(Name,
address and telephone of agent for service)
Approximate
date of commencement of proposed sale to the public:
As
soon
as practicable after the effective date of this registration
statement.
If
any of
the Securities being registered on this Form are to be offered on a delayed
or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, as
amended, check the following box: [X]
If
this
Form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act of 1933, please check the following box and
list
the Securities Act of 1933 registration number of the earlier effective
registration statement for the same offering. [ ]
If
this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act of 1933, check the following box and list the Securities Act
of
1933 registration statement number of the earlier effective registration
statement for the same offering. [ ]
If
this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act of 1933, check the following box and list the Securities Act
of
1933 registration statement number of the earlier effective registration
statement for the same offering. [ ]
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box. [ ]
Estimated
pursuant to Rule 457 solely for the purpose of calculating the
registration fee for the shares of common stock. The registration
fee for
the shares of common stock is based upon a value of $.25.
(2)
300,000
shares proposed to be offered by the
Registrant.
(3)
490,000
shares proposed to be offered by the Selling Security
Holder.
The
information in this prospectus is not complete and may be changed. Capital
Resource Funding and the Selling Security Holder may not sell these securities
until the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
We
hereby
amend this registration statement on such date or dates as may be necessary
to
delay its effective date until we shall file a further amendment which
specifically states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of 1933 or
until
this Registration Statement shall become effective on such date as the
Commission, acting pursuant to Section 8(a) may determine.
[The
Rest
of this Page is Intentionally Left Blank]
Capital
Resource Funding, Inc. (“Capital Resource Funding”) is offering for sale up to
300,000 shares of our common stock at an initial offering price of $.25 per
share of common stock. The offering will commence on the date of this prospectus
and will end on March 31, 2006, unless all of the shares are sold before that
date. There is no minimum offering amount that must be sold in order to close
the offering and make use of the proceeds. David Koran, our Chairman and CEO,
intends to offer the shares to the public and will not be paid any commissions.
We may pay participating brokers a commission of up to 7% of the selling price
per share, or $.0175 per share. Assuming all 300,000 shares are sold at $.25
per
share, we would recognize gross proceeds of $75,000, before participating
brokers’ commissions. However, there is no assurance that all of the shares will
be sold, and, accordingly, we may recognize gross proceeds of anywhere from
$0
up to a total of $75,000. All funds received will be immediately available
for
use by us, and such funds will not be placed in an escrow or similar account.
There are no minimum purchase requirements.
Greentree
Financial Group, Inc., a Florida corporation (“Greentree”), our Selling Security
Holder is offering 490,000 shares of our common stock for sale to the public.
Greentree is expected to offer and sell their shares through their own
securities broker-dealers or in private transactions. See - “Plan of
Distribution.” Greentree may continue to offer its shares until sold, as long as
we maintain a current prospectus to cover the sales. We will not receive any
proceeds from sales of shares by our Selling Security Holder. We will pay all
expenses of registering all of the securities registered hereunder.
Greentree
is registering its shares for sale because as a consultant to us, it is a
service provider to, rather than a long term investor in, Capital Resource
Funding. Greentree will sell its shares at $0.25 until such time, if and when,
the shares are traded on the Over-The-Counter Bulletin Board. In the event
of
such trading, Greentree will sell its shares at prevailing market prices;
however, there can be no assurance that we will find a market maker willing
to
work with us, or that our application for quotation on the Over-The-Counter
Bulletin Board will be accepted.
Upon
effectiveness of the registration statement of which this prospectus is a part,
we plan to pursue quotation of our common stock on the Over-The-Counter Bulletin
Board. This process requires the selection of a market maker to submit an
application to the National Association of Securities Dealers, Inc. in order
have our shares approved for quotation. There can be no assurance that we will
find a market maker willing to work with us, or that our application will be
accepted, in which case we may have to re-evaluate our plans to pursue quotation
of our shares on the Over-The-Counter Bulletin Board.
These
securities involve a high degree of risk and should be considered only by
persons who can afford the loss of their entire investment. See “Risk Factors”
beginning on page 9.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
We
were
incorporated in North Carolina on February 2, 2004 to engage in the business
of
commercial finance brokerage and consulting. We are currently engaged and plan
to continue in the commercial finance brokerage and consulting business. Our
executive offices are currently located at the residence of our President,
Mr.
David R. Koran, 2212 Lantern Way Circle, Cornelius, NC28031. Our telephone
number is (704) 564-1676. We are authorized to issue common stock. Our total
authorized common stock consists of 100,000,000 shares of which 10,790,000
shares are issued and outstanding. We are also authorized to issue up to
10,000,000 shares of convertible preferred stock, of which none are issued
and
outstanding.
OUR
BUSINESS.
We
have
acted and intend to continue to act as a broker for commercial finance
transactions. The different types of commercial financing that we intend to
broker are: Commercial Mortgages, Asset-Based Lines of Credit, Commercial
Leasing, Accounts Receivable Financing (also known as “Factoring”) and Purchase
Order Financing. To date, we have successfully brokered four financing
transactions totaling $11,094 in fees, consisting of two mortgage transactions
totaling $3,044, seven monthly broker fees for one factoring transaction and
one
broker fee in connection with a commercial lease transaction. Therefore, we
have
only received fees in connection with four closed transactions.
While
we
have developed a business plan that anticipates opportunistic growth, to date
we
have generated significant losses and our president is currently working without
remuneration. We find ourselves in need of additional funds, especially when
Mr.
Koran and other officers begin to draw a salary and/or receive repayment of
expenses, such as the expenses that Mr. Koran has incurred on our behalf. We
currently expect Mr. Koran and the other officers to begin to draw a salary
towards the end of 2005.
Set
forth
below is a brief description of several types of commercial financing that
we
intend to broker. We have had success in brokering a commercial mortgage, a
commercial lease and an accounts receivable financing package. There can be
no
assurances that we will continue to be successful with these types of commercial
financing, or with any of the other types of commercial financing that are
described.
In
brokering a commercial mortgage, we would typically act as an agent to secure
a
loan for a client to purchase a building in which to operate a business such
as
an import/export company. We would help the client arrange the loan with a
bank,
for example, and at closing we would be paid a broker’s commission from the
funding source that typically amounts to 1% of the loan amount.
In
brokering asset-based lines of credit, we would typically act as an agent to
secure a loan from a bank, for example, for a manufacturing company that would
be secured with inventory and/or accounts receivable. After the closing, we
would be paid a commission by the funding source that typically amounts to
.5%
to 1% of the loan amount.
In
brokering commercial leases, we would typically act as an agent to acquire
a
commercial lease of certain business equipment, such as several dump trucks
for
a construction company. Once each commercial lease transaction is closed, we
would typically be paid a brokering commission from the funding source that
averages .5% to1% of the loan amount.
In
brokering accounts receivable/factoring financing, we would typically act as
an
agent to acquire loans that speed up the collection of cash flow for our
clients. The typical fee for this type of financing is generally between 1
to 8%
of each invoice financed. The typical funding contract for a hypothetical
accounts receivable financing or factoring transaction will have a minimum
one
year term. Thus, we anticipate each transaction of this type to pay monthly
commissions for at least one year, if and when we have secured the brokerage
assignment.
In
brokering purchase order financing, we would typically act as an agent to
acquire financing on a purchase order-by-purchase order basis in order to
provide a client with funding to fill each order. Once each purchase order
financing transaction is closed and funded, we would be paid a brokering
commission from the funding source which would be .5% to 1% of each purchase
order funded.
In
performing all of these brokering services, we have and propose to represent
our
clients in all aspects of assisting with the assessment of funding needs and
qualifications, and identifying and making presentations to the most suitable
funding sources.
David
Koran is the key employee of Capital Resource Funding, and he devotes
approximately 25 hours per week to developing and operating our business. Laura
Koran, the spouse of David Koran, is the Chief Financial Officer, Secretary
and
a Director of Capital Resource Funding, and she owns 150,000 shares of our
common stock. Steve Moore is the Chief Operating Officer and a Director of
Capital Resource Funding, and he owns 75,000 shares of our common stock.
Finally, Richard Koran is the Vice President and a Director of Capital Resource
Funding, and he owns 75,000 shares of our common stock. He is also the father
of
David Koran. David Koran has complete control over Capital Resource Funding,
inasmuch as he is Chairman, Chief Executive Officer and a Director, and he
owns
10,000,000 shares of common stock, representing 91% of the issued and
outstanding shares of common stock.
Capital
Resource Funding has limited assets and is dependent on obtaining additional
equity or debt financing in the near future in order to be able to continue
its
operations. At such time, we intend to engage a licensed broker-dealer to seek
out additional equity and/or debt financing on our behalf. It is important
to
note that our business plan is not unique. There are thousands of competitors
in
the United States doing exactly what we do and what we propose to do. And there
are no barriers to competition to prevent the entry of more such competitors.
Finally, Mr. Koran has personally paid certain of our business expenses,
including website development and rent, and he is currently working without
remuneration.
$.25
per share, and thereafter at market, if and when quotation begins
on
OTCBB
Proceeds
to Capital Resource Funding
Gross
Proceeds
$
75,000
Estimated
Net Proceeds
$
75,000 (assumes no broker-dealers are paid a commission)
Proceeds
to Selling Security Holder
Gross
Proceeds
$122,500
Estimated
Net Proceeds
$122,500
(assumes shares are sold in private transactions
with no commissions).
Common
Stock to be
Outstanding
after Offering:
11,090,000
shares
Dividend
Policy
We
do not anticipate paying dividends on our
common
stock in the foreseeable future.
Use
of Proceeds
We
intend to use the proceeds from this Offering to
fund
working capital deficits.
Risk
Factors
The
securities offered hereby are speculative and
involve
a high degree of risk, including the risk of
substantial
and immediate dilution. See “Risk Factors”
at
page 9 and “Dilution” at page 16.
As
of
October __, 2005, we had 10,790,000 shares of our common stock outstanding.
This
offering is comprised of a registered securities offering by the Selling
Security Holder Greentree Financial Group, Inc., our consultant, who intends
to
sell all 490,000 shares of common stock that it received for providing services
to our Company, and a registered primary securities offering by Capital Resource
Funding, which intends to sell 300,000 shares of common stock in a capital
raising transaction.
We
and
Greentree have acknowledged that we are familiar with the anti-manipulation
rules of the SEC, including Regulation M. These rules may apply to sales by
Capital Resource Funding and Greentree in the market if a market develops.
Regulation
M prohibits any person who participates in a distribution from bidding for
or
purchasing any security which is the subject of the distribution until the
entire distribution is complete. It also prohibits sales or purchases to
stabilize the price of a security in the distribution.
We
have
paid all estimated expenses of registering the securities. Our offering expenses
are approximately $24,441 which has partly been paid from the $100 in proceeds
from the sales of our common stock to our President and a $15,000 unsecured
line
of credit with an unrelated bank.
Because
this is only a financial summary, it does not contain all the financial
information that may be important to you. You should also read carefully all
the
information in this prospectus, including the financial statements and their
explanatory notes.
AN
INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED IN THIS PROSPECTUS INVOLVES
A
HIGH DEGREE OF RISK. WE CANNOT ASSURE THAT WE WILL EVER GENERATE REVENUES,
DEVELOP OPERATIONS, OR MAKE A PROFIT.
Our
Limited Operating History And Lack Of Revenues Makes Evaluating Our
Business
And Prospects Difficult
While
our
competitors have operated commercial finance brokering firms for a significant
period of time, we have only had limited operations and a lack of revenues
since
our inception on February 2, 2004. As a result, we have a limited operating
history upon which you can evaluate us and our prospects. In addition, we show
cumulative losses of ($260,726) for the period from inception (February 2,2004)
through August 31, 2005, without paying any salary to the principal.
We
Have Incurred Losses From Operations And Limited Cash That Raises Substantial
Doubt As To Whether We Can Continue As A Going
Concern
Our
cash
flows used in operations were ($22,657) for the period from inception (February2, 2004) through August 31, 2005. We have incurred cumulative net losses of
($260,726) during this same period. During this time, we also incurred certain
expenses that did not use cash. For example, our officer and majority
shareholder paid $3,942 in business expenses on our behalf, including rent
and
website development expenses. Cash flows generated by financing activities
were
$24,281 for the period from inception (February 2, 2004) through August 31,2005.
Seasonal
Economic Fluctuations In The Commercial Finance Brokerage Business Adversely
Impact Our Revenues, Cause Cut Backs In Our Operations And May Impede Future
Growth.
The
commercial finance brokerage business is subject to seasonal fluctuations.
Historically, the commercial finance industry is known to have seasonal
fluctuations in the 4th
quarter.
Therefore, we expect to experience periods where a lack of revenue may adversely
effect our operations. For example, an extended period of lack of revenue may
cause us to cut back on our operations which may impede any future
growth.
We
May Not Be Able To Compete Effectively In The Financial Services Market Because
Of Our Size.
The
market for small business financial services is competitive, rapidly evolving,
fragmented, and highly sensitive to new product introductions and marketing
efforts by industry participants. Increased competition for services similar
to
our brokering services could lower Capital Resource Funding’s market share and
negatively impact its business and stock price. We face primary competition
from
a number of companies that offer commercial finance brokering services primarily
through an internet presence only. Although we have implemented a business
plan
designed to take advantage of market opportunities, it is likely that our
competitors will develop similar marketing strategies and implement them with
greater success, particularly given their greater size.
We
Have Had Limited Revenue Growth And May Not Be Able To Achieve Growth In
Revenues In The Future.
It
is
possible that our business will not grow in the future, or that its costs and
expenses will increase. It is possible that we will never achieve
profitability.
Our
Costs Of Doing Business May Increase Significantly When And If Our Business
Volume Increases, Which Could Have A Negative Impact On Overall
Profitability.
An
increased business volume would require, among other things, a full-time
commitment from Mr. Koran, and additional support staff could be required.
Currently, Mr. Koran does not draw a salary nor does Capital Resource Funding
pay for any of his personal expenses such as telephone, travel, automobile
mileage and entertainment of referral sources. We do not intend to retroactively
reimburse Mr. Koran for these business related expenses and his salary. Rather,
we will only reimburse him prospectively as expenses are incurred, if
applicable. For example, we expect to pay Mr. Koran a salary of $40,000 per
year, to begin sometime in 2005. Other anticipated expenses include search
engine optimization and additional internet advertising. Additional office
equipment and office space may be necessary as well. For 2005, we have budgeted
$3,200 for rent, phone, travel and web hosting, $9,000 per quarter in internet
advertising, $7,500 per quarter in professional fees, and $10,000 per quarter
in
salary. These expenses could have a negative impact on overall profitability,
which impact could be offset by additional revenue.
