UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of The Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported)
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May
28, 2010
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PRINCIPLE
SECURITY INTERNATIONAL INC.
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(Exact
name of registrant as specified in its charter)
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Nevada
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333-145730
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98-0538119
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(IRS
Employer Identification No.)
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65 S. Main Street, Ste A300, Pennington New
Jersey
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08543
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(Address of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code
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(609)
216-7938
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Unit
B – 2015 Burrard Street, Vancouver, BC, Canada V6J
3H4
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(Former
name or former address, if changed since last
report.)
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
FORWARD
LOOKING STATEMENTS
This
current report contains forward-looking statements as that term is defined in
section 27A of the United States Securities Act of 1933, as amended, and section
21E of the United States Securities Exchange Act of 1934, as
amended. These statements relate to future events or our future
financial performance. In some cases, you can identify
forward-looking statements by terminology such as "may", "will", "should",
"intends", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential", or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and
involve known and unknown risks, uncertainties and other factors, including the
risks in the section entitled "Risk Factors" on page 5 of this current report,
which may cause our or our industry's actual results, levels of activity or
performance to be materially different from any future results, levels of
activity or performance expressed or implied by these forward-looking
statements.
Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity or
performance. Except as required by applicable law, including the
securities laws of the United States, we do not intend to update any of the
forward-looking statements to conform these statements to actual
results.
Unless
otherwise specified, all dollar amounts are expressed in United States dollars
and all references to "common shares" refer to the common shares in our capital
stock.
As used
in this current report and unless otherwise indicated, the terms "we", "us",
"our", “company”, and “Principle” mean Principle Security International Ltd. and
our subsidiaries, unless otherwise indicated.
ITEM
1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On May
28, 2010, we entered into and closed a share exchange agreement with Leeward
Group, Inc. a Delaware corporation, and the shareholders of
Leeward. Pursuant to the terms of the share exchange agreement, we
have acquired all of the issued and outstanding shares of Leeward’s common stock
in exchange for the issuance by our company of 65,000,000 shares of our common
stock to the shareholders of Leeward.
Business of Leeward
Group, Inc
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Leeward
is a diversified retail insurance agency and risk consulting
group. It sells property, casualty, life and health insurance
products to customers and creates and administers insurance programs and risk
management services including reinsurance brokerage. It acts as a
broker or
agent. .
The
closing of the transactions contemplated in the share exchange agreement and the
acquisition of all of the issued and outstanding common stock in the capital of
Leeward occurred on May 28, 2010. Please refer to the information provided under
Item 2.01 of this current report for information related to the share exchange
agreement and our business as a result of the acquisition.
Concurrently
with the closing of the share exchange agreement, we entered into a stock
purchase agreement for the disposition of our wholly owned subsidiary, Principle
Security International Incorporated, to our former director and officer, Charles
Payne, for the purchase price of $1.00.
ITEM
2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
On May
28, 2010, we entered into a share exchange agreement with Leeward Group Inc. and
the shareholders of Leeward. The closing of the transactions contemplated in the
share exchange agreement and the acquisition of all of the issued and
outstanding common shares in the capital of Leeward also occurred on May 28,
2010. In accordance with the closing of the share exchange agreement,
we issued 65,000,000 shares of our common stock to the former shareholders of
Leeward in exchange for the acquisition, by our company, of all of the
12,105,802 issued and outstanding shares of Leeward.
As set
out in the share exchange agreement, the closing of the share exchange agreement
was subject to the satisfaction of certain conditions precedent, including,
among others, the following:
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1.
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The
representations and warranties of Leeward Group, Inc., it’s shareholders
and our company set forth in the share exchange agreement remain true,
correct and complete in all respects as of the closing;
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2.
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All
of the covenants and obligations that the respective parties are required
to perform or to comply with pursuant to the share exchange agreement at
or prior to the closing must have been performed and complied with in all
material respects;
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3.
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Leeward
Group, Inc. and our company having received duly executed copies of all
third party consents and approvals contemplated by the share exchange
agreement, if any;
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4.
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Leeward
Group, Inc. and our company having been reasonably satisfied with their
due diligence investigations of the other party that is reasonable and
customary in a similar transaction; and
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5.
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Leeward
Group, Inc. will have delivered to our company audited financial
statements prepared in accordance with United States GAAP and audited by
an independent auditor registered with the Public Company Accounting
Oversight Board in the United
States.
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Our
company had 23,010,225 common shares issued and outstanding as of May 28, 2010
immediately prior to the closing of the share exchange agreement, and
100,000,000 shares issued and outstanding upon closing of the share exchange
agreement, as a result of the issuance of 65,000,000 common shares in connection
with the closing of the share exchange agreement and the concurrent issuance of
11,989,775 to HE Capital. As of the closing date, the former
shareholders of Leeward Group, Inc. held 65% of the issued and outstanding
common shares of our company. The issuance of the 65,000,000 common
shares to the former shareholders of Leeward Group, Inc. was deemed to be a
reverse acquisition for accounting purposes. Leeward Group, Inc., the
acquired entity, is regarded as the predecessor entity as of May 28,
2010. Starting with the periodic report for the quarter in which the
acquisition was consummated, our company will file annual and quarterly reports
based on the December 31st fiscal year end of Leeward Group, Inc. Such financial
statements will depict the operating results of Leeward Group, Inc., including
the acquisition of our company, from May 28, 2010.
Concurrently
with the closing of the share exchange agreement, we entered into a stock
purchase agreement for the disposition of our wholly owned subsidiary, Principle
Security International Incorporated, to our former director and officer, Charles
Payne, for the purchase price of $1.00.
Because
we were a shell company before our acquisition of all of the common stock of
Leeward Group, Inc., we have included in this Current Report on Form 8-K, the
information on our company that would be required if we were filing a general
form for registration of securities on Form 10.
We are a
development stage company. For further details on our business, please see the
section entitled “Description of Our Business” beginning on page 3.
BUSINESS
General
Overview and Business Development over the Last Three Years
We were
incorporated in the State of Nevada on November 27, 2006. We have
been a development stage company. Through our wholly-owned Canadian subsidiary,
Principle Security International Incorporated, we were working towards the
establishment of a customer service oriented security firm specializing in
uniformed guard services, private investigations and a training facility for
security personnel. We have not yet generated or realized any revenues from our
business operations.
Since
inception, we had been implementing the early phases of our business plans,
including the establishment of our office, making application for our security
business license, making application and scouting locations for our accredited
security training facility, making application for our surety bond, registering
the URL address necessary to create our website, building a database of
potential clients, commencing interviews to hire a salesperson, designing our
corporate logos/badges and ordering uniforms. On December 15, 2006,
we obtained our surety bond in the amount of as required by the Private
Investigators and Security Agencies Act. This bond enabled us to make
application for a security business license. On January 3, 2007, we were granted
our security business license. On September 8, 2008, we received a
two-year approval to operate a security training school under the name
“Principle Security Training Academy”.
However,
we have not been able to achieve commercially viable operations for our proposed
security company business and as a result had been investigating further
opportunities to maintain and enhance shareholder value.
On May
28, 2010, we entered into a share exchange agreement with Leeward Group, Inc., a
Delaware corporation, and the shareholders of Leeward Group, Inc. The closing of
the transactions contemplated in the share exchange agreement and the
acquisition of all of the issued and outstanding common shares in the capital of
Leeward Group, Inc. also occurred on May 28, 2010. In accordance with
the closing of the share exchange agreement, we issued 65,000,000 shares of our
common stock to the former shareholders of Leeward Group, Inc. in exchange for
the acquisition, by our company, of all of the 12,105,802 issued and outstanding
shares of Leeward Group, Inc.
