LED LIGHTING CO FILES (8-K) Disclosing Change in Shell Company Status
(Edgar Glimpses Via Acquire Media NewsEdge) ITEM 5.06 CHANGE IN SHELL COMPANY STATUS
Based on the current operations of the LED Lighting Company (the "Company"), the
Company believes that it is no longer a shell company as that term is defined in
Rule 12b-2 of the Exchange Act. The current operations of the Company are
described in this Current Report on Form 8-K.
FORM 10 DISCLOSUREWe are providing below the information that would be included in a Form 10 if we
were to file a Form 10.
Recent Company Developments
On May 28, 2013, the Company's board of directors and stockholders approved an
amendment to the Company's Certificate of Formation to change its corporate name
to "LED Lighting Company", and the amendment was filed with the Secretary of
State of the State of Delaware on May 30, 2013. The summary of the amendment is
qualified in its entirety by reference to the amendment which is filed as an
exhibit to the Company's Current Report on Form 8-K filed with the SEC on June
Effective May 28, 2013, the Company's principal place of business has changed to
4000 Bridgeway, Suite 400, Sausalito, California 94965.
On May 28, 2013, the Company entered into a Share Cancellation Agreement with
the then 3 existing stockholders of the Company pursuant to which the
stockholders agreed to collectively cancel 18,900,000 of their issued and
outstanding shares resulting in 1,100,000 shares issued and outstanding among
the 3 stockholders. One of the 3 existing stockholders is Joseph Merhi, who is
also a director of the Company. The summary of the Share Cancellation Agreement
is qualified in its entirety by reference to the Share Cancellation Agreement
which is filed as an exhibit to the Company's Current Report on Form 8-K filed
with the SEC on June 4, 2013.
Effective May 28, 2013, the Company entered into subscription agreements with 15
accredited investors pursuant to which the Company agreed to issue a total of
3,335,000 shares of common stock at $.10 per share, and three-year warrants to
purchase up to 3,335,000 shares of common stock at $1.00 per share, in exchange
for cash proceeds and in-kind payments totaling $335,000. The summary of the
subscription agreement is qualified in its entirety by reference to the form of
subscription agreement which is filed as an exhibit to the Company's Current
Report on Form 8-K filed with the SEC on June 4, 2013.
On May 28, 2013, Joseph Merhi resigned all of his officer positions with the
Company. Mr. Merhi remains on the Board of Directors of the Company. On May
28, 2013, the Company appointed Kevin Kearney as a director of the Company, and
appointed Mr. Kearney as the Chief Executive Officer, Chief Financial Officer,
President and Secretary of the Company.
On May 28, 2013, the Company's board of directors and stockholders approved the
adoption of the LED Lighting Company 2013 Equity Incentive Plan (the "2013
Plan"). The 2013 Plan is intended to aid the Company in recruiting and retaining
key employees, directors or consultants and to motivate them by providing
incentives through the granting of awards of stock options or other stock based
awards. The 2013 Plan is administered by the board of directors. Directors,
officers, employees and consultants of the Company and its affiliates are
eligible to participate under the 2013 Plan. A total of 1,500,000 shares of
common stock have been reserved for awards under the 2013 Plan. The summary of
the 2013 Plan described above is qualified in its entirety by reference to the
2013 Plan which is filed as an exhibit to the Company's Current Report on Form
8-K filed with the SEC on June 4, 2013.
Effective June 1, 2013, the Company entered into a Consulting Agreement with
Mark Wolff pursuant to which he has agreed to be engaged as the Vice President
of Sales and Marketing of the Company. The agreement is for a period of one (1)
year, subject to any earlier termination. The compensation payable to Mr. Wolff
under the agreement is $20,833 per month. The Company also agreed to issue Mr.
Wolff a Warrant to purchase up to 500,000 shares of Company common stock at an
exercise price of $1.00 per share, vesting in 12 monthly increments and
terminating in 3 years. The summary of the Consulting Agreement and form of
Warrant is qualified in its entirety by reference to the agreements which are
filed as exhibits to the Company's Current Report on Form 8-K filed with the SEC
on June 4, 2013.