Our
Business Strategy Includes Forming New Marketing Relationships With Others
And A
Failure To Accomplish This Strategy May Adversely Impact Our Customer Base
And
Revenue Growth.
We
currently rely upon a web presence and individual referral sources for our
business. We recognize the importance of forming direct marketing partnerships
with other companies with complementary services. Failure to develop marketing
partnerships may adversely impact our ability to grow our business model.
Because
It Is Not Difficult To Enter Our Industry, We Expect Increased Competition
Which
Could Harm Our Business.
The
commercial finance brokerage industry is very competitive. Increased competition
is likely from both existing competitors and new entrants into our existing
or
future markets. We believe it is not very difficult to enter into business
in
our industry. Our competitors have significant advantages, and our future
competitors may also have advantages, including:
-
established referral network and name recognition;
-
substantially greater resources and market presence;
-
better
customer service and technological expertise;
-
additional personnel;
-
the
ability to devote greater resources to marketing;
To
Grow Our Business, We Plan To Launch A Marketing Campaign To Build Name
Recognition And Seek Complementary Marketing Partnerships With Accounting Firms
And Commercial Banks. There Can Be No Assurances We Will Have The Funds
Necessary To Pursue Our Marketing Campaign Or That It Will Succeed In Generating
Revenue Growth For Capital Resource Funding, Either Of Which Will Negatively
Impact Our Results Of Operations.
To
carry
out our growth strategies, we plan to launch a marketing campaign to build
name
recognition and seek complementary marketing partnerships with accounting firms
and commercial banks. An inability to launch a successful marketing campaign
and
secure key marketing partnerships may negatively affect our financial results
and our ability to grow. We cannot guarantee that we will be able to identify
and fund the proper marketing efforts that will yield produce any revenue
growth.
Many
Of The Companies That We Plan To Target For Strategic Marketing And Customer
Business, Such As Banks, Operate In A Highly Regulated Industry, Which Could
Adversely Impact Our Freedom To Conduct Business.
Although
our business is not highly regulated, we plan to offer our services to banks.
The banking industry is highly regulated and subject to supervision by several
federal and/or state governmental regulatory agencies. If bank regulations
change or if new regulations are adopted to regulate the financing of small
business accounts receivable, our business, financial condition and results
of
operations could be materially, adversely affected.
We
Do Not Expect To Pay Dividends On Our Common Stock.
To
date,
we have not paid any dividends on our common stock. We do not anticipate paying
any cash dividends on our common stock in the foreseeable future. Any payment
of
future dividends and the amounts thereof will depend upon our earnings,
financial requirements and other factors deemed relevant by our board of
directors.
If
Our Common Stock Becomes Tradable On The Over-The-Counter Bulletin Board, Sales
Of Our Common Stock By Our Principal Shareholder Could Affect The Level Of
Public Interest In Our Common Stock As Well As Depress Its
Price.
By
the
filing of this registration statement with the Commission, we are attempting
to
register 790,000 shares of our common stock. If this registration statement
is
declared effective, the Selling Security Holder, by delivery of the prospectus
included within this registration statement, will be able to sell its registered
shares at $.25 per share until trading begins on the OTC Bulletin Board, and
thereafter at negotiated prices. However, there can be no assurance that we
will
find a market maker willing to apply for such listing. In addition, if this
registration statement is declared effective, we, by delivery of the prospectus
included within this registration statement, will be able to sell our registered
shares at $.25 per share. If our common stock becomes tradable on the Over
the
Counter Bulletin Board, prospective purchasers will be able to purchase our
common stock in the open market. Greentree Financial Group, Inc. will be able
to
sell the shares covered by this prospectus on the open market. In addition,
because our principal stockholder, David Koran, owns approximately 91% of our
common stock he may dispose of a substantial percentage of his stock after
a
one-year holding period subject to the limitations of Rule 144 under the
Securities Act of 1933, as amended. In general, these limitations impose a
maximum sale requirement equal to the greater of an amount during the preceding
three months of 1% of our outstanding shares or an amount equal to the average
weekly reported volume of trading in our common stock on all national securities
exchanges and/or reported through the automated quotation system of a registered
securities association during the four calendar weeks preceding the filing
of a
Rule 144 notice. In addition, there are other requirements imposed by Rule
144,
including manner of sale and other requirements. If substantial amounts of
any
of these shares are sold either on the open market or pursuant to Rule 144,
there may be downward price pressures on our common stock price, causing the
market price of our common stock to decrease in value. In addition, this selling
activity could:
Decrease
the level of public interest in our common stock;
o
Inhibit
buying activity that might otherwise help support the market price
of our
common stock; and
o
Prevent
possible upward price movements in our common
stock.
There
Is A Risk That Our Shares May Not Become Quoted On The Over-The-Counter Bulletin
Board In The Near Future, In Which Case There May Be No Trading Market For
Our
Shares, Or We May Have To Consider Alternatives Such As Applying To List Them
For Quotation On The National Quotation Bureau’s Pink Sheets, Which Is
Considered To Be A Less Liquid Trading Market, And The Price Per Common Shares
Could Be Negatively Affected By Such A Listing.
We
intend
to reach an agreement with a market maker to assist us in filing a 15c-211
application to the NASD, Inc. to have our common shares quoted on the
Over-The-Counter Bulletin Board. Upon acceptance of our application, we intend
to acquire additional market makers to make a market in our common stock.
However, there can be no assurances that any of these steps will occur, and
we
may be unable to become quoted on the OTC Bulletin Board. In fact, no market
maker has agreed to make a market in our shares to date, no such agreement
may
ever be reached, and we have not taken any concrete steps toward having our
shares quoted on the OTC Bulletin Board to date. In addition, we have been
advised that the NASD requires that a company have approximately 35 shareholders
to be quoted on the OTC Bulletin Board and there can be no assurances that
we
will ever have the required number of shareholders, although we plan to increase
the number of our shareholders through this self-underwritten offering. If
we
fail to be quoted, there would be no established trading market for our shares.
From there we would have to consider other alternatives, such as the possibility
of listing the shares for trading on the National Quotation Bureau’s Pink
Sheets, which is considered to be a less liquid trading market and the price
per
common share could be negatively affected by such a listing.
The
NASD Requires That A Company Have Approximately 35 Shareholders To Be Quoted
On
The OTC Bulletin Board, And We Do Not Have Such A Shareholder Constituency
And
May Never Have One.
The
NASD,
Inc. requires approximately 35 shareholders for a company to be quoted on the
OTC Bulletin Board. Since we do not have the required 35 shareholders, we will
not be able to pursue such quotation in the immediate future, which could
negatively impact the trading value of our shares.
There
Is No Trading Market For Our Shares Of Common Stock And You May Be Unable To
Sell Your Shares.
There
is
not, and has never been, a trading market for our securities. There is no
established public trading market or market maker for our securities. There
can
be no assurance that a trading market for our common stock will be established
or that, if established, a market will be sustained.
Inasmuch
as our offering will not have an escrow account and there is not minimum
purchase amount, we will have access to investors’ funds immediately and a
purchaser of shares could end up as one of only a few investors in a company
which may continue to need capital to survive or expand its
operations.
We
do not
plan to have an escrow account in connection with this offering. As a result,
we
will have access to investors’ money immediately upon tender by a purchaser of
shares. Since our offering does not have a minimum purchase amount, a purchaser
of shares could end up as one of only a few investors in a company which may
continue to need capital to survive or expand its operations. Their investment
could have little or no value, and Capital Resource Funding may have few
opportunities to raise additional capital at that point in time.
Our
Lack Of An Established Brand Name And Relative Lack Of Resources Could
Negatively Impact Our Ability To Effectively Compete In The Financial Brokerage
Market.
We
do not
have an established brand name or reputation to successfully sell commercial
funding programs. We also have a relative lack of resources to conduct our
business operations. Thus, we may have difficulty effectively competing with
companies that have greater name recognition and resources than we do.
Presently, we have no patents, copyrights, trademarks and/or service marks
that
would protect our brand name or our proprietary information, nor do we have
any
current plans to file applications for such rights. Our inability to promote
and/or protect our brand name may have an adverse effect on our ability to
compete effectively in the commercial finance industry.
We
Have Near-Term Capital Needs; We May Be Unable To Obtain The Addition Funding
Needed To Enable Us To Operate Profitably In The
Future.
We
will
require additional funding over the next twelve months to develop our business
estimated to be equal to $96,000. Presently, we have only $1,624 worth of liquid
assets with which to pay our expenses. Accordingly, we will seek outside sources
of capital such as conventional bank financing; however, there can be no
assurance that additional capital will be available on favorable terms to us.
If
adequate funds are not available, we may be required to curtail operations
or to
obtain funds by entering into collaboration agreements on unattractive terms.
In
addition, we have no credit facility or other committed sources of capital
sufficient to fund our business plan. We may be unable to establish credit
arrangements on satisfactory terms. If capital resources are insufficient to
meet our future capital requirements, we may have to raise funds to continue
development of our operations. To the extent that additional capital is raised
through the sale of equity and/or convertible debt securities, the issuance
of
such securities could result in dilution to our shareholders and/or increased
debt service commitments. If adequate funds are not available, we may be unable
to sufficiently develop our operations to become profitable.
Our
Principal Stockholder And His Family Controls Our Board Of Directors And Thereby
Controls Our Business Affairs In Which Case You Will Have Little Or No
Participation In Our Business Affairs.
Currently,
our President, CEO and Director, Mr. David R. Koran owns 91% of the outstanding
shares of Capital Resource Funding. In addition, Laura Koran, his wife, is
our
Chief Financial Officer and a Director, and Richard Koran, his father, is our
Vice President and a Director. The Koran family will control the Board of
Directors and therefore control our business affairs. In addition, David Koran,
by virtue of his 91% share ownership percentage, he will have significant
influence over all matters requiring approval by our stockholders without the
approval of minority stockholders. In addition, he will be able to elect all
of
the members of our Board of Directors, which will allow him to significantly
control our affairs and management. Accordingly, you will be limited in your
ability to affect change in how we conduct our business.
If
We Lose The Services Of Our President, Our Business May Be
Impaired.
Our
success is heavily dependent upon the continued and active participation of
our
president, David R. Koran. Mr. Koran has 12 years of experience in the finance
business. The loss of Mr. Koran’s services could have a severely detrimental
effect upon the success and development of our business, inasmuch as he is
the
only officer with commercial finance brokerage experience with Capital Resource
Funding. The other officers include two family members and Steve Moore, our
Chief Operating Officer. His background is in the textile industry. We do not
maintain "key person" life insurance on Mr. Koran. We do not have a written
employment agreement with Mr. Koran. There can be no assurance that we will
be
able to recruit or retain other qualified personnel, should it be necessary
to
do so.
We
Do Not Have Any Plans To Hire Additional Personnel For At Least The Next Twelve
Months, Which May Cause Substantial Delays In Our
Operations.
Although
we plan to expand our business and operations, we have no plans to hire
additional personnel for at least the next twelve months. As we expand our
business there will be additional strains on our operations due to increased
cost. In addition, there may be additional demand for our services. We now
only
have the services of our president to accomplish our current business and our
planned expansion. If our growth outpaces his ability to provide services and
we
do not hire additional personnel itmay
cause
substantial delays in our operations.
We
Face Intense Competition, Which Puts Us At A Competitive Disadvantage; If We
Are
Unable To Overcome These Competitive Disadvantages We May Never Become
Profitable.
We
face
and will face intense competition from companies engaged in similar businesses.
We compete and will compete with numerous companies that broker commercial
finance products both over the Internet and via traditional forms of business.
Direct competition to us can be any individual or group of individuals or
company that brokers commercial finance products, and there are thousands of
entities that could be considered competitors in the United States. Hence,
there
is no way to accurately quantify or detail our market competition with
specificity. However, many of our competitors have significantly greater
customer bases, operating histories, financial, technical, personnel and other
resources than we do, and may have established reputations for success in the
commercial finance industry. There can be no assurance that we will be able
to
compete effectively in the highly competitive commercial finance industry,
which
may adversely affect our business prospects.
Our
Common Stock Is A “Penny Stock”, And Compliance With Requirements For Dealing In
Penny Stocks May Make It Difficult For Holders Of Our Common Stock To Resell
Their Shares.
The
SEC
has adopted rules that regulate broker-dealer practices in connection with
transactions in “penny stocks.” Penny stocks generally are equity securities
with a price of less than $5.00, other than securities registered on certain
national securities exchanges or quoted on NASDAQ, provided that current price
and volume information with respect to transactions in such securities is
provided by the exchange or system. Prior to a transaction in a penny stock,
a
broker-dealer is required to:
o
deliver
a standardized risk disclosure document prepared by the
SEC;
o
provide
the customer with current bid and offer quotation for the penny
stock;
o
explain
the compensation of the broker-dealer and its salesperson in the
transaction;
o
provide
monthly account statements showing the market value of each penny
stock
held in the customer’s account;
o
make
a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser’s approval;
and
o
provide
a written agreement for the
transaction.
These
requirements may have the effect of reducing the level of trading activity
in
the secondary market for our stock. Because our shares are subject to the penny
stock rules, you may find it more difficult to sell your shares.
The
net
proceeds of this offering will be $70,000 (gross proceeds of $75,000 less
offering costs of $5,000) if all of the Shares are sold. We intend to use the
net proceeds according to the following schedule:
Capital
Resource Funding will sell its shares at $.25 per share. The Selling Security
Holder will sell its shares at $.25 per share and thereafter at prevailing
market prices, if and when Capital Resource Funding is quoted on the
Over-The-Counter Bulletin Board. However, there can be no assurance that we
will
find a market maker willing to apply for such quotation. Prior to this offering,
there has been no market for our shares. The offering price of $.25 per share
was arbitrarily determined and bears no relationship to assets, book value,
net
worth, earnings, actual results of operations, or any other established
investment criteria. Among the factors considered in determining this price
were
our historical sales levels, estimates of our prospects, the background and
capital contributions of management, the degree of control which the current
shareholders desired to retain, current conditions of the securities markets
and
other information.
