UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
(Amendment No. 1)
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(Exact name of registrant as specified in its charter)
Wyoming
(State or other jurisdiction of incorporation or organization)
6162
(Primary Standard Industrial Classification Code Number)
83-0219465
(I.R.S. Employer Identification Number)
1000 5th Street, Suite 200,
Miami, Florida 33139
(305) 704-3294
(Address, including zip code, and telephone number,
including area code, of registrants principal executive offices)
Jon S. Cummings, IV, CEO
1000 5th Street, Suite 200,
Miami, Florida 33139
(305) 704-3294
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Laura Anthony, Esq.
Legal & Compliance, LLC
330 Clematis Street, Suite 217
West Palm Beach, FL 33401
Phone: 561-514-0936
Fax: 561-514-0832
As soon as practicable after this Registration Statement becomes effective
(Approximate date of commencement of proposed sale to the public)
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please 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
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company x |
Calculation of Registration Fee
Title of Each Class of Securities to be Registered | Amount to be Registered | Proposed Maximum Offering Price Per Share | Proposed Maximum Aggregate Offering Price | Amount of Registration Fee |
Common Stock(1) | 1,600,000 | $0.02(2) | $32,000 | $3.72 |
(1)
Represents the amount, and maximum aggregate value, of common stock which we may put to Dutchess Opportunity Fund, II, LP pursuant to the terms of an Investment Agreement between Dutchess and the Registrant dated March 12, 2012. In the event of stock splits, stock dividends or similar transactions involving the common stock, the number of common shares registered shall, unless otherwise expressly provided, automatically be deemed to cover the additional securities to be offered or issued pursuant to Rule 416 promulgated under the Securities Act of 1933, as amended.
(2)
Estimated solely for purposes of calculating the registration fee pursuant to Rule 457 based on the average of the high and low prices as reported on the OTC Markets Group, Inc.- OTC Pink No Information on March 1, 2012 (the last day our stock was traded), which was $0.02 per share.
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The registrant hereby amends this Registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
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Prospectus, subject to completion, dated May____ 2012
OMEGA COMMERCIAL FINANCE CORPORATION
1,600,000 Shares of Common Stock
This prospectus relates to the resale of up to 1,600,000 shares of the common stock, par value $0.01 per share, of Omega Commercial Finance Corporation, a Wyoming corporation (the Common Stock), by the selling stockholder, Dutchess Opportunity Fund, II, LP, a Delaware limited partnership (Dutchess or selling stockholder). Such shares are subject to the terms of an Investment Agreement with Dutchess dated March 12, 2012 pursuant to which we have the right to put to Dutchess (the Put Right) up to $25 million in shares of our common stock (the Investment Agreement or Equity Line).
We will not receive any proceeds from the resale of the shares of Common Stock offered by Dutchess. We will, however, receive proceeds from the sale of shares to Dutchess pursuant to the Equity Line. When we put an amount of shares to Dutchess, the per share purchase price that Dutchess will pay to us with respect to such put will be determined in accordance with a formula set forth in the Investment Agreement. Generally, with respect to each put, Dutchess will pay us a per share purchase price equal to ninety-five percent (95%) of the lowest daily volume weighted average price of our common stock during the five (5) consecutive trading day period beginning on the trading day immediately following the date of delivery of the applicable put notice.
Dutchess is an underwriter within the meaning of the Securities Act of 1933, as amended (the Securities Act) in connection with the resale of our common stock under the Equity Line of Credit.
We will be responsible for all fees and expenses incurred in connection with the preparation and filing of this registration statement, provided, however, we will not be required to pay any underwriters' discounts or commissions relating to the securities covered by the registration statement.
Our common stock is quoted on the OTC Markets Group, Inc.- OTC Pink No Information (Pink Sheets) and trades under the symbol OCFN.PK. As described below, there have been minimal recent public quotations of our common stock on the Pink Sheets. There has never been an active public market for our common stock, and the shares are being offered in anticipation of the development of a secondary trading market. However, on: (i) March 1, 2012 there was a reported sale of 10,000 shares for $0.02 per share, (ii) February 28, 2012 there was a reported sale of 2,225 shares for $0.02 per share, (iii) February 17, 2012 there was a reported sale of 200 shares for $0.02 per share, (iv) February 10, 2012 there was a reported sale of 2,000 shares for $0.049 per share, and (v) February 9, 2012 there was a reported sale of 15,225 shares for $0.053 per share. These sales were the only sales over the past month and do not reflect the emergence of an active market in our common stock. On March 12, 2012, the closing bid price of our common stock was $0.0055.
We are an emerging growth company as defined in the Jumpstart Our Business Startups Act (JOBS Act).
It is not possible to determine the price to the public in any sale of the shares of Common Stock by the selling stockholder and the selling stockholder reserves the right to accept or reject, in whole or in part, any proposed purchase of shares. Accordingly, the selling stockholder will determine the public offering price, the amount of any applicable underwriting discounts and commissions and the net proceeds at the time of any sale. The selling stockholder will pay any underwriting discounts and commissions.
INVESTING IN OUR SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE RISK FACTORS IN THIS PROSPECTUS BEGINNING ON PAGE ___FOR A DISCUSSION OF INFORMATION THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN OUR SECURITIES.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information from that contained in this prospectus. The selling stockholders are offering to sell and seeking offers to buy shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. This prospectus does not constitute an offer to sell, or a solicitation of an offer to buy the securities in any circumstances under which the offer or solicitation is unlawful. Neither the delivery of this prospectus nor any distribution of securities in accordance with this prospectus shall, under any circumstances, imply that there has been no change in our affairs since the date of this prospectus.
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We will receive no proceeds from the sale of the shares of common stock sold by the selling stockholder. However, we will receive proceeds from the sale of securities pursuant to our exercise of the Put Right.
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The date of this prospectus is May __, 2012.
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Table Of Contents
Prospectus Summary
This summary highlights certain information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should carefully read the entire prospectus, including the section entitled Risk Factors and our financial statements and related notes, before you decide whether to invest in our common stock. If you invest in our common stock, you are assuming a high degree of risk. See the section entitled Risk Factors. References to Omega, our, our company, us, or the Company refer to Omega Commercial Finance Corporation and its subsidiaries, unless the context indicates otherwise.
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About Us
We were incorporated in the state of Wyoming on November 6, 1973 under the name DOL Resources, Inc. From inception until October 2002, our primary business activity was the acquisition, disposition, commercialization and/or exploration of interests in oil, gas and/or coal properties. In October 2002, we sold all of our oil and gas properties to Glauber Management Company whereupon we ceased any business operations and became a development stage company, whose activities were limited to that of a shell company seeking to merge with or acquire an operating business.
On August 1, 2007 we changed our name to Omega Commercial Finance Corporation.
On September 14, 2007, we entered into a Stock Purchase Agreement and Share Exchange with Omega Capital Funding LLC, a Florida limited liability company (Omega Capital) pursuant to which we acquired 100% ownership of Omega Capital as previously disclosed in our Form 8-K filed on September 20, 2007 as subsequently amended by our Form 8-K/A filed on October 29, 2007 (the Reorganization). After the Reorganization, our business operations consisted of those of Omega Capital. Prior thereto since 2002, we were a non-operating shell company with no revenue and minimal assets. As a result of the Reorganization, we were no longer considered a shell company.
Since the Reorganization in September 2007, our business operations, through various subsidiaries, have been directed primarily on offering financing to the real estate markets in the United States. We provide short and medium term loans to borrowers primarily consisting of commercial real estate developers and speculators, business owners, landlords, and owners of core and non-core assets. We focus on various alternative commercial real estate financings with an emphasis on loans secured by commercial real estate and also on financing non-core assets, including ground up developments, as well as core assets, including office buildings, multi-family residences, shopping centers, and luxury residential estates. The loans consist of senior debt loans, mezzanine or subordinated loans, preferred equity, and other equity participation financing structures. Our operations are based primarily in Miami, Florida.
Our common stock is quoted on the OTC Markets Group, Inc. - OTC Pink No Information (Pink Sheets) and trades under the symbol OCFN.PK. The last reported sale price of our common stock on the Pink Sheets was on March 1, 2012 for $0.02 per share. On March 12, 2012, the closing bid price of our common stock was $0.0055.
About This Offering
This prospectus relates to the resale of up to 1,600,000 shares of our common stock by Dutchess. The Investment Agreement with Dutchess provides that Dutchess is committed to purchase up to $25 million of our common stock over the course of 36 months. We may draw on the facility from time to time, as and when we determine appropriate in accordance with the terms and conditions of the Investment Agreement. A maximum number of shares may be issued under the Equity Line at per-share prices set at ninety-five percent (95%) of the lowest daily volume weighted average price (VWAP) of our common stock during the five (5) consecutive trading day period beginning on the date of delivery of the applicable put notice (such five-day period may be referred to as the Pricing Period).
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The Investment Agreement is further described below under the heading, Investment Agreement and Registration Rights Agreement.
SUMMARY OF THE OFFERING | |
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Shares of common stock offered by selling stockholder: | 1,600,000 shares of common stock |
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Common stock outstanding before the offering: | 32,885,900 shares of common stock |
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Common stock outstanding after the offering: | 34,485,900 shares of common stock. |
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Use of proceeds: | We will not receive any proceeds from the sale of the shares by selling stockholders. However, we will receive proceeds from the sale of securities pursuant to the Investment Agreement. The proceeds received under the Investment Agreement will be used for payment of general corporate and operating expenses. |
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Risk factors: | You should carefully read and consider the information set forth under the caption Risk Factors beginning on page __ and all other information set forth in this prospectus before investing in our common stock. |
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OTC Markets Group, Inc. Symbol: | OCFN |
Investment Agreement and Registration Rights Agreement
We entered into the Investment Agreement with Dutchess on March 12, 2012. Pursuant to the Investment Agreement, Dutchess committed to purchase up to $25 million of our common stock, over the course of 36 months. The aggregate number of shares issuable by us and purchasable by Dutchess under the Investment Agreement is limited by the dollar amount sold, in this instance no more than $25 million, and will depend upon the trading price of our shares.
We may draw on the Equity Line from time to time, as and when we determine appropriate in accordance with the terms and conditions of the Investment Agreement. The maximum amount that we are entitled to put in any one notice is equal to, at our option, either (i) 200% of the average daily volume (U.S. market only) of the common stock for the three (3) trading days prior to the date of delivery of the applicable put notice, multiplied by the average of the closing prices for such trading days or (ii) $250,000. The purchase price shall be set at ninety-five percent (95%) of the lowest daily VWAP of our common stock during the Pricing Period. However, if, on any trading day during a Pricing Period, the daily VWAP of the common stock is lower than the floor price specified by us in the put notice, then we reserve the right, but not the obligation, to withdraw that portion of the put amount for each such trading day during the Pricing Period, with only the balance of such put amount above the minimum acceptable price being put to Dutchess. There are put restrictions applied on days between the put notice date and the closing date with respect to that particular put. During such time, we are not entitled to deliver another put notice.
In connection with the Investment Agreement, we also entered into a Registration Rights Agreement (the Registration Rights Agreement) with Dutchess. Pursuant to the Registration Rights Agreement, we are obligated to file a registration statement with the SEC covering 1,600,000 shares of the common stock underlying the Investment Agreement within 21 days after the execution of the Investment Agreement. In addition, we are obligated to use all commercially reasonable efforts to have the registration statement declared effective by the SEC within 90 days after the closing of the Investment Agreement and maintain the effectiveness of such registration statement until termination in accordance with the Investment Agreement.
As we draw down on the Equity Line, shares of our common stock will be sold into the market by Dutchess. The sale of these additional shares could cause our stock price to decline. In turn, if the stock price declines and we issue more puts, more shares will come into the market, which could cause a further drop in the stock price. You should be aware that there is an inverse relationship between the market price of our common stock and the number of shares to be issued under the Equity Line. If our stock price declines, we will be required to issue a greater number of shares under the Equity Line. We have no obligation to utilize the full amount available under the Equity Line. We have not yet drawn down on the Equity Line. Nevertheless, we will not be entitled to put shares to Dutchess to the extent that such shares would cause Dutchess' beneficial ownership to exceed 4.99% of our outstanding shares.
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By way of background, on February 6, 2008, we previously entered into an investment agreement with Dutchess in which we had a put right/equity line of credit. That investment agreement and the shares underlying the put right set forth therein were the subject of our Form S-1 Registration Statement filed on February 14, 2008 (which was subsequently withdrawn on March 11, 2008) and our Form S-1 filed on July 15, 2008 and subsequently withdrawn on April 20, 2009. We never consummated a securities transaction pursuant to that investment agreement, which is null and void because it was conditional on the effectiveness of the Form S-1 Registration Statement which was withdrawn as described above.
The following table compares the number of shares of our common stock outstanding prior to the Investment Agreement that are held by persons other than the selling shareholder, affiliates of the Company, and affiliates of the selling shareholder.
Name of Shareholder | Shares of common stock owned prior to Investment Agreement | Shares of common stock owned after Investment Agreement |
Jon S. Cummings, IV | 3,275,100 | 3,275,100 |
Clarence Williams | 25,000 | 25,000 |
Omega Capital Funding LLC | 12,000,000 | 12,000,000 |
Flavio Zuanier | 2,000,000 | 2,000,000 |
Dutchess(1) | 0 | 1,600,000 |
Other shareholders | 15,585,800 | 15,585,800 |
Total shares outstanding | 32,885,900 | 34,485,900 |
(1) We have not yet exercised our put right, but this table is based on the assumption that we have done so for 1,600,000 shares of common stock.
Risk Factors
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below as well as other information provided to you in this prospectus, including information in the section of this document entitled Information Regarding Forward Looking Statements. The risks and uncertainties described below are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently believe are immaterial may also impair our business operations. If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected, the value of our common stock could decline, and you may lose all or part of your investment.
Risks Related to Our Business
We have a limited operating history upon which an evaluation of our prospects can be made.
We were incorporated in November 1973, but only since September 2007, when we acquired Omega Capital have we been conducting business operations. Prior thereto until 2002, we had been a shell company with minimal assets and no operations. Our future operations are contingent upon increasing revenues and raising capital for operations. Because we have a limited operating history, you will have difficulty evaluating our business and future prospects. This limited operating history, and the unpredictability of the real estate market, makes it difficult for investors to evaluate our business and future operating results. An investor in our securities must consider the risks, uncertainties and difficulties frequently encountered by companies in the real estate market. The risks and difficulties we face include challenges in accurate financial planning as a result of limited historical data and the uncertainties resulting from having had a limited time period in which to implement and evaluate our business strategies as compared to older companies with longer operating histories.
We have a history of losses, our accountants expressed doubts about our ability to continue as a going concern and we need additional capital to execute our business plan.
As of December 31, 2011, we had not yet achieved profitable operations. We have accumulated losses, a working capital deficiency and we expect to incur further losses in the development of our business, all of which, according to our accountants, casts substantial doubt about our ability to continue as a going concern. We will require additional funds through the receipt of conventional sources of capital or through future sales of our common stock, until such time as our revenues are sufficient to meet our cost structure, and ultimately achieve profitable operations. We expect our current cash on hand to be sufficient for the three months. There is no assurance we will be successful in raising additional capital or achieving profitable operations. Wherever possible, our board of directors will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock. These actions will result in dilution of the ownership interests of existing stockholders and may further dilute common stock book value, and that dilution may be material.
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As an emerging growth company under the JOBS Act, we are permitted to rely on exemptions from certain disclosure requirements.
We qualify as an emerging growth company under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:
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have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
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comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditors report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
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submit certain executive compensation matters to shareholder advisory votes, such as say-on-pay and say-on-frequency; and
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disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executives compensation to median employee compensation.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a large accelerated filer as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
Until such time, however, we cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We have incurred a substantial amount of judgment debt, the affect of which impairs our financial performance and ability to prosper.
We have incurred over $2.3 million of judgment debt due to negative outcomes of the litigation described in the section Legal Proceedings and Footnote 9 to our financial statements. This debt negatively affects our financial performance and ability to borrow additional funds. Consequently, our ability to prosper and implement our business plan is severely hampered.
We depend highly on our current chief executive officer whose unexpected loss may adversely impact our business and with whom we do not have a formal employment agreement.
We rely heavily on the expertise, experience and continued services of Jon S. Cummings, IV, our Chairman and Chief Executive Officer. We presently do not have an employment agreement with Mr. Cummings and there can be no assurance that we will be able to retain him or, should he choose to leave us for any reason, to attract and retain a replacement or additional key executives. The unexpected loss of our CEO may have a material adverse effect on our business, our financial condition, including liquidity and profitability, and our results of operations.
Most of our investments are highly illiquid therefore we may not be able to liquidate such investments in a timely manner.
Most of our investments are highly illiquid with no established market, and there can be no assurance that we will be able to liquidate such investments in a timely manner. Although our loans and other investments may generate current income, the return of capital and the realization of gains, if any, from such investments generally will occur only upon the partial or complete realization or disposition of such loan or investment.
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Loans made by us may become uncollectible and large amounts of uncollectible debt may materially affect our performance.
The loans made by us are relatively illiquid and substantial risks are involved in making loans. Most, and possibly all, of the loans will not be guaranteed. We will attempt to use information to help eliminate uncollectible debt resulting from bankruptcy and death, but no assurance can be made that we will be able to do so. If our debt portfolio contains a large portion of uncollectible debt, our performance may be negatively affected. In addition, if any borrower defaults on a loan, we may be required to expend monies in connection with foreclosure proceedings and other remedial actions which could adversely affect our performance. Certain loans may be affected negatively by economic, political, interest rate and other risks, any of which could result in an adverse change in the value of the asset that is used as collateral for the loan.
We intend to obtain credit lines as part of our investment strategy which may substantially increase our risk of loss.
We have anticipated that certain loans will be originated or purchased using leverage available to us, thus increasing both net returns as well as risk. We are depending on procuring credit facilities to originate loans as part of our investment strategy. There is no guarantee that we will be able to procure credit facilities on favorable terms or at expected rates. Although the use of leverage may enhance returns and increase the number of investments that can be made, it may also substantially increase the risk of loss.
Our investment strategy is dependent upon Servicers to originate and administer loans; failure of the Servicers to originate loans in sufficient quantity and quality may cause us to fail to effectively implement our investment strategy
We will be largely dependent upon the Servicers (ie, third-party firms that specialize in Loan origination and servicing) to originate and administer loans in our portfolio. Should the Servicers fail to originate the loans in sufficient quantity and quality, we will be unable to effectively implement our investment strategy. Should the Servicer fail to properly administer and service loans, including monitoring borrowers compliance with the terms of the relevant loan documents, collecting and forwarding loan payments to us, and adequately pursuing and protecting our rights under the loan documents, any such failure could have a material adverse effect on us and our investment operations. In addition, should any Servicer default on its guaranty, if any, of a borrowers obligation to repay a loan, such default could have a material adverse effect on us and our investment operations.
In addition to the Servicers, we may retain mortgage brokers to introduce loans to us that satisfy our investment criteria, and pay commissions to such mortgage brokers based on the value of such loans. Some of these mortgage brokers may be deemed to be affiliates of management. We believe that all commissions payable to such persons or other affiliates of management will be reasonable and consistent with industry standards.
We may appraise loans at a value that is materially different from the value ultimately realized.
We make and values loans, in part, on the basis of information and data gathered from independent appraisal professionals. Although we evaluate all such information and data and may seek independent corroboration when appropriate and reasonably available, we are not in a position to confirm the completeness, genuineness or accuracy of such information and data, and in some cases, complete and accurate information may not be available. It is possible that the appraised value of a loan may differ materially from the actual value ultimately realized by us with respect to such loan.
Our loan strategy will likely be concentrated which could lead to increased risk
Due to the nature of our collateralized loan strategy, our portfolio will likely be concentrated in a limited number of loan investments. Thus, our investors will have limited diversification. In addition, if we make an investment in a single transaction with the intent of refinancing or selling a portion of the investment, there is a risk that we will be unable to successfully complete such a financing or sale. This could lead to increased risk as a result of having an unintended long term investment and reduced diversification.
We may make investment in foreign countries which may lead to additional risks not inherent to domestic lending.
We may make investments in foreign countries, some of which may prove to be unstable. As with any investment in a foreign country, there exists the risk of adverse political developments, including nationalization, acts of war or terrorism, and confiscation without fair compensation. Furthermore, any fluctuation in currency exchange rates will affect the value of investments in foreign securities or other assets and any restrictions imposed to prevent capital flight may make it difficult or impossible to exchange or repatriate foreign currency. In addition, laws and regulations of foreign countries may impose restrictions or approvals that would not exist in the United States and may require financing and structuring alternatives that differ significantly from those customarily used in the United States. Foreign countries also may impose taxes on us. We will analyze risks in the applicable foreign countries before making such investments, but no assurance can be given that a political or economic climate, or particular legal or regulatory risks, might not adversely affect our investments.
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We may make collateralized real estate loans which may subject us to certain risks associated with the real estate industry
We may make loans collateralized by real estate. Therefore, an investment in us may be subject to certain risks associated with the real estate industry in general. These risks include, without limitation: possible declines in the value of real estate; risks related to general and local economic conditions; possible lack of availability of mortgage funds; overbuilding; extended vacancies of properties; increases in competition, property taxes and operating expenses; changes in zoning laws; costs resulting from the clean-up of, and liability to third parties for damages resulting from, environmental problems; casualty or condemnation losses; uninsured damages from floods, earthquakes or other natural disasters; limitations on and variations in rents; and changes in interest rates. To the extent that our investments, or the assets of underlying or collateralizing our investments, are concentrated geographically, by property type or in certain other respects, we may be subject to the foregoing risks to a greater extent.
If third parties default or enter bankruptcy, we could suffer losses.
We may engage in transactions in securities and financial instruments that involve counterparties. Under certain conditions, we could suffer losses if counterparty to a transaction were to default or if the market for certain securities and/or financial instruments were to become illiquid. In addition, we could suffer losses if there were a default or bankruptcy by certain other third parties, including brokerage firms and banks with which we do business, or to which securities have been entrusted for custodial purposes.
We will incur increased costs as a result of being a public company, which could affect our profitability and operating results.
As a result of voluntarily registering our stock on this Registration Statement, we will become obligated to file annual, quarterly and current reports with the SEC pursuant to the Securities Exchange Act of 1934, as amended. In addition, the Sarbanes-Oxley Act of 2002 and the new rules subsequently implemented by the SEC and the Public Company Accounting Oversight Board have imposed various new requirements on public companies and its registered accountant, including changes in a public companys corporate governance practices. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities of our more time-consuming and costly. These costs could affect profitability and our results of operations.
If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results. As a result, current and potential stockholders could lose confidence in our financial reporting which, in turn, could harm our business and the trading price of our common stock.
We are subject to reporting obligations under the U.S. securities laws. The Securities and Exchange Commission, or the SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report on such companys internal controls over financial reporting in its annual report, which contains managements assessment of the effectiveness of the companys internal controls over financial reporting. In addition, an independent registered public accounting firm must attest to and report on managements assessment of the effectiveness of the companys internal controls over financial reporting. Our management may conclude that our internal controls over our financial reporting are not effective. Moreover, even if our management concludes that our internal controls over financial reporting are effective, our independent registered public accounting firm may still decline to attest to our managements assessment or may issue a report that is qualified if they are not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future. If we fail to timely achieve and maintain the adequacy of our internal controls, we may not be able to conclude that we have effective internal controls over financial reporting at a reasonable assurance level. Moreover, effective internal controls over financial reporting are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our common stock. Furthermore, we anticipate that we will incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act. As of the date of this prospectus we do not have an estimate of the costs to the company of compliance with the Act.
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We have not yet begun preparing for compliance with Section 404, but we are aware we must do so by strengthening, assessing and testing our system of internal controls to provide the basis for our report. The process of strengthening our internal controls and complying with Section 404 is expensive and time consuming, and requires significant management attention. We cannot be certain that these measures will ensure that we will maintain adequate controls over our financial processes and reporting in the future. Furthermore, as we grow our business, our internal controls will become more complex and will require significantly more resources to ensure our internal controls overall remain effective. Failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If we or our auditors discover a material weakness, the disclosure of that fact, even if quickly remedied, could reduce the market's confidence in our financial statements and harm our stock price.
We do not pay dividends on our Common Stock.
We have not paid any dividends on our common stock since our inception and do not anticipate paying dividends in the foreseeable future. We plan to retain earnings, if any, to finance the development and expansion of our business.
We may need additional capital in the future which could dilute the ownership of current stockholders or make our cash flow vulnerable to debt repayment requirements.
Historically, we have raised equity and debt capital to support our operations. To the extent that we raise additional equity capital, existing stockholders will experience a dilution in the voting power and ownership of their common stock, and earnings per share, if any, would be negatively impacted. Our inability to use our equity securities to finance our operations could materially limit our growth. Any borrowings made to finance operations could make us more vulnerable to a downturn in our operating results, a downturn in economic conditions, or increases in interest rates on borrowings that are subject to interest rate fluctuations. If our cash flow from operations is insufficient to meet our debt service requirements, we could be required to sell additional equity securities, refinance our obligations, or dispose of assets in order to meet debt service requirements. There can be no assurance that any financing will be available to us when needed or will be available on terms acceptable to us. Our failure to obtain sufficient financing on favorable terms and conditions could have a material adverse effect on our growth prospects and our business, financial condition and results of operations.
We may issue preferred stock, which could prevent a change in our control.