On June 5, 2013, the Company entered into a Non-Exclusive Distributor Agreement
with Polybrite International, Inc. ("Polybrite") pursuant to which the Company
was appointed as a non-exclusive distributor of Polybrite's LED products. The
agreement provides that the Company may purchase Polybrite's LED products on
most favored nation's terms. The term of the agreement is for five years,
subject to any early termination. The summary of the Distributor Agreement is
qualified in its entirety by reference to the Distributor Agreement which is
filed as an exhibit to the Company's Current Report on Form 8-K filed with the
SEC on June 10, 2013.
On June 5, 2013, the Company entered into a Sales Representative Agreement with
Polybrite pursuant to which the Company was appointed as a non-exclusive sales
representative of Polybrite's LED products. The agreement provides that the
Company may make introductions, solicit sales, and make referrals for purchases
of Polybrite's LED products and receive commission compensation upon the
completion of such sales. The term of the agreement is for eight years, subject
to either party's right to terminate earlier. The summary of the Sales
Representative Agreement is qualified in its entirety by reference to the Sales
Representative Agreement which is filed as an exhibit to the Company's Current
Report on Form 8-K filed with the SEC on June 10, 2013.
Form 10/Item 1. Description of Business
The LED Lighting Company plans to supply LED (light-emitting diode) light bulbs
and light fixtures to the commercial, industrial and consumer/retail markets.
All of our products are tested and listed by UL Underwriters Laboratories (UL)
or Electrical Testing Laboratories (ETL). Additionally, all products to be
supplied will be tested and in compliance with industry standards such as those
set up by Energy Star, and the Illuminating Engineering Society of North America
We have established a list of quality suppliers on a global basis that make our
products to our own specifications. Besides offices in the United States, we
also plan to maintain offices in Hong Kong and China.
The Industry and Overall Market
LED sales in 2012 were 9.4 billion dollars. Twenty five percent (25%) of those
sales were in the United States. In 2016 sales of all lighting products are
projected to be 78 billion dollars, and projections by various individuals state
that LED lighting products will equal 33 to 50 percent of the total sales
dollars (23 to 39 billion dollars).
LED lamps and fixtures are more efficient than traditional sources of
illumination. Their useful life is significantly longer as well and they use
anywhere from 85 to 90% less energy than traditional lighting sources such as
incandescent, halogen, and metal halide to name a few.
They are solid-state and dimmable which makes it ideal for applications such as
the Smart Grid. Besides lasting longer and being more energy efficient they are
made with non-hazardous materials (RoHS) and also operate at lower temperatures
than conventional lighting products. This combination of attributes along with
low operating costs, delivers a significant savings as well as strong "ROI"s"
(returns on investments) to customers that choose to use them.
The market is growing rapidly due to the technological advances, improvement in
pricing and growing acceptance in the commercial, industrial and residential
The lighting market is dominated by such companies, as General Electric,
Phillips, Orem/Sylvania, Hubbell Lighting, Acuity Brands and Cooper Electric. We
estimate that combined these companies account for 55 to 60% of the total
lighting market. We believe that our company has an opportunity to capitalize
on the many opportunities in the market.
In early 2005, Cree was an emerging supplier of semiconductors (LED Chips) and
today they sell finished lighting products on a global basis. Their annual sales
now top over one billion dollars. There are many high performing secondary
suppliers in the lighting market, such as Feit Electric, EIKO, TCP, and MAX
Light to name a few.
Our main sales efforts will be to sell the electrical distribution trade.
According to the National Association of Electrical Distributors (NAED) there
are over 4,000 distributor locations in the United States and Canada. These
distributors use the "stock and flow" business model for a great deal of their
sales. These distributors work with large electrical engineering firms and
general contractors on individual projects. To support their efforts we will
make presentations to Architects, Facility Managers, Lighting Designers, and
General Contractors to educate them on LED lighting products and our product
We also plan to call on original Equipment Manufacturers (OEM's), the Marine
industry and the RV/Mobile Home industry and drive this business through the
distribution channel when possible.