Our
net
tangible book deficit as of August 31, 2005 was $(58,394) or $(.0054) per share
of common stock. Net tangible book deficit is determined by dividing our
tangible book deficit (total tangible assets less total liabilities and
convertible preferred stock) by the number of outstanding shares of our common
stock. As of February 28, 2005, we had a total of 10,790,000 shares of common
stock outstanding and no shares of preferred stock outstanding.
This
small business issuer is not a reporting company. We have issued common equity
at a price significantly more than the price paid by its chief executive
officer, or $.001 per share. For example, we issued 790,000 shares of common
stock for services rendered at an offering price of $.25 per share
on
November 30, 2004. As of our most recent balance sheet date, these shares were
carried on the books in an account entitled “Common Stock to be Distributed.”
Our pro forma book deficit adjusted as of August 31, 2005, would have been
$16,606,
or about $.0015 per share (assuming a total of 11,090,000 shares of common
stock
outstanding after this offering). This represented an immediate increase in
our
pro forma book value to our existing shareholders of ($.2431) per share and
an
immediate dilution to new shareholders of about $.2480 or 99%.
The
following table illustrates the per share dilution based on this
example:
Offering
Price Per Share
$
.2500
Net
Tangible Book Value Per Share Before This Offering (1)
($.0054
)
Decrease
Attributable To New Investors (2)
($.2431
)
Net
Tangible Book Value Per Share After This Offering
$
.0015
Dilution
Per Share To New Shareholders
$
.2480
(1) Assumes
a
pro forma adjusted book deficit of ($58,394) on August 31, 2005, and 10,790,000
shares of common stock outstanding, and no shares of preferred stock
outstanding, as of August 31, 2005.
(2) Assumes
a
net increase of $75,000 in pro forma adjusted book value (attributable to new
shares issued to new shareholders) and 11,090,000 shares outstanding after
that
offering.
The
Selling Security Holder named in the table set forth below is selling the
securities covered by this prospectus. The Selling Security Holder named below
is not a registered securities broker-dealer or an affiliate of a broker-dealer.
The
table
indicates that all the securities will be available for resale after the
offering. However, any or all of the securities listed below may be retained
by
the Selling Security Holder, and therefore, no accurate forecast can be made
as
to the number of securities that will be held by the Selling Security Holder
upon termination of this offering. We believe that the Selling Security Holder
listed in the table has sole voting and investment powers with respect to the
securities indicated. We will not receive any proceeds from the sale of the
securities covered by this prospectus.
SELLING
SECURITY HOLDERS TABLE
Name
Relationship
With Issuer
Amount
Owned Prior to Offering
Amount
To Be Registered
Amount
Owned
After
Offering
Percent
Owned
Before/After
Offering
Greentree
Financial Group, Inc.
Consultant
(1)
490,000
490,000
0
4.5%/0%
TOTALS
490,000
490,000
_______________________
(1) Robert
C.
Cottone and Michael Bongiovanni are the owners of Greentree Financial Group,
Inc. Greentree Financial Group, Inc. received the 490,000 shares of our common
stock for consulting services that consist of assisting in the preparation
of
this Form SB-2 registration statement and the prospectus included therein,
compliance with state Blue Sky regulations, selection of an independent transfer
agent and Edgar services. Our contract with Greentree Financial Group, Inc.
is
attached as an exhibit to this Registration on Form SB-2.
We
intend
to seek qualification for sale of the securities in those states where the
securities will be offered. To resell the securities in the public market the
securities must either be qualified for sale or exempt from qualification in
the
states in which the Selling Security Holder or proposed purchasers reside.
We
intend to seek qualification or exemptions for trading in every state; however,
there is no assurance that the states in which we seek qualification or
exemption will approve of the security re-sales. Should we not obtain exemptions
or qualification in these states you will be unable to resell your shares.
Capital
Resource Funding is offering 300,000 shares of its common stock for sale by
David Koran, our Chairman and CEO. We do not intend to use an underwriter for
this offering but we may use participating brokers. We intend to offer the
shares of our Common Stock being registered for sale by David Koran in an
offering that will commence on the date of this prospectus and end on March31,2006, unless all of the shares are sold prior to that date. Mr. Koran will
not
receive any compensation for shares sold. We may also pay participating brokers
a commission of up to 7% of the selling price per share to assist in our effort
to sell the shares. Mr. Koran intends to rely on the exemption from broker
status afforded by Rule 3a4-1 under the Securities Exchange Act of 1934, as
amended, in connection with his efforts to sell our shares in this offering.
As
such, Mr. Koran has represented that he is not subject to a statutory
disqualification in connection with our offering. He will not be compensated
in
connection with his participation by the payment of commissions or other
remuneration based either directly or indirectly on transactions in securities.
Mr. Koran is not an associated person of a broker-dealer. In addition, Mr.
Koran
primarily performs substantial duties for or on our behalf otherwise in
connection with transactions in securities. Mr. Koran is not a broker or dealer,
or an associated person of brokers or dealers and has not been such within
the
preceding twelve months. He will not participate in selling an offering of
securities for any issuer more than once every twelve months unless another
exemption is available. There is no minimum offering amount or minimum purchase
amount. In addition, there is no escrow account being set up, so we will have
immediate access to an investors funds. We intend to offer the Shares in states
where we can offer them. Subject to compliance with applicable law, we also
intend to offer the Shares for sale in the Peoples’ Republic of China.
We
plan
to sell the shares directly to investors at a price of $.25 per share. The
Selling Security Holder plans to sell their shares at $.25 per share and
thereafter at prevailing market prices, if and when, Capital Resource Funding
is
quoted for trading on the OTCBB. We intend to use advertising and other means
of
public communication. We will receive the net proceeds from the sale of the
300,000 shares. There is no assurance that we will be able to sell all or any
of
these shares.
By
Selling Security Holder
The
Selling Security Holder is offering 490,000 shares of our common stock under
this prospectus. We do not have any plan, agreement or understanding with the
Selling Security Holder regarding the coordination of our offering with theirs.
In the event the Selling Security Holder engages an underwriter, we will be
obligated to amend this prospectus to identify the underwriter and disclose
the
terms of the underwriter’s compensation and disclose any change in the plan of
distribution.
The
Selling Security Holder may sell the shares from time to time directly to
purchasers or through underwriters, broker-dealers or agents who may receive
compensation in the form of discounts, concessions or commissions from the
Selling Security Holder or from the purchasers. We do not expect these
discounts, concessions or commissions to be in excess of those customary in
the
types of transactions involved. We will not receive any proceeds from the sale
of shares by Selling Security Holder.
The
shares may be sold in one or more transactions at then prevailing market prices
at the time of sale, at prices related to prevailing market prices, at varying
prices determined at the time of sale, or at negotiated prices. These sales
may
be in transactions, which may involve crosses or block
transactions:
-
On the
OTC Bulletin Board or in the over-the-counter market.
-
In
transactions other than on the OTC Bulletin Board or on the over-the-counter
market.
-
Through
the writing of options, whether the options are listed on an options
exchange or otherwise.
-
Through
the settlement of short sales made after the effective date of
this
prospectus.
In
connection with the sale of the shares, or otherwise, the Selling Security
Holder may enter into hedging transactions with broker-dealers or financial
institutions, which may in turn engage in short sales of the shares in the
course of hedging the positions they assume. The Selling Security Holder may
also sell our common stock short, provided the sale is not made to close out
their short positions, or loan or pledge their shares to broker-dealers who
in
turn may sell the shares.
The
aggregate proceeds to the Selling Security Holder from the sale of the shares
offered by it will be the purchase price of the shares less discounts,
concessions and commissions, if any. The Selling Security Holder reserves the
right to accept an, together with its agents from time to time, to reject,
in
whole or in part, any proposed purchase of the shares to be made directly or
through agents.
In
order
to comply with the securities laws of some states, if applicable, the shares
may
be sold in these jurisdictions only through registered or licensed securities
brokers or dealers. In addition, in some states, the shares may not be sold
unless they have been registered or qualified for sale or an exemption from
registration or qualification requirements is available and has been complied
with.
Any
underwriters, broker-dealers or agents who participate in the sale of the shares
may be deemed to be “underwriters” within the meaning of Section 2(11) of the
Securities Act. Any discounts, concessions, commissions or profit they earn
on
any resales of the shares may be underwriting discounts or commissions under
the
Securities Act. Agents of the Selling Security Holders who are “underwriters”
within the meaning of Section 2(11) of the Securities Act will be subject to
the
prospectus delivery requirements of the Act. We have advised the Selling
Security Holders that persons acting on their behalf are required to deliver
a
copy of this prospectus when making sales of the shares.
In
addition, any shares covered by this prospectus which also qualify for sale
pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather
than pursuant to this prospectus. The Selling Security Holder may transfer,
devise or gift his shares by other means not described in this
prospectus.
This
offering of shares for resale by the Selling Security Holder will begin on
the
date of this prospectus and continue as long as this prospectus is in effect
or
until the Selling Security Holder has sold all of its shares, whichever occurs
first. If required, we will distribute a supplement to this prospectus or amend
the registration statement of which this prospectus is a part to describe
material changes to the terms of the offering.
We
are
paying all of the costs for registering the shares for sale by Capital Resource
Funding and for resale by the Selling Security Holder. These expenses include
the SEC’s filing fees and filings fees under state securities or “blue sky”
laws. The Selling Security Holder will pay all underwriting discounts,
commissions, transfer taxes and other expenses associates with their resale
of
the shares.
Regulation
M Applies To The Selling Security Holder:
We
have
informed the Selling Security Holder that it should not place any bid for,
purchase or attempt to purchase, directly or indirectly, any of our common
shares in the public market before it has sold all of our shares that it is
entitled to sell under this prospectus. Also, the Selling Security Holder should
not attempt to convince anyone else to bid for or purchase our common stock
in
the public market before it has sold all of its shares covered by this
prospectus. To do so may violate Regulation M under the Securities Exchange
Act.
Any person who, directly or indirectly, bids for or effects any purchase of
the
common stock for the purpose of pegging, fixing or maintaining the price of
our
common shares, practices known as “stabilizing”, may violate Regulation M if the
action does not comply with Regulation M. Furthermore, no person should engage
in any activity that is fraudulent, manipulative, or deceptive under the federal
securities laws and regulations.
We
are
not aware of any pending or threatened legal proceedings, in which we are
involved. In addition, we are not aware of any pending or threatened legal
proceedings in which entities affiliated with our officers, directors or
beneficial owners are involved.
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS
Directors
and Executive Officers.
Article
III, Section 2 of our Bylaws provide that we must have at least 3 directors.
Each director will serve until our next annual shareholder meeting, to be held
sixty days after the close of the fiscal year, or until a successor is elected
who accepts the position. Directors are elected for one-year terms. Our officers
may be elected by our Board of Directors at any regular or special meeting
of
the Board of Directors.
Vacancies
may be filled by a majority vote of the remaining directors then in office.
Our
directors and executive officers are as follows:
Name
Age
Position
David
Koran
37
Chief
Executive Officer, President and Director
Steven
R. Moore
35
Chief
Operating Officer and Director
Richard
P. Koran
65
Vice
President and Director
Laura
Koran
35
Chief
Financial Officer, Secretary and
Director
David
Koran has been our Chief Executive Officer, President and Director since
inception in February 2004.
Mr.
Koran’s experience in the commercial finance and otherwise over the last five
years has consisted of the following:
From
2004
to Present, Mr. Koran has been the president of Capital Resource Funding, a
commercial finance brokerage company, which provides commercial finance
brokerage services within the entire United States. We were incorporated in
North Carolina on February 2, 2004. We have no employees, other than Mr. Koran,
since
our
inception. Currently Mr. Koran is working 25 hours per week in the employ of
Capital Resource Funding.
From
January 2004 to Present, Mr. Koran has been operating as an employee with
Benefactor Funding Corp. as a Director of Marketing. Benefactor Funding Corp.
is
a commercial factor offering funding programs to small to mid-sized businesses
ranging from 500,000 to 3 million. Mr. Koran will remain in this employment
until it is financially feasible to draw a comparable salary from CRF.
From
January 2002 to December 31, 2003, Mr. Koran worked as a Business Development
Officer for J D Factors, LLC. Mr. Koran was successful in developing a new
3
state territory into a profitable region in the first 4 months of operation.
J D
Factors specializes in factoring services for micro and small businesses.
From
July
2001 to January 2002, Mr. Koran worked as a Commercial Loan Officer responsible
for managing a 5 million dollar micro business loan portfolio and producing
new
loan volume monthly. Mr. Koran gained valuable experience in commercial
underwriting, loan work outs, and risk management.
From
December 1999 to July 2001, Mr. Koran worked as a Business Relationship Manager
for First Union Corp. In this role, Mr. Koran managed a small business portfolio
of over 500 banking relationships.
Mr.
Koran’s experience in the commercial banking industry helped develop his
business plan for CRF. Mr. Koran identified a service need within the banking
industry to help facilitate small business lending needs that was unmet by
the
conventional loan products. This industry experience helped to mold the business
plan of CRF.
Mr.
Koran
is a member of the following business organizations: Commercial Finance
Association, www.cfa.org;
Turnaround Management Association, www.turnaround.org;
National Funding Association, www.nationalfunding.org,
and he
is an Advisory Board member of the Charlotte, NC Chapter.
David
Koran lives in Cornelius, North Carolina.
Steven
Moore has been our Chief Operating Officer and Director since October 1, 2004.
Mr. Moore’s experience over the last five years has consisted of the
following:
From
June
1992 to January 2000, Mr. Moore was a Planning Manager with the Sara Lee Branded
Apparel Division of the Sara Lee Corporation.
From
February 2000 to February 2002, Mr. Moore as a Buyer for Kmart Corporation,
having the responsibility for buying merchandise to be sold in 2100 retail
stores. He supervised five employees.
From
March 2002 to September 2004, Mr. Moore was a Director of Sales Planning for
the
Sara Lee Branded Apparel Division of the Sara Lee Corporation. He managed a
team
of 24 people in the area of sales forecasting. His team was responsible for
providing retail information to their manufacturing planning teams.
Richard
Koran has been our Vice President and Director since October 1, 2004. Mr.