Our Articles of Incorporation authorize the issuance of preferred stock with such rights and preferences as may be determined from time to time by our Board of Directors. Accordingly, under the Articles of Incorporation, the Board of Directors, without shareholder approval, may issue preferred stock with dividend, liquidation, conversion, voting, redemption or other rights that could adversely affect the voting power or other rights of the holders of our common stock. The issuance of any shares of preferred stock, having rights superior to our common stock, may result in a decrease in the value or market price of our common stock and could prevent a change in our control. We have no other anti-takeover provisions in our Articles of Incorporation or Bylaws. Holders of the preferred stock may also have the right to receive dividends, certain preferences in liquidation and conversion rights.
Risk Factors Related to Our Common Stock
Our Common Stock is quoted on the Pink Sheets, which may limit the liquidity and price of our Common Stock more than if our Common Stock were quoted or listed on the OTC Bulletin Board, the Nasdaq Stock Market or a national exchange.
Our securities are currently quoted on the OTC Markets Group, Inc. - OTC Pink No Information (the Pink Sheets), an inter-dealer automated quotation system for equity securities. Quotation of our securities on the Pink Sheets may limit the liquidity and price of our securities more than if our securities were quoted or listed on the OTC Bulletin Board, the Nasdaq Stock Market or a national exchange. As a Pink Sheets listed company, we do not attract the extensive analyst coverage that accompanies companies listed on other exchanges. Further, institutional and other investors may have investment guidelines that restrict or prohibit investing in securities traded on the Pink Sheets. These factors may have an adverse impact on the trading and price of our Common Stock.
The trading price of our common stock may decrease due to factors beyond our control.
The stock market from time to time has experienced extreme price and volume fluctuations, which have particularly affected the market prices for emerging growth companies and which often have been unrelated to the operating performance of the companies. These broad market fluctuations may adversely affect the market price of our common stock. If our shareholders sell substantial amounts of their common stock in the public market, the price of our common stock could fall. These sales also might make it more difficult for us to sell equity, or equity-related securities, in the future at a price we deem appropriate.
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The market price of our common stock may also fluctuate significantly in response to the following factors, most of which are beyond our control:
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variations in our quarterly operating results,
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changes in general economic conditions and in the real estate industry,
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changes in market valuations of similar companies,
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announcements by us or our competitors of significant new contracts, acquisitions, strategic partnerships or joint ventures, or capital commitments,
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loss of a major customer, partner or joint venture participant and
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the addition or loss of key managerial and collaborative personnel.
Any such fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance. As a result, stockholders may be unable to sell their shares, or may be forced to sell them at a loss.
The application of the penny stock rules could adversely affect the market price of our common shares and increase your transaction costs to sell those shares.
The Securities and Exchange Commission (the SEC) has adopted rule 3a51-1 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, Rule 15g-9 requires:
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that a broker or dealer approve a persons 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 persons 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
·
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 SEC relating to the penny stock market, which, in highlight form:
·
sets forth the basis on which the broker or dealer made the suitability determination and
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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 stock and cause a decline in the market value of our stock.
The market price for our common shares is particularly volatile given our status as a relatively unknown company with a small and thinly traded public float, limited operating history and lack of profits which could lead to wide fluctuations in our share price. You may be unable to sell your common shares at or above your purchase price, which may result in substantial losses to you.
The market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common shares are sporadically and thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. Secondly, we are a speculative or risky investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products and services. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our common
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shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.
The registration and potential sale, pursuant to this prospectus, by the selling stockholder of a significant number of shares could depress the price of our common stock.
Because there is a limited public market for our common stock, there may be significant downward pressure on our stock price caused by the sale or potential sale of a significant number of shares pursuant to this prospectus, which could allow short sellers of our stock an opportunity to take advantage of any decrease in the value of our stock. The presence of short sellers in our common stock may further depress the price of our common stock.
If the selling stockholder sells a significant number of shares of common stock, the market price of our common stock may decline. Furthermore, the sale or potential sale of the offered shares pursuant to the prospectus and the depressive effect of such sales or potential sales could make it difficult for us to raise funds from other sources.
Rule 144 Related Risk.
The SEC adopted amendments to Rule 144 which became effective on February 15, 2008 that apply to securities acquired both before and after that date. Under these amendments, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell their securities provided that: (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding a sale, (ii) we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale and (iii) if the sale occurs prior to satisfaction of a one-year holding period, we provide current information at the time of sale.
Persons who have beneficially owned restricted shares of our common stock for at least six months but who are our affiliates at the time of, or at any time during the three months preceding a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:
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1% of the total number of securities of the same class then outstanding; or
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the average weekly trading volume of such securities during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale;
provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale. Such sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.
Risk Factors Related to this Offering
We are registering the resale of a maximum of 1,600,000 shares of common stock which may be issued to Dutchess under the Equity Line. The resale of such shares by Dutchess could depress the market price of our common stock.
We are registering the resale of a maximum of 1,600,000 shares of common stock under the registration statement of which this prospectus forms a part. The sale of these shares into the public market by Dutchess could depress the market price of our common stock. As of March 12, 2012, there were 32,885,900 shares of our common stock issued and outstanding. The sale of those additional shares into the public market by Dutchess could further depress the market price of our common stock.
Existing stockholders could experience substantial dilution upon the issuance of common stock pursuant to the Equity Line.
Our Equity Line with Dutchess contemplates our issuance of shares of our common stock to Dutchess, subject to certain restrictions and obligations. If the terms and conditions of the Equity Line are satisfied, and we choose to exercise our put rights to the fullest extent permitted and sell 1,600,000 shares of our common stock to Dutchess pursuant to this registration statement, representing approximately 4.64% of total outstanding number of our common shares after the offering. Our existing stockholders' ownership will be diluted by such sales.
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Dutchess will pay less than the then-prevailing market price for our common stock under the Equity Line.
The common stock to be issued to Dutchess pursuant to the Investment Agreement will be purchased at a 5% discount to the volume weighted average price of our common stock during the five consecutive trading day period beginning on the trading day immediately following the date of delivery of a put notice by us to Dutchess, subject to certain exceptions. Therefore, Dutchess has a financial incentive to sell our common stock upon receiving the shares to realize the profit equal to the difference between the discounted price and the market price. If Dutchess sells the shares, the price of our common stock could decrease.
We may not be able to access sufficient funds under the Equity Line when needed.
Our ability to put shares to Dutchess and obtain funds under the Equity Line is limited by the terms and conditions in the Investment Agreement, including restrictions on when we may exercise our put rights, restrictions on the amount we may put to Dutchess at any one time, which is determined in part by the trading volume of our common stock, and a limitation on our ability to put shares to Dutchess to the extent that it would cause Dutchess to beneficially own more than 4.99% of our outstanding shares.
Forward-Looking Statements
Statements in this prospectus may be forward-looking statements. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this prospectus, including the risks described under Risk Factors, and Managements Discussion and Analysis of Financial Condition and Results of Operations in this prospectus and in other documents which we file with the Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to our ability to raise any financing which we may require for our operations, competition, government regulations and requirements, pricing and development difficulties, our ability to make acquisitions and successfully integrate those acquisitions with our business, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this prospectus.
Use of Proceeds
We will not receive any proceeds from the sale of common stock offered by Dutchess, the selling stockholder. However, we will receive proceeds from the sale of our common stock to Dutchess pursuant to the Investment Agreement. The proceeds from our exercise of the Put Right pursuant to the Investment Agreement will be used for working capital and general corporate purposes.
Selling Security Holder
We are registering for resale shares of our common stock that are issued and outstanding held by the selling stockholder identified below. We are registering the shares to permit the selling stockholder to resell the shares when and as they deem appropriate in the manner described in the Plan of Distribution. As of the date of this Prospectus there are 32,885,900 shares of common stock issued and outstanding.
The following table sets forth:
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the name of the selling stockholder,
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the number of shares of our common stock that the selling stockholder beneficially owned prior to the offering for resale of the shares under this Prospectus,
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the maximum number of shares of our common stock that may be offered for resale for the account of the selling stockholder under this Prospectus, and
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the number and percentage of shares of our common stock to be beneficially owned by the selling stockholder after the offering of the shares (assuming all of the offered shares are sold by the selling stockholder).
The selling stockholder is neither a broker-dealer nor an affiliate of a broker-dealer. The selling stockholder did not have any agreement or understanding, directly or indirectly, to distribute any of the shares being registered at the time of purchase.
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The selling stockholder may offer for sale all or part of the shares from time to time. The table below assumes that the selling stockholder will sell all of the shares offered for sale. A selling stockholder is under no obligation, however, to sell any shares pursuant to this Prospectus.
Beneficial owner | Shares of common stock beneficially owned prior to Offering(1) | Shares of Common stock offered under this prospectus | Shares of common stock beneficially owned after Offering(3) | Percent Ownership After Offering |
Dutchess Opportunity Fund, II, LP (2) | 0 | 1,600,000 | 0 | 0 |
TOTAL | 0 | 1,600,000 | 0 | 0 |
(1) Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, securities that are currently convertible or exercisable into shares of our common stock, or convertible or exercisable into shares of our common stock within 60 days of the date hereof are deemed outstanding. Such shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Except as indicated in the footnotes to the following table, each stockholder named in the table has sole voting and investment power with respect to the shares set forth opposite such stockholders name.
(2) Dutchess is a Delaware limited partnership. Michael Novielli and Douglas H. Leighton are managing members of Dutchess Capital Management, II, LLC, which is the General Partner of Dutchess Opportunity Fund II, LP with voting and investment power over the shares.
(3) Pursuant to put right set forth in Investment Agreement.
Plan of Distribution
This prospectus includes 1,600,000 shares of common stock offered by the selling stockholder. The selling stockholder and any of its respective pledges, donees, assignees and other successors-in-interest may, from time to time, sell any or all of its shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The selling stockholder may use any one or more of the following methods when selling shares:
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ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
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purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
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an exchange distribution in accordance with the rules of the applicable exchange;
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privately negotiated transactions;
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short sales after this registration statement becomes effective;
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broker-dealers may agree with the selling stockholder to sell a specified number of such shares at a stipulated price per share;
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through the writing of options on the shares;
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a combination of any such methods of sale; and
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any other method permitted pursuant to applicable law.
The selling stockholder or any of its respective pledgees, donees, transferees or other successors in interest, may also sell the shares directly to market makers acting as principals and/or broker-dealers acting as agents for themselves or their customers. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the selling stockholder and/or the purchasers of shares for whom such broker-dealers may act as agents or to whom they sell as principal or both, which compensation as to a particular broker-dealer might be in excess of customary commissions. Before any such agent, or broker-dealer sells any of the shares registered here, a post-effective amendment will be filed to name anyone receiving compensation for selling the shares before any sales take place. Market makers and block purchasers purchasing the shares will do so for their own account and at their own risk. It is possible that a selling stockholder will attempt to sell shares of common stock in block transactions to market makers or other purchasers at a price per share which may be below the then market price. The selling stockholder cannot assure that all or any of the shares offered in this prospectus will be issued to, or sold by, the selling stockholder. The selling stockholder and any brokers, dealers or agents, upon effecting the sale of any of the shares offered in this prospectus, are "underwriters" as that term is defined under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or the rules and regulations under such acts. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.
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Discounts, concessions, commissions and similar selling expenses, if any, attributable to the sale of shares will be borne by a selling stockholder. The selling stockholder may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the shares if liabilities are imposed on that person under the Securities Act of 1933.
The selling stockholder may from time to time pledge or grant a security interest in some or all of the shares of common stock owned by it and, if it defaults in the performance of its secured obligations, the pledgee or secured parties may offer and sell the shares of common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or any other applicable provision of the Securities Act of 1933 amending the list of selling stockholder to include the pledgee, transferee or other successors in interest as selling stockholders under this Prospectus.
The selling stockholder also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus and may sell the shares of common stock from time to time under this prospectus after we have filed an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.
We are required to pay all fees and expenses incident to the registration of the shares of common stock. We have agreed to indemnify the selling stockholder against certain losses, claims, damages and liabilities, including liabilities under the Securities Act of 1933.
The selling stockholder acquired the securities offered hereby in the ordinary course of business and have advised us that it has not entered into any agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of its shares of common stock, nor is there an underwriter or coordinating broker acting in connection with a proposed sale of shares of common stock by any selling stockholder. If we are notified by any selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of shares of common stock, if required, we will file a supplement to this prospectus.
If the selling stockholder uses this Prospectus for any sale of the shares of common stock, it will be subject to the prospectus delivery requirements of the Securities Act of 1933.
The anti-manipulation rules of Regulation M under the Securities Exchange Act of 1934 may apply to sales of our common stock and activities of the selling stockholder.
Description of Securities to be Registered
As of March 12, 2012, our authorized capital stock consists of 100 million shares of Common Stock, $0.01 par value per share, 32,885,900 of which were issued and outstanding, and 10 million shares of preferred stock, $5.00 par value per share, none of which were issued and outstanding.
Subject to preferences that may be applicable to any preferred stock outstanding at the time, the holders of Common Stock are entitled to receive dividends out of legally available assets at such times and in such amounts as our Board of Directors may from time to time determine. Each stockholder is entitled to one vote for each share of Common Stock held on all matters submitted to a vote of stockholders. Cumulative voting for the election of directors is not authorized.
Our Common Stock is not subject to conversion or redemption and holders of Common Stock are not entitled to preemptive rights. Upon the liquidation, dissolution or winding up of the Company, the remaining assets legally available for distribution to stockholders, after payment of claims or creditors and payment of liquidation preferences, if any, on outstanding preferred stock, are distributable ratably among the holders of Common Stock and any participating preferred stock outstanding at that time. Each outstanding share of Common Stock is fully paid and nonassessable.
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Preferred Stock
Our Board of Directors has the authority, without action by stockholders, to designate and issue preferred stock in one or more series. The Board of Directors may also designate the rights, preferences and privileges of each series of preferred stock, any or all of which may be greater than the rights of our Common Stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock on the rights of holders of the Common Stock until the Board of Directors determines the specific rights of the holders of the preferred stock. However, these effects might include: (a) restricting dividends paid to the holders of shares of the Common Stock; (b) diluting the voting power of the holders of shares of the Common Stock; (c) impairing the liquidation rights of holders of shares of the Common Stock and (d) delaying or preventing a change in control of the Company without further action by stockholders.
Warrants
None.
Options
None.
Description of Business
Background and History
We were incorporated in the state of Wyoming on November 6, 1973 under the name DOL Resources, Inc. From inception until October 2002, our primary business activity was the acquisition, disposition, commercialization and/or exploration of interests in oil, gas and/or coal properties.
On March 6, 1975, we filed with the state of Wyoming Articles of Amendment to our Articles of Incorporation pursuant to which, in part, we increased our authorized common stock to 25 million shares, $0.01 par value per share.
On March 26, 2001, we filed with the state of Wyoming Articles of Amendment to our Articles of Incorporation pursuant to which we increased our authorized common stock to 100 million shares, $0.01 par value per share and authorized 10 million shares of blank check preferred stock, $5.00 par value per share.
Effective October 1, 2002, we sold all of our oil and gas properties to Glauber Management Company whereupon we ceased any business operations and became a development stage company, whose activities were limited to that of a shell company seeking to merge with or acquire an operating business.
On August 1, 2007 we filed with the Securities and Exchange Commission (the SEC) a Form 8-K in which we reported that : (i) Jon S. Cummings , IV acquired over 50% of our common stock, (ii) Mr. Cunnings was appointed as our President, Chief Executive Officer, Chief Financial Officer, Chairman of the Board and Secretary, (iii) Joseph Meuse resigned as a member of our Board of Directors and as our President, Chief Executive Officer, Chief Financial Officer, Chairman of the Board and Secretary, and (iv) we have changed our name to Omega Commercial Finance Corporation.
On August 1, 2007, we filed with the state of Wyoming Articles of Amendment to our Articles of Incorporation changing our name to Omega Commercial Finance Corporation.
On September 14, 2007, we entered into a Stock Purchase Agreement and Share Exchange with Omega Capital Funding LLC, a Florida limited liability company (Omega Capital) pursuant to which we acquired 100% ownership of Omega Capital as previously disclosed in our Form 8-K filed on September 20, 2007 as subsequently amended by our Form 8-K/A filed on October 29, 2007 (the Reorganization). After the Reorganization, our business operations consisted of those of Omega Capital. Prior thereto since 2002, we were a non-operating shell company with no revenue and minimal assets. As a result of the Reorganization, we were no longer considered a shell company.
On September 20, 2007 we filed with the SEC a Form 8-K (as amended on October 29, 2007) in which we reported: (i) that we acquired 100% of the equity of Omega Capital Funding, LLC, a Florida limited liability company, (ii) a change in our control, (iii) a change in our auditors, and (iv) that we were no longer a shell company.
On February 14, 2008 we filed a Registration Statement on Form S-1, which S-1 was withdrawn as reported in our Registration Withdrawal Request filed on March 11, 2008.
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On March 17, 2008 we filed a Form 8-K in which we reported the appointment of our new slate of directors and the amendment to our bylaws eliminating the restriction capping the number of directors to three.
On July 2, 2008 we filed a Form 8-K in which we reported that we entered into an Agreement for Share Exchange to acquire 100% of the capital stock of 21 Miami Oceans International Limited, a Belize Corporation.
On July 8, 2008 we filed a Form 8-K in which we reported that we rescinded the agreement to acquire 21 Miami Oceans International Limited as reported in our Form 8-K filed on July 2, 2008.
On July 15, 2008 we filed a Registration Statement on Form S-1, which S-1 was withdrawn as reported in our Registration Withdrawal Request filed on April 20, 2009.
On July 18, 2008 we filed a Form 8-K in which we reported that we entered into an Agreement for Share Exchange to acquire 100% of the capital stock of 21 Miami Oceans International Limited.
On July 18, 2008 we filed a Form 8-K in which we reported that we entered into an Agreement for Share Exchange to acquire 100% of the capital stock of 21 Miami Oceans International Limited.
On February 2, 2009 we filed a Form 8-K/A in which we reported that on July 17, 2008 we closed on the transaction with 21 Miami Oceans International Limited as reported in our Form 8-K filed on July 18, 2008.
On February 25, 2009 we filed a Form 8-K in which we reported that we have signed a letter of intent to acquire 100% ownership of 3.9 acres of beachfront property located in Puerto Penasco, Mexico.
On February 25, 2009 we filed a Form 8-K in which we reported that we entered into an Agreement for Share Exchange to acquire 100% of the equity of BBB Developments Mexico Developments Mexico S de RL de CV, a Mexican limited liability company which, in turns, owns the property described in our Form 8-K filed also on February 25, 2009.
The Agreements to acquire 21 Miami Oceans International Limited and BBB Developments Mexico as described above were never consummated and have been abandoned.
On September 15, 2009 we filed a Form 15 terminating our SEC registration and obligation to file reports thereunder
Our common stock is quoted on the OTC Markets Group, Inc. - OTC Pink No Information (Pink Sheets) and trades under the symbol OCFN.PK. The last reported sale price of our common stock on the Pink Sheets was on March 1, 2012 for $0.02 per share. On March 12, 2012, the closing bid price of our common stock was $0.0055.
Overview
Since the Reorganization in September 2007, our business operations, through various subsidiaries, have been directed primarily on offering financing to the real estate markets in the United States. We provide short and medium term loans to borrowers primarily consisting of commercial real estate developers and speculators, business owners, landlords, and owners of core and non-core assets. We focus on various alternative commercial real estate financings with an emphasis on loans secured by commercial real estate and also on financing non-core assets, including ground up developments, as well as core assets, including office buildings, multi-family residences, shopping centers, and luxury residential estates. The loans consist of senior debt loans, mezzanine or subordinated loans, preferred equity, and other equity participation financing structures. Our operations are based primarily in Miami, Florida.
Our website is www.omegapublic.com.
Plan of Operations
Our core investment objective is to achieve advantageous yields and consistent interest income by providing short and medium term loans (Loans) to borrowers primarily consisting of commercial real estate developers and speculators, business owners, landlords and owners of core assets described (collectively, Borrowers). We invest in various financing programs with an emphasis on Loans secured by commercial real estate such as core assets that include office buildings, multi-family residences, shopping centers, industrial, and hotels, as well as asset backed loans such as secured by account receivables from established companies. The Loans consist of senior debt loans, mezzanine or subordinated loans, preferred equity and other equity participation financing structures, and in the case of specialty financing for the factoring a standard UCC-1 filing procedure.
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We follow a conservative lending profile for our investments. Our financeable assets will be normally used to originate low leveraged first lien senior debt mortgage loans and high Debt Service structured financing programs, as opposed to riskier, less secure mezzanine or equity positions. We will maintain approximately 70% of our loan portfolio in first lien senior debt mortgage loans.
Many times when a company decides to pursue new opportunities, they find that the barriers of entry are often high or unattainable. Typically, this is due to a lack of capital and the proper advisory services and solutions necessary for these companies to achieve their business potential. We were organized as a publicly traded commercial real estate lending holding company primarily for the purpose of underwriting or investing in loans and/or specialty financing programs backed or secured by real estate or other types of related or assets or equity interests.
Regardless of the type of Loan, our investment focus is on earning rates of return that exceed the commensurate level of risk associated with each Loan and specialty financing program. We have utilized proven 3rd party relationships to independently assess the value, volatility, and adequacy of the collateral for each Loan to assure that all Loans made are appropriately collateralized. As part of our assurance procedures, our 3rd party independent asset loan manager will assess the ease of repossessing and disposing of collateral for each loan. We ensure that underlying loans will have adequate insurance. The standard securitization underwriting protocols and criteria is what is used by our third party firms and are part of the credit assessment prior to the final approval for any investment.
We have authority to invest in a wide variety of securities, loans, and real estate related investments, domestic or foreign, of all kinds and descriptions, whether publicly traded or privately placed, including but not limited to common and preferred stocks, bonds and other debt securities, direct ownership interests in real estate, interests in real estate investment funds, loans of all kind (including luxury residential loans and other loans described herein), accounts receivable, notes, convertible securities, limited partnership interests, limited liability company interests, mutual fund shares, options, warrants, derivatives, currencies, monetary instruments and cash and cash equivalents. We do not trade commodities or financial futures on our behalf.
Investment Objectives and Strategy
Our core investment objective is to achieve advantageous and consistent rates of return by providing short and medium term Loans to Borrowers when traditional financing is unavailable to such Borrowers for acquisitions, refinancing of commercial property loans and asset backed loans. We invest in various alternative commercial real estate financings with an emphasis on Loans secured by commercial real estate and also seeks to invest in financing of core assets that include office buildings, multi-family residences, shopping centers, and hospitality, plus a few ground up entitled land developments. The Loans consist of senior debt loans, mezzanine or subordinated loans, preferred equity and other equity participation financing structures. We follow a conservative loan profile for our investments, which means Low LTVs and High DSCRs. Our financing of assets are normally used to originate first lien, senior debt mortgage loans and specialty financing programs as opposed to riskier, yet much more profitable, and less secure mezzanine or equity positions. We plan to maintain approximately 70% of our loan portfolio in first lien senior debt mortgage loans and 30% for subordinate debt and equity.
With respect to asset backed loans, we will prudently originate, receivable based lines of credit better known as factoring. That will assist small to medium sized business owner resolve their short term working capital needs. This division is supported by a proven back office underwriting, due diligence, sales, marketing, servicing, training, and collections staff. This division will utilize state of the art software that will allow make it capable for facilitating and organizing a seamless stream of productions. An immediate use of prudent leverage that will be made available to the division up to 6(x) times will maximize our capital. This in turn will allow us to create capitalization models that offer us High Yielding loans with short terms. This is due to the ability of this financing product to garner high returns and turnover of the deployed capital, and this is secured by the receivables of established company such as a Wall Mart, GM, Best Buy, etc. Upon availability of capital to the division, the subsidiary can begin to access an existing receivable-based auction company providing millions of dollars of prospective factoring clientele Through the integrity of our knowledgeable back office team, we can address any small businesses owners short-term cash flow needs. The program will also provide non-recourse factoring to clients.
Use of Loan Servicers
In carrying out our investment strategy, we may seek out and utilize third-party firms (Servicers) that specialize in Loan origination and servicing. We perform due diligence on each Servicer in order to evaluate the firms experience and expertise in making loans that satisfy investment criteria. Upon completion and review of the due diligence process, those firms that meet the investment criteria will be eligible to enter into Loan origination and servicing agreements with us.
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Use of Other Third Party Feasibility and Evaluation Providers
We utilize various third party organizations that provide services in connection with the implementation of its investment program and important services such as evaluation and feasibility services, closing and escrow services and fund administration services.
Sale of Participations
In the discretion of management, we may sell participation rights in the loans to other entities.
THE COMMERCIAL REAL ESTATE LENDING PRODUCT
By originating commercial real estate loans with proven and standard securitization underwriting criteria, we can enhance its balance sheet with gainful long-term assets that also allow for instantaneous income. Operationally, management believes the CMBS-style loans that its' sales force consisting of highly regarded mortgage brokers will produce for us to originate, is currently estimated to be a volume of up to $100 Million Dollars. Strategically, we feel with its unblemished balance sheet coupled with the ability to raise this capital combined with utilizing a loan diversifying approach for its originations, it is a fundamentally solid and proven business model. The commercial real estate mortgage and securitization markets have suffered greatly in recent years beginning with a US banking financial market crisis, which collectively pushed the U.S. towards a steep recession starting in late 2008.
