As
filed
with the Securities and Exchange Commission on July 31, 2007
Registration
No. __________
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
SB-2
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
GREEN
MOUNTAIN RECOVERY, INC.
(Exact
name of Registrant as specified in its charter)
Delaware
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6141
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26-0252191
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(State
or other jurisdiction of
incorporation
or organization)
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|
(Primary
Standard Industrial
Classification
Code)
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|
(I.R.S.
Employer Identification No.)
|
(Address
and telephone number of Registrant's principal executive offices)
39
Broadway, Suite 1601
New
York,
New York 10006
(212)
363-7500
(Name,
address, including zip code, and telephone number, including area code, of
agent
for service)
Copies
of
all Correspondence to:
Samuel
M. Krieger, Esq.
Krieger
& Prager, LLP
39
Broadway, Suite 920
New
York, New York 10006
Telephone:
(212) 363-2900
Facsimile:
(212) 363-2999
|
Approximate
date of commencement of proposed sale to the public: From time to time after
the
effective date of this registration statement.
If
any of
the securities being registered on this form are to be offered on a delayed
or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, please
check the following box: x
If
this
form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. o
If
this
form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
o
If
this
form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
o
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box: o
Calculation
of Registration Fee
Title
of Class of Securities to be Registered
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|
Amount
to be Registered
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|
Proposed
Maximum Aggregate Price Per Share
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Proposed
Maximum Aggregate Offering Price
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Amount
of Registration Fee
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|
Common
Stock, $0.0001 per share(1)
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1,686,000
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$
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0.10
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$
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168,600
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$
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5.18
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|
Total
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1,686,000
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$
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0.10
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$
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168,600
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$
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5.18
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|
(1)
|
Represents
common shares currently outstanding to be sold by the selling security
holders.
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(2)
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There
is no current market for the securities. Although the registrant's
common
stock has a par value of $0.0001, the registrant believes that the
calculations offered pursuant to Rule 457(f)(2) are not applicable
and, as
such, the registrant has valued the common stock, in good faith and
for
purposes of the registration fee, based on $0.10 per share. In the
event
of a stock split, stock dividend or similar transaction involving
our
common stock, the number of shares registered shall automatically
be
increased to cover the additional shares of common stock issuable
pursuant
to Rule 416 under the Securities Act of 1933, as
amended.
|
THE
INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT
SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL
THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PRELIMINARY
PROSPECTUS SUBJECT TO COMPLETION DATED JULY 31, 2007
GREEN
MOUNTAIN RECOVERY, INC.
1,686,000
Shares of Common Stock, par value $0.0001
This
prospectus relates to the resale of 1,686,000 shares of common stock, par value
$0.0001, of Green Mountain Recovery, Inc. which are issued and outstanding
and
held by persons who are stockholders of Green Mountain Recovery, Inc.
The
selling security holders will be offering our shares of common stock at a price
of $0.10 per share until a market develops and thereafter at prevailing market
prices or privately negotiated prices. There has been no market for our
securities and a public market may not develop, or, if any market does develop,
it may not be sustained. Our common stock is not traded on any exchange or
on
the over-the-counter market. After the effective date of the registration
statement relating to this prospectus, we hope to have a market maker file
an
application with the National Association of Securities Dealers, Inc. for our
common stock to become eligible for trading on the Over The Counter Bulletin
Board. We do not yet have a market maker who has agreed to file such
application.
Investing
in our securities involves significant risks. See "Risk Factors" beginning
on
page 3.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION
HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS
IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The
information in this prospectus is not complete and may be changed. This
prospectus is included in the registration statement that was filed by us with
the Securities and Exchange Commission. The selling security holders may not
sell these securities until the registration statement becomes effective. This
prospectus is not an offer to sell these securities and is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
The
date
of this prospectus is ___________ __, 2007
Table
of Contents
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Page
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Prospectus
Summary
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1 |
Risk
Factors
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3
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Risk
Factors Relating to Our Company
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3
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Risk
Factors Relating to Our Common Shares
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10
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The
Offering
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13
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Use
of Proceeds
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13
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Determination
of Offering Price
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13
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Description
of Business
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14
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Plan
of Operations
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18
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Management
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|
Security
Ownership of Certain Beneficial Owners and Management
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25
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Certain
Relationships and Related Transactions
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25
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Selling
Security holders
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25
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Plan
of Distribution
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27
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Dividend
Policy
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29
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Share
Capital
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29
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Legal
Matters
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|
Experts
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|
Interest
of Named Experts and Counsel
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Indemnification
for Securities Act Liabilities
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|
Where
You Can Find More Information
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34
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Financial
Statements
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F-1
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Changes
in and Disagreements with Accountants
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F-13
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Information
not Required in Prospectus
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II-1
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PROSPECTUS
SUMMARY
As
used
in this prospectus, references to “Green Mountain Recovery, Inc.”, the
"Company," "we," “our” or "us" refer to Green Mountain Recovery, Inc., unless
the context otherwise indicates.
The
following summary highlights selected information contained in this prospectus.
Before making an investment decision, you should read the entire prospectus
carefully, including the "Risk Factors" section, the financial statements and
the notes to the financial statements.
Corporate
Background
Green
Mountain Recovery, Inc. was incorporated under the laws of the State of Delaware
on May 17, 2007. We have not generated any revenue to date. We currently have
no
employees other than our CEO and CFO who are also our only board members.
The
Company acquires, manages and collects portfolios of consumer receivables for
its own account. These portfolios generally consist of charged-off receivables
that we acquire at a significant discount to the total amounts actually owed
by
the debtors. We acquire these portfolios after a qualitative and quantitative
analysis of the underlying receivables and calculate the purchase price so
that
our estimated cash flow offers us an adequate return on our investment after
servicing expenses. After purchasing a portfolio, we actively monitor its
performance and review and adjust our collection and servicing strategies
accordingly. To date, we have acquired one portfolio with a face principal
amount of $877,267.67.
We
may
purchase receivables through privately negotiated direct sales, brokered
transactions and auctions in which sellers of receivables seek bids from several
debt purchasers. These receivables consist primarily of charged-off credit
card
accounts but may include other types of charged-off receivables. We pursue
acquisitions of consumer receivable portfolios on an ongoing basis through
our
relationships with industry participants, collection agencies and brokers who
specialize in the sale of consumer receivable portfolios. Prior to purchasing
a
consumer receivable portfolio, we analyze the portfolio to determine the
strategy that will best maximize collections in a cost efficient
manner.
We
typically outsource our collections activities to third-party collection
agencies. Once a group of receivables is sent to a third-party collection
agency, we actively monitor and review the third-party collection agencies’
performance on an ongoing basis. Based on collection performance, we may either
move certain receivables from one third-party collection agency to another
if we
anticipate that this will result in an increase in collections. In some
situations, we may outsource further collections to attorneys that use a legal
strategy to collect the debt. In order to maximize returns, we may also decide
to sell all or part of a portfolio to a broker, collection agency or other
entity interested in purchasing charged-off receivables.
We
may
acquire portfolios through a combination of internally generated cash flow
and
debt. We may also partner with other entities to purchase a large portfolio
acquisition in which we share in the income generated from the collections
on
the portfolio.
Our
offices are currently located at 39 Broadway, New York, New York. Our telephone
number is (212)363-7500.
The
Offering
Securities
offered:
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Shares
of Common Stock
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Offering
price :
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$0.10
per share until a market develops and thereafter at market prices
or
prices negotiated in private transactions
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Shares
outstanding prior to offering:
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2,500,000
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Shares
outstanding after offering:
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2,500,000
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Market
for the common shares:
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There
has been no market for our securities. Our common stock is not traded
on
any exchange or on the over-the-counter market. After the effective
date
of the registration statement relating to this prospectus, we hope
to have
a market maker file an application with the National Association
of
Securities Dealers, Inc. for our common stock to eligible for trading
on
the Over The Counter Bulletin Board. We do not yet have a market
maker who
has agreed to file such application.
There
is no assurance that a trading market will develop, or, if developed,
that
it will be sustained. Consequently, a purchaser of our common stock
may
find it difficult to resell the securities offered herein should
the
purchaser desire to do so when eligible for public
resale.
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Use
of proceeds:
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We
will not receive any proceeds from the sale of shares by the selling
security holders.
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Summary
Financial Information
Statement
of Income Data:
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From
May 17, 2007 (inception) to
June
30, 2007
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Revenues
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$
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-0-
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Net
Loss
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$
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38,357
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Net
Loss per Common Share - Basic and Diluted
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$
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(0.02
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)
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Weighted
Average Common Shares Outstanding -
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Basic
and Diluted
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2,311,400
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Balance
Sheet Data:
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At
June 30, 2007
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Working
Capital
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$
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2,743
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Total
Assets
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$
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13,615
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Stockholders'
Equity
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$
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2,743
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Capitalization:
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Stockholders'
Equity
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Preferred
Stock, $.0001 par value; 1,000,000 shares authorized, none issued
and
outstanding
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_______
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Common
Stock, $.0001 par value; 99,000,000 shares authorized, 2,500,000
shares
issued and outstanding
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$
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2,500
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Additional
Paid-In Capital
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$
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38,600
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Accumulated
Deficit
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$
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(38,357
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)
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Total
Stockholders' Equity
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$
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2,743
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RISK
FACTORS
An
investment in our common stock involves a high degree of risk. You should
carefully consider these risk factors in addition to our financial statements.
In addition to the following risks, there may also be risks that we do not
yet
know of or that we currently think are immaterial that may also impair our
business operations. If any of the following risks occur, our business,
financial condition, results of operations and prospects for growth would likely
suffer. As a result, you could lose all or part of your investment.
Risk
Factors Relating to Our Business
We
may not be able to collect sufficient amounts on our defaulted consumer
receivables to fund our operations
Our
business consists of acquiring and servicing receivables that consumers have
failed to pay and that the credit originator has deemed uncollectible and has
charged-off. The credit originators generally make numerous attempts to recover
on their defaulted consumer receivables, often using a combination of in-house
recovery efforts and third-party collection agencies. These defaulted consumer
receivables are difficult to collect and we may not collect a sufficient amount
to cover our investment associated with purchasing the defaulted consumer
receivables and the costs of running our business.
In
the
normal course of our portfolio acquisitions, some receivables may be included
in
the portfolios that fail to conform to certain terms of the purchase agreements
and we may seek to return these receivables to the seller for payment or
replacement receivables. However, we cannot guarantee that any of such sellers
will be able to meet their obligations to us. Accounts that we are unable to
return to sellers may yield no return. If cash flows from operations are less
than anticipated, our ability to satisfy our obligations, purchase new
portfolios and our future growth and profitability may be materially adversely
affected.
We
may not be able to purchase defaulted consumer receivables at favorable prices,
and a decrease in our ability to purchase portfolios of receivables could
adversely affect our ability to generate revenue
Our
ability to operate profitably depends upon the continued availability of
receivable portfolios which meet our purchasing standards and are cost-effective
based upon projected collections exceeding our acquisition costs. The market
for
acquiring receivable portfolios is becoming more competitive. Recently, our
industry has attracted a large amount of investment capital. With this inflow
of
capital, we have seen a significant increase in the pricing of portfolios to
levels that we believe will generate reduced returns on investment. With this
increase in market competition, the purchase price of portfolios has increased,
and the ratio of collections to acquisition costs can be expected to decrease,
which would negatively affect our results of operations.
In
addition to the competitive factors discussed above, the availability of
consumer receivable portfolios at favorable prices and on favorable terms
depends on a number of factors, within and outside of our control, including:
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· |
the
continuation of the current growth and charge-off trends in consumer
debt;
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· |
the
continued sale of receivable portfolios by originating
institutions;
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· |
our
ability to develop and maintain long-term relationships with portfolio
sellers;
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|
· |
our
ability to obtain adequate data from portfolio sellers to appropriately
evaluate the collectibility of, and estimate the value of, portfolios;
and
|
|
· |
changes
in laws and regulations governing consumer
lending.
|
Because
of the length of time involved in collecting defaulted consumer receivables
on
acquired portfolios and the volatility in the timing of our collections, we
may
not be able to identify trends and make changes in our purchasing strategies
in
a timely manner. Furthermore, heightened regulation of the credit card and
consumer lending industry may result in decreased availability of credit to
consumers, potentially leading to a future reduction in defaulted consumer
receivables available for purchase from credit originators. We cannot predict
how our ability to identify and purchase receivables and the quality of those
receivables would be affected if there is a shift in consumer lending practices,
whether caused by changes in the regulations or accounting practices applicable
to credit originators, a sustained economic downturn or otherwise.
Ultimately,
if we are unable to continually purchase and collect on a sufficient volume
of
receivables to generate cash collections that exceed our costs, our business
will be materially adversely affected.
We
may rely on third parties to locate, identify and evaluate consumer receivable
portfolios available for purchase.
We
may
rely on third parties, including brokers, to identify consumer receivable
portfolios and, in some instances, to assist us in our evaluation and purchase
of these portfolios. As a result, if such third parties fail to identify
receivable portfolios or if our relationships with such third parties are not
maintained, our ability to identify and purchase additional receivable
portfolios could be materially adversely affected. In addition, if we or such
parties fail to correctly or adequately evaluate the value or collectibility
of
these consumer receivable portfolios, we may pay too much for such portfolios
and our earnings could be negatively affected.
Our
industry is highly competitive, and we may be unable to continue to compete
successfully with businesses that may have greater resources than we have.
We
face
competition from a wide range of collection and financial services companies
that may have substantially greater financial, personnel and other resources,
greater adaptability to changing market needs and more established relationships
in our industry than we currently have. Competitive pressures adversely affect
the availability and pricing of charged-off receivable portfolios, as well
as
the availability and cost of qualified recovery personnel. As there are few
significant barriers to entry for new purchasers of charged-off receivable
portfolios, there is a risk that additional competitors with greater resources
than ours, including competitors that have historically focused on the
acquisition of different asset types, will enter our market. If we are unable
to
develop and expand our business or adapt to changing market needs as well as
our
current or future competitors, we may experience reduced access to charged-off
receivable portfolios at acceptable prices and reduced profitability.
Moreover,
we cannot assure you that we will be able to continue to offer competitive
bids
for charged-off receivable portfolios. We face bidding competition in our
acquisition of charged-off receivable portfolios. In our industry, successful
bids generally are awarded on a combination of price, service, and relationships
with the debt sellers. Some of our current and future competitors may have
more
effective pricing and collection models, greater adaptability to changing market
needs, and more established relationships in our industry. They may also pay
prices for portfolios that we determine are not reasonable. There can be no
assurance that we will continue to offer competitive bids for charged-off
consumer receivable portfolios. In addition, there continues to be consolidation
of issuers of credit cards, which have been a principal source of receivable
purchases. This consolidation has limited the number of sellers in the market
and has correspondingly given the remaining sellers increasing market strength
in the price and terms of the sale of credit card accounts. If we are unable
to
develop and expand our business or adapt to changing market needs as well as
our
current or future competitors are able to do, we may experience reduced access
to defaulted consumer receivables portfolios at appropriate prices and reduced
profitability.
Our
quarterly operating results may fluctuate and cause our stock price to decline.
Because
of the nature of our business, our quarterly operating results may fluctuate,
which may adversely affect the market price of our common stock. Our results
may
fluctuate as a result of any of the following:
|
· |
the
timing and amount of collections on our consumer receivable
portfolios;
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|
· |
a
decline in the estimated value of our consumer receivable portfolio
recoveries;
|
|
· |
increases
in operating expenses associated with the growth of our operations;
and
|
|
· |
general
and economic market conditions.
|
We
may not be successful at acquiring receivables of new asset types or in
implementing a new pricing structure
We
may
pursue the acquisition of receivables portfolios of asset types in which we
have
little current experience. We may not be successful in completing any
acquisitions of receivables of these asset types and our limited experience
in
these asset types may impair our ability to collect on these receivables. This
may cause us to pay too much for these receivables and consequently we may
not
generate a profit from these receivables portfolio acquisitions. Even if we
successfully acquire such new types of receivables, our existing methods of
collections may prove ineffective for such new receivables and our inexperience
may materially adversely affect our financial condition.