Koran’s experience over the last five years has consisted of the
following:
From
1997
to September 2004, Mr. Koran was Production Administrator at Standard Register
Corp. in Valley View, Ohio. At Standard Register, he oversaw the production
operation of demand print, prepress and press production. He was responsible
for
all of the quality control functions. He managed 20 associates and supervisors,
scheduled jobs for internal and all outsourcing of the three shift
operations.
Richard
Koran is the father of David Koran and lives in Avon, Ohio.
Laura
Koran has been our Chief Financial Officer, Secretary and Director since October1, 2004. Ms. Koran’s experience over the last five years has consisted of the
following:
From
January 1993 to May 2000, Ms. Koran was an MRO Buyer, Buyer, Senior MRO Buyer,
Purchasing Agent and Purchasing Manager at the Sara Lee
Corporation.
From
May
2000 to March 2003, Ms. Koran was a Purchasing Manager and VMI Program Manager
at Solectron, Inc.
From
May
2002 to August 2004, Ms. Koran was a Loan Officer and Independent Contractor
with her own mortgage loan origination company.
Ms.
Koran
is married to David Koran.
Significant
Employees.
Other
than those persons mentioned above, we have no significant
employees.
Family
Relationships.
None,
except as mentioned above.
Legal
Proceedings.
No
officer, director, or persons nominated for such positions and no promoter
or
significant employee of our Company has been involved in legal proceedings
that
would be material to an evaluation of our management.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following tables set forth the ownership, as of October 19, 2005, of our common
stock (a) by each person known by us to be the beneficial owner of more than
5%
of our outstanding common stock (with the exception of Greentree Financial
Group, Inc., which only owns 4.5% of our outstanding common stock but is listed
in the table for informational purposes only), and (b) by each of our directors,
by all executive officers and our directors as a group. To the best of our
knowledge, all persons named have sole voting and investment power with respect
to such shares, except as otherwise noted.
Security
Ownership of Certain Beneficial Owners (1)(2)
(1)
Pursuant to Rule 13-d-3 under the Securities Exchange Act of 1934, as amended,
beneficial ownership of a security consists of sole or shared voting power
(including the power to vote or direct the voting) and/or sole or shared
investment power (including the power to dispose or direct the disposition)
with
respect to a security whether through a contract, arrangement, understanding,
relationship or otherwise. Unless otherwise indicated, each person indicated
above has sole power to vote, or dispose or direct the disposition of all shares
beneficially owned. We are unaware of any shareholders whose voting rights
would
be affected by community property laws.
(2)
This
table is based upon information obtained from our stock records. Unless
otherwise indicated in the footnotes to the above tables and subject to
community property laws where applicable, we believe that each shareholder
named
in the above table has sole or shared voting and investment power with respect
to the shares indicated as beneficially owned.
(3)
Greentree Financial Group, Inc., a Florida corporation, is equally and wholly
owned by Mr. Robert C. Cottone, CPA and Mr. Michael Bongiovanni, CPA. Mr.
Bongiovanni is Mr. Cottone’s step-father.
The
following description is a summary and is qualified in its entirety by the
provisions of our Articles of Incorporation and Bylaws, copies of which have
been filed as exhibits to the registration statement of which this prospectus
is
a part.
COMMON
STOCK.
We
are
authorized to issue 100,000,000 shares of common stock, with a par value of
$.00000005 per share. As of October 19, 2005, there were 10,790,000 common
shares issued and outstanding. All shares of common stock outstanding are
validly issued, fully paid and non-assessable.
CONVERTIBLE
PREFERRED STOCK
We
are
authorized to issue 10,000,000 shares of convertible preferred stock with a
par
value of $.00000005 per share. As of October19, 2005, there were no convertible
preferred shares issued and outstanding. If issued, our preferred shares may
include certain shareholder privileges to be determined by our board of
directors such as cumulative dividend payments and conversion
features.
Our
Financial Statements for the year ended May 31, 2005 have been included in
this
prospectus in reliance upon Traci Anderson, CPA, independent Certified Public
Accountants, as experts in accounting and auditing. The legality of the issuance
of our shares of common stock in this offering have been passed upon by the
Law
Offices of Harold H. Martin, P.A., counsel to Capital Resource
Funding.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to our directors, officers and controlling persons, we have been
advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act
of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities, other than the payment by us of
expenses incurred or paid by our directors, officers or controlling persons
in
the successful defense of any action, suit or proceedings, is asserted by such
director, officer, or controlling person in connection with any securities
being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to court of appropriate jurisdiction
the question whether such indemnification by us is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issues.
On
or
about June 23, 2004, we increased our authorized common shares to 100,000,000,
and subsequently changed the par value of our common stock to $.00000005 per
share and forward split our common stock 20,000 for 1. As a result, Mr. Koran’s
500 shares were exchanged for 10,000,000 of our common shares. As part of the
transaction, Mr. Koran paid $100 in cash. In addition, we authorized 10,000,000
shares of convertible preferred stock to be issued, $.001 par value, and
subsequently changed the par value to $.00000005 per share. Each one of these
shares is convertible into ten common shares.
On
June23, 2004, we entered into a Financial Advisory Services Agreement with Greentree
Financial Group, Inc. Under the terms of the agreement, Greentree Financial
Group, Inc. has agreed to provide the following services:
·
Assistance
with the preparation of our Form SB-2 registration statement;
·
State
Blue-Sky compliance;
·
Selection
of an independent stock transfer agent; and
·
Edgar
services.
In
exchange for these services, we have issued to Greentree 490,000 shares of
our
common stock. The common shares issued were valued at the estimated value for
the services received which was $122,500, or $.25 per share.
In
connection with this agreement, we promised to pay $40,000 (representing $38,835
principal and $1,165 interest or approximately 6% per annum) to Greentree
Financial Group, Inc. The 6-month, nonassumable promissory note with Greentree
Financial Group, Inc. was signed on June 24, 2004.
On
or
about February 2, 2004, we sold 500 pre-split shares (10,000,000 post-split)
of
stock to our President, David Koran, for $100 in an exempt offering under the
Securities Act of 1933, as amended, pursuant to Section 4(2) of that
Act.
During
the period from inception (February 2, 2004) through May 31, 2004, our President
provided us with $2,000 in fair value of rent, which is considered to be a
capital contribution. During the period from inception (February 2, 2004)
through May 31, 2004, our President paid $1,942 in business expenses on our
behalf, which is also considered to be a capital contribution.
On
May 4,2004, we received a $15,000 unsecured line of credit from The First Citizens
Bank & Trust Company (the “Bank”). The annual percentage rate (“APR”) is
based on the Bank’s prime rate plus 1% with a maximum APR of 8%. As of the date
of the note, the APR was 5%. The initial maturity date of the note is May 4,2005. As of May 31, 2004, Capital Resource Funding had not drawn against this
line of credit. Subsequent to May 31, 2004, Capital Resource Funding borrowed
$12,500 against this line of credit. There is currently $2,500 in unused
credit.
On
June23, 2004, we amended our Articles of Incorporation to effect a name change
from
Capital Business Funding, Inc. to Capital Resource Funding, Inc.
On
June23, 2004, we entered into a letter of intent to form a strategic alliance with
HairMax International, Inc., a Nevada corporation (“Hairmax”). Pursuant to the
strategic alliance, our services were to have been offered to the commercial
customers of HairMax International, Inc. with a 50/50% revenue split on every
referral made by HairMax. HairMax had approximately 5,000 retail cleaning
clients, and several hundred commercial cleaning customers. Its commercial
accounts represented a potentially valuable source of leads which we had hoped
to be able to offer the services of Capital Resource Funding. In consideration
for services provided by HairMax International, Inc., we agreed to issue to
HairMax 200,000 shares of our restricted common stock, $.00000005 par value,
which it agreed to distribute as a dividend to its shareholders. On December20,2004, we terminated the strategic alliance agreement with Hairmax, in light
of
Hairmax’s plans to merge with a privately-held corporation and adverse comments
which we received from the Commission in which the staff took the position
that
our strategic alliance agreement and share distribution plan with the
shareholders of Hairmax constituted a primary offering of securities. In the
view of the staff of the Commission, we would have had to consummate our
offering at a fixed price and for a finite duration. Without the affiliation
with Hairmax, we understand that we are free to pursue the offering as currently
structured. The share certificate for 200,000 shares of our common stock was
never delivered to Hairmax and has been cancelled.
On
March1, 2005, we secured an SBA unsecured line of credit from a bank in the amount
of
$10,000, of which $5,000 was borrowed in April, 2005. The note is for prime
plus
two percentage points and interest-only payments are required.
Description
Of Our Role As A Broker Of Commercial Finance Transactions.
We
plan
to continue to operate as a broker of commercial finance transactions. In
performing these services, we will represent individual businesses that are
in
need of obtaining a variety of types of financing to help fund their growth.
The
different funding transactions that we plan to broker are: commercial loans,
purchase order financing, account receivables financing/factoring and equipment
leasing. An example of a commercial loan would be short term or long term bank
or other financing to help a business purchase a new building to house their
company. For commercial loan transactions, our anticipated broker commission
would be approximately 1% of the loan amount paid by the lender. Management
believes that this is what commercial finance brokers of commercial loans in
the
Charlotte, North Carolina market typically earn for their services, based on
its
knowledge of such brokers’ transactions.
Purchase
order financing is a funding program that helps a business receive the advance
funding needed to cover their costs to fill a purchase order. For example,
a
manufacturing company that received a large purchase order from a new client
that requires significant outlay of funds to purchase raw materials and
manufacture the product may be in need of financing in order to produce the
ordered goods. A purchase order financing company will advance funds to finance
a purchase order and help the manufacturer pay the supply and labor costs needed
to fill the order. Our anticipated broker commission for purchase order
financing is .25-1% of each purchase order paid by the individual funding
company. Again, management believes that this is what commercial finance brokers
of purchase order financing in the Charlotte, North Carolina market typically
earn for their services, based on its knowledge of such brokers’ transactions.
Account
receivables financing/factoring is the advancement of funds against receivables
to assist companies with in the management of their cash flow derived from
accounts receivable. Loan of this type usually will be structured to advance
80-85% of the pre-qualified receivables, and they also manage the collections
of
the receivables for a small discount fee or percentage of each receivable.
Our
anticipated discount/percentage fee for this type of financing is between 1%-8%
depending on the size of receivables funded. In a typical transaction, the
higher the funded amount, the lower the discount fee. Our anticipated broker
commission for account receivables financing/factoring is 10%-15% of the gross
monthly fees for the life of the funding. For example, an accounts receivable
financing borrower that receives 150,000/month in funding at a 2.5% monthly
discount fee will generate $3,750 per month in gross fees with a broker
commission ranging from $375 to $562.50 paid monthly for the life of the
financing. Management believes that fees for accounts receivable financing
anywhere in the country are competitive and commercial finance brokers of
accounts receivable financing typically earn this amount for their services.
We
have earned such a fee on a past transaction
Equipment
leasing is the leasing of equipment that a company needs to conduct business
such as machinery, trucks and office equipment. Our anticipated broker
commission for commercial leasing ranges from .5%-1% of the total lease amount
paid by the funding company. Management believes that type of fee is fairly
standard in the industry, and a commercial finance broker of equipment leasing
can expect to earn it, based on our knowledge of what competitors earn in
similar transactions.
In
each
of the above transactions, we anticipate negotiating a broker agreement with
each lender before submitting any documentation, so as to insure that we have
a
relationship with the lender and get paid.
Our
Business Plan.
Our
business plan is to continue to offer commercial finance brokering services
to
our existing referral base. Our existing referral base consists of unaffiliated
business relationships with individuals that David Koran knows personally.
At
present, that base consists of twenty individual commercial bankers who work
at
five major banks in the Charlotte, NC area. Mr. Koran has an informal business
relationship with these bankers and there is no formal agreement in place with
any of these individuals. A typical referral transaction involves a banker
who
has a customer that does not qualify for financing at that bank. The banker
then
refers these prospects to us for assistance in finding a funding source. After
the transaction is consummated, the banker will have performed a valuable
service for his customer, by introducing them to a broker who found an
alternative funding source. Often, the commercial banker will not have lost
a
customer’s other business in the process of making the referral.
In
addition, we get leads from our membership in the professional associations,
and
from individual CPAs, lawyers and consultants. We also plan to prospect new
business on the internet via our Website and will fund additional advertising
as
our revenue growth permits.
We
have
one account receivable/factoring transaction that is currently paying monthly
broker commissions averaging $1,100 per month. This commission will continue
as
long as the client company receives funding from the funding source. Mr. Koran
acted as the broker in this transaction.
Our
goal
is to increase our brokering transactions every quarter. Our revenue projections
for the next four quarters are as follows:
Quarter
1: $3,300 in quarterly revenue with $29,700 in quarterly expenses
Quarter
2: $5,000 in quarterly revenue with $29,700 in quarterly expenses
Quarter
3: $6,500 in quarterly revenue with $29,700 in quarterly expenses
Quarter
4: $8,000 in quarterly revenue with $29,700 in quarterly expenses
The
expense projections set forth above are based on an estimate of quarterly
expenses, and include (i) $3,200 per quarter for rent, phone, travel and web
hosting, (ii) $9,000 per quarter for internet advertising, (iii) $7,500 per
quarter in professional fees, and (iv) $10,000 per quarter for salary. The
revenue projections set forth above are based on the following assumptions:
1
new factoring transaction per quarter from our current referral channels and
our
Website, averaging $1,100 per month in revenue, and attrition of 1 factoring
transaction per year.
We
feel
that our business plan is conservative. Revenues could exceed this level with
additional marketing expenditures. We will need to raise additional debt or
equity funds to pay for this marketing. There can be no assurances that we
will
be successful in obtaining funds from traditional sources.
While
Mr.
Koran has only been engaged as a commercial finance broker since February 2004,
he has significant experience in banking and insurance. We feel that his
experience in the finance industry will translate into successful employment
with Capital Resource Funding. It is important to note that there are no work
experience requirements to enter this industry, and there have been a number
of
successful brokers who do not come from a commercial finance
background.
We
Tailor Our Services To Individual Needs.
