I need help with the editing my narrative of a small portion of a proposed tertiary securities offering,
I intend to make a filing with the CO SOS office for securities on Form U-7. It is, essentially, a question and answer fill in form. Above and beyond the fill in box questions, there is opportunity to make pertinent additional comments. I would like to ensure that my comments do not duplicate those answered in the fill in portion of the Form. I am not asking for legal guidance but rather editing to avoid duplication and clarification where my drafting is wanting.
Securities laws require that a company warn prospective purchasers of all material risks that apply to the company and its offering. A company that fails to disclose all material risks may face liability under state and federal law.
The following is a summary of the material risks that apply to the Company and this offering. The Company has checked off risks that it has identified as applicable to this offering, and has included additional risk factors that are unique to the Company. You should carefully consider these risks prior to investing in this offering. Failure to disclose all material risks may cause the Company, its officers, directors, managers, and/or promoters to be liable for securities fraud.
☒ The Company has limited or no operating history. As a new enterprise, the Company is likely to be subject to risks that management has not anticipated.
☒ Because the Company has only been operating for a short period of time, it has produced little or no profit. There is no assurance that it will ever produce a profit.
☒ You may lose your entire investment. You should not invest in this offering unless you can afford to lose your entire investment.
☒ The Company has limited resources and will not be able to continue operating without the proceeds from this offering. It is possible that the proceeds from this offering and other resources may not be enough for the Company to continue operating.
☒ The Company expects to experience losses from its operations and cannot predict when or if it will become profitable. If the Company becomes profitable, it may not be sustainable.
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☒ The Company has incurred losses since inception and may incur future losses. The Company has not yet generated a profit from operations. As of the date of the Company’s most recent financial statements, it had an accumulated deficit of
Experience of Management
☒ None of the Company’s executive officers, directors, and/or managers has managed a company in this industry. The Company’s ability to operate successfully may depend on its ability to attract and retain qualified personnel, who may be in great demand.
☐ None of the Company’s executive officers, directors, and/or managers has experience in managing an enterprise that is in a development stage.
☐ Prior to organizing the Company, one or more of its executive officers, directors, and/or managers operated a business in which shareholders lost part or all of their investment. The Company’s ability to operate successfully may depend on its executive officers, directors, and/or managers to succeed where they have failed before.
☒ The Company’s executive officers, directors, and/or managers will continue to have substantial ownership and control over the Company after the offering.
☒ The Company’s success depends substantially on the experience and knowedge of its executive officers, directors, and/or managers. The Company may be harmed if it loses their services and it is not able to attract and retain qualified replacements.
☒ The Company does not maintain key person life or disability insurance on executive officers, directors, and/or managers that are important to the Company’s success. The loss of any of these individuals could have a substantial negative impact on the Company and your investment.
☐ The Company operates in a highly technical industry which is characterized by frequent introductions of new products and services into the market. The Company’s success will depend in part on its ability to improve on such products or services, develop new products or services and provide necessary support.
☒ A large number of enterprises provide products or services similar to the Company’s. The Company will be competing with established businesses that have an operating history, and greater financial resources, management experience and market share than the Company. There can be no assurance that the Company will be able to compete or capture adequate market share. The Company may not be profitable if it cannot compete successfully with other businesses.
Here are my additional notes:
An investment in our common stock involves a significant degree of risk.In addition to the other information in this offering circular, you should carefully consider the following factors in evaluating us and our business before purchasing the shares of common stock offered hereby. This offering circular contains, in addition to historical information, forward-looking statements which involve risks and uncertainties. Our actual results could differ materially. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below, as well as those discussed elsewhere in this offering circular, including the documents incorporated by reference.
We are selling this offering without an underwriter and may be unable to sell any shares. Unless we are successful in selling the shares and receiving the proceeds from this offering, we may have to seek alternative financing to implement our business plans and investors would receive a return of their entire investment.
This offering is self-underwritten, that is, we will not engage the services of an underwriter to sell the shares. We intend to sell them through our officer and director, who will not receive a commission. He will offer the shares to friends, relatives, acquaintances, and business associates. However, there is no guarantee that he will be able to sell any of the shares.
We are highly dependent on the services of Patrick Brooks, our sole officer and sole director.
Our success depends on the efforts and abilities of our sole officer and director, Patrick Brooks. The loss of the services of Mr. Brooks would have a material adverse effect on the Company. Our success also depends on our ability to attract and retain qualified personnel required to fully implement our business plan. There can be no assurance that we will be successful in these efforts.
Our officer and director is not a full-time employee of our Company. He is actively involved in other business pursuits and will devote only a portion of his time to our affairs, estimated to be not more than 20 hours per week, on average. In all likelihood, there will be occasions when the time requirements of our business will conflict with the demands of his other business activities. Such conflicts may require that we seek to employ additional personnel. We cannot assure you that we will be financially able to employ such persons, if required, or that such personnel will be available or that they can be employed on terms favorable to the Company. We have not established a policy for determining how conflicts of interest with Mr. Brooks’ other business activities would be resolved and we cannot assure you that any conflicts which may arise will be resolved in our favor. If Mr. Brooks is unable to fulfill any aspect of his duties to the Company, we may experience a shortfall or complete lack of revenue resulting in little or no profits and eventual closure of the business.
Subject to negotiation, our fees may be paid in the form of restricted stock of our clients.
In certain situations, we may negotiate with our clients to receive all or a portion of payment owed to us for services rendered in the form of equity in that client’s company. Such determination will be made by our sole officer, Patrick Brooks. While we generally prefer to receive cash compensation, our officer may believe that certain situations require the receipt of restricted equity as compensation. Risks associated with receiving restricted equity compensation include, but are not limited to:
problems of liquidity where no market exists for such equity and therefore the Company cannot sell such equity and realize cash;
the client goes out of business and such equity is rendered worthless;
the equity is sold for less than the value of services provided by us to the client.
We believe that it is necessary to receive a limited amount of equity in order to hedge the associated risks involved with such form of payment. However, any loss we experience related to equity compensation could have a material effect on our ability to become profitable, and in the long term, to continue as a going concern.
We are subject to all the complications and difficulties associated with new enterprises.
We are a consulting company and while our management believes that it can implement our business plan, attract talented personnel, and develop a market for its products and services, our plan of operations is subject to changing needs of target clientele, market conditions and various other factors out of our control. For these and other reasons, the purchase of the shares should only be made by persons who can afford to lose their entire investment.
Our ability to become profitable and continue as a going concern will be dependent on our ability to attract, employ and retain highly skilled individuals to serve our clients.
The nature of our business requires that we employ “skilled persons”, to perform managerial tasks, and other highly skilled and specialized tasks for our clientele. We define “skilled persons” as professionals with defined skill sets including auditing, corporate accounting, public company compliance reporting, finance, business writing, and research and development.
Whilst we have identified several skilled persons with whom Mr. Brooks has previously worked, and whom we plan on contacting for employment with our Company, as of the date hereof, we have not contacted nor have we entered into any agreements with any skilled persons, as we do not yet have the funds to retain them.
Our failure to retain such personnel could have a material adverse effect on our ability to offer services to clientele and could potentially have a negative effect on our business. While we are confident that we will be able to find such persons, there is no guarantee that they will be available and willing to work for us in the future, nor is there any guarantee that we could afford to retain them if they are available at a future time.
Our engagements could result in professional liability, which could be very costly and damage our reputation.
Our engagements may involve complex analyses and the exercise of professional judgment. As a result, we are subject to the risk of professional liability. If a client questions the quality of our work, the client could threaten or bring a lawsuit to recover damages or contest its obligation to pay our fees. Litigation alleging that we performed negligently or breached any other obligations to a client could expose us to significant legal liabilities and, regardless of outcome, is often very costly, could distract our management and could damage our reputation. We are not always able to include provisions in our engagement agreements that are designed to limit our exposure to legal claims relating to our services. Even if these limiting provisions are included in an engagement agreement, they may not protect us or may not be enforceable under some circumstances. In addition, we intend to carry professional liability insurance to cover many of these types of claims, but the policy limits and the breadth of coverage may be inadequate to cover any particular claim or all claims plus the cost of legal defense. For example, we intend to provide services on engagements in which the impact on a client may substantially exceed the limits of our errors and omissions insurance coverage. If we are found to have professional liability with respect to work performed on such an engagement, we may not have sufficient insurance to cover the entire liability.
Voting control of our common stock is controlled by Mr. Brooks. This concentration of voting control gives Mr. Brooks the ability to control all matters submitted to our shareholders for approval and to control our management and affairs, including extraordinary transactions such as mergers and other changes of corporate control.
We may not be able to compete successfully with current and future competitors.
There is ease of market entry for other companies that choose to compete with us. Effective competition could result in price reductions, reduced margins or have other negative implications, any of which could adversely and materially affect our business and chances for success. Competition is likely to increase significantly as new companies enter the market and current competitors expand their services. Many of these potential competitors are likely to enjoy substantial competitive advantages, including larger staffing numbers, greater name recognition, larger customer bases and substantially greater financial, marketing, technical and other resources. To be competitive, we must respond promptly and effectively to the challenges of financial change, evolving standards and competitors’ innovations by continuing to enhance our services and sales and marketing channels. Any pricing pressures, reduced margins or loss of market share resulting from increased competition, or our failure to compete effectively, could fatally damage our business and chances of success.
We may not be able to manage our growth effectively.
We must continually implement and improve our products and/or services, operations, operating procedures, and quality controls on a timely basis, as well as expand, train, motivate and manage our work force to accommodate anticipated growth and compete effectively in our market segment. Successful implementation of our strategy also requires that we establish and manage a competent, dedicated work force and employ additional key employees in corporate management, product design, client service and sales. We can give no assurance that our personnel, systems, procedures, and controls will be adequate to support our existing and future operations. If we fail to implement and improve these operations, there could be a material, adverse effect on our business, operating results, and financial condition.
If we do not continually update our services, they may become obsolete and we may not be able to compete with other companies.
We cannot assure you that we will be able to keep pace with advances or that our services will not become obsolete. We cannot assure you that competitors will not develop related or similar services and offer them before we do, or do so more successfully, or that they will not develop services and products more effective than any that we have or are developing. If that happens, our business, prospects, results of operations and financial condition will be materially adversely affected.
We have agreed to indemnify our officers and directors against lawsuits to the fullest extent of the law.
We are a Colorado corporation. Colorado law permits the indemnification of officers and directors against expenses incurred in successfully defending against a claim. Colorado law also authorizes Colorado corporations to indemnify their officers and directors against expenses and liabilities incurred because of their being or having been an officer or director. Our organizational documents provide for this indemnification to the fullest extent permitted by law.
If we engage in any acquisition, we will incur a variety of costs and may never realize the anticipated benefits of the acquisition.
We may attempt to acquire businesses, technologies, services or products or license technologies that we believe are a strategic fit with our business. We have limited experience in identifying acquisition targets, and successfully completing and integrating any acquired businesses, technologies, services, or products into our current infrastructure. The process of integrating any acquired business, technology, service, or product may result in unforeseen operating difficulties and expenditures and may divert significant management attention away from our ongoing business operations. As a result, we will incur a variety of costs in connection with an acquisition and may never realize our anticipated benefits.
Investors in this offering will bear a substantial risk of loss due to immediate and substantial dilution.
The principal shareholder of our Company is the Brooks Family Irrevocable Trust. Mr. Patrick Brooks is a trustee but not a beneficiary of the Trust. Mr. Brooks disclaims any beneficiary interest in the Trust. The Trust owns 80,000 restricted shares of the Company’s Common Stock. Upon the sale of the Common Stock offered hereby, the investors in this offering will experience an immediate and substantial “dilution.” Therefore, the investors in this offering will bear a substantial portion of the risk of loss. Additional sales of the Company’s Common Stock in the future could result in further dilution. Please refer to the section entitled “Dilution” herein.
[pc3]I feel you have talked about this in the next comment.
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