We intend to make sales presentations to federal, state and local government
Our product offering will include the following:
Parking Lot Lighting
Warehouse Lighting (High Bays)
Light Bulbs (A 19 Series)
Flood and Spot Lights
LED Tubes (replaces fluorescent bulbs)
The LED Lighting Company is a Delaware corporation which was incorporated in
July 19, 2010. Prior to June 1, 2013, it as a non-operational shell company
named "Fun World Media, Inc." On June 1, 2013, the Company commenced operations
and its business plan to import and sell LED lighting bulbs and fixtures.
Production and Logistics
The majority of the LED Lighting Company's products are manufactured in either
Shenzhen or the Pearl River Delta, both of which are in the Peoples' Republic of
The finished product is shipped to the nearby port of Yan Tian, China. From Yan
Tian it is then shipped to a warehouse located in San Francisco, California. We
intend to contract with a facility in San Francisco, California that we will use
as a staging area for shipments throughout the U.S. and Canada.
As our business grows we have the option of using regional warehousing which is
owned by our independent sales agents.
We face competition from traditional lighting suppliers, be it manufacturers or
trading companies. LED lighting is a growing industry with a number of
suppliers. Some have significant capital resources, distribution channels and
entrenched customer accounts while others live from order to order.
We will compete against traditional lighting manufacturers primarily based on
our entrepreneurial culture. By removing layers of bureaucratic and cumbersome
controls and administrative tasks we can respond quicker to our customer's
needs. Our company will be customer focused and not corporate focused.
Besides offering to the customer's traditional LED lighting products we will
position ourselves as an innovative supplier of cutting edge LED lighting
products. Our pricing is and will continue to be competitive. We expect over
time that the smaller innovative companies and those that control a niche in the
market place will be bought by the larger companies.
There are a number of off shore OEM manufacturers who continually develop new
component advances in LED lighting. We will stay close to these companies, and
use their advances in our finished products.
We have one full time contracted position and one part-time contracted position
as of June 1, 2013.
We do not have any material order backlog as of the date of this Current Report.
We do not expect that our business will experience significant seasonality.
Form 10/Item 1A. Risk Factors
An investment in our common stock involves a high degree of risk. You should
carefully consider the risks described below, together with all of the other
information included in this Current Report, before making an investment
decision. If any of the following risks actually occurs, our business,
financial condition or results of operations could suffer. In that case, the
trading price of our common stock could decline, and you may lose all or part of
your investment. You should read the section entitled "Special Notes Regarding
Forward-Looking Statements" for a discussion of what types of statements are
forward-looking statements as well as the significance of such statements in the
context of this report.
Risks Related To Our BusinessWe have a very limited operating history. Prior to June 1, 2013, our Company
was a "shell" company with no or nominal operations. The Company recently
became funded and commenced operations. The Company does not currently have
significant operating revenues and has a very limited operating history.
Because the Company has a limited operating history, we do not have any
historical financial data upon which to base planned operations. Our historical
financial information is not a reliable indicator of future performance or
The segments of the LED industry in which we operate are highly competitive and
increased competition could reduce our sales and profitability. We compete in
different markets within the LED lighting industry on the basis of the quality
of our products, customer service, price and distribution. All of our markets
are highly competitive. Our competitors vary in size and many have greater
financial and marketing resources than we do. While we believe that our Company
offers unique advantages, if we cannot maintain quality and pricing that are
comparable to other LED products and other lighting products we may not be able
to develop, or may lose, market share.
Our business and financial performance may be adversely affected by downturns in
the target markets that we serve or reduced demand for the types of products we
sell. Demand for our products is often affected by general economic conditions
as well as product-use trends in our target markets. These changes may result
in decreased demand for our products. The occurrence of these conditions is
beyond our ability to control and, when they occur, they may have a significant
impact on our sales and results of operations. Our products are typically
higher priced than non-LED lighting products. The inability or unwillingness of
our customers to pay a premium for our products due to general economic
conditions or a downturn in the economy may have a significant adverse impact on
our sales and results of operations.