When
acting as a broker for the individual businesses, we will provide our customers
with the following services:
o
Assist
the business with assessing their funding
needs.
o
Assist
the business with identifying their lending options and potential
funding
sources
o
Assist
the business with compiling an application package and submitting
it to a
suitable funding source.
o
Act
as a liaison between the business and funding source through the
entire
application and funding process.
In
exchange for providing these services we are compensated through the payment
of
a commission by the funding company only if and when a transaction is closed.
Our services are of no additional cost to the client.
We
hope
to continue to attract prospective clients to our Website, which is on the
internet at the following address: www.capitalresourcefunding.biz
. We pay
$105 per quarter for web hosting fees, and $400 to register the Website. In
addition, we plan to market our services to our existing referral sources.
Our
future plans, which depend on our revenue growth, entail a marketing campaign
that includes additional internet and radio advertising to increase the number
of inquiries for our services.
Business
Regulation and Other.
There
are
no known license requirements to broker commercial finance transactions. We
have
never been the subject of any bankruptcy or relationship. We have had no
material reclassification, merger, consolidation, or purchase or sale of a
significant amount of assets not in the ordinary course of
business.
Competition.
We
face
and will face intense competition from companies engaged in similar businesses.
We compete and anticipating competing with numerous companies that broker
commercial finance products both over the Internet and via traditional forms
of
business. Direct competition to us can be any individual or group of individuals
or company that brokers commercial finance products, and there are thousands
of
entities that could be considered competitors in the United States. Hence,
there
is no way to accurately quantify or detail our market competition with greater
specificity. However, many of our competitors have significantly greater
customer bases, operating histories, financial, technical, personnel and other
resources than we do, and may have established reputations for success in the
commercial finance industry. There can be no assurance that we will be able
to
compete effectively in the highly competitive commercial finance industry,
which
may adversely affect our business prospects.
There
are
few barriers to entry in the commercial finance brokering business. There are
brokers, finders, agents, lawyers, consultants and a variety of other
professionals all trying to put funding sources together with prospective
clients in order to make a commission. With the advent of modern computers
and
internet communication, this business has become national in scope, and it
is
not unusual to find a broker from Miami, Florida putting together a financing
package for a manufacturer in Pittsburgh, PA with a finance company located
in
Los Angeles, CA. We intend to participate in all of these markets, and seek
commission based income wherever it can be derived.
There
are
examples of successful commercial finance brokerage firms within our industry,
and we hope to achieve success with a business plan that shares many
similarities, but is tailored to our size and resources. We meet from time
to
time with our competition and share ideas and opportunities. For example, there
are large professional associations of commercial finance brokers and funding
companies that meet on a regular basis in the major metropolitan areas. For
example, the Commercial Finance Association, which is a nationwide organization
with chapters in all of the major metropolitan areas, meets quarterly to discuss
topics of interest and exchange leads. We are a member of this organization’s
Charlotte, NC chapter. In addition, we are a member of the National Funding
Association, based in Charlotte, NC, with other chapters in Atlanta, GA and
Chicago, IL. Our Chairman, Mr. Koran, serves on the advisory board of the
Charlotte, NC chapter of the NFA. Further, we are a member of the Turnaround
Management Association, with chapters in all major metropolitan
areas.
We
are
currently not involved in any legal proceedings related to the conduct of our
business.
REPORTS
TO SECURITY HOLDERS
After
the
effective date of this document, we will be a reporting company under the
requirements of the Securities Exchange Act of 1934 and will file quarterly,
annual and other reports with the Securities and Exchange Commission.
Our
annual report will contain the required audited financial statements. We are
not
required to deliver an annual report to security holders and will not
voluntarily deliver a copy of the annual report to the security holders. The
reports
and other information filed by us will be available for inspection and copying
at the public reference facilities of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
Copies
of
such material may be obtained by mail from the Public Reference Section of
the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Information on the operation of the Public Reference Room may be obtained
by calling the SEC at 1-800-SEC-0330. In addition, the Commission maintains
a
World Wide Website on the Internet at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission.
The
discussion contained in this prospectus contains “forward-looking statements”
that involve risk and uncertainties. These statements may be identified by
the
use of terminology such as “believes”, “expects”, “may”, or “should”, or
“anticipates”, or expressing this terminology negatively or similar expressions
or by discussions of strategy. The cautionary statements made in this prospectus
should be read as being applicable to all related forward-looking statements
wherever they appear in this prospectus. Our actual results could differ
materially from those discussed in this prospectus. Important factors that
could
cause or contribute to such differences include those discussed under the
caption entitled “risk factors,” as well as those discussed elsewhere in this
prospectus.
OUR
COMPANY
The
discussion contained in this prospectus contains “forward-looking statements”
that involve risk and uncertainties. These statements may be identified by
the
use of terminology such as “believes”, “expects”, “may”, or “should”, or
“anticipates”, or expressing this terminology negatively or similar expressions
or by discussions of strategy. The cautionary statements made in this prospectus
should be read as being applicable to all related forward-looking statements
wherever they appear in this prospectus. Our actual results could differ
materially from those discussed in this prospectus. Important factors that
could
cause or contribute to such differences include those discussed under the
caption entitled “risk factors,” as well as those discussed elsewhere in this
prospectus.
We
were
incorporated in North Carolina on February 2, 2004 to engage in the business
of
commercial finance brokerage and consulting. We are currently engaged and plan
to continue in the commercial finance brokerage and consulting business. Our
executive offices are currently located at the residence of our President,
Mr.
David R. Koran, 2212 Lantern Way Circle, Cornelius, NC28031. Our telephone
number is (704) 564-1676. We are authorized to issue 100,000,000 shares of
common stock. Our total authorized common stock consists of 100,000,000 of
which
10,790,000 shares are currently issued and outstanding. We are also authorized
to issue up to 10,000,000 shares of convertible preferred stock, of which none
are issued and outstanding.
For
the
next twelve months, we plan to continue to operate as a broker of commercial
finance transactions with offices based in the banking center of Charlotte,
NC.
We have conservatively projected revenues of approximately $22,800 and costs
of
$118,800 for the next twelve months of operations. Revenues could exceed this
level with additional marketing expenditures. Such expenditures would involve
targeted internet advertising via banner and search engine advertisements or
printed advertising in industry publications. We anticipate such expenditures
to
approximate $3,000 per month, and we will need to incur additional debt or
raise
equity funds to pay for this marketing. While we are currently evaluating
selling additional shares to third parties or incurring additional indebtedness,
there can be no assurances that we will be successful in obtaining funds from
these sources.
We
anticipate beginning to pay our chief executive officer a salary at the rate
of
$40,000 per year, seeking additional staff and looking for office space sometime
in 2005 or when our revenues exceed our projected quarterly expenses of
$29,700.
In
the
event that we are successful in raising an additional $3,000 per month to fund
marketing expenditures, we project that our revenues could exceed $100,000
per
year within a three month period, based on our knowledge of the marketing and
revenue performance of competitors in the Charlotte, NC market.
Sales
for
the period from inception (February 2, 2004) through May 31, 2005 were $12,191.
Sales consisted of commissions earned on funded loans as follows:
·
Broker
fee in connection with factoring of accounts receivable generated
$9,147.
·
Broker
fee in connection with two mortgage commissions generated
$3,044.
All
sales
transactions were with unrelated parties.
Expenses.
Total
expenses for the period from inception (February 2, 2004) through May 31, 2005
was $271,035. These expenses related to the fair value of rent contributed
by
our President free of charge in the amount of $2,000, for website development
expenses paid by him on our behalf in the amount of $1,942 and other
miscellaneous and sundry costs.
We
expect
increases in expenses through the year 2005 as we move toward developing our
business plan and registering our common stock. In addition, we expect
professional fees to increase to around $30,000 per annum for compliance with
the reporting requirements of the Securities Exchange Act of 1934, as amended.
We also expect rent, phone, travel and web-hosting to increase to $12,800 per
annum, internet advertising to increase to $36,000 per annum, and salaries
to
increase to $40,000 per annum.
We
do not
have any lease agreements for our facilities and do not currently have any
employment agreements.
Income
Taxes
We
did
not have any federal or state income tax expense for the period from inception
(February 2, 2004) through May 31, 2005.
Income/
Losses.
Net
income for the period from inception (February 2, 2004) through May 31, 2005
was
$(260,310), less that $.02 per share, due to the excess of revenue over
expenses. We expect to continue to incur losses at least through the year 2005,
partly attributable to the fair value of expected services to be received after
May 31, 2005. In addition, there can be no assurance that we will achieve or
maintain profitability or that our revenue growth can be sustained in the
future.
Impact
of
Inflation.
We
believe that inflation has had a negligible effect on operations since
inception. We believe that we can offset inflationary increases in the cost
of
operations by increasing sales and improving operating
efficiencies.
Liquidity
and Capital Resources.
Cash
flows provided by operations for the period from inception (February 2, 2004)
through May 31, 2005 were $(22,241). Cash flows were primarily attributable
to
net income and non-cash charges to reconcile net income to net cash provided
by
operations. Cash received for commissions and broker fees for the period from
inception (February 2, 2004) through May 31, 2005 was $12,191. Cash paid for
various fees and expenses during this same period of time was
$271,035.
Cash
flow
generated by financing activities was $24,281 for the period from inception
(February 2, 2004) through May 31, 2005. Cash flows for this period included
proceeds from the sale of 10,000,000 shares of our common stock to our President
for $100 in cash pursuant to a private offering exemption from registration
under Section 4(2) of the Securities Act of 1933, as amended. Proceeds were
used
towards general business expenses.
Overall,
we have funded our cash needs for the period from inception (February 2, 2004)
through May 31, 2005 with one equity transaction with our President as described
above. If we are unable to receive additional cash from our President, we may
need to rely on financing from outside sources through debt or equity
transactions. Our officer is under no legal obligation to provide us with
capital infusions. As described above under Liquidity and Capital Resources
for
the period from inception (February 2, 2004) to May 31, 2005, our cash flow
and
cash needs for the future are significant.
Failure
to obtain such financing could have a material adverse effect on our operations
and financial condition. This could include an inability to do sufficient
advertising for the services we provide, which would make us less competitive
in
the marketplace. We could also find it more difficult to enter into strategic
joint venture relationships with third parties. Finally, it would most likely
delay the implementation of our business plan. An alternative plan of operation
in the event of a failure to obtain financing would be to continue operations
as
currently configured, with the result being little, if any, projected growth.
Another alternative would be to enter into a joint venture with a brokerage
firm
that has working capital available, albeit on less favorable terms than had
we
obtained financing, for the development of our business plan.
We
had
cash on hand of only $2,040 and working capital of $2,040 as of May 31, 2005.
We
may need to seek additional outside sources of funding, such as equity or debt
placements. We will also rely on the existence of our projected revenue from
our
business operations, if any. A lack of significant revenues during the remainder
of 2004 will significantly affect our cash position and move us towards a
position where the raising of additional funds through equity or debt financing
will have to be necessary. Our current level of operations would require capital
of approximately $1,000 to sustain operations through year 2005 and
approximately $35,000 per year thereafter. Any modifications to our business
plans, such the hiring of additional employees and the principal making a
full-time commitment to the business, which would require the payment of his
salary and expenses, may require additional capital for us to operate. There
can
be no assurance that additional capital will be available to us when needed
or
available on terms favorable to us. Our approximate offering expenses of $10,000
in connection with this offering have already been paid, subsequent to May31,2005, through a draw-down on our $15,000 unsecured line of credit. A second
draw-down in the amount of $2,500 on our unsecured line of credit was made,
subsequent to May 31, 2005, to pay for the services of our accountant, Traci
J.
Anderson, CPA, in connection with her work on our audit.
Neither
Mr. Koran, nor any other person or entity is liable for, surety or otherwise
provides a guarantee for our line of credit with First Citizens
Bank.
On
a
long-term basis, liquidity is dependent on continuation and expansion of
operations, receipt of revenues, and additional infusions of capital and debt
financing. We are considering launching a local advertising campaign. Our
current capital and revenues are insufficient to fund such marketing. If we
choose to launch such a campaign, we will require substantially more capital.
If
necessary, we will raise this capital through an additional stock offering.
However, there can be no assurance that we will be able to obtain additional
equity or debt financing in the future, if at all. If we are unable to raise
additional capital, our growth potential will be adversely affected and we
will
have to significantly modify our plans. For example, if we unable to raise
sufficient capital to develop our business plan, we may need to:
§
Seek
projects that are less in value or that may be projected to be less
profitable, or
§
Seek
business that is outside our immediate area to bring some revenue
to
us.
Demand
for the products and services will be dependent on, among other things, market
acceptance of our services, the commercial finance brokering market in general,
and general economic conditions, which are cyclical in nature. Inasmuch as
a
major portion of our activities is the receipt of revenues from commissions
earned, our business operations may be adversely affected by our competitors
and
prolonged recession periods.
Our
success will be dependent upon implementing our plan of operations and the
risks
associated with our business plan. We operate a small commercial finance
brokerage business in the Charlotte, North Carolina area. We see a need to
strengthen our position in these markets. We are considering expanding our
operations through aggressively marketing our services. We project that we
may
become profitable on a self-sustaining basis in 24-36 months. However, there
can
be no assurances that we will ever become profitable on a self-sustaining
basis.
Our
cash
on hand as of the latest balance sheet date is insufficient to fund our
operations and our expectations of cash inflows will not meet our cash
requirements for the next twelve months. This is reflecting in the “going
concern” opinion that has been issued by our auditor. We intend to raise cash
through additional debt and equity financings, however, there is no assurance
that we will be successful in this regard.
This
section is being presented because we are considered to be in the development
stage of operations.
Sales
for
the period from June 1, 2005 through August 31, 2005 were $542. Sales consisted
of commissions earned on funded loans as follows:
·
Broker
fee in connection with factoring of accounts receivable generated
$26.
·
Broker
fee in connection with factoring of accounts receivable generated
$47.
·
Broker
fee in connection with factoring of accounts receivable generated
$69.
·
Broker
fee in connection with consulting services generated
$400.
All
sales
transactions were with unrelated parties.
Expenses.
We
expect
increases in expenses through the fiscal year 2005 as we move toward developing
our business plan and registering our common stock. In addition, we expect
professional fees to increase to around $30,000 per annum for compliance with
the reporting requirements of the Securities Exchange Act of 1934, as amended.