Corporate
History of Leeward Group, Inc. and Corporate Structure
Leeward
Group, Inc., a Delaware company, was incorporated on June 24, 2008.
Business
Subsequent to the Closing of the Share Exchange Agreement
As of the
closing date of the share exchange agreement on May 28, 2010 we commenced the
business of a diversified retail insurance agency and risk consulting
group. We sell property, casualty, life and health insurance products
to customers; we create and administer insurance programs and risk management
services including reinsurance brokerage. We act as a broker or
agent. We do not assume any underwriting risks. We provide
our customers with insurance contracts underwritten by insurance companies that
assume the underwriting risks. We are headquartered in Pennington,
New Jersey.
As of
December 31, 2009, our group employed 16 full time equivalent persons. Our
insurance agency and program business provides a broad range of insurance
products and services to commercial, professional and individual customers. We
have multiple locations in the northeast to provide sales and servicing for our
customers. The categories of insurance we principally sell include: property
insurance relating to physical damage to property; casualty insurance relating
to legal liabilities, workers’ compensation, commercial and private passenger
automobile coverages; and fidelity and surety bonds. In addition, we sell and
service group and individual life, accident, disability, health,
hospitalization, medical and dental insurance.
Our
program business markets specialty products and services to associations,
industries and businesses. We have three insurance programs: 1) hotel
umbrella insurance for franchise hotels; 2) personal umbrella for lawyers; and
3) mobile phone insurance program for telecommunications companies.
Our
Franchise Hotel Umbrella program provides umbrella insurance policies for
limited service franchise hotels and motels and offers limits of $5 Million, $10
Million and $15 Million.
Our
Personal Umbrella Product for Lawyers provides personal umbrella
insurance for lawyers with limits to $10 Million.
Our
Cellphone Program provides coverage for loss, theft or accidental damage to a
cellphone. It is distributed to consumers through rural telecommunications
companies nationwide.
We are
compensated for our services primarily by the commissions received from the sale
of insurance contracts to our clients. The commissions are usually a
percentage of the insurance premiums paid by the insured. Commission
rates generally vary with the type of insurance sold and the insurance company
that underwrites the insurance policy. We may also receive a “profit
sharing contingent commission” from an insurance company which is primarily
based on the underwriting results, growth, overall volume and/or
retention. The amount of revenue from commissions and fees fluctuates
based on factors such as insurance premiums, retention rates of existing
customers, growth rates of new customers, and the type of
insurance.
Employees
As of
December 31, 2009 we had 16 full time equivalent employees. None of
our employees are represented by a labor union, and we consider our relations
with our employees to be satisfactory.
Customers
For the
year ended December 31, 2009, approximately 9.6%, 6.8%, 6.0%, 5.8%, 5.5%
and 5.2%, respectively, of our total revenues were derived from insurance
policies underwritten by six separate insurance companies. If one or more of
these insurance companies were to seek to terminate their contract with us, we
believe that other insurance companies are available to underwrite the business,
although some additional expense and loss of market share could possibly result.
No other insurance company accounts for 5% or more of our total
revenues. No material part of our insurance agency and program
business is attributable to a single customer. During 2009,
commissions and fees from our largest single customer represented less than one
percent of the total commissions and fees revenue.
Competition
Competition
in the insurance intermediary sector is based on quality of service, price of
insurance premiums, policy coverage and innovation. Overall the
insurance intermediary industry is a highly competitive industry with multiple
distribution channels. There are numerous firms providing insurance
intermediary services: brokers, financial institutions, independent insurance
agents, and insurance companies through direct sales, internet sales and captive
insurance agents. A number of large regionally based insurance
intermediaries with substantially greater resources and market presence compete
with us in the northeast United States and elsewhere.
In 2008,
the US Insurance Industry had net premiums written of $1.1 Trillion with
approximately, $441 Billion in Property and Casualty insurance premiums written
and $628 Billion in Life and Health insurance premiums. There are
2,741 Property and Casualty insurance companies and 1,128 Life and Health
insurance companies in the United States. There are 2.3 million
people employed in the insurance industry with 907,000 employed in the insurance
intermediary sector. It is estimated, Independent Insurance Agents and Brokers
of America in their 2008 Agency University Study released in 2009 that there are
approximately 37,500 independent insurance agencies in the United
States. Of that it is estimated that 17% of the independent insurance
agencies (6,375) had commission revenue less than $150,000; 54% of the agencies
(20,250) had commission revenues between $150,000 and $1.25
million. It is further estimated that 13% of the agencies
(4,875) had revenues between $1.25 million and $2.5 million; and 14% of the
agencies (5,250) had revenues between $2.5 million and $10 million.
The
distribution of insurance distribution channels are segmented as follows: direct
sales- insurance company sales to customers; captive insurance agency- agencies
owned by or franchised by insurance companies that market the insurance
company’s products and services; and the independent insurance agency- agencies
that are independently owned that market multiple products for multiple
insurance companies, and Internet.
Distribution
Our
products are distributed through our retail agencies and insurance producers;
and our insurance programs are distributed on a wholesale basis through
non-affiliated insurance agencies and associations.
We market
our products through referrals, signage, electronic marketing through the
internet, lead and appointment setting services. Our internet
capabilities allow us to provide an insurance indication for a potential
customer in minutes.
We are
licensed individually or corporately in 50 states with offices in New Jersey,
New York, Rhode Island and Massachusetts.
Compliance
with Government Regulation
The
insurance industry is a state-regulated industry. Insurance laws are
enacted, amended and adjudicated on a state level. Given our business
is concentrated in a few states, we have a greater risk exposure to unfavorable
changes in the regulatory environment, laws, judicial decisions, adverse
economic conditions, natural or other disasters in those states than more
geographically diversified insurance intermediaries.
We are
licensed individually or corporately in 50 states with offices in New Jersey,
New York, Rhode Island and Massachusetts. We and/or designated
employees must be licensed to act as agents or brokers by state regulatory
authorities in states in which we conduct business. Regulations and
are often complex and vary by state. All
applicable
laws and regulations are subject to interpretation, change and/or amendment by
the individual state regulatory and/or legislative governing
bodies. Such regulatory authorities have broad discretion as to
granting, renewing and revoking licenses; issuing fines and/or
penalties. The possibility exists that we and/or our employees could
be excluded or temporarily suspended from conducting insurance intermediary
services and/or all of our activities by a particular state.
Subsidiaries
As of
this date, Leeward has two operating subsidiaries, Sangamon Associates, Inc. and
Flagship Insurance Agency, Inc.
Intellectual
Property
We do not
own, either legally or beneficially, any patent or trademark.
RISK
FACTORS
Our
business operations are subject to a number of risks and uncertainties,
including, but not limited to those set forth below:
Risks
Related to our Business
Volatility
or declines in premiums or other adverse trends in the insurance industry may
seriously undermine Leeward’s profitability.
Leeward
derives much of its revenue from commissions and fees for its brokerage
services. Leeward does not determine the insurance premiums on which its
commissions are generally based. Moreover, insurance premiums are cyclical in
nature and may vary widely based on market conditions. Because of these market
cycles for insurance product pricing, which Leeward cannot predict or control,
its brokerage revenues and profitability can be volatile or remain depressed for
significant periods of time.
As
traditional risk-bearing insurance companies continue to outsource the
production of premium revenue to non-affiliated brokers or agents such as
Leeward, those insurance companies may seek to reduce further their expenses by
reducing the commission rates payable to insurance agents or brokers. The
reduction of these commission rates, along with general volatility and/or
declines in premiums, may significantly affect Leeward’s profitability. Because
Leeward does not determine the timing or extent of premium pricing changes,
Leeward cannot accurately forecast its commission revenues, including whether
they will significantly decline. As a result, Leeward’s budgets for future
acquisitions, capital expenditures, dividend payments, loan repayments and other
expenditures may have to be adjusted to account for unexpected changes in
revenues, and any decreases in premium rates may adversely affect the results of
its operations.
In
addition, there have been and may continue to be various trends in the insurance
industry toward alternative insurance markets including, among other things,
greater levels of self-insurance, captives, rent-a-captives, risk retention
groups and non-insurance capital markets-based solutions to traditional
insurance. While Leeward historically has been able to participate in certain of
these activities on behalf of its customers and obtain fee revenue for such
services, there can be no assurance that Leeward will realize revenues and
profitability as favorable as those realized from its traditional brokerage
activities.
Leeward
faces significant competitive pressures in each of its businesses.
The
insurance brokerage and service business is highly competitive and there are
many insurance brokerage and service organizations as well as individuals on a
global basis who actively compete with Leeward in one or more areas of its
business. Leeward competes with many firms that are significantly larger than
Leeward, in terms of revenues, in the brokerage markets. In addition, there are
various other competing firms that operate nationally or that are strong in a
particular region or locality and may have, in that region or locality, an
office that is as large as or larger than, in terms of revenues, the particular
local office of Leeward. Leeward believes that the primary factors determining
its competitive position with other organizations in its industry are the
quality of the services rendered and the overall costs to its clients. Losing
business to competitors offering similar products at lower prices or having
other competitive advantages would adversely affect Leeward’s
business.
In
addition, the increase in competition due to new legislative or industry
developments could adversely affect Leeward. These developments
include:
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An
increase in capital-raising by insurance underwriting companies, which
could result in new capital in the industry, which in turn may lead to
lower insurance premiums and
commissions;
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The
selling of insurance by insurance companies directly to insureds without
the involvement of a broker or other
intermediary;
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Changes
in Leeward’s business compensation model as a result of regulatory
developments;
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The
establishment of programs by Federal and state governments to provide
health insurance or, in certain cases, property insurance in
catastrophe-prone areas or other alternative market types of coverage,
which compete with, or completely replace, insurance products offered by
insurance carriers; and
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An
increase in competition from new market participants such as banks,
accounting firms and consulting firms offering risk management or
insurance brokerage services.
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New
competition as a result of these or other competitive or industry developments
could cause the demand for Leeward’s products and services to change, which
could in turn adversely affect Leeward’s results of operations and financial
condition.
The
current disruption in the global credit markets and instability of financial
systems, and a continuation or worsening of the current economic recession, may
adversely affect Leeward’s results of operations and financial
condition.
The
current disruption in the global credit markets, the repricing of credit risk
and the deterioration of the financial and real estate markets have created
increasingly difficult conditions for financial institutions and certain
insurance companies. These conditions include significant losses, greater
volatility, significantly less liquidity, widening of credit spreads and a lack
of price transparency in certain markets. These conditions have resulted in the
failure of a number of financial institutions and unprecedented action by
governmental authorities and central banks around the world, including investing
in or lending money to financial institutions and insurance companies that are
perceived to need additional capital. It is difficult to predict how long these
conditions will persist and the extent to which Leeward’s markets, products and
business will be adversely affected.
These
unprecedented disruptions in the credit and financial markets and the resulting
impact on a number of financial institutions have limited access to capital and
credit for many companies. The failure of a lender could adversely affect its
ability to borrow on that facility, which over time could negatively impact
Leeward’s ability to consummate significant acquisitions or make other
significant capital expenditures. Continued adverse conditions in the credit
markets in future years could adversely affect the availability and terms of
future borrowings, renewals or refinancings.
The
disruptions in the credit and financial markets also led to a general
deterioration in the economy, which could adversely impact Leeward in future
years as a result of reductions in the overall amount of insurance coverage that
its clients purchase due to reductions in their headcount, payroll, properties,
and the market values of assets, among other factors. Such reductions could also
adversely impact Leeward’s commission revenues when exposure audits by the
carriers are performed and if subsequent downward premium adjustments are
determined. The income effects of subsequent premium adjustments are recorded
when the adjustments become known, and, as a result, any improvement in
Leeward’s results of operations and financial condition may lag an improvement
in the economy. In addition, some of Leeward’s clients may cease operations
completely in the event of a prolonged deterioration in the economy, which would
have an adverse effect on Leeward’s results of operations and financial
condition. Leeward also has a significant amount of trade accounts receivable
from some of the insurance companies with which it places insurance. If those
insurance companies experience liquidity problems or other financial
difficulties, Leeward could encounter delays or defaults in payments owed to
Leeward, which could have a significant adverse impact on Leeward’s consolidated
financial condition and results of operations. In addition, if a significant
insurer fails or withdraws from writing certain insurance coverages that Leeward
offers its clients, overall capacity in the industry could be negatively
affected, which could reduce Leeward’s placement of certain lines and types of
insurance and, as a result, reduce its revenues and profitability. The failure
of an insurer with whom Leeward places business could also result in errors and
omissions claims by Leeward’s clients, which could adversely affect Leeward’s
results of operations and financial condition.
Leeward
has historically engaged in a number of acquisitions of insurance brokers and
agencies. Leeward may not be able to continue to implement such an acquisition
strategy in the future and there are risks associated with such
acquisitions.
In the
past several years, Leeward has completed numerous acquisitions of insurance
brokers and agencies and may continue to make such acquisitions in the future.
Leeward’s acquisition program has been an important part of its historical
growth and Leeward believes that similar acquisition activity will be critical
to maintaining comparable growth in the future. Failure to successfully identify
and complete acquisitions likely will result in Leeward achieving slower growth.
Moreover, even if Leeward is able to identify appropriate acquisition targets,
it may not be able to execute acquisition transactions on favorable terms or
integrate such targets following acquisition in a manner that allows Leeward to
realize the anticipated benefits of such acquisitions. Additionally, Leeward may
incur or assume unanticipated liabilities or contingencies in connection with
its acquisitions. If any of these developments occur, Leeward’s results of
operations could be adversely affected.
We
have incurred net losses since commencing business and expect losses to continue
for the foreseeable future.
We have
had modest revenues to date. We had a net loss of $242,957 for the year ended
December 31, 2009 and a net loss of $90,956 for the three months ended March 31,
2010. As at March 31, 2010, we had cash of $93,670 and a working capital deficit
of $140,029.
Our
ability to continue as a going concern is in substantial doubt.
The
ability of our company to continue as a going concern is in substantial doubt
and is dependent on achieving profitable operations and obtaining the necessary
financing in order to develop our business. The outcome of these matters cannot
be predicted at this time. Our future operations are dependent on the market’s
acceptance of our services in order to ultimately generate future profitable
operations, and our ability to secure sufficient financing to fund future
expansion or operations. There can be no assurance that our services will be
able to secure market acceptance. Management plans to raise additional equity
financing to enable our company to complete our development plans. However,
there can be no assurance that we will be successful in raising additional
financing. Our financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
We
are subject to specific risks of litigation that are unique to the insurance
industry.
We are
subject to various potential claims relating principally to alleged errors and
omissions in connection with the placement or servicing of insurance in the
ordinary course of business. Because we often assist clients with matters
involving substantial amounts of money, including the placement of insurance,
clients may assert errors and omissions claims against us alleging potential
liability for all or part of the amounts in question. Claimants may seek large
damage awards, and these claims may involve potentially significant legal costs.
While most of the errors and omissions claims made against us would be covered
by our professional indemnity insurance, our business results of operations,
financial condition and liquidity may be adversely affected if, in the future,
our insurance coverage proves to be inadequate or unavailable. Our ability to
obtain professional indemnity insurance in the amounts and with the deductibles
we desire in the future may be adversely impacted by general developments in the
market for such insurance or our own claims experience. In addition, claims,
lawsuits and other proceedings may harm our reputation or divert management
resources away from operating our business.
We
have limited financial and management resources to pursue our growth
strategy.
Our
growth strategy may place a significant strain on our management, operational
and financial resources. We have negative cash flow from operations and continue
to seek additional capital. We will have to obtain additional capital either
through debt or equity financing. There can be no assurance, however, that we
will be able to obtain such financing on terms acceptable to our
company.
If we
raise additional funds through the issuance of equity or convertible securities,
these new securities may contain certain rights, preferences or privileges that
are senior to those of our common shares. Additionally, the percentage of
ownership of our company held by existing shareholders will be
reduced.
We
are dependent upon our officers for management and direction, and the loss of
any of these persons could adversely affect our operations and
results.
We are
dependent upon our officers for execution of our business plan. The loss of any
of our officers could have a material adverse effect upon our results of
operations and financial position. We do not maintain “key person” life
insurance for any of our officers. The loss of any of our officers could delay
or prevent the achievement of our business objectives
Risks
Associated with Our Common Stock
Trading
on the OTC Bulletin Board may be volatile and sporadic, which could depress the
market price of our common stock and make it difficult for our stockholders to
resell their shares.
Our
common stock is quoted on the OTC Bulletin Board service of the Financial
Industry Regulatory Authority. Trading in stock quoted on the OTC Bulletin Board
is often thin and characterized by wide fluctuations in trading prices, due to
many factors that may have little to do with our operations or business
prospects. This volatility could depress the market price of our common stock
for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board
is not a stock exchange, and trading of securities on the OTC Bulletin Board is
often more sporadic than the trading of securities listed on a quotation system
like NASDAQ or a stock exchange like Amex. Accordingly, shareholders may have
difficulty reselling any of their shares.
Our
stock is a penny stock. Trading of our stock may be restricted by the SEC’s
penny stock regulations and FINRA’s sales practice requirements, which may limit
a stockholder’s ability to buy and sell our stock.
Our stock
is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9
which generally defines “penny stock” to be any equity security that has a
market price (as defined) less than $5.00 per share or an exercise price of less
than $5.00 per share, subject to certain exceptions. Our securities are covered
by the penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
“accredited investors”. The term “accredited investor” refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the SEC which
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker-dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer’s
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customer’s confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
these rules, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser’s written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in, and limit the marketability of, our common stock.
In
addition to the “penny stock” rules promulgated by the Securities and Exchange
Commission, the Financial Industry Regulatory Authority has adopted rules that
require that in recommending an investment to a customer, a broker-dealer must
have reasonable grounds for believing that the investment is suitable for that
customer. Prior to recommending speculative low priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to
obtain information about the customer’s financial status, tax status, investment
objectives and other information. Under interpretations of these rules, the
Financial Industry Regulatory Authority believes that there is a high
probability that speculative low-priced securities will not be suitable for at
least some customers. The Financial Industry Regulatory Authority ’ requirements
make it more difficult for broker-dealers to recommend that their customers buy
our common stock, which may limit your ability to buy and sell our
stock.
Oher
Risks
Trends,
Risks and Uncertainties
We have
sought to identify what we believe to be the most significant risks to our
business, but we cannot predict whether, or to what extent, any of such risks
may be realized nor can we guarantee that we have identified all possible risks
that might arise. Investors should carefully consider all of such risk factors
before making an investment decision with respect to our common
stock.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Plan
of Operation
We have
made insurance agency asset acquisitions each year, since beginning operations
in 2007. We intend to continue to acquire insurance agency
assets. We had an independent, certified appraisal performed on
company assets acquired as of March 31, 2009. This appraisal valued
our acquired insurance agency assets based on customer base and cash
flow. As of March 31, 2009 our assets acquired to date were valued at
over $1,800,000. We estimate that 26,000 independent insurance
agencies can be categorized as having less than 1.25 million in annual
commission revenue. Our target acquisition has less than $1.25
million in commission revenue. The company’s plan of action over the
next twelve months is to continue its operations to market and sell insurance
products and raise additional capital financing, if necessary, to acquire agency
assets and grow operations.
Acquisitions
will be based on our ability to internally finance from cash flow, raise equity
and/or debt to acquire the assets. The disruption in the credit and
financial markets had made the availability of equity and/or debt
uncertain.
Over the
next 12 months we anticipate that we will incur the following operating
expenses:
|
General,
Administrative and Corporate Expenses
|
$525,000
|
|
Depreciation
and amortization
|
$139,545
|
|
Salaries,
and wages
|
$650,000
|
|
Professional
fees
|
$60,000
|
|
Total
|
$1,374,545
|
Our
estimated negative cash flow from operations is estimated to be approximately
$90,000 and our cash position as at March 31, 2010 is $93,670. We will
need additional funds to meet our working capital requirements over the twelve
month period. We anticipate that we will have to raise additional
funds through private placements of our equity securities and/or debt financing
to complete our business plan. There is no assurance that the financing will be
completed as planned or at all. We have not yet been successful
raising the funding necessary to proceed with our business plan. If
we are unable to secure adequate capital to continue our planned operations, our
shareholders may lose some or all of their investment and our business may
fail.
Purchase
of Significant Equipment
We do not
intend to purchase any significant equipment over the next twelve
months.
Personnel
Plan
We do not
expect any material changes in the number of employees over the next 12 month
period.
Off-Balance
Sheet Arrangements
There are
no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.
Our
principal capital resources have been through the subscription and issuance of
common stock, although we have also used stockholder loans and advances from
related parties and co-founders of the company.
Results of Operations of Leeward
Group, Inc
.
for the
years ended December 31, 2009 and 2008
The
following summary of the results of operations of Leeward Group, Inc. should be
read in conjunction with its audited financial statements for the years ended
December 31, 2009 and 2008.
|
|
|
Year
Ended
December
31
|
|
|
|
|
2009
|
2008
|
|
|
Revenue
|
$
|
1,226,304
|
|
$
|
839,140
|
|
|
Operating
Expenses
|
$
|
1,356,186
|
|
$
|
904,574
|
|
|
Net
Loss from Operations
Loss
per share
|
$
$
|
242,957
(0.02)
|
|
$
$
|
150,229
(0.08)
|
|
Revenues
We earned
revenues of $1,226,304 for the year ended December 31, 2009 as compared to
revenues of $839,140 for the year ended December 31, 2008. The
increase in revenues was as a result of expanded operations from the previous
year.
Operating
Expenses
Leeward’s
operating expenses for the years ended December 31, 2009 and 2008 are outlined
in the table below:
|
|
|
Year
Ended
December
31
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Salaries
and wages
Depreciation
and Amortization
|
$
$
|
664,598
139,545
|
|
$
|
503,401
118,074
|
|
|
General
and Administrative
|
$
|
552,042
|
|
$
|
283,099
|
|
Increases
in salaries and wages are due primarily to the insurance agency asset
acquisitions made throughout the year. The acquisitions also led to
higher depreciation and amortization expenses as the acquired assets placed in
service during the year are now being amortized. General and
administrative expenses increased as a result of several
factors. Commissions paid as part of the agency acquisitions, related
acquisition expense and commissions paid to affiliated insurance
agency totaled approximately $200,000 during 2009 as compared to
approximately $21,000 in 2008. Rent expense increased from $38,000 to
$63,000 as a result of adding additional office space.
If net
income is recast to exclude the additional non-cash expenses incurred during
2009 and 2008, our operating net loss would have been approximately $9,600 and
$52,600, respectively.
Liquidity
and Financial Condition of Leeward for the Years Ended December 31,
2009 and 2008
Cash
Flows
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
December
31, 2009
|
|
Year
Ended
December
31, 2008
|
|
Increase
/ (Decrease)
|
|
Net
Cash Provided by (Used in) Operating Activities
|
$
|
(89,272)
|
$
|
9,391
|
$
|
98,663
|
|
Net
Cash Used in Investing Activities
|
$
|
20,000
|
$
|
2,100
|
$
|
17,900
|
|
Net
Cash Provided by Financing Activities
|
$
|
64,995
|
$
|
284,876
|
$
|
(219,881)
|
|
Net
Increase (Decrease) in Cash
|
$
|
(44,277)
|
$
|
292,167
|
$
|
(336,444)
|
As of
December 31, 2009, our total current assets were $405,954 and our total current
liabilities were $471,064 and we had a working capital deficit of $65,110. Our
financial statements report a net loss of $242,957 for the year ended December
31, 2009.
We have
suffered recurring losses from operations. The continuation of our company is
dependent upon our company attaining and maintaining profitable operations and
raising additional capital as needed. In this regard we have raised additional
capital through equity offerings and loan transactions.
Results
of Operations of Leeward Group, Inc. for the three months ended March 31,
2010
The
following summary of the results of operations of Leeward Group, Inc. should be
read in conjunction with its unaudited financial statements for the three months
ended March 31, 2010.
|
|
|
Three
Months Ended
March
31
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Revenue
|
$
|
322,909
|
|
$
|
296,415
|
|
|
Operating
Expenses
|
$
|
381,142
|
|
$
|
285,089
|
|
|
Net
Loss from Operations
|
$
|
90,956
|
|
$
|
9,828
|
|
Revenues
We earned
revenues of $322,909 for the three month period ended March 31, 2010 as compared
to $296,415 for the prior period. The increase was as a result of the
acquisition of additional agencies in 2009.
Operating
Expenses
Leeward’s
operating expenses for the three months ended March 31, 2010 are outlined in the
table below:
|
|
|
Three
Months Ended
March
31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
Depreciation
and amortization
|
$
|
32,194
|
|
$
|
36,713
|
|
|
Salaries
and Wages
|
$
|
209,575
|
|
$
|
157,108
|
|
|
General
and Administrative
|
$
|
139,373
|
|
$
|
91,268
|
|
Increases
in salaries and wages are due primarily to the insurance agency asset
acquisitions made throughout the year. General and administrative
expenses increased as a result of several factors. Commissions paid
as part of the agency acquisitions totaled approximately $36,675 during 2010 as
compared to approximately $30,947 in 2009. Rent expense increased
from $17,700 to $24,000 as a result of adding additional office
space. We also experienced increased legal and accounting fees
associated with the annual audits for the years ended December 31, 2009 and 2008
of approximately $10,000.
If net
income is recast to exclude the additional non-cash expenses incurred during
2009 and 2008, our operating net loss would have been approximately $26,039 in
2010 and we would have had operating income of $48,000 in 2009.
Liquidity
and Financial Condition of Leeward for the Three Months Ended March 31, 2010 and
2009
Cash
Flows
|
|
|
Three
Months Ended
March
31, 2009
|
|
|
Three
Months Ended
March
31, 2008
|
|
|
Increase
/ (Decrease)
|
|
Net
Cash Used in Operating Activities
|
$
|
65,530
|
|
$
|
39,038
|
|
$
|
26,492
|
|
Net
Cash Used in Investing Activities
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Net
Cash Used in Financing Activities
|
$
|
49,477
|
|
$
|
166,086
|
|
$
|
-116,609
|
|
Effect
of Exchange Rate on Cash
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Net
Decrease in Cash
|
$
|
115,007
|
|
$
|
205,124
|
|
$
|
-90,117
|
As of
March 31, 2010, our total current assets were $289,983 and our total current
liabilities were $430,012 and we had a working capital deficit of $140,029. Our
financial statements report a net loss of $90,956 for the three month period
ended March 31, 2010.
We have
suffered recurring losses from operations. The continuation of our company is
dependent upon our company attaining and maintaining profitable operations and
raising additional capital as needed. In this regard we have raised additional
capital through equity offerings and loan transactions.
Critical
Accounting Policies
|
|
Principles
of Consolidation
|
The
accompanying consolidated financial statements include the accounts of the
company and its wholly-owned subsidiaries, Sangamon Associates, Inc along with
its wholly-owned subsidiary Flagship Insurance Agency, Inc. All significant
intercompany balances and transactions have been eliminated.
Cash
and Cash Equivalents
The
company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. Cash and cash equivalents are
maintained with major financial institutions in the US. Deposits held with these
banks at times exceed $250,000 of insurance provided on such deposits. The
company has not experienced any losses in such accounts and believes that it is
not exposed to any significant credit risk on cash and cash equivalents. At
December 31, 2009 and 2008, no excess existed.
As of
December 31, 2009 and 2008 the company had $183,361 and $237,313 of cash and
cash equivalents, respectively
.
Fixed Assets
Property,
plant and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets,
ranging from 3 to 7 years for furniture, fixtures, machinery and
equipment. Leasehold improvements are amortized over the lesser of
the term of the lease or the economic life of the asset.
Long-lived
Assets
The
company continually monitors events and changes in circumstances that could
indicate carrying amounts of long-lived assets may not be recoverable. When such
events or changes in circumstances are present, the company assesses the
recoverability of long-lived assets by determining whether the carrying value of
such assets will be recovered through undiscounted expected future cash flows.
If the total of the future cash flows is less than the carrying amount of those
assets, the company recognizes an impairment loss based on the excess of the
carrying amount over the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or the fair value less costs to
sell.
|
|
Fair
Value of Financial Instruments
|
On
January 1, 2008, the company adopted ASC 820, “
Fair Value Measurements.
ASC
820 defines fair value, establishes a three-level valuation hierarchy for
disclosures of fair value measurement and enhances disclosure requirements for
fair value measures. The three levels are defined as follows:
|
§
|
Level
1 inputs to the valuation methodology are quoted prices (unadjusted) for
identical assets or liabilities in active
markets.
|
|
§
|
Level
2 inputs to the valuation methodology include quoted prices for similar
assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for
substantially the full term of the financial
instrument.
|
|
§
|
Level
3 inputs to valuation methodology are unobservable and significant to the
fair measurement.
|
The
carrying amounts reported in the balance sheets for the cash and cash
equivalents, receivables and current liabilities each qualify as financial
instruments and are a reasonable estimate of fair value because of the short
period of time between the origination of such instruments and their expected
realization and their current market rate of interest. The carrying value of
notes payable approximates fair value because negotiated terms and conditions
are consistent with current market rates as of December 31, 2009 and
2008.
Revenue
Recognition
The
company recognizes revenue according to ASC 740, when persuasive evidence of an
arrangement exists, the price to the buyer is fixed or determinable and
collectability is reasonably assured. These criteria are typically
met when a policy is signed. When policies are signed, the company
enters the sales into its policy management and tracking system which is when
revenue is recognized. Returns are booked as contra-revenue and are
generally less than 1% of all sales and thus no reserve or estimate of returns
is recorded. Cash for sales is either collected up-front in the form
of a non-refundable deposit which is greater than the commission portion due to
the company. The remaining sales are remitted on a monthly basis from
the insurance providers. No allowance for doubtful accounts is
recorded as all remittances are made from the insurance providers directly;
revenue is not recognized on cancelled policies.
Income
Taxes
The
company applies ASC 740, which requires the asset and liability method of
accounting for income taxes. The asset and liability method requires that
the current or deferred tax consequences of all events recognized in the
financial statements are measured by applying the provisions of enacted tax laws
to determine the amount of taxes payable or refundable currently or in future
years. Deferred tax assets are reviewed for recoverability and the company
records a valuation allowance to reduce its deferred tax assets when it is more
likely than not that all or some portion of the deferred tax assets will not be
recovered.
The
company adopted ASC 740, at the beginning of fiscal year 2008. This
interpretation requires recognition and measurement of uncertain tax positions
using a “more-likely-than-not” approach, requiring the recognition and
measurement of uncertain tax positions. The adoption of ASC 740 had no material
impact on the company’s financial statements.
Stock-Based
Compensation
The
company records stock-based compensation in accordance with SFAS No. 123R “Share
Based Payments”, using the fair value method. All transactions in which goods or
services are the consideration received for the issuance of equity instruments
are accounted for based on the fair value of the consideration received or the
fair value of the equity instrument issued, whichever is more reliably
measurable. Equity instruments issued to employees and the cost of the services
received as consideration are measured and recognized based on the fair value of
the equity instruments issued
.
PROPERTIES
Offices
As of the
date of this current report, our executive office is located at 65 S. Main
Street Suite A-300 Pennington NJ 08534 and our administrative, and operating
offices are located at 651 Orchard Street Suite 301, New Bedford MA 02744. We
lease approximately 2,125 square feet at a cost of $1,342 per month. We believe
these facilities are adequate for our current needs and that alternate
facilities on similar terms would be readily available if needed.
We have
five locations in the northeastern United States. We have one
location in New Jersey approximately 800 square feet; one location New York
approximately 600 square feet; one location Rhode Island approximately 1,400
square feet; and two locations in Massachusetts 600 square feet and 2,125 square
feet respectively.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth, as of May 28, 2010, certain information with respect
to the beneficial ownership of our common stock by each stockholder known by us
to be the beneficial owner of more than 5% of our common stock and by each of
our current directors and executive officers, following completion of all share
issuances described herein. Each person has sole voting and
investment power with respect to the shares of common
stock. Beneficial ownership consists of a direct interest in the
shares of common stock, except as otherwise indicated.
|
Name
and Address of Beneficial Owner
|
Amount
and Nature of
Beneficial
Ownership
|
Percentage
of
Class
(1)
|
|
Kevin
M. Coughlin
111
N. Central Ave.
Hartsdale,
NY 10530
|
28,473,072
|
28.47%
|
|
William
F. Cleave
65
S. Main Street
Pennington,
NJ 08534
|
28,473,072
|
28.47%
|
|
Digital
Application Corp.
769
S.W. 104
th
St. Ste 2
Miami,
FL 33156
|
8,053,856
|
8.05%
|
|
Directors
and Officers as a group
|
56,946,144
|
56.95%
|
|
(1)
|
Under
Rule 13d-3, a beneficial owner of a security includes any person who,
directly or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has or shares: (i) voting power, which includes
the power to vote, or to direct the voting of shares; and (ii) investment
power, which includes the power to dispose or direct the disposition of
shares. Certain shares may be deemed to be beneficially owned
by more than one person (if, for example, persons share the power to vote
or the power to dispose of the shares). In addition, shares are
deemed to be beneficially owned by a person if the person has the right to
acquire the shares (for example, upon exercise of an option) within 60
days of the date as of which the information is provided. In
computing the percentage ownership of any person, the amount of shares
outstanding is deemed to include the amount of shares beneficially owned
by such person (and only such person) by reason of these acquisition
rights. As a result, the percentage of outstanding shares of
any person as shown in this table does not necessarily reflect the
person’s actual ownership or voting power with respect to the number of
shares of common stock actually outstanding on May 28, 2010. As
of May 28, 2010, there were 100,000,000 shares of our company’s
common stock issued and
outstanding.
|
Change
in Control
Upon
closing of the transactions contemplated by the share exchange agreement on May
28, 2010, we issued 65,000,000 shares of our common stock to the former
shareholders of Leeward Group, Inc. in consideration for the acquisition of all
of the issued and outstanding common shares in the capital of Leeward Group,
Inc.
As of the
closing date, the former shareholders of Leeward Group, Inc. held approximately
65% of the issued and outstanding common shares of our company.
DIRECTORS
AND EXECUTIVE OFFICERS
The
following individuals serve as the directors, executive officers and key
employees of our company. All directors of our company and our subsidiary hold
office until the next annual meeting of our shareholders or until their
successors have been elected and qualified. The executive officers of our
company and our subsidiaries are appointed by our board of directors and hold
office until their death, resignation or removal from office.
|
Name
|
Position
Held
with
the Company
|
Age
|
Date
First Elected or Appointed
|
|
Kevin
M. Coughlin
|
President/CEO,
Chief Executive Officer, Chief Financial Officer and
Director
|
44
|
May
28, 2010
|
|
William
F. Cleave
|
Vice
President, Chief Operational Officer, and Director
|
45
|
May
28, 2010
|
Business
Experience
The
following is a brief account of the education and business experience during at
least the past five years of each director, executive officer and key employee
of our company, indicating the person’s principal occupation during that period,
and the name and principal business of the organization in which such occupation
and employment were carried out.
Kevin
M. Coughlin, President, Chief Executive Officer, and Director
Mr.
Coughlin is the President and Chief Executive Officer of the company and
Chairman of the Board. Mr. Coughlin resides in Hartsdale New
York. Mr. Coughlin was one of the co-founders of Sangamon Associates,
Inc. and Flagship Insurance Agency, Inc. the operating subsidiaries of the
company. He has worked in the insurance and industry for over 18
years, with the last 10 years primarily in insurance agency
acquisitions. Mr. Coughlin is a licensed life and health insurance
broker. Mr. Coughlin has a BS from Manhattan College and an MA from
Fordham University.
William
F. Cleave, Vice President, Chief Operational Officer, and Director
Mr.
Cleave is the Senior Vice President and Chief Operating Officer of the company
and a director of the board. Mr. Cleave resides in Pennington, New
Jersey. Mr. Cleave was one of the co-founders of Sangamon Associates,
Inc. and Flagship Insurance Agency, Inc. the operating subsidiaries of the
Company. He has worked in the insurance and industry for
approximately 20 years, with the last 10 years primarily in
reinsurance and risk management services. Mr. Cleave is
licensed as a property and casualty insurance agent or broker in 50 states and
holds the commercial property casualty underwriter (“CPCU”) designation and
Associate of Reinsurance (“ARe”) designation. Mr. Cleave has a BS from Bradley
University.
Audit
Committee and Audit Committee Financial Expert
Our board
of directors has determined that it does not have a member of its audit
committee that qualifies as an "audit committee financial expert" as defined in
Item 407(d)(5)(ii) of Regulation S-K.
Board
and Committee Meetings
Our board
of directors held no formal meetings, prior to the closing of the acquisition of
Leeward. All proceedings of the board of directors were conducted by resolutions
consented to in writing by all the directors and filed with the minutes of the
proceedings of the directors. Such resolutions consented to in writing by the
directors entitled to vote on that resolution at a meeting of the directors are,
according to the Nevada General Corporate Law and our Bylaws, as valid and
effective as if they had been passed at a meeting of the directors duly called
and held.
Family
Relationships
There are
no family relationships among our directors or executive officers.
Involvement
in Certain Legal Proceedings
Our
directors, executive officers and control persons have not been involved in any
of the following events during the past five years:
|
1.
|
any
bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that
time;
|
|
2.
|
any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor
offenses);
|
|
3.
|
being
subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking
activities; or
|
|
4.
|
being
found by a court of competent jurisdiction (in a civil action), the
Securities and Exchange Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or commodities
law, and the judgment has not been reversed, suspended, or
vacated.
|
EXECUTIVE
COMPENSATION
The
particulars of compensation paid to the following persons:
(a) our
principal executive officer;
|
(b)
|
each
of our three most highly compensated executive officers who were serving
as executive officers at the end of the year ended December 31, 2009;
and
|
|
(c)
|
up
to two additional individuals for whom disclosure would have been provided
under (b) but for the fact that the individual was not serving as our
executive officer at the end of the year ended December 31,
2009,
|
who we
will collectively refer to as our named executive officers, of our company for
the years ended December 31, 2009 and December 31, 2008, are set out in the
following summary compensation table:
|
SUMMARY
COMPENSATION TABLE
|
|
Name
and
Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan Compensation
($)
|
Change
in Pension
Value
and Nonqualified Deferred Compensation Earnings
($)
|
All
Other
Compensation
($)
|
Total
($)
|
|
Kevin
Coughlin
President
and
CEO
|
2009
2008
|
$41,000
$
6,000
|
N/A
N/A
|
N/A
N/A
|
N/A
N/A
|
N/A
N/A
|
N/A
N/A
|
N/A
N/A
|
$41,000
$
6,000
|
|
William
Cleave
Vice
President and
COO
|
2009
2008
|
$62,190
$14,927
|
N/A
Nil
|
N/A
Nil
|
N/A
Nil
|
N/A
Nil
|
N/A
Nil
|
N/A
Nil
|
$62,190
$14,297
|
Other
than as set out below, there are no compensatory plans or arrangements with
respect to our directors, executive officers or key employees resulting from
their resignation, retirement or other termination of employment or from a
change of control. The officers and directors of the company do not
have an employment agreement. Mr. Coughlin is paid a salary and
commission on insurance policies he produces. Mr. Cleave is paid a
salary and commission on insurance policies he produces.
Outstanding
Equity Awards at Fiscal Year-End
As at
December 31, 2009, there were no unexercised options or stock that had not
vested in regards to our executive officers, and there were no equity incentive
plan awards for our executive officers during the year ended December 31,
2009.
Options
Grants in the Year Ended December 31, 2009
During
the year ended December 31, 2009, no stock options were granted to our executive
officers and directors.
Aggregated
Options Exercised in the Year Ended December 31, 2009 and Year End
Option Values
There
were no stock options exercised during the year ended December 31, 2009 and no
stock options held by our executive officers at the end of the year ended
December 31, 2009.
Repricing
of Options/SARS
We did
not reprice any options previously granted to our executive officers during the
year ended December 31, 2009.
Director
Compensation
Directors
of our company may be paid for their expenses incurred in attending each meeting
of the directors. In addition to expenses, directors may be paid a sum for
attending each meeting of the directors or may receive a stated salary as
director. No payment precludes any director from serving our company in any
other capacity and being compensated for such service. Members of special or
standing committees may be allowed similar reimbursement and compensation for
attending committee meetings. During the year ended December 31, 2009, we did
not pay any compensation or grant any stock options to our
directors.
Indebtedness
of Directors, Senior Officers, Executive Officers and Other
Management
None of
our directors or executive officers or any associate or affiliate of our company
during the last two fiscal years, is or has been indebted to our company by way
of guarantee, support agreement, letter of credit or other similar agreement or
understanding currently outstanding.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Except as
disclosed below, there have been no transactions or proposed transactions in
which the amount involved exceeds the lesser of $120,000 or one percent of the
average of our total assets at year-end for the last two completed fiscal years
in which any of our directors, executive officers or beneficial holders of more
than 5% of the outstanding shares of our common stock, or any of their
respective relatives, spouses, associates or affiliates, has had or will have
any direct or material indirect interest.
During
the year ended December 31, 2009, the company incurred $103,190 of commissions
and fees payable with companies in which officers and directors have ownership
interest at the time the fees were incurred.
We
currently act with two (2) directors, consisting of Kevin Coughlin and William
Cleave.
We have
determined that we do not have independent directors, as that term is used in
Rule 4200(a)(15) of the Rules of National Association of Securities
Dealers.
Our
entire board of directors currently functions as our audit committee. We believe
that our board of directors is capable of analyzing and evaluating our financial
statements and understanding internal controls and procedures for financial
reporting.
LEGAL
PROCEEDINGS
We know
of no material, existing or pending legal proceedings against our company, nor
are we involved as a plaintiff in any material proceeding or pending litigation.
There are no proceedings in which any of our directors, officers or affiliates,
or any registered or beneficial shareholder, is an adverse party or has a
material interest adverse to our interest.
MARKET
PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our common shares are quoted on the Over-the-Counter Bulletin
Board under the symbol “PCPZ.” The following quotations, obtained from
Stockwatch, reflect the high and low bids for our common shares based on
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.
The high and low bid prices of our common stock for the periods
indicated below are as follows:
|
National
Association of Securities Dealers OTC Bulletin Board
(1)(3)
|
|
Quarter
Ended
|
High
|
Low
|
|
May
31, 2010
|
$N/A
(2)
|
$N/A
(2)
|
|
February
28, 2010
|
$N/A
(2)
|
$N/A
(2)
|
|
November
30, 2009
|
$N/A
(2)
|
$N/A
(2)
|
|
August
31, 2009
|
$N/A
(2)
|
$N/A
(2)
|
|
May
31, 2009
|
$N/A
(2)
|
$N/A
(2)
|
|
February
28, 2009
|
$N/A
(2)
|
$N/A
(2)
|
|
November
30, 2008
|
$N/A
(2)
|
$N/A
(2)
|
|
August
31, 2008
|
$N/A
(2)
|
$N/A
(2)
|
(1) Over-the-counter
market quotations reflect inter-dealer prices without retail mark-up, mark-down
or commission, and may not represent actual transactions.
(2) No
trades occurred during this period.
(3) Our
common stock was quoted on the Over-the-Counter Bulletin Board on under the
symbol “PCPL” until October 5, 2009 at which time the symbol was changed to
“PCPZ”.
Our
shares are issued in registered form. Signature Stock Transfer, Inc. PMB 317,
2220 Coit Road, Suite 480, Plano, TX 75075, Telephone: (972) 612-4120;
Facsimile: (972) 612-4122 is the transfer agent for our common
shares.
On May
28, 2010, the shareholders' list showed 37 registered shareholders and
23,010,225 shares issued immediately prior to the completion of the share
exchange agreement.
Dividend
Policy
We have
not paid any cash dividends on our common stock and have no present intention of
paying any dividends on the shares of our common stock. Our current policy is to
retain earnings, if any, for use in our operations and in the development of our
business. Our future dividend policy will be determined from time to time by our
board of directors.
Equity
Compensation Plan Information
We have
not adopted any equity compensation plans.
RECENT
SALES OF UNREGISTERED SECURITIES
The
following sets forth certain information concerning securities which were sold
or issued by us without the registration of the securities under the Securities
Act of 1933 in reliance on exemptions from such registration requirements within
the past three years that have not been previously disclosed in a current or
periodic report:
On May
28, 2010, we issued 11,989,775 common shares as compensation for services
rendered to our company. These shares were issued to one U.S. person
(as that term is defined in Regulation S of the Securities Act of 1933) relying
upon Rule 506 of Regulation D of the Securities Act of 1933.
On May
28, 2010, we issued 65,000,000 shares of our common stock to the former
shareholders of Leeward Group, Inc. a Delaware corporation, in
consideration for the acquisition of all of the issued and outstanding common
shares in the capital of Leeward Group, Inc. These shares were issued
to three U.S. persons (as that term is defined in Regulation S of the Securities
Act of 1933) relying upon Rule 506 of Regulation D of the Securities Act of
1933.
DESCRIPTION
OF REGISTRANT’S SECURITIES TO BE REGISTERED
General
Our
authorized capital stock consists of 100,000,000 shares of common stock at a par
value of $0.00001 per share and 100,000,000 shares of preferred stock with a par
value of $0.00001per share.
Common
Stock
As of the
closing of the share exchange agreement on May 28, 2010, there were
100,000,000
shares
of our common stock issued and outstanding that are held by the stockholders of
record.
Holders
of our common stock are entitled to one vote for each share on all matters
submitted to a stockholder vote. Holders of common stock do not have cumulative
voting rights. Therefore, holders of a majority of the shares of common stock
voting for the election of directors can elect all of the directors. Holders of
our common stock representing a majority of the voting power of our capital
stock issued, outstanding and entitled to vote, represented in person or by
proxy, are necessary to constitute a quorum at any meeting of our stockholders.
A vote by the holders of a majority of our outstanding shares is required to
effectuate certain fundamental corporate changes such as liquidation, merger or
an amendment to our articles of incorporation.
Holders
of common stock are entitled to share in all dividends that the board of
directors, in its discretion, declares from legally available funds. In the
event of a liquidation, dissolution or winding up, each outstanding share
entitles its holder to participate pro rata in all assets that remain after
payment of liabilities and after providing for each class of stock, if any,
having preference over the common stock. Holders of our common stock have no
pre-emptive rights, no conversion rights and there are no redemption provisions
applicable to our common stock.
Preferred
Stock
We are
authorized to issue up to 100,000,000 shares of preferred stock with a par value
of $0.00001, for which the board of directors may fix and determine the
designations, rights, preferences or other variations of each class or series
within each class of the Preferred Shares.
As of the
date of this current report we have no preferred shares issued and
outstanding.
Dividend Policy
We have
never declared or paid any cash dividends on our common stock. We currently
intend to retain future earnings, if any, to finance the expansion of our
business. As a result, we do not anticipate paying any cash dividends in the
foreseeable future.
Share
Purchase Warrants
We have
no share purchase warrants outstanding.
Options
We have
not issued and do not have outstanding any options to purchase shares of our
common stock.
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
The
Nevada Revised Statutes provide 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 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;
|
|
·
|
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 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 therefrom, 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;
and
|
|
·
|
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 corporation shall indemnify him against expenses, including attorneys’
fees, actually and reasonably incurred by him in connection with the
defense.
|
We may
make any discretionary indemnification only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances. The determination must be
made:
|
·
|
by
our board of directors by majority vote of a quorum consisting of
directors who were not parties to the action, suit or
proceeding;
|
|
·
|
if
a majority vote of a quorum consisting of directors who were not parties
to the action, suit or proceeding so orders, by independent legal counsel
in a written opinion;
|
|
·
|
if
a quorum consisting of directors who were not parties to the action, suit
or proceeding cannot be obtained, by independent legal counsel in a
written opinion; or
|
Unless
limited by our articles of incorporation (which is not the case with our
articles of incorporation) a corporation must indemnify a director who is wholly
successful, on the merits or otherwise, in the defense of any proceeding to
which the director was a party because of being a director of the corporation
against reasonable expenses incurred by the director in connection with the
proceeding.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM
3.02 UNREGISTERED SALES OF EQUITY SECURITIES
On May
28, 2010, we issued 11,989,775 common shares as compensation for services
rendered to our company. These shares were issued to one U.S. person
(as that term is defined in Regulation S of the Securities Act of 1933) relying
upon Rule 506 of Regulation D of the Securities Act of 1933.
On May
28, 2010, we issued 65,000,000 shares of our common stock to the former
shareholders of Leeward Group, Inc. a Delaware corporation, in
consideration for the acquisition of all of the issued and outstanding common
shares in the capital of Leeward Group, Inc. These shares were issued
to three U.S. persons (as that term is defined in Regulation S of the Securities
Act of 1933) relying upon Rule 506 of Regulation D of the Securities Act of
1933.
ITEM
5.01 CHANGES IN CONTROL OF REGISTRANT
Upon
closing of the transactions contemplated by the share exchange agreement on May
28, 2010, we issued 65,000,000
shares of our common
stock to the former shareholders of Leeward Group, Inc. in consideration for the
acquisition of all of the issued and outstanding common shares in the capital of
Leeward Group, Inc.
As of the
closing date, the former shareholders of Leeward held 65% of the issued and
outstanding common shares of our company.
ITEM
5.02 – DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN
OFFICERS
On May
28, 2010, in connection with the closing of the share exchange agreement, new
directors were appointed to our board of directors. At the same time,
Charles Payne and Stanley Chapman resigned as directors. The new directors are
Kevin Coughlin and William Cleave.
Descriptions
of business experience over the past five years and compensatory arrangements of
the new directors and officers can be found in the sections entitled “Directors,
Executive Officers, Promoters and Control Persons” and “Executive
Compensation”.
ITEM
5.03 CHANGE IN FISCAL YEAR
On May
28, 2010, in connection with the closing of the share exchange agreement, we
changed our fiscal year end to December 31
st
for
accounting purposes. Starting with the periodic report for the
quarter in which the acquisition was consummated, our company will file annual
and quarterly reports based on the December 31
st
fiscal
year end of Leeward. Such financial statements will depict the
operating results of Leeward.
ITEM
5.06 CHANGE IN SHELL COMPANY STATUS
Management
has determined that, as of the closing of the share exchange agreement, our
company has ceased to be a shell company as defined in Rule 12b-2 of the United
States Securities Exchange Act of 1934, as amended. Please refer to
Item 2.01 of this current report for a detailed description of the share
exchange agreement and the business of our company following the closing
date.
ITEM
9.01 FINANCIAL STATEMENTS AND EXHIBITS
|
(a)
|
Financial
Statements for Leeward Group, Inc.
|
Exhibits
required by Item 601 of Regulation S-K
|
Exhibit
Number
|
Description
|
|
(3)
|
Articles
of Incorporation and By-laws
|
|
3.1
|
Articles
of Incorporation (Incorporated by reference from our Registration
Statement on Form SB-2 filed on August 27, 2007)
|
|
3.2
|
Bylaws (Incorporated
by reference from our Registration Statement on Form SB-2 filed on August
27, 2007)
|
|
(10)
|
Material
Contracts
|
|
10.1
|
Share
Exchange Agreement dated May 28, 2010 with Leeward Group,
Inc.
|
|
10.2
|
Agreement
of Sale between Sangamon Associates, Inc., and Flagship Insurance,
Inc.
|
|
10.3
|
Agreement
of Sale between Leeward Group, Inc. and its wholly owned subsidiaries
Sangamon Associates, Inc., Flagship Insurance Agency, Inc., and
Brady-Rogers Inc.
|
|
10.4
|
Agreement
of Sale between Leeward Group, Inc. and its wholly owned subsidiaries
Sangamon Associates, Inc., Flagship Insurance Agency, Inc., and Waughtal -
D. P. Domestic and International Insurance, LLC.
|
|
|
|
|
(99)
|
Additional
Exhibits
|
|
99.1
|
Financial
Statements for Leeward Group, Inc.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
PRINCIPLE
SECURITY INTERNATIONAL INC.
/s/ Kevin Coughlin
By:
Kevin
Coughlin
President,
Chief Executive Officer,
Chief
Financial Officer and Director
Date: June
4, 2010
Leeward (CE) (USOTC:PCPZ)
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Leeward (CE) (USOTC:PCPZ)
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