However in terms of forward thinking, we along with industry pioneers and market leaders within the industry, feel the CMBS-style loan landscape has now stabilized in select CBDs and there are extremely attractive opportunities for deploying capital. Thus, we will focus on positioning the company to seize this opportunity within this market. In order to augment its operations & create a sound, proven back-office, we have hired top securitization, CRE, and financial-market loan processors as well as underwriters, credit analyst, and servicing organizations. These partners are some of the most successful 3rd party authorities emerging from this sector.
As noted earlier, this model is being used by some of the top-level CMBS players. However to compete and succeed within this industry, we have vetted and designed a proprietary pricing & lending model from the direct contribution of its aligned partners who have a pulse on this particular lending sector of the market. This lending model and strategic positioning will allow for us to successfully compete rather well and immediately.
From an opportunistic approach, our balance sheet has not experienced the distress like our competition nor do we have toxic assets impeding us from strategically positioning ourselves for the future. Through our lending subsidiary we can build a long term cash flowing balance sheet by using prudent underwriting criteria. Furthermore, we intend to formulate an influential board of directors. The directors will be required to have a comprehensive background in the following sectors: structured finance, commercial real estate mortgage banking, CRE asset management, and other related financial or accounting expertise. More importantly, the board will be part of the Loan Committee in addition to a separate Advisory Board Financial Audit Committee that will be formed.
KEY OPERATIONAL HIGHLIGHTS
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The overall core property CRE lending market is vast and global pushing well above a trillion dollars so there is plenty of business to go around and grow the company.
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This lending model will allow for smaller increments of loans designed for quicker closings to permit investors to monitor development of the ongoing balance sheet and enable us to achieve milestone.
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Trepp.com a top CMBS research firm believes this CMBS style loan market is currently estimated to be valued at $750 Billion Dollars with $250 Billion Dollars of underlying mortgages maturing between now and 2014.
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Seasoned commercial real estate, securitization specialist have been hired to coordinate our loan underwriting model centered on mitigating loan-loss risks and to perform all other related and required 3rd party due diligence
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Since the securitization industry has standardized the underwriting criteria, it will allow for each hired 3rd party organization and the back office operations to integrate and exchange information effectively & efficiently.
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Low cost and prudent leverage is available to us for these type of loan originations
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We feel this strategy coupled with a CRE investment bankers expertise, our public platform, and prudent determination to become a leading small cap growth company in this lending market could add significant value to us and our current market price moving forward.
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We shall be presented CMBS-style loan originations generated from their proven and well-experienced loan processing sales force as well as from top-rated REITS.
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We shall utilize our own internal industry knowledge as well as its strategic partners extensive loan origination, structuring, and closing experience to serve our needs to grow the top-line.
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We have hired RR Donnelley for our preliminary 3rd party securitization credit, underwriting, and due diligence analysis of the CMBS-style loans and hired Berkadi Mortgage Servicing to administer all post-loan closing functions, such as the management of the Lock-Box for all Interest Income Payments that are due to us.
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These experienced industry veterans have all contributed to the creation of this loan strategy, which has yielded us immediate loan production of quality loans.
The Commercial Real Estate Market Forecast
The forecast of the commercial real estate finance markets projects originations of commercial property mortgages will hit $230 billion in 2012, an increase of 17 percent from 2011 volumes, and continue to rise to $290 billion in 2015. Commercial mortgage debt outstanding is expected to also grow in 2012, ending the year above $2.4 trillion, two percent higher than at the end of 2011. By the end of 2015, mortgage debt outstanding is forecast to exceed $2.5 trillion. In general, the U.S. CRE market appears to be on a gradual but uneven path to recovery, with increased capital availability, transactions, and improved fundamentals will allow us to be prudently competitive.
Competition
A number of much larger proven commercial real estate lenders such as JP Morgan, Bank of America, and Goldman, currently have established operations with large balance sheets and back office staff. However, we are a non-banking institution and are not regulated like the larger banks or typical CMBS lender in that we are not pigeon holed into immediately securitizing our assets. Rather we elect to use the standardized securitization underwriting characteristics to originate its loans, consequently to mitigate liquidly-risk (i.e. recapitalization) with the ability to hold these loans on the un-tainted balance sheet in order to garner stable instantaneous income to yield strong growth and market share.
Finally, upon closing a minimum of $5 million dollars of loans, we can apply to be listed on the AMEX or other national stock exchange enabling the investors to have robust liquidity and more importantly will allow for us to implement additional proven, balance sheet, capital markets growth-strategies to compete with top tier financial firms like CapitalSource Inc, Goldman Sachs Commercial Real Estate, Morgan Stanley Real Estate, JP Morgan Chase, etc.
ASSET BACKED FINANCING KEY OPERATIONAL HIGHLIGHTS
Our factoring division understands that business does not always go as planned; therefore we will work with clients to get them realigned financially with viable solutions for optimum profitability. Key among the services provided through this division, is a line of factoring products.
In addition, we will deploy capital for participation in a proven auctioned based account receivable program from The Receivable Exchange Inc that will provide consistent revenue generation. This program allows businesses to sell their receivables to a global network of institutional investors and access working capital in as little as three days. This is in contrast to typical remittance terms of 48 to 180 days being offered for factoring services, thus providing this division with an immediate competitive advantage. Additionally, in order to qualify for this platform through most institutions, they must have a minimum of $5 million in capital. This too, offers a captive market for the majority of smaller to medium sized factoring companies that have been eliminated from conventional consideration. The factoring division will be operating in tandem with larger financial institutions. The capital from this offering fortified by our access to the capital markets, plus experienced due diligence operations in place, gives us a formidable financial platform.
Ours main product will be Advance factoring, which enables clients to turn accounts receivable into cash-on-hand with secured working capital loans. Accounts receivable, inventory or other assets such as real estate, equipment and intellectual property can secure the factoring divisions working capital loans. Advance rates are determined based on analysis of appropriate metrics for each collateral class (e.g. accounts receivable dilution, assessed value of tangible assets)
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Loan Production Relationships
We have strategically aligned ourselves with top commercial real estate mortgage bankers to utilize their vast production sales with Producers across the country. They have experienced loan origination back office staff to ensure our commercial real estate financing loan product is appropriately and professionally being marketed. Also, management has a proprietary database of 50 to 100 mortgage bankers to market their loan product to and generate loan production internally for consistent deal flow and have the option to hire a sales (production) force.
Underwriting & Due Diligence Relationships
We have engaged RR Donnelly to administer and implement the due diligence process and streamline our underwriting back office functions. To date, they have provided these services to others for more than one million commercial real estate assets throughout the United States, Canada, Europe, Asia and Latin America. Those deals represent a combined $550 billion and involve some of the largest private CMBS issuances ever completed. Their services will enable us to fully utilize their experience to deliver comprehensive, accurate, third-party reviews supporting pre-sale and post-sale financing transactions. Armed with this transparent information, we and more importantly our investors/shareholders are ultimately able to make informed and sound decisions.
Loan Servicing Relationships
We have hired Berkadi Commercial Mortgage Master Service, which is a leading provider of commercial loan servicing, special servicing and asset management services with proven track record and high ratings. We will utilize their advanced technology that will provide an intergraded and streamlined post-closing back office platform, by minimizing any overlapping operational functions that could reduce cost and make our loans over time worth more.
The Factoring Back Office Relationships
We as of January 2011 bought a 20-year-old turnkey factoring franchise operation from Liquid Capital for $50,000 that offers proven factoring marketing support and back office operations support staff. This support consists of due diligence, underwriting, servicing, and collection under our brand, Omega Factoring LLC. In addition, the franchise agreement offers access to an approved credit facility providing us with leverage for capital up to a multiple of 6. There is a $250,000 minimum requirement to utilize the credit facility. Our main product will be Advance factoring, which enables clients to turn account receivables into cash-on-hand with secured working capital loans. These loans can be secured by account receivables, inventory, or other assets such as real estate, equipment, and intellectual property. Advance rates are determined based on analysis of appropriate metrics for each collateral class (e.g. accounts receivable dilution, assessed value of tangible assets).
Co-Investments and Participation with Established Organizations
We from time to time will co-invest and or syndicate participation interest in loans as the administrative agent or buying participation interest. We will only employ this strategy with seasoned well-established organizations in the commercial real estate lending industry such as private trusts, real estate financing institutions, mutual funds, pension funds, investment houses, or hedge funds of fund. This will allow us to participate in well-structured transactions with organizations with proven track records involving originating, underwriting, and servicing.
Employees
We have no employees. We will rely on third party commercial real estate professional in areas such as credit, underwriting, due diligence, and loan servicing, plus a team of seasoned commercial real estate attorneys to secure our assets. We will rely on proven mortgage bankers to generate production for stabilized commercial property loans. The underwriting and due diligence will be supervised by RR Donley, a company that has completed loan underwritings in the billions of dollars.
Description of Property
Our principal executive offices are located at 1000 5th Street, Suite 200, Miami Beach, FL 33139 and our telephone number is (305) 704-3294. The term of the lease is month to month and our monthly rent is $563.
Legal Proceedings
Other than as set forth below, there are no material pending legal proceedings to which we are a party or to which any of our property is subject and to the best of our knowledge, no such actions against us are contemplated or threatened.
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The following is summary information on the cases against us or our affiliates.
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Jorge Ramos v. Omega Capital Funding, LLC, et. al. In the 11th Judicial Circuit in and for Miami-Dade County, Florida. Case No.: 07-38288 CA 09. This matter resulted in a summary judgment against the Defendants on September 25, 2009 for $85,000. The judgment accrues interest at 8% annually and has yet to be satisfied.
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Sebaco Siete, S.A. v. Omega Realty Partners, L.L.C., et. al. In the 11th Judicial Circuit in and for Miami-Dade County, Florida. Case No.: 06-11204 CA 13. This matter resulted in a default final judgment against the Defendants in March 2008 for $1,564,832 plus fees and costs. The judgment accrues interest at 11% annually and has yet to be satisfied.
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Luxury Home, LLC v. Omega Commercial Finance Corporation, et. al. In the Superior Court of Arizona, Maricopa County, Arizona. Case No.: CV2011-004554. This breach of contract matter resulted in a default judgment against the Defendants in 2012 for $651,113 plus fees and costs. The judgment accrues interest at 4.25% annually and has yet to be satisfied.
We currently have payment obligations of total $2,300,945 on the judgments against us, which is included in the audited financial statements for the years ended December 31, 2011 and 2010.
Management's Discussion and Analysis of Financial Condition and Results of Operations
We qualify as an emerging growth company under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:
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have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
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comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditors report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
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submit certain executive compensation matters to shareholder advisory votes, such as say-on-pay and say-on-frequency; and
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disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEOs compensation to median employee compensation.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a large accelerated filer as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
Overview
We were incorporated in the state of Wyoming on November 6, 1973 under the name DOL Resources, Inc. From inception until October 2002, our primary business activity was the acquisition, disposition, commercialization and/or exploration of interests in oil, gas and/or coal properties. In October 2002, we sold all of our oil and gas properties to Glauber Management Company whereupon we ceased any business operations and became a development stage company, whose activities were limited to that of a shell company seeking to merge with or acquire an operating business.
On September 14, 2007, we entered into a Stock Purchase Agreement and Share Exchange with Omega Capital Funding LLC, a Florida limited liability company (Omega Capital) pursuant to which we acquired 100% ownership of Omega Capital as previously disclosed in our Form 8-K filed on September 20, 2007 as subsequently amended by our Form 8-K/A filed on October 29, 2007 (the Reorganization). After the Reorganization, our business operations consisted of those of Omega Capital. Prior thereto since 2002, we were a non-operating shell company with no revenue and minimal assets. As a result of the Reorganization, we were no longer considered a shell company.
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Since the Reorganization in September 2007, our business operations, through various subsidiaries, have been directed primarily on offering financing to the real estate markets in the United States. We provide short and medium term loans to borrowers primarily consisting of commercial real estate developers and speculators, business owners, landlords, and owners of core and non-core assets. We focus on various alternative commercial real estate financings with an emphasis on loans secured by commercial real estate and also on financing non-core assets, including ground up developments, as well as core assets, including office buildings, multi-family residences, shopping centers, and luxury residential estates. The loans consist of senior debt loans, mezzanine or subordinated loans, preferred equity, and other equity participation financing structures. Our operations are based primarily in Miami, Florida.
Going Concern
As of December 31, 2011, we have not yet achieved profitable operations. We have accumulated losses since inception, a working capital deficiency and we expect to incur further losses in the development of our business, all of which, according to our accountants, casts substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. We intend to seek additional funds by equity financing through the Offering and/or related party advances, however there is no assurance of additional funding being available.
RESULTS OF OPERATIONS
Twelve months ended December 31, 2011
compared to twelve months ended December 31, 2010
For the twelve-months ended December 31, 2011, we generated $347,150 in revenues compared to $99,500 in revenues for the twelve-months ended December 31, 2010 for an increase of $247,650. The increase in revenue is a result of enhanced and expanded operations.
Cost of goods sold for the twelve-months ended December 31, 2011 was $234,704 compared to $47,083 for the twelve-months ended December 31, 2010 for an increase of $187,621. This increase was a result of enhanced and expanded operations.
Total expenses increased to $897,756 for the twelve months ended December 31, 2011 from $18,194 for the twelve-months ended December 31, 2010 a net increase of $879,562. The reason for the increase was due to primarily the payment to our CEO for services rendered in exchange for issuance of our common shares valued at $750,000 as well as an increase in expenses associated with becoming more operational.
We generated a net loss of $785,310 for the twelve months ended December 31, 2011 compared to net income of $34,223 for the same period in 2010 due to the circumstances set forth above.
CAPITAL RESOURCES AND LIQUIDITY
On December 31, 2011 we had total assets of $2663 compared to $37,973 on December 31, 2010, a decrease of $35,310. We had a deficit in total stockholders equity of $5,252,114 on December 31, 2011 compared to the deficit of stockholders equity of $4,466,804 on December 31, 2010, a decrease in equity of $785,310, which is in part due to the net loss during the past 12 months.
All assets are booked at historical cost. Management reviews on an annual basis the book value, along with the prospective dismantlement, restoration, and abandonment costs and estimate residual value for the assets, in comparison to the carrying values on the financial statements.
Financing - The Equity Line of Credit. As a means for financing operations, we have entered into an Investment Agreement/Equity Line of Credit with Dutchess pursuant to which we have the right to put to Dutchess up to $25 million in shares of our common stock (i.e., we can compel Dutchess to purchase our common stock at a pre-determined formula). For a detailed discussion of the Investment Agreement, see the section entitled About This Offering as well as the attendant Risk Factors.
Net cash flow used in operating activities during the twelve months ended December 31, 2011 was $35,310 as compared to net cash flow provided by operating activities of $37,973 for the twelve months ended December 31, 2010. The decrease by $73,283in cash flows was primarily due a net loss of $785,310, which was offset by non-cash expenses due to the issuance of common shares to officer for services rendered in the amount of $750,000 in 2011.
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Cash Requirements
We have not yet achieved profitable operations and expect to incur further losses in the development of our business, the result of which casts substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from business operations when they come due. We intend to meet our financial needs for operations through ticket sales, sponsorships and merchandise sales; otherwise, we intend to seek additional funds by equity and/or debt financing and/or related party advances. However there is no assurance of additional funding being available. As of December 31, 2011 we had cash and cash equivalents of $2,663.
We have financed operations through the collections of accounts receivable and sales, as well as loans by officers and raising additional capital via debt and/or equity funding. Our future capital requirements will depend on numerous factors, including the profitability of operations and our ability to control costs. We believe that our current assets will be sufficient to meet our operating expenses and capital expenditures in the near term. However, we cannot predict when and if any additional capital contributions may be needed and we may need to seek one or more substantial new investors. New investors could cause substantial dilution to existing stockholders.
There can be no assurances that we will be successful in raising additional capital via debt and/or equity funding, or that any such transactions, if consummated, will be on terms favorable to us. In the event that additional capital is not obtained from other sources, it may become necessary to alter development plans or otherwise abandon certain ventures.
If we need to raise additional funds in order to fund expansion, develop new or enhanced services or products, respond to competitive pressures or acquire complementary products, businesses or technologies, any additional funds raised through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution and such securities may have rights, preferences or privileges senior to those of ours Common Stock.
In the next twelve months, the company's goal is to achieve profitable operations through ticket sales, sponsorship and merchandise sales. Over the next 24 months the company's focus is on expanding our client base, as well as obtaining new sponsors, and increasing tickets sales, while potentially seeking a strategic acquisition.
We do not currently have any contractual restrictions on our ability to incur debt and, accordingly we could incur significant amounts of indebtedness to finance operations. Any such indebtedness could contain covenants which would restrict our operations.
Off-Balance Sheet Arrangements.
We currently do not have any off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Emerging Growth Company
We are an emerging growth company under the federal securities laws and will be subject to reduced public company reporting requirements. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards.
Critical Accounting Policies
Our financial statements are based on the application of accounting principles generally accepted in the United States (GAAP). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenue, and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
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Our significant accounting policies are summarized in Note 1 of our financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause an effect on our results of operations, financial position or liquidity for the periods presented in this report.
Revenue Recognition
The Company will be primarily engaged in the sourcing of second- and third-tier financing for commercial development and construction. Revenues are generated from fixed non-refundable processing fees associated with the contractual agreement. Revenues are recorded at the time each contract is signed and fees remitted.
The fees are non-refundable and fixed, which is unconditionally earned and is not contingent on success factors. The Company recognizes revenues as amounts become billable in accordance with contract terms. These revenues based on contractual agreement with the Company are recognized as the contracts are signed and the fees are received, and amounts are earned in accordance with the Securities and Exchange Commission (the SEC) Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements (SAB 101), as amended by SAB No. 104, Revenue Recognition (SAB 104). The Company considers amounts to be earned once evidence of an arrangement has been obtained, the contract signed, and the processing fees remitted.
In the past our fees have not been refundable, which resulted in unclear contracts and several lawsuits. Our contracts have been rewritten to clearly state the processing fees as non-refundable, and customers are clearly informed of the fees and policies. If the Company elects to refund any processing fees, determined on a case by case basis, a loss provision will be recorded in the period in which the loss first becomes probable and reasonably estimable. Contract losses are determined by the contractual agreement and the amount of processing fees associated with the customer. There were no refunds or anticipated contract refunds as of December 31, 2011 and 2010.
Fair Value of Financial Instruments
The carrying amounts of the Companys financial instruments, including cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities, approximate fair value because of their short maturities.
Investments in and Advances to Unconsolidated Entities
The trends, uncertainties or other factors that may negatively affected the Companys business and the finance, construction and new development industries in general may also affect the unconsolidated entities in which the Company may have investments. The Company will review each of its investments in unconsolidated entities on a quarterly basis to determine the recoverability of its investment. The Company evaluates the recoverability of its investment in unconsolidated entities, which entails a detailed cash flow analysis using many estimates including but not limited to expected sales pace, expected sales prices, expected incentives, costs incurred and anticipated, sufficiency of financing and capital, competition, and market conditions. When markets deteriorate and it is no longer probable that the Company can recover its investment in a joint venture, the Company impairs its investment. If a joint venture has its own loans or is principally a joint venture to hold an option, such impairment may result in the majority or all of the Companys investment being impaired.
Income Taxes Valuation Allowance
Significant judgment is required in estimating valuation allowances for deferred tax assets. In accordance with ASC 740, a valuation allowance is established against a deferred tax asset if, based on the available evidence, it is more likely than not that such asset will not be realized. The realization of a deferred tax asset ultimately depends on the existence of sufficient taxable income in either the carryback or carry forward periods under tax law. The Company periodically assesses the need for valuation allowances for deferred tax assets based on ASC 740s more-likely-than-not realization threshold criterion. In the Companys assessment, appropriate consideration is given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency, and severity of current and cumulative income and losses, forecasts of future profitability, the duration of statutory carryback or carry forward periods, its experience with operating loss and tax credit carry forwards being used before expiration, and tax planning alternatives.
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In accordance with ASC 740, the Company assesses whether a valuation allowance should be established based on its determination of whether it is more likely than not that some or all of the deferred tax assets will not be realized. The Companys assessment of the need for a valuation allowance on its deferred tax assets includes assessing the likely future tax consequences of events that have been recognized in its consolidated financial statements or tax returns. The Company bases its estimate of deferred tax assets and liabilities on current tax laws and rates and, in certain cases, on business plans and other expectations about future outcomes. Changes in existing tax laws or rates could affect actual tax results and future business results may affect the amount of deferred tax liabilities or the valuation of deferred tax assets over time. The Companys accounting for deferred tax assets represents its best estimate of future events using the guidance provided by ASC 740.
Due to uncertainties in the estimation process, particularly with respect to changes in facts and circumstances in future reporting periods (carry forward period assumptions), it is reasonably possible that actual results could differ from the estimates used in the Companys historical analyses. The Companys assumptions require significant judgment because the residential homebuilding industry is cyclical and is highly sensitive to changes in economic conditions. If the Companys results of operations are less than projected and there is insufficient objectively verifiable evidence to support the likely realization of its deferred tax assets, a valuation allowance would be required to reduce or eliminate its deferred tax assets.
Stock Based Compensation
From time to time, the Company has compensated its officers and vendors with the issuance of stock. The value of the transaction is determined by the trading price on the day of the transactions. We anticipate that the Company will continue to compensate its officers with stock and traditional payments in the future. Since the stock price is variable and there is no assurance the stock price will remain at any level, the amount of stock issued for services in kind or bonus awards will vary, and dilution may occur. The Company does not issue options or warrants.
Market Price of and Dividends on the Registrants Common Equity and Related Stockholder Matters
Our common stock is quoted on the OTC Markets Group, Inc. - OTC Pink No Information (Pink Sheets) and trades under the symbol OCFN.PK. As described below, there have been minimal recent public quotations of our common stock on the Pink Sheets. There has never been an active public market for our common stock, and the shares are being offered in anticipation of the development of a secondary trading market. However, on: (i) March 1, 2012 there was a reported sale of 10,000 shares for $0.02 per share, (ii) February 28, 2012 there was a reported sale of 2,225 shares for $0.02 per share, (iii) February 17, 2012 there was a reported sale of 200 shares for $0.02 per share, (iv) February 10, 2012 there was a reported sale of 2,000 shares for $0.049 per share, and (v) February 9, 2012 there was a reported sale of 15,225 shares for $0.053 per share. These sales were the only sales over the past month and do not reflect the emergence of an active market in our common stock. On March 12, 2012, the closing bid price of our common stock was $0.0055.
The following table reflects the high and low bid information for our common stock for the period indicated. The bid information was obtained from the OTC Markets Group, Inc. and reflects inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.
Quarter Ended | Bid High | Bid Low |
Fiscal Year 2011 | ||
December 31, 2011 | $0.05 | $0.005 |
September 30, 2011 | $0.10 | $0.031 |
June 30, 2011 | $0.07 | $0.0023 |
March 31, 2011 | $0.013 | $0.0018 |
Fiscal Year 2010 | ||
December 31, 2010 | $0.015 | $0.005 |
September 30, 2010 | $0.014 | $0.0015 |
June 30, 2010 | $0.014 | $0.005 |
March 31, 2010 | $0.01 | $0.006 |
As of March 12, 2012, there were approximately 32,885,900 shares of common stock issued and outstanding and there were 2489 holders of record of our common stock.
We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
Directors, Executive Officers, Promoters and Control Persons
The following table sets forth the name, age and position of each person who is a director or executive as of the filing of this registration statement.
Name | Age | Positions and Offices to be Held |
|
|
|
Jon S. Cummings, IV | 41 | Director, Chief Executive Officer, Chief Financial Officer |
Clarence Williams | 67 | Director |
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board. All officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified. There are no agreements with respect to the election of Directors. We have not compensated our Directors for service on our Board of Directors, any committee thereof, or reimbursed for expenses incurred for attendance at meetings of our Board of Directors and/or any committee of our Board of Directors. Our Board of Directors appoints officers annually and each Executive Officer serves at the discretion of our Board of Directors. We do not have any standing committees. Our Board of Directors may in the future determine to pay Directors fees and reimburse Directors for expenses related to their activities.
Jon S. Cummings, IV is the Companys Chief Executive Officer, President, Chief Financial Officer and member of the Board of Directors. Jon is responsible for the day to day operation of the Company including communications to employ additional personnel in the future, such as real estate analyst, surveyors, licensed appraiser, and real estate brokers. Additionally, he is responsible to oversee the internal underwriting department to achieve the maximum value in the origination and lending of the investment proceeds. Jon graduated from Ohio University in 1994 with BS dual major in Pre-Law & History. Jon spent the majority of is post gradated years working for his fathers company in the construction management and budgeting in the commercial real estate development and residential building industry. Jon had overseen an estimated one hundred plus million dollars of projects both internationally and domestically.
Clarence Williams is a member of the Companys Board of Directors. Mr. Williams has 45 years of demonstrated experience in business administration and management. He retired from the City of Dayton as Chief Executive to the Dayton City Council. During that tenure of 32 years of service, his responsibilities included the review and the assessment of the city's 800 million dollar general and enterprise fund budgets. Mr. Williams has facilitated workshops and training seminars across the country and in Russia, Israel, Zimbabwe, Zambia, Liberia, and South Africa. He has served on numerous boards for government entities and non-profit organizations. Mr. Williams has a Bachelor of Science degree in Business Management and a MBA graduate degree. He was selected as a George Washington University Fellow; Elliott School of International Affairs and focused on international global economic development opportunities. He was certified at the Senior Executive Institute, University of Virginia.
Employment Agreements
We have not entered into employment agreements with any of our executive officers.
Board of Directors
Our Board of Directors currently consists of two (2) members. Our Bylaws provide that our board shall consist of not less than one (1) with a maximum as determined by the board or the stockholders. The terms of directors expire at the next annual shareholders meeting unless their terms are staggered as permitted in our bylaws. Each shareholder is entitled to vote the number of shares owned by him for as many persons as there are directors to be elected. Shareholders do not have a right to cumulate their votes for directors.
Director Compensation
Currently, we do not pay our directors any cash or other compensation. In the future, we may consider appropriate forms of compensation, including the issuance of common stock and stock options as compensation.
29
Committees
To date, we have not established a compensation committee, nominating committee or an audit committee.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the registrant's officers and directors, and persons who own more than 10% of a registered class of the registrant's equity securities, to file reports of ownership and changes in ownership of equity securities of the Registrant with the Securities and Exchange Commission. Officers, directors and greater-than 10% shareholders are required by the Securities and Exchange Commission regulations to furnish the registrant with copies of all Section 16(a) forms that they file.
Executive Compensation
The following table sets forth the compensation on an annualized basis for fiscal years ending December 31, 2011 and 2010 that will be earned by our named executive officers.
SUMMARY COMPENSATION TABLE | |||||||||
Name and principal position | Year | Salary | Bonus | Stock Awards | Option Awards | Non-Equity Incentive Plan Compensation | Nonqualified Deferred Compensation Earnings | All Other Compensation | Total |
Jon S. Cummings, IV, CEO | 2011 |
|
|
|
|
|
|
|
|
2010 |
|
|
|
|
|
|
|
|
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2011 | |||||||||
OPTION AWARDS | STOCK AWARDS | ||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Jon S. Cummings, IV, CEO | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, as of March 12, 2012 with respect to the beneficial ownership of the outstanding common stock by (i) any holder of more than five percent, (ii) each of our executive officers and directors, and (iii) our directors and executive officers as a group.
Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership(1) | Percent of Class(1) |
| Common stock | Common stock |
Jon S. Cummings, IV c/o Omega Commercial Finance Corporation 1000 5th Street, Suite 200, Miami, Florida 33139 | 3,275,100 | 10% |
Clarence Williams c/o Omega Commercial Finance Corporation 1000 5th Street, Suite 200, Miami, Florida 33139 | 25,000 | Less than 1% |
Omega Capital Funding LLC | 12,000,000 | 38% |
Flavio Zuanier | 2,000,000 | 6% |
Directors and Officers as a group (2 persons) | 3,300,100 | 10% |
(1) Based on an aggregate of 32,885,900 shares of common stock outstanding as of March 12, 2012.
30
Certain Relationships and Related Transactions, and Corporate Governance
In October 2011, we issued 15,000,000 shares of common stock to our CEO in exchange for $750,000 in services rendered, valued at the closing stock price at the date of issuance. In February 2012 the CEO returned to us for retirement 13,000,000 of said shares.
As previously disclosed herein, on September 14, 2007, we entered into a Stock Purchase Agreement and Share Exchange with Omega Capital Funding LLC, a Florida limited liability company pursuant to which we acquired 100% ownership of Omega Capital Funding as previously disclosed in our Form 8-K filed on September 20, 2007 as subsequently amended by our Form 8-K/A filed on October 29, 2007. Omega Capital Funding is controlled by our CEO.
Where You Can Find Additional Information
We have filed a registration statement on Form S-1 under the Securities Act of 1933, as amended, relating to the shares of common stock being offered by this prospectus, and reference is made to such registration statement. This prospectus constitutes the prospectus of Omega Commercial Finance Corporation filed as part of the registration statement, and it does not contain all information in the registration statement, as certain portions have been omitted in accordance with the rules and regulations of the Securities and Exchange Commission.
In addition, after the effective date of this prospectus, we will be required to file annual, quarterly, and current reports, or other information with the SEC as provided by the Securities Exchange Act. You may read and copy any reports, statements or other information we file at the SEC's public reference facility maintained by the SEC at 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. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference room. Our SEC filings are also available to the public through the SEC's Internet website at http://www.sec.gov.
Disclosure of Commission Position on Indemnification for Securities Act Liabilities
Neither our Articles of Incorporation nor Bylaws prevent us from indemnifying our officers, directors and agents to the extent permitted under the Wyoming Business Corporation Act (WBCA). The WBCA, provides that a corporation shall indemnify any director, officer, employee or agent of a corporation against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with any the defense to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding, or in defense of any claim, issue or matter therein.
The WBCA provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (a) is not liable pursuant to the WBCA; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
The WBCA provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he: (a) is not liable pursuant to the WBCA; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals there from, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
The WBCA provides that except as otherwise provided by specific statute, no director or officer of a corporation is individually liable for a debt or liability of the corporation, unless the director or officer acts as the alter ego of the corporation. The court as a matter of law must determine the question of whether a director or officer acts as the alter ego of a corporation.
31
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred 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, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed hereby in the Securities Act and we will be governed by the final adjudication of such issue.
Legal Matters
The validity of the common stock offered hereby will be passed upon by Legal & Compliance, LLC, West Palm Beach, FL.
Experts
The financial statements appearing in this prospectus and registration statement on Form S-1 have been audited by Bongiovanni & Associates, CPAs, independent certified public accountants, as set forth in their report thereon appearing elsewhere in this prospectus and in the registration statement on Form S-1, and such report is included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing.
Interests 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 subsidiaries.
Transfer Agent
Our transfer agent is PacWest Transfer.
Financial Statements
32
FL Office
7951 SW 6th St., Suite. 216
Plantation, FL 33324
Tel: 954-424-2345
Fax: 954-424-2230
NC Office
19720 Jetton Road, 3rd Floor
Cornelius, NC 28031
Tel: 704-892-8733
Fax: 704-892-6487
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
Omega Commercial Finance Corporation
We have audited the accompanying balance sheets of Omega Commercial Finance Corporation as of December 31, 2011 and 2010, and the related statements of operations, stockholders equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys 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 Omega Commercial Finance Corporation as of December 31, 2011 and 2010 and the results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has suffered an operating loss, has an accumulated stockholders deficit, has negative working capital, has a retained deficit, and has yet to generate an internal cash flow that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are described in Note 8. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Bongiovanni & Associates, CPAs
Bongiovanni & Associates, CPAs
Cornelius, North Carolina
February 20, 2012
www.bai-cpa.com
33
CONTENTS | |
|
|
BALANCE SHEETS | 1 |
STATEMENTS OF OPERATIONS | 2 |
STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT) | 3 |
STATEMENTS OF CASH FLOWS | 4 |
NOTES TO FINANCIAL STATEMENTS | 5-10 |
|
|
34
OMEGA COMMERCIAL FINANCE CORPORATION | |||||
BALANCE SHEETS | |||||
AS OF DECEMBER 31, 2011 AND 2010 | |||||
|
|
|
|
|
|
| 12/31/2011 |
| 12/31/2010 | ||
ASSETS |
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
Cash | $ | 2,663 |
| $ | 37,973 |
TOTAL CURRENT ASSETS |
| 2,663 |
|
| 37,973 |
|
|
|
|
|
|
TOTAL ASSETS | $ | 2,663 |
| $ | 37,973 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
Accounts payable and accrued expenses | $ | 7,500 |
| $ | 7,500 |
Judgments payable |
| 2,300,945 |
|
| 2,300,945 |
TOTAL CURRENT LIABILITIES |
| 2,308,445 |
|
| 2,308,445 |
|
|
|
|
|
|
STOCKHOLDERS' EQUITY (DEFICIT) |
|
|
|
|
|
Common stock ($.01 par value, 100,000,000 shares authorized; 43,885,900 and 28,885,900 common shares issued and outstanding at December 31, 2011 and 2010, respectively) |
| 438,859 |
|
| 288,859 |
Preferred stock ($5.00 par value, 10,000,000 shares authorized; no preferred shares issued and outstanding at December 31, 2011 and 2010, respectively) |
| - |
|
| - |
Additional paid in capital |
| 2,507,473 |
|
| 1,907,473 |
Retained (deficit) |
| (5,252,114) |
|
| (4,466,804) |
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) |
| (2,305,782) |
|
| (2,270,472) |
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ | 2,663 |
| $ | 37,973 |
The accompanying notes are an integral part of these financial statements
F-1
OMEGA COMMERCIAL FINANCE CORPORATION | |||||
STATEMENTS OF OPERATIONS | |||||
FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 | |||||
|
|
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|
|
|
| For the Years | ||||
| Ended December 31, | ||||
| 2011 |
| 2010 | ||
REVENUES: |
|
|
|
|
|
Earned commissions | $ | 347,150 |
| $ | 99,500 |
Cost of revenues |
| (234,704) |
|
| (47,083) |
Gross profit |
| 112,446 |
|
| 52,417 |
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
|
Auto |
| 16,034 |
|
| 1,349 |
Labor |
| 49,383 |
|
| 1,143 |
Services received from officer in exchange for issuance of shares |
| 750,000 |
|
| - |
Professional fees |
| 15,000 |
|
| - |
Directors' fees |
| 7,847 |
|
| - |
Dues and subscriptions |
| 6,033 |
|
| - |
Rent |
| 10,001 |
|
| 5,333 |
Other selling, general and administrative expenses |
| 43,458 |
|
| 10,369 |
Total expenses |
| 897,756 |
|
| 18,194 |
|
|
|
|
|
|
Income (loss) from operations | $ | (785,310) |
| $ | 34,223 |
|
|
|
|
|
|
Provision for income taxes |
| - |
|
| - |
|
|
|
|
|
|
NET INCOME (LOSS) | $ | (785,310) |
| $ | 34,223 |
|
|
|
|
|
|
Basic and fully diluted net income (loss) per common share: |
| ($0.02) |
|
| ** |
|
|
|
|
|
|
Weighted average common shares outstanding |
| 36,385,900 |
|
| 28,885,900 |
** Less than $.01
The accompanying notes are an integral part of these financial statements
F-2
OMEGA COMMERICAL FINANCE CORPORATION | |||||||||||||
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) | |||||||||||||
FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 | |||||||||||||
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| Additional |
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|
|
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| |
| Common Stock |
| Paid-in |
| Retained |
|
| ||||||
| Shares |
| Amount |
| Capital |
| (Deficit) |
| Total | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, January 1, 2010 | 28,885,900 |
| $ | 288,859 |
| $ | 1,907,473 |
| $ | (4,501,027) |
| $ | (2,304,695) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the year ended December 31, 2010 | - |
|
| - |
|
| - |
|
| 34,223 |
|
| 34,223 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2010 | 28,885,900 |
| $ | 288,859 |
| $ | 1,907,473 |
| $ | (4,466,804) |
| $ | (2,270,472) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares to officer for services | 15,000,000 |
| $ | 150,000 |
| $ | 600,000 |
| $ | - |
| $ | 750,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year ended December 31, 2011 | - |
|
| - |
|
| - |
|
| (785,310) |
|
| (785,310) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2011 | 43,885,900 |
| $ | 438,859 |
| $ | 2,507,473 |
| $ | (5,252,114) |
| $ | (2,305,782) |
The accompanying notes are an integral part of these financial statements
F-3
OMAGE COMMERICAL FINANCE CORPORATION | |||||
STATEMENTS OF CASH FLOWS | |||||
FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010 | |||||
|
|
|
|
|
|
| 2011 |
| 2010 | ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
Net income (loss) | $ | (785,310) |
| $ | 34,223 |
Adjustments to reconcile net (loss) to net cash provided by operations: |
|
|
|
|
|
Issuance of common shares to officer for services |
| 750,000 |
|
| - |
Increase (decrease) in operating liabilities: |
|
|
|
|
|
Accounts payable and accrued expenses |
| - |
|
| 3,750 |
NET CASH PROVIDED BY OPERATING ACTIVITIES |
| (35,310) |
|
| 37,973 |
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
| (35,310) |
|
| 37,973 |
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, |
|
|
|
|
|
BEGINNING OF THE YEAR |
| 37,973 |
|
| - |
END OF THE YEAR | $ | 2,663 |
| $ | 37,973 |
The accompanying notes are an integral part of these financial statements
F-4
OMEGA COMMERCIAL FINANCE CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 2011 and 2010
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity
Omega Commercial Finance Corporation (formerly known as DOL Resources, Inc.) (the Company) is a commercial real estate financing company that also provides asset backed lending services located in the Miami, Florida area. The Company was incorporated in the State of Wyoming on November 6, 1973.
Basis of Presentation
The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) under the accrual basis of accounting.
Managements Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The financial statements above reflect all of the costs of doing business.
Deferred Taxes
The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.
Cash and Cash Equivalents - For purposes of the Statements of Cash Flows, the Company considers highly liquid investments with an original maturity of three months or less to be cash equivalents.
Revenue Recognition The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when services are realized or realizable and earned less estimated future doubtful accounts. The Company considers revenue realized or realizable and earned when all of the following criteria are met:
(i)
persuasive evidence of an arrangement exists,
(ii)
the services have been rendered and all required milestones achieved,
(iii)
the sales price is fixed or determinable, and
(iv)
collectability is reasonably assured.
Specifically, the Company is primarily engaged in the sourcing of second- and third-tier financing for commercial development and construction. Revenues are generated from fixed non-refundable processing fees associated with the contractual agreement. Revenues are recorded at the time each contract is signed and fees remitted.
F-5
The fees are non-refundable and fixed, which is unconditionally earned and is not contingent on success factors. The Company recognizes revenues as amounts become billable in accordance with contract terms. These revenues based on contractual agreement with the Company are recognized as the contracts are signed and the fees are received, and amounts are earned in accordance with the Securities and Exchange Commission (the SEC) Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements (SAB 101), as amended by SAB No. 104, Revenue Recognition (SAB 104). The Company considers amounts to be earned once evidence of an arrangement has been obtained, the contract signed, and the processing fees remitted.
Comprehensive Income (Loss) - The Company reports comprehensive income and its components following guidance set forth by section 220-10 of the FASB Accounting Standards Codification which establishes standards for the reporting and display of comprehensive income and its components in the financial statements. There were no items of comprehensive income (loss) applicable to the Company during the periods covered in the financial statements.
Income (Loss) Per Share - Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net income (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 each period. There were no potentially dilutive shares outstanding as of December 31, 2011 and 2010.
Risk and Uncertainties - The Company is subject to risks common to companies in the service industry, including, but not limited to, litigation, development of new technological innovations and dependence on key personnel.
Stock-Based Compensation- The Company accounts for stock-based compensation using the fair value method following the guidance set forth in section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. During the year ended December 31, 2011, the Company recorded $750,000 in compensation expense based on the fair value of services rendered in exchange for common shares issued by the Companys officer. These approximated the fair value of the shares at the dates of issuances in the opinion of management.
Advertising Costs - Advertising costs are expensed as incurred. The Company does not incur any direct-response advertising costs.
Fair Value for Financial Assets and Financial Liabilities- The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (Paragraph 820-10-35-37) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
F-6
Level 1 Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2 Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3 Pricing inputs that are generally observable inputs and not corroborated by market data.
Fair Value for Financial Assets and Financial Liabilities (Cont.)- The carrying amounts of the Companys financial assets and liabilities, such as cash and accounts payable approximate their fair values because of the short maturity of these instruments.
The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value at December 31, 2011 and 2010 nor gains or losses are reported in the statement of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held at the reporting date for the for the years ended December 31, 2011 and 2010.
Recent Accounting Pronouncements - The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
In July 2010, the FASB amended the requirements for Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. As a result of these amendments, an entity is required to disaggregate by portfolio segment or class certain existing disclosures and provide certain new disclosures about its financing receivables and related allowance for credit losses. The new disclosures as of the end of the reporting period are effective for the fiscal year ending December 31, 2010, while the disclosures about activity that occurs during a reporting period are effective for the first fiscal quarter of 2011. The adoption of this guidance will not impact the Companys consolidated results of operations or financial position.
In January 2010, the FASB issued authoritative guidance regarding fair value measures and disclosures. The guidance requires disclosure of significant transfers between level 1 and level 2 fair value measurements along with the reason for the transfer. An entity must also separately report purchases, sales, issuances and settlements within the level 3 fair value roll forward. The guidance further provides clarification of the level of disaggregation to be used within the fair value measurement disclosures for each class of assets and liabilities and clarified the disclosures required for the valuation techniques and inputs used to measure level 2 or level 3 fair value measurements. This new authoritative guidance is effective for the Company in fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The adoption of this guidance will not impact the Companys consolidated results of operations or financial position.
In September 2011, the FASB issued ASU 2011-08 which provides an entity the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test for goodwill impairment. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. The revised standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company does not expect that the adoption of this standard will have a material impact on the Companys results of operations, cash flows or financial condition.
F-7
In December 2011, FASB issued Accounting Standards Update 2011-11, Balance Sheet - Disclosures about Offsetting Assets and Liabilities to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures, as such, the Company does not expect that the adoption of this standard will have a material impact on the Companys results of operations, cash flows or financial condition.
NOTE 2
INCOME TAXES
At December 31, 2011, the Company had federal and state net operating loss carry forwards of approximately $5,200,000 that expire in various years through the year 2024.
Due to operating losses, there is no provision for current federal or state income taxes for the years ended December 31, 2011 and 2010.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes.
The Companys deferred tax asset at December 31, 2011 consists of net operating loss carry forwards calculated using federal and state effective tax rates equating to approximately $1,768,000 less a valuation allowance in the amount of approximately $1,768,000. Because of the Companys lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance. The valuation allowance increased (decreased) by approximately $267,000 and $(12,000) for the years ended December 31, 2011 and 2010, respectively.
The Companys total deferred tax asset as of December 31, 2011 is as follows:
Net operating loss carry forwards | $ | 1,768,000 |
Valuation allowance |
| (1,768,000) |
|
|
|
Net deferred tax asset | $ | -- |
The reconciliation of income taxes computed at the federal and state statutory income tax rate to total income taxes for the years ended December 31, 2011 and 2010 is as follows:
Income tax computed at the federal statutory rate |
| 34% |
Valuation allowance |
| (34%) |
|
|
|
Total deferred tax asset |
| 0% |
NOTE 3
CAPITAL STOCK
The Company is currently authorized to issue 100,000,000 common shares at $.01 par value per share and 10,000,000 preferred shares at $5.00 par value per share.
During the year ended December 31, 2011, the Company issued to 15,000,000 common shares to an officer of the Company in exchange for $750,000 in services rendered, valued at the closing stock price of $.05 per share at the date of issuance.
F-8
NOTE 4
LEASE COMMITMENTS AND RELATED PARTY TRANSACTIONS
The Company has a month to month lease at $563 per month with an unrelated landlord. Therefore, no future minimum lease commitment exists beyond one year.
NOTE 5
INCOME (LOSS) PER SHARE
Income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. Basic and diluted income (loss) per share was the same for the years ended December 31, 2011 and 2010.
NOTE 6
SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosures of cash flow information for the years ending December 31, 2011 and 2010 are summarized as follows:
Cash paid during the years ending December 31, 2011 and 2010 for interest and income taxes:
Income Taxes | $ | -- |
Interest | $ | -- |
NOTE 7
SEGMENT REPORTING
The Company follows paragraph 280 of the FASB Accounting Standards Codification for disclosures about segment reporting. This Statement requires companies to report information about operating segments in interim and annual financial statements. It also requires segment disclosures about products and services, geographic areas, and major customers. The Company determined that it did not have any separately reportable operating segments as of December 31, 2011 and 2010.
NOTE 8
GOING CONCERN
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a net loss in 2011, has negative cash flows from operations, has a stockholders deficit, has a retained deficit, and negative working capital. There can be no assurance that the Company will be able to obtain the substantial additional capital resources necessary to implement its business plan or that any assumptions relating to its business plan will prove to be accurate. The Company is pursuing sources of additional financing and there can be no assurance that any such financing will be available to the Company on commercially reasonable terms, or at all. Any inability to obtain additional financing will have a material adverse effect on the Company, including possibly requiring the Company to cease operations.
These factors raise substantial doubt about the ability of the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 9
JUDGMENTS PAYABLE
The Company currently has three judgments against it. Included in the accompanying balance sheets at December 31, 2011 and 2010 is $2,300,945 in the following judgments.
Sebaco Siete, S.A. v. Omega Realty Partners, LLC, et. al. 11th Judicial Circuit in and for Miami-Dade County, Florida. Case No.: 06-11204 CA 13 FJ. A default judgment against impleader defendants in the amount of $1,564,832 was filed in 2009.
F-9
Jorge Ramos v. Omega Capital Funding, LLC, et. al. in the circuit court of the 11th Judicial Circuit in and for Miami-Dade County, Florida. Case No.: 07-38288 CA 09. A final summary judgment was filed in 2009 in the amount of $85,000.
Subsequent to year-end, the Company received a judgment against it from a case originating in prior years as follows:
Luxury Home LLC v. Omega et. al. Case No.: CV2011-004554. A default judgment in the amount of $651,113 was filed in 2012 for a previous years claim.
NOTE 10 SUBSEQUENT EVENTS
Subsequent to year end, the Companys officer and Director retired 13,000,000 of his 15,000,000 common shares to the Companys treasury.
As of February 10, 2012, the Company issued 2,000,000 shares of common stock to Flavio Zuanier in connection with a strategic alliance which gave this individual a vested interest in the Company; the shares were valued at par value .01. Separately, the strategic alliance entity, Gardens VE Limited transferred 49% interest to CCRE a wholly owned subsidiary of Omega Commercial Finance Corporation representing 49% of the net book value of the strategic alliance entity, Gardens VE Limited. There were neither other expenses nor net proceeds to the company in this transaction. (Please Reference Exhibit 10.3)
Summary of The Gardens VE Limited Strategic Alliance: On February 10, 2012, CCRE, a wholly owned subsidiary of Omega Commercial Finance Corporation (Omega or the Company), entered into the Strategic Alliance Agreement (the Agreement) with Gardens VE Limited (Company No. 07071936), a British Company (Gardens), and its managing member Flavio Zuanier, whereby the parties agreed to form a strategic alliance for the acquisition and refurbishment of the La Posta Golf Club & Luxury Hotel future project. Under the Agreement, the majority owner of Gardens is responsible for the transfer of fix assets, free and clear and unencumbered into Gardens; subsequently transferring ownership interest equal to forty-nine (49%) percent in of Gardens VE Limited at no cost to CCRE. Separately, the Company offered at no cost to Flavio Zunnier 2,000,000 shares of restricted common stock as an incentive to form this strategic alliance with CCRE due to the fact its unproven in the commercial real estate development sector, same as for the parent Company.
F-10
Part II - Information Not Required in Prospectus
Item 13. Other Expenses of Issuance and Distribution
The expenses to be paid by the Registrant are as follows. All amounts, other than the SEC registration fee, are estimates.
| Amount to | |
| Be Paid | |
SEC registration fee | $ |
|
Legal fees and expenses | $ |
|
Accounting fees and expenses | $ |
|
Miscellaneous | $ |
|
Total | $ |
|
Item 14. Indemnification of Directors and Officers
Neither our Articles of Incorporation nor Bylaws prevent us from indemnifying our officers, directors and agents to the extent permitted under the Wyoming Business Corporation Act (WBCA). The WBCA, provides that a corporation shall indemnify any director, officer, employee or agent of a corporation against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with any the defense to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding, or in defense of any claim, issue or matter therein.
The WBCA provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (a) is not liable pursuant to the WBCA; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
The WBCA provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he: (a) is not liable pursuant to the WBCA; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals there from, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
The WBCA provides that except as otherwise provided by specific statute, no director or officer of a corporation is individually liable for a debt or liability of the corporation, unless the director or officer acts as the alter ego of the corporation. The court as a matter of law must determine the question of whether a director or officer acts as the alter ego of a corporation.
45
Item 15. Recent Sales of Unregistered Securities
The following issuances of shares were exempt from registration under section 4(2) or 4(6) of the Securities Act and/or Regulation D promulgated there under:
In October 2011, we issued 15,000,000 shares of common stock to our CEO in exchange for $750,000 in services rendered, valued at the closing stock price at the date of issuance. In February 2012 the CEO returned to us for retirement 13,000,000 of said shares.
In February 2012, we issued 2,000,000 shares of common stock to Flavio Zuanier as an incentive to form the Gardens VE Strategic Alliance with CCRE a wholly owned subsidiary of the Company.
Item 16. Exhibits and Financial Statement Schedules
Item 17. Undertakings
1. The undersigned registrant hereby undertakes to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement.
(iii) To 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.
Provided, however, that paragraphs (B)(1)(i) and (B)(1)(ii) of this section do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the registration statement.
46
2. The undersigned registrant hereby undertakes that, for the purpose of determining any liability under the Securities Act of 1933, as amended, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
3. The undersigned registrant hereby undertakes to remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering.
4. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrants annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plans annual report pursuant to Section 15(d) of the Exchange Act) 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 that time shall be deemed to be the initial bona fide offering thereof.
5. The undersigned registrant hereby undertakes that, for the purposes of determining liability to any purchaser:
(i) If the registrant is relying on Rule 430B:
(A) For purposes of determining liability under the Securities Act of 1933, each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and
(B) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date; or
(ii) If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
47
6. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the undersigned registrant according the foregoing provisions, or otherwise, the undersigned registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred 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 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, as amended, and will be governed by the final adjudication of such issue.
Signatures
In accordance with the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Miami, State of Florida, on May 21, 2012.
Omega Commercial Finance Corporation:
By:/s/ Jon S. Cummings, IV
Name: Jon S. Cummings, IV
Title: Chief Executive Officer
Date: May 21, 2012
In accordance with the Securities and Exchange Act, this Prospectus has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Jon S. Cummings, IV
Name: Jon S. Cummings, IV
Title: CFO, Director
Date: May 21, 2012
By: /s/ Clarence Williams
Name: Clarence Williams
Title: Director
Date: May 21, 2012
48
Exhibit 3.1
Exhibit 3.2
Exhibit 3.3
Exhibit 3.4
____________________
AMENDED
BY-LAWS OF
OMEGA COMMERCIAL FINANCE CORPORATION
____________________
ARTICLE I
The Corporation
Section 1. Name. The legal name of this corporation (hereinafter called the Corporation) is Omega Commercial Finance Corporation.
Section 2. Offices. The Corporation shall have its principal office in the State of Wyoming. The Corporation may also have offices at such other places within and without the United States as the Board of Directors may from time to time appoint or the business of the Corporation may require.
Section 3. Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Wyoming." One or more duplicate dies for impressing such seal may be kept and used.
ARTICLE II
Meetings of Shareholders
Section 1. Place of Meetings. All meetings of the shareholders shall be held at the principal office of the Corporation in the State of Wyoming or at such other place, within or without the State of Wyoming, as is fixed in the notice of the meeting.
Section 2. Annual Meeting. An annual meeting of the shareholders of the Corporation for the election of directors and the transaction of such other business as may properly come before the meeting shall be held on the 1st Monday in the month of March in each year if not a legal holiday, and if a legal holiday, then on the next secular day. If for any reason any annual meeting shall not be held at the time herein specified, the same may be held at any time thereafter upon notice, as herein provided, or the business thereof may be transacted at any special meeting called for the purpose.
Section 3. Special Meetings. Special meetings of shareholders may be called by the President whenever he deems it necessary or advisable. A special meeting of the shareholders shall be called by the President whenever so directed in writing by a majority of the entire Board of Directors or whenever the holders of not less than one-tenth (1/10) of the number of shares of the capital stock of the Corporation entitled to vote at such meeting shall, in writing, request the same.
Section 4. Notice of Meetings. Notice of the time and place of the annual and of each special meeting of the shareholders shall be given to each of the shareholders entitled to vote at such meeting by mailing the same in a postage prepaid wrapper addressed to each such shareholders at his address as it appears on the books of the Corporation, or by delivering the same personally to any such shareholder in lieu of such mailing, at least ten (10) and not more than fifty (50) days prior to each meeting. Meetings may be held without notice if all of the shareholders entitled to vote thereat are present in person or by proxy, or if notice thereof is waived by all such shareholders not present in person or by proxy, before or after the meeting. Notice by mail shall be deemed to be given when deposited, with postage thereon prepaid, in the United States mail. If a meeting is adjourned to another time, not more than thirty (30) days hence, or to another place, and if an announcement of the adjourned time or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the Board of Directors, after adjournment fix a new record date for the adjourned meeting. Notice of the annual and each special meeting of the shareholders shall indicate that it is being issued by or at the direction of the person or persons calling the meeting, and shall state the name and capacity of each such person. Notice of each special meeting shall also state the purpose or purposes for which it has been called. Neither the business to be transacted at nor the purpose of the annual or any special meeting of the shareholders need be specified in any written waiver of notice.
Section 5. Record Date for Shareholders. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or other distribution or the allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than fifty (50) days nor less than ten (10) days before the date of such meeting, nor more than fifty (50) days prior to any other action. If no record date is fixed, the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice is given, or, if no notice is given, the day on which the meeting is held; the record date for determining shareholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent is expressed; and the record date for determining shareholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of shareholders of record entitled to notice of or to vote at any meeting of shareholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
Section 6. Proxy Representation. Every shareholder may authorize another person or persons to act for him by proxy in all matters in which a shareholder is entitled to participate, whether by waiving notice of any meeting, voting or participating at a meeting, or expressing consent or dissent without a meeting. Every proxy must be signed by the shareholder or by his attorney-in-fact. No proxy shall be voted or acted upon after eleven (11) months from its date unless such proxy provides for a longer period. Every proxy shall be revocable at the pleasure of the shareholder executing it, except as otherwise provided by Wyoming Corporation Law.
Section 7. Voting at Shareholders' Meetings. Each share of stock shall entitle the holder thereof to one vote. In the election of directors, a plurality of the votes cast shall elect. Any other action shall be authorized by a majority of the votes cast except Wyoming Corporation Law prescribes a different percentage of votes or a different exercise of voting power. In the election of directors, and for any other action, voting need not be by ballot.
Section 8. Quorum and Adjournment. A majority of the shares of the stock of the Corporation outstanding and entitled to vote thereat shall be requisite and shall constitute a quorum at any meeting of the shareholders. When a quorum is once present to organize a meeting, it shall not be broken by the subsequent withdrawal of any shareholders. If at any meeting of the shareholders there shall be less than a quorum so present, the shareholders present in person or by proxy and entitled to vote thereat, may adjourn the meeting from time to time until a quorum shall be present, but no business shall be transacted at any such adjourned meeting except such as might have been lawfully transacted had the meeting not adjourned.
Section 9. List of Shareholders. The officer who has charge of the stock ledger of the Corporation shall prepare, make and certify, at least ten (10) days before every meeting of shareholders, a complete list of the shareholders, as of the record date fixed for such meeting, arranged in alphabetical order, and showing the address of each shareholder and the number of shares registered in the name of each shareholder. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city or other municipality or community where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any shareholder who is present. If the right to vote at any meeting is challenged, the inspectors of election, if any, or the person presiding thereat, shall require such list of shareholders to be produced as evidence of the right of the persons challenged to vote at such meeting, and all persons who appear from such list to be shareholders entitled to vote thereat may vote at such meeting.
Section 10. Inspectors of Election. The Board of Directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election to act at the meeting or any adjournment thereof. If an inspector or inspectors are not appointed, the person presiding at the meeting may, and at the request of any shareholder entitled to vote thereat shall, appoint one or more inspectors. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the Board of Directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, if any, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of the inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. On request of the person presiding at the meeting or any shareholder entitled to vote thereat, the inspector or inspectors, if any, shall make a report in writing of any challenge, question or matter determined by him or them and execute a certificate of any fact found by him or them. Any report or certificate made by the inspector or inspectors shall be prima facie evidence of the facts stated and of the vote as certified by them.
Section 11. Action of the Shareholders Without Meetings. Any action which may be taken at any annual or special meeting of the shareholders may be taken without a meeting on written consent, setting forth the action so taken, signed by the holders of all outstanding shares entitled to vote thereon. Written consent thus given by the holders of all outstanding shares entitled to vote shall have the same effect as a unanimous vote of the shareholders.
ARTICLE III
Directors
Section 1. Number of Directors. The number of directors which shall constitute the entire Board of Directors shall be at least one (1). Subject to the foregoing limitation, such number may be fixed from time to time by action of a majority of the entire Board of Directors or of the shareholders at an annual or special meeting, or, if the number of directors is not so fixed, the number shall be one (1) or shall be equal to the number of shareholders, but not less than one (1). No decrease in the number of directors shall shorten the term of any incumbent director.
Section 2. Election and Term. The initial Board of Directors shall be elected by the incorporator and each initial director so elected shall hold office until the first annual meeting of shareholders and until his successor has been elected and qualified. Thereafter, each director who is elected at an annual meeting of shareholders, and each director who is elected in the interim to fill a vacancy or a newly created directorship, shall hold office until the next annual meeting of shareholders and until his successor has been elected and qualified.
Section 3. Filling Vacancies, Resignation and Removal. Any director may tender his resignation at any time. Any director or the entire Board of Directors may be removed, with or without cause, by vote of the shareholders. In the interim between annual meetings of shareholders or special meetings of shareholders called for the election of directors or for the removal of one or more directors and for the filling of any vacancy in that connection, newly created directorships and any vacancies in the Board of Directors, including unfilled vacancies resulting from the resignation or removal of directors for cause or without cause, may be filled by the vote of a majority of the remaining directors then in office, although less than a quorum, or by the sole remaining director.
Section 4. Qualifications and Powers. Each director shall be at least eighteen (18) years of age. A director need not be a shareholder, a citizen of the United States or a resident of the State of Wyoming. The business of the Corporation shall be managed by the Board of Directors, subject to the provisions of the Certificate of Incorporation. In addition to the powers and authorities by these By-Laws expressly conferred upon it, the Board may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws directed or required to be exercised or done exclusively by the shareholders.
Section 5. Regular and Special Meetings of the Board. The Board of Directors may hold its meetings, whether regular or special, either within or without the State of Wyoming. The newly elected Board may meet at such place and time as shall be fixed by the vote of the shareholders at the annual meeting, for the purpose of organization or otherwise, and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a majority of the entire Board shall be present; or they may meet at such place and time as shall be fixed by the consent in writing of all directors. Regular meetings of the Board may be held with or without notice at such time and place as shall from time to time be determined by resolution of the Board. Whenever the time or place of regular meetings of the Board shall have been determined by resolution of the Board, no regular meetings shall be held pursuant to any resolution of the Board altering or modifying its previous resolution relating to the time or place of the holding of regular meetings, without first giving at least three (3) days written notice to each director, either personally or by telegram, or at least five (5) days written notice to each director by mail, of the substance and effect of such new resolution relating to the time and place at which regular meetings of the Board may thereafter be held without notice. Special meetings of the Board shall be held whenever called by the President, Vice-President, the Secretary or any director in writing. Notice of each special meeting of the Board shall be delivered personally to each director or sent by telegraph to his residence or usual place of business at least three (3) days before the meeting, or mailed to him to his residence or usual place of business at least five (5) days before the meeting. Meetings of the Board, whether regular or special, may be held at any time and place, and for any purpose, without notice, when all the directors are present or when all directors not present shall, in writing, waive notice of and consent to the holding of such meeting, which waiver and consent may be given after the holding of such meeting. All or any of the directors may waive notice of any meeting and the presence of a director at any meeting of the Board shall be deemed a waiver of notice thereof by him. A notice, or waiver of notice, need not specify the purpose or purposes of any regular or special meeting of the Board.
Section 6. Quorum and Action. A majority of the entire Board of Directors shall constitute a quorum except that when the entire Board consists of one director, then one director shall constitute a quorum, and except that when a vacancy or vacancies prevents such majority, a majority of the directors in office shall constitute a quorum. A majority of the directors present, whether or not they constitute a quorum, may adjourn a meeting to another time and place. Except as herein otherwise provided, and except as otherwise provided by the Wyoming Corporation Law, the vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board.
Section 7. Telephonic Meetings. Any member or members of the Board of Directors, or of any committee designated by the Board, may participate in a meeting of the Board, or any such committee, as the case may be, by means of conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time, and participation in a meeting by such means shall constitute presence in person at such meeting.
Section 8. Action Without a Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee.
Section 9. Compensation of Directors. By resolution of the Board of Directors, the directors may be paid their expenses, if any, for attendance at each regular or special meeting of the Board or of any committee designated by the Board and may be paid a fixed sum for attendance at such meeting, or a stated salary as director, or both. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor; provided, however, that directors who are also salaried officers shall not receive fees or salaries as directors.
ARTICLE IV
Committees
Section 1. In General. The Board of Directors may, by resolution or resolutions passed by the affirmative vote therefore of a majority of the entire Board, designate an Executive Committee and such other committees as the Board may from time to time determine, each to consist of one (1) or more directors, and each of which, to the extent provided in the resolution or in the Certificate of Incorporation or in the By-Laws, shall have all the powers of the Board, except that no such Committee shall have power to fill vacancies in the Board, or to change the membership of or to fill vacancies in any committee, or to make, amend, repeal or adopt By-Laws of the Corporation, or to submit to the shareholders any action that needs shareholder approval under these By-Laws or the Wyoming Corporation Law, or to fix the compensation of the directors for serving on the Board or any committee thereof, or to amend or repeal any resolution of the Board which by its terms shall not be so amendable or repealable. Each committee shall serve at the pleasure of the Board. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.
Section 2. Executive Committee. Except as otherwise limited by the Board of Directors or by these By-Laws, the Executive Committee, if so designated by the Board of Directors, shall have and may exercise, when the Board is not in session, all the powers of the Board of Directors in the management of the business and affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it. The Board shall have the power at any time to change the membership of the Executive Committee, to fill vacancies in it, or to dissolve it. The Executive Committee may make rules for the conduct of its business and may appoint such assistance as it shall from time to time deem necessary. A majority of the members of the Executive Committee, if more than a single member, shall constitute a quorum.
ARTICLE V
Officers
Section 1. Designation, Term and Vacancies. The officers of the Corporation shall be a President, one or more Vice-Presidents, a Secretary, a Treasurer, and such other officers as the Board of Directors may from time to time deem necessary. Such officers may have and perform the powers and duties usually pertaining to their respective offices, the powers and duties respectively prescribed by law and by these By-Laws, and such additional powers and duties as may from time to time be prescribed by the Board. The same person may hold any two or more offices, except that the offices of President and Secretary may not be held by the same person unless all the issued and outstanding stock of the Corporation is owned by one person, in which instance such person may hold all or any combination of offices.
The initial officers of the Corporation shall be appointed by the initial Board of Directors, each to hold office until the meeting of the Board of Directors following the first annual meeting of shareholders and until his successor has been appointed and qualified. Thereafter, the officers of the Corporation shall be appointed by the Board as soon as practicable after the election of the Board at the annual meeting of shareholders, and each officer so appointed shall hold office until the first meeting of the Board of Directors following the next annual meeting of shareholders and until his successor has been appointed and qualified. Any officer may be removed at any time, with or without cause, by the affirmative note therefor of a majority of the entire Board of Directors. All other agents and employees of the Corporation shall hold office during the pleasure of the Board of Directors. Vacancies occurring among the officers of the Corporation shall be filled by the Board of Directors. The salaries of all officers of the Corporation shall be fixed by the Board of Directors.
Section 2. President. The President shall preside at all meetings of the shareholders and at all meetings of the Board of Directors at which he may be present. Subject to the direction of the Board of Directors, he shall be the chief executive officer of the Corporation, and shall have general charge of the entire business of the Corporation. He may sign certificates of stock and sign and seal bonds, debentures, contracts or other obligations authorized by the Board, and may, without previous authority of the Board, make such contracts as the ordinary conduct of the Corporation's business requires. He shall have the usual powers and duties vested in the President of a corporation. He shall have power to select and appoint all necessary officers and employees of the Corporation, except those selected by the Board of Directors, and to remove all such officers and employees except those selected by the Board of Directors, and make new appointments to fill vacancies. He may delegate any of his powers to a Vice-President of the Corporation.
Section 3. Vice-President. A Vice-President shall have such of the President's powers and duties as the President may from time to time delegate to him, and shall have such other powers and perform such other duties as may be assigned to him by the Board of Directors. During the absence or incapacity of the President, the Vice-President, or, if there be more than one, the Vice-President having the greatest seniority in office, shall perform the duties of the President, and when so acting shall have all the powers and be subject to all the responsibilities of the office of President.
Section 4. Treasurer. The Treasurer shall have custody of such funds and securities of the Corporation as may come to his hands or be committed to his care by the Board of Directors. Whenever necessary or proper, he shall endorse on behalf of the Corporation, for collection, checks, notes, or other obligations, and shall deposit the same to the credit of the Corporation in such bank or banks or depositaries, approved by the Board of Directors as the Board of Directors or President may designate. He may sign receipts or vouchers for payments made to the Corporation, and the Board of Directors may require that such receipts or vouchers shall also be signed by some other officer to be designated by them. Whenever required by the Board of Directors, he shall render a statement of his cash accounts and such other statements respecting the affairs of the Corporation as may be required. He shall keep proper and accurate books of account. He shall perform all acts incident to the office of Treasurer, subject to the control of the Board.
Section 5. Secretary. The Secretary shall have custody of the seal of the Corporation and when required by the Board of Directors, or when any instrument shall have been signed by the President duly authorized to sign the same, or when necessary to attest any proceedings of the shareholders or directors, shall affix it to any instrument requiring the same and shall attest the same with his signature, provided that the seal may be affixed by the President or Vice-President or other officer of the Corporation to any document executed by either of them respectively on behalf of the Corporation which does not require the attestation of the Secretary. He shall attend to the giving and serving of notices of meetings. He shall have charge of such books and papers as properly belong to his office or as may be committed to his care by the Board of Directors. He shall perform such other duties as appertain to his office or as may be required by the Board of Directors.
Section 6. Delegation. In case of the absence of any officer of the Corporation, or for any other reason that the Board of Directors may deem sufficient, the Board may temporarily delegate the powers or duties, or any of them, of such officer to any other officer or to any director.
ARTICLE VI
Stock
Section 1. Certificates Representing Shares. All certificates representing shares of the capital stock of the Corporation shall be in such form not inconsistent with the Certificate of Incorporation, these By-Laws or the laws of the State of Wyoming. Such shares shall be approved by the Board of Directors, and shall be signed by the President or a Vice-President and by the Secretary or the Treasurer and shall bear the seal of the Corporation and shall not be valid unless so signed and sealed. Certificates countersigned by a duly appointed transfer agent and/or registered by a duly appointed registrar shall be deemed to be so signed and sealed whether the signatures be manual or facsimile signatures and whether the seal be a facsimile seal or any other form of seal. All certificates shall be consecutively numbered and the name of the person owning the shares represented thereby, his residence, with the number of such shares and the date of issue, shall be entered on the Corporation's books. All certificates surrendered shall be cancelled and no new certificates issued until the former certificates for the same number of shares shall have been surrendered and cancelled, except as provided for herein.
In case any officer or officers who shall have signed or whose facsimile signature or signatures shall have been affixed to any such certificate or certificates, shall cease to be such officer or officers of the Corporation before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation, and may be issued and delivered as though the person or persons who signed such certificates, or whose facsimile signature or signatures shall have been affixed thereto, had not ceased to be such officer or officers of the Corporation.
Any restriction on the transfer or registration of transfer of any shares of stock of any class or series shall be noted conspicuously on the certificate representing such shares.
Section 2. Fractional Share Interests. The Corporation, may, but shall not be required to, issue certificates for fractions of a share. If the Corporation does not issue fractions of a share, it shall: (1) arrange for the disposition of fractional interests by those entitled thereto; (2) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined; or (3) issue scrip or warrants in registered or bearer form which shall entitle the holder to receive a certificate for a full share upon the surrender of such scrip or warrants aggregating a full share. A certificate for a fractional share shall, but scrip or warrants shall not unless otherwise provided therein, entitle the holder to exercise voting rights, to receive dividends thereon, and to participate in any distribution of the assets of the Corporation in the event of liquidation. The Board of Directors may cause scrip or warrants to be issued subject to the conditions that they shall become void if not exchanged for certificates representing full shares before a specified date, or subject to the condition that the shares for which scrip or warrants are exchangeable may be sold by the Corporation and the proceeds thereof distributed to the holders of scrip or warrants, or subject to any other conditions which the Board of Directors may impose.
Section 3. Addresses of Shareholders. Every shareholder shall furnish the Corporation with an address to which notices of meetings and other notices may be served upon or mailed to him, and in default thereof notices may be addressed to him at his last known post office address.
Section 4. Stolen, Lost or Destroyed Certificates. The Board of Directors may in its sole discretion direct that a new certificate or certificates of stock be issued in place of any certificate or certificates of stock theretofore issued by the Corporation, alleged to have been stolen, lost or destroyed, and the Board of Directors when authorizing the issuance of such new certificate or certificates, may, in its discretion, and as a condition precedent thereto, require the owner of such stolen, lost or destroyed certificate or certificates or his legal representatives to give to the Corporation and to such registrar or registrars and/or transfer agent or transfer agents as may be authorized or required to countersign such new certificate or certificates, a bond in such sum as the Corporation may direct not exceeding double the value of the stock represented by the certificate alleged to have been stolen, lost or destroyed, as indemnity against any claim that may be made against them or any of them for or in respect of the shares of stock represented by the certificate alleged to have been stolen, lost or destroyed.
Section 5. Transfers of Shares. Upon compliance with all provisions restricting the transferability of shares, if any, transfers of stock shall be made only upon the books of the Corporation by the holder in person or by his attorney thereunto authorized by power of attorney duly filed with the Secretary of the Corporation or with a transfer agent or registrar, if any, upon the surrender and cancellation of the certificate or certificates for such shares properly endorsed and the payment of all taxes due thereon. The Board of Directors may appoint one or more suitable banks and/or trust companies as transfer agents and/or registrars of transfers, for facilitating transfers of any class or series of stock of the Corporation by the holders thereof under such regulations as the Board of Directors may from time to time prescribe. Upon such appointment being made all certificates of stock of such class or series thereafter issued shall be countersigned by one of such transfer agents and/or one of such registrars of transfers, and shall not be valid unless so countersigned.
ARTICLE VII
Dividends and Finance
Section 1. Dividends. The Board of Directors shall have power to fix and determine and to vary, from time to time, the amount of the working capital of the Corporation before declaring any dividends among its shareholders, and to direct and determine the use and disposition of any net profits or surplus, and to determine the date or dates for the declaration and payment of dividends and to determine the amount of any dividend, and the amount of any reserves necessary in their judgment before declaring any dividends among its shareholder, and to determine the amount of the net profits of the Corporation from time to time available for dividends.
Section 2. Fiscal Year. The fiscal year of the Corporation shall end on the last day of December in each year and shall begin on the next succeeding day, or shall be for such other period as the Board of Directors may from time to time designate with the consent of the Department of Taxation and Finance, where applicable.
ARTICLE VIII
Miscellaneous Provisions
Section 1. Stock of Other Corporations. The Board of Directors shall have the right to authorize any director, officer or other person on behalf of the Corporation to attend, act and vote at meetings of the shareholders of any corporation in which the Corporation shall hold stock, and to exercise thereat any and all rights and powers incident to the ownership of such stock, and to execute waivers of notice of such meetings and calls therefor; and authority may be given to exercise the same either on one or more designated occasions, or generally on all occasions until revoked by the Board. In the event that the Board shall fail to give such authority, such authority may be exercised by the President in person or by proxy appointed by him on behalf of the Corporation.
Any stocks or securities owned by this Corporation may, if so determined by the Board of Directors, be registered either in the name of this Corporation or in the name of any nominee or nominees appointed for that purpose by the Board of Directors.
Section 2. Books and Records. Subject to Wyoming Corporation Law, the Corporation may keep its books and accounts outside the State of Wyoming.
Section 3. Notices. Whenever any notice is required by these By-Laws to be given, personal notice is not meant unless expressly so stated, and any notice so required shall be deemed to be sufficient if given by depositing the same in a post office box in a sealed postpaid wrapper, addressed to the person entitled thereto at his last known post office address, and such notice shall be deemed to have been given on the day of such mailing.
Whenever any notice whatsoever is required to be given under the provisions of any law, or under the provisions of the Certificate of Incorporation or these By-Laws a waiver in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.
Section 4. Amendments. Except as otherwise provided herein, these By-Laws may be altered, amended or repealed and By-Laws may be made at any annual meeting of the shareholders or at any special meeting thereof if notice of the proposed alteration, amendment or repeal, or By-Law or By-Laws to be made be contained in the notice of such special meeting, by the holders of a majority of the shares of stock of the Corporation outstanding and entitled to vote thereat; or by a majority of the Board of Directors at any regular meeting of the Board of Directors, or at any special meeting of the Board of Directors, if notice of the proposed alteration, amendment or repeal, or By-Law or By-Laws to be made, be contained in the notice of such special meeting.
Exhibit 5.1
LEGAL & COMPLIANCE, LLC | |
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LAURA ANTHONY, ESQUIRE |
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| WWW.LEGALANDCOMPLIANCE.COM |
| WWW.REVERSE-MERGER.COM |
| HTTP://WWW.SECURITIES-LAW-BLOG.COM |
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| DIRECT E-MAIL: |
| LANTHONY@LEGALANDCOMPLIANCE.COM |
May __, 2012
Board of Directors
Omega Commercial Finance Corporation
1000 5th Street, Suite 200,
Miami, Florida 33139
Re: Registration Statement on Form S-1 (File No. 333-180443)
Ladies and Gentlemen:
We have acted as special securities counsel to Omega Commercial Finance Corporation, a Wyoming corporation (the Company), in connection with the registration under the Securities Act of 1933, as amended (the Act) of 1,600,000 shares of Common Stock (the Registered Shares) for resale by that certain selling shareholder (the Selling Shareholder) named in the Companys Registration Statement on Form S-1 (as amended to date, the Registration Statement).
We have examined originals or certified copies of such corporate records of the Company and other certificates and documents of officials of the Company, public officials and others as we have deemed appropriate for purposes of this letter. We have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to authentic original documents of all copies submitted to us as conformed and certified or reproduced copies.
Based on the foregoing, we are of the opinion that the Registered Shares have been validly authorized, and, when issued in accordance with the terms of the Registration Statement and the agreements between the Company and the Selling Shareholder, will be validly issued, fully paid, and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to the undersigned under the heading Legal Matters therein and in the related prospectus. In giving this consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Act.