We also expect rent, phone, travel and web-hosting to increase to $12,800 per
annum, internet advertising to increase to $36,000 per annum, and salaries
to
increase to $40,000 per annum.
We
do not
have any lease agreements for our facilities and do not currently have any
employment agreements.
We
did
not have any federal or state income tax expense for the period from inception
June 1, 2005 through August 31, 2005.
Income/
Losses.
Net
loss
for the period from June 1, 2005 through August 31, 2005 was $(416), $(.0000385)
per share, due to the aforementioned issuances of common shares for services
rendered. We expect to continue to incur losses at least through the fiscal
year
2005, partly attributable to the fair value of expected services to be received.
In addition, there can be no assurance that we will achieve or maintain
profitability or that our revenue growth can be sustained in the
future.
Impact
of
Inflation.
We
believe that inflation has had a negligible effect on operations since
inception. We believe that we can offset inflationary increases in the cost
of
operations by increasing sales and improving operating
efficiencies.
Liquidity
and Capital Resources.
Cash
flow
used in operations for the period from June 1, 2005 through August 31, 2005
was
$(416). Cash flows were primarily attributable to a net loss with non-cash
charge items added back in order to reconcile net loss to net cash used in
operations. Cash received for commissions and broker fees for the period from
June 1, 2005 through August 31, 2005 was $542. Cash paid for various fees and
expenses during this same period of time was $587.
Cash
flows generated by financing activities were $0 for the period from June 1,2005
through August 31, 2005. Cash flows for this period included proceeds from
capital contributions. Proceeds were used towards general business
expenses.
Overall,
we have funded our cash needs for the period from June 1, 2005 through August31, 2005 with capital contributions as described above and from borrowings
from
a note payable. If we are unable to receive additional cash from our President,
we may need to rely on financing from outside sources through debt or equity
transactions. Our officer is under no legal obligation to provide us with
capital infusions. As described above under Liquidity and Capital Resources
for
the period from June 1, 2005 to August 31, 2005, our cash flow and cash needs
for the future are significant. Cash flow for the period from June 1, 2005
to
February 28, 2005 has decreased and our cash needs have increased as a result
of
our results of operations during the period.
Failure
to obtain such financing could have a material adverse effect on our operations
and financial condition. This could include an inability to do sufficient
advertising for the services we provide, which would make us less competitive
in
the marketplace. We could also find it more difficult to enter into strategic
joint venture relationships with third parties. Finally, it would most likely
delay the implementation of our business plan. An alternative plan of operation
in the event of a failure to obtain financing would be to continue operations
as
currently configured, with the result being little, if any, projected growth.
Another alternative would be to enter into a joint venture with a brokerage
firm
that has working capital available, albeit on less favorable terms than had
we
obtained financing, for the development of our business plan.
We
had
cash on hand of only $1,624 and a working capital deficit of $(58,394) as of
August 31, 2005. In addition to the line of credit, we may need to seek
additional outside sources of funding, such as equity or debt placements. We
will also rely on the existence of our projected revenue from our business
operations, if any. A lack of significant revenues during the remainder of
2005
will significantly affect our cash position and move us towards a position
where
the raising of additional funds through equity or debt financing will have
to be
necessary. Our current level of operations would require capital of
approximately $1,000 to sustain operations through year 2005 and approximately
$35,000 per year thereafter. Any modifications to our business plans, such
the
hiring of additional employees and the principal making a full-time commitment
to the business, which would require the payment of his salary and expenses,
may
require additional capital for us to operate. There can be no assurance that
additional capital will be available to us when needed or available on terms
favorable to us. Our approximate offering expenses of $10,000 in connection
with
this offering have already been paid through a draw-down on our $15,000
unsecured line of credit. A second draw-down in the amount of $2,500 on our
unsecured line of credit was made to pay for the services of our accountant,
Traci J. Anderson, CPA, in connection with her work on our audit.
Neither
Mr. Koran, nor any other person or entity is liable for, surety or otherwise
provides a guarantee for our line of credit with First Citizens
Bank.
On
a
long-term basis, liquidity is dependent on continuation and expansion of
operations, receipt of revenues, and additional infusions of capital and debt
financing. We are considering launching a local advertising campaign. Our
current capital and revenues are insufficient to fund such marketing. If we
choose to launch such a campaign, we will require substantially more capital.
If
necessary, we will raise this capital through an additional stock offering.
However, there can be no assurance that we will be able to obtain additional
equity or debt financing in the future, if at all. If we are unable to raise
additional capital, our growth potential will be adversely affected and we
will
have to significantly modify our plans. For example, if we unable to raise
sufficient capital to develop our business plan, we may need to:
§
Seek
projects that are less in value or that may be projected to be less
profitable, or
§
Seek
business that is outside our immediate area to bring some revenue
in to
us.
Demand
for the products and services will be dependent on, among other things, market
acceptance of our services, the commercial finance brokering market in general,
and general economic conditions, which are cyclical in nature. Inasmuch as
a
major portion of our activities is the receipt of revenues from commissions
earned, our business operations may be adversely affected by our competitors
and
prolonged recession periods.
Our
success will be dependent upon implementing our plan of operations and the
risks
associated with our business plan. We operate a small commercial finance
brokerage business in the Charlotte, North Carolina area. We see a need to
strengthen our position in these markets. We are considering expanding our
operations through aggressively marketing our services. We project that we
may
become profitable on a self-sustaining basis in 24-36 months. However, there
can
be no assurances that we will ever become profitable on a self-sustaining
basis.
Our
cash
on hand as of the latest balance sheet date is insufficient to fund our
operations and our expectations of cash inflows will not meet our cash
requirements for the next twelve months. This is reflecting in the “going
concern” opinion that has been issued by our auditor. We intend to raise cash
through additional debt and equity financings, however, there is no assurance
that we will be successful in this regard.
We
do not
own any property nor do we have any contracts or options to acquire any property
in the future. Presently, we are operating out of offices in our president’s
residence in Cornelius, North Carolina. We occupy 200 square feet. This space
is
adequate for our present and our planned future operations. We pay no rent
to
our president for use of this space. In addition we have no written agreement
or
formal arrangement with our president pertaining to the use of this space.
No
other businesses operate from this office. We have no current plans to occupy
other or additional office space.
In
February 2004, we issued 500 pre-split (10,000,000 post-split) common shares
of
$.001 par value stock to an officer for $100. He contributed $3,942 in services
and expenses paid personally by him, to us during the period from inception
(February 2, 2004) through November 30, 2004.
On
June23, 2004, we increased our number of currently authorized of 25,000 shares
of
common stock to 100,000,000 shares of common stock. The par value of our common
stock and convertible preferred stock remained at $.001 at the time. However,
on
March 14, 2005 we amended our articles of incorporation to decrease this par
value to $.00000005 per share. Accordingly, this document includes retroactive
adjustments to the period of inception in order to reflect this change. We
also
authorized 10,000,000 shares of convertible preferred stock which is convertible
to common stock at a ratio of ten shares of common stock for each share of
preferred stock. The par value of each share is $.00000005.
On
June23, 2004, an agreement was signed between Capital Resource Funding and Greentree
Financial Group, Inc. whereby Greentree Financial Group, Inc. will assist with
the preparation of SEC Registration Statement form SB-2, assist with the
preparation of Board Resolutions authorizing the transactions, assist with
preparing our corporate housekeeping, assist with the preparation of a share
exchange agreement such as the Letter of Intent with HairMax, Edgarization
of
the SB-2 with the SEC, and assist with the preparation of a newly created
preferred stock issue. In connection with this agreement, we promised to pay
$40,000 (representing $38,835 principal and $1,165 interest or approximately
6%
per annum) to Greentree Financial Group, Inc. The 6-month, non-assumable
promissory note between Capital Resource Funding and Greentree Financial Group,
Inc. was signed on June 24, 2004. In addition to the promissory note, we paid
$10,000 in cash upon signing the agreement and we have issued 490,000 shares
of
common stock to Greentree Financial Group, Inc., which shares are being
registered in this offering.
On
or
about December 31, 2004, we issued shares of common stock to three of our
officers, as follows: Laura Koran, Chief Financial Officer, 150,000 shares;
Steven Moore, Chief Operating Officer, 75,000 shares; and Richard Koran, Vice
President, 75,000 shares. All three issuances were exempt from the registration
requirements of the Securities Act as a private placement pursuant to Section
4(2) thereof.
Our
common stock is not traded on any exchange. We plan to have our shares of common
stock quoted on the Over-The-Counter Bulletin Board. The Over-The-Counter
Bulletin Board is a quotation medium for subscribing members only. And only
market makers can apply to quote securities on the Over-The-Counter Bulletin
Board. We cannot guarantee that we will obtain a market maker or such a
quotation. Although we will seek a market maker for our securities, our
management has no agreements, understandings or other arrangements with market
makers to begin making a market for our shares. In addition, we have been
advised that the NASD requires that a company have approximately 35 shareholders
to be quoted on the Over-The-Counter Bulletin Board and there can be no
assurances that we will ever have the required number of shareholders, although
we plan to increase the number of our shareholders as soon as possible. There
is
no trading activity in our securities, and there can be no assurance that a
regular trading market for our common stock will ever be developed, or if
developed, will be sustained.
A
shareholder in all likelihood, therefore, will not be able to resell their
securities should he or she desire to do when eligible for public resale.
Furthermore, it is unlikely that a lending institution will accept our
securities as pledged collateral for loans unless a regular trading market
develops. We have no plans, proposals, arrangements or understandings with
any
person with regard to the development of a trading market in any of our
securities.
Agreements
to Register.
Not
applicable.
Holders.
As
of
October 19, 2005, there were 5 holders of record of our common
stock.
Shares
Eligible for Future Sale.
Upon
effectiveness of this registration statement, only the 790,000 shares of common
stock sold in this offering will be freely tradable without restrictions under
the Securities Act of 1933. The shares held by our affiliates will be restricted
by the resale limitations under Rule 144 under the Securities Act of
1933.
In
general, under Rule 144 as currently in effect, any of our affiliates and any
person or persons whose sales are aggregated who has beneficially owned his
or
her restricted shares for at least one year, may be entitled to sell in the
open
market within any three-month period a number of shares of common stock that
does not exceed the greater of (i) 1% of the then outstanding shares of our
common stock, or (ii) the average weekly trading volume in the common stock
during the four calendar weeks preceding such sale. Sales under Rule 144 are
also affected by limitations on manner of sale, notice requirements, and
availability of current public information about us. Non-affiliates, who have
held their restricted shares for one year may be entitled to sell their shares
under Rule 144 without regard to any of the above limitations, provided they
have not been affiliates for the three months preceding such sale.
Further,
Rule 144A as currently in effect, in general, permits unlimited resale of
restricted securities of any issuer provided that the purchaser is an
institution that owns and invests on a discretionary basis at least $100 million
in securities or is a registered broker-dealer that owns and invests $10 million
in securities. Rule 144A allows our existing stockholders to sell their shares
of common stock to such institutions and registered broker-dealers without
regard to any volume or other restrictions. Unlike under Rule 144, restricted
securities sold under Rule 144A to non-affiliates do not lose their status
as
restricted securities.
The
availability for sale of substantial amounts of common stock under Rule 144
could adversely affect prevailing market prices for our securities.
Dividends.
We
have
not declared any cash dividends on our common stock since our inception and
do
not anticipate paying such dividends in the foreseeable future. We plan to
retain any future earnings for use in our business. Any decisions as to future
payment of dividends will depend on our earnings and financial position and
such
other factors, as the Board of Directors deems relevant.
Only
the
790,000 shares of common stock sold in this offering will be freely tradable
without restrictions under the Securities Act of 1933. The shares held by our
affiliates will be restricted by the resale limitations under Rule 144 under
the
Securities Act of 1933.
Dividend
Policy.
All
shares of common stock are entitled to participate proportionally in dividends
if our Board of Directors declares them out of the funds legally available.
These dividends may be paid in cash, property or additional shares of common
stock. We have not paid any dividends since our inception and presently
anticipate that all earnings, if any, will be retained for development of our
business. Any future dividends will be at the discretion of our Board of
Directors and will depend upon, among other things, our future earnings,
operating and financial condition, capital requirements, and other
factors.
Our
Shares are "Penny Stocks" within the Meaning of the Securities Exchange Act
of
1934
Our
Shares are "penny stocks" within the definition of that term as contained in
the
Securities Exchange Act of 1934, generally equity securities with a price of
less than $5.00. Our shares will then be subject to rules that impose sales
practice and disclosure requirements on certain broker-dealers who engage in
certain transactions involving a penny stock.
Under
the
penny stock regulations, a broker-dealer selling penny stock to anyone other
than an established customer or "accredited investor" must make a special
suitability determination for the purchaser and must receive the purchaser's
written consent to the transaction prior to the sale, unless the broker-dealer
is otherwise exempt. Generally, an individual with a net worth in excess of
$1,000,000 or annual income exceeding $200,000 individually or $300,000 together
with his or her spouse is considered an accredited investor. In addition, unless
the broker-dealer or the transaction is otherwise exempt, the penny stock
regulations require the broker-dealer to deliver, prior to any transaction
involving a penny stock, a disclosure schedule prepared by the Securities and
Exchange Commission relating to the penny stock market. A broker-dealer is
also
required to disclose commissions payable to the broker-dealer and the Registered
Representative and current bid and offer quotations for the securities. In
addition a broker-dealer is required to send monthly statements disclosing
recent price information with respect to the penny stock held in a customer's
account, the account’s value and information regarding the limited market in
penny stocks. As a result of these regulations, the ability of broker-dealers
to
sell our stock may affect the ability of Selling Security Holder or other
holders to sell their shares in the secondary market. In addition, the penny
stock rules generally require that prior to a transaction in a penny stock,
the
broker-dealer 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 a stock that becomes subject to the penny
stock rules. These additional sales practice and disclosure requirements could
impede the sale of Capital Resource Funding's securities, if our securities
become publicly traded. In addition, the liquidity for Capital Resource
Funding's securities may be adversely affected, with concomitant adverse affects
on the price of Capital Resource Funding's securities. Our shares may someday
be
subject to such penny stock rules and our shareholders will, in all likelihood,
find it difficult to sell their securities.