We
are dependent upon third parties to service a majority of our consumer
receivable portfolios.
We
outsource all our receivable collections to third-party collection agencies.
As
a result, we are dependent upon the efforts of these third- party service
providers. Our revenues and profitability could be materially adversely affected
if we are not able to identify suitable collections agencies to service our
portfolios or if the collections agencies we use fail to adequately perform
their obligations.
Our
collections may decrease if certain types of bankruptcy filings
increase
During
times of economic recession, the amount of defaulted consumer receivables
generally increases, which contributes to an increase in the amount of personal
bankruptcy filings. Under certain bankruptcy filings a debtor’s assets are
liquidated to repay credit originators, but since the defaulted consumer
receivables we service are generally unsecured we often would not be able to
collect on those receivables. We cannot assure you that our collection
experience would not decline with an increase in these types of bankruptcy
filings. If our actual collection experience with respect to a defaulted
consumer receivables portfolio is significantly lower than we projected when
we
purchased the portfolio, our financial condition and results of operations
could
deteriorate.
Our
ability to recover and enforce our defaulted consumer receivables may be limited
under federal and state laws
Federal
and state laws may limit our ability to recover and enforce our defaulted
consumer receivables regardless of any act or omission on our part. Some laws
and regulations applicable to credit card issuers may preclude us from
collecting on defaulted consumer receivables we purchase if the credit card
issuer previously failed to comply with applicable law in generating or
servicing those receivables. Collection laws and regulations also directly
apply
to our business. Additional consumer protection and privacy protection laws
may
be enacted that would impose additional requirements on the enforcement of
and
collection on consumer credit card receivables. Any new laws, rules or
regulations that may be adopted, as well as existing consumer protection and
privacy protection laws, may adversely affect our ability to collect on our
defaulted consumer receivables and may harm our business. In addition, federal
and state governmental bodies are considering, and may consider in the future,
other legislative proposals that would regulate the collection of our defaulted
consumer receivables. Although we cannot predict if or how any future
legislation would impact our business, our failure to comply with any current
or
future laws or regulations applicable to us could limit our ability to collect
on our defaulted consumer receivables, which could reduce our profitability
and
harm our business.
Because
our receivables are generally originated and serviced nationwide, we cannot
assure you that the originating lenders have complied with applicable laws
and
regulations. While receivable acquisition contracts typically contain provisions
indemnifying us for losses owing to the originating institution’s failure to
comply with applicable laws and other events, we cannot assure you that any
indemnities received from originating institutions will be adequate to protect
us from losses on the receivables or liabilities to customers.
We
use estimates in our revenue recognition and our earnings will be reduced if
actual results are less than estimated.
We
will utilize the interest method to determine revenue recognized on
substantially all of our receivable portfolios. Under this method, each pool
of
receivables is modeled based upon its projected cash flows. A yield is then
established which, when applied to the outstanding balance of the receivables,
results in the recognition of revenue at a constant yield relative to the
remaining balance in the receivable portfolio. The actual amount recovered
by us
on portfolios may substantially differ from our projections and may be lower
than initially projected. If differences are material, we may reduce our yield,
which would negatively affect our earnings, or take a write-off on all or a
portion of our investment.
We
are subject to ongoing risks of litigation, including individual or class
actions under consumer credit, collections, employment, securities and other
laws.
We
operate in an extremely litigious climate and may in the future, be named as
defendants in litigation, including individual or class actions under consumer
credit, collections, employment, securities and other laws. Defending a lawsuit,
regardless of its merit, could be costly and divert management’s attention from
the operation of our business. The use of certain collection strategies could
be
restricted if class-action plaintiffs were to prevail in their claims. In
addition, insurance costs continue to increase significantly and policy
deductibles have also increased. All of these factors could have an adverse
effect on our consolidated financial condition and results of operations.
We
may make acquisitions that prove unsuccessful or strain or divert our resources.
From
time
to time, we consider acquisitions of other companies in our industry that could
complement our business, including the acquisition of entities in diverse
geographic regions and entities offering greater access to businesses and
markets that we do not currently serve. We may not be able to successfully
acquire other businesses or, if we do, we may not be able to successfully
integrate these businesses with our own, which may result in our inability
to
maintain our goals, objectives, standards, controls, policies or culture. In
addition, through acquisitions, we may enter markets in which we have limited
or
no experience. The occurrence of one or more of these events may place
additional constraints on our resources such as diverting the attention of
our
management from other business concerns which can materially adversely affect
our operations and financial condition. Moreover, any acquisition may result
in
a potentially dilutive issuance of equity securities, incurrence of additional
debt and amortization of identifiable intangible assets, all of which could
reduce our profitability.
We
may not be able to raise sufficient capital or generate adequate revenue to
meet
our obligations and fund our operating expenses.
Failure
to raise adequate capital and generate adequate revenues to purchase debt
portfolios and sustain our operations could result in our having to curtail
or
cease operations. Additionally, even if we do raise sufficient capital and
generate revenues to support our operating expenses, there can be no assurances
that the revenue will be sufficient to enable us to develop business to a level
where it will generate profits and cash flows from operations. These matters
raise substantial doubt about our ability to continue as a going concern.
Accordingly, our failure to generate sufficient revenues or to generate adequate
capital could result in the failure of our business and the loss of your entire
investment.
If
we are unable to obtain additional funding, our business operations will be
harmed. Even if we do obtain additional financing, our then existing
shareholders may suffer substantial dilution.
We
will
require additional funds to operate our business. We anticipate that we will
require up to approximately $100,000 to fund our continued operations for the
next twelve months. Such funds may come from the sale of equity and/or debt
securities and/or loans. It is possible that additional capital will be required
to effectively support the operations and to otherwise implement our overall
business strategy. The inability to raise the required capital will restrict
our
ability to grow and may reduce our ability to continue to conduct business
operations. If we are unable to obtain necessary financing, we will likely
be
required to curtail our business plans which could cause the company to become
dormant. We currently do not have any arrangements or agreements to raise
additional capital. Any additional equity financing may involve substantial
dilution to our then existing shareholders.
We
do not
have an audit or compensation committee comprised of independent directors.
Indeed, we do not have any audit or compensation committee. These functions
are
performed by our president. Thus, there is a potential conflict of interest
in
that our president has the authority to determine issues concerning management
compensation and audit issues that may affect management decisions.
Shareholders
may be diluted significantly through our efforts to obtain financing and satisfy
obligations through issuance of additional shares of our common
stock.
We
have
no committed source of financing. Wherever possible, our board of directors
will
attempt to use non-cash consideration to satisfy obligations. In many instances,
we believe that the non-cash consideration will consist of shares of our stock.
Our board of directors has authority, without action or vote of the
shareholders, to issue all or part of the authorized (99,000,000) but unissued
(96,500,000) common shares. In addition, if a trading market develops for our
common stock, we may attempt to raise capital by selling shares of our common
stock, possibly at a discount to market. These actions will result in dilution
of the ownership interests of existing shareholders, may further dilute common
stock book value, and that dilution may be material. Such issuances may also
serve to enhance existing management’s ability to maintain control of the
Company because the shares may be issued to parties or entities committed to
supporting existing management.
The
Company is and will continue to be completely dependent on the services of
its
president Joseph Levi, the loss of whose services may cause our business
operations to cease, and we will need to engage and retain qualified employees
and consultants to further implement our strategy.
The
Company’s operations and business strategy are completely dependent upon the
knowledge and business contacts of Joseph Levi, our president. He is
under no contractual obligation to remain employed by us. If he should
choose to leave us for any reason before we have hired additional personnel,
our
operations may fail. Even if we are able to find additional personnel, it is
uncertain whether we could find someone who could develop our business along
the
lines described herein. We will fail without Mr. Levi or an appropriate
replacement(s). Accordingly, it is important that we are able to attract,
motivate and retain highly qualified and talented personnel and independent
contractors.
Our
articles of incorporation provide for indemnification of officers and directors
at our expense and limit their liability which may result in a major cost to
us
and hurt the interests of our shareholders because corporate resources may
be
expended for the benefit of officers and/or directors.
Our
articles of incorporation and applicable Delaware law provide for the
indemnification of our directors, officers, employees, and agents, under certain
circumstances, against attorney's fees and other expenses incurred by them
in
any litigation to which they become a party arising from their association
with
or activities on our behalf. We will also bear the expenses of such litigation
for any of our directors, officers, employees, or agents, upon such person's
promise to repay us. Therefore
if it is
ultimately determined that any such person shall not have been entitled to
indemnification, this indemnification policy could result in substantial
expenditures by us which we will be unable to recoup.
Our
board of directors has the authority, without stockholder approval, to issue
preferred stock with terms that may not be beneficial to common stockholders
and
with the ability to affect adversely stockholder voting power and perpetuate
their control over the Company.
Our
certificate of incorporation authorizes the issuance of up to 1,000,000 shares
of preferred stock, par value $ .0001 per share.
The
specific terms of the preferred stock have not been determined,
including:
|
· |
optional
or other rights, including:
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· |
restrictions
of the preferred stock
|
Our
board
of directors is entitled to authorize the issuance of up to 1,000,000 shares
of
preferred stock in one or more series with such limitations and restrictions
as
may be determined in its sole discretion, with no further authorization by
security holders required for the issuance thereof.
The
issuance of preferred stock could adversely affect the voting power and other
rights of the holders of common stock. Preferred stock may be issued quickly
with terms calculated to discourage, make more difficult, delay or prevent
a
change in control of the Company or make removal of management more difficult.
As a result, the board of directors' ability to issue preferred stock may
discourage the potential hostility of an acquirer, possibly resulting in
beneficial negotiations. Negotiating with an unfriendly acquirer may result
in,
among other things, terms more favorable to us and our stockholders. Conversely,
the issuance of preferred stock may adversely affect any market price of, and
the voting and other rights of the holders of the common stock. We presently
have no plans to issue any preferred stock.
The
ability of our two principal officers to control our business may limit or
eliminate minority shareholders’ ability to influence corporate
affairs.
Upon
the
completion of this offering, two principal officers will beneficially own
approximately 93% of our outstanding common stock assuming sale of all shares
being registered. Because of this beneficial stock ownership, they will be
in a
position to continue to elect our board of directors, decide all matters
requiring stockholder approval and determine our policies. Their interests
may
differ from the interests of other shareholders with respect to the issuance
of
shares, business transactions with or sales to other companies, selection of
officers and directors and other business decisions. The minority shareholders
would have no way of overriding their decisions. This level of control may
also
have an adverse impact on the market value of our shares because they may
institute or undertake transactions, policies or programs that result in losses,
may not take any steps to increase our visibility in the financial community
and/or
may
sell sufficient numbers of shares to significantly decrease our price per
share.
We
do not expect to pay dividends in the foreseeable future.
We
have
never paid cash dividends on our common stock. We do not expect to pay cash
dividends on our common stock at any time in the foreseeable future. The future
payment of dividends directly depends upon our future earnings, capital
requirements, financial requirements and other factors that our board of
directors will consider. Since we do not anticipate paying cash dividends on
our
common stock, return on your investment, if any, will depend solely on an
increase, if any, in the market value of our common stock.
We
may be exposed to potential risks resulting from new requirements under
Section 404 of the Sarbanes-Oxley Act of 2002.
If
we
become registered with the SEC, we will be required, pursuant to
Section 404 of the Sarbanes-Oxley Act of 2002, to include in our annual
report our assessment of the effectiveness of our internal control over
financial reporting. We do not have a sufficient number of employees to
segregate responsibilities and may be unable to afford increasing our staff
or
engaging outside consultants or professionals to overcome our lack of employees.
Because
we are not subject to compliance with rules requiring the adoption of certain
corporate governance measures, our stockholders have limited protections against
interested director transactions, conflicts of interest and similar
matters.
The
Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by
the
SEC, the New York and American Stock Exchanges and the Nasdaq Stock Market,
as a
result of Sarbanes-Oxley, require the implementation of various measures
relating to corporate governance. These measures are designed to enhance the
integrity of corporate management and the securities markets and apply to
securities which are listed on those exchanges or the Nasdaq Stock Market.
Because we are not presently required to comply with many of the corporate
governance provisions and because we chose to avoid incurring the substantial
additional costs associated with such compliance any sooner than necessary,
we
have not yet adopted these measures.
Because
none of our directors are independent directors, we do not currently have
independent audit or compensation committees. As a result, these directors
have
the ability, among other things, to determine their own level of compensation.
Until we comply with such corporate governance measures, regardless of whether
such compliance is required, the absence of such standards of corporate
governance may leave our stockholders without protections against interested
director transactions, conflicts of interest and similar matters and investors
may be reluctant to provide us with funds necessary to expand our
operations.
The
costs to meet our reporting and other requirements as a public company subject
to the Exchange Act of 1934 will be substantial and may result in us having
insufficient funds to expand our business or even to meet routine business
obligations.
If
we
become a public entity, subject to the reporting requirements of the Exchange
Act of 1934, we will incur ongoing expenses associated with professional fees
for accounting, legal and a host of other expenses for annual reports and proxy
statements. We estimate that these costs will range up to $50,000 per year
for
the next few years and will be higher if our business volume and activity
increases but lower during the first year of being public because our overall
business volume will be lower, and we will not yet be subject to the
requirements of Section 404 of the Sarbanes-Oxley Act of 2002.
Risks
Relating To Our Common Shares
We
may, in the future, issue additional common shares, which would reduce
investors' percent of ownership and may dilute our share
value.
Our
Certificate of Incorporation authorizes the issuance of 99,000,000 shares of
common stock, of which 2,500,000 shares are issued and outstanding, and
1,000,000 shares of preferred stock, of which no shares are issued and
outstanding. The future issuance of common stock may result in substantial
dilution in the percentage of our common stock held by our then existing
shareholders. We may value any common stock issued in the future on an arbitrary
basis. The issuance of common stock for future services or acquisitions or
other
corporate actions may have the effect of diluting the value of the shares held
by our investors, and might have an adverse effect on any trading market for
our
common stock.
Our
common shares are subject to the "Penny Stock" Rules of the SEC and the trading
market in our securities is limited, which makes transactions in our stock
cumbersome and may reduce the value of an investment in our
stock.
The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes
the
definition of a "penny stock," for the purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions.
For
any transaction involving a penny stock, unless exempt, the rules
require:
·
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that
a broker or dealer approve a person's account for transactions in
penny
stocks; and
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the
broker or dealer receive from the investor a written agreement to
the
transaction, setting forth the identity and quantity of the penny
stock to
be purchased.
|
In
order
to approve a person's account for transactions in penny stocks, the broker
or
dealer must:
·
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obtain
financial information and investment experience objectives of the
person;
and
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make
a reasonable determination that the transactions in penny stocks
are
suitable for that person and the person has sufficient knowledge
and
experience in financial matters to be capable of evaluating the risks
of
transactions in penny stocks.
|
The
broker or dealer must also deliver, prior to any transaction in a penny stock,
a
disclosure schedule prescribed by the Commission relating to the penny stock
market, which, in highlight form:
·
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|
sets
forth the basis on which the broker or dealer made the suitability
determination; and
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that
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
|
Generally,
brokers may be less willing to execute transactions in securities subject to
the
"penny stock" rules. This may make it more difficult for investors to dispose
of
our Common shares and cause a decline in the market value of our
stock.
Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both
the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account
and
information on the limited market in penny stocks.
Currently,
there is no public market for our securities, and there can be no assurances
that any public market will ever develop or that our common stock will be quoted
for trading and, even if quoted, it is likely to be subject to significant
price
fluctuations.