Changes within the lighting industry may adversely affect our financial
performance. Changes in the identity, ownership structure and strategic goals of
our competitors and the emergence of new competitors in our target markets may
harm our financial performance. New competitors may include foreign-based
companies and commodity-based domestic producers who could enter our specialty
markets if they are unable to compete in their traditional markets.
Additionally, consolidation within our industry could unite other producers
with distribution channels through which we intend to sell our products, thereby
limiting access to our target markets.
Any interruption in delivery from our suppliers will impair our ability to
distribute our products and generate revenues. We are dependent on third party
manufacturers for the production and supply of our products. We have no
manufacturing facilities and we rely on these third parties to provide us with
an adequate and reliable supply of products on a timely basis. Any interruption
in the distribution from our suppliers could affect our ability to distribute
our products. Additionally, these suppliers are located outside of the United
States in the Peoples' Republic of China (PRC). Any legislation or consumer
preferences in the United States or other countries requiring products which are
made in the United States or such other countries may have a material adverse
impact on our sales and results of operations.
If the third party manufactures who supply our products were to suffer a
catastrophic loss, unforeseen or recurring operational problems at any of their
facilities, we could suffer significant product shortages, sales declines and/or
cost increases. The facilities which make the lighting products we distribute as
well as their distribution warehouses could suffer catastrophic loss due to
fire, flood, terrorism, mechanical failure or other natural or human caused
events, or other unforeseen interruptions in production or delivery. If any of
these facilities were to experience a catastrophic loss, it could disrupt our
supply of products for sale, delay or reduce shipments and reduce our revenues.
These expenses and losses are not covered by property or business interruption
insurance. Even if covered by insurance, our inability to deliver our products
to customers, even on a short-term basis, may cause us to lose market share on a
more permanent basis.
If we are not able to compete effectively against companies with greater
resources, our prospects for future success will be jeopardized. The lighting
industry is highly competitive. In the lighting markets in which we plan to sell
our LED lighting solutions, our products will compete with lighting products
utilizing traditional lighting technology provided by larger and
better-established lighting operators. We expect competition to intensify in the
future. Many of our competitors have longer operating histories, larger customer
bases, greater brand recognition and significantly greater financial, marketing,
technical and other resources. Our competitors may acquire or be acquired by,
receive investments from or enter into other commercial relationships with,
larger, well established and well-financed competitors. Therefore, some of our
competitors with other revenue sources may be able to devote greater resources
to marketing and promotional campaigns, adopt more aggressive pricing policies,
and devote substantially more resources to product development. It is difficult
to effectively compete with companies that have these resources so we cannot
assure that we will ever become a significant company in the industry.
If our lighting products do not gain wider market acceptance, prospects for our
growth and profitability may be limited. We face competition from both
traditional lighting technologies, such as incandescent, florescent and neon
lighting, and from competitors engaged in providing LED lighting products.
Traditional lighting technologies have the advantage of a long history of market
acceptance and familiarity as compared to our LED lighting solutions. Potential
customers for our LED products may be reluctant to adopt these as alternatives
to traditional lighting technologies because of their higher initial cost to
achieve comparable light output, although our LED lighting products tend to be
more energy efficient and require less maintenance. Our success will depend upon
both the increased acceptance of our LED products as an alternative to
traditional lighting technologies and the development of higher lumen producing
products to meet traditional lighting applications. Obstacles to adoption of LED
lighting in the general lighting market include the high initial cost of high
brightness white LEDs and the need for further advances in brightness, color
characteristics, efficiency and the predicted life of the LEDs before they
require replacement. Our future results are dependent upon sales growth in the
commercial, hospitality, institutional, retail and sign markets. If acceptance
of our lighting products in general does not continue to grow, then
opportunities to increase our revenue and operate profitably may be limited.