We
have
not entered into any other employment agreements with our employees, Officers
or
Directors. We have no standard arrangements under which we will compensate
our
directors for their services provided to us. We plan to compensate Mr. Koran
at
the rate of $40,000 per year plus expenses in the event that we have sufficient
funds to do so. Based on our projections, this will not be possible during
the
first twelve months of operations, and we anticipate paying him no compensation.
During the second twelve months of operations, our projections indicate that
we
should have sufficient funds to fully pay him at this rate. None of our other
officers are projected to receive a salary of over $100,000.
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Stockholders
of Capital Resource Funding, Inc. (FKA Capital Business Funding,
Inc.)
We
have
audited the accompanying balance sheets of Capital Resource Funding, Inc. (FKA
Capital Business Funding, Inc.) (A Development Stage Company) as of December31,2005, and the related statements of income, stockholders’ equity and
comprehensive income, and cash flows for the year ended May 31, 2005 and for
the
period from inception (February 2, 2004) through May 31, 2004. These financial
statements are the responsibility of the company’s management. Our
responsibility is to express an opinion on these financial statements based
on
our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Capital Resource Funding, Inc.
(FKA
Capital Business Funding, Inc.) (A Development Stage Company) as of May 31,2005, and the results of its operations and its cash flows for the year ended
May 31, 2005 and the period from inception (February 2, 2004) through May 31,2004 in conformity with accounting principles generally accepted in the United
States of America.
The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As discussed in Note F to the financial statements,
the Company is in the development stage, has suffered losses, has a net capital
deficiency and has yet to generate an internal cash flow. These factors raise
substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans in regard to these matters are also described in Note E. The
financial statements do not include any adjustments that might result from
the
outcome of this uncertainty.
Management’s
Use of Estimates—The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date
of
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
financial statements above reflect all of the costs of doing
business.
Revenue
Recognition—The
Company’s revenue is derived primarily from brokering income which range from
one time origination fees to on-going monthly commissions paid for the life
of
the financing. Revenue is recognized as earned when each loan deal is finalized.
For purposes of on-going monthly commissions paid for the life of the financing,
revenue is recognized as earned based on the total of the gross monthly
financing fees generated.
Comprehensive
Income (Loss)—The
Company adopted Financial Accounting Standards Board Statement of Financial
Accounting Standards (SFAS) No. 130, “Reporting
Comprehensive Income”,
which
establishes standards for the reporting and display of comprehensive income
and
its components in the financial statements. There were no items of comprehensive
income (loss) applicable to the Company during the period covered in the
financial statements.
Net
Income per Common Share—Statement
of Financial Accounting Standard (SFAS) No. 128 requires dual presentation
of
basic and diluted earnings per share (EPS) with a reconciliation of the
numerator and denominator of the EPS computations. Basic earnings per share
amounts are based on the weighted average shares of common stock outstanding.
If
applicable, diluted earnings per share would assume the conversion, exercise
or
issuance of all potential common stock instruments such as options, warrants
and
convertible securities, unless the effect is to reduce a loss or increase
earnings per share. Accordingly, this presentation has been adopted for the
period presented. There were no adjustments required to net income for the
period presented in the computation of diluted earnings per share.
Income
Taxes—The
S
Corporation is not a taxpaying entity for federal and state income tax purposes
and thus no provisions for income taxes has been recognized. Income of the
S
Corporation is faxed to the shareholders in their respective
returns.
Fair
Value of Financial Instruments—The
carrying amounts reported in the balance sheet for cash, accounts receivable
and
payable approximate fair value based on the short-term maturity of these
instruments.
NOTE
A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Impairment
of Long-Lived Assets—The
Company evaluates the recoverability of its fixed assets and other assets in
accordance with Statement of Financial Accounting Standards No. 144,
“Accounting
for the Impairment or Disposal of Long-Lived Assets” (“SFAS
144’).
SFAS 144
requires recognition of impairment of long-lived assets in the event the net
book value of such assets exceeds its expected cash flows, it is considered
to
be impaired and is written down to fair value, which is determined based on
either discounted future cash flows or appraised values. The Company adopted
the
statement on inception. No impairments of these types of assets were recognized
during the period ended November 30, 2004 based upon a management review of
such
assets.
Stock-Based
Compensation—The
Company accounts for stock-based compensation using the fair value method of
Financial Accounting Standard No. 123. Common shares issued for services
rendered by a third party (both employees and non-employees) are recorded at
the
fair value of the shares issued or services rendered, whichever is more readily
determinable.
Recent
Accounting Pronouncements—In
June
2001, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 143, “Accounting
for Asset Retirement Obligations”
which
addresses the accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated retirement costs.
SFAS No. 143 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a reasonable
estimate of fair value cannot be made. SFAS No. 143 is effective for financial
statements issued for fiscal years beginning after June 15, 2002. The Company
does not expect SFAS No. 143 to have a material effect on its financial
condition or cash flows.
In
August
2001, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 144, “Accounting
for the Impairment or Disposal of Long-Lived Assets”.
SFAS No.
144 generally establishes a standard framework to measure the impairment of
long-lived assets and expands the Accounting Principles Board (“APB”) 30,
“Reporting the Results of Operations—Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions” to include a component of the entity (rather than a
segment of the business). SFAS No.144 is effective for financial statements
issued for fiscal years beginning after December 15, 2001. The Company does
not
expect SFAS No. 144 to have a material effect on its financial condition and
cash flows.
NOTE
A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
In
April
of 2002, Statement of Financial Accounting Standards (SFAS) No. 145 was issued
which rescinded SFAS Statements 4, 44, and 64, amended No. 13 and contained
technical corrections. As a result of SFAS No. 145, gains and losses from
extinguishments of debt will be classified as extraordinary items only if they
meet the criteria in APB Opinion No. 30, that they are unusual and infrequent
and not part of an entity’s recurring operations. The Company does not expect
SFAS No. 145 to have a material effect on its financial condition or cash flows.
In
July
of 2002, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard (SFAS) No. 146, which addresses significant issues regarding
the recognition, measurement, and reporting of costs that are associated with
exit and disposal activities, including restructuring activities that are
currently accounted for pursuant to the guidance that the Emerging Issues Task
Force (EITF) has set forth in EITF Issue No. 94-3, “Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an
Activity (Including Certain Costs Incurred in a Restructuring)”.
SFAS
No. 146 revises the accounting for certain lease termination costs and employee
termination benefits, which are generally recognized in connection with
restructuring charges. The provisions of SFAS 146 are effective for exit or
disposal activities that are initiated after December 31, 2002. The adoption
of
this standard will not have an impact on the Company’s financial
statements.
In
November 2002, the Financial Accounting Standards Board issued Interpretation
No. 45 (FIN 45), “Guarantor’s
Accounting and Disclosure Requirements for Guarantee, Including Indirect
Guarantees or Indebtedness of Others”,
which
addresses the disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under guarantees. FIN 45 also
requires the recognition of a liability by a guarantor at the inception of
certain guarantees that are entered into or modified after December 31,2002.
In
December 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 148, “Accounting
for Stock-Based Compensation Transition and Disclosure”—an
amendment to SFAS No. 123 (SFAS No. 148), which provides alternative methods
of
transition for companies voluntarily planning on implementing the fair value
recognition provisions of SFAS No. 123. SFAS No. 148 also revises the disclosure
provisions of SFAS No. 123 to require more prominent disclosure of the method
of
accounting for stock-based compensation, and requiring disclosure of pro forma
net income and earnings per share as if the fair value recognition provisions
of
SFAS No. 123 had been applied from the original effective date of SFAS No.
123.
NOTE
A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
In
January 2003, Financial Accounting Standards Board issued FIN No. 46,
“Consolidation
of Variable Interest Entities”.
FIN No.
46 requires the consolidation of entities that cannot finance their activities
without the support of other parties and that lack certain characteristics
of a
controlling interest, such as the ability to make decisions about the entity’s
activities via voting rights or similar rights. The entity that consolidates
the
variable interest entity is the primary beneficiary of the entity’s activities.
FIN No. 46 applies immediately to variable interest entities created after
January 31, 2003, and must be applied in the first period beginning after June15, 2003 for entities in which an enterprise holds a variable interest entity
that it acquired before February 1, 2003.
In
January 2003, the EITF released Issue No. 00-21, (EITF 00-21), “Revenue
Arrangements with Multiple Deliveries”,
which
addressed certain aspects of the accounting by a vendor for arrangement under
which it will perform multiple revenue-generating activities. Specifically,
EITF
00-21 addresses whether an arrangement contains more than one unit of accounting
and the measurement and allocation to the separate units of accounting in the
arrangement. EITF 00-21 is effective for revenue arrangements entered into
in
fiscal periods beginning after June 15, 2003. The adoption of this standard
will
not have an impact on the Company’s financial statements.
In
May
2003, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 149, “Amendment
of Statement 133 on Derivative Instruments and Hedging
Activities.”
SFAS No.
149 amends and clarifies accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities under SFAS No. 133. SFAS No. 149 is effective for contracts entered
into or modified after June 30, 2003 and for hedging relationships designated
after June 30, 2003. The Company does not believe that there will be any impact
on its financial statements.
In
May
2003, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 150, “Accounting
for Certain Financial Instruments with Characteristics of both Liabilities
and
Equity.”
SFAS No.
150 establishes standards for how companies classify and measure certain
financial with characteristics of both liabilities and equity. It requires
companies to classify a financial instrument that is within its scope as a
liability (or an asset in some characteristics). SFAS No. 150 is effective
for
financial instruments entered into or modified after May 31, 2003. The standard
will not impact the Company’s financial statements.
NOTE
B—NOTES PAYABLE
Notes
payable at May 31, 2005 consists of the following:
The
Company has a $15,000 unsecured line of credit from The First Citizens Bank
& Trust Company (“The Bank”). The annual percentage rate (“APR”) is based on
the Bank’s prime rate plus 1% with a maximum APR of 8%. As of the date of the
note, the APR was 7%. The maturity date of the note
was
originally May 4, 2005 but was extended to May 4, 2006. As of May 31, 2005,
the
Company drew against this line of credit and owes $14,900 against this line
of
credit.
The
Company has a $10,000 unsecured line of credit from Bank of America (“BofA”).
The annual percentage rate (“APR”) is based on BofA’s prime rate plus 2%. As of
the date of the note, the APR was 7%. The line of credit is due on demand with
interest only payments and has no maturity date. As of May 31, 2005, the Company
drew against this line of credit and owes $5,700 against this line of credit.
In
connection with financial advisory agreement with Greentree Financial Group,
Inc., the Company owes $38,835 in principal. The six-month, non-assumable
promissory note between the Company and Greentree Financial Group, Inc. was
drafted and signed on June 24, 2004. The note matured on December 24, 2004
and
carries interest of 6% per annum. This loan is presently due on
demand.
NOTE
C— COMMON STOCK
Included
in $75,000 in “Common Stock” in the accompanying audited financial statements at
May 31, 2005 are common shares issued to consulting service providers which
have
been delivered for services rendered and incurred as of May 31, 2005.
Specifically, 490,000 common shares were paid to Greentree Financial Group,
Inc.
as of May 31, 2005. The common shares, valued at $.25 per share, were issued
to
Greentree on October 31, 2004.
NOTE
D
- VALUATION OF COMMON STOCK
The
Company valued the common shares to be issued to each of its employees and
non-employees during the period presented using the fair amount valuation of
25
cents per share. This amount reasonably approximated the fair value of services
rendered by such parties. For instance, the 490,000 and 300,000 shares issued
to
Greentree Financial Group, Inc. and the Company’s three officers, respectively,
for their services rendered to us were valued at 25 cents per share, or $122,500
and $75,000, and recorded as a non-cash expense to our books covering the period
of time the services related to. The Company feels these valuations are based
upon the most objective, verifiable evidence available for these non-monetary
exchanges and arms-length transactions. For example, we researched what firms
providing services comparable to those offered by Greentree charged, and the
Company found that Greentree’s services were less expensive. Hence, the Company
believes that the objective evidence supports a fair value of $122,500 for
the
stock portion of Greentree’s services and the number of shares that were issued
to them. The Company’s valuations used to determine the fair value of the common
stock were retrospective in nature, and the valuation specialists who made
these
determinations were related parties, including David Koran, its president,
and
Greentree, both of whom own substantial positions in our common stock.
Specifically,
the 300,000 shares issued to the Company’s three officers were recorded as
compensation expense in the second quarter of its fiscal year ending May 31,2005 in the amount of $75,000.
NOTE
E
GOING CONCERN
As
shown
in the accompanying audited financial statements, the Company has suffered
recurring losses from operations to date. It experienced losses of $260,310
since inceptions and has a negative working capital. These factors raise
substantial doubt about the Company’s ability to continue as a going
concern.
Management’s
plans in regard to this matter are to raise equity capital and seek strategic
relationships and alliances in order to increase sales in an effort to generate
positive cash flow. Additionally, the Company must continue to rely upon equity
infusions from investors in order to improve liquidity and sustain operations.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
NOTE
F
- DEVELOPMENT STAGE COMPANY
The
Company is in the development stage as of May 31, 2005 and to date has had
no
significant operations. Recovery of the Company’s assets is dependent on future
events, the outcome of which is indeterminable. In addition, successful
completion of the Company’s development program and its transition, ultimately,
to attaining profitable operations is dependent upon obtaining adequate
financing to fulfill its development activities and achieving a level of sales
adequate to support the Company’s cost structure.
Management’s
Use of Estimates—The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date
of
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
financial statements above reflect all of the costs of doing
business.
Revenue
Recognition—The
Company’s revenue is derived primarily from brokering income which range from
one time origination fees to on-going monthly commissions paid for the life
of
the financing. Revenue is recognized as earned when each loan deal is finalized.
For purposes of on-going monthly commissions paid for the life of the financing,
revenue is recognized as earned based on the total of the gross monthly
financing fees generated.
Comprehensive
Income (Loss)—The
Company adopted Financial Accounting Standards Board Statement of Financial
Accounting Standards (SFAS) No. 130, “Reporting
Comprehensive Income”,
which
establishes standards for the reporting and display of comprehensive income
and
its components in the financial statements. There were no items of comprehensive
income (loss) applicable to the Company during the period covered in the
financial statements.
Net
Income per Common Share—Statement
of Financial Accounting Standard (SFAS) No. 128 requires dual presentation
of
basic and diluted earnings per share (EPS) with a reconciliation of the
numerator and denominator of the EPS computations. Basic earnings per share
amounts are based on the weighted average shares of common stock outstanding.