There
has
not been any established trading market for our common stock, and there is
currently no public market whatsoever for our securities. There can be no
assurances as to whether, subsequent to registration with the SEC:
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(i) |
any
market for our shares will develop;
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(ii) |
the
prices at which our common stock will trade;
or
|
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(iii) |
the
extent to which investor interest in us will lead to the development
of an
active, liquid trading market. Active trading markets generally
result in lower price volatility and more efficient execution of
buy and
sell orders for investors.
|
In
addition, our common stock is unlikely to be followed by any market analysts,
and there may be few institutions acting as market makers for our common stock.
Either of these factors could adversely affect the liquidity and trading price
of our common stock. Until our common stock is fully distributed and an orderly
market develops in our common stock, if ever, the price at which it trades
is
likely to fluctuate significantly. Prices for our common stock will be
determined in the marketplace and may be influenced by many factors, including
the depth and liquidity of the market for shares of our common stock,
developments affecting our business, including the impact of the factors
referred to elsewhere in these Risk Factors, investor perception of The Company
and general economic and market conditions. No assurances can be given
that an orderly or liquid market will ever develop for the shares of our common
stock.
If
a market develops for our shares, sales of our shares relying upon rule 144
may
depress prices in that market by a material amount.
The
majority of the outstanding shares of our common stock held by present
stockholders are "restricted securities" within the meaning of Rule 144 under
the Securities Act of 1933, as amended.
As
restricted shares, these shares may be resold only pursuant to an effective
registration statement, such as this one (for the shares registered hereunder)
or under the requirements of Rule 144 or other applicable exemptions from
registration under the Act and as required under applicable state securities
laws. Rule 144 provides in essence that a person who has held restricted
securities for a prescribed period may, under certain conditions, sell every
three months, in brokerage transactions, a number of shares that does not exceed
1.0% of a company's outstanding common stock. The alternative average weekly
trading volume during the four calendar weeks prior to the sale is not available
to our shareholders being that the OTCBB (if and when listed thereon) is not
an
"automated quotation system" and, accordingly, market based volume limitations
are not available for securities quoted only over the OTCBB. As a result of
revisions to Rule 144 which became effective on or about April 29, 1997, there
is no limit on the amount of restricted securities that may be sold by a
non-affiliate (i.e., a stockholder who has not been an officer, director or
control person for at least 90 consecutive days) after the restricted securities
have been held by the owner for a period of two years. A sale under Rule
144 or under any other exemption from the Act, if available, or pursuant to
registration of shares of common stock of present stockholders, may have a
depressive effect upon the price of the common stock in any market that may
develop.
On
June
22, 2007, the Securities and Exchange Commission published proposed changes
to
Rule 144, which, if adopted in their current form, would shorten the holding
period for sales by non-affiliates to six months (subject to extension under
certain circumstances) and remove the volume limitations for such persons.
The
proposed rules may be changed before final adoption or may be withdrawn
altogether. It is anticipated that the changes, if any, will not be finalized
before the Fall of 2007.
The
market for penny stocks has experienced numerous frauds and abuses which could
adversely impact investors in our stock.
We
believe that the market for penny stocks has suffered from patterns of fraud
and
abuse. Such patterns include:
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Control
of the market for the security by one or a few broker-dealers that
are
often related to the promoter or
issuer;
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Manipulation
of prices through prearranged matching of purchases and sales and
false
and misleading press releases;
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"Boiler
room" practices involving high pressure sales tactics and unrealistic
price projections by inexperienced sales
persons;
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Excessive
and undisclosed bid-ask differentials and markups by selling
broker-dealers; and
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The
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the inevitable
collapse of those prices with consequent investor losses.
Any
trading market that may develop may be restricted by virtue of state securities
“Blue Sky” laws which prohibit trading absent compliance with individual state
laws. These restrictions may make it difficult or impossible to sell shares
in
those states.
There
is
no public market for our common stock, and there can be no assurance that any
public market will develop in the foreseeable future. Transfer of our
common stock may also be restricted under the securities or securities
regulations laws promulgated by various states and foreign jurisdictions,
commonly referred to as “Blue Sky” laws. Absent compliance with such
individual state laws, our common stock may not be traded in such jurisdictions.
Because the securities registered hereunder have not been registered for
resale under the blue sky laws of any state, the holders of such shares and
persons who desire to purchase them in any trading market that might develop
in
the future, should be aware that there may be significant state blue sky law
restrictions upon the ability of investors to sell the securities and of
purchasers to purchase the securities. These restrictions prohibit the secondary
trading of our common stock. We currently do not intend to and may not be able
to qualify securities for resale in approximately 17 states which do not offer
manual exemptions and require shares to be qualified before they can be resold
by our shareholders. Accordingly, investors should consider the secondary market
for our securities to be a limited one. See also “Plan of
Distribution-State Securities-Blue Sky Laws.”
There
is no current trading market for our securities and if a trading market does
not
develop, purchasers of our securities may have difficulty selling their
shares.
There
is
currently no established public trading market for our securities and an active
trading market in our securities may not develop or, if developed, may not
be
sustained. We intend to have a market maker apply for admission to quotation
of
our securities on the NASD Over The Counter Bulletin Board after the
registration statement relating to this prospectus is declared effective by
the
SEC. We do not yet have a market maker who has agreed to file such application.
If for any reason our common stock is not quoted on the Over The Counter
Bulletin Board or a public trading market does not otherwise develop, purchasers
of the shares may have difficulty selling their common stock should they desire
to do so. No market makers have committed to becoming market makers for our
common stock and none may do so.
State
securities laws may limit secondary trading, which may restrict the states
in
which and conditions under which you can sell the shares offered by this
prospectus.
Secondary
trading in common stock sold in this offering will not be possible in any state
until the common stock is qualified for sale under the applicable securities
laws of the state or there is confirmation that an exemption, such as listing
in
certain recognized securities manuals, is available for secondary trading in
the
state. If we fail to register or qualify, or to obtain or verify an exemption
for the secondary trading of, the common stock in any particular state, the
common stock could not be offered or sold to, or purchased by, a resident of
that state. In the event that a significant number of states refuse to permit
secondary trading in our common stock, the liquidity for the common stock could
be significantly impacted thus causing you to realize a loss on your
investment.
Because
we do not intend to pay any cash dividends on our common stock, our stockholders
will not be able to receive a return on their shares unless they sell
them.
We
intend
to retain any future earnings to finance the development and expansion of our
business. We do not anticipate paying any cash dividends on our common stock
in
the foreseeable future. Unless we pay dividends, our stockholders will not
be
able to receive a return on their shares unless the value of such shares
appreciates and they sell them. There is no assurance that stockholders will
be
able to sell shares when desired.
We
may issue shares of preferred stock in the future that may adversely impact
your
rights as holders of our common stock.
Our
Certificate of Incorporation authorizes us to issue up to 1,000,000 shares
of
"blank check" preferred stock. Accordingly, our board of directors will have
the
authority to fix and determine the relative rights and preferences of preferred
shares, as well as the authority to issue such shares, without further
stockholder approval. As a result, our board of directors could authorize the
issuance of a series of preferred stock that would grant to holders preferred
rights to our assets upon liquidation, the right to receive dividends before
dividends are declared to holders of our common stock, and the right to the
redemption of such preferred shares, together with a premium, prior to the
redemption of the common stock. To the extent that we do issue such additional
shares of preferred stock, your rights as holders of common stock could be
impaired thereby, including, without limitation, dilution of your ownership
interests in us. In addition, shares of preferred stock could be issued with
terms calculated to delay or prevent a change in control or make removal of
management more difficult, which may not be in your interest as holders of
common stock.
THE
OFFERING
This
prospectus relates to the resale by certain selling security holders of the
Company of up to 1,700,000 shares of our common stock. Such shares were offered
and sold by us to the selling security holders in private placements conducted
in June, 2007, to the selling security holders pursuant to the exemptions from
registration under the Securities Act provided by Regulations D and S of the
Securities Act.
The
selling security holders will be offering the shares of common stock being
covered by this prospectus at a price of $0.10 per share until a market develops
and thereafter at prevailing market prices or privately negotiated prices.
We
will not receive any proceeds from the resale of common shares by the selling
security holders.
USE
OF PROCEEDS
We
will
not receive any of the proceeds from the sale of the common shares being offered
for sale by the selling security holders.
DETERMINATION
OF OFFERING PRICE
The
selling security holders will be offering the shares of common stock being
covered by this prospectus at a price of $0.10 per share until a market develops
and thereafter at prevailing market prices or privately negotiated prices.
The
offering price of $0.10 per share is based on the price at which the selling
shareholders purchased the shares from us. Such offering price does not have
any
relationship to any established criteria of value, such as book value or
earnings per share. Because we have no significant operating history and have
not generated any revenues to date, the price of our common stock is not based
on past earnings, nor is the price of our common stock indicative of the current
market value of the assets owned by us. No valuation or appraisal has been
prepared for our business and potential business expansion. Our common stock
is
presently not traded on any market or securities exchange and we have not
applied for listing or quotation on any public market.
FORWARD-LOOKING
STATEMENTS
This
prospectus contains forward-looking statements which relate to future events
or
our future financial performance. In some cases, you can identify
forward-looking statements by terminology such as “may”, “should”, “expects”,
“plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or
“continue” or the negative of these terms or other comparable terminology. These
statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled
“Risk Factors,” that may cause our or our industry’s actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied
by
these forward-looking statements.
While
these forward-looking statements, and any assumptions upon which they are based,
are made in good faith and reflect our current judgment regarding the direction
of our business, actual results will almost always vary, sometimes materially,
from any estimates, predictions, projections, assumptions or other future
performance suggested herein. Except as required by applicable law, including
the securities laws of the United States, we do not intend to update any of
the
forward-looking statements to conform these statements to actual results.
DESCRIPTION
OF BUSINESS
Overview
The
Company acquires, manages and collects portfolios of consumer receivables for
its own account. These portfolios generally consist of charged-off receivables
that we acquire at a significant discount to the total amounts actually owed
by
the debtors. We acquire these portfolios after a qualitative and quantitative
analysis of the underlying receivables and calculate the purchase price so
that
our estimated cash flow offers us an adequate return on our investment after
servicing expenses. After purchasing a portfolio, we actively monitor its
performance and review and adjust our collection and servicing strategies
accordingly.
We
may
purchase receivables through privately negotiated direct sales, brokered
transactions and auctions in which sellers of receivables seek bids from several
debt purchasers. These receivables consist primarily of charged-off credit
card
accounts but may include other types of charged-off receivables. We pursue
acquisitions of consumer receivable portfolios on an ongoing basis through
our
relationships with industry participants, collection agencies and brokers who
specialize in the sale of consumer receivable portfolios. Prior to purchasing
a
consumer receivable portfolio, we analyze the portfolio to determine the
strategy that will best maximize collections in a cost efficient
manner.
We
typically outsource our collections activities to third-party collection
agencies. Once a group of receivables is sent to a third-party collection
agency, we actively monitor and review the third-party collection agencies’
performance on an ongoing basis. Based on collection performance, we may either
move certain receivables from one third-party collection agency to another
if we
anticipate that this will result in an increase in collections. In some
situations, we may outsource further collections to attorneys that use a legal
strategy to collect the debt. In order to maximize returns, we may also decide
to sell all or part of a portfolio to a broker, collection agency or other
entity interested in purchasing charged-off receivables.
We
may
acquire portfolios through a combination of internally generated cash flow
and
debt. We may also partner with other entities to purchase a large portfolio
acquisition in which we share in the income generated from the collections
on
the portfolio.
Industry
Overview
Historically,
credit originators have sought to limit credit losses either through using
internal collection efforts with their own personnel or outsourcing collection
activities to accounts receivable management providers. Credit originators
that
have outsourced the collection of defaulted receivables have typically remained
committed to third-party providers as a result of the perceived economic benefit
of outsourcing and the resources required to reestablish the infrastructure
required to support in-house collection efforts. Credit originators’ outsourced
solutions include selling their defaulted receivables for immediate cash
proceeds and placing defaulted receivables with an outsourced provider on a
contingent fee basis while retaining ownership of the receivables.
In
the
event that a credit originator sells receivables to an accounts receivables
management company, the credit originator receives immediate cash proceeds
and
eliminates the related fixed and variable costs associated with internal
recovery operations. Credit originators have developed a variety of processes
through which to sell their receivables. Some credit originators pursue an
auction-type sales approach in which they obtain bids for specified portfolios
from competing parties. Receivables are also sold in privately negotiated
transactions between the credit originator and a purchaser. In addition, many
credit originators enter into forward flow contracts. Forward flow contracts
commit a credit originator to sell, and purchasers to acquire, a steady flow
of
defaulted consumer receivables periodically over a specified period of time
for
a fixed percentage of the face amount of the receivables.
According
to the U.S. Federal Reserve Board, consumer credit has increased from $1.2
trillion at December 31, 1997 to $2.3 trillion at July 31, 2006. Over $110
billion in face value of debt was purchased in the United States in 2005. The
vast majority of purchased debt has been charged-off credit card receivables
which accounted for 90 percent of the face value of debt purchased in 2005.
As
the debt purchasing market matures, other companies, such as telecommunications
providers, hospitals, physician groups and other businesses have begun to sell
their nonperforming accounts.
Third-party
debt collectors returned $39.3 billion to the U.S. economy in 2005 that
represented a 22% reduction in private sector bad debt for the year. U.S.
collection agencies earned $12.1 billion in 2005. There are approximately 6,500
collection agencies operating the United States. Most of these collections
companies are small, privately-owned companies that collect for others for
a
contingent fee. Counting creditors’ in-house collectors, the accounts receivable
management industry employs 456,000 collectors and is expected to add 18 to
26
percent to staffing roles between 2004 and 2014.
The
receivables management industry is growing rapidly, driven by increasing levels
of consumer debt, higher default rates, and increasing use of third-party
providers by credit originators to collect their defaulted receivables. We
believe that as a result of the difficulty in collecting these receivables
and
the desire of originating institutions to focus on their core businesses and
to
generate revenue from these receivables, originating institutions are
increasingly electing to sell portfolios of charged-off receivables. The
accounts receivable management industry services credit originators including
banks, healthcare providers, utilities, telecommunications providers, consumer
finance companies, retail businesses and auto lenders, among others.
In
recent
years, the accounts receivable management industry has increased its use of
technology in order to operate more effectively and leading companies utilize
proprietary databases and portfolio evaluation programs, automated predictive
dialers, automated call distributors and computerized skip-tracing capabilities.
We expect the increasing importance of technology and the associated increased
capital requirements to cause challenges for many smaller participants lacking
the required capital and management resources to implement and effectively
utilize such technology to compete effectively and to continue to maintain
regulatory standards.
Our
Strategy
Our
primary objective is to grow our business by identifying, evaluating, pricing
and acquiring consumer receivable portfolios and maximizing collections of
such
receivables in a cost efficient manner. Our strategy includes using strategic
relationships to identify and acquire consumer receivable portfolios; managing
the collection and servicing of our consumer receivables by outsourcing those
activities to maintain low fixed overhead; selling accounts when our efforts
have been exhausted or when we can capitalize on favorable market prices; and
expanding our business through the purchase of consumer receivables from new
sources and consisting of different asset classes.
Portfolio
Acquisitions
We
purchase discrete pools of consumer receivables from a variety of debt sellers
as well as from collection agencies and through debt brokers. We have
established certain relationships that allow us to purchase portfolios directly
through negotiated transactions and we also participate in the auction-style
purchase processes. The receivables we purchase primarily consist of charged-off
credit card accounts and other charged-off consumer loans. We may also purchase
other types debt such as auto deficiencies, non-performing healthcare
receivables, payday loans or student loans. As a part of our strategy to acquire
consumer receivable portfolios, we may partner with another entity to purchase
a
portfolio in which we then share the collections returns associated with such
portfolio.
We
acquire these consumer receivable portfolios at a significant discount to the
total amounts actually owed by the debtors. We acquire these portfolios after
a
qualitative and quantitative analysis of the underlying receivables and
calculate the purchase price so that our estimated cash flow resulting from
collection efforts provides us an adequate return on our investment after
servicing expenses. After purchasing a portfolio, we actively monitor its
performance and review and adjust our collection strategy in an effort to
maximize returns.
