even in adhesion contracts that are not negotiated between the parties.
The basis for the Company’s Arbitration clause is based on Concepcion, and based on the grounds that Corporation’s, through a public offering of securities, have a “Contract with their Shareholders”
it is the Opinion of the Company that the permissibility of arbitration clauses in shareholder-corporation dispute resolution is enforceable. The Federal Arbitration Act and the Supreme Court cases upholding its effect suggest an expansive use of arbitration clauses is possible.
WHEN A CORPORATION MAKES A PUBLIC OFFERING OF SECURITIES, THEY ENGAGED IN ‘INTERSTATE COMMERCE’, THUS MAKING IT POSSIBLE FOR THE COMPANY TO USE THE FEDERAL ARBITRATION ACT.
pg. 38
NOTE: Mandatory Shareholder Arbitration Clauses in Initial Public Offerings of Securities, like this Offering, have not been challenged in the State or Federal Courts, and the enforceability of Mandatory Shareholder Arbitration Clauses (like those contained in this Offering) have not been validated or invalidated by any court, and any future rulings by any State or Federal Court may affect the Mandatory Shareholder Arbitration Agreement associated with this Offering.
Pros & Cons of Mandatory Shareholder Arbitration:
1.
COSTS
PRO: Unlike court litigation, it is not necessary to hire a lawyer to pursue a claim against the Company in arbitration. Also, arbitration does not ordinarily involve time-consuming and expensive “discovery”, a period during which attorneys for each party subpoena each other’s documents and interrogate each other’s witnesses.
CON: Even though it is not mandatory, most parties elect to be represented by an attorney. Consequently, the cost savings of not using an attorney often is not realized by either party. And unlike court filing fees, which are relatively nominal, arbitration ordinarily entails substantial filing and arbitrator’s fees. For example, the American Arbitration Association (AAA) charges an Administrative Fee based on the amount of the claim or counterclaim that ranges from $975 for claims less than $10,000, to $8,700 for claims between $500,000 and $1 Million. Additionally, the parties must compensate the arbitrator or arbitrators for their time. A single arbitrator’s fees can exceed $1,500 per day.
2.
TIME
PRO: The arbitrator sets the date, time and place for the hearing after consulting with the parties. It is common for an arbitration to take three to six months from the initial demand to the issuance of an award. Under the AAA rules, special fast-track procedures apply if neither party’s claim or counterclaim exceeds $75,000. In this case, the arbitrator is required to set a date for the hearing within 30 days of confirmation of the arbitrator’s appointment.
CON: A lawsuit in the State of California ordinarily takes nine to 12 months, but can take years due to a variety of factors (court schedules, attorney schedules, case investigation times, discovery times, preliminary conference times, deposition times, etc.) to get from the initial filing to the trial. However, unlike in an arbitration, a lawsuit opens up the opportunity to have the court make legal rulings in advance of the trial that narrow the issuers or dismiss all or part of the claims.
3.
THE DECISION-MAKER
PRO: In an arbitration, the parties can choose an arbitrator who has experience with the industry. Additionally, unlike a judge in a court proceeding whose docket is often dominated by criminal, divorce and personal injury cases, an arbitrator ordinarily has the time to evaluate and decide the dispute.
Con: Unlike an arbitration, a judge or jury ordinarily does not have a background as an owner of a business, an active investor, both, or even neither. Consequently, arbitrators may have a bias that favors one side or the other in an arbitration. For these reasons, one party may object to an arbitrator, and vice versa.
4.
EVIDENCE
PRO: Because the rules of evidence do not apply in an arbitration proceeding, it is less time-consuming and less expensive to present a case in an arbitration proceeding than in a court trial.
CON: A party in an arbitration proceeding can be confronted with correspondence and affidavits from third-party witnesses who are not available for cross-examination. Likewise, a party in an arbitration proceeding can be confronted with testimony from witnesses who have no first-hand knowledge of the subject of the testimony. In a court proceeding, damages must be proven with reasonable certainty; in an arbitration proceeding, proof of damages can be based on speculation and conjecture.
pg. 39
5.
DISCOVERY
PRO: In an arbitration proceeding, the parties only have limited rights to discover damaging information from the opposing party. Among other things, this means that a party probably will not incur the significant costs of subpoenaing and reviewing the opposing party’s documents and taking depositions of the opposing witnesses. Under the AAA’s fast-track rules for claims under $75,000, there is no discovery (absent exceptional circumstances) except for an exchange of exhibits and lists of witnesses five days before the hearing. In other cases, the AAA rules state the arbitrator has the discretion to direct the parties to exchange documents and other information and identify witnesses, but there is no other discovery (absent exceptional circumstances) except for an exchange of exhibits seven days before the hearing.
CON: Court rules allow each party to use a variety of methods to discover information known only by the opposing party, or a third party, including depositions, interrogatories (written questions) the opposing party must answer under oath and subpoenas for the production of documents. These procedures greatly increase the chances that each party will discover the weakness and strengths of their respective cases before trial.
6.
PRIVACY
PRO: Arbitration proceedings are not open to the public and the parties can agree to keep the proceeding confidential.
CON: In a court proceeding, confidential or embarrassing matters cannot be concealed from the public.
7.
JOINING THIRD PARTIES
PRO: Third parties who ultimately may be responsible may not be brought into the arbitration without their consent. Thus, most arbitration proceedings involve only the two parties to the contract.
CON: Court rules allow a party who has been sued for something for which a third party is ultimately responsible to bring the third party into the lawsuit by filing a cross-claim or third-party claim. In this manner, all parties involved in the dispute are before the court at the same time in the same lawsuit, and the party who is ultimately responsible bears the ultimate liability.
8.
APPEAL RIGHTS
PRO: Ordinarily an appeal from an arbitration award is permitted only on one of five narrow grounds:
·
The award was procured by corruption, fraud or other undue means;
·
There was evident partiality, corruption or misconduct by the arbitrator;
·
The arbitrator exceeded his or her powers;
·
The arbitrator refused to postpone the hearing or hear evidence, or improperly conducted the hearing; or
·
There was no arbitration agreement.
Consequently, an award in an arbitration proceeding is rarely overturned, even if the evidence does not support the result.
CON: The losing party in a court case has a right to appeal to a higher court. The basis for the appeal can include alleged errors made by the trial judge as well as alleged mistakes made by the jury, including that the result is not supported by the evidence.
pg. 40
9.
ENFORCEMENT OF THE AWARD
PRO: In an arbitration, the prevailing party can file an application with the local court to confirm the arbitration award and enter judgment in conformity with the award. Once a court enters judgment, the award can be enforced just as any other court judgment, including garnishment or bank accounts and execution and seizures of assets.
CON: Unlike a court judgment, which usually allows the party to enforce the judgment within 30 days, an arbitration award cannot be enforced until a lawsuit is filed and a court formally confirms the arbitration award, and enters a court judgment in conformity with the award. This process usually takes at least 90 days.
10.
LEGAL ERRORS
PRO: An arbitrator generally is not bound by legal principals, nor does he or she have to explain or justify the decision. Additionally, the decision is not reviewed for legal errors. An arbitrator is generally entitled to make a decision based on what he or she deems to be just and equitable within the scope of the contract between the parties.
CON: The court is required to enforce the terms of the contract between the parties in accordance with the contract’s plain terms.
pg. 41
FINANCIAL STATEMENTS SECTION:
TITLE | PAGE |
Company Balance Sheet - Unaudited | 54 |
Company Statement of Revenue and Expense - Unaudited | 55 |
Statement of Shareholders Equity - Unaudited | 56 |
Statement of Cash Flows - Unaudited | 57 |
Notes to Financial Statements | 58 |
Signatures | 59 |
Tool Floor, Inc.
(A Development Stage Company)
UN-AUDITED BALANCE SHEET
January 17th, 2017
ASSETS |
|
|
Current Assets |
|
|
· Cash |
| $65,000 |
· Accounts Receivable (Capitalization Commitment) |
| $0.00 |
· Inventory |
| $0.00 |
· Prepaid Expenses |
| $0.00 |
· Short-term Investments |
| $0.00 |
| Total Current Assets | $65,000 |
Fixed (Long-Term)Assets |
|
|
· Long-Term Investments |
| $0.00 |
· Property & Equipment |
| $0.00 |
(Less Accumulated Depreciation) |
| $0.00 |
· Intangible Assets |
|
|
| Total Fixed Assets | $0.00 |
Other Assets |
|
|
· Deferred Income Tax |
| $0.00 |
· Other |
| $0.00 |
| Total Fixed Assets | $0.00 |
TOTAL ASSETS |
| $65,000 |
|
|
|
LIABILITIES & OWNER’S EQUITY |
|
|
Current Liabilities |
| $0.00 |
· Accounts Payable |
| $0.00 |
· Short-term Loans |
| $0.00 |
· Income Taxes Payable |
| $0.00 |
· Accrued Salaries & Wages |
| $0.00 |
· Unearned Revenue |
| $0.00 |
· Current Portion of Long-term Debt |
| $0.00 |
| Total Current Liabilities | $0.00 |
Long-Term Liabilities |
|
|
· Long-Term Debt |
| $0.00 |
· Deferred Taxes |
| $0.00 |
· Other |
| $0.00 |
| Total Long-term Liabilities | $0.00 |
Owner’s Equity |
|
|
· Owner’s Investment |
| $0.00 |
· Accounts Receivable |
| $0.00 |
| Total Owner’s Equity | $0.00 |
TOTAL LIABILITIES & OWNER’S EQUITY |
| $65,000 |
SEE NOTES TO FINANCIAL STATEMENTS
pg. 42
Tool Floor, Inc.
(A Development Stage Company)
UN-AUDITED STATEMENTS OF REVENUE AND EXPENSES
December 9th, 2016 (inception) to January 1st, 2017
REVENUE | January 1st, 2017 |
· Total Revenues | $0.00 |
· Founder Capital Contribution | $125,000 |
TOTAL REVENUES / CAPITAL CONTRIBUTION (Start-up Co.) | $125,000 |
|
|
EXPENSES |
|
· Professional Fees | ($28,250) |
· General Business / Admin Fees | ($31,750) |
· Taxes, other | $0.00 |
· Organization Costs | $0.00 |
TOTAL EXPENSES | $0.00 |
|
|
NET LOSS | ($60,000) |
|
|
SEE NOTES TO FINANCIAL STATEMENTS
pg. 43
Tool Floor, Inc.
(A Development Stage Company)
UN-AUDITED STATEMENT OF SHAREHOLDERS’ EQUITY
For the period for
December 9th, 2016 (inception) to January 1st, 2017
| Founding Shareholder | Total |
Founding Contribution | $125,000 | $125,000 |
All Costs | ($60,000) | ($60,000) |
Net Loss | ($60,000) | ($60,000) |
|
|
|
BALANCE, January 1st, 2017 | $65,000 | $65,000 |
SEE NOTES TO FINANCIAL STATEMENTS
pg. 44
Tool Floor, Inc.
(A Development Stage Company)
UN-AUDITED STATEMENT OF CASH FLOWS
For the period for
December 9th, 2016 (inception) to January 1st, 2017
CASH FLOWS FROM OPERATING ACTIVITIES | December 9th, 2016 (Inception) to January 1st, 2017 |
· Net Loss | ($0.00) |
· Other | $0.00 |
|
|
CASH FLOWS FROM INVESTING ACTIVITIES | December 9th, 2016 (Inception) to January 1st, 2017 |
· All Investing Activities | $0.00 |
|
|
CASH FLOWS FROM FINANCING ACTIVITIES | December 9th, 2016 (Inception) to January 1st, 2017 |
· All Financing Activities | $0.00 |
|
|
NET INCREASE IN CASH | $0.00 |
|
|
Cash, Beginning of year | $1,000 |
Cash, End of Year | $1,000 |
|
|
|
|
|
|
SEE NOTES TO FINANCIAL STATEMENTS
pg. 45
Tool Floor, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
The Company was formed as a Delaware Stock Corporation in December of 2016.
NOTE 2. BASIS OF ACCOUNTING:
The Financial Statements of the Company have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP).
pg. 46
SIGNATURES
Pursuant to the Requirements of the Securities Act of 1933, the Registrant has duly caused this Offering Statement to be signed on its behalf by the undersigned, thereunto duly authorized, on January 17th, 2017.
Tool Floor, Inc.
By: Mr. Rodney Mikesell
By: /s/ _Rodney Mikesell________
Name: Mr. Rodney Mikesell
Title: Founder & Chairman of the Board of Directors
pg. 47
Tool Floor, Inc.
1727 Wildberry F
Glenview, Illinois 60025
Company Direct: (847) 612-2984
http://Helio-Eex.com
SUBSCRIPTION AGREEMENT
7% Convertible Preferred Stock Units 1 to 200,000
Subject to the terms and conditions of the shares of 7% Preferred Convertible Preferred Stock Units (the "Convertible Preferred Stock”) described in the Tool Floor, Inc. Offering Circular dated January 17th, 2017 (the "Offering"), I hereby subscribe to purchase the number of shares of 7% Convertible Preferred Stock set forth below for a purchase price of $100.00 per share. Enclosed with this subscription agreement is my check (Online “E-Check” or Traditional Papery Check) or money order made payable to "Tool Floor, Inc." evidencing $100.00 for each share of Convertible Preferred Stock Subscribed, subject to a minimum of ONE 7% Preferred Convertible Preferred Stock Unit ($100.00).
I understand that my subscription is conditioned upon acceptance by Tool Floor, Inc. Company Managers and subject to additional conditions described in the Offering Circular. I further understand that Tool Floor, Inc. Company Managers, in their sole discretion, may reject my subscription in whole or in part and may, without notice, allot to me a fewer number of shares of 7% Convertible Preferred Stock that I have subscribed for. In the event the Offering is terminated, all subscription proceeds will be returned with such interest as may have been earned thereon.
I understand that when this subscription agreement is executed and delivered, it is irrevocable and binding to me. I further understand and agree that my right to purchase shares of 7% Convertible Preferred Stock offered by the Company may be assigned or transferred to any third party without the express written consent of the Company.
I further certify, under penalties of perjury, that: (1) the taxpayer identification number shown on the signature page of this Offering Circular is my correct identification number; (2) I am not subject to backup withholding under the Internal Revenue Code because (a) I am exempt from backup withholding; (b) I have not been notified by the Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding; and (3) I am a U.S. citizen or other U.S. person (as defined in the instructions to Form W-9).
pg. 48
SUBSCRIPTION AGREEMENT (the “Agreement”) with the undersigned Purchaser for ______________ 7% Convertible Preferred Stock Units of Tool Floor, Inc., with no par value per share, at a purchase price of $100.00 (ONE HUNDRED DOLLARS AND ZERO CENTS) per share (aggregate purchase price: $____________________).
Made __________________________________, by and between Tool Floor, Inc., a Delaware Stock Corporation (the “Company”), and the Purchaser whose signature appears below on the signature line of this Agreement (the “Purchaser”).
W I T N E S E T H:
WHEREAS, the Company is offering for sale up to TWO HUNDRED THOUSAND 7% Convertible Preferred Stock Units (the “Shares”) (such offering being referred to as the “Offering”).
NOW, THEREFORE, the Company and the Purchaser, in consideration of the mutual covenants contained herein and intending to be legally bound, do hereby agree as follows:
1
Purchase and Sale. Subject to the terms and conditions hereof, the Company shall sell, and the Purchaser shall purchase, the number of Shares indicated above at the price so indicated.
2.
Method of Subscription. The Purchaser is requested to complete and execute this agreement online or to print, execute and deliver two copies of this Agreement to the Company, at Tool Floor, Inc.; 1727 Wildberry F, Glenview, Illinois 60025, along with a check payable to the order of Tool Floor, Inc. in the amount of the aggregate purchase price of the Shares subscribed (the “Funds”). The Company reserves the right in its sole discretion, to accept or reject, in whole or in part, any and all subscriptions for Shares.
3
Subscription and Purchase. The Offering will begin on the effective date of the Offering Statement and continue until the Company has sold all of the Shares offered hereby or on such earlier date as the Company may close or terminate the Offering.
Any subscription for Shares received will be accepted or rejected by the Company within 30 days of receipt thereof or the termination date of this Offering, if earlier. If any such subscription is accepted, in whole or part, the Company will promptly deliver or mail to the Purchaser (i) a fully executed counterpart of this Agreement, (ii) a certificate or certificates for the Shares being purchased, registered in the name of the Purchaser, and (iii) if the subscription has been accepted only in part, a refund of the Funds submitted for Shares not purchased. Simultaneously with the delivery or mailing of the foregoing, the Funds deposited in payment for the Shares purchased will be released to the Company. If any such subscription is rejected by the Company, the Company will promptly return, without interest, the Funds submitted with such subscription to the subscriber.
4
Representations, Warranties and Covenants of the Purchaser. The Purchaser represents, warrants and agrees as follows:
pg. 49
(a)
Prior to making the decision to enter into this Agreement, the Purchaser acknowledges that the Purchaser processes sufficient information to understand the merits and risks associated with the investment in the Shares subscribed.
(b)
The Purchaser has such knowledge and experience in financial and business matters that the Purchaser is capable of evaluating the merits and risks of the investment in the Shares subscribed and the Purchaser believes that the Purchaser’s prior investment experience and knowledge of investments in low-priced securities (“penny stocks”) enables the Purchaser to make an informal decision with respect to an investment in the Shares subscribed.
(c)
The Shares subscribed are being acquired for the Purchaser’s own account and for the purposes of investment and not with a view to, or for the sale in connection with, the distribution thereof, nor with any present intention of distributing or selling any such Shares.
(d)
The Purchaser’s overall commitment to investments is not disproportionate to his/her net worth, and his/her investment in the Shares subscribed will not cause such overall commitment to become excessive.
(e)
The Purchaser has adequate means of providing for his/her current needs and personal contingencies, and has no need for current income or liquidity in his/her investment in the Shares subscribed.
(f)
With respects to the tax aspects of the investment, the Purchaser will rely upon the advice of the Purchaser’s own tax advisors.
(g)
The Purchaser can withstand the loss of the Purchaser’s entire investment without suffering serious financial difficulties.
(h)
The Purchaser is aware that this investment involves a high degree of risk and that it is possible that his/her entire investment will be lost.
(i)
The Purchaser is a resident of the State set forth below the signature of the Purchaser on the last age of this Agreement.
Company Convertible Securities: All 7% Convertible Preferred Stock Units must be Converted to Company Common Stock either in the 3rd, 4th or 5th year under the following terms and conditions at the Shareholders’ Option:
§
YEAR 3: (Shareholder Conversion Option)
·
At anytime during the third year of the investment, the Shareholder may choose on the First Business Day of Each Month to convert each Unit of the Company’s 7% Convertible Preferred Stock for Common Stock of the Company at market price minus 5% of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock Closing Price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.
·
The Shareholder can sell the 7% Convertible Preferred Stock Shares back to the Company at any time after two years for the full face value of
pg. 50
the Shares plus any accrued interest, though the Company has no obligation to purchase the Shares.
·
Dividends on this 7% Convertible Preferred Stock will be payable on a cumulative basis, when and if declared by the Board of Directors, or an authorized committee of the Board of Directors, at an annual rate of 7.00% of the state value of $100.00
·
Should the Company not be listed on any Regulated Stock Exchange or OTC Market (“Over-the-Counter inter-dealer quotation system”), the shares shall convert to Common Stock in the Company at the “per share value” of the Company’s Common Stock as determined by an Independent Third Party Valuations Firm that is chosen by the Company’s Board of Directors.
§
YEAR 4: (Optional Conversion Option)
·
At anytime during the fourth year of the investment, the Shareholder may choose on the First Business Day of Each Month to convert each unit of the Company’s 7% Convertible Preferred Stock for Common Stock of the Company at market price minus 10.0% of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock Closing Price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.
·
The Shareholder can sell the 7% Convertible Preferred Stock Shares back to the Company at any time after two years for the full face value of the Shares plus any accrued interest, though the Company has no obligation to purchase the Shares.
·
Dividends on this 7% Convertible Preferred Stock will be payable on a cumulative basis, when and if declared by the Board of Directors, or an authorized committee of the Board of Directors, at an annual rate of 7.00% of the state value of $100.00
·
Should the Company not be listed on any Regulated Stock Exchange or OTC Market (“Over-the-Counter inter-dealer quotation system”), the shares shall convert to Common Stock in the Company at the “per share value” (minus any discounts) of the Company’s Common Stock as determined by an Independent Third Party Valuations Firm that is chosen by the Company’s Board of Directors.
§
YEAR 5: (Optional & Mandatory Conversion Options)
·
Optional: At anytime during the fourth year of the investment, the Shareholder may choose on the First Day of Each Month to convert each unit of the Company’s Convertible 7% Preferred Stock for Common Stock of the Company at market price minus 15% of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock Closing Price over the
pg. 51
previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.
·
The Shareholder can sell the 7% Convertible Preferred Stock Shares back to the Company at any time after two years for the full face value of the Shares plus any accrued interest, though the Company has no obligation to purchase the Shares.
·
Dividends on this 7% Convertible Preferred Stock will be payable on a cumulative basis, when and if declared by the Board of Directors, or an authorized committee of the Board of Directors, at an annual rate of 7.00% of the state value of $100.00
·
Mandatory: On the last business day of the 5th year of the investment, the Shareholder MUST convert each Unit of the Company’s 7% Convertible Preferred Stock for Common Stock of the Company at market price minus 15% of the Company’s Common Stock at time of conversion / closing. The closing price will be the weighted average price of the Common Stock Closing Price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash.
·
Should the Company not be listed on any Regulated Stock Exchange or OTC Market (“Over-the-Counter inter-dealer quotation system”), the shares shall convert to Common Stock in the Company at the “per share value” (minus any discounts) of the Company’s Common Stock as determined by an Independent Third Party Valuations Firm that is chosen by the Company’s Board of Directors.
The Company has the Right to convert the 7% Convertible Preferred Stock Shares to Common Shares of the Company should the Company be acquired or merged with another company (where the Company has less than 50% controlling interest). The Company has the Right to “Call In” all 7% Convertible Preferred Stock Shares at the value of the Common Stock Shares, less the appropriate percentage discount in the Year that the acquisition or merger occurs.
5
Notices. All notices, request, consents and other communications required or permitted hereunder shall be in writing and shall be delivered, or mailed first class, postage prepaid, registered or certified mail, return receipt requested:
(a)
If to any holder of any of the Shares, addressed to such holder at the holder’s last address appearing on the books of the Company, or
(b) If to the Company, addressed to the Tool Floor, Inc.; 1727 Wildberry F, Glenview, Illinois 60025 or such other address as the Company may specify by written notice to the Purchaser, and such notices or other communications shall for all purposes of this Agreement be treated as being effective on delivery, if delivered personally, or, if sent by mail, on the earlier of actual receipt or the third postal business day after the same has been deposited in a regularly maintained receptacle for the deposit of United States’ mail, addressed and postage prepaid as aforesaid.
pg. 52
6.
Severability. If any provision of this Subscription Agreement is determined to be invalid or unenforceable under any applicable law, then such provision shall be deemed inoperative to the extent that it may conflict with such applicable law and shall be deemed modified to conform with such law. Any provision of this Agreement that may be invalid or unenforceable under any applicable law shall not affect the validity or enforceability of any other provision of this Agreement, and to this extent the provisions of this Agreement shall be severable.
7.
Parties in Interest. This Agreement shall be binding upon and inure to the benefits of and be enforceable against the parties hereto and their respective successors or assigns, provided, however, that the Purchaser may not assign this Agreement or any rights or benefits hereunder.
8.
Choice of Law. This Agreement is made under the laws of the State of Delaware, and for all purposes shall be governed by and construed in accordance with the laws of that State, including, without limitation, the validity of this Agreement, the construction of its terms, and the interpretation of the rights and obligations of the parties hereto.
9
Headings. Sections and paragraph heading used in this Agreement have been inserted for convenience of reference only, do not constitute a part of this Agreement and shall not affect the construction of this Agreement.
10.
Execution in Counterparts. This Agreement may be executed an any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument.
11.
Survival of Representations and Warranties. The representations and warranties of the Purchaser in and with respect to this Agreement shall survive the execution and delivery of this Agreement, any investigation at any time made by or on behalf of any Purchaser, and the sale and purchase of the Shares and payment therefore.
12.
Arbitration: Except as expressly provided in this Subscription Agreement, any dispute, claim or controversy between or among any of the Investors or between any Investor or his/her/its Affiliates and the Company arising out of or relating to this Agreement or any subscription by any Investor to purchase Securities, or any termination, alleged breach, enforcement, interpretation or validity of any of those agreements (including the determination of the scope or applicability of this agreement to arbitrate), or otherwise involving the Company, will be submitted to arbitration in the county and state in which the Company maintains its principal office at the time the request for arbitration is made, before a sole arbitrator, in accordance with the laws of the state of Illinois for agreements made in and to be performed in the state of Illinois. Such arbitration will be administered by the Judicial Arbitration and Mediation Services (“JAMS”) and conducted under the provisions of its Comprehensive Arbitration Rules and Procedures. Arbitration must be commenced by service upon the other party of a written demand for arbitration or a written notice of intention to arbitrate, therein electing the arbitration tribunal. Judgment upon any award rendered by the arbitrator shall be final and may be entered in any court having jurisdiction thereof. No party to any such controversy will be entitled to any punitive damages. Notwithstanding the rules of JAMS, no arbitration proceeding will be consolidated with any other arbitration proceeding without all parties’ consent. The arbitrator shall, in the award, allocate all of the costs of the arbitration,
pg. 53
including the fees of the arbitrator and the reasonable attorneys’ fees of the prevailing party, against the party who did not prevail.
NOTICE: By executing this Subscription Agreement, Subscriber is agreeing to have all disputes, claims, or controversies arising out of or relating to this Agreement decided by neutral binding arbitration, and Subscriber is giving up any rights he, she or it may possess to have those matters litigated in a court or jury trial. By executing this Subscription Agreement, Subscriber is giving up his, her or its judicial rights to discovery and appeal except to the extent that they are specifically provided for in this Subscription Agreement. If Subscriber refuses to submit to arbitration after agreeing to this provision, Subscriber may be compelled to arbitrate under federal or state law. Subscriber confirms that his, her or its agreement to this arbitration provision is voluntary.
NOTICE: SUBSCRIBERS TO THIS OFFERING UNDERSTAND THAT THEY HAVE NOT WAIVED ANY RIGHT THAT THEY MAY HAVE UNDER ANY APPLICABLE FEDERAL SECURITIES LAWS.
13.
THE PARTIES HERBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATON BASED HEREIN, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY OTHER DOCUMENTS CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY.
14.
In Connection with any litigation, mediation, arbitration, special proceeding or other proceeding arising out of this Agreement, the prevailing party shall be entitled to recover its litigation-related costs and reasonable attorneys’ fees through and including any appeals and post-judgment proceedings.
15.
In no event shall any party be liable for any incidental, consequential, punitive or special damages by reason of its breach of this Agreement. The liability, if any, of the Company and its Managers, Directors, Officers, Employees, Agents, Representatives, and Employees to the undersigned under this Agreement for claims, costs, damages, and expenses of any nature for which they are or may be legally liable, whether arising in negligence or other tort, contract, or otherwise, shall not exceed, in the aggregate the undersigned’s investment amount.
16. Additional Information. The Purchaser realizes that the Shares are offered hereby pursuant to exemptions from registration provided by Regulation A and the Securities Act of 1933. The Shares are being offered ONLY TO RESIDENTS OF THE STATE OF:
·
NEW YORK
pg. 54
IN WITNESSES WHEREOF, the parties hereto have executed this Subscription Agreement as of the day and year first above written.
Tool Floor, Inc.
By: ______________________________________________
Name: ____________________________________________
Title: _____________________________________
PURCHASER:
_____________________________________________
Signature of Purchaser
_________________________________________________
Name of Purchaser
pg. 55
INVESTOR CONTACT INFORMATION:
Name: _____________________________________________________________
Spouse Name (if applicable): ___________________________________________
Address: ___________________________________________________________
Address Line 2 (if applicable): ___________________________________________
City: _______________________________________________________________
State or Province: ____________________________________________________
Postal Code / Zip Code: ________________________________________________
Country: _____________________________________________________________
Best Phone Number: __________________________________________________
Alternate Phone Number (not required): ____________________________________
Email Address: ________________________________________________________
pg. 56
PART TWO: INVESTOR QUALIFICATION
(__) I made $200,000 or more in the last two years and expect to make at least $200,000 this year.
(__) My household income was $300,000 or more in the last two years and it is expected to be at least $300,000 this year.
(__) I have a net worth either on my own or jointly with my spouse of $1,000,000 or more excluding my home.
(__) None of the above.
Investor Suitability Questionnaire: Choose One Answer for each of the next FIFTEEN Questions:
1.
Income Tax Bracket:
(__) 15% or less
(__) 15-27%
(__) 28% or more
2.
When do you expect to need the funds from your Investments:
(__) Less than one year
(__) 1-3 years
(__) 3-5 years
(__) 6-10 years
(__) 11+ years
pg. 57
3.
Net Worth (excluding your home):
(__) $1 to $5,000
(__) $5,001 to $10,000
(__) $10,001 to $50,000
(__) $50,000 to $100,000
(__) $100,001 to $500,000
(__) $500,001 to $999,999
(__) $1,000,000 to $5,000,000
(__) Greater than $5M
4.
Annual Income:
(__) Less than $15,000
(__) $15,001 to $25,000
(__) $25,001 to $50,000
(__) $50,001 to $100,000
(__) $100,001 to $150,000
(__) $150,000 to $199,000
(__) $200,000 to $300,000
(__) More than $300,000
pg. 58
5.
Household Income:
(__) Less than $15K
(__) $15,001 to $25,000
(__) $25,001 to $50,000
(__) $50,001 to $100,000
(__) $100,001 to $150,000
(__) $150,001 to $199,999
(__) $200,000 to $300,000
(__) More than $300,000
6.
Past Private Equity or Private Debt Investments:
(__) None
(__) One Investment
(__) 2-5 Investments
(__) Six or Move Investments
pg. 59
7.
Employment Status:
(__) Student
(__) Self-Employed
(__) Employed in Same Field Less than Five Years
(__) Employed in Same Field Five Years or More
(__) Retired
(__) Unemployed
8.
Education:
(__) None
(__) GED
(__) High School
(__) College 2 Year
(__) College 4 Year
(__) Masters/PHD
pg. 60
9.
Annual Expenses:
(__) $50,000 or Less
(__) $50,001 to $100,000
(__) $100,001 to $250,000
(__) $250,001 to $500,000
(__) Over $500,000
10.
Liquid Net Worth:
(__) $1 to $5,000
(__) $5,001 to $10,000
(__) $10,001 to $50,000
(__) $50,001 to $100,000
(__) $100,001 to $500,000
(__) $500,001 to $999,999
(__) $1,000,000 to $5,000,000
(__) Greater than $5,000,000
pg. 61
11.
Marital Status:
(__) Single
(__) Married
(__) Domestic Partner
(__) Divorced
(__) Widowed
12.
Number of Dependents:
(__) One
(__) Two to Three
(__) Four to Five
(__) Greater than Five
13.
Are you or any of your immediate family employed by or associated with the Securities Industry?
(__) YES
(__) NO
14.
Are you an officer, director or 10% (or more) shareholder in a publicly-owned company?
(__) YES
(__) NO
pg. 62
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