If
applicable, diluted earnings per share would assume the conversion, exercise
or
issuance of all potential common stock instruments such as options, warrants
and
convertible securities, unless the effect is to reduce a loss or increase
earnings per share. Accordingly, this presentation has been adopted for the
period presented. There were no adjustments required to net income for the
period presented in the computation of diluted earnings per share.
Income
Taxes—The
S
Corporation is not a taxpaying entity for federal and state income tax purposes
and thus no provisions for income taxes has been recognized. Income of the
S
Corporation is faxed to the shareholders in their respective
returns.
Fair
Value of Financial Instruments—The
carrying amounts reported in the balance sheet for cash, accounts receivable
and
payable approximate fair value based on the short-term maturity of these
instruments.
NOTE
A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Impairment
of Long-Lived Assets—The
Company evaluates the recoverability of its fixed assets and other assets in
accordance with Statement of Financial Accounting Standards No. 144,
“Accounting
for the Impairment or Disposal of Long-Lived Assets” (“SFAS
144’).
SFAS 144
requires recognition of impairment of long-lived assets in the event the net
book value of such assets exceeds its expected cash flows, it is considered
to
be impaired and is written down to fair value, which is determined based on
either discounted future cash flows or appraised values. The Company adopted
the
statement on inception. No impairments of these types of assets were recognized
during the period ended November 30, 2004 based upon a management review of
such
assets.
Stock-Based
Compensation—The
Company accounts for stock-based compensation using the fair value method of
Financial Accounting Standard No. 123. Common shares issued for services
rendered by a third party (both employees and non-employees) are recorded at
the
fair value of the shares issued or services rendered, whichever is more readily
determinable.
Recent
Accounting Pronouncements—In
June
2001, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 143, “Accounting
for Asset Retirement Obligations”
which
addresses the accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated retirement costs.
SFAS No. 143 requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a reasonable
estimate of fair value cannot be made. SFAS No. 143 is effective for financial
statements issued for fiscal years beginning after June 15, 2002. The Company
does not expect SFAS No. 143 to have a material effect on its financial
condition or cash flows.
In
August
2001, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 144, “Accounting
for the Impairment or Disposal of Long-Lived Assets”.
SFAS No.
144 generally establishes a standard framework to measure the impairment of
long-lived assets and expands the Accounting Principles Board (“APB”) 30,
“Reporting the Results of Operations—Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions” to include a component of the entity (rather than a
segment of the business). SFAS No.144 is effective for financial statements
issued for fiscal years beginning after December 15, 2001. The Company does
not
expect SFAS No. 144 to have a material effect on its financial condition and
cash flows.
NOTE
A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
In
April
of 2002, Statement of Financial Accounting Standards (SFAS) No. 145 was issued
which rescinded SFAS Statements 4, 44, and 64, amended No. 13 and contained
technical corrections. As a result of SFAS No. 145, gains and losses from
extinguishments of debt will be classified as extraordinary items only if they
meet the criteria in APB Opinion No. 30, that they are unusual and infrequent
and not part of an entity’s recurring operations. The Company does not expect
SFAS No. 145 to have a material effect on its financial condition or cash flows.
In
July
of 2002, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard (SFAS) No. 146, which addresses significant issues regarding
the recognition, measurement, and reporting of costs that are associated with
exit and disposal activities, including restructuring activities that are
currently accounted for pursuant to the guidance that the Emerging Issues Task
Force (EITF) has set forth in EITF Issue No. 94-3, “Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an
Activity (Including Certain Costs Incurred in a Restructuring)”.
SFAS
No. 146 revises the accounting for certain lease termination costs and employee
termination benefits, which are generally recognized in connection with
restructuring charges. The provisions of SFAS 146 are effective for exit or
disposal activities that are initiated after December 31, 2002. The adoption
of
this standard will not have an impact on the Company’s financial
statements.
In
November 2002, the Financial Accounting Standards Board issued Interpretation
No. 45 (FIN 45), “Guarantor’s
Accounting and Disclosure Requirements for Guarantee, Including Indirect
Guarantees or Indebtedness of Others”,
which
addresses the disclosures to be made by a guarantor in its interim and annual
financial statements about its obligations under guarantees. FIN 45 also
requires the recognition of a liability by a guarantor at the inception of
certain guarantees that are entered into or modified after December 31,2002.
In
December 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 148, “Accounting
for Stock-Based Compensation Transition and Disclosure”—an
amendment to SFAS No. 123 (SFAS No. 148), which provides alternative methods
of
transition for companies voluntarily planning on implementing the fair value
recognition provisions of SFAS No. 123. SFAS No. 148 also revises the disclosure
provisions of SFAS No. 123 to require more prominent disclosure of the method
of
accounting for stock-based compensation, and requiring disclosure of pro forma
net income and earnings per share as if the fair value recognition provisions
of
SFAS No. 123 had been applied from the original effective date of SFAS No.
123.
NOTE
A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
In
January 2003, Financial Accounting Standards Board issued FIN No. 46,
“Consolidation
of Variable Interest Entities”.
FIN No.
46 requires the consolidation of entities that cannot finance their activities
without the support of other parties and that lack certain characteristics
of a
controlling interest, such as the ability to make decisions about the entity’s
activities via voting rights or similar rights. The entity that consolidates
the
variable interest entity is the primary beneficiary of the entity’s activities.
FIN No. 46 applies immediately to variable interest entities created after
January 31, 2003, and must be applied in the first period beginning after June15, 2003 for entities in which an enterprise holds a variable interest entity
that it acquired before February 1, 2003.
In
January 2003, the EITF released Issue No. 00-21, (EITF 00-21), “Revenue
Arrangements with Multiple Deliveries”,
which
addressed certain aspects of the accounting by a vendor for arrangement under
which it will perform multiple revenue-generating activities. Specifically,
EITF
00-21 addresses whether an arrangement contains more than one unit of accounting
and the measurement and allocation to the separate units of accounting in the
arrangement. EITF 00-21 is effective for revenue arrangements entered into
in
fiscal periods beginning after June 15, 2003. The adoption of this standard
will
not have an impact on the Company’s financial statements.
In
May
2003, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 149, “Amendment
of Statement 133 on Derivative Instruments and Hedging
Activities.”
SFAS No.
149 amends and clarifies accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities under SFAS No. 133. SFAS No. 149 is effective for contracts entered
into or modified after June 30, 2003 and for hedging relationships designated
after June 30, 2003. The Company does not believe that there will be any impact
on its financial statements.
In
May
2003, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 150, “Accounting
for Certain Financial Instruments with Characteristics of both Liabilities
and
Equity.”
SFAS No.
150 establishes standards for how companies classify and measure certain
financial with characteristics of both liabilities and equity. It requires
companies to classify a financial instrument that is within its scope as a
liability (or an asset in some characteristics). SFAS No. 150 is effective
for
financial instruments entered into or modified after May 31, 2003. The standard
will not impact the Company’s financial statements.
The
Company has a $10,000 unsecured line of credit from Bank of America (“BofA”).
The annual percentage rate (“APR”) is based on BofA’s prime rate plus 2%. As of
the date of the note, the APR was 7%. The line of credit is due on demand with
interest only payments and has no maturity date. As of August 31, 2005, the
Company drew against this line of credit and owes $5,600 against this line
of
credit.
The
Company has a $15,000 unsecured line of credit from The First Citizens Bank
& Trust Company (“The Bank”). The annual percentage rate (“APR”) is based on
the Bank’s prime rate plus 1% with a maximum APR of 8%. As of the date of the
note, the APR was 5%. The maturity date of the note was May 4, 2005. As of
August 31, 2005, the Company drew against this line of credit and owes $15,000
against this line of credit. There is currently no unused line of credit and
this loan is currently due on demand.
In
connection with financial advisory agreement with Greentree Financial Group,
Inc., the Company owes $38,835 in principal. The 6-month, non-assumable
promissory note between the Company and Greentree Financial Group, Inc. was
entered into on June 24, 2004. The note matured on December 24, 2004,
is
presently due on demand, and carries interest of 6% per annum.
NOTE
C—DEVELOPMENT STAGE COMPANY
The
Company is in the development stage as of August 31, 2005 and to date has had
no
significant operations. Recovery of the Company’s assets is dependent on future
events, the outcome of which is indeterminable. In addition, successful
completion of the Company’s development program and its transition, ultimately,
to attaining profitable operations is dependent upon obtaining adequate
financing to fulfill its development activities and achieving a level of sales
adequate to support the Company’s cost structure.
Traci
J.
Anderson, Certified Public Accountant audited our financial statements for
the
period from May 31, 2004 to May 31, 2005. We have never had any changes in
or
disagreements with our accountants.
DEALER
PROSPECTUS DELIVERY OBLIGATION
Until
ninety days after the effectiveness of the registration statement of which
this
prospectus is a part, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers’ obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
PART
II
INFORMATION NOT REQUIRED TO BE INCLUDED IN PROSPECTUS
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
Our
bylaws provide for indemnification of each person (including the heirs,
executors, administrators, or estate of such person) who is or was director
and
officer of the corporation to the fullest extent permitted or authorized by
current or future legislation or judicial or administrative decision against
all
fines, liabilities, costs and expenses, including attorneys’ fees, arising out
of his or her status as a director, officer, agent, employee or representative.
The foregoing right of indemnification shall not be exclusive of other rights
to
which those seeking an indemnification may be entitled. The corporation may
maintain insurance, at its expense, to protect itself and all officers and
directors against fines, liabilities, costs, and expenses, whether or not the
corporation would have the legal power to indemnify them directly against such
liability.
Insofar
as indemnification
for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers or persons controlling an issuer pursuant to the foregoing
provisions, the opinion of the Commission is that such indemnification
is
against public policy as expressed in the Securities Act of 1933 and is
therefore unenforceable.
OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION
The
following table is an itemization of all expenses, without consideration to
future contingencies, incurred or expected to be incurred by our Corporation
in
connection with the issuance and distribution of the securities being offered
by
this prospectus. Items marked with an asterisk (*) represent estimated expenses.
We have agreed to pay all the costs and expenses of this offering. These
estimated expenses have been paid and we do not expect any material additional
expenses as the result if this offering. Selling Security Holder will pay no
offering expenses.
On
or
about June 23, 2004, we increased our authorized common shares to 100,000,000,
kept the par value at $.001 per share at the time and forward split our common
stock 20,000 for 1. As a result, Mr. Koran’s 500 shares were exchanged for
10,000,000 of our common shares. In addition, we authorized 10,000,000 shares
of
convertible preferred stock to be issued, par value of $.001. Each one of these
shares is convertible into ten common shares. On March 14, 2005, we amended
our
articles of incorporation to change the par value per share of our common stock
and convertible preferred stock to $.00000005.
On
June23, 2004, we entered into a Financial Advisory Services Agreement with Greentree
Financial Group, Inc. Under the terms of the agreement, Greentree Financial
Group, Inc. has agreed to use its best efforts to assist us in having our common
stock publicly traded. In exchange for the following services, we have paid
Greentree Financial Group, Inc., 490,000 shares of our common stock and $10,000
cash for:
·
Assistance
with the preparation of our Form SB-2 registration statement;
·
State
Blue-Sky compliance;
·
Selection
of an independent stock transfer agent; and
·
Edgar
services.
The
common shares issued were valued at the estimated value for the services
received which was $122,500, or $.25 per share.
The
shares issued to Greentree were issued in reliance upon an exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as amended,
inasmuch as Greentree is a sophisticated investor which is able to bear the
financial risk of its investment, it was provided with access to information
about us and there was no general solicitation or advertising in connection
with
the offering. In addition, Greentree is an “accredited investor” within the
meaning of the Securities Act of 1933, as amended.
In
connection with this agreement, we promised to pay $40,000 (representing $38,835
principal and $1,165 interest or approximately 6% per annum) to Greentree
Financial Group, Inc. The 6-month, nonassumable promissory note with Greentree
Financial Group, Inc. was signed on June 24, 2004.
On
or
about February 2, 2004, we sold 500 pre-split shares (10,000,000 post-split)
of
stock to our President, David Koran for $100 pursuant to an offering that was
exempt under Section 4(2) of the Securities Act of 1933, as
amended.
On
or
about December 22, 2004, we issued shares of common stock to three of our
officers, as follows: Laura Koran, Chief Financial Officer, 150,000 shares;
Steven Moore, Chief Operating Officer, 75,000 shares; and Richard Koran, Vice
President, 75,000 shares. All three issuances were exempt from the registration
requirements of the Securities Act as a private placement pursuant to Section
4(2) thereof.
To
file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement
to:
a.
Include
any prospectus required by Section 10(a)(3) of the Securities Act
of
1933;
b.
Reflect
in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information in the registration
statement; and notwithstanding the foregoing, any increase or decrease
in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation
from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospects filed with the Commission pursuant
to
Rule 424(b) if, in the aggregate, the changes in the volume and price
represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in
the
effective registration statement.
c.
Include
any additional or changed material information on the plan of
distribution.
2.
That,
for determining liability under the Securities Act of 1933, to treat
each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the
initial
bona fide offering.
3.
To
file a post-effective amendment to remove from registration any of
the
securities that remain unsold at the end of the
offering.
4.
Insofar
as indemnification for liabilities arising under the Securities Act
of
1933 may be permitted to directors, officers and controlling persons
of
the Registrant pursuant to the foregoing provisions, or otherwise,
the
Registrant has been advised that in the opinion of the Securities
and
Exchange Commission such indemnification is against public policy
as
expressed in the Act and is, therefore,
unenforceable.
5.
In
the event that a claim for indemnification against such liabilities,
other
than the payment by the Registrant of expenses incurred and paid
by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding, is asserted
by such
director, officer or controlling person in connection with the securities
being registered hereby, the Registrant will, unless in the opinion
of its
counsel the matter has been settled by controlling precedent, submit
to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication
of
such issue.
In
accordance with the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements of filing of Form SB-2 and authorized this registration statement
to be signed on its behalf by the undersigned, in the City of Cornelius, State
of North Carolina on October 19, 2005.
Capital Resource Funding, Inc.
/s/
David R. Koran___
By:
David
R.
Koran
Title:
President
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the date
indicated:
