HMBSINCREGA
Regulation A Part II and III
PART II INFORMATION REQUIRED IN OFFERING CIRCULAR
An Offering Circular pursuant to the requirements of Regulation A relating to these Securities has been filed with the United States Securities and Exchange Commission (the Commission ). Information contained in this Preliminary Offering Circular is subject to completion or amendment. These Securities may not be sold nor may offers to buy be accepted before the Offering Statement filed with the Commission is Qualified. This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer solicitation or sale would be unlawful before registration or qualification under the laws of any such state. We shall elect to satisfy our obligation to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Final Offering Circular or the Offering Statement in which such Final Offering Circular was filed may be obtained.
As filed with the United States Securities Exchange Commission on
OFFERING CIRCULAR FOR
HOWARDS MBS INC.
A Florida Stock Corporation
HOWARDS MBS INC. (the Company Issuer we us or our )is a Florida corporation. The Company will be managed by our executive officers (each an Officer and collectively the Officers ). As further detailed in this Offering Circular (the Offering Circular ) the Company has been organized as a Financial Technologies company.
The Offering Period will commence upon this Offering Circular being Qualified by the SEC. The Company is offering by means of this Offering Circular shares of its Convertible Preferred Stock on a best efforts and ongoing basis to investors who meet the Investor Suitability standards as set forth herein. We anticipate the shares of the Companys Convertible Preferred Stock will be sold by the Company and our Officers the Company and our Officers will also offer and sell shares of Convertible Preferred Stock through the services of an independent broker dealer who is a member firm of the Financial Industry Regulatory Authority (FINRA ).
The minimum number of Convertible Preferred Stock Shares that will be sold to any investor is TEN (10)Convertible Preferred Stock Shares for a total investment of ONE THOUSAND DOLLARS ($1000.00 USD). Investors cannot purchase fractional Convertible Preferred Stock Shares. Investors whose purchase of Convertible Preferred Stock Shares is accepted shall be referred to herein individually as a Shareholder or collectively as the Shareholders .
The shares of the Companys Common Stock and Convertible Preferred Stock WILL NOT be initially listed for trading on a stock exchange or other trading market. Investing in our Convertible Preferred Stock Shares is speculative and involves substantial risk. You should purchase these securities only if you can afford a complete loss of your investment. See Risk Factors to read more about the significant risks you should consider before buying our Convertible Preferred Stock Shares.
This Offering is being conducted on a best efforts basis which means we (and and independent broker dealer who is a member of FINRA)will use commercially reasonable best efforts in an attempt to sell the shares of Convertible Preferred Stock. Our Officers will not receive any commission or any other remuneration for these sales. In offering the Convertible Preferred Stock Shares on behalf of the Company our Officers will rely on the safe harbor from broker dealer registration set forth in Rule 3a4.1 under the Securities Exchange Act of 1934 as amended.
We are an emerging growth company under applicable United States Securities and Exchange Commission rules and will be subject to reduced public company reporting requirements. This Offering Circular follows the disclosure format of Part I of Form S.1 pursuant to the general instructions of Part II(a)(1)(ii)of Form 1 A.
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (SEC )DOES NOT PASS UPON THE MERITS OR GIVE ITS APPROVAL OF ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED ARE EXEMPT FROM REGISTRATION.
GENERALLY NO SALE MAY BE MADE TO INVESTORS IF THE AGGREGATE PURCHASE PRICE BY INVESTORS EXCEEDS SEVENTYFIVE MILLION AND 00100 DOLLARS ($75 000 000.00 USD)ANNUALLY PURSUANT TO THE TERMS OF RULE 251 OF REGULATION A TIER II SET FORTH UNDER THE SECURITIES ACT OF 1933 (THE ACT ).
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THAT INFORMATION AND THOSE REPRESENTATIONS SPECIFICALLY CONTAINED IN THIS OFFERING CIRCULAR; ANY OTHER INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED UPON. ANY PROSPECTIVE PURCHASER OF THE CONVERTIBLE PREFERRED STOCK SHARES WHO RECEIVES ANY OTHER INFORMATION OR REPRESENTATIONS SHOULD CONTACT THE COMPANY IMMEDIATELY TO DETERMINE THE ACCURACY OF SUCH INFORMATION AND REPRESENTATIONS. NEITHER THE DELIVERY OF THIS OFFERING CIRCULAR NOR ANY SALES HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR IN THE INFORMATION SET FORTH HEREIN SINCE THE DATE OF THIS OFFERING CIRCULAR SET FORTH ABOVE.
PROSPECTIVE PURCHASERS SHOULD NOT REGARD THE CONTENTS OF THIS OFFERING CIRCULAR OR ANY OTHER COMMUNICATION FROM THE COMPANY AS A SUBSTITUTE FOR CAREFUL AND INDEPENDENT TAX AND FINANCIAL PLANNING. EACH POTENTIAL INVESTOR IS ENCOURAGED TO CONSULT WITH HIS HER OR ITS OWN INDEPENDENT LEGAL COUNSEL ACCOUNTANT AND OTHER PROFESSIONALS WITH RESPECT TO THE LEGAL AND TAX ASPECTS OF THIS INVESTMENT AND WITH SPECIFIC REFERENCE TO HIS HER OR ITS OWN TAX SITUATION PRIOR TO SUBSCRIBING FOR CONVERTIBLE PREFERRED STOCK SHARES. THE PURCHASE OF CONVERTIBLE PREFERRED STOCK SHARES BY AN INDIVIDUAL RETIREMENT ACCOUNT KEOGH PLAN OR OTHER QUALIFIED RETIREMENT PLAN INVOLVES SPECIAL TAX RISKS AND OTHER CONSIDERATIONS THAT SHOULD BE CAREFULLY CONSIDERED.
THE INFORMATION CONTAINED IN THIS OFFERING CIRCULAR HAS BEEN SUPPLIED BY THE COMPANY. THIS OFFERING CIRCULAR CONTAINS SUMMARIES OF DOCUMENTS NOT CONTAINED IN THIS OFFERING CIRCULAR BUT ALL SUCH SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCES TO THE ACTUAL DOCUMENTS. COPIES OF DOCUMENTS REFERRED TO IN THIS OFFERING CIRCULAR BUT NOT INCLUDED AS AN EXHIBIT WILL BE MADE AVAILABLE TO QUALIFIED PROSPECTIVE INVESTORS UPON REQUEST. RULE 251(D)(3)(I)(F)PERMITS REGULATION A OFFERINGS TO CONDUCT ONGOING CONTINUOUS OFFERINGS OF SECURITIES FOR MORE THAN THIRTY (30)DAYS AFTER THE QUALIFICATION DATE IF: (1)THE OFFERING WILL COMMENCE WITHIN TWO (2)DAYS AFTER THE QUALIFICATION DATE; (2)THE OFFERING WILL BE MADE ON AN CONTINUOUS AND ONGOING BASIS FOR A PERIOD THAT MAY BE IN EXCESS OF THIRTY (30)DAYS OF THE INITIAL QUALIFICATION DATE; (3)THE OFFERING WILL BE IN AN AMOUNT THAT AT THE TIME THE OFFERING CIRCULAR IS QUALIFIED IS REASONABLY EXPECTED TO BE OFFERED AND SOLD WITHIN TWO (2)YEARS FROM THE INITIAL QUALIFICATION DATE AND FILED BY THE COMPANY PURSUANT TO RULE 251(D)(3)(I)(F)WITH THE SECURITIES AND EXCHANGE COMMISSION COVERING THE REMAINING SECURITIES OFFERED UNDER THE PREVIOUS OFFERING; THEN THE SECURITIES MAY CONTINUE TO BE OFFERED AND SOLD UNTIL THE EARLIER OF THE QUALIFICATION DATE OF THE NEW OFFERING CIRCULAR OR ONE HUNDRED EIGHTY
(180)CALENDAR DAYS AFTER THE THIRD ANNIVERSARY OF THE INITIAL QUALIFICATION DATE OF THE PRIOR OFFERING CIRCULAR.
THE COMPANY MAY CHOOSE IN THE FUTURE TO OFFER THE CONVERTIBLE PREFERRED STOCK SHARES DESCRIBED HEREIN ON A CONTINUOUS AND ONGOING BASIS PURSUANT TO RULE 251(D)(3)(I)(F). PURSUANT TO RULE 251(D)(3)(I)(F) THE COMPANY INTENDS TO COMMENCE THE OFFERING IMMEDIATELY AFTER THE INITIAL QUALIFICATION DATE.
The use of projections or forecasts in this Offering is prohibited. No one is permitted to make any oral or written predictions about the cash benefits or tax consequences you will receive from your investment in our Convertible Preferred Stock Shares.
IMPORTANT INFORMATION ABOUT THIS OFFERING CIRCULAR
Please carefully read the information in this Offering Circular and any supplements to this Offering Circular which we refer to collectively as the Offering Circular. You should rely only on the information contained in this Offering Circular. We have not authorized anyone to provide you with different information. This Offering Circular may only be used where it is legal to sell these securities. You should not assume that the information contained in this Offering Circular is accurate as of any date later than the date hereof or such other dates as are stated herein or as of the respective dates of any documents or other information incorporated herein by reference.
This Offering Circular is part of an offering statement that we filed with the SEC using a continuous offering process. Periodically as we make material investments or have other material developments we will provide an Offering Circular supplement that may add update or change information contained in this Offering Circular. Any statement that we make in this Offering Circular will be modified or superseded by any inconsistent statement made by us in a subsequent Offering Circular supplement. The offering statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this Offering Circular. You should read this Offering Circular and the related exhibits filed with the SEC and any Offering Circular supplement together with additional information contained in the Companys annual reports semi-annual reports and other reports and information statements that the Company will file periodically with the SEC. The offering statement and all supplements and reports that we have filed or will file in the future can be read at the SEC website www.sec.gov or on our website www.HMBSINC.com. The contents of our website (other than this Offering Circular and the appendices and exhibits thereto)are not incorporated by reference in or otherwise a part of this Offering Circular. The Companys Management and those selling the Companys Convertible Preferred Stock Shares on the Companys behalf in this Offering will be permitted to make a determination that the purchasers of the Companys Convertible Preferred Stock Shares in this Offering are to Qualified Purchasers in reliance on the information and representations provided by the purchaser regarding the purchasers financial situation. Before making any representation that your investment does not exceed applicable thresholds we encourage you to review Rule 251(d)(2)(i)(C)of Regulation A. For general information on investing we encourage you to refer to www.investor.gov.
OFFERING SUMMARY CONVERSION DETAILS:
The Offering Period will commence upon this Offering Circular being Qualified by the SEC. The proposed Offering of the Companys Convertible Preferred Stock Shares is scheduled to begin immediately upon qualification of this Offering Circular by the United States Securities and Exchange Commission. A Maximum of seven hundred fifty thousand (750 000)Convertible Preferred Stock Shares are being offered to Qualified Purchasers.
PREFERRED DIVIDEND DISTRIBUTION POLICY:
Dividends on the Convertible Preferred Stock Shares will be payable on a cumulative basis and in cash when declared by the Companys Board of Directors or an authorized committee of the Companys Board of Directors at an annual rate of 7.00% on the stated value of One Hundred Dollars ($100.00 USD).
DETAILS OF CONVERSION OF THE COMPANYS CONVERTIBLE PREFERRED STOCK SHARES:
Year 2
(Shareholder Conversion Option):
At any time during the second (2rd)year of the investment the Shareholder may choose on the First Business Day of Each Month to convert each Share of the Companys 7% Convertible Preferred Stock for the Companys Common Stock at the market price of the Companys Common Stock at the time of conversion closing. The closing price will be the weighted average price of the Companys Common Stock Price over the previous sixty (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 (2)years for the full face value of the Convertible Preferred Stock Share(s)plus any unpaid accrued dividends though the Company has no obligation to purchase the Convertible Preferred Stock Shares.
Dividends on the Companys 7% Convertible Preferred Stock Shares will be payable on a cumulative basis when and if declared by the Companys Board of Directors or an authorized committee of the Companys Board of Directors at an annual rate of 7.00% of the stated face value of One Hundred Dollars ($100.00 USD).
Should the Company not be listed on any Regulated Stock Exchange or OTC Market (Over the Counter inter dealer quotation system ) the Convertible Preferred Stock Shares shall convert to the Companys Common Stock Shares at the per share value of the Companys Common Stock as determined by an Independent third-party valuation firm that is chosen by the Companys Board of Directors and approved by the majority vote of our Shareholders at the annual meeting.
Year 3
(Shareholder Conversion Option):
At any time during the third (3rd)year of the investment the Shareholder may choose on the First Business Day of Each Month to convert each Share of the Companys 7% Convertible Preferred Stock for the Companys Common Stock at the market price minus five percent (5%)of the Companys Common Stock at the time of conversion closing. The closing price will be the weighted average price of the Companys Common Stock Price over the previous sixty (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 (2)years for the full face value of the Convertible Preferred Stock Share(s)plus any unpaid accrued dividends though the Company has no obligation to purchase the Convertible Preferred Stock Shares.
Dividends on the Companys 7% Convertible Preferred Stock Shares will be payable on a cumulative basis when and if declared by the Companys Board of Directors or an authorized committee of the Companys Board of Directors at an annual rate of 7.00% of the stated face value of One Hundred Dollars ($100.00 USD).
Should the Company not be listed on any Regulated Stock Exchange or OTC Market (Over the Counter inter dealer quotation system ) the Convertible Preferred Stock Shares shall convert to the Companys Common Stock Shares at the per share value
of the Companys Common Stock as determined by an Independent third party valuation firm that is chosen by the Companys Board of Directors and approved by the majority vote of our Shareholders at the annual meeting.
Year 4
(Shareholder Conversion Option):
At any time during the fourth (4th)year of the investment the Shareholder may choose on the First Business Day of Each Month to convert each Share of the Companys 7% Convertible Preferred Stock for the Companys Common Stock at the market price minus ten percent (10%)of the Companys Common Stock at the time of conversion closing. The closing price will be the weighted average price of the Companys Common Stock Price over the previous sixty (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 (2)years for the full face value of the Convertible Preferred Stock Share(s)plus any unpaid accrued dividends though the Company has no obligation to purchase the Convertible Preferred Stock Shares.
Dividends on the Companys 7% Convertible Preferred Stock Shares will be payable on a cumulative basis when and if declared by the Companys Board of Directors or an authorized committee of the Companys Board of Directors at an annual rate of 7.00% of the stated face value of One Hundred Dollars ($100.00 USD).
Should the Company not be listed on any Regulated Stock Exchange or OTC Market (Over the Counter inter dealer quotation system ) the Convertible Preferred Stock Shares shall convert to the Companys Common Stock Shares at the per share value of the Companys Common Stock as determined by an Independent third party valuation firm that is chosen by the Companys Board of Directors and approved by the majority vote of our Shareholders at the annual meeting.
Year 5
(Shareholder Conversion Option Mandatory Conversion Option):
Optional Shareholder Conversion Options: At any time during the fifth (5th)year of the investment the Shareholder may choose on the First Business Day of Each Month to convert each Share of the Companys 7% Convertible Preferred Stock for the Companys Common Stock at the market price minus fifteen percent (15%)of the Companys Common Stock at the time of conversion closing. The closing price will be the weighted average price of the Companys Common Stock Price over the previous sixty (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 (2)years for the full face value of the Convertible Preferred Stock Share(s)plus any unpaid accrued dividends though the Company has no obligation to purchase the Convertible Preferred Stock Shares. Dividends on the Companys 7% Convertible Preferred Stock Shares will be payable on a cumulative basis when and if declared by the Companys Board of Directors or an authorized committee of the Companys Board of Directors at an annual rate of 7.00% of the stated face value of One Hundred Dollars ($100.00 USD). Should the Company not be listed on any Regulated Stock Exchange or OTC Market (Over the Counter inter-dealer quotation system ) the Convertible Preferred Stock Shares shall convert to the Companys Common Stock Shares at the per share value of the Companys Common Stock as determined by an Independent third party valuation firm that is chosen by the Companys Board of Directors and approved by the majority vote of our Shareholders at the annual meeting.
Mandatory Shareholder Conversion: On the last business day of the fifth (5th)year of the investment the Shareholder MUST convert each Convertible Preferred Stock Share of the Company for Common Stock of the Company at market price minus fifteen percent (15%)at the time of conversion closing. The closing price will be the weighted average price of the Companys Common Stock Price over the previous 60 days. Fractional interests will be paid to the shareholder by the Company in cash. The Company has the right to convert the 7% Convertible Preferred Stock Shares to Common 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 at the value of the Companys Common Stock Shares less the appropriate percentage discount in the Year that the acquisitions or merger occurs.
TABLE OF CONTENTS:
ITEM 2: STATE LAW EXEMPTION AND PURCHASE RESTRICTIONS:
The Companys Convertible Preferred Stock Shares will be offered and sold to Qualified Purchasers (as defined in Regulation A). As a Tier 2 Offering pursuant to Regulation A this Offering will be exempt from State Law Blue Sky review subject to meeting certain state filing requirements and complying with certain anti fraud provisions to the extent that the Companys Convertible Preferred Stock Shares offered hereby are offered and sold only to Qualified Purchasers or at a time when the Companys Convertible Preferred Stock Shares are listed on a National Securities Exchange.
Qualified Purchasers include:
Accredited Investors as defined under Rule 501(a)of Regulation D; and
All other investors so long as their investment in the Companys Convertible Preferred Stock Shares does not represent more than ten percent (10%)of the greater of their annual income or net worth (for natural persons) or 10% of the greater of annual revenue or net assets at fiscal year-end (for non natural persons).
However the Companys Convertible Preferred Stock Shares will be offered and sold only to those investors that are within the latter category (i.e. investors whose investment in the Companys Convertible Preferred Stock Shares does not represent more than ten percent (10%)of the applicable amount) regardless of an investors status as an accredited investor . Accordingly the Company and its management reserves the right to reject any investors subscription in whole or in part for any reason including if the Company Management in their sole and absolute and absolute discretion that such investor is not a Qualified Purchaser for purposes of Regulation A.
To determine whether a potential investor is an Accredited Investor for purpose of satisfying one of the tests in the Qualified Purchaser definition the investor must be a natural person who has:
An individual net worth or joint net worth with the persons spouse that exceeds $1000 000. USD at the time of the purchase excluding the value of the primary residence of such person; or
Earned income exceeding $200 000 USD in each of the two most recent years or joint income with a spouse exceeding
$300 000 USD for those years and a reasonable expectation of the same income level in the current year.
If not a natural person one of the following:
An employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974 (ERISA )(a)if the investment decision is made by a plan fiduciary as defined in section 3(21)thereof which is (i)a bank; (ii)a savings and loan association (iii)an insurance company or (iv)a registered investment advisor or (b)if the employee benefit plan has total assets in excess of $5 Million USD or (c)if the employee benefit plan is a self directed plan with investment decisions made solely by persons that are accredited investors;
A trust with total assets in excess of $5 Million USD not formed for the specific purpose of acquiring the securities of the company being offered whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)
(ii)of Regulation D of the Securities Act;
A bank as defined in section 3(a)(2)of the Securities Act whether acting in its individual or fiduciary capacity a savings and loan association or other institution as defined in section 3(a)(5)(A)of the Securities Act whether acting in its individual or fiduciary capacity;
A broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934;
An insurance company as defined in section 2(a)(13)of the Securities Act;
An investment company registered under the Investment Company Act of 1940 (the Investment Company Act )or registered pursuant to the laws of a state; any investment adviser relying on the exemption from registering with the SEC under section 203(l)or (m)of the Investment Advisers Act of 1940 (the Advisers Act );
A business development company as defined in section 2(a)(48)of the Investment Company Act;
A Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c)or
(d)of the Small Business Investment Act of 1958;
Any rural Business Investment Company as defined in section 384A of the Consolidated Farm and Rural Development Act;
A private business development company as defined in section 202(a)(22)of the Advisers Act;
A corporation a Massachusetts or similar business trust partnership limited liability company or an organization described in section 501(c)(3)of the Internal Revenue Code of 1986 as amended (the Code ) not formed for the specific purpose of acquiring the securities of the issuer being offering with total assets in excess of $5 Million USD;
A plan established or maintained by a state or its political subdivisions or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees if such plan has total asses in excess of $5 Million USD;
Any entity not formed for the specific purposes of acquiring the securities offered owning investments in excess of
$5 Million USD;
Any natural person holding in good standing one or more professional certifications or designations or credentials from an accredited educational institution that the SEC has designated as qualifying an individual for accredited investor status;
Any natural person who is a knowledgeable employee as defined in rule 3c.5(a)(4)under the Investment Company Act of the issuer of the securities being offered or sold where the issuer would be an investment company as defined in section 3 of such act but for the exclusion provided by either section 3(c)(1)or section 3(c)(7)of such act;
Any family office as defined in rule 202(a)(11)(G)1 under the Advisers Act (i)with assets under management of
$5 Million USD (ii)not formed for the specific purpose of acquiring the securities offered and (iii)whose prospective investment is directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment;
Any family client as defined in rule 202(a)(11)(G)1 under the Advisers Act of a family office that qualifies as an accredited investor pursuant to subsection (xvi)above whose prospective investment in the issuer is directed by such family office;
Any director or executive officer of the company; or
An entity in which all the equity owners are accredited investors.
For purposes of determining whether a potential investor is a Qualified Purchaser annual income and net worth should be calculated as provided in the Accredited Investor definition under Rule 501 of Regulation D. In particular net worth in all cases should be calculated excluding the value of an investors home home furnishings and automobiles.
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ITEM 3: STATEMENTS REGARDING FORWARD LOOKING INFORMATION:
There are a number of statements in this Offering Circular which addresses activities events or developments which the Companys Management expects or anticipates will or may occur in the future. These statements are based on certain assumptions and analyses the Companys Management made in light of its perception of historical trends current business and economic conditions and expected future developments as well as other factors the Companys Management believes are reasonable or appropriate. There can be no assurance that the actual results or developments the Companys Management anticipates will be realized or even if substantially realized that they will have the expected consequences to or effects on the Companys business or operations. ANY ESTIMATES OF LIKELY CASH FLOW ARE JUST THAT ESTIMATES. CASH FLOW IF ACHIEVED MAY BE ERRATIC. Potential investors can identify forward looking statements by the use of words such as may should will could estimates predicts potential continue anticipates believes plans expects future and similar expressions that are intended to identify forward looking statements. These statements are not guarantees of future performance and are subject to the risks and uncertainties and other factors some of which are beyond the Companys control and are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. In evaluating these forward looking statements each investor should carefully consider the risks and uncertainties described in this Offering Circular.
Factors many of which are beyond the Companys control which could have a material adverse effect on the Companys operations and future prospects including but are not limited to:
Any of the risk factors identified above;
The Companys ability to effectively deploy the proceeds raised in this Offering;
The Companys ability to attract investors to purchase shares of its Convertible Preferred Stock;
Changes in economic conditions in the United States;
Expected rates of return provided to investors;
The ability of the Companys Management Officers to manage the Companys Operations;
The quality and performance of the receivables;
Legislative andor Regulatory changes impacting the Companys business andor the Companys assets (including SEC guidance related to Regulation A or the JOBS Act);
The Companys compliance with applicable Local State andor Federal Laws.
Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this Offering Circular. All forward-looking statements are made as of the date of this Offering Circular and the risk that actual results will differ materially from the expectations expressed in this Offering Circular will increase with the passage of time. Except as otherwise required by the Federal Securities Laws the Company undertakes no obligation to publicly update or revise any forward looking statements after the date of this Offering Circular whether as a result of new information future events changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward looking statements included in this Offering Circular including without limitations the risks described under Risk Factors the inclusion of such forward-looking statements should not be regarded as a representation by the Company the Companys Management or any other person that the objectives and plans set forth in this Offering Circular will be achieved.
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ITEM 4: DISTRIBUTION SPREAD:
Number of Convertible Preferred Stock Shares Offered
Offering Price
($USD)
Selling Commissions ($USD)
Proceeds to the Company ($USD)
The price per Convertible Preferred Stock Share shown above was determined by the Management of the Company.
The Convertible Preferred Stock Shares will be offered and sold directly by the Company and its Management Officers. No commissions for selling Convertible Preferred Stock Shares will be paid to the Company or its Management Officers. The Convertible Preferred Stock Shares will also be sold by a SEC registered broker dealer and a member of Financial Industry Regulatory Authority (FINRA ) pursuant to an engagement agreement dated (Broker Dealer Agreement )by and between the Company and. Under the Broker Dealer Agreement the Company agreed to pay the following: (i)an engagement fee of $ (ii)a commission of five percent (5%)of the capital raised up to $75 000 000 USD; and (iii)stock warrants to purchase an amount of Common Stock of the Company equal to the amount of commission paid to in connection with the capital raise.
The Company will be reimbursed for organization offering accounting and legal costs in connection with this offering which are expected to be approximately ten percent (10.00%)of the total capital raised.
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ITEM 5. RISK FACTORS:
THE PURCHASE OF THE COMPANYS CONVERTIBLE PREFERRED STOCK SHARES IS SPECULATIVE AND INVOLVES SUBSTANTIAL RISK. IT IS IMPOSSIBLE TO PREDICT ACCURATELY THE RESULTS TO AN INVESTOR OF AN INVESTMENT IN THE COMPANYS CONVERTIBLE PREFERRED STOCK SHARES BECAUSE OF THE GENERAL UNCERTAINTIES THE COMPANY IS LIKELY TO FACE. THIS OFFERING CIRCULAR CONTAINS FORWARD LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THESE STATEMENTS ARE ONLY PREDICTIONS AND ARE NOT GUARANTEES. ACTUAL EVENTS AND RESULTS OF OPERATIONS COULD DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED IN THE FORWARD-LOOKING STATEMENTS. FORWARD LOOKING STATEMENTS ARE TYPICALLY IDENTIFIED BY THE USE OF TERMS SUCH AS MAY WILL SHOULD EXPECT COULD INTEND ANTICIPATE PLAN ESTIMATE BELIEVE POTENTIAL OR THE NEGATIVE OF SUCH TERMS OR OTHER COMPARABLE TERMINOLOGY. THE FORWARD-LOOKING STATEMENTS INCLUDE HEREIN ARE BASED UPON THE COMPANYS CURRENT EXPECTATIONS PLANS ESTIMATES ASSUMPTIONS AND BELIEFS THAT INVOLVE NUMEROUS RISKS AND UNCERTAINTIES. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD LOOKING STATEMENTS ARE BASED ON REASONABLE ASSUMPTIONS THE COMPANYS ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH DIFFERENCES INCLUDE BUT ARE NOT LIMITED TO THE RISK FACTORS DISCUSSED BELOW. ANY ASSUMPTIONS UNDERLYING FORWARD-LOOKING STATEMENTS COULD BE INACCURATE. PURCHASERS OF THE CONVERTIBLE PREFERRED STOCK SHARES ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON ANY FORWARD LOOKING STATEMENTS CONTAINED HEREIN. YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISKS AND SHOULD CONSULT WITH YOUR OWN LEGAL TAX AND FINANCIAL ADVISORS WITH RESPECT THERETO. YOU ARE URGED TO READ THIS ENTIRE OFFERING CIRCULAR AND ANY OFFERING CIRCULAR SUPPLEMENTS BEFORE INVESTING IN THE COMPANYS CONVERTIBLE PREFERRED STOCK SHARES.
The Ongoing COVID 19 Pandemic May Have a Material Adverse Effect on the Companys Business Results of Operations and Financial Condition
In March of 2020 the World Health Organization classified the COVID 19 outbreak as a pandemic. The Company is unable to accurately predict the full impact that the pandemic will have on the Companys results from operations financial condition liquidity and cash flows due to numerous factors that are not within the Companys control including the duration and severity of the outbreak public health measures such as business closures and stay at home orders and other actions taken by governments and business in response to the pandemic the availability of government or local funding programs general economic disruption and uncertainty in key markets and financial market volatility and the impact of the COVID-19 pandemic on general macroeconomic conditions and the pace of recovery when the pandemic subsides.
The events and consequences of the ongoing COVID 19 Pandemic may cause the Company not to be able to accurately predict recognize or control have a material adverse effect on its business growth reputation prospects financial condition operating results cash flows and liquidity.
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 the 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 auditors attestation report on managements assessment of the effectiveness of the Companys 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 auditors report in which the auditor would be required to provide additional information about the audit and the financial statements of the Company;
An exemption from compliance with any other new auditing standards adopted by the PCAOB after April 5th 2012 unless the United States Securities 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 Companys 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 earliest of (i)when the Company has $1.0 Billion USD or more in annual revenues (ii)when the Company has at least $700 Million USD in market value of the Companys Common Shares held by non- affiliates (iii)when the Company issues more than $1.0 Billion USD of non-convertible debt over a three-year period or (iv)the last day of the fiscal year following the fifth anniversary of the Companys Initial Public Offering.
Development Stage Business
The Company was formed as a Florida Stock Corporation in JUNE of 2021 (SOS P21000052400 In Good Standing). Accordingly the Company has only a limited history upon which an evaluation of its prospects and future performance can be made. The Companys proposed operations are subject to all business risks associated with new enterprises. The likelihood of the Companys 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 can be no assurances that the Company will operate profitably.
Future Growth or Operating Results May Require the Company to Raise Additional Capital but that Capital May Not be Available or it May be Dilutive
The Company may be required by regulatory authorities to maintain adequate levels of capital to support its stated operations. To the extent that future operating results erode capital the Company may be required to maintain capital in excess of traditional standards. Similarly if the Company elects to expand through growth or layered acquisitions the Company may be required to raise additional capital to meet that accelerated growth. Its ability to raise capital will depend on conditions in the capital markets which are outside its control and on its financial performance. Accordingly the Company cannot be assured of its ability to raise capital when needed on favorable terms or at all. An inability to raise additional capital on acceptable terms when needed could have a materially adverse effect on the Companys business financial condition results of operations and cash flows. In addition in order to raise additional capital the Company may need to issue common shares or Perpetual Preferred in a manner that would dilute the book value of the Class A Common Shares or Perpetual Preferred and reduce shareholders percentage ownership interest to the extent they do not participate in such future offerings.
Liquidity Risk Could Impair the Companys ability to Fund Operations and Jeopardize its Financial Condition
Liquidity is essential to the Companys business plan. An inability to raise funds through borrowing through generating positive business cash flow or through other sources could have a substantial negative effect on the Companys liquidity. The Companys access to funding sources in amounts adequate to finance its activities or on terms which are acceptable to it could be impaired by factors that affect it specifically or the financial services industry in general or the economy in total. Factors that could detrimentally impact the Companys access to liquidity sources include a decrease in the level of its business activity as a result of a downturn in the markets in which the acquisitions are concentrated or as a result of adverse regulatory action against the Company or its investments. The Companys ability to borrow could also be impaired by factors that are not specific to it such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry.
The Company May Not be able to Achieve its Planned Growth Rate which may Adversely Impact the Companys Results of Operations and Financial Condition
The Company may not be able to achieve its planned rate of growth or may not even be able to grow at all. In addition the Company may not be able to obtain the financing necessary to fund additional growth. Various factors such as economic conditions the regulatory environment and competition may impede or prohibit the Companys growth plans. Any inability to attract and retain experienced personnel may adversely affect the Companys internal growth. A significant decrease in the Companys planned rate of growth may impact its results of operations and financial condition.
System Failure or Cybersecurity Breaches of the Companys Network Security could subject the Company to Increased Operating Costs as well as Litigation and other Potential Losses
The computer systems and network infrastructure the Company will use could be vulnerable to unforeseen hardware and cybersecurity issues including hacking and identity theft. The Companys operations will be dependent upon theCompanys ability to protect the Companys computer equipment against damage from fire power loss telecommunications failure or a similar catastrophic event. Any damage or failure that causes an interruption in the Companys operations could have an adverse effect on the Companys financial condition and results of operations. In addition the Companys operations will be dependent upon the Companys ability to protect the computer systems and network infrastructure utilized by the Company against damage from physical break-ins cybersecurity breaches and other disruptive problems caused by the Internet or other users. Such computer break-ins and other disruptions would jeopardize the security of information stored in and transmitted through the Companys computer systems and network infrastructure which may result in significant liability to the Company damage the Companys reputation. In addition a security breach could also subject the Company to additional regulatory scrutiny and expose the Company to civil litigation and possible financial liability.
Each year the Company plans to add additional security measures to the Companys computer systems and network-infrastructure to mitigate the possibility of cybersecurity breaches including firewalls and penetration testing. Further the Company will continually investigate cost effective measures to maintain network security.
The Company will have a Continuing Need for Technological Change The industries which the Company intends to serve and to invest including the consumer credit industry and mobile banking technology are subject to rapid technological changes with frequent introductions of new technology-driven products and services. Further for the Company to better serve its customers by increasing efficiency and by reducing costs it must continue to invest in technology enhancements and to effectively use technology. The Companys success depends in part upon its ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands for convenience as well as create additional efficiencies in its operations. Many of the Companys competitors have substantially greater resources to invest in technological improvements than it does. If the Company is unable to keep pace with advancing technological changes affecting its industries and customers it will lose customers and will be less profitable or sustain losses. In addition there can be no assurance that the Company will be able to effectively implement new technology driven products and services or be successful in marketing such products and services to its customers.
The Company Operates in a Highly Regulated Environment and May be Adversely Affected by Changes in Federal and State Laws and Regulations
The Company is subject to extensive regulation supervision and examination by Federal and State Financial Institution Authorities. Any change in applicable regulations or laws could have a substantial impact on the Company and the Companys operations. Additional legislation and regulations that could significantly affect the Companys powers authority and operations may be enacted or adopted in the future which could have a material adverse effect on the Companys financial condition and results of operations. Financial Industry Regulations are primarily intended to protect consumers funds and not the holders of the Companys equity or debt securities. These regulations can affect the Companys proposed lending practices capital structure investment practices dividend policy and growth among other things. Congress State Legislatures and Federal and State regulatory agencies continually review financing laws regulations and policies for possible changes. Changes to Statutes Regulations or Regulatory policies including changes in interpretation or implementation of Statutes Regulations or Policies could affect Company in substantial and unpredictable ways. Such changes could subject the Company to additional costs limit the types of financial services and products the Company may offer andor increase the ability of non-banks to offer competing financial services and products among other things. Legislation that has or may be passed at the Federal level andor by any State in response to current conditions affecting credit markets could cause the Company to experience higher credit losses if such legislation reduces the amount that the Companys borrowers are otherwise contractually required to pay under existing loan credit contracts. Such events could result in increased loan credit losses and require a material increase in the allowance for loan credit losses. Failure to comply with Laws Regulations or Policies could also result in enforcement actions or sanctions by Regulatory Agencies Civil Money Penalties andor repetitional damage which could have a material adverse effect on the Companys business financial condition and results of operations. While the Company has policies and procedures designed to prevent any such violations there can be no assurance that such violations will not occur.
The Company is Subject to a Variety of Operational Risk Environmental Legal and Compliance Risks and the Risk of Fraud or Theft by Employees or Outsiders which may Adversely Affect the Companys Business and Results of Operations
The Companys financial interests will be exposed to many types of operational risks including reputational risk legal and compliance risk the risk of fraud or theft by employees or outsiders and unauthorized transactions by employees or operational errors including clerical or record keeping errors or those resulting from faulty or disabled computer or telecommunications systems. Negative public opinion can result from the Companys actual or alleged conduct in any number of activities including lending practices corporate governance and acquisitions and from actions taken by Government Regulators and community organizations in response to those activities. Negative public opinion can adversely affect the Companys ability to attract and keep customers and can expose the Company to litigation and regulatory action.
If personal non public confidential or proprietary information of customers in the Companys possession were to be misappropriated mishandled or misused the Company could suffer significant regulatory consequences reputational damage and financial loss. Such mishandling or misuse could include for example erroneously providing such information to parties who are not permitted to have the information either by fault of the Companys systems employees or counterparties or the interception or inappropriate acquisition of such information by third parties.
Because the nature of the financial services business involves a high volume of transactions certain errors may be repeated or compounded before they are discovered and successfully rectified. The Companys necessary dependence upon automated systems to record and process transactions and the Companys large transaction volume may further increase the risk that technical flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect. The Company also may be subject to disruptions of its operating systems arising from events that are wholly or partially beyond the Companys control (for example computer viruses or electrical or telecommunications outages or natural disasters disease pandemics or other damage to property or physical assets)which may give rise to disruption of service to customers and to financial loss or liability. The Company may be further exposed to the risk that its external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as the Company is)and to the risk that the Companys (or the Companys vendors)business continuity and data security systems prove to be inadequate. The occurrence of any of these risks could result in the Companys diminished ability to operate its business (for example by requiring the Company to expend significant resources to correct the defect) as well as potential liability to clients reputational damage and regulatory intervention which could adversely affect the Companys business financial condition or results of operations perhaps materially.
The Company Faces Competition from Banks Financial Service Companies and other Companies that Offering Credit and Loan Services which could Adversely Affect our Business Competition in the Companys market may result in reduced loans credit or reduced rates charged or paid on these instruments and adversely affect the Companys net interest margin. Ultimately the Company may not be able to compete successfully against current and future competitors. The Companys competitors include national and super regional banks and finance companies as well as technology oriented financial institutions offering online services many with greater resources that afford them a marketplace advantage by enabling them to maintain numerous banking locations and mount extensive promotional and advertising campaigns. Additionally banks and other financial institutions with larger capitalization and financial intermediaries not subject to regulatory restrictions have larger lending limits than that the Company will and are thereby better able to serve the credit needs of larger customers. Areas of competition include interest rates for loans credit and the range and quality of products and services provided including new technology driven products and services. Technological innovation continues to contribute to greater competition in domestic and international financial services markets as technological advances such as Internet based financial services that cross traditional geographic bounds enable more companies to provide financial services. The ability to keep pace with technological change is important and the failure to do so could have a material adverse impact on the Companys business. If the Company is not able to effectively compete in its market area the Companys results of operations may be negatively affected.
Failure to Establish and Maintain Effective Internal Control over Financial Reporting Could have a Material Adverse Effect on the Companys Business and Operating Results
Maintaining effective internal control over financial reporting is necessary for the Company to produce and complete financial reports and to help prevent financial fraud. In addition such control is required in order for the Company to list its Common Stock on a regulated capital market in the future. If the Company is unable to maintain adequate internal controls or fail to correct deficiencies in its controls noted by the Companys Management or the Companys to be determined in the future independent registered public accounting firm the Companys business and operating results could be adversely affected and the Company could fail to meet its obligations to report its operating results accurately and the Companys ability to list its Common Stock in the future on a regulated capital market could be jeopardized.
The Companys Current Insurance Policies May Not Provide Adequate Levels of Coverage Against All Claims and the Company May Incur Losses that are Not Covered by the Companys Insurance
The Company believes it maintains insurance coverage that is customary for businesses of its size and type; however the Company may be unable to insure against certain types of losses or claims or the cost of such insurance may be prohibitive. Uninsured losses or claims if they occur could have a material adverse effect on the Companys financial condition business and results of operations.
RISKS RELATED TO THIS OFFERING AND OWNERSHP OF THE COMPANYS SECURITIES:
There is No Existing Market for the Companys Common Stock or its Convertible Preferred Stock Shares and a Trading Market that will provide you with Adequate Liquidity May Not Develop for the Companys Common Stock or its Convertible Preferred Stock Shares
No public market for buying and selling of the Companys Common Stock or Convertible Preferred Stock Shares currently exists. Although the Company does plan to list its shares in the future on a National Regulated Market through a direct listing a liquid trading market for the Companys Common Stock or its Convertible Preferred Stock Shares may not develop or be sustained after this Offering. The Company cannot provide assurances that Investors will be able to resell any shares of the Companys Common Stock Shares or its Convertible Preferred Stock Shares at any time in the future.
The Companys Revenues Operating Results and Cash Flows may Fluctuate in Future Periods and the Company may Fail to Meet Investor Expectations which may Cause the Value of the Companys Common Stock to Decline
Variations in the Companys quarterly and year end operating results are difficult to predict and may fluctuate significantly from period to period. If the Companys revenues or operating results fall below the expectations of Investors or securities analysts the value of the Companys Common Stock could decline substantially. Specific factors that may cause fluctuations in the Companys operating results include (but are not limited to):
Demand for Companys products services;
Quarterly and annual results of operations that fail to meet investor andor analyst expectations;
Actual or anticipated fluctuations in the Companys operating results due to factors related to the Companys business;
Changes in accounting standards policies guidance interpretations or principles;
Changes in earnings estimates by securities analysts of the Companys inability to meet those estimates;
The operating and stock price performance of other comparable companies;
Overall market fluctuations; and
General economic conditions.
Future Sales of the Companys Common Stock Could Depress the Market Price of the Companys Common Stock
Sales of a substantial number of the Companys Common Stock in the public market could occur at any time especially after conversion of the Companys Convertible Preferred Stock Shares that are part of this Offering. If the Companys Stockholders sell or the market perceives that the Companys Stockholders intend to sell their shares substantial amounts of the Companys Common Stock in the public market may cause the Companys Common Stock Market Price to decline significantly.
Compliance with Securities Laws
The Convertible Preferred Stock Shares are being offered for sale in reliance upon certain exemptions from the registration requirements of the Securities Act applicable FLORIDA Securities Laws and other applicable state securities laws. If the sale of Convertible Preferred Stock Shares were to fail to qualify for these exemptions purchasers may seek rescission of their purchases of the Convertible Preferred Stock Shares. If a number of purchasers were to obtain rescission the Company would face significant financial demands which could adversely affect the Company as a whole as well as any non-rescinding purchasers.
Offering Price
The price of the Convertible Preferred Stock Shares offered has been arbitrarily established by Executives Directors of the Company. The Offering price bears little relationship to the assets net worth or any other objective criteria.
Federal Income Tax Risks
THE COMPANY HAS NOT OBTAINED A LEGAL OPINION CONCERNING THE TAX IMPLICATIONS OF AN INVESTMENT
IN THE CONVERTIBLE PREFERRED STOCK SHARES. Prospective purchasers of the Convertible Preferred Stock Shares must consult their own tax advisors as to their own tax situation prior to investment in the Convertible Preferred Stock Shares. The cost of such consultation could depending on the amount thereof materially increase the cost of investment in the Convertible Preferred Stock Shares and decrease any anticipated yield on the investment. A number of changes in the tax laws have been made andor are under consideration and such professional consultation is essential.
NOTICE REGARDING AGREEMENT TO ARBITRATE
THIS OFFERING CIRCULAR REQUIRES THAT ALL INVESTORS ARBITRATE ANY DISPUTE ARISING OUT OF THEIR INVESTMENT IN THE CONVERTIBLE PREFERRED STOCK SHARES. ALL INVESTORS FURTHER AGREE THAT THE ARBITRATION WILL BE BINDING AND HELD IN THE STATE OF FLORIDA IN THE COUNTY OF BROWARD. 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.
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ITEM 6: COMPANY OWNERSHIP DILUTION:
HOWARDS MBS INC. is a Florida Stock Corporation (P21000052400). As of September 2021the Ownership Structure of the company is as illustrated below. The Company current has 1000 000 Shares of Common Stock Issued and Outstanding and current ownership of those Common Stock Shares are detailed below.
Future Dilution
For the business purposes may from time to time issue additional Common Stock Shares which may result in dilution of existing Common Stock Shares. Dilution is a reduction in the percentage of Common Stock Shares caused by the issuance of Common Stock Shares. Dilution can also occur when holders of options (such as company employees)or holders of other optionable securities exercise their options. When the number of Common Stock Shares outstanding increases each existing Common Stock Shareholder will own a smaller or diluted percentage of the company making each Common Stock Share less valuable. Dilution may also reduce the value of existing Common Stock Shares by reducing the Common Stock Shares earnings per Common Stock Share. There is no guarantee that dilution of the Common Stock Shares of the Company will not occur in the future.
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ITEM 7. PLAN FOR DISTRIBUTION:
The Offering Period will commence upon this Offering Circular being Qualified by the SEC. The Company is offering up to
$75 000 000 USD of its Convertible Preferred Stock Shares pursuant to this Offering Circular. The Company anticipates that the Convertible Preferred Stock Shares will be sold by the Company and its Management Officers. The Company and its Management Officers will also offer and sell Convertible Preferred Stock Shares of the Company through the services of a independent broker dealers who are member firms of FINRA. The Company Management Officers who will be offering the Convertible Preferred Stock Shares are not deemed to be brokers under Rule 3a4.1 of the Securities Exchange Act of 1934 as amended. In accordance with the provisions of Rule 3a4.1(a) Officers who sell Shares of the Companys Convertible Preferred Stock will not be compensated by commission will not be associated with any broker or dealer and will limit their activities so that. Among other things they do not engage in oral solicitations of and comply with certain specified limitations when responding to inquiries from potential Qualified Purchasers.
While most of the Convertible Preferred Stock Shares are expected to be offered and sold directly by the Company and its Management Officers the Company has engaged a SEC registered brokerdealer and a member of FINRA pursuant to a Broker Dealer Agreement . Under the Broker Dealer Agreement the Company agreed to pay the following: an engagement fee of $ USD; (ii)a commission of five percent (5%)of the capital raised up to $75 000 000 USD; and (iii)stock warrants to purchase an amount of Common Stock of the Company equal to the amount of commission paid to( )in connection with this Offering.
The Offering will terminate upon the earlier of (i)such time as all of the Convertible Preferred Stock Shares have been sold pursuant to this Offering Circular; (ii)the date that is twelve (12)months from the date that this Offering is qualified by the United States Securities and Exchange Commission unless extended by the Company for an additional ninety (90)days in the sole discretion of the Management of the Company without notice to or consent from investors; or (iii)the date at which the Offering is earlier terminated by the Company in the sole discretion of the Management of the Company which may occur at any time. The Company reserves the right to terminate the Offering at any time and for any reason without notice to or consent from any purchaser of the Shares of Convertible Preferred Stock in this Offering.
Once the SEC qualifies this Offering the Company will be permitted to generally solicit investors nationwide by use of various advertising mediums such as print radio television and the Internet.
This Offering Circular will be furnished to prospective investors upon their request via electronic PDF format and will be available for viewing and download 24 hours a day 7 days a week on the Companys website as well as on the United States Securities Exchange Commissions website at www.SEC.gov.
In order to subscribe to purchase the Companys Convertible Preferred Stock Shares a prospective investor must electronically complete sign and deliver to the Company an executed Subscription Agreement (see Exhibit A of this Offering Circular) and wire funds for the Subscription Amount in accordance with the instructions provided therein.
An investor will become a Shareholder including for tax purposes and the shares of the Companys Convertible Preferred Stock will be issued as of the date of settlement. Settlement will not occur until an investors funds have cleared and the Company accepts the investor as a Shareholder.
The Company reserves the right to reject any investors subscription in whole or in part for any reason including if the Company determines in the sole and absolute discretion of its Management that such investor is not a Qualified Purchaser for the purposes of Section 18(b)(4)(D)(ii)of the Securities Act. If the Offering terminates or if any prospective investors subscription is rejected all funds received from such investors will be returned without interest or deduction.
Qualified Purchasers and Blue Sky Laws: The Companys Convertible Preferred Stock Shares are being offered and sold only to Qualified Purchasers (as defined in Regulation A under the Securities Act). As a Tier 2 offering pursuant to Regulation A under the Securities Act this Offering will be exempt from State Blue Sky Law Review subject to certain state filing requirements and anti fraud provisions to the extent that the Shares of Convertible Preferred Stock offered hereby are offered and sold only to Qualified Purchasers.
Qualified Purchasers include:
Accredited Investors as defined under Rule 501(a)of Regulation D; and
All other investors so long as their investment in the Companys Convertible Preferred Stock Shares does not represent more than ten percent (10%)of the greater of their annual income or net worth (for natural persons) or 10% of the greater of annual revenue or net assets at fiscal year end (for non natural persons).
However the Companys Convertible Preferred Stock Shares will be offered and sold only to those investors that are within the latter category (i.e. investors whose investment in the Companys Convertible Preferred Stock Shares does not represent more than ten percent
(10%)of the applicable amount) regardless of an investors status as an accredited investor . Accordingly the Company and its management reserves the right to reject any investors subscription in whole or in part for any reason including if the Company Management in their sole and absolute and absolute discretion that such investor is not a Qualified Purchaser for purposes of Regulation A.
To determine whether a potential investor is an Accredited Investor for purpose of satisfying one of the tests in the Qualified Purchaser definition the investor must be a natural person who has:
An individual net worth or joint net worth with the persons spouse that exceeds $1000 000. USD at the time of the purchase excluding the value of the primary residence of such person; or
Earned income exceeding $200 000 USD in each of the two most recent years or joint income with a spouse exceeding
$300 000 USD for those years and a reasonable expectation of the same income level in the current year.
If not a natural person one of the following:
An employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974 (ERISA )(a)if the investment decision is made by a plan fiduciary as defined in section 3(21)thereof which is (i)a bank; (ii)a savings and loan association (iii)an insurance company or (iv)a registered investment advisor or (b)if the employee benefit plan has total assets in excess of $5 Million USD or (c)if the employee benefit plan is a self- directed plan with investment decisions made solely by persons that are accredited investors;
A trust with total assets in excess of $5 Million USD not formed for the specific purpose of acquiring the securities of the company being offered whose purchase is directed by a sophisticated person as described in Rule 506(b)(2)
of Regulation D of the Securities Act;
A bank as defined in section 3(a)(2)of the Securities Act whether acting in its individual or fiduciary capacity a savings and loan association or other institution as defined in section 3(a)(5)(A)of the Securities Act whether acting in its individual or fiduciary capacity;
A broker or dealer registered pursuant to section 15 of the Securities Exchange Act of 1934;
An insurance company as defined in section 2(a)(13)of the Securities Act;
An investment company registered under the Investment Company Act of 1940 (the Investment Company Act )or registered pursuant to the laws of a state; any investment adviser relying on the exemption from registering with the SEC under section 203(l)or (m)of the Investment Advisers Act of 1940 (the Advisers Act );
A business development company as defined in section 2(a)(48)of the Investment Company Act;
A Small Business Investment Company licensed by the U.S. Small Business Administration under section 301(c)or
(d)of the Small Business Investment Act of 1958;
Any rural Business Investment Company as defined in section 384A of the Consolidated Farm and Rural Development Act;
A private business development company as defined in section 202(a)(22)of the Advisers Act;
A corporation a Massachusetts or similar business trust partnership limited liability company or an organization described in section 501(c)(3)of the Internal Revenue Code of 1986 as amended (the Code ) not formed for the specific purpose of acquiring the securities of the issuer being offering with total assets in excess of $5 Million USD;
A plan established or maintained by a state or its political subdivisions or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees if such plan has total asses in excess of $5 Million USD;
Any entity not formed for the specific purposes of acquiring the securities offered owning investments in excess of
$5 Million USD;
Any natural person holding in good standing one or more professional certifications or designations or credentials from an accredited educational institution that the SEC has designated as qualifying an individual for accredited investor status;
Any natural person who is a knowledgeable employee as defined in rule 3c.5(a)(4)under the Investment Company Act of the issuer of the securities being offered or sold where the issuer would be an investment company as defined in section 3 of such act but for the exclusion provided by either section 3(c)(1)or section 3(c)(7)of such act;
Any family office as defined in rule 202(a)(11)(G).1 under the Advisers Act (i)with assets under management of
$5 Million USD (ii)not formed for the specific purpose of acquiring the securities offered and (iii)whose prospective investment is directed by a person who has such knowledge and experience in financial and business matters that such family office is capable of evaluating the merits and risks of the prospective investment;
Any family client as defined in rule 202(a)(11)(G).1 under the Advisers Act of a family office that qualifies as an accredited investor pursuant to subsection (xvi)above whose prospective investment in the issuer is directed by such family office;
Any director or executive officer of the company; or An entity in which all the equity owners are accredited investors.
For purposes of determining whether a potential investor is a Qualified Purchaser annual income and net worth should be calculated as provided in the Accredited Investor definition under Rule 501 of Regulation D. In particular net worth in all cases should be calculated excluding the value of an investors home home furnishings and automobiles.
Transferability of the Companys Convertible Preferred Stock: The Companys Convertible Preferred Stock Shares are generally not freely transferable by Shareholders. Transfer of the Convertible Preferred Stock Shares by Shareholders is restricted by applicable Securities Laws or Regulations as well as the Shareholders Agreement (See Exhibit B of this Offering Circular)
Advertising Sales Promotional Materials: In addition to this Offering Circular subject to limitations imposed by applicable Securities Laws the Company expects to use additional advertising sales and other promotional materials in connection with this Offering. In addition the sales material may contain certain quotes from various publications without obtaining the consent of the author or the publication for use of the quoted material in the sales material. Although these materials will not contain information in conflict with the information provided by this Offering Circular and will be prepared with a view to presenting a balanced discussion of risk and reward with respect to the Companys Convertible Preferred Stock Shares these materials will not give a complete understanding of this Offering the Company or the Companys Convertible Preferred Stock Shares 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 Companys Convertible Preferred Stock Shares.
Supplements and Post Qualification Amendments to this Offering Circular: In compliance with Rule 253(e)of Regulation A the Company shall revise this Offering Circular during the course of the Offering whenever information herein has become false or misleading in light of existing circumstances material developments have occurred or there has been an fundamental change in the information initially presented. Such updates will not only correct such misleading information but shall also provide updated financial statements and shall be filed as an Exhibit to the Offering Circular and be requalified under Rule 252.
ITEM 8. USE OF INVESTMENT PROCEEDS BY COMPANY:
The following two tables sets forth certain information concerning the estimated use of investment proceeds of the Offering. Many of the amounts set forth in the two tables below both represent the best estimate of the Company since they cannot be precisely calculated at this time.
Table 1 of 2:
Sale of the Companys Convertible Preferred Stock Shares:
Category
Maximum Proceeds
Percentage of Total Proceeds
Minimum Proceeds
Percentage of Proceeds
Offering Expenses
Category
Maximum Proceeds
Percentage of Total Proceeds
Minimum Proceeds
Percentage of Proceeds
The Convertible Preferred Stock Shares will be offered and sold directly by the Company and its Management Officers. No commissions for selling Convertible Preferred Stock Shares will be paid to the Company or its Management Officers. The Convertible Preferred Stock Shares will also be sold by a SEC registered broker dealer and a member of Financial Industry Regulatory Authority (FINRA ) pursuant to an engagement agreement dated (Broker-Dealer Agreement )by and between the Company and . Under the Broker Dealer Agreement the Company agreed to pay the following: (i)an engagement fee of $ (ii)a commission of five percent (5%)of the capital raised up to $75 000 000 USD; and (iii)stock warrants to purchase an amount of Common Stock of the Company equal to the amount of commission paid to in connection with the capital raise.
The Company will be reimbursed for organization offering accounting and legal costs in connection with this offering which are expected to be approximately ten percent (10.00%)of the total capital raised.
Table 2 of 3 (If the Maximum is Raised):
The Management of the Company has significant flexibility and broad discretion in applying the net proceeds received in this Offering. These are the best estimates of the Companys financial requirements and plans for fiscal year 2021 and the start of fiscal year 2022. The Company may reallocate the estimated use of proceeds among the various categories or for other uses if the Companys Management deems such reallocation to be appropriate. The Company cannot assure you that the capital budget will be sufficient to satisfy the Companys operational needs or that the Company will have sufficient capital to fund its business.
Table 3 of 3 (If only the Minimum is Raised):
The Management of the Company has significant flexibility and broad discretion in applying the net proceeds received in this Offering. These are the best estimates of the Companys financial requirements and plans for fiscal year 2021 and the start of fiscal year 2022. The Company may reallocate the estimated use of proceeds among the various categories or for other uses if the Companys Management deems such reallocation to be appropriate. The Company cannot assure you that the capital budget will be sufficient to satisfy the Companys operational needs or that the Company will have sufficient capital to fund its business.
ITEM 9. ABOUT THE COMPANYISSUER
The Companys Current Financial Education Service:
The Companys Website can be found at: www.HMBSINC.com.
The Companys community over understands the importance of a quality education for children. That education includes but is not limited to: social skills high academia and early exposure to matters associated with economics. In the United States we have all but failed our children with antiquated policies curriculum and methods that just do not expand to all students and does not encourage thinkers . We as a society need to take a new look behind the psychology of our education system today. And our Company does exactly that by providing a community full of qualified professionals with similar ideologies. Our Company is here to teach and support our peers through our amazing consulting services with the hopes that the experiences from our platform will bring conversation and engagement within our homes decimating vital information to children from an early age. This movement is a must to bridge equality equity and diversity on a consistent basis. The United States will surely to stay behind highly advanced countries if we dont create the village today that our young adults will inherit tomorrow.
Use of Investment Proceeds:
The Company seeks to continue to educate and consult with clients individually and within groups. The Company has partnered with BrightFi for the release of the Companys Proprietary Credit Card Debit Card Program. The Companys Credit Card Program Extra Money Network is ready for release and expects to have ONE MILLION CARDS in circulation by 2024.
The Extra Money Network (EMN )will also provide EMN Credit Monitoring EMN Financial Consulting Education and engage in much larger conversations with the Companys Customer Base and New Clients.
We will also use proceeds from this Offering to Revamp the Companys Website Hire new Counselors and rollout a National Marketing and Advertising Program.
ITEM 10. TERMS AND CONDITIONS OF THE OFFERING:
The following information is only a brief summary of and is qualified in its entirety by the detailed information appearing elsewhere in this Offering Circular.
Securities Offered:
Offering Price Per Share:
Shares Outstanding Before this Offering:
Minimum Number of Shares to be Sold in this Offering:
Shares Outstanding After this Offering:
Details about the Conversion of the Shares:
Regulation A Tier: Manner of Offering:
Investor Suitability Standards:
Termination of this Offering:
Up to 750 000 Shares of the Companys Convertible Preferred Stock on a best efforts basis to Qualified Purchasers who meet the Investor Suitability Standards as set forth in this Offering Circular.
$100.00 USD per Share of the Companys Convertible Preferred Stock.
As of the date of this Offering Circular the following Shares of the Companys Capital Stock are issued and outstanding:
1000 000 Shares of Common Stock;
0 Shares of Preferred Stock;
Options for Common Stock in the Amount of: $0.00
A Stock Warrant for up to 0 Shares of Common Stock
The minimum number of Shares of the Companys Convertible Preferred Stock to be sold in this Offering before the Company can have access to the Investment Proceeds is 50 000 Shares ($5 000 000 USD).
1000 000 Shares of the Companys Common Stock will be Issued and Outstanding at the conclusion of this Offering.
750 000 Shares of Convertible Preferred Stock Shares will be issued and outstanding assuming the maximum offering of Shares of the Companys Convertible Preferred Stock is sold through this Offering.
See Page 4 5 of this Offering Circular for details about the Shareholder Option and Mandatory Shareholder Conversion of the Companys Convertible Preferred Stock Shares.
Tier 2
See Plan for Distribution on page 18 of this Offering Circular.
Accredited Investors pursuant to Rule 501 and non accredited investors. Pursuant to Rule 251(d)(2)(C) non accredited investors who are natural persons may only invest the greater of 10% of their annual income or net worth. Non natural non accredited persons may invest up to 10% of the greater of their net assets or revenues for the most recently completed fiscal year.
This Offering will terminate upon the earlier of (i)such time as all of the Companys Convertible Preferred Stock Shares have been sold pursuant to this Offering Circular (ii)the date that is twelve (12)months from the date that this Offering is Qualified by the United States Securities and Exchange Commission unless extended by the Company for an additional ninety (90)days in the sole discretion of the Management of the Company without notice to or consent from investors; or (iii)the date at which the Offering is earlier terminated by the Companys Management in their sole discretion which may occur at any time. The Company reserves the right to terminate the Offering at any time and for any reason without notice to our consent from any purchaser of Shares of the Companys Convertible Preferred Stock in this Offering.
Company Information:
Commissions for Selling Shares:
The Companys Principal Executive Offices are located at: 7401 Wiles Road Coral Springs Florida 33067; the Companys Website is located at www.HMBSINC.com No information on the Companys Website is part of this Offering Circular.
Shares of the Companys Convertible Preferred Stock will be offered and sold directly by the Company and its Officers Managers. No commissions for selling Shares of the Companys Convertible Preferred Stock will be paid to the Company or its Officers Managers. The Convertible Preferred Stock Shares will also be sold by a SEC registered Broker Dealer and a member of FINRA pursuant to the Broker Dealer Agreement . Under the Broker Dealer Agreement the Company has agreed to pay the following: (i)an engagement fee of $ USD; (ii)a commission of five percent (5%)of the capital raise up to $75 000 000 USD; and (iii)stock warrants to purchase an amount of Common Stock of the Company equal to the amount of commission paid to in connection with this capital raise.
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ITEM 11. DIRECTORS EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The Companys day to day operations are managed by the Companys Officers.
MS. KETSHA THOMPASON
CHIEF EXECUTIVE OFFICER
Ms. Ketsha Thompson is an entrepreneur and has held senior management positions over the past twenty five years within the financial industry. In all instances Ms. Thompson has managed a variety of teams and has been responsible for the growth of her assigned divisions and adding value to the parent companies. The financial services industry is Ms. Thompsons niche. She pursues continued education with traditional and non-traditional educational seminary lectures and literature. Ms. Thompson is an honorable SCDV veteran of the United States Army and as a soldier she was recognized for being reliable responsible and a team player.
Significant Employees. Each individual named above is considered a Significant Employee and is an Officer of the Company. The Company would be materially adversely affected if it were to lose the services of any of the individuals named above as each has provided significant leadership and direction to the Company.
Limitations of Liability and Indemnification of Officers Managers Directors. The Companys Articles limits the liability of directors to the maximum extent permitted by Florida Law and States that a Company Director shall not be personally liable to the Company or its Shareholders for monetary damages for breach of fiduciary duty as a director.
The Companys Articles and Bylaws provide that the Company will indemnify the Companys Directors Managers Officers Employees and other Agents to the fullest extent permitted by Law. The Company believes that indemnification under its Articles and Bylaws covers at least negligence and gross negligence on the part of the indemnified parties. The Companys Bylaws also permit the Company to secure insurance on behalf of any Officer Manager Director Employee or other Agent for any liability arising out of his or her actions in connection with their services to the Company regardless of whether the Companys Articles and Bylaws permit such indemnification.
The Company intends to enter into separate indemnification agreements with its Directors Managers and Officers in addition to the indemnification provided for in the Companys Articles and Bylaws. These agreements among other things will provide that the Company will indemnify its Directors Managers and Officers for certain expenses (including attorneys fees) judgments finds and settlement amounts incurred by a Director Manager or Officer in any action or proceeding arising out of such persons services as one of the Companys Directors Managers or Officers or rendering services at the Companys request to any of its subsidiaries or any of its subsidiaries (not existing or to be formed in the future)or any other company or enterprise. The Company believes that these provisions and agreements are necessary to attract and retain qualified persons as Directors Managers andor Officers.
Legal Proceeding 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 or control person of the Company during the past seven years.
From time to time the Company may be involved in legal proceedings. The results of such legal proceedings and claims cannot be predicted with certainty and regardless of the outcome legal proceedings could have an adverse impact on the Companys business plan due to the costs associated with legal defense and settlement costs diversion of resources and other factors. As of the date of this Offering Circular the Company is not subject to any material legal proceedings nor to the Companys knowledge are any material legal proceedings pending or threatened against the Company.
Stock Option Plan: None
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ITEM 12. COMPENSATION OF DIRECTORS AND OFFICERS
Compensation of the Companys Board of Directors Members and Officers Managers is as follows:
Key Man Insurance: The Company does not at this time have Key Man Insurance on any Board Member Director Manager or Officer of the Company.
ITEM 13: SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SHAREHOLDERS:
As of the date of this Offering Circular the following table sets forth information regarding beneficial ownership of the Companys Capital Stock by:
Each person or group of affiliated persons known to the Company to beneficially own 5% or more of the Companys Common Stock;
Each of the Companys named Managers or Officers;
Each of the Companys Directors and Director Nominees; and
All of the Companys current Officers Directors and Director nominees as a group.
The information presented below regarding beneficial ownership of the Companys voting securities has been presented in accordance with the rules of the United States Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under the rules a person is deemed to be a beneficial owner of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within sixty (60)days through the conversion or exercise of any convertible security warrant option or other right. More than one (1)person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person which includes the number of shares as to which such person has the right to acquire voting or investment power within sixty (60)days by the sum of the number of shares outstanding as of such date. Consequently the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below and under applicable community property law the Company believes that the beneficial owners of the Companys Common Stock listed below have sole voting and investment power with respect to the Shares shown.
ITEM 14: MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:
The Managements Discussion and Analysis may contain forward looking statements. Investors should not place undue reliance on forward looking statements and should consider carefully the statements made in Risk Factors and elsewhere in this Offering Circular that identify important factors that could cause actual outcomes to differ from those expressed or implied in the Companys forward looking statements and that could materially and adversely affect the Companys business operating results and financial condition.
The Managements Discussion and Analysis should be read together with the financial statements and notes thereto included elsewhere in this Offering Circular.
Cautionary Statement:
The following discussion and analysis should be read in conjunction with the Companys consolidated financial statements and related notes beginning on page 54 of this Offering Circular.
The Companys results may differ materially from those anticipated in the following discussion as a result of a variety of risks and uncertainties including those described under Cautionary Statements Regarding Forward Looking Statements and Risk Factors. The Company assumes no obligation to update any of the forward-looking statements included herein.
Overview:
The Companys Website can be found at: www.HMBSINC.com.
The Companys community over-understands the importance of a quality education for children. That education includes but is not limited to: social skills high academia and early exposure to matters associated with economics. In the United States we have all but failed our children with antiquated policies curriculum and methods that just do not expand to all students and does not encourage thinkers . We as a society need to take a new look behind the psychology of our education system today. And our Company does exactly that by providing a community full of qualified professionals with similar ideologies. Our Company is here to teach and support our peers through our amazing consulting services with the hopes that the experiences from our platform will bring conversation and engagement within our homes decimating vital information to children from an early age. This movement is a must to bridge equality equity and diversity on a consistent basis. The United States will surely to stay behind highly advanced countries if we dont create the village today that our young adults will inherit tomorrow.
Use of Investment Proceeds:
The Company seeks to continue to educate and consult with clients individually and within groups. The Company has partnered with BrightFi for the release of the Companys Proprietary Credit Card Debit Card Program. The Companys Credit Card Program Extra Money Network is ready for release and expects to have ONE MILLION CARDS in circulation in 2022.
The Extra Money Network (EMN )will also provide EMN Credit Monitoring EMN Financial Consulting Education and engage in much larger conversations with the Companys Customer Base and New Clients.
We will also use proceeds from this Offering to Revamp the Companys Website Hire new Counselors and rollout a National Marketing and Advertising Program.
Effects of COVID 19:
As of the date of this Offering Circular there exist significant uncertainties regarding the current novel Coronavirus (COVID 19)Pandemic including the scope of health issues the possible duration of the Pandemic and the extent of local and worldwide social political and economic disruption it may cause in the future.
To date the COVID 19 Pandemic has had a discernable short-term negative impact on the ability of the Company to obtain capital needed to accelerate the development of its business. With respect to the Companys business operations the Company does not believe the COVID 19 Pandemic has had a discernable short-term negative impact. Overall the Companys is not of a size that has required it to implement company wide policies in response to the COVID 19 Pandemic.
The COVID 19 Pandemic can be expected to continue to result in regional and local quarantines masking policies labor stoppages and shortages changes in consumer purchasing patterns mandatory or elective shut-downs of retail locations disruptions to supply chains severe market volatility liquidity disruptions and overall economic instability. It can be further expected that the COVID 19 Pandemic will continue to have unpredictable adverse impacts on the Companys business financial condition and results of operations. This situation is changing rapidly and additional impacts may arise of the Company is not currently aware.
The Company intends to continue to assess the evolving impact of the COVID 19 Pandemic and intends to make adjustments accordingly. However the extent to which the COVID 19 Pandemic may impact the Companys business financial condition and results of operations will depend on how the COVID 19 Pandemic and its impact continues to impact the United States and to a lesser extent the rest of the world all of which remains highly uncertain and cannot be predicted at this time.
In light of these uncertainties for purposes of the discussion below except where otherwise indicated the descriptions of the Companys business its strategies the Companys Risk Factors and any other forward-looking statements including regarding the Company the Companys business and the market generally do not reflect the potential impact of the COVID 19 Pandemic or the Companys response(s)thereto.
Emerging Growth Company:
Upon the completion of this Offering the Company may elect to become a Public Reporting Company under the Exchange Act. The Company will qualify as an Emerging Growth Company under the Jumpstart Our Businesses Act of 2012 (the JOBS Act ). As a result the Company will be permitted to and intends to rely on exemptions from certain disclosure requirements. For so long as the Company can remain an Emerging Growth Company the Company will not be required to:
Have an auditor report on its internal controls over financial reporting pursuant to Section 404(b)of the Sarbanes Oxley Act.
Comply with the requirements that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditors report providing additional information about the audit and the financial statements (i.e. an auditor discussion and analysis).
Only two (2)years of audited financial statements in addition to any required unaudited interim financial statements with corresponding reduced Managements Discussion and Analysis of Financial Condition and Results of Operations disclosure.
Reduced disclosure about the Companys executive compensation arrangements.
Not having to obtain non binding advisory votes on executive compensation or golden parachute arrangements.
Exemption from the auditor attestation requirement in the assessment of the Companys internal control over financial reporting.
The Company may take advantage of these exemptions for up to five (5)years or such earlier time that the Company is no longer an Emerging Growth Company. The Company would cease to be an Emerging Growth Company if it were to have more than $1.07 Billion USD in annual revenue the Company has more than $700 Million USD in market value of its stock held by non affiliates or the Company issues more than $1 Billion of non convertible debt over a three year period. The Company may choose to take advantage of some but not all of these reduced burdens. The Company has taken advantage of these reduced reporting burdens herein and the information that the Company provides may be different than what you might get from other public companies in which you hold stock.
Revenues:
The Company is newly formed in June of 2021and to date has not had any revenues. The Company does not anticipate achieving revenues until the Company is full funded and the commercial operations detailed in this Offering Circular have commenced.
Operating Expenses:
Operating expenses were approximately $10 000 USD thus far since its formation in June of 2021. Operating expenses primarily consisted of formation costs accounting fees and legal fees. The Company expects its operating expenses to increase significantly as it implements its business plan as detailed in this Offering Circular.
Net Losses:
The Company incurred an approximate net loss of $10 000 USD thus far since its formation in June of 2021 and the date of this Offering Memorandum.
Liquidity and Capital Resources:
As of August 312021 the Company had total current assets of approximately $0.00 USD and current liabilities of approximately $0.00 USD resulting in a working capital deficit of approximately $0.00 USD.
Off Balance Sheet Arrangements:
As of August 312021there were no off-balance sheet arrangements.
Critical Accounting Policies:
A Critical Accounting Policy is one which is both important to the portrayal of the Companys financial condition and results and requires managements most difficult subjective or complex judgments often as a result of the to make estimates about the effect of matters that are inherently uncertain.
The Companys accounting policies are discussed in detail in the footnotes to the Companys Financial Statements included in this Offering Circular however the Company considers its Critical Accounting Policies to be those related to revenue recognition calculation of revenue share expense stock-based compensation capitalization and related amortization of intangible assets and impairment of assets.
Recently Issued Accounting Pronouncements:
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Companys results of operations financial position or cash flow.
Going Concern:
The Companys current financial condition and the uncertainty surrounding the Companys ability to consummate this Offering raises substantial doubt regarding the Companys ability to continue as a going concern. As shown in the accompanying financial statements the Company has sustained losses from operations since inception and does not have a predictable revenue stream. The Companys financial statement are prepared on the basis that the Company is a going concern. The going concern assumption contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty related to the Companys ability to continue as a going concern.
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ITEM 15. DESCRIPTION OF CAPITAL STOCK
General:
The Company is offering up to 750 000 Shares of Convertible Preferred Stock though this Offering. No Shares of the Companys Common Stock is being offered to investors through this Offering.
The following description summarizes the most important terms of the Companys capital stock. This summary does not purport to be complete and is qualified in its entirety by the provisions of the Companys Articles Bylaws and Shareholders Agreement copies of which have been filed as Exhibits to this Offering Statement of which this Offering Circular is a part. For a complete description of the Companys capita stock you should refer to the Articles Bylaws and Shareholders Agreement and the applicable provisions of Florida Law.
The Company is authorized to issue up to FIVE MILLION (5 000 000)shares of capital stock of which (i)4 000 000 shares are Common Stock without a par value; and (ii)1000 000 shares are Preferred Stock (Preferred Stock )without a par value. The Companys Preferred Stock is designated as Convertible Preferred Stock and Series A Preferred Stock . Through this Offering the Company is offering its 750 000 Shares of Convertible Preferred Stock. The 250 000 Shares of Series A Preferred Stock are reserved for future issuance.
The Convertible Preferred Stock Shares:
As of the date of this Offering Circular none of the Convertible Preferred Stock Shares are issued and outstanding.
Voting: Holders of Convertible Preferred Stock Shares have one vote per Convertible Preferred Stock Share. There is no cumulative voting.
Dividends: Holders of the Companys Convertible Preferred Stock Shares are entitled to receive dividends at the rate of seven percent (7%)of the Convertible Preferred Stock issue price of $100.00 USD which such dividend shall accrue and be payable only if declared by the Companys Board of Directors. While dividends to holder of the Companys Convertible Preferred Stock Shares are accruing the Company has not paid cash dividends to any shareholders of any of the Companys securities and currently does not anticipate paying any cash dividends after this Offering or in the foreseeable future.
Liquidation: In the event of a voluntary or involuntary liquidation dissolution winding up of the Company or other deemed liquidation event holders of the Companys Convertible Preferred Stock Shares shall be entitled to be paid out of assets of the Company available for distribution to its Shareholders before any payment is made to holders of the Companys Common Stock in an amount per Convertible Preferred Stock Share that is equal to the original purchase price of $100.00 USD per Share plus all accrued dividends up to the date of payment.
Transferability: The Companys Convertible Preferred Stock Shares are not freely transferable and are subject to the transfer restrictions in the Shareholders Agreement. Additionally the Companys Convertible Preferred Stock Shares are not registered under the Securities Act or under the securities law of any state or other jurisdiction. Shares of the Companys Convertible Preferred Stock Shares are restricted securities and may be resold by Shareholders only in compliance with Rule 144 promulgated under the Securities Act. Notwithstanding the foregoing the Companys Convertible Preferred Stock Shares are generally transferable to anyone or more members of a class consisting of the Shareholders spouse descendants guardian or conservator to a trust for the benefit of any one or more members of such lass.
The Common Stock:
As of the date of this Offering Circular 1000 000 Shares of the Companys Common Stock is issued and outstanding.
Voting: Holders of the Companys Common Stock have one vote per Share of Common Stock. There is not cumulative voting.
Dividends: The holders of the Companys Common Stock shall be entitled to receive when and if declared by the Companys Board of Directors out of any assets of this corporation legally available therefor any dividends as may be declared from time to time by the Companys Board of Directors. The Company does not anticipate paying any cash dividends after this Offering or in the foreseeable future.
Liquidation: In the event of a voluntary or involuntary liquidation dissolution or winding up of the Company the holders of the Companys Common Stock are entitled to share ratably in the net assets legally available for distribution to Shareholders after
the payment of all debts and other liabilities of the Company; and (ii)the liquidation preference payable to the holders of the Companys Convertible Preferred Stock Shares.
Transferability: The Companys Common Stock Shares are not freely transferable and are subject to the transfer restrictions in the Shareholders Agreement. Additionally the Companys Common Stock Shares are not registered under the Securities Act or under the securities law of any state or other jurisdiction. Shares of the Companys Common Stock Shares are restricted securities and may be resold by Shareholders only in compliance with Rule 144 promulgated under the Securities Act. Notwithstanding the foregoing the Companys Common Stock Shares are generally transferable to anyone or more members of a class consisting of the Shareholders spouse descendants guardian or conservator to a trust for the benefit of any one or more members of such lass.
Warrants:
The Company has issued one warrant to a SEC registered broker dealer and a member of the Financial Industry Regulatory Authority (FINRA )to purchase an amount of Common Stock of the Company equal to the amount of commission paid to in connection with the capital raise described in this Offering Circular.
Transfer Agent and Registrar:
As of the date of this Offering Circular the Company has not engaged a transfer agent and does not intend to engage a transfer agent until such time as the Company is required to do so in order to satisfy the conditional exemption contained in Rule 12g5.1(a)(7)of the Securities Exchange Act of 1934 or the Exchange Act.
ITEM 16. MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the material U.S. Federal Income Tax considerations relating to the acquisition ownership and disposition of the Convertible Preferred Stock Share(s). The summary is based on the Internal Revenue Code (the Code ) and Treasury regulations rulings and judicial decisions as of the date hereof all of which may be repealed revoked or modified with possible retroactive effect. This summary applies to you only if you acquire the Convertible Preferred Stock Share(s)for cash in this Offering Circular at the initial Offering price and hold the Convertible Preferred Stock Share(s)as capital assets within the meaning of Section 1221 of the Code. This summary is for general information only and does not address all aspects of the U.S. Federal Income Taxation that may be important to you in light of your particular circumstances and it does not address state local foreign alternative minimum or non income tax considerations that may be applicable to you. Further this summary does not deal with Convertible Preferred Stock Holders that may be subject to special tax rules including but not limited to insurance companies tax exempt organizations financial institutions dealers in securities or currencies U.S. Commercial Convertible Preferred Stock Holders (as described below)whose functional currency is not the U.S. Dollar certain U.S. expatriates or Holders who hold the Convertible Preferred Stock Share(s)as a hedge against currency risks or as part of a straddle synthetic security conversion transaction or other integrated transaction for U.S. Federal Tax purposes. You should consult your own tax advisor as to the particular tax consequences to your of acquiring holding or disposing of the Convertible Preferred Stock Share(s).
For purposes of this summary a U.S. Convertible Preferred Stock Holder is a beneficial owner of a Convertible Preferred Stock Share(s)that for U.S. Federal Income Tax purposes is: (a)an individual citizen or resident of the United States; (b)a corporation (or other business entity treated as a corporation)created or organized in or under the Laws of the United States or any State thereof (including the District of Columbia); (c)an estate the income of which is subject to U.S. Federal Income Taxation regardless of its source; or (d)a trust if (i)such trust has a valid election in effect under applicable Treasury regulations to be treated as a United States person or (ii)a court within the United States is able to exercise primary supervision over the trusts administration and one or more United States persons have the authority to control all substantial decisions of the trust.
For purposes of this summary a Non U.S. Convertible Preferred Stock Share(s) is a beneficial owner of a Convertible Preferred Stock Share(s)that is neither a U.S. Convertible Preferred Stockholder nor a partnership or any entity or arrangement treated as a partnership for U.S. Federal Income Tax purposes. If a partnership (or other entity or arrangement treated as a partnership for U.S. Federal Income Tax purposes)holds Convertible Preferred Stock Share(s) then the U.S. Federal Income Tax treatment of a partner in such partnership will generally depend on the status of the partner and the activities of the partnership. If you are a partnership that holds Convertible Preferred Stock Shares of a partner in such a partnership you should consult your own tax advisor as to the particular U.S. Federal Income Tax consequences applicable to you.
U.S. Convertible Preferred Stockholders
Dividends
The Management of the Company anticipates that the Convertible Preferred Stock Share(s)will not be issued with original discount for U.S. Federal Income Tax purposes. In such case if you are a U.S. Convertible Preferred Stock Shareholder dividends on a Convertible Preferred Stock Share(s)will generally be taxable to you as ordinary income as it accrues or is received by you in accordance with your usual method of accounting for U.S. Federal Income Tax purposes.
Sale Exchange or Other Taxable Dispositions of Convertible Preferred Stock Shares
If you are a U.S. Convertible Preferred Stock Shareholder upon the sale exchange redemption retirement or other taxable disposition of a Convertible Preferred Stock Shareholder you will generally recognize gain or loss for U.S. Federal Income Tax purposes in an amount equal to the difference if any between (i)the amount of the cash and the fair market value of any property you receive on the sale or other taxable disposition (less an amount attributable to any accrued but unpaid dividends which will be taxable as ordinary dividend income to the extent not previously taken into income) and (ii)your adjusted tax basis in the Convertible Preferred Stock Share(s). Your adjusted tax basis in a Convertible Preferred Stock Share will generally be equal to your cost of the Convertible Preferred Stock Share reduced by any principal payments you have previously received in respect of the Convertible Preferred Stock Share. Such gain or loss will generally be treated as capital gain or loss and will be treated as long term capital gain or loss if your holding period in the Convertible Preferred Stock Share exceeds on year at the time of the disposition. Long term capital gains of non corporate taxpayers are subject to reduced rates of taxation. The deductibility of capital losses is subject to limitation.
Backup Withholding and Information Reporting
U.S. Federal Backup Withholding may apply to payments on the Convertible Preferred Stock Shares and proceeds from the sale or other disposition of the Convertible Preferred Stock Share if you are a non corporate U.S. Convertible Preferred Stock Shareholder and fail to provide a correct taxpayer identification number or otherwise comply with applicable requirements of the backup withholding rules.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a credit against a U.S. Convertible Preferred Stock Shareholders U.S. Federal Income Tax liability and may entitle such Convertible Preferred Stock Shareholder to a refund provided the required information is timely furnished to the Internal Revenue Service (the IRS ).
A U.S. Convertible Preferred Stock Shareholder will also be subject to information reporting with respect to payments on the Convertible Preferred Stock Share(s)and proceeds from the sale or other disposition of the Convertible Preferred Stock Share(s) unless such Convertible Preferred Stock Shareholder is an exempt recipient and appropriately establishes that exemption.
Non U.S. Holders
Dividends
Subject to the discussion of Backup Withholding and information reporting below if you are a Non U.S. Convertible Preferred Stock Shareholder payments of dividends on the Convertible Preferred Stock Shares to you will not be subject to U.S. Federal Income Tax (including branch profits or withholding tax) provided that:
You do not directly or indirectly actually or constructively own 10% or more of the voting power of the stock of the Company.
You are not a bank receiving interest on an extension of credit pursuant to a loan agreement entered into in the ordinary course of your trade or business;
You are not a controlled foreign corporation for U.S. Federal Income Tax purposes that is actually or constructively related to the Company (as provided in the Code);
The dividend payments are not effectively connected with your conduct of a trade or business within the United States; and
You meet certification requirements.
You will satisfy these certification requirements if you certify on IRS Form W 8BEN or a substantially similar substitute form under penalties of perjury that you are not a United States person with the meaning of the Code provide your name and address and file such form with the withholding agent. If you hold the Convertible Preferred Stock Shares through a foreign partnership or intermediary must satisfy certification requirements of applicable Treasury regulations.
Even if the requirements listed above are not satisfied you will be entitled to an exemption from or reduction in U.S. Withholding Tax provided that:
You are entitled to an exemption from or reduction in Withholding Tax or interest under a tax treaty between the United States and your country of residence. To claim this exemption or reduction you must generally complete IRS Form W 8BEN and claim this exemption or reduction on the form. In some cases you must instead be permitted to provide documentary evidence of your claim to the intermediary or a qualified intermediary may already have some or all of the necessary evidence in its files; or
The dividend income on the Convertible Preferred Stock Shares is effectively connected with the conduct of your trade or business in the United States. To claim this exemption you must complete IRS Form W 8ECI.
You may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.
Sale Exchange or Other Taxable Dispositions of Convertible Preferred Stock Shares
Subject to the discussion below regarding Backup Withholding and information reporting if you are a Non U.S. Convertible Preferred Stock Shareholder you will not be subject to U.S. Federal Income Tax (including branch profits tax)on the gain you realize on any sale exchange redemption retirement or other taxable disposition of Convertible Preferred Stock Shares.
The gain is effectively connected with your conduct of a trade or business within the United States and if required by an applicable treaty (and you comply with a applicable certification and other requirements to claim treaty benefits) is generally attributable to a U.S. permanent establishment ;
You are an individual and have been present in the United States for 183 days or more in the taxable year of disposition and certain other requirements are met; or
A portion of the gain represents accrued but unpaid dividends interest in which case the U.S. Federal Income Tax rules for dividendsinterest would apply to such portion.
U.S. Trade or Business
If dividend income on a Convertible Preferred Stock Share or gain from a disposition of the Convertible Preferred Stock Shares is effectively connected with your conduct of a U.S. trade or business and if required by an applicable treaty you maintain a U.S. permanent establishment to which the dividend interest or gain is attributable you will generally be subject to U.S. Federal Income Tax on the dividend interest or gain on a net basis in the same manner as if you were a U.S. Convertible Preferred Stock Shareholder. If you are a foreign corporation you may also be subject to a branch profits tax of 30% of your effectively connected earnings and profits for the taxable year subject to certain adjustments unless you qualify for a lower rate under an applicable income tax treaty.
Backup Withholding and Information Reporting
Under current U.S. Federal Income Tax Backup Withholding and information reporting may apply to payments made by the Company (including any paying agents)to you in respect of the Convertible Preferred Stock Shares unless you provide an IRS Form W 8BEN or otherwise meet documentary evidence requirements for establishing that you are a Non U.S. Convertible Preferred Stock Shareholder or otherwise establish an exemption. The Management of the Company (or its paying agents)may however report payments of dividends on the Convertible Preferred Stock Shares.
The gross proceeds from the disposition of your Convertible Preferred Stock Shares may be subject to information reporting and Backup Withholding Tax at the applicable rate. If you sell your Convertible Preferred Stock Shares outside the United States through a foreign office of a foreign broker and the sales proceeds are paid to you outside the United States then the Backup Withholding and information reporting requirements will generally not apply to that payment. However information reporting but not Backup Withholding will apply to a payment of sales proceeds even if that payment is made outside the United States if you sell your Convertible Preferred Stock Shares through the foreign office of a foreign broker that is for U.S. Federal Income Tax purposes:
A United States person (within the meaning of the Code);
A controlled foreign corporation;
A foreign person 50% of more of whose gross income is effectively connected with a U.S. trade or business for a specified three-year period; or
A foreign partnership with certain connections to the United States
Unless such broker has in its records documentary evidence that you are not a United States person and certain other conditions are met or you otherwise establish an exemption. In addition Backup Withholding may apply to any payment that the broker is required to report if the broker has actual knowledge that you are a United States person.
You should consult your own tax advisor regarding the application of information reporting and Backup Withholding in your particular situation the availability of an exemption from Backup Withholding and the procedure for obtaining such an exemption if available. Backup Withholding is not an additional tax. Any amounts withheld under the Backup Withholding rules may be allowed as a credit against your U.S. Federal Income Tax liability and may entitle you to a refund provided the required information is timely furnished to the IRS.
The U.S. Federal Tax discussion set forth above is included for general information only and may not be applicable depending on the Convertible Preferred Stock Shareholders particular situation. Convertible Preferred Stock Shareholders should consult their tax advisors with respect to the tax consequences to them of the beneficial ownership and disposition of the Convertible Preferred Stock Shares including the tax consequences under State Local Foreign and other tax laws and the possible effects of changes in U.S. Federal and other Tax Laws.
ITEM 17. ADDITIONAL REQUIREMENTS AND RESTRICTIONS:
Restrictions imposed by the USA PATRIOT ACT and Related Acts.
In accordance with the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001or the USA PATRIOT ACT the securities offered hereby may not be offered sold transferred or delivered directly or indirectly to any unacceptable investor which means anyone who is:
A designated national specially designated national specially designated terrorist specially designated global terrorist foreign terrorist organization or blocked person within the definitions provided under the Foreign Assets Control Regulations of the United States or U.S. Treasury Department;
Acting on behalf of or an entity owned or controlled by any government against whom the U.S. maintains economic sanctions or embargoes under the Regulations of the U.S. Treasury Department;
Within the scope of Executive Order 13224-Blocking Property and Prohibiting Transactions with Persons Who Commit Threaten to Commit or Support Terrorism effective September 24th 2001;
A person or entity subject to additional restrictions imposed by any of the following statutes or regulations and executive orders issued thereunder: the Trading with Enemy Act the National Emergencies Act the Antiterrorism and Effective Death Penalty Act of 1996 the International Emergency Economic Powers Act the United Nations Participation Act the International Security and Development Cooperation Act the Nuclear Proliferation Prevention Act of 1994 the Foreign Narcotics Kingpin Designation Act the Iran and Libya Sanctions Act of 1996 the Cuban Democracy Act the Cuban Liberty and Democratic Solidarity Act and the Foreign Operations Export Financing and Related Programs Appropriations Act or any other Law of similar import to any non U.S. country as each such act or law has been or may be amended adjusted modified or reviewed from time to time; or
Designated or blocked associated or involved in terrorism or subject to restrictions under laws regulations or executive orders as may apply in the future similar to any of those described above.
ITEM 18. ERISA CONSIDERATIONS:
An investment in the Company by an employee benefit plan is subject to additional considerations. This is because investments by employee benefit plans are subject to the Employee Retirement Income Security Act of 1974 as amended (ERISA )fiduciary responsibility and prohibited transaction provisions and to restrictions imposed by Code Section 4975. The term Employee Benefit Plan includes without limitation Qualified Pension Profit Sharing and Stock Bonus Plans Keogh Plans Simplified Employee Pension Plans and Tax Deferred Annuities or IRAs established or maintained by an employer or employee organization. Among other things consideration should be given to:
Whether the investment is prudent under Section 404(a)(1)(B)of ERISA;
Whether in making the investment the investing plan will satisfy the diversification requirements of Section 404(a)(1)(C)of ERISA; and
Whether the investment will result in recognition of unrelated business taxable income by the plan and if so the potential after tax investment returns.
ERISA is a broad statutory framework that governs most U.S. retirement and other U.S. employee benefit plans. ERISA and the rules and regulations of the Department of Labor (DOL ) under ERISA contain provisions that should be considered by fiduciaries of employee benefit plans subject to the provisions of Title I of ERISA or ERISA Plans and their legal advisors. The person having investment discretion concerning assets of an employee benefit plan is generally referred to as a fiduciary . Such person should determine whether an investment in the Company is authorized by the applicable governing plan instrument wand whether it is a proper investment for the plan.
ERISA Section 406 and Code Section 4975 prohibit employee benefit plans from engaging in specified transactions involving plan assets with parties that are parties in interest under ERISA or disqualified persons under the Code with respect to the plan.
In addition to considering whether the purchase of securities is a prohibited transaction a fiduciary of an employee benefit plan should consider whether the plan will by investing in the Company be deemed to own an undivided interest in the Companys assets with the result that the Companys operations would be subject to the regulatory restrictions of ERISA including its prohibited transaction rules as well as the prohibited rules of the Code.
The Department of Labor Regulations provide guidance concerning whether assets of an entity in which employee benefit plans acquire equity interests would be deemed plan assets under certain circumstances. Under these regulations an entitys assets would not be considered to be plan assets if among other things:
Equity interests acquired by employee benefit plans are publicly offered securities for example the equity interests are widely held by 100 or more investors independent of the issuer and each other freely transferrable and registered under some provision of the Federal Securities Laws;
The entity is an operating company for example it is primarily engaged in the production or sale of a product or service other than the investment of capital either directly or through a majority owned subsidiary or subsidiaries; or there is no significant investment by benefit plan investors which is defined to mean that less than 25% of the value of each class of equity interest is held by the employee benefit plans referenced to above.
The Company does not intend to limit investment by benefit plan investors in the Company because the Company does believe that it does quality as an operating company. If the Department of Labor were ever to take the position that the Company is not an operating company and that the Company has significant investment by benefit plans then the Company may become subject to the regulatory restrictions of ERISA which would likely have a material adverse effect on the Companys business and the value of its Common Stock.
Plan fiduciaries contemplating a purchase of securities offered hereunder are highly encouraged to consult with their own legal counsel regarding the consequences under ERISA and the Code in light of the serious penalties imposed on persons who engage in prohibited transactions or other violations.
ACCEPTANCE OF ORDERS ON BEHALF OF PLANS IS IN NO RESPECT A REPRESENTATION BY THE COMPANYS BOARD OF DIRECTORS OR ANY OTHER PARTY RELATED TO THE COMPANY THAT THIS INVESTMENT MEETS THE RELEVANT LEGAL REQUIREMENTS REGARDING INVESTMENTS BY ANY PARTICULAR PLAN OR THAT AN INVESTMENT WITH THE COMPANY IS APPROPRIATE FOR ANY PARTICULAR TYPE OF PLAN. THE PERSON WITH INVESTMENT DISCRETION SHOULD CONSULT THEIR ATTORNEY AND FINANCIAL ADVISORS AS TO THE APPROPRIATENESS OF AN INVESTMENT IN THE COMPANY BASED ON CIRCUMSTANCES OF THE PARTICUAL PLAN.
ITEM 19.
PUBLIC REPORTING REQUIREMENTS OF THE COMPANY:
The Company will furnish the following reports statements and tax information to each shareholder.
Reporting Requirements under Tier II of Regulation A. Following this Tier II Regulation A Offering the Company will be required to comply with certain ongoing disclosure requirements under Rule 257 of Regulation A. The Company will be required to file: (i)an annual report with the SEC on Form 1 K; (ii)a semi-annual report with the SEC on Form 1 SA; (iii)current reports with the SEC on Form 1-U; and (iv)a notice under cover of Form 1.Z. The necessity to file current reports will be triggered by certain corporate events similar to the ongoing reporting obligation faced by issuers under the Exchange Act however the requirement to file a Form 1 U is expected to be triggered by significantly fewer corporate events than that of the Form 8 K. Parts I II of Form 1-Z will be filed by the Company when it decides to and is no longer obligated to file and provide annual reports pursuant to the requirements of Regulation A.
Annual Reports. As soon as practicable but in no event later than one hundred twenty (120)days after the close of the Companys fiscal year ending January 31st the Companys Board of Directors will cause to be mailed or made available by any reasonable means to each Shareholder as of the date selected by the Companys Board of Directors an annual report containing financial statements of the Company for such fiscal year presented in accordance with GAAP including a balance sheet and statements of operations company equity and cash flows with such statements having been audited by an accountant selected by the Companys Board of Directors. The Companys Board of Directors shall be deemed to have made a report available to each Shareholder as required if it has either (i)filed such report with the SEC via its Electronic Data Gathering Analysis and Retrieval System (the EDGAR System )and such report is publicly available on such system or (ii)made such report available on any website maintained by the Company and available for viewing by the Shareholders.
Tax Information On or before January 31st of the year immediately following the Companys fiscal year which is currently January 1st through December 31st the Company will send to each Shareholder such tax information as shall be reasonably required for Federal and State Income Tax reporting purposes.
Stock Certificates. The Company does not anticipate issuing Stock Certificates representing Convertible Preferred Stock Shares purchased in this Offering to new Shareholders. However the Company is permitted to issue stock certificates and may do so at the request of the investor andor a Stock Transfer Agent. The number of Convertible Preferred Stock Shares held by each Shareholder will be maintained by the Company or the Companys Stock Transfer Agent in the Companys register.
ITEM 20. DIRECT LISTING OF THE COMPANYS SECURIITES ON THE NEW YORK STOCK EXCHANGE OR NASDAQ
Direct Listings: An evolving pathway to the public capital markets.
Direct listings have increasingly been gaining attention as a means for a private company to go public. A direct listing refers to the listing of a privately held companys stock for trading on a national stock exchange (either the NYSE or Nasdaq)without conducting an underwritten offering spin off or transfer quotation from another regulated stock exchange. Under historical stock exchange rules direct listings involve the registration of a secondary offering of a companys shares on a registration statement on Form S.1 or other applicable registration form publicly filed with and declared effective by the Securities and Exchange Commission or the SEC at least 15 days in advance of launch referred to as a Selling Shareholder Direct Listing. Existing shareholders such as employees and early stage investors whose shares are registered for resale or that may be resold under Rule 144 under the Securities Act are able to sell their shares on the applicable exchange but are not obligated to do so providing flexibility and value to such shareholders by creating a public market and liquidity for the companys stock. Historically companies were not permitted to raise fresh capital as part of the direct listing process. On December 22 2020 however the SEC issued its final approval of rules proposed by the NYSE that permit a primary offering along with or in lieu of a direct secondary listing referred to as a Primary Direct Floor Listing. Upon listing of the companys stock the company becomes subject to the reporting and governance requirements applicable to publicly traded companies including periodic reporting requirements under the Securities Exchange Act of 1934 as amended (the Exchange Act) and governance requirements of the applicable exchange.
Companies may pursue a direct listing to provide liquidity and a broader trading market for their shareholders; however the listing company can also benefit even if not raising capital in a Primary Direct Floor Listing. A direct listing whether a Primary Direct Floor Listing or a Selling Shareholder Direct Listing will provide a company with many of the benefits of a traditional IPO including access to the public markets for capital raising and the ability to use publicly traded equity as an acquisition currency.
Advantages of a direct listing as compared to an IPO.
Immediate Benefits to Existing Shareholders.
In both a Selling Shareholder Direct Listing and Primary Direct Floor Listing all selling shareholders whose shares are registered on the applicable registration statement or whose shares are eligible for resale under Rule 144 will have the opportunity to participate in the first day of trading of the companys stock. Shareholders who choose to sell are able to do so at market trading prices rather than only at the initial price to the public set in an IPO. The ability to sell at market prices on the first day of a listing can be a significant benefit to existing shareholders who elect to sell. However this benefit assumes there is sufficient market demand for the shares offered for resale.
Potentially Wider Initial Market Participation.
The traditional IPO process includes a focused set of participants and institutional buyers tend to feature prominently in the initial allocation of shares to be sold by the underwriting syndicate. Direct listings offer access to a wider group of investors as any investor may place orders through its broker. In a Selling Shareholder Direct Listing any prospective purchasers of shares are able to place orders with their broker dealer of choice at whatever price they believe is appropriate and such orders become part of the initial reference price setting process. The price setting mechanisms applicable to Primary Direct Floor Listings differ in material respects from the practice that has developed with respect to Selling Shareholder Direct Listings. In a Primary Direct Floor Listing prospective purchasers of shares are able to place orders with their broker dealer of choice at whatever price they believe is appropriate but will have priority for purchases at the minimum offering price specified in the related prospectus.
Flexibility in Marketing.
IPO marketing has become more flexible since the introduction of rules providing for testing the waters communications by Emerging Growth Companies and starting December 3 2019 all companies. However a direct listing allows a company to avoid the rigidity of the traditional roadshow conducted for a specified period of time following the publicly announced launch of an IPO and allows it to tailor marketing activities to the specific considerations underlying the direct listing. For instance the traditional roadshow has been replaced in some direct listings by an investor day whereby the company invites investors to learn about the company one to many such as via a webcast which can be considered more democratic as all investors have access to the same educational materials at once. Marketing efforts may include one or more of these investor days and a roadshow like presentation conducted at times deemed most advantageous (although the applicable registration statement must still be publicly filed for at least 15 days in advance of any such marketing efforts). Although the approximate timing of the direct listing can be inferred from the status of the publicly filed registration statement the company may have more flexibility as to the day its shares commence trading on the applicable stock exchange.
Brand Visibility.
As direct listings are still a relatively novel concept in U.S. capital markets any direct listing with moderate success in particular a direct listing involving a primary capital raise will likely draw broad interest from market participants and relevant media. This effect is multiplied when the listing company has a well recognized brand name.
No Underwriting Fees.
A direct listing can save money by allowing companies to avoid underwriting discounts and commissions on the shares sold in the IPO. In direct listings to date the companies have engaged financial advisers to assist with the positioning of the company and the preparation of the registration statement. Such financial advisors have been paid significant fees though substantially less than traditional IPO underwriting discounts and commissions. This may marginally decrease a companys cost of capital although the company will still incur significant fees to market makers or specialists independent valuation agents auditors and legal counsel.
More Flexible Lockup Agreements.
In most direct listings to date existing management and significant shareholders are not typically subject to the restrictions imposed by 180 day lockup agreements standard in IPOs. Notwithstanding as practice evolves practice may vary from transaction to transaction. For example Spotifys largest non management shareholder was subject to a lockup and Palantirs directors and executive officers were subject to a lockup period. We expect that lockup arrangements in direct listings will continue to be more tailored to the particular companys circumstances than in traditional IPOs.
Certain issues to consider before choosing a direct listing.
Establishing a Price Range or Initial Reference Price.
No marketing efforts are permissible without a compliant preliminary prospectus on file with the SEC and such prospectus must include an estimated price range. In a traditional IPO and Primary Direct Floor Listing the cover page of the preliminary prospectus contains a price range of the anticipated initial sale price of the shares. In a Selling Shareholder Direct Listing the current market practice is to describe how the initial reference price is derived (e.g. by buy and sell orders collected by the applicable exchange from various broker dealers). These buy and sell orders have in the past been largely determined with reference to high and low sales prices per share in recent private transactions of the subject company. In cases where a company does not have such transactions to reference additional information will be necessary to educate and assist investors and help establish an initial bid price. In addition the listing company in a direct listing may elect to increase the period between the effectiveness of its registration statement and its first day of trading thereby allowing time for additional buy and sell orders to be placed. In either case the financial advisor to the company will play an important role in establishing a price range or initial reference price as applicable.
Financial Advisors and Their Independence.
In a Selling Shareholder Direct Listing the rules of both the NYSE and Nasdaq require that the listing company appoint a financial advisor to provide an independent valuation of the listing companys publicly held shares and in practice assist the applicable exchanges market maker or specialists as applicable in setting a price range or initial reference price as applicable. In past direct listings in particular those involving the NYSE the financial advisor that served this role was not the financial advisor the listing company engaged to advise generally including to assist the company define objectives for the listing position the equity story of the company advise on the registration statement assist in preparing presentations and other public communications and help establish a firm price range in a Primary Direct Floor Listing. As reviewed in detail below the financial advisor that values the publicly held shares and assists the applicable exchanges market maker or specialists as applicable must be independent which under the relevant rules disqualifies any broker dealer that has provided investment banking services to the listing company within the 12 months preceding the date of the valuation.
Shares to be Registered.
In a direct listing in addition to new shares being issued in connection with a Primary Direct Floor Listing a company generally registers for resale all of its outstanding common equity which cannot then be sold pursuant to an applicable exemption from registration (such as Rule 144) including those subject to registration rights obligations. The company may also register shares held by affiliates and non affiliates who have held the shares for less than one year or otherwise did not meet the requirements for transactions without restriction under Rule 144.Companies may also register shares held by employees to address any regulatory concerns that resales of shares by employees occurring around the time of the direct listing may not have been entitled to an exemption from registration under the Securities Act. All shares subject to registration may be freely resold pursuant to the registration statement only as long as the registration statement remains effective and current. The company will typically bear the related costs.
Direct Listing Specific Risks.
Traditional IPOs offer certain advantages that are not currently present in direct listings. Going public without the structure of an IPO process is not without risk such as the need to obtain research coverage in the absence of an underwriting syndicate that has research analysts or the need to educate investors on the companys business model. Any company considering a direct listing should contemplate whether its investor relations apparatus is capable of playing an outsized role in coordinating marketing efforts and outreach to potential investors both in connection with the listing and after the transaction. Notably in a Selling Shareholder Direct Listing the listing companys management plays no role in setting the initial reference price and certain market making activities conducted by the underwriting syndicate may be unavailable. In a Primary Direct Floor Listing the listing companys management may play an outsized role in determining an initial price range. Either scenario may present unacceptable risk for companies that may otherwise be poised to undertake a direct listing.
The NYSE and Nasdaq rules applicable to a direct listing.
Background.
The direct listing rules of both the NYSE and Nasdaq Global Select Market are substantially similar and are structured as an exception to each exchanges requirement concerning the aggregate market value of the company to be listed. Prior to the direct listing rules companies that did not previously have their common equity registered under the Exchange Act were required to show an aggregate market value of publicly held shares in excess of $100 million ($110 million for Nasdaq Global Select Market under certain circumstances) such market value being established by both an independent third party valuation and recent trading prices in a trading market for unregistered securities (commonly referred to as the Private Placement Market).
Publicly held shares include those held by persons other than directors officers and presumed affiliates (shareholders holding in excess of 10%). The Private Placement Market includes trading platforms operated by any national securities exchange or registered broker-dealers. Generally in a direct listing the relevant company either (i)does not have its shares traded on a Private Placement Market prior its listing or (ii)underlying trading in the Private Placement Market is not sufficient to provide a reasonable basis for reaching conclusions about a companys trading price.
Direct Listings on Secondary Markets.
Nasdaq rules permit direct listings onto the Nasdaq Global Market and Nasdaq Capital Market the second and third tier Nasdaq markets respectively. If the company to be listed on a secondary market does not have recent sustained trading activity in a Private Placement Market and thereby must rely on an independent third party valuation consistent with the rules described above such calculation must reflect a (i)tentative initial bid price (ii)market value of listed securities and (iii)market value of publicly held shares that each exceed 200 percent of the otherwise applicable requirements.
Requirements for a Direct Listing.
The direct listing rules discussed above were intended to provide relief for privately held unicorns or companies that are otherwise sufficiently capitalized and which do not need to raise money. Each exchanges listing standards applicable to direct listings by U.S. companies are summarized by relevant exchange in the 05 pages that follow.
NYSE (Selling Shareholder Direct Listing):
Market Value of Publicly Held Shares (ie held by persons other than directors officers and presumed affiliates):
The listing company must have a recent valuation from an independent third party indicating at least $250 Million USD in aggregate market value of publicly held shares (Rule 102.01A(E))
Financial Standards:
The listing company is required to meet one of the following applicable financial standards:
Each of (a)aggregate adjusted pretax income for the last three fiscal years in excess of $10 Million USD (b)with at least $2 Million USD in each of the two most recent fiscal years and (c)positive income in each of the last three years (the NYSE Earnings Test ).
Global Market Capitalization of $200 Million USD (the Global Market Capitalization Test ).
Distribution Standards:
The listing company must meet the following distribution standards:
400 round lot shareholders;
1.1 million publicly held shares; and
Minimum initial reference price of $4.00 USD
Engagement of Financial Advisor:
Any valuation used in connection with a direct listing must be provided by an entity that has significant experience and demonstrable competence in the provision of such valuations. (Rule 102.01A(E)).
A valuation agent will not be deemed to be independent if (Rule 102.01A(E)):
At the time it provides such valuation the valuation agent or any affiliated person or persons beneficially own in the aggregate as of the date of the valuation more than 5% of the class of securities to be listed including any such securities exercisable within 60 days.
The valuation of any affiliated entity has provided any investment banking services to the listing applicant within 12 months preceding the date of the valuation. For purposes of this provision investment banking services include without limitation acting as an underwriter in an offering for the issuer; acting as a financial advisor in a merger or acquisition; providing venture capital equity lines of credit PIPEs (private investment public equity transactions) or similar investments; serving as placement agent for the issuer; or acting as a member of a selling group in a securities underwriting.
The valuation agent or any affiliated entity has been engaged to provide investment banking services to the listing applicant in connection with the proposed listing or any related financings or other relating transactions.
NYSE (Primary Direct Listing Floor):
Market Value of Publicly Held Shares (ie held by persons other than directors officers and presumed affiliates):
The listing company (i)must sell at least $100 Million of shares in the opening auction or (ii)show that the aggregate market value of shares sold in the opening auction together with publicly held shares exceeds $250 Million USD in each case with market value calculated using the lowest price per share set forth in the related prospectus.
Financial Standards:
The listing company is required to meet one of the following applicable financial standards:
Each of (a)aggregate adjusted pre tax income for the last three fiscal years in excess of $10 Million USD (b)with at least $2 Million USD in each of the two most recent fiscal years and (c)positive income in each of the last three years (the NYSE Earnings Test ).
Global Market Capitalization of $200 Million USD (the Global Market Capitalization Test ).
Distribution Standards:
The listing company must meet the following distribution standards:
400 round lot shareholders;
1.1 million publicly held shares; and
Minimum initial reference price of $4.00 USD
Engagement of Financial Advisor:
Not required in connection with a Primary Direct Floor Listings as the related prospectus is required to include a price range within which the company anticipates selling the shares it is offering.
NASDAQ GLOBAL SELECT MARKET:
Market Value of Publicly Held Shares (ie held by persons other than directors officers and presumed affiliates):
The listing company must have a recent valuation from an independent third party indicating at least $250 Million USD in aggregate market value of publicly held shares. (Rule IM 5315.1(b))9
Financial Standards:
The listing company is required to meet one of the following applicable financial standards:
Each of (a)aggregate adjusted pre tax income for the last three fiscal years in excess of $11 Million USD (b)with at least $2.2 million in each of the two most recent fiscal years (c)positive income in each of the last three fiscal years (the NASDAQ Earnings Standard ).
Each of (a)average market capitalization in excess of $550 Million USD over the prior 12 months (b)$110 Million USD in revenue for the previous fiscal year and (c)aggregate cash flows for the last three fiscal years in excess of
$27.5 Million USD and positive cash flows for each of the last three fiscal years (the Capitalization with Cash Flow Standard ).
Each of (a)average market capitalization in excess of $850 Million USD over the prior 12 months and (b)$90 Million in revenue for the previous fiscal year (the Capitalization with Revenue Standard ).
Each of (a)market capitalization in excess of $160 Million USD (b)total assets in excess of $80 Million USD and
(c)stockholders equity in excess of $55 Million USD (the Assets with Equity Standard ).
Distribution Standards:
The listing company must meet the following liquidity standards:
450 round lot shareholders or 2 200 total shareholders;
1.25 million publicly held shares; and
Minimum initial reference price of $4.00 USD
Engagement of Financial Advisor:
Any valuation in connection with a direct listing must be provided by an entity that has significant experience and demonstrable competence in the provision of such valuations (Rule IM 5315.1(e))
A valuation agent will not be deemed to be independent if (Rule 5315.1(f)):
NASDAQ GLOBAL MARKET:
Market Value of Publicly Held Shares (ie held by persons other than directors officers and presumed affiliates):
The listing company must have a recent valuation from an independent third party indicating at in excess of $16 Million USD to
$40 Million USD in aggregate market value of publicly held shares depending on the financial standard met below (Rule 5405).
Financial Standards:
The listing company is required to meet one of the following applicable financial standards:
Each of(a)aggregate adjusted pre tax income in excess of $1 Million USD in the last fiscal year or in two of the last three fiscal years and(b)stockholders equity in excess of $15 Million USD.
Each of(a)stockholders equity in excess of $30 Million USD and (b)two years of operating history.
Market value of listed securities in excess of $150 Million USD.
Total assets and total revenue in excess of $75 Million USD in the latest fiscal year or in two of the last three fiscal years.
Distribution Standards:
The listing company must meet the following liquidity standards:
400 round lot shareholders or 2 200 total shareholders;
1.1 million publicly held shares; and
Minimum initial reference price of $8.00 USD
Engagement of Financial Advisor:
Any valuation in connection with a direct listing must be provided by an entity that has significant experience and demonstrable competence in the provision of such valuations (Rule IM 5315.1(e))
A valuation agent will not be deemed to be independent if (Rule 5315.1(f)):
NASDAQ CAPITAL MARKET:
Market Value of Publicly Held Shares (ie held by persons other than directors officers and presumed affiliates):
The listing company must have a recent valuation from an independent third party indicating at in excess of $10 Million USD to
$30 Million USD in aggregate market value of publicly held shares depending on the financial standard met below (Rule 5505).
Financial Standards:
The listing company is required to meet one of the following applicable financial standards:
Each of (a)stockholders equity in excess of $15 Million USD and (b)two years of operating history
Each of (a)stockholders equity in excess of $4 Million USD and (b)market valuation of list securities in excess of
$100 Million USD.
Total assets and total revenue of $75 Million USD in the latest fiscal year or in two of the last three fiscal years.
Distribution Standards:
The listing company must meet the following liquidity standards:
300 round lot shareholders or 2 200 total shareholders;
1 million publicly held shares; and
Minimum initial reference price of $8.00 USD OR closing price of $6.00 USD.
Engagement of Financial Advisor:
Any valuation in connection with a direct listing must be provided by an entity that has significant experience and demonstrable competence in the provision of such valuations (Rule IM 5315.1(e))
A valuation agent will not be deemed to be independent if (Rule 5315.1(f)):
ITEM 21. DIRECT LISTING OF THE COMPANYS SECURIITES ON THE OTC MARKET (Only in the event that the
Company does not qualify for a listing of the Companys Securities on the NYSE MKT or NASDAQ).
Overview:
Public trading is often a key component in creating successful and sustainable enterprises over the long term and provides companies with access to benefits not easily available to private companies.
Companies go public to build visibility create share liquidity grow their valuation gain wider access to capital and convey their reputation to investors. Public companies have the advantage of perpetual capital competitive benchmarks and trust that is driven by transparency.
In contrast to the traditional accelerated IPO process a Slow PO enables companies to enter into the public markets by making previously restricted shares available for public trading by brokers on the OTCQX OTCQBand PinkMarkets. The Slow PO is akin to a direct listing on an exchange where a company goes public without raising money and without underwriting as in a traditional IPO. The longer on ramp allows seasoned companies with an established investor base to avoid the high costs and time pressures of a traditional IPO while growing their liquidity organically over time. The Slow PO also provides management more resources to focus on executing their business plans as they grow into the company they aspire to be.
Shareholder capital raised through private placements to angel investors private equity firms and venture capital has created a huge pool of value that can be unlocked and used by companies to build an informed and efficient public trading market of these freely tradable shares.
Benefits of a Slow PO
Provides management with more resources to focus on growing the business rather than meeting externally imposed financial targets and time pressures of a traditional IPO.
Builds investor confidence in the quality of the companys management and financials as the market in its shares expand.
Enables companies to grow liquidity organically through a slower entry to the public markets.
Allows companies to choose the market visibility and reporting status that best fits their needs whether SEC reporting or Alternative Reporting Standard.
How a Slow PO Works:
A Slow PO enables companies to enter the public markets by making previously restricted shares available for public trading on the OTCQX OTCQB and Pink markets.
RAISE CAPITAL IN PRIVATE OR RESTRICTED OFFERINGS OR ISSUE SHARES TO EMPLOYEES: The Securities Act of
1933 provides several exemptions from registration for companies looking to sell shares to investors. Four of the more popular offering exemptions are:
Regulation A+ (Tier I Tier II)
Rule 506 of Regulation D
Rule 144A
Rule 701 (for issuance to employeesservice providers only)
MAKING SHARES TRADABLE AFTER REGISTRATION OR SEASONING:
Registration: Once shares have been issued to make them immediately tradable a company would have to file a registration statement with respect to the securities under the Securities Act of 1933.
Seasoning: A company may work with its attorney and transfer agent to remove restrictive legends from shares held by non affiliates for greater than six months (for securities of issuers current with their reporting obligations to the SEC) or one year (for securities of non SEC reporting issuers).
ENABLE BROKERDEALERS TO QUOTE SHARES ON OTC LINKATS:
a)A FINRA member broker dealer must sponsor the companys securities by filing a Form 211 with FINRA. After 30 days those securities will become piggyback qualified allowing any broker dealer to quote them.
Liquidity on OTCQX OTCQB OTC Pink:
OTC LinkATS is an SEC registered Alternative Trading System for broker dealer subscribers to provide investors with an efficient and effective electronic trading experience. OTC LinkATS directly links a diverse network leading U.S. broker dealers that provide liquidity and execution services for U.S. and global OTCQX OTCQB and Pink securities. Its real time price transparency and connectivity offers broker dealers control of trades and choice of counterparties so that they can efficiently provide best execution attract order flow and comply with FINRA and SEC regulations.
In addition investors in all OTCQX and OTCQB companies may view the full market depth of their stock free of charge on www.otcmarkets.com through the Real Time Level 2 Quote Display Service. OTC Link ATS is operated by OTC Link LLC a FINRA member broker dealer and wholly owned subsidiary of OTC Markets Group Inc.
OTC Link ATS is operated by OTC Link LLC a FINRA member broker dealer and wholly owned subsidiary of OTC Markets Group Inc.
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ITEM 22.
HOW TO SUBSCRIBE:
Subscription Procedures
Investors seeking to purchase Shares of the Companys Convertible Preferred Stock who satisfy the Qualified Purchaser standards should proceed as follows:
Read this entire Offering Circular (including all Exhibits hereto)and any supplements accompanying this Offering Circular.
Electronically complete and execute a copy of the Subscription Agreement. A complete copy of the Subscription Agreement including instructions for completing it is included in this Offering Circular as Exhibit A.
By executing the Subscription Agreement and paying the total purchase price for the Companys Convertible Preferred Stock Shares subscribed for each investor agrees to accept the terms of the Subscription Agreement and attests that the investor meets the minimum standards of a Qualified Purchaser. And for non-accredited investors that such subscription for Shares of the Companys Convertible Preferred Stock does not exceed ten percent(10%)of the greater of such investors annual income or net worth (for natural persons) or ten percent(10%)of the greater of annual revenue or net assets at fiscal year end (for non natural persons). Subscriptions will be binding upon investors but will be effective only upon the Companys acceptance and the Company reserves the right to reject any subscription in whole or in part.
Right to Reject Subscriptions. After the Company receives your complete executed Subscription Agreement and the funds required under the Subscription Agreement have been received the Company has the right to review and accept your subscription in whole or in part for any reason or for no reason. The Company will return all monies from rejected subscriptions immediately to you generally without interest and without deduction.
Acceptance of Subscriptions. Upon the Companys acceptance of a Subscription Agreement the Company will countersign the Subscription Agreement and issue the Shares at closing. Once you submit the Subscription Agreement and it is accepted you may not revoke or change your subscription or request your subscription funds returned. All accepted Subscription Agreements are irrevocable.
Minimum Purchase Requirements. You must purchase at least ten(10)Convertible Preferred Stock Shares at a price of $100.00 USD per Convertible Preferred Stock Share. The Company reserves the right to revise the minimum purchase requirements in the future.
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ITEM 23. ADDITIONAL INFORMATION:
The Company has filed with the SEC an Offering Statement under the Securities Act on Form 1-A regarding this Offering. This Offering Circular which is part of the Offering Statement does not contain all the information set forth in the Offering Statement and the exhibits related thereto filed with the SEC reference to which is hereby made. Upon Qualification of the Offering Statement the Company will be subject to the informational reporting requirements of the Exchange Act that are applicable to Tier 2 companies whose securities are registered pursuant to Regulation A and accordingly the Company will file annual reports semi-annual reports and other information with the SEC. You may read and copy the Offering Statement the related exhibits and the reports and other information the Company has filed and will file in the future at the SECs public reference facilities maintained by the SEC at 100 F Street N.E. Washington DC 20549. You can also request copies of those documents upon payment of a duplicating fee by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information regarding the operations of the public reference rooms. The SEC also maintains a website at www.SEC.gov that contains reports information statements and other information regarding issuers that file with the SEC.
You may also request a copy of these filings at no cost by writing emailing or telephoning the Company at:
HOWARDS MBS INC
7401 Wiles Road Coral Springs Florida 33067
Within 120 days after the end of each fiscal year the Company will electronically provide to all Shareholders of record an annual report. The annual report will contain statements and certain other financial narrative information that the Company is required to provide to its Shareholders. The Company does not intend to send paper copies out of its reports unless requested in writing by a Shareholder.
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SIGNATURES
The Issuer has duly caused this Offering Circular to be signed on its behalf by the undersigned thereunto duly authorized.
HOWARDS MBS INC:
By: Ms. Ketsha Thompson
By: Name: Ms. Ketsha Thompson
Title: Chief Executive Officer
HOWARDS MBS INC
FINANCIAL STATEMENTS
Year Ended August 312021 (With Independent Auditors Report)
HOWARD MBS INC.
2021 Review
INDEX
Description Page Number
Independent Accountants Review Report 1
Financial Statements
Combined Balance Sheet 2
Combined Statement of Income and Retained Earnings 3
Combined Statement of Cash Flows 4
Footnotes to the Financial Statements 5to8
Howards MBS Inc.
ACCOUNTING ANO BUS.IN ESS Mf NAGEMENT
Audits: AMSTARDAM BELGIUM GHANA LONDON PARIS MADRID SPAIN SOUTH AFRICA POLAND
INDEPENDENT AUDITORS REVIEW REPORT
John P. Holder C.F.O M.B.A. Christina E. Gibson. C.P.A Todd Middlemas. C.P.A. Frederick T Monett. CPA.
To the Board of Directors of Howards MBS Inc.
CERTIFIED PUBLIC ACCOUNTANTS
Report on the Financial Statements
We have audited the accompanying financial statements of Howards MBS Inc. (The company)(a for profit S Corporation) which compdse the balance sheet as of (inception)through August 312021and the related statements of income and officers equity from July 312021 (inception August 312021then ended and the related notes to the financial statements.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from matedal misstatement whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves perfo1ming procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment including the assessment of the1isks of mate1ial misstatement of the financial statements whether due to fraud or enor. In making those dsk assessments the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements to design audit procedures that are appropriate in thecircumstances but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. Accordingly we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion the financial statements refened to above present fairly in all material respects the financial position of Howards MBS Inc. as of August 312021and the results of its operations presentedcash flow and equity from July 12021 (inception)through August 312021in accordance with accounting p1inciples generally accepted in the United States of America.
The accompanying notes are integral parts these financial statements. 3
Howards MBS Inc.
HOWARDS MBS INC
Balance Sheet
As of August 312021
For the period from May 30 2021to August 312021
ASSETS
Current Assets
Cash $0
Total Current Assets
TOTALASSETS $0 LIABILITIES AND EQUITY
Current Liabilities
Total Current Liabilities $0
TOTAL CURRENT LIABLITIES $0
Officer Shares Equity
TOTAL SHAERHOLDER EQUITY $0 TOTAL LIABILITIES AND SHAREOWNER EQUITY $0
Howards MBS Inc.
HOWARDS MBS INC
Statement of Operations As of August 312021
For the period from May 30 2021to August 312021 REVENUE
Total revenue $0
EXPENSES
Total operating expenses $ 0
LOSS FROM OPERATIONS $0
OTHER INCOME (EXPENSES) $0
NET LOSS $0
Howards MBS Inc.
HOWARDS MBS INC
Statement of Share Holder Value As of August 312021
For the period from May 30 2021to August 312021
Issuance of Founders Preferred Stock
Class A Preferred
1000
Stock Retained Earnings
Total
Contribution
$0.00
$0.00
Net Income (loss)
0.00
0.00
0.00
1000
$ 0.00 $ 0.00
0.00 0.0
0
0.00 0.0
0
August 312021
0.00
1000 0.00 0.00
HOWARDS MBS INC
Statement of Cash Flows As of August 312021
For the period from May 30 2021to August 312021 CASH FLOWS OPERATING ACTIVITIES
Net Loss $0
Adjustment to reconcile net income (loss) $0 To net cash provided by (used in)
Operating activities: $0
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash provided by financing activities
NET INCREASE IN CASH
Cash at beginning of month $0
Cash at the end ofTmheonatchcompanying notes are integral parts these financial $0
SUPPLEMENT DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during months for interest $0
Cash paid during the months for income taxes $0
Howards MBS Inc.
HOWARDS MBS INC
Notes to Financial Statements
For the period from May 30 2021to August 312021
Notes Corporate shareholder Shares
HOWARDS MBS INC Fund 1authorized one preferred class of stock as of July 2021 authorized and issued are as follows
Class A Common Shares represent 100 % of stock of the total interest in the company. During the period from May 30 2021to August 312021the company issued 1000 shares Preferred Stock 100.00 par value to one stockholder for $0.
Organization
HOWARDS MBS INC The Company was formed as a Florida Stock as a for profit corporation on May 30 2021 and is headquartered in Florida where it maintains its Operation. Accordingly the Company has only a limited history upon which an evaluation of its prospects and future performance can be made The Company seeks to continue to educate and consult with clients individually and within groups. The Company has partnered with BrightFi for the release of the Companys Proprietary Credit Card
Debit Card Program. The Companys Credit Card Program Extra Money Network is ready for release and expects to have ONE MILLION CARDS in circulation in 2022. The Extra Money Network (EMN )will also provide EMN Credit Monitoring EMN Financial Consulting Education and engage in much larger conversations with the Companys Customer Base and New Clients.
The Company recognizes revenue when Credit cards are issued and consumers are processing transactions
Effects of COVID-19:
As of the date of this Offering Circular there exist significant uncertainties regarding the current novel Coronavirus (COVID-19)Pandemic including the scope of health issues the possible duration of the Pandemic and the extent of local and worldwide social political and economic disruption it may cause in the future. To date the COVID-19 Pandemic has had a discernable short-term negative impact on the ability of the Company to obtain capital needed to accelerate the development of its business. With respect to the Companys business operations the Company does not believe the COVID-19 Pandemic has had a discernable short-term negative impact. Overall the Companys is not of a size that has required it to implement company-wide policies in response to the COVID-19 Pandemic. The COVID- 19 Pandemic can be expected to continue to result in regional and local quarantines masking policies labor stoppages and shortages changes in consumer purchasing patterns mandatory or elective shut- downs of retail locations disruptions to supply chains severe market volatility liquidity disruptions and
overall economic instability. We have not been able to measure the financial impact on the company but will review operations so it does not reflect the potential impact of the COVID 19 Pandemic or the Companys response(s)thereto.
Howards MBS Inc.
Summary of Significant Accounting Policies Basis of Accounting
The accompanying combined financial statements have been prepared on the accrual basis of accounting.
Income Taxes
The Company with the consent of its stockholders have elected to be taxed under sections of the federal and state income tax law which provide that in lieu of sub chapter S as a C Corporation for income taxes the officer as a C corporation if this corporation makes more than eigteen million a flat rate of 35 percent will be applied and only income paid as dividends get taxed twice . Income distributed as salary or deferred compensation is a deduction. As a result of this election no income tax have been recograzed in the accompanying financial statements. The company periodically assesses whether it has incurred income tax expense or related interest or penalties in accordance for uncertain income tax positons. No such amonuts were recognized.
The Company adopted the income tax standards for uncertian tax postions. as a result of this implementation.
The Company evaluated the income tax postions and determined that it has no uncertain tax positions of of August 312021the Companys 2021 tax year will be open for examination for federal and state taxing authorities.
Use of Estimates
The preparation of the combined financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of this financial statement and the reported amounts of revenues and expenses during the reporting period. Accordingly actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company has on deposit with a financial institution amounts in excess of FDIC insurance limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk for cash.