The
consumer receivables we purchase includes a diverse set of accounts that can
be
categorized by asset type, age and size of account, level of previous collection
efforts and geography. To identify attractive buying opportunities, we contact
known and prospective sellers of defaulted consumer receivables. In a typical
sale transaction, a debt owner distributes a computer data file containing
ten
to fifteen basic data fields on each receivables account in the portfolio
offered for sale. Such fields typically include the consumer’s name, address,
outstanding balance, date of charge-off, date of last payment and the date
the
account was opened. We perform our due diligence on the portfolio by performing
quantitative analysis on the data file to determine the estimated cash flows
resulting from collecting on the portfolio over certain periods of time. The
analysis includes evaluating many different variables associated with the
portfolio that may include: the number of collection agencies previously
attempting to collect the accounts in the portfolio, the average balance of
the
receivables; the age of the receivables, past history of performance of similar
assets; number of days since charge-off, payments made since charge-off, the
credit originator and their credit guidelines, the locations of the debtors,
assets found within portfolios and the ability to obtain customer statements
from the original issuer.
We
may
also use certain proprietary modeling tools that analyze use demographic and
marketing data to determine the collectibility of each account. We use the
total
projected collectibility value, expenses and resale value to determine an
appropriate purchase price. We also record the demographic, revenue and expense
data of each portfolio that we have acquired to refine the underwriting models
that we use to price future portfolio purchases. In addition, we estimate the
projected expenses associated with collecting a particular portfolio and also
estimate the value of any portions of the portfolio that remain uncollected
in
order to arrive at an appropriate price for the portfolio.
Collection
of Receivables
We
use
third-party collection agencies to service the portfolios that we purchase.
We
determine the appropriate third-party collection agency based on the type of
receivables purchased and the track record of the collection agency collecting
that type of receivables. Once a group of receivables is sent to a third-party
collection agency, we will actively monitor and review the third-party
collection agencies’ performance on an ongoing basis. Based on the performance,
we may transfer certain receivables from one third-party collection agency
to
another if we believe that such transfer will result in an increase in
collections. We work accounts we deem collectible over an extended period of
time to improve our return on investment. For certain accounts where the debtor
appears to have the ability, but is unwilling to pay, we may decide to refer
such accounts to lawyers that specialize in collection matters, paying them
a
contingency fee on amounts collected. At any time in the collection process
we
may determine that our returns will be maximized by selling the remaining
uncollected portion of a particular portfolio to a debt buyer, broker collection
agency or other entity. By applying these multiple collection processes in
a
systematic manner, we believe that we will increased our collection
effectiveness and reduce our total operating expense per dollar
collected.
Competition
The
consumer credit recovery industry is highly competitive and fragmented. We
compete with a wide range of collection companies and financial services
companies which may have substantially greater personnel and financial resources
than we do. We also compete with traditional contingency agencies and in-house
recovery departments. Competitive pressures affect the availability and pricing
of receivables portfolios, as well as the availability and cost of qualified
recovery personnel. In addition, some of our competitors may have signed forward
flow contracts under which originating institutions have agreed to transfer
charged-off receivables to them in the future, which could restrict those
originating institutions from selling receivables to us. We believe some of
our
major competitors, which include companies that focus primarily on the purchase
of charged-off receivables portfolios, have continued to diversify into third
party agency collections and into offering credit card and other financial
services as part of their recovery strategy.
When
purchasing receivables, we compete primarily on the basis of the price paid
for
receivables portfolios and our ability to be a reliable buyer of prospective
portfolios. There continues to be consolidation of issuers of credit cards
which
have been a principal source of receivable purchases. This consolidation has
limited the sellers in the market and has correspondingly given the remaining
sellers increasing market strength in the price and terms of the sale of credit
card accounts.
In
recent
years, the accounts receivable management industry has increased its use of
technology in order to operate more effectively and leading companies utilize
proprietary databases and portfolio evaluation programs, automated predictive
dialers, automated call distributors and computerized skip-tracing capabilities.
We expect the increasing importance of technology and the associated increased
capital requirements to cause challenges for many smaller participants lacking
the required capital and management resources to implement and effectively
utilize such technology to compete effectively and to continue to maintain
regulatory standards.
We
do not
have sufficient capital to operate our business and will require additional
funding to sustain operations through the next twelve months. There is no
assurance that we will have revenue in the future or that we will be able to
secure the necessary funding to develop our business.
Our
offices are currently located at 39 Broadway, Suite 1601, New York, New
York.
Government
Regulation
Federal
and state statutes establish specific guidelines and procedures which debt
collectors must follow when collecting consumer accounts. It is our policy
to
comply with the provisions of all applicable federal laws and comparable state
statutes in all of our recovery activities, even in circumstances in which
we
may not be specifically subject to these laws. Our failure to comply with these
laws could have a material adverse effect on us in the event and to the extent
that they apply to some or all of our recovery activities. Federal and state
consumer protection, privacy and related laws and regulations extensively
regulate the relationship between debt collectors and debtors, and the
relationship between customers and credit card issuers. Significant federal
laws
and regulations applicable to our business as a debt collector include The
Fair
Debt Collections Practices Act (the “FDCPA”)
and
comparable state statutes that establish specific guidelines and procedures,
which debt collectors must follow when communicating with customers, including
the time, place and manner of the communications. It is our policy to comply
with the provisions of the FDCPA and comparable state statutes in all of our
recovery activities, even though we may not be specifically subject to these
laws. Our failure to comply with these laws could have a material adverse effect
on us if they apply to some or all of our recovery activities. In addition
to
the FDCPA, significant federal laws applicable to our business include the
following: Truth-In-Lending Act, Fair Credit Billing Act, Equal Credit
Opportunity Act, Fair Credit Reporting Act, Electronic Funds Transfer Act,
U.S. Bankruptcy Code, Gramm-Leach-Bliley Act and Regulations that relate to
these Acts.
Additionally,
there may be comparable statutes in those states in which customers reside
or in
which the originating institutions are located. State laws may also limit the
interest rate and the fees that a credit card issuer may impose on its
customers, and also limit the time in which we may file legal actions to enforce
consumer accounts.
The
relationship between a customer and a credit card issuer is extensively
regulated by federal and state consumer protection and related laws and
regulations. While we are not a credit card issuer, these laws affect some
of
our operations because the majority of our receivables were originated through
credit card transactions. The laws and regulations applicable to credit card
issuers, among other things, impose disclosure requirements when a credit card
account is advertised, when it is applied for and when it is opened, at the
end
of monthly billing cycles, and at year-end. Federal law requires, among other
things, that credit card issuers disclose to consumers the interest rates,
fees,
grace periods, and balance calculation methods associated with their credit
card
accounts. Some laws prohibit discriminatory practices in connection with the
extension of credit. If the originating institution fails to comply with
applicable statutes, rules, and regulations, it could create claims and rights
for the customers that would reduce or eliminate their obligations under their
receivables, and have a possible material adverse effect on us. When we acquire
receivables, we generally require the originating institution to contractually
indemnify us against losses caused by its failure to comply with applicable
statutes, rules, and regulations relating to the receivables before they are
sold to us.
Federal
statutes further provide that, in some cases, consumers cannot be held liable
for, or their liability is limited with respect to, charges to the credit card
account that were a result of an unauthorized use of the credit card. These
laws, among others, may give consumers a legal cause of action against us,
or
may limit our liability to recover amounts owing with respect to the
receivables, whether or not we committed any wrongful act or omission in
connection with the account.
Recently
enacted state and federal laws concerning identity theft, privacy, the use
of
automated dialing equipment and other consumer protection laws impose
requirements or restrictions on collection methods or our ability to enforce
and
recover certain debts. These requirements or restrictions could adversely affect
our ability to enforce the receivables.
The
laws
described above, among others, as well as any new laws, rules or regulations,
may adversely affect our ability to recover amounts owing with respect to the
receivables.
Employees
We
have
no full time employees at this time. All functions including development,
strategy, negotiations and clerical are currently being provided by Joseph
Levi,
our President and Chief Executive Officer, and Eduard Korsinsky our Chief
Financial Officer, Secretary, and Director, at no salary. Mr. Levi and Mr.
Korsinsky have agreed to the deferment of their salary until such time that
sufficient funds are available. Our collection activities are staffed by
independent contractors.
DESCRIPTION
OF PROPERTY
The
Company’s office is located at the office of Joseph Levi, our President, Chief
Executive Officer and Director. Mr. Levi provides such office to the Company
at
no charge.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OR
PLAN
OF OPERATION
Plan
of Operation
We
have
not had any revenues since our inception, May 17, 2007. Over the next twelve
months, we intend on generating revenues by purchasing
and collecting defaulted or charged-off accounts receivable portfolios from
consumer credit originators. Charged-off receivables are the unpaid obligations
of individuals to credit originators, such as credit card issuers, consumer
finance companies, retail merchants and utility providers. Since these
receivables are delinquent or past due, we are able to purchase them at a
substantial discount.
Our
primary source of revenue is derived from cash collections on our purchased
charged-off receivables portfolios. Since the credit originator, and in most
cases other collection companies, have unsuccessfully attempted to collect
these
receivables, we are able to purchase them at a substantial discount to face
value.
We
will
use unaffiliated third parties, primarily attorneys and other collection
agencies, to collect account balances on our behalf. The cash flows generated
by
the collections on our purchased receivable portfolios are the primary driver
of
our business. We will record the gross proceeds received by third party
collection agencies and attorneys as cash collections. We will monitor the
collections on our charged-off receivables portfolios, as well as the
collections by our collectors. This data will help us evaluate our collection
performance and collection strategies, test and refine our purchasing
methodologies and improve collector productivity.
From
time
to time, we may sell previously acquired charged-off consumer receivables to
third parties, retaining no claims to any of the subsequent collections. When
we
sell receivables prior to attempting any collection efforts, we record a gain
or
loss on sale by comparing the price paid for the receivables to the price
received from the purchaser. If we sell receivables out of a portfolio that
has
received collections, we determine the basis of the sold receivables by using
the pro rata share of the face amount sold to the current carrying value of
the
portfolio and then record the gain or the loss on sale by comparing the basis
of
the sold receivable to the price received from the purchaser.
On
June
20, 2007, we purchased a portfolio of charged-off receivable having an aggregate
face value of $877,266.67 and a total value, including accrued interest, of
$1,270,323.33 (the “Portfolio”). The price we paid for the Portfolio was 1.14%
of face value. On June 21, 2007, we placed the Portfolio with Investors
Portfolio Management Services, LLC (“IPMS”) that will manage the third-party
collection agencies that will collect the Portfolio. IPMS retains 45% of all
collected receivables of which 40% is used to compensate the third-party
collection agencies and 5% is used to compensate IPMS for their services. On
June 20, 2007, we entered into an agreement with RB Consulting, LLC in which
RB
Consulting agreed to purchase the portion of the Portfolio that remains
uncollected after 180 days at a rate of 50 basis points of face
value.
We
do not
have sufficient resources to effectuate our business. As of June 30, 2007 we
had
approximately $3,614 in cash. We expect to require approximately $100,000 to
fund operations over the next twelve months including general overhead expenses
such as for salaries, corporate legal and accounting fees, office overhead
and
general working capital. Accordingly, we will have to raise the funds to pay
for
these expenses. We may have to borrow money from shareholders or issue debt
or
equity or enter into a strategic arrangement with a third party. Our officers
will fund any expenses which arise until such time as the Company raises
sufficient funds. There can be no assurance that additional capital will be
available to us. We currently have no agreements, arrangements or understandings
with any person to obtain funds through bank loans, lines of credit or any
other
sources. Since we have no such arrangements or plans currently in effect, our
inability to raise funds for operations will have a severe negative impact
on
our ability to remain a viable company.
Critical
Accounting Principles
Purchased
Accounts Receivable:
The
Company applies American Institute of Certified Public Accountants (“AICPA”)
Statement of Position 03-3, “Accounting for Loans or Certain Securities
Acquired in a Transfer” (“SOP 03-3”). SOP 03-3 addresses accounting for
differences between contractual versus expected cash flows over an investor’s
initial investment in certain loans when such differences are attributable,
at
least in part, to credit quality.
The
Company uses all available information to forecast the cash flows of its
purchased accounts receivable including, but not limited to, credit scores
of
the underlying debtors, seller’s credit policies, and location of the debtor.
The
Company acquired the accounts receivable in a portfolio that was recorded at
cost, which includes external costs of acquiring portfolios. Once a portfolio
is
acquired, the accounts in the portfolio are not changed, unless replaced,
returned or sold. All acquired accounts receivable have experienced
deterioration of credit quality between origination and the Company’s
acquisition of the accounts receivable, and the amount paid for a portfolio
of
accounts receivable reflects the Company’s determination that it is probable the
Company will be unable to collect all amounts due according to each loan’s
contractual terms. The Company considers expected collections, and estimates
the
amount and timing of undiscounted expected principal, interest, and other cash
flows (expected at acquisition). The Company determines the nonaccretable
difference, or the excess of the portfolio’s contractual principal over all cash
flows expected at acquisition as an amount that should not be accreted. The
remaining amount represents accretable yield, or the excess of the portfolio’s
cash flows expected to be collected over the amount paid, and is accreted into
earnings over the remaining life of the portfolio.
At
acquisition, the Company derives an internal rate of return (“IRR”) based on the
expected monthly collections over the estimated economic life of the portfolio
of accounts receivable compared to the original purchase price. Collections
on
the portfolios are allocated to revenue and principal reduction based on the
estimated IRR for each accounts receivable. Revenue on purchased accounts
receivable is recorded monthly based on applying the effective IRR for the
quarter to its carrying value. Over the life of a portfolio, the Company
continues to estimate cash flows expected to be collected. The Company evaluates
at the balance sheet date whether the present value of its portfolio determined
using the effective interest rates has decreased, and if so, records an expense
to establish a valuation allowance to maintain the original IRR established
at
acquisition. Any increase in actual or estimated cash flows expected to be
collected is first used to reverse any existing valuation allowance for that
portfolio, or aggregation of portfolios, and any remaining increases in cash
flows are recognized prospectively through an increase in the IRR. The updated
IRR then becomes the new benchmark for subsequent valuation allowance testing.
Income
Taxes
The
Company accounts for income taxes using the asset and liability method. Under
this method, income taxes are provided for amounts currently payable and for
amounts deferred as tax assets and liabilities based on differences between
the
financial statement carrying amounts and the tax bases of existing assets and
liabilities. Deferred income taxes are measured using the enacted tax rates
that
are assumed will be in effect when the differences reverse.
Impact
of
New Accounting Standards
In
June
2003, the Securities and Exchange Commission (“SEC”) adopted final rules under
Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Commencing with
the Company’s Annual Report for the year ending December 31, 2008, the Company
is required to include a report of management on the Company’s internal control
over financial reporting. The internal control report must include a statement
of management’s responsibility for establishing and maintaining adequate
internal control over financial reporting for the Company; of management’s
assessment of the effectiveness of the Company’s internal control over financial
reporting as of year end; of the framework used by management to evaluate the
effectiveness of the Company’s internal control over financial reporting; and
that the Company’s independent accounting firm has issued an attestation report
on management’s assessment of the Company’s internal control over financial
reporting, which report is also required to be filed as part of the Annual
Report on Form 10-KSB.
In
July
2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
(FIN) No. 48, "Accounting
for Uncertainty in Income Taxes-an interpretation of FASB Statement No.
109."
This
interpretation provides guidance for recognizing and measuring uncertain tax
positions, as defined in SFAS No. 109, "Accounting for Income Taxes." FIN No.
48
prescribes a threshold condition that a tax position must meet for any of the
benefit of an uncertain tax position to be recognized in the financial
statements. Guidance is also provided regarding de-recognition, classification,
and disclosure of uncertain tax positions. FIN No. 48 is effective for fiscal
years beginning after December 15, 2006. The Company does not expect that this
interpretation will have a material impact on its financial position, results
of
operations, or cash flows.
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No.
157, "Fair
Value Measurements"
("FAS
157"). This Statement defines fair value as used in numerous accounting
pronouncements, establishes a framework for measuring fair value in generally
accepted accounting principles and expands disclosure related to the use of
fair
value measures in financial statements. The Statement is to be effective for
the
Company's financial statements issued in 2008; however, earlier application
is
encouraged. The Company does not anticipate that the adoption of SAB No. 108
will have a material effect on the Company’s financial condition and results of
operations.
In
September 2006, FASB issued SFAS No. 158,
Employers' Accounting for Defined Benefit Pension and Other Postretirement
Plans, an amendment of FASB Statements No 87, 88, 106 and
132(R)
(SFAS
158).
SFAS 158
requires the recognition of the overfunded or underfunded status of a defined
benefit postretirement plan as an asset or liability in the statement of
financial position and the recognition of changes in that funded status in
the
year in which the changes occur through comprehensive income. SFAS 158 also
requires the measurement of the funded status of a plan as of the date of the
year-end statement of financial position.
The
Company does not anticipate that the adoption of this statement will have a
material effect on the Company’s financial condition and results of
operations.
In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" (SFAS No. 159). SFAS No. 159 permits
entities to choose to measure, on an item-by-item basis, specified financial
instruments and certain other items at fair value. Unrealized gains and losses
on items for which the fair value option has been elected are required to be
reported in earnings at each reporting date. SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007, the provisions of which are
required to be applied prospectively.
In
September 2006, the SEC staff issued Accounting Bulletin No. 108, "Considering
the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements" (SAB No. 108). SAB No. 108 was issued in
order to eliminate the diversity in practice surrounding how public companies
quantify financial statement misstatements. SAB No. 108 requires that
registrants quantify errors using both a balance sheet and income statement
approach and evaluate whether either approach results in a misstated amount
that, when all relevant quantitative factors are considered, is material.
Management
does not believe that any other recently issued, but not yet effective
accounting pronouncements, if adopted, would have a material effect on the
accompanying consolidated financial statements.
Accordingly,
we will have to raise the funds to pay for these expenses. We may have to borrow
money from shareholders or issue debt or equity or enter into a strategic
arrangement with a third party. Our officer and director will fund any expenses
which arise until such time as the Company raises sufficient funds. There can
be
no assurance that additional capital will be available to us. We currently
have
no agreements, arrangements or understandings with any person to obtain funds
through bank loans, lines of credit or any other sources. Since we have no
such
arrangements or plans currently in effect, our inability to raise funds for
a
marketing program will have a severe negative impact on our ability to remain
a
viable company.
Going
Concern Consideration
Our
independent auditors included an explanatory paragraph in their report on the
accompanying financial statements regarding concerns about our ability to
continue as a going concern. Our financial statements contain additional note
disclosures describing the circumstances that lead to this disclosure by our
independent auditors.
Off-Balance
Sheet Arrangements
We
have
no off-balance sheet arrangements.
LEGAL
PROCEEDINGS
There
are
no pending legal proceedings to which the Company is a party or in which any
director, officer or affiliate of the Company, any owner of record or
beneficially of more than 5% of any class of voting securities of the Company,
or security holder is a party adverse to the Company or has a material interest
adverse to the Company. The Company’s property is not the subject of any pending
legal proceedings.
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors
and Executive Officers
Set
forth
below is certain information relating to our directors and executive officers,
including their names, ages, and business experience.
Name
and Business Address
|
|
Age
|
|
Position
|
|
|
|
|
|
Joseph
Levi
39
Broadway
New
York, New York 10006
|
|
48
|
|
President,
Chief Executive Officer & Director
|
|
|
|
|
|
Eduard
Korsinsky
39
Broadway
New
York, New York 10006
|
|
36
|
|
Secretary,
Chief Financial Officer &
Director
|
Joseph
Levi has been our Chief Executive Officer and director since our inception
on
May 17, 2007. Since September 2003, Mr. Levi has been a partner at the law
firm
of Zimmerman, Levi and Korsinsky, LLP. From September 1995 to September 2003,
Mr. Levi was a litigation associate at various law firms. Mr. Levi has a BS
Degree in Electrical Engineering from Polytechnic University (1984), an MS
in
System Engineering from , Polytechnic University (1986) and a JD from - Brooklyn
Law School (1995). From April 1992 to June 1995, Mr. Levi was a principal in
a
computer network consulting practice. From June 1988 to May 1992, Mr. Levi
was a
corporate sales manager for a computer sales and services firm. From June 1984
to May 1988, Mr. Levi was an engineer at ITT Avionics.
Eduard
Korsinsky has been our Chief Financial Officer, Secretary and director since
our
inception on May 17, 2007. Since September 2003 Mr. Korsinsky has been a partner
with the law firm of Zimmerman, Levi & Korsinsky where he concentrates in
the area of complex commercial litigation and mergers and acquisitions
litigation. From 1997 through 2003 Mr. Korsinsky was a litigation associate
at
various law firms. From 1995 through 1997 Mr. Korsinsky worked for the
accounting firm of KPMG. Mr. Korsinsky holds a B.S. in Accounting from Brooklyn
College, Summa
cum laude (1992);
a J.D.
from Brooklyn Law School (1995); and a LL.M, Master of Law(s) degree in Taxation
from New York University School of Law (1998).
Mr.
Levi
is a director of StatSure Diagnostic Systems, Inc. Mr. Korsinsky is not a
director in any reporting company. They have not been affiliated with any
business that has filed for bankruptcy within the last five years. They are
not
parties adverse to our Company and nor do they have a material interest adverse
to it.
Each
director of the Company serves for a term of one year or until the successor
is
elected at the Company's annual shareholders' meeting and is qualified, subject
to removal by the Company's shareholders. Each officer serves, at the pleasure
of the board of directors, for a term of one year and until the successor is
elected at the annual meeting of the board of directors and is
qualified.
Auditors;
Code of Ethics; Financial Expert
Our
principal independent accountant is Li & Company, P.C.
We
do not
currently have a Code of Ethics applicable to our principal executive, financial
and accounting officers. We do not have a “financial expert” on the board or an
audit committee or nominating committee.
Potential
Conflicts of Interest
We
are
not aware of any current or potential conflicts of interest with any of our
executives or directors.
Committees
of the Board of Directors
Concurrent
with having sufficient members and resources, the Company’s board of directors
will establish an audit committee and a compensation committee. We believe
that we will need a minimum of five directors to have effective committee
system. The audit committee will review the results and scope of the audit
and
other services provided by the independent auditors and review and evaluate
the
system of internal controls. The compensation committee will manage the
stock option plan and review and recommend compensation arrangements for the
officers. No final determination has yet been made as to the memberships of
these committees or when we will have sufficient members to establish
committees.
All
directors will be reimbursed by the Company for any expenses incurred in
attending directors' meetings provided that the Company has the resources to
pay
these fees. The Company will consider applying for officers and directors
liability insurance at such time when it has the resources to do
so.
Pursuant
to the board of directors’ approval and subsequent stockholder approval, the
Company adopted our 2007 Non-Statutory Stock Option Plan (the “Plan”) whereby we
reserved for issuance up to 1,500,000 shares of our common stock. Non-Statutory
Stock Options do not meet certain requirements of the Internal Revenue Service
as compared to Incentive Stock Options which meet the requirements of Section
422 of the Internal Revenue Code. Nonqualified options have two disadvantages
compared to incentive stock options. One is that recipients have to report
taxable income at the time that they exercise the option to buy stock, and
the
other is that the income is treated as compensation, which is taxed at higher
rates than long-term capital gains. We intend to file a Registration Statement
on Form S-8 so as to register those 1,500,000 shares of common stock underlying
the options in the Plan once we are eligible to do so which will be after we
are
subject to the Exchange Act Reporting Requirements and have filed all required
reports during the preceding 12 months or such shorter period of time as
required.
No
options are outstanding or have been issued under the Plan as of July 16,
2007.
As
previously indicated, the board of directors, on June 1, 2007, adopted the
Plan
so as to provide a long-term incentive for employees, non-employee directors,
consultants, attorneys and advisors of the Company and our subsidiaries, if
any.
The board of directors believes that our policy of granting stock options
to such persons will provide us with a potential critical advantage in
attracting and retaining qualified candidates. In addition, the Plan is
intended to provide us with maximum flexibility to compensate plan participants.
We believe that such flexibility will be an integral part of our policy to
encourage employees, non-employee directors, consultants, attorneys and advisors
to focus on the long-term growth of stockholder value. The board of
directors believes that important advantages to the Company are gained by an
option program such as the Plan which includes incentives for motivating our
employees, while at the same time promoting a closer identity of interest
between employees, non-employee directors, consultants, attorneys and advisors
on the one hand, and our stockholders on the other.
The
principal terms of the Plan are summarized below; however, it is not intended
to
be a complete description thereof and such summary is qualified in its entirety
by the actual text of the Plan, a copy of which has been filed as an exhibit
to
our registration statement of which this prospectus is a part.
Summary
Description of the Green Mountain Recovery, Inc. 2007 Non-Statutory Stock Option
Plan
The
purpose of the Plan is to provide directors, officers and employees of, as
well
as consultants, attorneys and advisors to, the Company and our subsidiaries,
if
any, with additional incentives by increasing their ownership interest in Green
Mountain Recovery. Directors, officers and other employees of the Company and
our subsidiaries, if any, are eligible to participate in the Plan. Options
in the form of Non-Statutory Stock Options (“NSO”) may also be granted to
directors who are not employed by us and consultants, attorneys and advisors
to
us providing valuable services to us and our subsidiaries. In addition,
individuals who have agreed to become an employee of, director of or an
attorney, consultant or advisor to us and/or our subsidiaries are eligible
for
option grants, conditional in each case on actual employment, directorship
or
attorney, advisor and/or consultant status. The Plan provides for the
issuance of NSO’s only, which are not intended to qualify as “incentive stock
options” within the meaning of Section 422 of the Internal Revenue Code, as
amended. Further, NSO’s have two disadvantages compared to ISO’s in that
recipients of NSOs must report taxable income at the time of NSO option exercise
and income from NSO’s is treated as compensation which is taxed at higher rates
than long-term capital gains.
Our
board
of directors or a compensation committee (once established) will administer
the
Plan with the discretion generally to determine the terms of any option grant,
including the number of option shares, exercise price, term, vesting schedule
and the post-termination exercise period. Notwithstanding this discretion
(i) the term of any option may not exceed 10 years and (ii) an option will
terminate as follows: (a) if such termination is on account of termination
of
employment for any reason other than death, without cause, such options shall
terminate one year thereafter; (b) if such termination is on account of death,
such options shall terminate 15 months thereafter; and (c) if such termination
is for cause (as determined by the board of directors and/or compensation
committee), such options shall terminate immediately. Unless otherwise
determined by the board of directors or compensation committee, the exercise
price per share of common stock subject to an option shall be equal to no less
than 10% of the fair market value of the common stock on the date such option
is
granted. No NSO shall be assignable or otherwise transferable except by
will or the laws of descent and distribution or except as permitted in
accordance with SEC Release No.33-7646 as effective April 7,
1999.
The
Plan
may be amended, altered, suspended, discontinued or terminated by the board
of
directors without further stockholder approval, unless such approval is required
by law or regulation or under the rules of the stock exchange or automated
quotation system on which the common stock is then listed or quoted. Thus,
stockholder approval will not necessarily be required for amendments which
might
increase the cost of the Plan or broaden eligibility except that no amendment
or
alteration to the Plan shall be made without the approval of stockholders which
would:
a.
decrease
the NSO price (except as provided in paragraph 9 of the Plan) or change the
classes of
persons
eligible to participate in the Plan, or
b. extend
the NSO period, or
c. materially
increase the benefits accruing to Plan participants, or
d.
materially
modify Plan participation eligibility requirements, or
e.
extend
the expiration date of the Plan.
Unless
otherwise indicated the Plan will remain in effect for a period of ten years
from the date adopted unless terminated earlier by the board of directors except
as to NSOs then outstanding, which shall remain in effect until they have
expired or been exercised.
Equity
Compensation Plan Information
|
Plan
category
|
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
(a)
|
|
Weighted-average
exercise price of outstanding options, warrants and rights
(b)
|
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
(c)
|
|
Equity
compensation plans approved by security holders
|
|
|
-
|
|
|
-
|
|
|
|
|
Equity
compensation plans not approved by security holders
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Total
|
|
|
-
|
|
|
-
|
|
|
|
|
EXECUTIVE
COMPENSATION
Since
our
inception, May 17, 2007, we have not paid any compensation to directors and
officers.
We
adopted our 2007 Non-Statutory Stock Option Plan on June 1, 2007. No stock
options or stock appreciation rights have been granted to our sole director
and
officer since our inception.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table lists, as of July 16, 2007, the number of shares of common
stock
of our Company that are beneficially owned by (i) each person or entity known
to
our Company to be the beneficial owner of more than 5% of the outstanding common
stock; (ii) each officer and director of our Company; and (iii) all officers
and
directors as a group. Information relating to beneficial ownership of common
stock by our principal shareholders and management is based upon information
furnished by each person using “beneficial ownership” concepts under the rules
of the Securities and Exchange Commission. Under these rules, a person is deemed
to be a beneficial owner of a security if that person has or shares voting
power, which includes the power to vote or direct the voting of the security,
or
investment power, which includes the power to vote or direct the voting of
the
security. The person is also deemed to be a beneficial owner of any security
of
which that person has a right to acquire beneficial ownership within 60 days.
Under the Securities and Exchange Commission rules, more than one person may
be
deemed to be a beneficial owner of the same securities, and a person may be
deemed to be a beneficial owner of securities as to which he or she may not
have
any pecuniary beneficial interest. The balance shown for Joseph Levi includes
an
additional 3,000 Shares owned by his wife in accordance with SEC Release 33-4819
which states, in part, that a person is regarded as the beneficial owner of
securities held in the name of his or her spouse and their minor children.
Mr.
Levi disclaims any beneficial interest in or control over any of such shares
other than that which may be attributed to them by operation of law. Except
as
noted below, each person has sole voting and investment power.
Beneficial
Owner1
|
|
Beneficially
Owned
|
|
Percent
of Class
|
|
|
|
|
|
|
|
Joseph
Levi
|
|
|
1,150,000
|
|
|
46
|
%
|
Eduard
Korsinsky
|
|
|
1,147,000
|
|
|
45.9
|
%
|
|
|
|
|
|
|
|
|
Officers
and Directors
|
|
|
|
|
|
|
|
As
a group (2 members)
|
|
|
2,297,000
|
|
|
91.9
|
%
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
On
May
17, 2007, we issued 2,294,000 shares of our common stock to Joseph Levi and
Eduard Korsinsky in consideration for the payment of an aggregate of $1,147
each. The shares were issued under Section 4(2) of the Securities Act of 1933,
as amended, and/or Regulation D promulgated by the Securities and Exchange
Commission.
SELLING
SECURITY HOLDERS
The
following table sets forth the shares beneficially owned, as of July 16, 2007,
by the selling security holders prior to the offering contemplated by this
prospectus, the number of shares each selling security holder is offering by
this prospectus and the number of shares which each would own beneficially
if
all such offered shares are sold.
1
The address for each person is 39 Broadway, Ste. 1601, New York, New York
10006.
Beneficial
ownership is determined in accordance with Securities and Exchange Commission
rules. Under these rules, a person is deemed to be a beneficial owner of a
security if that person has or shares voting power, which includes the power
to
vote or direct the voting of the security, or investment power, which includes
the power to vote or direct the voting of the security. The person is also
deemed to be a beneficial owner of any security of which that person has a
right
to acquire beneficial ownership within 60 days. Under the Securities and
Exchange Commission rules, more than one person may be deemed to be a beneficial
owner of the same securities, and a person may be deemed to be a beneficial
owner of securities as to which he or she may not have any pecuniary beneficial
interest. Except as noted below, each person has sole voting and investment
power.
None
of
the selling security holders is a registered broker-dealer or an affiliate
of a
registered broker-dealer. Each of the selling security holders has acquired
his,
her or its shares pursuant to a private placement solely for investment and
not
with a view to or for resale or distribution of such securities. The shares
were
offered and sold to the selling security holders in a private placement made
between May through June 2007 pursuant to the exemptions from the registration
under the Securities Act provided by Regulations D and S of the Securities
Act.
None of the selling security holders are affiliates or controlled by our
affiliates and none of the selling security holders are now or were at any
time
in the past an officer or director of ours or any of any of our predecessors
or
affiliates.
The
percentages below are calculated based on 2,500,000 shares of our common stock
issued and outstanding. We do not have any outstanding options, warrants or
other securities exercisable for or convertible into shares of our common
stock.
|
|
Common
Shares owned by the
Selling
|
|
Number
of Shares Offered by
Selling
|
|
Number
of Shares and Percent of Total Issued and Outstanding Held After the
Offering(1)
|
|
Name
of Selling Security Holder
|
|
Security
Holder
|
|
Security
Holder
|
|
Number
of Shares
|
|
%
of Class
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
Levi (2)
|
|
|
1,147,000
|
|
|
740,000
|
|
|
407,000
|
|
|
16.3
|
|
Eduard
Korsinsky (3)
|
|
|
1,147,000
|
|
|
740,000
|
|
|
407,000
|
|
|
16.3
|
|
Michael
Korsinsky
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Leah
S. Korsinsky
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Julian
Whiteman
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Marc
Whiteman
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Deborah
Whiteman
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Julian
Whiteman CUST Esther Whitman
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Julian
Whiteman CUST Sam Herskowitz
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Julian
Whiteman CUST Ethan Zolty
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Helen
Korsinsky
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Gersh
Korsinsky
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Freda
Levi (4)
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Shlomo
Levi(4)
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Miri
Levi(4)
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Milton
Pfeiffer
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Francis
Pfeiffer
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Zev
Kahan
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Azron
Markowitch
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Yaakov
Markowitch
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Masha
Markowitch
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Getzel
Markowitch
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Beth
Shochet
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Moshe
Y. Kops
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Yaakov
Markovitch CUST Rosa Markovitch
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Chana
Wolfson
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Yaakov
Markowitch CUST Aaron Markowitz
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Ronald
Nussbaum
|
|
|
28,000
|
|
|
28,000
|
|
|
|
|
|
|
|
Etty
Nussbaum
|
|
|
28,000
|
|
|
28,000
|
|
|
|
|
|
|
|
Miryam
Wasserman
|
|
|
6,000
|
|
|
6,000
|
|
|
|
|
|
|
|
Giela
Gellis
|
|
|
6,000
|
|
|
6,000
|
|
|
|
|
|
|
|
Michael
Alter
|
|
|
6,000
|
|
|
6,000
|
|
|
|
|
|
|
|
Fay
Krieger
|
|
|
50,000
|
|
|
50,000
|
|
|
|
|
|
|
|
Ita
Londinski
|
|
|
9,000
|
|
|
9,000
|
|
|
|
|
|
|
|
Rivky
Kalatsky
|
|
|
9,000
|
|
|
9,000
|
|
|
|
|
|
|
|
Steven
D. Prager
|
|
|
7,000
|
|
|
7,000
|
|
|
|
|
|
|
|
Paula
M. Merkle
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
George
Grossberger
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Eliezer
Grossberger
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Lawrence
Grossberger
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
David
Spira
|
|
|
10,000
|
|
|
10,000
|
|
|
|
|
|
|
|
Israel
Bollag
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Michael
Ribowsky
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Bracha
Ribowsky
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Stephanie
Askal
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Aliza
Klugman
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Abraham
Rosenblatt
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Shulamis
T. Unger
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Stuart
Jay Unger
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Stuart
Jay Under CUST Ethan Unger
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
JASH
Group, Inc.
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Shelley
Spindel
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Say
Chicken, Inc.
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
Chaim
Benjaminson
|
|
|
5,000
|
|
|
5,000
|
|
|
|
|
|
|
|
Shloma
Raskin
|
|
|
1,000
|
|
|
1,000
|
|
|
|
|
|
|
|
*
Represents less than one percent of the total number of shares of common stock
outstanding as of the date of this filing.
(1)
Assumes
all of the shares of common stock offered in this prospectus are sold and no
other shares of common stock are sold or issued during this offering period.
Based on 2,500,000 shares of common stock issued and outstanding as of July
16,
2007.
(2)
Joseph
Levi is our President and Chief Executive Officer and Director.
(3)
Eduard
Korsinsky is our Chief Financial Officer, Secretary and Director.
(4)
Freda
Levi is Joseph Levi’s wife, and Shlomo Levi and Miri Levi are his children. In
accordance with SEC Release 33-4819, Mr. Levi is regarded as the beneficial
owner of securities held in the name of his spouse and their minor
children.
We
may
require the selling security holders to suspend the sales of the securities
offered by this prospectus upon the occurrence of any event that makes any
statement in this prospectus, or the related registration statement, untrue
in
any material respect, or that requires the changing of statements in these
documents in order to make statements in those documents not misleading. We
will
file a post-effective amendment to this registration statement to reflect any
material changes to this prospectus.
EXPENSES
OF ISSUANCE AND DISTRIBUTION
We
have
agreed to pay all expenses incident to the offering and sale to the public
of
the shares being registered other than any commissions and discounts of
underwriters, dealers or agents and any transfer taxes, which shall be borne
by
the selling security holders. The expenses which we are paying are set forth
in
the following table. All of the amounts shown are estimates except the SEC
registration fee.
Nature
of Expense
|
|
Amount
|
|
Accounting
fees and expenses
|
|
$
|
10,000.00
|
|
SEC
registration fee
|
|
$
|
5.18
|
|
Legal
fees and other expenses
|
|
$
|
65,000.00
|
|
Total
|
|
$
|
75,005.18
|
|
*
Estimated Expenses.
PLAN
OF DISTRIBUTION
There
has
been no market for our securities. Our common stock is not traded on any
exchange or on the over-the-counter market. After the effective date of the
registration statement relating to this prospectus, we hope to have a market
maker file an application with the National Association of Securities Dealers,
Inc. for our common stock to eligible for trading on the Over The Counter
Bulletin Board. We do not yet have a market maker who has agreed to file such
application. The selling security holders will be offering our shares of common
stock at a price of $0.10 per share until a market develops and thereafter
at
prevailing market prices or privately negotiated prices.
The
selling security holders may, from time to time, sell all or a portion of the
shares of common stock on any market upon which the common stock may be listed
or quoted (anticipated to be the OTC Bulletin Board in the United States),
in
privately negotiated transactions or otherwise. Such sales may be at fixed
prices prevailing at the time of sale, at prices related to the market prices
or
at negotiated prices. Moreover, the shares of common stock being offered for
resale by this prospectus may be sold by the selling security holders by one
or
more of the following methods, without limitation: (a) ordinary brokerage
transactions and transactions in which the broker solicits purchasers; (b)
privately negotiated transactions; (c) market sales (both long and short to
the
extent permitted under the federal securities laws); (d) at the market to or
through market makers or into an existing market for the shares; (e) through
transactions in options, swaps or other derivatives (whether exchange listed
or
otherwise); and (f) a combination of any of the aforementioned methods of
sale.
In
the
event of the transfer by any of the selling security holders of its common
shares to any pledgee, donee or other transferee, we will amend this prospectus
and the registration statement of which this prospectus forms a part by the
filing of a post-effective amendment in order to have the pledgee, donee or
other transferee in place of the selling security holder who has transferred
his, her or its shares.
In
effecting sales, brokers and dealers engaged by the selling security holders
may
arrange for other brokers or dealers to participate. Brokers or dealers may
receive commissions or discounts from a selling security holder or, if any
of
the broker-dealers act as an agent for the purchaser of such shares, from a
purchaser in amounts to be negotiated which are not expected to exceed those
customary in the types of transactions involved. Broker-dealers may agree with
a
selling security holder to sell a specified number of the shares of common
stock
at a stipulated price per share. Such an agreement may also require the
broker-dealer to purchase as principal any unsold shares of common stock at
the
price required to fulfill the broker-dealer commitment to the selling security
holder if such broker-dealer is unable to sell the shares on behalf of the
selling security holder. Broker-dealers who acquire shares of common stock
as
principal may thereafter resell the shares of common stock from time to time
in
transactions which may involve block transactions and sales to and through
other
broker-dealers, including transactions of the nature described above. Such
sales
by a broker-dealer could be at prices and on terms then prevailing at the time
of sale, at prices related to the then-current market price or in negotiated
transactions. In connection with such resales, the broker-dealer may pay to
or
receive from the purchasers of the shares commissions as described
above.
The
selling security holders and any broker-dealers or agents that participate
with
the selling security holders in the sale of the shares of common stock may
be
deemed to be "underwriters" within the meaning of the Securities Act in
connection with these sales. In that event, any commissions received by the
broker-dealers or agents and any profit on the resale of the shares of common
stock purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
From
time
to time, any of the selling security holders may pledge shares of common stock
pursuant to the margin provisions of customer agreements with brokers. Upon
a
default by a selling security holder, their broker may offer and sell the
pledged shares of common stock from time to time. Upon a sale of the shares
of
common stock, the selling security holders intend to comply with the prospectus
delivery requirements under the Securities Act by delivering a prospectus to
each purchaser in the transaction. We intend to file any amendments or other
necessary documents in compliance with the Securities Act which may be required
in the event any of the selling security holders defaults under any customer
agreement with brokers.
To
the
extent required under the Securities Act, a post effective amendment to this
registration statement will be filed disclosing the name of any broker-dealers,
the number of shares of common stock involved, the price at which the common
stock is to be sold, the commissions paid or discounts or concessions allowed
to
such broker-dealers, where applicable, that such broker-dealers did not conduct
any investigation to verify the information set out or incorporated by reference
in this prospectus and other facts material to the transaction.
We
and
the selling security holders will be subject to applicable provisions of the
Exchange Act and the rules and regulations under it, including, without
limitation, Rule 10b-5 and, insofar as a selling security holder is a
distribution participant and we, under certain circumstances, may be a
distribution participant, under Regulation M. All of the foregoing may affect
the marketability of the common stock.
All
expenses of the registration statement including, but not limited to, legal,
accounting, printing and mailing fees are and will be borne by us. Any
commissions, discounts or other fees payable to brokers or dealers in connection
with any sale of the shares of common stock will be borne by the selling
security holders, the purchasers participating in such transaction, or
both.
Any
shares of common stock covered by this prospectus which qualify for sale
pursuant to Rule 144 under the Securities Act, as amended, may be sold under
Rule 144 rather than pursuant to this prospectus.
Penny
Stock Regulations
You
should note that our stock is a penny stock. The Securities and Exchange
Commission has adopted Rule 15g-9 which generally defines "penny stock" to
be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and "accredited investors". The term
"accredited investor" refers generally to institutions with assets in excess
of
$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse. The penny
stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the SEC which provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information,
must
be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customer's
confirmation. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from these rules, the
broker-dealer must make a special written determination that the penny stock
is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the stock
that is subject to these penny stock rules. Consequently, these penny stock
rules may affect the ability of broker-dealers to trade our securities. We
believe that the penny stock rules discourage investor interest in and limit
the
marketability of our common stock.
Blue
Sky Restrictions on Resale
If
a
selling security holder wants to sell shares of our common stock under this
registration statement in the United States, the selling security holders will
also need to comply with state securities laws, also known as “Blue Sky laws,”
with regard to secondary sales. All states offer a variety of exemption from
registration for secondary sales. Many states, for example, have an exemption
for secondary trading of securities registered under Section 12(g) of the
Securities Exchange Act of 1934 or for securities of issuers that publish
continuous disclosure of financial and non-financial information in a recognized
securities manual, such as Standard & Poor’s. The broker for a selling
security holder will be able to advise a selling security holder which states
our common stock is exempt from registration with that state for secondary
sales.
Any
person who purchases shares of our common stock from a selling security holder
under this registration statement who then wants to sell such shares will also
have to comply with Blue Sky laws regarding secondary sales.
When
the
registration statement becomes effective, and a selling security holder
indicates in which state(s) he desires to sell his shares, we will be able
to
identify whether it will need to register or will rely on an exemption there
from.
DIVIDEND
POLICY
We
have
not declared or paid dividends on our Common Stock since our formation, and
we
do not anticipate paying dividends in the foreseeable future. Declaration or
payment of dividends, if any, in the future, will be at the discretion of our
Board of Directors and will depend on our then current financial condition,
results of operations, capital requirements and other factors deemed relevant
by
the board of directors. There are no contractual restrictions on our ability
to
declare or pay dividends.
SHARE
CAPITAL
Security
Holders
As
of
July 16, 2007, there were 2,500,000 common shares issued and outstanding, which
were held by approximately fifty-five stockholders of record.
Admission
to Quotation on the OTC Bulletin Board
We
intend
to have a market maker file an application for our common stock to be quoted
on
the OTC Bulletin Board. However, we do not have a market maker that has agreed
to file such application. If our securities are not quoted on the OTC Bulletin
Board, a security holder may find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of our securities. The OTC Bulletin
Board differs from national and regional stock exchanges in that it
(1)
is
not situated in a single location but operates through communication of bids,
offers and confirmations between broker-dealers, and
(2)
securities admitted to quotation are offered by one or more Broker-dealers
rather than the "specialist" common to stock exchanges.
To
qualify for quotation on the OTC Bulletin Board, an equity security must have
one registered broker-dealer, known as the market maker, willing to list bid
or
sale quotations and to sponsor the company listing. If it meets the
qualifications for trading securities on the OTC Bulletin Board our securities
will trade on the OTC Bulletin Board. We may not now or ever qualify for
quotation on the OTC Bulletin Board. We currently have no market maker who
is
willing to list quotations for our securities.
Description
of Securities
Preferred
Stock
The
Company’s certificate of incorporation authorizes the issuance of 1,000,000
shares of preferred stock with designations, rights and preferences determined
from time to time by our board of directors. No shares of preferred stock have
been designated, issued or are outstanding. Accordingly, our board of directors
is empowered, without stockholder approval, to issue up to 1,000,000 shares
of
preferred stock with voting, liquidation, conversion, or other rights that
could
adversely affect the rights of the holders of the common stock. Although we
have
no present intention to issue any shares of preferred stock, there can be no
assurance that we will not do so in the future.
Among
other rights, our board of directors may determine, without further vote or
action by our stockholders:
|
· |
the
number of shares and the designation of the
series;
|
|
· |
whether
to pay dividends on the series and, if so, the dividend rate, whether
dividends will be cumulative and, if so, from which date or dates,
and the
relative rights of priority of payment of dividends on shares of
the
series;
|
|
· |
whether
the series will have voting rights in addition to the voting rights
provided by law and, if so, the terms of the voting
rights;
|
|
· |
whether
the series will be convertible into or exchangeable for shares of
any
other class or series of stock and, if so, the terms and conditions
of
conversion or exchange;
|
|
· |
the
rights of the shares of the series in the event of our voluntary
or
involuntary liquidation, dissolution or winding up and the relative
rights
or priority, if any, of payment of shares of the
series.
|
We
presently do not have plans to issue any shares of preferred stock. However,
preferred stock could be used to dilute a potential hostile acquirer.
Accordingly, any future issuance of preferred stock or any rights to
purchase preferred shares may have the effect of making it more difficult for
a
third party to acquire control of us. This may delay, defer or prevent a change
of control in our company or an unsolicited acquisition proposal. The issuance
of preferred stock also could decrease the amount of earnings attributable
to,
and assets available for distribution to, the holders of our common stock and
could adversely affect the rights and powers, including voting rights, of the
holders of our common stock.
Common
Stock
Our
certificate of incorporation authorizes the issuance of 99,000,000 shares of
common stock. There are 2,500,000 shares of our common stock issued and
outstanding at July 16, 2007, which shares are held by approximately 55
shareholders. The holders of our common stock:
|
· |
have
equal ratable rights to dividends from funds legally available for
payment
of dividends when, as and if declared by the board of
directors;
|
|
· |
are
entitled to share ratably in all of the assets available for distribution
to holders of common stock upon liquidation, dissolution or winding
up of
our affairs;
|
|
· |
do
not have preemptive, subscription or conversion rights, or redemption
or
access to any sinking fund; and
|
|
· |
are
entitled to one non-cumulative vote per share on all matters submitted
to
stockholders for a vote at any meeting of
stockholders.
|
See
also
Plan of Distribution subsection entitled “Any market that develops in shares of
our common stock will be subject to the penny stock restrictions which will
make
trading difficult or impossible” regarding negative implications of being
classified as a “Penny Stock.”
Authorized
but Un-issued Capital Stock
Delaware
law does not require stockholder approval for any issuance of authorized shares.
However, the marketplace rules of the NASDAQ, which would apply only if our
common stock were listed on the NASDAQ, require stockholder approval of certain
issuances of common stock equal to or exceeding 20% of the then-outstanding
voting power or then-outstanding number of shares of common stock, including
in
connection with a change of control of the Company, the acquisition of the
stock
or assets of another company or the sale or issuance of common stock below
the
book or market value price of such stock. These additional shares may be used
for a variety of corporate purposes, including future public offerings to raise
additional capital or to facilitate corporate acquisitions.
Delaware
Anti-Takeover Law
We
will
be subject to the provisions of Section 203 of the Delaware General Corporation
Law regulating corporate takeovers. This section prohibits, subject to
exceptions, publicly-traded Delaware corporations from engaging in a business
combination, which includes a merger or sale of more than 10% of the
corporation's assets, with any interested stockholder. An interested stockholder
is generally defined as a person who, with its affiliates and associates, owns
or, within three years before the time of determination of interested
stockholder status, owned 15% or more of a corporation's outstanding voting
securities. This prohibition does not apply if:
|
· |
the
transaction is approved by the board of directors before the time
the
interested stockholder attained that
status;
|
|
· |
upon
the closing of the transaction that resulted in the stockholder becoming
an interest stockholder, the interested stockholder owned at least
85% of
the voting stock of the corporation outstanding at the start of the
transaction; or
|
|
· |
at
or after the time the stockholder became an interested stockholder,
the
business combination is approved by the board and authorized at an
annual
or special meeting of stockholders by at least two-thirds of the
outstanding voting stock that is not owned by the interested
stockholder.
|
A
Delaware corporation may opt out of this provision with an express provision
in
its original certificate of incorporation or an express provision in its
certificate of incorporation or bylaws resulting from an amendment approved
by
at least a majority of the outstanding voting shares. However, we have not
opted
out of this provision. This provision of the Delaware General Corporation Law
could prohibit or delay a merger or other takeover or change-in-control attempts
and may discourage attempts to acquire us.
Shareholder
Matters
Certain
provisions of Delaware law create rights that might be deemed material to our
shareholders. Other provisions might delay or make more difficult acquisitions
of our stock or changes in our control or might also have the effect of
preventing changes in our management or might make it more difficult to
accomplish transactions that some of our shareholders may believe to be in
their
best interests.
Dissenters'
Rights.
Among
the rights granted under Delaware law which might be considered as material
is
the right for shareholders to dissent from certain corporate actions and obtain
payment for their shares (see Delaware Revised Statutes ("DRS") 92A.380-390).
This right is subject to exceptions, summarized below, and arises in the event
of mergers or plans of exchange. This right normally applies if shareholder
approval of the corporate action is required either by Delaware law or by the
terms of the articles of incorporation.
|
· |
listed
on a national securities exchange,
|
|
· |
included
in the national market system by the National Association of Securities
Dealers, or
|
|
· |
held
of record by not less than 2,000
holders.
|
This
exception notwithstanding, a shareholder will still have a right of dissent
if
it is provided for in the articles of incorporation (our certificate of
incorporation does not so provide) or if the shareholders are required under
the
plan of merger or exchange to accept anything but cash or owner's interests,
or
a combination of the two, in the surviving or acquiring entity, or in any other
entity falling in any of the three categories described above in this
paragraph.
Inspection
Rights.
Delaware law also specifies that shareholders are to have the right to inspect
company records. This right extends to any person who has been a shareholder
of
record for at least six months immediately preceding his demand. It also extends
to any person holding, or authorized in writing by the holders of, at least
5%
of our outstanding shares. Shareholders having this right are to be granted
inspection rights upon five days' written notice. The records covered by this
right include official copies of:
|
· |
the
articles of incorporation, and all amendments
thereto,
|
|
· |
bylaws
and all amendments thereto; and
|
|
· |
a
stock ledger or a duplicate stock ledger, revised annually, containing
the
names, alphabetically arranged, of all persons who are stockholders
of the
corporation, showing their places of residence, if known, and the
number
of shares held by them,
respectively.
|
In
lieu
of the stock ledger or duplicate stock ledger, Delaware law provides that the
corporation may keep a statement setting out the name of the custodian of the
stock ledger or duplicate stock ledger, and the present and complete post office
address, including street and number, if any, where the stock ledger or
duplicate stock ledger specified in this section is kept.
Transfer
Agent
The
transfer agent for our common stock is Action Stock Transfer Corp. 7069 S.
Highland Dr., Suite 300, Salt Lake City, UT 84121. Its telephone number is
(801)
274-1088.
LEGAL
MATTERS
Krieger
& Prager, LLP of 39 Broadway, New York, New York 10006 has advised us about
the legality and validity of the shares. Members of Krieger & Prager, LLP
and their spouses, hold approximately 113,000 shares of our Common Stock.
Krieger & Prager, LLP has opined on the validity of the shares of common
stock being offered hereby.
EXPERTS
The
financial statements included in this prospectus and in the registration
statement have been audited by Li & Company, PC, an independent registered
public accounting firm, to the extent and for the period set forth in their
report appearing elsewhere herein and in the registration statement, and are
included in reliance upon such report given upon the authority of said firm
as
experts in auditing and accounting.
INTEREST
OF NAMED EXPERTS AND COUNSEL
No
expert
or counsel named in this prospectus as having prepared or certified any part
of
this prospectus or having given an opinion upon the validity of the securities
being registered or upon other legal matters in connection with the registration
or offering of the common stock was employed on a contingency basis or had,
or
is to receive, in connection with the offering, a substantial interest, directly
or indirectly, in the registrant or any of its parents or subsidiaries. Nor
was
any such person connected with the registrant or any of its parents,
subsidiaries as a promoter, managing or principal underwriter, voting trustee,
director, officer or employee.
INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Our
By-laws provide to the fullest extent permitted by law, our directors or
officers, former directors and officers, and persons who act at our request
as a
director or officer of a body corporate of which we are a shareholder or
creditor shall be indemnified by us. We believe that the indemnification
provisions in our By-laws are necessary to attract and retain qualified persons
as directors and officers.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
(the
"Act" or "Securities Act") may be permitted to directors, officers or persons
controlling us pursuant to the foregoing provisions, or otherwise, we have
been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
WHERE
YOU CAN FIND MORE INFORMATION
We
have
filed a registration statement on Form SB-2 under the Securities Act with the
SEC for the securities offered hereby. This prospectus, which constitutes a
part
of the registration statement, does not contain all of the information set
forth
in the registration statement or the exhibits and schedules which are part
of
the registration statement. For additional information about us and our
securities, we refer you to the registration statement and the accompanying
exhibits and schedules. Statements contained in this prospectus regarding the
contents of any contract or any other documents to which we refer are not
necessarily complete. In each instance, reference is made to the copy of the
contract or document filed as an exhibit to the registration statement, and
each
statement is qualified in all respects by that reference. Copies of the
registration statement and the accompanying exhibits and schedules may be
inspected without charge (and copies may be obtained at prescribed rates) at
the
public reference facility of the SEC at Room 1024, 100 F Street, N.E.
Washington, D.C. 20549.
You
can
request copies of these documents upon payment of a duplicating fee by writing
to the SEC. You may call the SEC at 1-800-SEC-0330 for further information
on
the operation of its public reference rooms. Our filings, including the
registration statement, will also be available to you on the Internet web site
maintained by the SEC at http://www.sec.gov.
GREEN
MOUNTAIN RECOVERY, INC.
JUNE
30, 2007
INDEX
TO FINANCIAL STATEMENTS
Contents
|
|
Page(s)
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
|
F-2
|
|
|
|
Balance
Sheet at June 30, 2007
|
|
F-3
|
|
|
|
Statement
of Operations for the period from May 17, 2007 (inception) through
June
30, 2007
|
|
F-4
|
|
|
|
Statement
of Stockholders’ Equity for the period from May 17, 2007 (inception)
through June 30, 2007
|
|
F-5
|
|
|
|
Statement
of Cash Flows for the period from May 17, 2007 (inception) through
June
30, 2007
|
|
F-6
|
|
|
|
Notes
to the Financial Statements
|
|
F-7
to F-12
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors
Green
Mountain Recovery, Inc.
New
York,
NY
We
have
audited the accompanying balance sheet of Green Mountain Recovery, Inc. (the
“Company”) as of June 30, 2007 and the related statements of operations,
stockholders’ equity and cash flows for the period from May 17, 2007 (inception)
through June 30, 2007. These financial statements are the responsibility of
the
Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Green Mountain Recovery, Inc.
as of
June 30, 2007 and the results of its operations and its cash flows for the
period from May 17, 2007 (inception) through June 30, 2007 in conformity with
accounting principles generally accepted in the United States of
America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the
Company has no revenues, has incurred losses since inception and has an
accumulated deficit of $38,357 at June 30, 2007. These
factors raise substantial doubt about the Company’s ability to continue as a
going concern. Management's plans in regards to these matters are also described
in Note 3. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
|
|
|
|
|
/s/
Li
& Company, PC |
|
Li
& Company, PC
|
|
|
Skillman,
New Jersey
July
15,
2007
GREEN
MOUNTAIN RECOVERY, INC.
Balance
Sheet
June
30,
2007
ASSETS
|
|
|
|
|
|
Current
Assets:
|
|
|
|
Cash
|
|
$
|
3,614
|
|
Purchased
accounts receivable
|
|
|
10,001
|
|
Total
current assets
|
|
|
13,615
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
13,615
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
|
Accrued
expenses
|
|
$
|
10,872
|
|
Total
current liabilities
|
|
|
10,872
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
Preferred
stock: $0.0001 par value; 1,000,000 shares authorized; no shares
issued or
outstanding
|
|
|
-
|
|
Common
stock: $0.0001 par value; 99,000,000 shares authorized; 2,500,000
shares
issued and outstanding
|
|
|
2,500
|
|
Additional
paid-in capital
|
|
|
38,600
|
|
Accumulated
deficit
|
|
|
(38,357
|
)
|
Total
stockholders’ equity
|
|
|
2,743
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
13,615
|
|
|
|
|
|
|
See
accompanying notes to the financial
statements.
|
GREEN
MOUNTAIN RECOVERY, INC.
Statement
of Operations
For
the
Period from May 17, 2007 (Inception) through June 30, 2007
Operating
Expenses:
|
|
|
|
Professional
fees
|
|
$
|
37,872
|
|
Organization
costs
|
|
|
485
|
|
Total
operating expenses
|
|
|
38,357
|
|
|
|
|
|
|
Loss
before income taxes
|
|
|
(38,357
|
)
|
|
|
|
|
|
Provision
for income taxes
|
|
|
-
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(38,357
|
)
|
|
|
|
|
|
Net
loss per common share - basic and diluted
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
Weighted
average number of common shares outstanding - basic and
diluted
|
|
|
2,311,400
|
|
|
|
|
|
|
See
accompanying notes to the financial
statements.
|
GREEN
MOUNTAIN RECOVERY, INC.
Statement
of Stockholders’ Equity
For
the
Period from May 17, 2007 (Inception) through June 30, 2007
|
|
Common
Shares
|
|
Amount
|
|
Additional
Paid-in Capital
|
|
Accumulated
Deficit
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
May 17, 2007 (inception)
|
|
|
2,294,000
|
|
$
|
2,294
|
|
$
|
-
|
|
$
|
-
|
|
$
|
2,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of common stock
|
|
|
56,000
|
|
|
56
|
|
|
5,544
|
|
|
-
|
|
|
5,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services
|
|
|
150,000
|
|
|
150
|
|
|
14,850
|
|
|
-
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution
to capital
|
|
|
-
|
|
|
-
|
|
|
18,206
|
|
|
-
|
|
|
18,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(38,357
|
)
|
|
(38,357
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
June 30, 2007
|
|
|
2,500,000
|
|
$
|
2,500
|
|
$
|
38,600
|
|
$
|
(38,357
|
)
|
$
|
2,743
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to the financial statements.
GREEN
MOUNTAIN RECOVERY, INC.
Statement
of Cash Flows
For
the
Period from May 17, 2007 (Inception) through June 30, 2007
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
Net
loss
|
|
$
|
(38,357
|
)
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
Stock
compensation
|
|
|
15,000
|
|
|
|
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
Increase
in purchased accounts receivable
|
|
|
(10,001
|
)
|
Increase
in accrued expenses
|
|
|
10,872
|
|
Net
Cash Used in Operating Activities
|
|
|
(22,486
|
)
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
Sale
of common stock
|
|
|
7,894
|
|
Contributions
to capital
|
|
|
18,206
|
|
Net
Cash Provided by Financing Activities
|
|
|
26,100
|
|
|
|
|
|
|
NET
CHANGE IN CASH
|
|
|
3,614
|
|
|
|
|
|
|
CASH
AT BEGINNING OF PERIOD
|
|
|
-
|
|
CASH
AT END OF PERIOD
|
|
$
|
3,614
|
|
|
|
|
|
|
SUPPLEMENTAL
SCHEDULE OF CASH FLOW ACTIVITIES
|
|
|
|
|
Cash
Paid For:
|
|
|
|
|
Interest
|
|
$
|
-
|
|
Income
taxes
|
|
$
|
-
|
|
|
|
|
|
|
See
accompanying notes to the financial
statements.
|
GREEN
MOUNTAIN RECOVERY, INC.
Notes
to
the Financial Statements
June
30,
2007
NOTE
1 -
ORGANIZATION
Green
Mountain Recovery, Inc. (“GMR” or the “Company”) was incorporated in the State
of Delaware on May 17, 2007. The Company provides
accounts receivable management and collection for purchased portfolios of
receivables that have been charged off by their original holders. The
Company focuses
on charged-off credit card receivables. The portfolios are purchased at a
discount to their face value, and then the Company uses third party collection
agencies to maximize the recovery on these receivables.
NOTE
2 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash
Equivalents
The
Company considers all highly liquid investments with a maturity of three months
or less when purchased to be cash equivalents.
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (“US GAAP”) requires
management to make estimates and assumptions that affect the reported amounts
of
assets and liabilities and disclosure of contingent assets and liabilities
at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Fair
value of financial instruments
The
carrying amounts reported in the balance sheet for cash, accounts receivable
and
accrued expenses approximate fair value based on the short-term maturity of
these instruments.
Basic
and
Diluted Loss Per Common Share
Basic
net
loss per common share has been calculated by dividing the net loss for the
period by the basic weighted average number of common shares outstanding.
Diluted
net loss per share is computed by dividing net loss by the weighted average
number of shares of common stock and potentially outstanding shares of common
stock during the period. There were no potentially dilutive shares
outstanding
as of
June 30, 2007.
Revenue
Recognition
Purchased
Accounts Receivable:
The
Company applies American Institute of Certified Public Accountants (“AICPA”)
Statement of Position 03-3, “Accounting for Loans or Certain Securities
Acquired in a Transfer” (“SOP 03-3”). SOP 03-3 addresses accounting for
differences between contractual versus expected cash flows over an investor’s
initial investment in certain loans when such differences are attributable,
at
least in part, to credit quality.
The
Company uses all available information to forecast the cash flows of its
purchased accounts receivable including, but not limited to, credit scores
of
the underlying debtors, seller’s credit policies, and location of the debtor.
The
Company acquired the accounts receivable in a portfolio that was recorded at
cost, which includes external costs of acquiring portfolios. Once a portfolio
is
acquired, the accounts in the portfolio are not changed, unless replaced,
returned or sold. All acquired accounts receivable have experienced
deterioration of credit quality between origination and the Company’s
acquisition of the accounts receivable, and the amount paid for a portfolio
of
accounts receivable reflects the Company’s determination that it is probable the
Company will be unable to collect all amounts due according to each loan’s
contractual terms. The Company considers expected collections, and estimates
the
amount and timing of undiscounted expected principal, interest, and other cash
flows (expected at acquisition). The Company determines the nonaccretable
difference, or the excess of the portfolio’s contractual principal over all cash
flows expected at acquisition as an amount that should not be accreted. The
remaining amount represents accretable yield, or the excess of the portfolio’s
cash flows expected to be collected over the amount paid, and is accreted into
earnings over the remaining life of the portfolio.
At
acquisition, the Company derives an internal rate of return (“IRR”) based on the
expected monthly collections over the estimated economic life of the portfolio
of accounts receivable compared to the original purchase price. Collections
on
the portfolios are allocated to revenue and principal reduction based on the
estimated IRR for each accounts receivable. Revenue on purchased accounts
receivable is recorded monthly based on applying the effective IRR for the
quarter to its carrying value. Over the life of a portfolio, the Company
continues to estimate cash flows expected to be collected. The Company evaluates
at the balance sheet date whether the present value of its portfolio determined
using the effective interest rates has decreased, and if so, records an expense
to establish a valuation allowance to maintain the original IRR established
at
acquisition. Any increase in actual or estimated cash flows expected to be
collected is first used to reverse any existing valuation allowance for that
portfolio, or aggregation of portfolios, and any remaining increases in cash
flows are recognized prospectively through an increase in the IRR. The updated
IRR then becomes the new benchmark for subsequent valuation allowance testing.
Income
Taxes
The
Company accounts for income taxes using the asset and liability method. Under
this method, income taxes are provided for amounts currently payable and for
amounts deferred as tax assets and liabilities based on differences between
the
financial statement carrying amounts and the tax bases of existing assets and
liabilities. Deferred income taxes are measured using the enacted tax rates
that
are assumed will be in effect when the differences reverse.
Stock
Based Compensation
Compensation
costs for common stock issued for services were based on the fair value method.
Fair value was based on the fair value of the common stock issued or services
provided by non-employees, whichever is more determinable.
Impact
of
New Accounting Standards
In
June
2003, the Securities and Exchange Commission (“SEC”) adopted final rules under
Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Commencing with
the Company’s Annual Report for the year ending December 31, 2008, the Company
is required to include a report of management on the Company’s internal control
over financial reporting. The internal control report must include a statement
of management’s responsibility for establishing and maintaining adequate
internal control over financial reporting for the Company; of management’s
assessment of the effectiveness of the Company’s internal control over financial
reporting as of year end; of the framework used by management to evaluate the
effectiveness of the Company’s internal control over financial reporting; and
that the Company’s independent accounting firm has issued an attestation report
on management’s assessment of the Company’s internal control over financial
reporting, which report is also required to be filed as part of the Annual
Report on Form 10-KSB.
In
July
2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
(FIN) No. 48, "Accounting
for Uncertainty in Income Taxes-an interpretation of FASB Statement No.
109."
This
interpretation provides guidance for recognizing and measuring uncertain tax
positions, as defined in SFAS No. 109, "Accounting for Income Taxes." FIN No.
48
prescribes a threshold condition that a tax position must meet for any of the
benefit of an uncertain tax position to be recognized in the financial
statements. Guidance is also provided regarding de-recognition, classification,
and disclosure of uncertain tax positions. FIN No. 48 is effective for fiscal
years beginning after December 15, 2006. The Company does not expect that this
interpretation will have a material impact on its financial position, results
of
operations, or cash flows.
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No.
157, "Fair
Value Measurements"
("FAS
157"). This Statement defines fair value as used in numerous accounting
pronouncements, establishes a framework for measuring fair value in generally
accepted accounting principles and expands disclosure related to the use of
fair
value measures in financial statements. The Statement is to be effective for
the
Company's financial statements issued in 2008; however, earlier application
is
encouraged. The Company does not anticipate that the adoption of SAB No. 108
will have a material effect on the Company’s financial condition and results of
operations.
In
September 2006, FASB issued SFAS No. 158,
Employers' Accounting for Defined Benefit Pension and Other Postretirement
Plans, an amendment of FASB Statements No 87, 88, 106 and
132(R)
(SFAS
158).
SFAS 158
requires the recognition of the overfunded or underfunded status of a defined
benefit postretirement plan as an asset or liability in the statement of
financial position and the recognition of changes in that funded status in
the
year in which the changes occur through comprehensive income. SFAS 158 also
requires the measurement of the funded status of a plan as of the date of the
year-end statement of financial position.
The
Company does not anticipate that the adoption of this statement will have a
material effect on the Company’s financial condition and results of
operations.
In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" (SFAS No. 159). SFAS No. 159 permits
entities to choose to measure, on an item-by-item basis, specified financial
instruments and certain other items at fair value. Unrealized gains and losses
on items for which the fair value option has been elected are required to be
reported in earnings at each reporting date. SFAS No. 159 is effective for
fiscal years beginning after November 15, 2007, the provisions of which are
required to be applied prospectively.
In
September 2006, the SEC staff issued Accounting Bulletin No. 108, "Considering
the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements" (SAB No. 108). SAB No. 108 was issued in
order to eliminate the diversity in practice surrounding how public companies
quantify financial statement misstatements. SAB No. 108 requires that
registrants quantify errors using both a balance sheet and income statement
approach and evaluate whether either approach results in a misstated amount
that, when all relevant quantitative factors are considered, is material.
Management
does not believe that any other recently issued, but not yet effective
accounting pronouncements, if adopted, would have a material effect on the
accompanying consolidated financial statements.
NOTE
3 -
GOING CONCERN
The
accompanying financial statements have been prepared on a going concern basis
which contemplates the realization of assets and satisfaction of liabilities
in
the normal course of business. At June 30, 2007, the Company has no
revenues, has incurred losses since inception and has an accumulated deficit
of
$38,357.
While
the
Company is attempting to generate revenues, the Company’s cash position may not
be significant enough to support the Company’s daily operations. Management
intends to raise additional funds by way of a public or private offering.
Management believes that the actions presently being taken to further implement
its business plan and generate revenues provide the opportunity for the Company
to continue as a going concern. While the Company believes in the viability
of
its strategy to increase revenues and in its ability to raise additional funds,
there can be no assurances to that effect. The Company’s ability to continue as
a going concern
is
dependent upon its ability to achieve profitable operations or obtain adequate
financing. The financial statements do not include any adjustments related
to
the recoverability and classification of recorded asset amounts or the amounts
and classification of liabilities that might be necessary should the Company
be
unable to continue in existence.
NOTE
4 -
STOCKHOLDERS’ EQUITY
The
Company was incorporated as a C corporation on May 17, 2007 at which time
2,294,000 shares of common stock were issued to the Company’s founders in
exchange for $2,300.
During
the month of June 2007, the Company issued subscription agreements for the
sale
of its common stock at $0.10 per share. The Company sold a total of 56,000
shares for cash, totaling $5,600.
During
the month of June 2007, the Company issued 150,000 shares of its common stock
for services. The stock was valued at its fair market value on the date of
issuance of $15,000 or $0.10 per share.
Stock
Option Plan
Pursuant
to a June 1, 2007 Board of Directors approval and subsequent stockholder
approval, the Company adopted its 2007 Non-Statutory Stock Option Plan (the
“Plan”) whereby it reserved for issuance up to 1,500,000 shares of its common
stock to directors, officers, employees, consultants and professionals. The
purpose of the Plan is to provide recipients with additional incentives by
increasing their ownership interest in the Company. The Plan
provides for the issuance of Non-Statutory Stock Options only, which are not
intended to qualify as “incentive stock options” within the meaning of Section
422 of the Internal Revenue Code, as amended. The Plan expires in
2017.
No
options are outstanding or have been issued under the Plan as of July 15,
2007.
NOTE
5 -
INCOME TAXES
At
June
30, 2007, the Company had net operating loss (“NOL”) carry-forwards for Federal
income tax purposes of $38,357 that may be offset against future taxable income
through 2027. No tax benefit has been reported with respect to these net
operating loss carry-forwards in the accompanying financial statements because
the Company believes that the realization of the Company’s net deferred tax
assets of approximately $13,000 was not considered more likely than not and
accordingly, the potential tax benefits of the net loss carry-forwards are
fully
offset by a valuation allowance.
There
are
no significant differences between the Company’s operating results for financial
reporting purposes than for income tax purposes.
NOTE
6 -
RELATED PARTY TRANSACTIONS
During
the month of June 2007, the two officers of the Company contributed capital
in
the amount of $18,206.
NOTE
7 -
COMMITMENTS AND CONTINGENCIES
On
June
27, 2007, the Company executed an agreement with a provider of collection
agencies. The provider of the agencies will receive a servicing fee equal to
5%
on all monies collected. Agency fees will be negotiated based on the portfolio
serviced and placed. Either party may terminate the agreement by giving thirty
(30) days notice.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Li
&
Company, P.C. is our auditors. There have not been any changes in or
disagreements with accountants on accounting and financial disclosure or any
other matter.
PART
II - INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION
OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
Our
officers and directors are indemnified as provided by the Delaware General
Corporations Law and our bylaws.
Under
the
Delaware General Corporation Law, director immunity from liability to a company
or its shareholders for monetary liabilities applies automatically unless it
is
specifically limited by a company's Certificate of Incorporation. Our
Certificate of Incorporation do not specifically limit our directors' immunity.
Excepted from that immunity are: (a) a willful failure to deal fairly with
the
company or its stockholders in connection with a matter in which the director
has a material conflict of interest; (b) a violation of criminal law, unless
the
director had reasonable cause to believe that his or her conduct was lawful
or
no reasonable cause to believe that his or her conduct was unlawful; (c) a
transaction from which the director derived an improper personal profit; and
(d)
willful misconduct.
Our
bylaws provide that we will indemnify our directors and officers to the fullest
extent permitted by Delaware law; provided, however, that we may modify the
extent of such indemnification by individual contracts with our directors and
officers; and, provided, further, that we shall not be required to indemnify
any
director or officer in connection with any proceeding, or part thereof,
initiated by such person unless such indemnification: (a) is expressly required
to be made by law, (b) the proceeding was authorized by our board of directors,
(c) is provided by us, in our sole discretion, pursuant to the powers vested
in
us under Delaware law or (d) is required to be made pursuant to the
bylaws.
Our
bylaws also provide that we may indemnify a director or former director of
subsidiary corporation and we may indemnify our officers, employees or agents,
or the officers, employees or agents of a subsidiary corporation and the heirs
and personal representatives of any such person, against all expenses incurred
by the person relating to a judgment, criminal charge, administrative action
or
other proceeding to which he or she is a party by reason of being or having
been
one of our directors, officers or employees.
Our
directors cause us to purchase and maintain insurance for the benefit of a
person who is or was serving as our director, officer, employee or agent, or
as
a director, officer, employee or agent or our subsidiaries, and his or her
heirs
or personal representatives against a liability incurred by him as a director,
officer, employee or agent.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to our directors, officers and control persons pursuant to the
foregoing provisions or otherwise, we have been advised that, in the opinion
of
the Securities and Exchange Commission, such indemnification is against public
policy, and is, therefore, unenforceable.
OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION
The
following table sets forth the expenses in connection with the issuance and
distribution of the securities being registered hereby. All such expenses will
be borne by the Company; none shall be borne by any selling security holders.
Securities
and Exchange
|
|
|
|
Commission
registration fee
|
|
$
|
5.18
|
|
Legal
fees and miscellaneous expenses (1)
|
|
$
|
65,000.00
|
|
Accounting
fees and expenses (1)
|
|
$
|
10,000.00
|
|
Total
(1)
|
|
$
|
75,005.18
|
|
|
|
|
|
|
(1)
Estimated.
|
|
|
|
|
RECENT
SALES OF UNREGISTERED SECURITIES
On
May
17, 2007, we issued 1,147,000 shares of our common stock to each of Joseph
Levi
and Eduard Korsinsky in consideration for the payment of an aggregate of $2,294.
The shares were issued under Section 4(2) of the Securities Act of 1933, as
amended, and/or Regulation D promulgated by the Securities and Exchange
Commission.
In
June
2007, we issued 56,000 shares of common stock to approximately forty-five
investors in a private placement pursuant to the exemption from the registration
requirements of the Securities Act provided by Regulation D. The aggregate
consideration paid for such shares was $5,600. We also issued 150,000 shares
to
ten (10) investors for the aggregate sum of $15,000. The Company conducted
the
private placement without any general solicitation or advertisement and a
restriction on resale. The Company provided all investors in the 2007 private
placement with a subscription agreement.
EXHIBITS
The
following exhibits are filed as part of this registration
statement:
Exhibit
|
|
Description
|
3.1
|
|
Certificate
of Incorporation of Registrant*
|
3.2
|
|
By-Laws
of Registrant*
|
4.1
|
|
Specimen
Common Stock certificate*
|
5.1
|
|
Opinion
of Krieger & Prager, LLP regarding the legality of the securities
being registered*
|
10.1
|
|
2007
Non-Statutory Stock Option Plan*
|
10.2
|
|
Receivable
Purchase Agreement*
|
10.3
|
|
Form
of Regulation D Subscription Agreement *
|
23.1
|
|
Consent
of Li & Company, P.C.*
|
23.2
|
|
Consent
of Krieger & Prager, LLP (included in Exhibit
5.1)
|
*
Filed
herewith
UNDERTAKINGS
(A)
The
undersigned Registrant hereby undertakes:
(1)
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i)
Include any prospectus required by Section 10(a)(3) of the Securities Act of
1933;
(ii)
Reflect in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information set forth in the registration
statement; and
(iii)
Include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2)
That,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3)
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
(B)
Undertaking Required by Regulation S-B, Item 512(e).
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to directors, officers or controlling persons pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in
the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel that
the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(C)
Undertaking Required by Regulation S-B, Item 512(f)
The
undersigned Registrant hereby undertakes that, for purposes of determining
any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing this Form SB-2 and has authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York , State of New York, on July 25 ,
2007
|
|
|
|
GREEN
MOUNTAIN RECOVERY, INC.
|
|
|
|
|
By: |
/s/
Joseph Levi
|
|
Name: Joseph
Levi
|
|
Title: President
and Chief Executive Officer
& Director
|
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
Signature:
|
/s/
Joseph Levi
|
|
|
/s/
Eduard Korsinsky
|
Name:
|
Joseph
Levi
|
|
|
Eduard
Korsinsky
|
Title:
|
President
and Chief Executive Officer & Director
|
|
|
Secretary
and Chief Financial Officer & Director
|
Date:
|
July
25, 2007
|
|
|
July
25, 2007
|
POWER
OF
ATTORNEY
Know
all
men by these presents, that each person whose signature appears below
constitutes and appoints Joseph Levi his true and lawful attorney-in-fact and
agent, with full power of substitution and re-substitution, for him and in
his
place and stead, in any and all capacities, to sign any and all further
amendments to this Registration Statement and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/
Eduard Korsinsky
Eduard
Korsinsky
|
Secretary
and Chief Financial Officer &
Director
|
Date:
July 25, 2007