Sincerely yours,
/s/ Laura E. Anthony
Laura E. Anthony,
For the Firm
330 CLEMATIS STREET, #217 WEST PALM BEACH, FLORIDA 33401 PHONE: 561-514-0936 FAX 561-514-0832
Exhibit 10.1
INVESTMENT AGREEMENT
INVESTMENT AGREEMENT (this AGREEMENT), dated as of March 8, 2012 by and between OMEGA COMMERCIAL FINANCE CORPORATION. a Wyoming corporation (the Company), and Dutchess Opportunity Fund, II, LP, a Delaware Limited Partnership (the Investor).
WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Investor shall invest up to twenty-five million dollars ($25,000,000) to purchase the Company's Common Stock with .01 par value per share (the Common Stock);
WHEREAS, such investments will be made in reliance upon the provisions of Section 4(2) under the Securities Act of 1933, as amended (the 1933 Act), Rule 506 of Regulation D, and the rules and regulations promulgated thereunder, and/or upon such other exemption from the registration requirements of the 1933 Act as may be available with respect to any or all of the investments in Common Stock to be made hereunder; and
WHEREAS, contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement substantially in the form attached hereto (the Registration Rights Agreement) pursuant to which the Company has agreed to provide certain registration rights under the 1933 Act, and the rules and regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, in consideration of the foregoing recitals, which shall be considered an integral part of this Agreement, the covenants and agreements set forth hereafter, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Investor hereby agree as follows:
SECTION 1.
DEFINITIONS.
As used in this Agreement, the following terms shall have the following meanings specified or indicated below, and such meanings shall be equally applicable to the singular and plural forms of such defined terms.
1933 Act shall have the meaning set forth in the recitals of this Agreement.
1934 Act shall mean the Securities Exchange Act of 1934, as it may be amended.
AAA shall have the meaning specified in Section 12.
Affiliate shall have the meaning specified in Section 5(H).
Agreement shall mean this Investment Agreement.
Articles of Incorporation shall have the meaning specified in Section 4(C).
By-laws shall have the meaning specified in Section 4(C).
Closing shall have the meaning specified in Section 2(F).
Closing Date shall have the meaning specified in Section 2(F).
Common Stock shall have the meaning set forth in the recitals of this Agreement.
Company shall have the meaning set forth in the preamble of this Agreement.
Control or Controls shall have the meaning specified in Section 5(H).
DTC shall have the meaning specified in Section 2(F).
DWAC shall have the meaning specified in Section 2(F).
Effective Date shall mean the date the SEC declares effective under the 1933 Act the Registration Statement covering the Securities.
Equity Line Transaction Documents shall mean this Agreement and the Registration Rights Agreement.
FAST shall have the meaning specified in Section 2(F).
Indemnities shall have the meaning specified in Section 11.
Indemnified Liabilities shall have the meaning specified in Section 11.
Indemnitor shall have the meaning specified in Section 11.
Investor shall have the meaning indicated in the preamble of this Agreement.
Material Adverse Effect shall have the meaning specified in Section 4(A).
Maximum Common Stock Issuance shall have the meaning specified in Section 2(G).
Open Market Adjustment Amount shall have the meaning specified in Section 2(H).
Open Market Share Purchase shall have the meaning specified in Section 2(H).
Open Period shall mean the period beginning on and including the Trading Day immediately following the Effective Date and ending on the earlier to occur of (i) the date which is thirty-six (36) months from the Effective Date; or (ii) termination of the Agreement in accordance with Section 9, below.
Pricing Period shall mean the five (5) consecutive Trading Days beginning on the Put Notice Date and ending on and including the date that is four (4) Trading Days after such Put Notice Date.
Principal Market shall mean the Nasdaq Capital Market, the NYSE Amex, the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq Global Select Market or the OTC Bulletin Board, whichever is the principal market on which the Common Stock is listed.
Prospectus shall mean the prospectus, preliminary prospectus and supplemental prospectus used in connection with the Registration Statement.
Purchase Amount shall mean the total amount being paid by the Investor on a particular Closing Date to purchase the Securities.
Purchase Price shall mean ninety-five percent (95%) of the lowest daily VWAP (as defined herein) of the Common Stock during the Pricing Period.
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Put shall have the meaning set forth in Section 2(B) hereof.
Put Amount shall have the meaning set forth in Section 2(B) hereof.
Put Notice shall mean a written notice in the form attached hereto as Exhibit C, sent to the Investor by the Company stating the Put Amount in U.S. dollars the Company intends to sell to the Investor pursuant to the terms of the Agreement and stating the current number of Shares issued and outstanding on such date.
Put Notice Date shall mean the Trading Day, as set forth below, immediately following the day on which the Investor receives a Put Notice, however a Put Notice shall be deemed delivered on (a) the Trading Day it is received by facsimile or email by the Investor if such notice is received prior to noon Eastern Time, or (b) the immediately succeeding Trading Day if it is received by facsimile or otherwise after noon Eastern Time on a Trading Day. No Put Notice may be deemed delivered on a day that is not a Trading Day.
Put Restriction shall mean the days during the Pricing Period. During this time, the Company shall not be entitled to deliver another Put Notice.
Put Shares Due shall have the meaning specified in Section 2(H).
Registration Rights Agreement shall have the meaning set forth in the recitals of this Agreement.
Registration Statement means the registration statement of the Company filed under the 1933 Act covering the resale by the Investor of the Common Stock issuable hereunder.
Related Party shall have the meaning specified in Section 5(H).
Resolutions shall have the meaning specified in Section 8(E).
SEC shall mean the U.S. Securities & Exchange Commission.
SEC Documents shall have the meaning specified in Section 4(G).
Securities shall mean the shares of Common Stock issued pursuant to the terms of the Agreement.
Shares shall mean the shares of the Companys Common Stock.
Subsequent Purchasers shall have the meaning specified in Section 2(I).
Subsidiaries shall have the meaning specified in Section 4(A).
Trading Day shall mean any day on which the Principal Market for the Common Stock is open for trading, from the hours of 9:30 am until 4:00 pm Boston Time.
VWAP shall mean the volume weighted average price during a Trading Day.
SECTION 2.
PURCHASE AND SALE OF COMMON STOCK.
(A)
PURCHASE AND SALE OF COMMON STOCK. Subject to the terms and conditions set forth herein, the Company may issue and sell to the Investor, and the Investor shall purchase from the Company, up to that number of Shares having an aggregate Purchase Price of twenty-five million dollars ($25,000,000).
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(B)
DELIVERY OF PUT NOTICES. Subject to the terms and conditions of the Equity Line Transaction Documents, and from time to time during the Open Period, the Company may, in its sole discretion, deliver a Put Notice to the Investor which states the dollar amount (designated in U.S. Dollars) (the "Put Amount") of Shares which the Company intends to sell to the Investor on a Closing Date (the "Put"). The Put Notice shall be in the form attached hereto as Exhibit C and incorporated herein by reference. The amount that the Company shall be entitled to Put to the Investor (the "Put Amount") shall be equal to either 1) two hundred percent (200%) of the average daily volume (U.S. market only) of the Common Stock for the three (3) Trading Days prior to the applicable Put Notice Date, multiplied by the average of the three (3) daily closing prices immediately preceding the Put Date or 2) two hundred and fifty thousand dollars ($250,000). During the Open Period, the Company shall not be entitled to submit a Put Notice until the Pricing Period for the prior Put has been completed. The Common Stock identified in the Put Notice shall be purchased for a price equal to the Purchase Price.
(C)
COMPANYS RIGHT TO SUSPEND. On each Put Notice submitted to the Investor by the Company, the Company shall have the option to specify a Suspension Price for that Put. In the event the Common Stock falls below the Suspension Price, the Put shall be temporarily suspended. The Put shall resume at such time as the Common Stock is above the Suspension Price, provided the dates for the Pricing Period for that particular Put are still valid. In the event the Pricing Period has been complete, any shares above the Suspension Price due to the Investor shall be sold to the Investor by the Company at the Suspension Price under the terms of this Agreement. The Suspension Price for a Put may not be changed by the Company once submitted to the Investor.
(D)
CONDITIONS TO INVESTOR'S OBLIGATION TO PURCHASE SHARES. Notwithstanding anything to the contrary in this Agreement, the Company shall not be entitled to deliver a Put Notice and the Investor shall not be obligated to purchase any Shares at a Closing unless each of the following conditions are satisfied:
(1)
a Registration Statement shall have been declared effective and shall remain effective and available for the resale of all the Registrable Securities (as defined in the Registration Rights Agreement) at all times until the Closing with respect to the subject Put Notice;
(2)
at all times during the period beginning on the related Put Notice Date and ending on and including the related Closing Date, the Common Stock shall have been listed on the Principal Market and shall not have been suspended from trading thereon for a period of two (2) consecutive Trading Days during the Open Period and the Company shall not have been notified of any pending or threatened proceeding or other action to suspend the trading of the Common Stock;
(3)
the Company has complied with its obligations and is otherwise not in breach of or in default under this Agreement, the Registration Rights Agreement or any other agreement executed in connection herewith which has not been cured prior to delivery of the Put Notice;
(4)
no injunction shall have been issued and remain in force, or action commenced by a governmental authority which has not been stayed or abandoned, prohibiting the purchase or the issuance of the Securities; and
(5)
the issuance of the Securities pursuant to this Agreement will not violate any shareholder approval requirements of the Principal Market.
If any of the events described in clauses (1) through (5) above occurs during a Pricing Period, then the Investor shall have no obligation to purchase the Common Stock subject to the applicable Put Notice.
(E)
INTENTIONALLY OMITTED.
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(F)
MECHANICS OF PURCHASE OF SHARES BY INVESTOR. The closing of the purchase by the Investor of Shares (a Closing) shall occur on the date which is no later than fifteen (15) Trading Days following the applicable Put Notice Date (each a Closing Date). On each Closing Date, (I) the Company shall deliver to the Investor pursuant to this Agreement, certificates representing the Shares to be issued to the Investor on such date and registered in the name of the Investor; and (II) the Investor shall deliver to the Company the Purchase Price to be paid for such Shares, based on the Put Amount set forth in Section 2(B). In lieu of delivering physical certificates representing the Securities and provided that the Company's transfer agent then is participating in The Depository Trust Company (DTC) Fast Automated Securities Transfer (FAST) program, upon request of the Investor, the Company shall use all commercially reasonable efforts to cause its transfer agent to electronically transmit the Securities by crediting the account of the Investor's prime broker (as specified by the Investor within a reasonable period in advance of the Investor's notice) with DTC through its Deposit Withdrawal Agent Commission (DWAC) system.
The Company understands that a delay in the issuance of Securities beyond the Closing Date could result in economic damage to the Investor. After the Effective Date, as compensation to the Investor for such loss, the Company agrees to make payments to the Investor for late issuance of Securities (delivery of Securities after the applicable Closing Date) in accordance with the following schedule (where No. of Days Late is defined as the number of trading days beyond the Closing Date, with the Amounts being cumulative.):
LATE PAYMENT FOR EACH NO. OF DAYS LATE | |
1 | $100 |
2 | $200 |
3 | $300 |
4 | $400 |
5 | $500 |
6 | $600 |
7 | $700 |
8 | $800 |
9 | $900 |
10 | $1000 |
Over 10 | $1,000 + $200 for each Business Day late beyond 10 days |
The Company shall make any payments incurred under this Section in immediately available funds upon demand by the Investor. Nothing herein shall limit the Investor's right to pursue actual damages for the Company's failure to issue and deliver the Securities to the Investor, except that such late payments shall offset any such actual damages incurred by the Investor, and any Open Market Adjustment Amount, as set forth below.
(G)
OVERALL LIMIT ON COMMON STOCK ISSUABLE. Notwithstanding anything contained herein to the contrary, if during the Open Period the Company becomes listed on an exchange that limits the number of shares of Common Stock that may be issued without shareholder approval, then the number of Shares issuable by the Company and purchasable by the Investor, shall not exceed that number of the shares of Common Stock that may be issuable without shareholder approval (the Maximum Common Stock Issuance). If such issuance of shares of Common Stock could cause a delisting on the Principal Market, then the Maximum Common Stock Issuance shall first be approved by the Company's shareholders in accordance with applicable law and the By-laws and Articles of Incorporation of the Company, as amended. The parties understand and agree that the Company's failure to seek or obtain such shareholder approval shall in no way adversely affect the validity and due authorization of the issuance and sale of Securities or the Investor's obligation in accordance with the terms and conditions hereof to purchase a number of Shares in the aggregate up to the Maximum Common Stock Issuance limitation, and that such approval pertains only to the applicability of the Maximum Common Stock Issuance limitation provided in this Section 2(H).
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(H)
OPEN MARKET ADJUSTMENT. If, by the third (3rd) business day after a Closing Date, the Company fails to deliver any portion of the Securities subject to a Put Notice to the Investor (the Put Shares Due) and the Investor purchases, in an open market transaction or otherwise, shares of Common Stock necessary to make delivery by the Investor of shares in respect of sales to subsequent purchasers, pursuant to transactions entered into before the Closing Date (Subsequent Purchasers), which such shares of Common Stock would have been delivered to the Investor by the Company but for the Companys failure to so deliver (the Open Market Share Purchase), then the Company shall pay to the Investor, in addition to any other amounts due to Investor pursuant to the Put, and not in lieu thereof, the Open Market Adjustment Amount (as defined below). The Open Market Adjustment Amount is the amount equal to the excess, if any, of (x) the Investor's total purchase price (including brokerage commissions, if any) for the Open Market Share Purchase minus (y) the net proceeds (after brokerage commissions, if any) received by the Investor from the sale of the Put Shares Due to such Subsequent Purchasers. The Company shall pay the Open Market Adjustment Amount to the Investor in immediately available funds within five (5) business days of written demand by the Investor. By way of illustration and not in limitation of the foregoing, if the Investor purchases shares of Common Stock having a total purchase price (including brokerage commissions) of $11,000 to cover an Open Market Share Purchase with respect to shares of Common Stock it sold to Subsequent Purchasers for net proceeds of $10,000, the Open Market Adjustment Amount which the Company will be required to pay to the Investor will be $1,000.
(I)
LIMITATION ON AMOUNT OF OWNERSHIP. Notwithstanding anything to the contrary in this Agreement, in no event shall the Investor be entitled to purchase that number of Shares, which when added to the sum of the number of shares of Common Stock beneficially owned (as such term is defined under Section 13(d) and Rule 13d-3 of the 1934 Act), by the Investor, would exceed 4.99% of the number of shares of Common Stock outstanding on the Closing Date, as determined in accordance with Rule 13d-1(j) of the 1934 Act.
SECTION 3.
INVESTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS. The Investor represents and warrants to the Company, and covenants, that:
(A)
SOPHISTICATED INVESTOR. The Investor has, by reason of its business and financial experience, such knowledge, sophistication and experience in financial and business matters and in making investment decisions of this type that it is capable of (1) evaluating the merits and risks of an investment in the Securities and making an informed investment decision; (2) protecting its own interest; and (3) bearing the economic risk of such investment for an indefinite period of time.
(B)
AUTHORIZATION; ENFORCEMENT. The Investor has the requisite power and authority to enter into and perform this Agreement and the Registration Rights Agreement. The execution and delivery of the Equity Line Transaction Documents by the Investor and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by the Investor's general partners and no further consent or authorization is required by its partners. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Investor and is a valid and binding agreement of the Investor enforceable against the Investor in accordance with its terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies.
(C)
SECTION 9 OF THE 1934 ACT. During the term of this Agreement, the Investor will comply with the provisions of Section 9 of the 1934 Act, and the rules promulgated thereunder, with respect to transactions involving the Common Stock. The Investor agrees not to sell the Company's stock short, either directly or indirectly through its affiliates, principals or advisors, the Company's common stock during the term of this Agreement.
(D)
ACCREDITED INVESTOR. Investor is an Accredited Investor as that term is defined in Rule 501(a) of Regulation D of the 1933 Act.
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(E)
NO CONFLICTS. The execution, delivery and performance of the Transaction Documents by the Investor and the consummation by the Investor of the transactions contemplated hereby and thereby will not (1) result in a violation of the partnership agreement or other organizational documents of the Investor, (2) conflict with, or constitute a material default (or an event which with notice or lapse of time or both would become a material default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, contract, indenture mortgage, indebtedness or instrument to which the Investor is a party, or to the Investors knowledge result in a violation of any law, rule, regulation, order, judgment or decree (including United States federal and state securities laws and regulations) applicable to the Investor or by which any property or asset of the Investor is bound or affected.
(F)
NO VIOLATIONS. Except as disclosed in Schedule 3(f), the Investor is not in violation of any term of, or in default under, the partnership agreement of other organizational documents of the Investor or any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Investor, except for conflicts, defaults, terminations, amendments, accelerations, cancellations and violations that would not, individually or in the aggregate, constitute or reasonably be expected to constitute a material adverse effect on the Investor. The business of the Investor is not being conducted, and shall not be conducted, in violation of any law, statute, ordinance, rule, order or regulation of any governmental authority or agency, regulatory or self-regulatory agency, or court, except for violations the sanctions for which either, individually or in the aggregate, would not have or reasonably be expected to have a material adverse effect on the Investor. Except as specifically contemplated by this Agreement and as required under the 1933 Act or any securities laws of any states, to the Investors knowledge, the Investor is not required to obtain any consent, authorization, permit or order of, or make any filing or registration (except the filing of a registration statement as outlined in the Registration Rights Agreement) with, any court, governmental authority or agency, regulatory or self-regulatory agency or other third party in order for it to execute, deliver or perform any of its obligations under, or contemplated by, the Equity Line Transaction Documents in accordance with the terms hereof or thereof except for those consents, authorizations, permits, orders or filings as have been obtained or effected on or prior to the date hereof and are in full force and effect as of the date hereof. Except as disclosed in Schedule 3(f), the Investor is unaware of any facts or circumstances which might give rise to any violation or default set forth in this Section 3(F).
(G)
OPPORTUNITY TO DISCUSS. The Investor has received all materials relating to the Company's business, finance and operations which it has requested. The Investor has had an opportunity to discuss the business, management and financial affairs of the Company with the Company's management.
(H)
INVESTMENT PURPOSES. The Investor is purchasing the Securities for its own account for investment purposes and not with a view towards distribution and agrees to resell or otherwise dispose of the Securities solely in accordance with the registration provisions of the 1933 Act (or pursuant to an exemption from such registration provisions).
(I)
NO REGISTRATION AS A DEALER. The Investor is not and will not be required to be registered as a dealer under the 1934 Act, either as a result of its execution and performance of its obligations under this Agreement or otherwise.
(J)
GOOD STANDING. The Investor is a Limited Partnership, duly organized, validly existing and in good standing in the state of Delaware.
(K)
TAX LIABILITIES. The Investor understands that it is liable for its own tax liabilities.
SECTION 4.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth in the Schedules attached hereto, or as disclosed in the Company's SEC Documents, the Company represents and warrants to the Investor that:
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(A)
ORGANIZATION AND QUALIFICATION. The Company is a corporation duly organized and validly existing in good standing under the laws of the State of Wyoming, USA and has the requisite corporate power and authorization to own its properties and to carry on its business as now being conducted. Both the Company and the companies it owns or controls (Subsidiaries) are duly qualified to do business and are in good standing in every jurisdiction in which its ownership of property or the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. As used in this Agreement, Material Adverse Effect means any material adverse effect on (1) the properties, assets, operations, results of operations, or financial condition of the Company and its Subsidiaries, if any, taken as a whole, (2) the transactions contemplated hereby or by the agreements and instruments to be entered into in connection herewith, or (3) the authority or ability of the Company to perform its obligations under the Equity Line Transaction Documents other than as a result of (a) changes adversely affecting the United States economy (so long as the Company is not disproportionately affected thereby), (b) changes adversely affecting the industry in which the Company operates (so long as the Company is not disproportionately affected thereby), (c) the announcement or consummation of the transactions contemplated by this Agreement, and (d) changes in the market price of the Common Stock.
(B)
AUTHORIZATION; ENFORCEMENT; COMPLIANCE WITH OTHER INSTRUMENTS.
(1)
The Company has the requisite corporate power and authority to enter into and perform the Equity Line Transaction Documents, and to perform its obligations contemplated hereby and thereby.
(2)
The execution and delivery of the Equity Line Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby, including without limitation the reservation for issuance and the issuance of the Securities pursuant to this Agreement, have been duly and validly authorized by the Company's Board of Directors and no further consent or authorization is required by the Company, its Board of Directors, or its shareholders.
(3)
The Equity Line Transaction Documents have been duly and validly executed and delivered by the Company.
(4)
The Equity Line Transaction Documents constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and remedies.
(C)
CAPITALIZATION. As of the date hereof, the authorized capital stock of the Company consists of 100,000,000 shares of Common Stock with .01 par value per share, of as of March 8, 2012, 32,885,900 shares were issued and outstanding. Except as disclosed in the Companys publicly available filings with the SEC: (1) no shares of the Company's capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company; (2) there are no outstanding debt securities; (3) there are no outstanding shares of capital stock, options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries; (4) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the 1933 Act (except the Registration Rights Agreement); (5) there are no outstanding securities of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to redeem a security of the Company or any of its Subsidiaries; (6) there are no
8
securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities as described in this Agreement; (7) the Company does not have any stock appreciation rights or phantom stock plans or agreements or any similar plan or agreement; and (8) there is no dispute as to the classification of any shares of the Company's capital stock.
The Company has furnished to the Investor, or the Investor has had access through the SECs EDGAR website to, true and correct copies of the Company's Articles of Incorporation, as amended and in effect on the date hereof (the Articles of Incorporation), and the Company's By-laws, as in effect on the date hereof (the By-laws), and the terms of all securities convertible into or exercisable for Common Stock and the material rights of the holders thereof in respect thereto.
(D)
ISSUANCE OF SHARES. The Company has reserved 2,000,000 Shares for issuance pursuant to this Agreement, which have been duly authorized and reserved for issuance (subject to adjustment pursuant to the Company's covenant set forth in Section 5(F) below) pursuant to this Agreement. Upon issuance in accordance with this Agreement, the Securities will be validly issued, fully paid for and non-assessable and free from all taxes, liens and charges with respect to the issue thereof. In the event the Company cannot register a sufficient number of Shares for issuance pursuant to this Agreement, the Company will use its best efforts to authorize and reserve for issuance the number of Shares required for the Company to perform its obligations hereunder as soon as reasonably practicable.
(E) NO CONFLICTS. The execution, delivery and performance of the Equity Line Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby will not (I) result in a violation of the Articles of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the By-laws; or (II) conflict with, or constitute a material default (or an event which with notice or lapse of time or both would become a material default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, contract, indenture mortgage, indebtedness or instrument to which the Company or any of its Subsidiaries is a party, or to the Company's knowledge result in a violation of any law, rule, regulation, order, judgment or decree (including United States federal and state securities laws and regulations and the rules and regulations of the Principal Market or principal securities exchange or trading market on which the Common Stock is traded or listed) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected. Except as disclosed in Schedule 4(e), neither the Company nor its Subsidiaries is in violation of any term of, or in default under, the Articles of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the By-laws or their organizational charter or by-laws, respectively, or any contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or its Subsidiaries, except for possible conflicts, defaults, terminations, amendments, accelerations, cancellations and violations that would not individually or in the aggregate have or constitute a Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted, and shall not be conducted, in violation of any law, statute, ordinance, rule, order or regulation of any governmental authority or agency, regulatory or self-regulatory agency, or court, except for possible violations the sanctions for which either individually or in the aggregate would not have a Material Adverse Effect. Except as specifically contemplated by this Agreement and as required under the 1933 Act or any securities laws of any states, to the Company's knowledge, the Company is not required to obtain any consent, authorization, permit or order of, or make any filing or registration (except the filing of a registration statement as outlined in the Registration Rights Agreement between the Parties) with, any court, governmental authority or agency, regulatory or self-regulatory agency or other third party in order for it to execute, deliver or perform any of its obligations under, or contemplated by, the Equity Line Transaction Documents in accordance with the terms hereof or thereof. All consents, authorizations, permits, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof and are in full force and effect as of the date hereof. Except as disclosed in Schedule 4(e), the Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any violation or default of any of the foregoing. The Company is not, and will not be, in violation of the listing requirements of the Principal Market as in effect on the date hereof and on each of the Closing Dates and is not aware of any facts
9
which would reasonably lead to delisting of the Common Stock by the Principal Market in the foreseeable future.
(F) SEC DOCUMENTS; FINANCIAL STATEMENTS. As of the date hereof, the Company cannot make representation that it has filed all reports, schedules, forms, statements due to the Form 15 flied on September 15th 2009. The Company has delivered to the Investor or its representatives, or they have had access through the SECs EDGAR website to, true and complete copies of the SEC Documents. As of their respective filing dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents, at the time they were filed with the SEC, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, and audited by a firm that is a member a member of the Public Companies Accounting Oversight Board ("PCAOB") consistently applied, during the periods involved (except (I) as may be otherwise indicated in such financial statements or the notes thereto, or (II) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other written information provided by or on behalf of the Company to the Investor which is not included in the SEC Documents, including, without limitation, information referred to in Section 4(D) of this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstance under which they are or were made, not misleading. Neither the Company nor any of its Subsidiaries or any of their officers, directors, employees or agents have provided the Investor with any material, nonpublic information which was not publicly disclosed prior to the date hereof and any material, nonpublic information provided to the Investor by the Company or its Subsidiaries or any of their officers, directors, employees or agents prior to any Closing Date shall be publicly disclosed by the Company prior to such Closing Date.
(G) ABSENCE OF CERTAIN CHANGES. Except as otherwise set forth in the SEC Documents, the Company does not intend to change the business operations of the Company in any material way. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy law nor does the Company or its Subsidiaries have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings.
(H) ABSENCE OF LITIGATION AND/OR REGULATORY PROCEEDINGS. Except as set forth in the SEC Documents, the Company has no current action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of Company or any of its Subsidiaries, threatened against or affecting the Company, the Common Stock or any of the Company's Subsidiaries or any of the Company's or the Company's Subsidiaries' officers or directors in their capacities as such, in which an adverse decision could have a Material Adverse Effect.
(I) ACKNOWLEDGMENT REGARDING INVESTOR'S PURCHASE OF SHARES. The Company acknowledges and agrees that the Investor is acting solely in the capacity of an arm's length purchaser with respect to the Equity Line Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Equity Line Transaction Documents and the transactions contemplated hereby and thereby and any advice given by the Investor or any of its respective representatives or agents in connection with the Equity Line Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Investor's purchase of the Securities, and is not being relied on by the Company. The Company further represents
10
to the Investor that the Company's decision to enter into the Equity Line Transaction Documents has been based solely on the independent evaluation by the Company and its representatives.
(J) NO UNDISCLOSED EVENTS, LIABILITIES, DEVELOPMENTS OR CIRCUMSTANCES. Except as set forth in the SEC Documents, as of the date hereof, no event, liability, development or circumstance has occurred or exists, or to the Company's knowledge is contemplated to occur, with respect to the Company or its Subsidiaries or their respective business, properties, assets, prospects, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws on a registration statement filed with the SEC relating to an issuance and sale by the Company of its Common Stock and which has not been publicly announced.
(K) EMPLOYEE RELATIONS. Neither the Company nor any of its Subsidiaries is involved in any union labor dispute nor, to the knowledge of the Company or any of its Subsidiaries, is any such dispute threatened. Neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and its Subsidiaries believe that relations with their employees are good. No executive officer (as defined in Rule 501(f) of the 1933 Act) has notified the Company that such officer intends to leave the Company's employ or otherwise terminate such officer's employment with the Company.
(L) INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own or possess adequate rights or licenses to use all trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct their respective businesses as now conducted. Except as set forth in the SEC Documents, none of the Company's trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights necessary to conduct its business as now or as proposed to be conducted have expired or terminated, or are expected to expire or terminate within two (2) years from the date of this Agreement. The Company and its Subsidiaries do not have any knowledge of any infringement by the Company or its Subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others and, except as set forth in the SEC Documents, there is no claim, action or proceeding being made or brought against, or to the Company's knowledge, being threatened against, the Company or its Subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement; and the Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing. The Company and its Subsidiaries have taken commercially reasonable security measures to protect the secrecy, confidentiality and value of all of their intellectual properties.
(M) ENVIRONMENTAL LAWS. The Company and its Subsidiaries (I) are, to the knowledge of the Company and its Subsidiaries, in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants ("Environmental Laws"); (II) have, to the knowledge of the Company, received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses; and (III) are in compliance, to the knowledge of the Company, with all terms and conditions of any such permit, license or approval where, in each of the three (3) foregoing cases, the failure to so comply would have, individually or in the aggregate, a Material Adverse Effect.
(N) TITLE. The Company and its Subsidiaries have good and marketable title to all personal property owned by them which is material to the business of the Company and its Subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in the SEC Documents or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of its Subsidiaries. Any real
11
property and facilities held under lease by the Company or any of its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries.
(O) INSURANCE. Each of the Company's Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company reasonably believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any of its Subsidiaries has been refused any insurance coverage sought or applied for and neither the Company nor its Subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.
(P) REGULATORY PERMITS. The Company and its Subsidiaries have in full force and effect all certificates, approvals, authorizations and permits from the appropriate federal, state, local or foreign regulatory authorities and comparable foreign regulatory agencies, necessary to own, lease or operate their respective properties and assets and conduct their respective businesses, and neither the Company nor any such Subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, approval, authorization or permit, except for such certificates, approvals, authorizations or permits which if not obtained, or such revocations or modifications which, would not have a Material Adverse Effect.
(Q) INTERNAL ACCOUNTING CONTROLS. The Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (I) transactions are executed in accordance with management's general or specific authorizations; (II) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles by a firm with membership to the PCAOB and to maintain asset accountability; (III) reasonable controls to safeguard assets are in place; and (IV) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(R) NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the Company nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree or order which in the judgment of the Company's officers has or is expected in the future to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any contract or agreement which in the judgment of the Company's officers has or is expected to have a Material Adverse Effect.
(S) TAX STATUS. The Company and each of its Subsidiaries has made or filed all United States federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Company and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.
(T) CERTAIN TRANSACTIONS. Except as set forth in the SEC Documents filed at least ten (10) days prior to the date hereof and except for arm's length transactions pursuant to which the Company makes payments in the ordinary course of business upon terms no less favorable than the Company could obtain from disinterested third parties and other than the grant of stock options disclosed in the SEC Documents or stock options granted in the future as contemplated by current compensation agreements or plans disclosed in the SEC Documents, none of the officers, directors, or employees of the
12
Company is presently a party to any transaction with the Company or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.
(U) DILUTIVE EFFECT. The Company understands and acknowledges that the number of shares of Common Stock issuable upon purchases pursuant to this Agreement will increase in certain circumstances including, but not necessarily limited to, the circumstance wherein the trading price of the Common Stock declines during the period between the Effective Date and the end of the Open Period. The Company's executive officers and directors have studied and fully understand the nature of the transactions contemplated by this Agreement and recognize that they have a potential dilutive effect on the shareholders of the Company. The Board of Directors of the Company has concluded, in its good faith business judgment, and with full understanding of the implications, that such issuance is in the best interests of the Company. The Company specifically acknowledges that, subject to such limitations as are expressly set forth in the Equity Line Transaction Documents, its obligation to issue shares of Common Stock upon purchases pursuant to this Agreement is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.
(V) LOCK-UP. The Company shall cause its officers and directors to refrain from selling Common Stock during each Pricing Period.
(W) NO GENERAL SOLICITATION. Neither the Company, nor any of its affiliates, nor any person acting on its behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Common Stock to be offered as set forth in this Agreement.
(X) NO BROKERS, FINDERS OR FINANCIAL ADVISORY FEES OR COMMISSIONS. No brokers, finders or financial advisory fees or commissions will be payable by the Company, its agents or Subsidiaries, with respect to the transactions contemplated by this Agreement, except as otherwise disclosed in this Agreement.
SECTION 5.
COVENANTS OF THE COMPANY
(A)
EFFORTS. The Company shall use all commercially reasonable efforts to timely satisfy each of the conditions set forth in Section 8 of this Agreement.
(B)
BLUE SKY. The Company shall, at its sole cost and expense, on or before each of the Closing Dates, take such action as the Company shall reasonably determine is necessary to qualify the Securities for, or obtain exemption for the Securities for, sale to the Investor at each of the Closings pursuant to this Agreement under applicable securities or Blue Sky laws of such states of the United States, as reasonably specified by the Investor, and shall provide evidence of any such action so taken to the Investor on or prior to the Closing Date.
(C)
REPORTING STATUS. Until one of the following occurs, the Company shall file the S1 registration statement and upon the Effective date of the S1 registration statement, the Company shall be required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status, or take an action or fail to take any action, which would terminate its status as a reporting company under the 1934 Act: (1) this Agreement terminates pursuant to Section 9, or (2) the date on which the Investor has sold all the Securities; provided that the Investor shall promptly notify the Company after the Investor has sold all the Securities.
(D)
USE OF PROCEEDS. The Company will use the proceeds from the sale of the Securities (excluding amounts paid by the Company for fees as set forth in the Equity Line Transaction Documents)
13
for general corporate and working capital purposes and acquisitions or assets, businesses or operations or for other purposes that the Board of Directors, in its good faith, deems to be in the best interest of the Company.
(E)
FINANCIAL INFORMATION. During the Open Period, the Company agrees to make available to the Investor via the SECs EDGAR website or other electronic means the following documents and information on the forms set forth: (1) within five (5) Trading Days after the filing thereof with the SEC, a copy of its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any Registration Statements or amendments filed pursuant to the 1933 Act; (2) copies of any notices and other information made available or given to the shareholders of the Company generally, contemporaneously with the making available or giving thereof to the shareholders; and (3) within two (2) calendar days of filing or delivery thereof, copies of all documents filed with, and all correspondence sent to, the Principal Market, any securities exchange or market, or the Financial Industry Regulatory Authority, unless such information is material nonpublic information.
(F)
RESERVATION OF SHARES. The Company shall reserve 2,000,000 Shares for the issuance of the Securities to the Investor as required hereunder. In the event that the Company determines that it does not have a sufficient number of authorized shares of Common Stock to reserve and keep available for issuance as described in this Section 5(F), the Company shall use all commercially reasonable efforts to increase the number of authorized shares of Common Stock by seeking shareholder approval for the authorization of such additional shares.
(G)
LISTING. The Company shall promptly secure and maintain the listing of all of the Registrable Securities (as defined in the Registration Rights Agreement) on the Principal Market and each other national securities exchange and automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and shall maintain, such listing of all Registrable Securities from time to time issuable under the terms of the Equity Line Transaction Documents. Neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Common Stock on the Principal Market (excluding suspensions of not more than one (1) trading day resulting from business announcements by the Company). The Company shall promptly provide to the Investor copies of any notices it receives from the Principal Market regarding the continued eligibility of the Common Stock for listing on such automated quotation system or securities exchange. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 5(G).
(H)
TRANSACTIONS WITH AFFILIATES. The Company shall not, and shall cause each of its Subsidiaries not to, enter into, amend, modify or supplement, or permit any Subsidiary to enter into, amend, modify or supplement, any agreement, transaction, commitment or arrangement with any of its or any Subsidiary's officers, directors, persons who were officers or directors at any time during the previous two (2) years, shareholders who beneficially own 5% or more of the Common Stock, or Affiliates or with any individual related by blood, marriage or adoption to any such individual or with any entity in which any such entity or individual owns a 5% or more beneficial interest (each a Related Party), except for (1) customary employment arrangements and benefit programs on reasonable terms, (2) any agreement, transaction, commitment or arrangement on an arms-length basis on terms no less favorable than terms which would have been obtainable from a disinterested third party other than such Related Party,(3) any agreement, transaction, commitment or arrangement which is approved by a majority of the disinterested directors of the Company, or (4) extensions or amendments of any existing employment agreement. For purposes hereof, any director who is also an officer of the Company or any Subsidiary of the Company shall not be a disinterested director with respect to any such agreement, transaction, commitment or arrangement. Affiliate for purposes hereof means, with respect to any person or entity, another person or entity that, directly or indirectly, (1) has a 5% or more equity interest in that person or entity, (2) has 5% or more common ownership with that person or entity, (3) controls that person or entity, or (4) is under common control with that person or entity. Control or Controls for purposes hereof means that a person or entity has the power, directly or indirectly, to conduct or govern the policies of another person or entity.
14
(I)
FILING OF FORM 8-K. Upon and within the filing of the S1 registration statement, the Company shall file with the SEC describing the terms of the transaction contemplated by the Equity Line Transaction Documents in the form required by the 1934 Act, if such filing is required.
(J)
CORPORATE EXISTENCE. The Company shall use all commercially reasonable efforts to preserve and continue the corporate existence of the Company.
(K)
NOTICE OF CERTAIN EVENTS AFFECTING REGISTRATION; SUSPENSION OF RIGHT TO MAKE A PUT. The Company shall promptly notify the Investor upon the occurrence of any of the following events in respect of a Registration Statement or related prospectus in respect of an offering of the Securities: (1) receipt of any request for additional information by the SEC or any other federal or state governmental authority during the period of effectiveness of the Registration Statement for amendments or supplements to the Registration Statement or related prospectus; (2) the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose; (3) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Securities for sale in any jurisdiction or the initiation or notice of any proceeding for such purpose; (4) the happening of any event that makes any statement made in such Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related prospectus or documents so that, in the case of a Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (5) the Company's reasonable determination that a post-effective amendment to the Registration Statement would be appropriate, and the Company shall promptly make available to Investor any such supplement or amendment to the related prospectus. The Company shall not deliver to the Investor any Put Notice during the continuation of any of the foregoing events in this Section 5(K).
(L)
REIMBURSEMENT. If (I) the Investor becomes involved in any capacity in any action, proceeding or investigation brought by any shareholder of the Company, in connection with or as a result of the consummation of the transactions contemplated by the Equity Line Transaction Documents, or if the Investor is impleaded in any such action, proceeding or investigation by any person (other than as a result of a breach of the Investors representations and warranties set forth in this Agreement); or (II) the Investor becomes involved in any capacity in any action, proceeding or investigation brought by the SEC against or involving the Company (unless the Company is involved in the action, proceeding or investigation as a witness only) or in connection with or as a result of the consummation of the transactions contemplated by the Equity Line Transaction Documents (other than as a result of a breach of the Investors representations and warranties set forth in this Agreement), or if this Investor is impleaded in any such action, proceeding or investigation by any person, then in any such case, the Company will reimburse the Investor for its actual, reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith, as such expenses are incurred. In addition, other than with respect to any matter in which the Investor is a named party, the Company will pay to the Investor the charges, as reasonably determined by the Investor, for the time of any officers or employees of the Investor devoted to appearing and preparing to appear as witnesses, assisting in preparation for hearings, trials or pretrial matters, or otherwise with respect to inquiries, hearing, trials, and other proceedings relating to the subject matter of this Agreement. The reimbursement obligations of the Company under this section shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliates of the Investor that are actually named in such action, proceeding or investigation, and partners, directors, agents, employees, attorneys, accountants, auditors and controlling persons (if any), as the case may be, of Investor and any such affiliate, and shall be binding upon and inure to the benefit of any successors of the Company, the Investor and any such affiliate and any such person. However, in all events, if the Investor is found to be guilty of violations of the federal or state securities laws (or pleads no contest or other similar plea or
15
settles an investigation or pleading without a specific finding of liability but is still subject to civil or criminal liability), the Company will have no responsibility to pay any of the Investors fees and expenses regardless of whether or not the Company is or is also found to have liability.
(M)
TRANSFER AGENT. Upon effectiveness of the Registration Statement, and for so long as the Registration Statement is effective, the Company shall deliver instructions to its transfer agent to issue Shares to the Investor that are covered for resale by the Registration Statement free of restrictive legends.
(N)
ACKNOWLEDGEMENT OF TERMS. The Company hereby represents and warrants to the Investor that: (1) it is voluntarily entering into this Agreement of its own freewill, (2) it is not entering this Agreement under economic duress, (3) the terms of this Agreement are reasonable and fair to the Company, and (4) the Company has had independent legal counsel of its own choosing review this Agreement, advise the Company with respect to this Agreement, and represent the Company in connection with this Agreement.
SECTION 6.
INTENTIONALLY OMITTED.
SECTION 7.
CONDITIONS OF THE COMPANY'S OBLIGATION TO SELL. The obligation hereunder of the Company to issue and sell the Securities to the Investor is further subject to the satisfaction, at or before each Closing Date, of each of the following conditions set forth below. These conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion.
(A)
The Investor shall have executed this Agreement and the Registration Rights Agreement and delivered the same to the Company.
(B)
The Investor shall have delivered to the Company the Purchase Price for the Securities being purchased by the Investor between the end of the Pricing Period and the Closing Date via a Put Settlement Sheet (hereto attached as Exhibit D). Immediately after receipt of confirmation of delivery of such Securities to the Investor, the Investor, by wire transfer of immediately available funds pursuant to the wire instructions provided by the Company, will disburse the funds constituting the Purchase Amount.
(C)
The representations and warranties of the Investor shall be true and correct in all material respects as of the date when made and as of the applicable Closing Date as though made at that time and the Investor shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by the Equity Line Transaction Documents to be performed, satisfied or complied with by the Investor on or before such Closing Date.
(D)
No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.
SECTION 8.
FURTHER CONDITIONS OF THE INVESTOR'S OBLIGATION TO PURCHASE. The obligation of the Investor hereunder to purchase Shares is subject to the satisfaction, on or before each Closing Date, of each of the following conditions set forth below.
(A)
The Company shall have executed the Equity Line Transaction Documents and delivered the same to the Investor.
(B)
The Common Stock shall be authorized for quotation on the Principal Market and trading in the Common Stock shall not have been suspended by the Principal Market or the SEC, at any time beginning on the date hereof and through and including the respective Closing Date (excluding suspensions of not more than one (1) Trading Day resulting from business announcements by the Company, provided that such suspensions occur prior to the Company's delivery of the Put Notice related to such Closing).
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(C)
The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the applicable Closing Date as though made at that time and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by the Equity Line Transaction Documents to be performed, satisfied or complied with by the Company on or before such Closing Date. The Investor may request an update as of such Closing Date regarding the representation contained in Section 4(C) above.
(D)
The Company shall have executed and delivered to the Investor the certificates representing, or have executed electronic book-entry transfer of, the Securities (in such denominations as the Investor shall request) being purchased by the Investor at such Closing.
(E)
The Board of Directors of the Company shall have adopted resolutions consistent with Section 4(B)(2) above (the Resolutions) and such Resolutions shall not have been amended or rescinded prior to such Closing Date.
(F)
INTENTIONALLY OMITTED.
(G)
No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.
(H)
The Registration Statement shall be effective on each Closing Date and no stop order suspending the effectiveness of the Registration statement shall be in effect or to the Company's knowledge shall be pending or threatened. Furthermore, on each Closing Date (1) neither the Company nor the Investor shall have received notice that the SEC has issued or intends to issue a stop order with respect to such Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of such Registration Statement, either temporarily or permanently, or intends or has threatened to do so (unless the SEC's concerns have been addressed and Investor is reasonably satisfied that the SEC no longer is considering or intends to take such action), and (2) no other suspension of the use or withdrawal of the effectiveness of such Registration Statement or related prospectus shall exist.
(I)
At the time of each Closing, the Registration Statement (including information or documents incorporated by reference therein) and any amendments or supplements thereto shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading or which would require public disclosure or an update supplement to the prospectus.
(J)
If applicable, the shareholders of the Company shall have approved the issuance of any Shares in excess of the Maximum Common Stock Issuance in accordance with Section 2(H) or the Company shall have obtained appropriate approval pursuant to the requirements of Michigan law and the Companys Articles of Incorporation and By-laws.
(K)
The conditions to such Closing set forth in Section 2(E) shall have been satisfied on or before such Closing Date.
(L)
The Company shall have certified to the Investor the number of Shares of Common Stock outstanding when a Put Notice is given to the Investor. The Company's delivery of a Put Notice to the Investor constitutes the Company's certification of the reservation for issuance of the necessary number of shares of Common Stock subject to a Put Notice.
SECTION 9.
TERMINATION. This Agreement shall terminate upon any of the following events:
(A)
when the Investor has purchased an aggregate of twenty-five million dollars $25,000,000 in the Common Stock of the Company pursuant to this Agreement; or,
17
(B)
on the date which is thirty-six (36) months after the Effective Date; or,
(C)
upon written notice of the Company to the Investor. Any and all shares, or penalties, if any, due under this Agreement shall be immediately payable and due upon termination of this Agreement.
SECTION 10.
SUSPENSION. The Companys right to cause the Investor to purchase Shares pursuant to a Put Notice, and the Investors obligation to purchase Shares under this Agreement shall be suspended upon any of the following events, and shall remain suspended until such event is rectified:
(A)
The trading of the Common Stock is suspended by the SEC, the Principal Market or FINRA for a period of two (2) consecutive Trading Days during the Open Period; or,
(B)
The Common Stock ceases to be registered under the 1934 Act or listed or traded on the Principal Market. Immediately upon the occurrence of one of the above-described events, the Company shall send written notice of such event to the Investor.
SECTION 11.
INDEMNIFICATION. In consideration of the parties mutual obligations set forth in the Transaction Documents, each of the parties (in such capacity, an Indemnitor) shall defend, protect, indemnify and hold harmless the other and all of the other party's shareholders, officers, directors, employees, counsel, and direct or indirect investors and any of the foregoing person's agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the Indemnitees) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and reasonable expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys' fees and disbursements (the Indemnified Liabilities), incurred by any Indemnitee as a result of, or arising out of, or relating to (A) any material misrepresentation or breach of any representation or warranty made by the Indemnitor in the Equity Line Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby; (B) any material breach of any covenant, agreement or obligation of the Indemnitor contained in the Equity Line Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby; or (C) any cause of action, suit or claim brought or made against such Indemnitee by a third party and arising out of or resulting from the execution, delivery, performance or enforcement of the Equity Line Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, except insofar as (Y) any such misrepresentation, breach or any untrue statement, alleged untrue statement, omission or alleged omission is made in reliance upon and in conformity with information furnished to Indemnitor which is specifically intended for use in the preparation of any such Registration Statement, preliminary prospectus, prospectus or amendments to the prospectus, (Z) any such Indemnified Liabilities resulted or arose from the breach by the Indemnitee party hereto of any representation, warranty, covenant or agreement of such Indemnitee contained in the Equity Line Transaction Documents or the negligence, recklessness, willful misconduct or bad faith of such Indemnitee. To the extent that the foregoing undertaking by the Indemnitor may be unenforceable for any reason, the Indemnitor shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. The indemnity provisions contained herein shall be in addition to any cause of action or similar rights Indemnitor may have, and any liabilities the Indemnitor or the Indemnitees may be subject to.
SECTION 12.
GOVERNING LAW; DISPUTES SUBMITTED TO ARBITRATION. All disputes arising under this agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts, without regard to principles of conflict of laws. The parties to this agreement will submit all disputes arising under this agreement to arbitration in Boston, MA before a single arbitrator of the American Arbitration Association (AAA). The arbitrator shall be selected by application of the rules of the AAA, or by mutual agreement of the parties, except that such arbitrator shall be an attorney admitted to practice law in Commonwealth of Massachusetts. No party to this Agreement will challenge the jurisdiction or venue provisions as provided in this section. No party to this agreement
18
will challenge the jurisdiction or venue provisions as provided in this section. Nothing contained herein shall prevent the party from obtaining an injunction.
SECTION 13.
LEGAL EXPENSES; AND MISCELLANEOUS EXPENSES. Except as otherwise set forth in the Equity Line Transaction Documents, each party shall pay the fees and expenses of its advisers, counsel, the accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. Any attorneys' fees and expenses incurred by either the Company or the Investor in connection with the preparation, negotiation, execution and delivery of any amendments to this Agreement or relating to the enforcement of the rights of any party, after the occurrence of any breach of the terms of this Agreement by another party or any default by another party in respect of the transactions contemplated hereunder, shall be paid on demand by the party which breached the Agreement and/or defaulted, as the case may be. The Company shall pay all stamp and other taxes and duties levied in connection with the issuance of any Securities.
SECTION 14.
COUNTERPARTS. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original signature.
SECTION 15.
HEADINGS; SINGULAR/PLURAL. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Whenever required by the context of this Agreement, the singular shall include the plural and masculine shall include the feminine.
SECTION 16.
SEVERABILITY. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.
SECTION 17.
ENTIRE AGREEMENT; AMENDMENTS. This Agreement is the FINAL AGREEMENT between the Company and the Investor with respect to the terms and conditions set forth herein, and, the terms of this Agreement may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the Parties. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Investor, and no provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought. The execution and delivery of the Equity Line Transaction Documents shall not alter the force and effect of any other agreements between the Parties, and the obligations under those agreements.
SECTION 18.
NOTICES. Any notices or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (A) upon receipt, when delivered personally; (B) upon receipt, when sent by facsimile or email with the signed document attached in PDF format (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (C) one (1) day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:
19
If to the Company:
Omega Commercial Finance Corporation
1000 5th Street Suite 200
Miami Beach, FL 33139
305-704-3295
If to the Investor:
Dutchess Opportunity Fund, II, LP
50 Commonwealth Avenue, Suite 2
Boston, MA 02116
Telephone: (617) 301-4700
Each party shall provide five (5) days prior written notice to the other party of any change in address or facsimile number.
SECTION 19.
NO ASSIGNMENT. This Agreement and any rights, agreements or obligations hereunder may not be assigned, by operation of law, merger or otherwise, without the prior written consent of the other party hereto, and any purported assignment by a party without prior written consent of the other party will be null and void and not binding on such other party. Subject to the preceding sentence, all of the terms, agreements, covenants, representations, warranties and conditions of this Agreement are binding upon, and inure to the benefit of and are enforceable by, the parties and their respective successors and assigns.
SECTION 20.
NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of the parties hereto and is not for the benefit of, nor may any provision hereof be enforced by, any other person, except that the Company acknowledges that the rights of the Investor may be enforced by its general partner.
SECTION 21.
SURVIVAL. The indemnification provisions set forth in Section 11, shall survive each of the Closings and the termination of this Agreement.
SECTION 22.
PUBLICITY. The Company and the Investor shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and no party shall issue any such press release or otherwise make any such public statement without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other party with prior notice of such public statement. The Investor acknowledges that this Agreement and all or part of the Equity Line Transaction Documents may be deemed to be material contracts as that term is defined by Item 601(b)(10) of Regulation S-B, and that the Company may therefore be required to file such documents as exhibits to reports or registration statements filed under the 1933 Act or the 1934 Act. The Investor further agrees that the status of such documents and materials as material contracts shall be determined solely by the Company, in consultation with its counsel.
SECTION 23.
FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
SECTION 24.
INTENTIONALLY OMITTED.
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SECTION 25.
NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party, as the parties mutually agree that each has had a full and fair opportunity to review this Agreement and seek the advice of counsel on it.
SECTION 26.
REMEDIES. The Investor shall have all rights and remedies set forth in this Agreement and the Registration Rights Agreement and all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which the Investor has by law. Any person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any default or breach of any provision of this Agreement, including the recovery of reasonable attorneys fees and costs, and to exercise all other rights granted by law.
SECTION 27.
PAYMENT SET ASIDE. To the extent that the Company makes a payment or payments to the Investor hereunder or under the Registration Rights Agreement or the Investor enforces or exercises its rights hereunder or thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.
SECTION 28.
PRICING OF COMMON STOCK. For purposes of this Agreement, the VWAP of the Common Stock shall be as reported on a direct feed service.
SECTION 29.
NON-DISCLOSURE OF NON-PUBLIC INFORMATION.
(A)
The Company shall not disclose non-public information concerning the Company to the Investor, its advisors, or its representatives.
(B)
Nothing herein shall require the Company to disclose non-public information to the Investor or its advisors or representatives, provided, however, that notwithstanding anything herein to the contrary, the Company will, as hereinabove provided, immediately notify the advisors and representatives of the Investor and, if any, underwriters, of any event or the existence of any circumstance (without any obligation to disclose the specific event or circumstance) of which it becomes aware, constituting non-public information (whether or not requested of the Company specifically or generally during the course of due diligence by such persons or entities), which, if not disclosed in the prospectus included in the Registration Statement would cause such prospectus to include a material misstatement or to omit a material fact required to be stated therein in order to make the statements, therein, in light of the circumstances in which they were made, not misleading. Nothing contained in this Section 29 shall be construed to mean that such persons or entities other than the Investor (without the written consent of the Investor prior to disclosure of such information) may not obtain non-public information in the course of conducting due diligence in accordance with the terms of this Agreement and nothing herein shall prevent any such persons or entities from notifying the Company of their opinion that based on such due diligence by such persons or entities, that the Registration Statement contains an untrue statement of material fact or omits a material fact required to be stated in the Registration Statement or necessary to make the statements contained therein, in light of the circumstances in which they were made, not misleading.
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SECTION 30.
ACKNOWLEDGEMENTS OF THE PARTIES. Notwithstanding anything in this Agreement to the contrary, the parties hereto hereby acknowledge and agree to the following: (A) the Investor makes no representations or covenants that it will not engage in trading in the securities of the Company, other than the Investor will not sell any of the Company's common stock at any time during a Pricing Period; (B) the Company shall, by 8:30 a.m. Boston Time on the fourth Trading Day following the date hereof, file a current report on Form 8-K disclosing the material terms of the transactions contemplated hereby and in the other Equity Line Transaction Documents; (C) the Company has not and shall not provide material non-public information to the Investor unless prior thereto the Investor shall have executed a written agreement regarding the confidentiality and use of such information; and (D) the Company understands and confirms that the Investor will be relying on the acknowledgements set forth in clauses (A) through (C) above if the Investor effects any transactions in the securities of the Company.
[Signature Page Follows]
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SIGNATURE PAGE OF INVESTMENT AGREEMENT
Your signature on this Signature Page evidences your agreement to be bound by the terms and conditions of the Investment Agreement and the Registration Rights Agreement as of the date first written above.
The undersigned signatory hereby certifies that he has read and understands the Investment Agreement, and the representations made by the undersigned in this Investment Agreement are true and accurate, and agrees to be bound by its terms.
DUTCHESS OPPORTUNITY FUND, II, LP, | |
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By: | /s/ Douglas H. Leighton |
| Douglas H. Leighton |
| Managing Member of: |
| Dutchess Capital Management, II, LLC |
| General Partner to: |
| Dutchess Opportunity Fund, II, LP |
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OMEGA COMMERCIAL FINANCE CORP. | |
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By: | /s/ Jon S, Cummings, IV |
| Jon S, Cummings, IV |
| (Principal Executive Officer) |
Signature Page to Investment Agreement
LIST OF EXHIBITS
EXHIBIT A
Registration Rights Agreement
EXHIBIT B
Opinion of Company's Counsel
EXHIBIT C
Put Notice
EXHIBIT D
Put Settlement Sheet
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
(Attached)
A-1
EXHIBIT B
OPINION OF COMPANYS COUNSEL
(Attached)
B-1
EXHIBIT C
FORM OF PUT NOTICE
Date:_____________
RE: Put Notice Number _________
Dear Mr. Leighton:
This is to inform you that as of today, OMEGA COMMERCIAL FINANCE CORPORATION. an Wyoming corporation (the "Company"), hereby elects to exercise its right pursuant to the Investment Agreement entered into with Dutchess Opportunity Fund II, LP (Dutchess) to require Dutchess to purchase shares of its common stock. The Company hereby certifies that:
The amount of this put is $___________________.
The Pricing Period runs from _________________until _________________.
The Suspension Price is $____________________.
The current number of shares issued and outstanding as of the Company are: ___________________
The number of shares currently available for resale pursuant to the Registration Statement on Form S-1 for the Equity Line are:___________________.
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OMEGA COMMERCIAL FINANCE CORPORATION. | ||
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C-1
EXHIBIT D
FORM OF PUT SETTLEMENT SHEET
Date:________________
RE: OMEGA COMMERCIAL FINANCE CORPORATION.
Dear ________________:
Pursuant to the Put given by OMEGA COMMERCIAL FINANCE CORPORATION. to Dutchess Opportunity Fund, II, LP on ____________________ 20__, we are now submitting the amount of common shares for you to issue to Dutchess.
Please deliver __________ shares without restrictive legend via book entry to Dutchess Opportunity Fund, II, LP immediately and send via DWAC to the following account:
XXXXXX
Once these shares are received by us, we will have the funds wired to the Company.
Regards,
Douglas H. Leighton
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PUT AMOUNT
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The undersigned has completed this Put as of this ___th day of _________, 200_.
OMEGA COMMERCIAL FINANCE CORPORATION | ||
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Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement (the Agreement), dated as of March 8, 2012 by and between OMEGA COMMERCIAL FINANCE CORPORATION., a corporation organized under the laws of Wyoming, USA (the Company), and Dutchess Opportunity Fund, II, LP, a Delaware Limited Partnership (the Investor).
Whereas, in connection with the Investment Agreement by and between the Company and the Investor of this date (the Investment Agreement), the Company has agreed to issue and sell to the Investor up to 2,000,000 shares of the Companys Common Stock, .01 par value per share (the Common Stock), to be purchased pursuant to the terms and subject to the conditions set forth in the Investment Agreement; and
Whereas, to induce the Investor to execute and deliver the Investment Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the 1933 Act), and applicable state securities laws, with respect to the shares of Common Stock issuable pursuant to the Investment Agreement.
Now therefore, in consideration of the foregoing promises and the mutual covenants contained hereinafter and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investor hereby agree as follows:
Section 1.
DEFINITIONS.
As used in this Agreement, the following terms shall have the following meanings:
Execution Date means the date of this Agreement set forth above.
Person means a corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency.
Principal Market shall mean Nasdaq Capital Market, the NYSE Amex, the New York Stock Exchange, the Nasdaq Global Market, the Nasdaq Global Select Market or the OTC Bulletin Board, whichever is the principal market on which the Common Stock of the Company is listed.
Register, Registered, and Registration refer to the Registration effected by preparing and filing one (1) or more Registration Statements in compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any successor rule providing for offering securities on a continuous basis (Rule 415), and the declaration or ordering of effectiveness of such Registration Statement(s) by the United States Securities and Exchange Commission (the SEC).
Registrable Securities means (i) the shares of Common Stock issued or issuable pursuant to the Investment Agreement, and (ii) any shares of capital stock issued or issuable with respect to such shares of Common Stock, if any, as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, which have not been (x) included in the Registration Statement that has been declared effective by the SEC, or (y) sold under circumstances meeting all of the applicable conditions of Rule 144 (or any similar provision then in force) under the 1933 Act.
Registration Statement means the registration statement or statements of the Company filed under the 1933 Act covering the Registrable Securities.
All capitalized terms used in this Agreement and not otherwise defined herein shall have the same meaning ascribed to them as in the Investment Agreement.
Section 2.
REGISTRATION.
(a)
Subject to Section 3(g), the Company shall, within twenty-one (21) days after the date of this Agreement, file with the SEC the Registration Statement or Registration Statements (as is necessary) on Form S-1 (or, if such form is unavailable for such a registration, on such other form as is available for such registration), covering the resale of all of the Registrable Securities, which Registration Statement(s) shall state that, in accordance with Rule 416 promulgated under the 1933 Act, such Registration Statement also covers such indeterminate number of additional shares of Common Stock as may become issuable upon stock splits, stock dividends or similar transactions. The Company shall initially register for resale 2,000,000 shares of Common Stock, except to the extent that the SEC requires the share amount to be reduced as a condition of effectiveness.
(b)
Intentionally Omitted.
(c)
The Company agrees not to include any other securities in the Registration Statement covering the Registrable Securities without the Investors prior written consent which the Investor may withhold in its sole discretion. Furthermore, the Company agrees that it will not file any other Registration Statement for other securities, until thirty calendar days after the Registration Statement for the Registrable Securities is declared effective by the SEC.
Section 3.
RELATED OBLIGATIONS.
At such time as the Company is obligated to prepare and file the Registration Statement with the SEC pursuant to Section 2(a), the Company shall have the following obligations with respect to the Registration Statement:
(a)
The Company shall use all commercially reasonable efforts to cause such Registration Statement relating to the Registrable Securities to become effective within ninety (90) days after the date that the Registration Statement is filed and shall keep such Registration Statement effective until the earlier to occur of the date on which (A) the Investor shall have sold all the Registrable Securities; or (B) the Company has no right to sell any additional shares of Common Stock under the Investment Agreement (the Registration Period). The Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading. The Company shall use all commercially reasonable efforts to respond to all SEC comments within ten (10) business days from receipt of such comments by the Company. The Company shall use all commercially reasonable efforts to cause the Registration Statement relating to the Registrable Securities to become effective no later than five (5) business days after notice from the SEC that the Registration Statement may be declared effective. The Investor agrees to provide all information which it is required by law to provide to the Company, including the intended method of disposition of the Registrable Securities, and the Companys obligations set forth above shall be conditioned on the receipt of such information.
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(b)
The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be necessary to keep such Registration Statement effective during the Registration Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the Investor thereof as set forth in such Registration Statement. In the event the number of shares of Common Stock covered by the Registration Statement filed pursuant to this Agreement is at any time insufficient to cover all of the Registrable Securities, the Company shall amend such Registration Statement, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover all of the Registrable Securities, in each case, as soon as practicable, but in any event within fifty (50) calendar days after the necessity therefor arises (based on the then Purchase Price of the Common Stock and other relevant factors on which the Company reasonably elects to rely), assuming the Company has sufficient authorized shares at that time, and if it does not, within fifty (50) calendar days after such shares are authorized. The Company shall use commercially reasonable efforts to cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof.
(c)
The Company shall make available to the Investor whose Registrable Securities are included in any Registration Statement and its legal counsel without charge (i) if requested by the Investor, promptly after the same is prepared and filed with the SEC at least one (1) copy of such Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits, the prospectus included in such Registration Statement (including each preliminary prospectus) and, with regards to such Registration Statement(s), any correspondence by or on behalf of the Company to the SEC or the staff of the SEC and any correspondence from the SEC or the staff of the SEC to the Company or its representatives; and (ii) upon the effectiveness of any Registration Statement, the Company shall make available copies of the prospectus, via EDGAR, included in such Registration Statement and all amendments and supplements thereto.
(d)
The Company shall use commercially reasonable efforts to (i) register and qualify the Registrable Securities covered by the Registration Statement under such other securities or blue sky laws of such states in the United States as the Investor reasonably requests; (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period; (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), or (y) subject itself to general taxation in any such jurisdiction. The Company shall promptly notify the Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or blue sky laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.
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(e)
As promptly as practicable after becoming aware of such event, the Company shall notify the Investor in writing of the happening of any event as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (Registration Default) and use all diligent efforts to promptly prepare a supplement or amendment to such Registration Statement and take any other necessary steps to cure the Registration Default (which, if such Registration Statement is on Form S-3, may consist of a document to be filed by the Company with the SEC pursuant to Section 13(a), 13(c), 14 or 15(d) of the 1934 Act (as defined below) and to be incorporated by reference in the prospectus) to correct such untrue statement or omission, and make available copies of such supplement or amendment to the Investor. The Company shall also promptly notify the Investor (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when the Registration Statement or any post-effective amendment has become effective; (ii) of any request by the SEC for amendments or supplements to the Registration Statement or related prospectus or related information, (iii) of the Companys reasonable determination that a post-effective amendment to the Registration Statement would be appropriate, (iv) in the event the Registration Statement is no longer effective, or (v) if the Registration Statement is stale as a result of the Companys failure to timely file its financials or otherwise. If a Registration Default occurs during the period commencing on the Put Notice Date and ending on the Closing Date, the Company acknowledges that its failure to cure such a Registration Default within ten (10) business days will cause the Investor to suffer damages in an amount that will be difficult to ascertain.
(f)
The Company shall use all commercially reasonable efforts to prevent the issuance of any stop order or other suspension of effectiveness of the Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify the Investor holding Registrable Securities being sold of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding concerning the effectiveness of the Registration Statement.
(g)
The Company shall permit the Investor and one (1) legal counsel, designated by the Investor, to review and comment upon the Registration Statement and all amendments and supplements thereto at least one (1) calendar day prior to their filing with the SEC. However, any postponement of a filing of a Registration Statement or any postponement of a request for acceleration or any postponement of the effective date or effectiveness of a Registration Statement by written request of the Investor (collectively, the "Investor's Delay") shall not act to trigger any penalty of any kind, or any cash amount due or any in-kind amount due the Investor from the Company under any and all agreements of any nature or kind between the Company and the Investor. The event(s) of an Investor's Delay shall act to suspend all obligations of any kind or nature of the Company under any and all agreements of any nature or kind between the Company and the Investor.
(h)
Intentionally Omitted.
(i)
The Company shall hold in confidence and not make any disclosure of information concerning the Investor unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement, or (v) the Investor has consented to such disclosure. The Company agrees that it shall, upon learning that disclosure of such information concerning the Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to the Investor and allow the Investor, at the Investors expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order covering such information.
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(j)
The Company shall use all commercially reasonable efforts to maintain designation and quotation of all the Registrable Securities covered by any Registration Statement on the Principal Market. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 3(j).
(k)
Intentionally Omitted.
(l)
The Company shall provide a transfer agent for all the Registrable Securities not later than the effective date of the first Registration Statement filed pursuant hereto.
(m)
If requested by the Investor, the Company shall (i) as soon as reasonably practical incorporate in a prospectus supplement or post-effective amendment such information as the Investor reasonably determines should be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the offering of the Registrable Securities to be sold in such offering; (ii) make all required filings of such prospectus supplement or post-effective amendment as soon as reasonably possible after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any Registration Statement if reasonably requested by the Investor.
(n)
The Company shall use all commercially reasonable efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to facilitate the disposition of such Registrable Securities.
(o)
The Company shall otherwise use all commercially reasonable efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder.
(p)
Within one (1) business day after the Registration Statement which includes Registrable Securities is declared effective by the SEC, the Company shall deliver to the transfer agent for such Registrable Securities, with copies to the Investor, a written notification that such Registration Statement has been declared effective by the SEC.
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Section 4.
OBLIGATIONS OF THE INVESTOR.
(a)
At least five (5) calendar days prior to the first anticipated filing date of the Registration Statement the Company shall notify the Investor in writing of the information the Company requires from the Investor for the Registration Statement. It shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities and the Investor agrees to furnish to the Company that information regarding itself, the Registrable Securities and the intended method of disposition of the Registrable Securities as shall reasonably be required to effect the registration of the resale of such Registrable Securities and the Investor shall execute such documents in connection with such registration as the Company may reasonably request. The Investor covenants and agrees that, in connection with any sale of Registrable Securities by it pursuant to the Registration Statement, it shall comply with the Plan of Distribution section of the then current prospectus relating to such Registration Statement.
(b)
The Investor, by its acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any Registration Statement hereunder.
(c)
The Investor agrees that, upon receipt of written notice from the Company of the happening of any event of the kind described in Section 3(f) or the first sentence of Section 3(e), the Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering the resale of such Registrable Securities until the Investors receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(f) or the first sentence of Section 3(e).
Section 5.
EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and commissions and other than as set forth in the Investment Agreement, incurred in connection with registrations including comments, filings or qualifications pursuant to Section 2 and Section 3, including, without limitation, all registration, listing and qualifications fees, printing and accounting fees, and fees and disbursements of counsel for the Company shall be paid by the Company.
Section 6.
INDEMNIFICATION.
In the event any Registrable Securities are included in the Registration Statement under this Agreement:
(a)
To the fullest extent permitted by law, the Company, under this Agreement, will, and hereby does, indemnify, hold harmless and defend the Investor, the directors, officers, partners, employees, counsel, agents, representatives of, and each Person, if any, who controls, the Investor within the meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended (the 1934 Act) (each, an Indemnified Person), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, attorneys fees, amounts paid in settlement or expenses, joint or several (collectively, Claims), incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (Indemnified Damages), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in the Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other blue sky laws of any jurisdiction in which the Investor has requested in writing that the Company register or qualify the Shares (Blue Sky Filing), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which the statements therein were made, not misleading, (ii) any untrue statement or alleged untrue statement of a material fact
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contained in the final prospectus for the offer of the Registrable Securities (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, or (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to the Registration Statement (the matters in the foregoing clauses (i) through (iii) being, collectively, Violations). Subject to the restrictions set forth in Section 6(c) the Company shall reimburse each Indemnified Person, promptly as such expenses are incurred and are due and payable, for any reasonable legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim arising out of or based upon a Violation which is due to the inclusion in the Registration Statement of the information furnished to the Company by any Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto; (ii) shall not be available to the extent such Claim is based on (A) a failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company; (B) the Indemnified Persons use of an incorrect prospectus despite being promptly advised in advance by the Company in writing not to use such incorrect prospectus; (C) the manner of sale of the Registrable Securities by the Investor or of the Investors failure to register as a dealer under applicable securities laws; (D) any omission of the Investor to notify the Company of any material fact that should be stated in the Registration Statement or prospectus relating to the Investor or the manner of sale; and (E) any amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the resale of the Registrable Securities by the Investor pursuant to the Registration Statement; and (iii) shall not be available to the extent the Claim arises out of the gross negligence or willful misconduct of the Indemnified Person.
(b)
In connection with any Registration Statement in which the Investor is participating, the Investor agrees to severally and jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, officers, employees, counsel, agents and representatives and each Person, if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act (each, an Indemnified Party), against any Claim or Indemnified Damages to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation is due to (i) the inclusion in the Registration Statement of the written information furnished to the Company by the Investor expressly for use in connection with such Registration Statement; (ii) a failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company or the Investors use of an incorrect prospectus despite being timely advised by the Company in writing not to use such incorrect prospectus; (iii) the Investors failure to register as a dealer under applicable securities laws; (iv) the Investors gross negligence or willful misconduct; or (v) any omission of the Investor to notify the Company of any material fact that should be stated in the Registration Statement or prospectus relating to the Investor or the manner of sale; and, subject to Section 6(c), the Investor will reimburse any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Investor, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the resale of the Registrable Securities by the Investor pursuant to the Registration Statement.
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(c)
Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party, as the case may be, shall have the right to retain its own counsel with the fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the Indemnified Person or Indemnified Party, the representation by counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. The indemnifying party shall pay for only one (1) separate legal counsel for the Indemnified Persons or the Indemnified Parties, as applicable, and such counsel shall be selected by the Investor, if the Investor is entitled to indemnification hereunder, or the Company, if the Company is entitled to indemnification hereunder, as applicable. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or Claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding affected without its written consent; provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such Claim. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.
(d)
The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.
Section 7.
CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 6; (ii) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation; and (iii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.
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Section 8.
REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investor the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the Investor to sell securities of the Company to the public without registration (Rule 144), provided that the Investor holds any Registrable Securities which are eligible for resale under Rule 144 and such information is necessary in order for the Investor to sell such Securities pursuant to Rule 144, the Company agrees to:
(a)
make and keep public information available, as those terms are understood and defined in Rule 144;
(b)
file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such requirements (it being understood that nothing herein shall limit the Companys obligations under Section 5(c) of the Investment Agreement) and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and
(c)
furnish to the Investor, promptly upon request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act applicable to the Company, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investor to sell such securities pursuant to Rule 144 without registration.
Section 9.
NO ASSIGNMENT OF REGISTRATION RIGHTS.
This Agreement and the rights, agreements or obligations hereunder may not be assigned, by operation of law, merger or otherwise, and without the prior written consent of the other party hereto, and any purported assignment by a party without prior written consent of the other party will be null and void and not binding on such other party. Subject to the preceding sentence, all of the terms, agreements, covenants, representations, warranties and conditions of this Agreement are binding upon, and inure to the benefit of and are enforceable by, the parties and their respective successors and assigns.
Section 10.
AMENDMENT OF REGISTRATION RIGHTS.
The provisions of this Agreement may be amended only with the written consent of the Company and the Investor.
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Section 11.
MISCELLANEOUS.
(a)
Any notices or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile or email with the signed document attached in PDF format (provided a confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:
If to the Company:
OMEGA COMMERCIAL FINANCE Corporation
1000 5th Street Suite 200
Miami Beach, FL 33139
If to the Investor:
Dutchess Opportunity Fund, II, LP
50 Commonwealth Ave, Suite 2
Boston, MA 02116
Telephone: (617) 301-4700
Each party shall provide five (5) business days prior notice to the other party of any change in address, phone number, facsimile number ore-mail address.
(b)
Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.
(c)
This Agreement and the Investment Agreement constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein.
(d)
This Agreement and the Investment Agreement supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.
(e)
The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. Whenever required by the context of this Agreement, the singular shall include the plural and masculine shall include the feminine. This Agreement shall not be construed as if it had been prepared by one of the parties, but rather as if all the parties had prepared the same.
(f)
This Agreement may be executed in two or more identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission or by e-mail delivery of a PDF format of a copy of this Agreement bearing the signature of the party so delivering this Agreement.
(g)
Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
10
(h)
In case any provision of this Agreement is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Agreement will not in any way be affected or impaired thereby.
Section 12.
DISPUTES SUBJECT TO ARBITRATION GOVERNED BY DELAWARE LAW.
All disputes arising under this agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Delaware, without regard to principles of conflict of laws. The parties to this agreement will submit all disputes arising under this agreement to arbitration in Delaware before a single arbitrator of the American Arbitration Association (AAA). The arbitrator shall be selected by application of the rules of the AAA, or by mutual agreement of the parties, except that such arbitrator shall be an attorney admitted to practice law in the Commonwealth of Delaware. No party to this agreement will challenge the jurisdiction or venue provisions as provided in this section. Nothing contained herein shall prevent the party from obtaining an injunction.
*.*.*
11
SIGNATURE PAGE OF REGISTRATION RIGHTS AGREEMENT
Your signature on this Signature Page evidences your agreement to be bound by the terms and conditions of the Investment Agreement and the Registration Rights Agreement as of the date first written above.
The undersigned signatory hereby certifies that he has read and understands the Registration Rights Agreement, and the representations made by the undersigned in this Registration Rights Agreement are true and accurate, and agrees to be bound by its terms.
DUTCHESS OPPORTUNITY FUND, II, LP, | |
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By: | /s/ Douglas H. Leighton |
| Douglas H. Leighton |
| Managing Member of: |
| Dutchess Capital Management, II, LLC |
| General Partner to: |
| Dutchess Opportunity Fund, II, LP |
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OMEGA COMMERCIAL FINANCE CORP. | |
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By: | /s/ Jon S, Cummings, IV |
| Jon S, Cummings, IV |
| President/Chairman |
| (Principal Executive Officer) |
Signature Page to Registration Rights Agreement
Exhibit 21.1
List of Subsidiaries
Omega Commercial Finance Corporations (OCFN) subsidiaries from - Past to Present:
1.
Omega Capital Funding LLC converted to Omega Commercial Finance the Limited Liability Company - PAST (please do not get confused with the OCFN)
2.
Then in 2009 Omega Commercial Finance Limited Liability Company was CLOSED PAST
3.
Omega Factoring LLC PRESENT
4.
CCRE Capital LLC PRESENT
Bio of Jon S. Cummings IV- Please see previous filings
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Registration Statement on Form S-1 of our report dated February 20, 2012 relating to the financial statements of Omega Commercial Finance Corporation.
We also consent to the reference to our Firm under the caption "Experts" in the Registration Statement.
Bongiovanni & Associates CPAs
Mike Bongiovanni, CPA, Partner
19720 Jetton Road, 3rd Floor
Cornelius, NC 28031
Tel: 704-892-8733
Fax: 704-892-6487
Email: mikebongiovanni@msn.com
/s/ Bongiovanni & Associates C.P.As
Bongiovanni & Associates C.P.As
March 26, 2012
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