We will depend on independent sales representatives for a substantial portion of
our revenue and sales, and the failure to successfully manage our relationships
with these third-parties, or the termination of these relationships, could cause
our revenue to decline and harm our business. We intend to establish a network
of independent sales representatives to sell certain products. We may not be
able to negotiate acceptable relationships in the future and cannot predict
whether current or future relationships will be successful. These relationships
have not yet been formalized in a detailed contract, and may be subject to
termination at any time. The agreements that are formalized in a contract are
generally short-term, not exclusive, and can be cancelled by these sales
channels without significant financial consequence. We cannot control how these
sales channels perform and cannot be certain that we or end-users will be
satisfied by their performance. If we cannot establish these sales channels or
if they do not perform once established, there could be a significant impact on
our revenue and profits.
Our products could contain defects or they may be installed or operated
incorrectly, which could reduce sales of those products or result in claims
against us. Defects may be found in the products we will distribute. This could
result in, among other things, a delay in the recognition or loss of revenue,
loss of market share or failure to achieve market acceptance. The occurrence of
these problems could result in the delay or loss of market acceptance of our
lighting products and would likely harm our business. Defects, integration
issues or other performance problems in our lighting products could result in
personal injury or financial or other damages to end-users or could damage
market acceptance of our products. Our customers and end-users could also seek
damages from us for their losses. A product liability claim brought against us,
even if unsuccessful, would likely be time consuming and costly to defend.
The reduction or elimination of incentives to adopt LED lighting could cause the
growth in demand for our products to slow, which could materially and adversely
affect our revenues, profits and margins. We believe the near-term growth of the
LED market will be accelerated by government policies in certain countries that
either directly promote the use of LEDs or discourage the use of some
traditional lighting technologies. Currently, the upfront cost of LED lighting
exceeds the upfront cost for some traditional lighting technologies that provide
similar lumen output in many applications. However, some governments have used
policy initiatives to accelerate the development and adoption of LED lighting
and other non-traditional lighting technologies that are seen as more
environmentally friendly compared to some traditional lighting technologies.
Reductions in, or the elimination of, government investment and favorable energy
policies could result in decreased demand for the products we distribute and
decrease our revenues, profits and margins. Additionally, if our products fail
to qualify for any financial incentives or rebates provided by governmental
agencies or utilities for which our competitors' products qualify, such programs
may diminish or eliminate our ability to compete by offering products at lower
prices than our competitors.
The failure to obtain certifications or compliance would harm our business. The
products we intend to distribute are required to comply with certain legal
requirements governing the materials in those products. If the products do not
comply with these legal requirements, our revenue might be materially harmed.
Financial RisksIf we cannot return to and sustain profitable operations, we will need to raise
additional capital to continue our operations, which may not be available on
commercially reasonable terms, or at all, and which may dilute your investment.
We have no revenues or sales as of the date of this Current Report. Achieving
and sustaining profitability will require us to achieve revenues and manage our
product, operating and administrative expenses. We cannot guarantee that we will
be successful in achieving revenues or profitability. If we are unable to
generate sufficient revenues to pay our expenses and our existing sources of
cash and cash flows are otherwise insufficient to fund our activities, we will
need to raise additional funds to continue our operations. We do not have any
arrangements in place for additional funds. If needed, those funds may not be
available on favorable terms, or at all. Furthermore, if we issue equity or debt
securities to raise additional funds, our existing stockholders may experience
dilution, and the new equity or debt securities may have rights, preferences and
privileges senior to those of our existing stockholders. If we are unsuccessful
in achieving revenues or profitability, and we cannot obtain additional funds on
commercially reasonable terms or at all, we may be required to curtail
significantly or cease our operations, which could result in the loss of all of
your investment in our stock.
Our financial statements have been prepared assuming that the Company will
continue as a going concern. We have generated losses to date and have limited
working capital. These factors raise substantial doubt about our ability to
continue as a going concern. Our financial statements do not include any
adjustments that might result from this uncertainty. The report of our
independent registered public accounting firm included an explanatory paragraph
expressing substantial doubt about our ability to continue as a going concern in
their audit report included herein. If we cannot generate the required revenues
and gross margin to achieve profitability or obtain additional capital on
acceptable terms, we will need to substantially revise our business plan or
cease operations and an investor could suffer the loss of a significant portion
or all of his investment in our Company.
As we transition from a Company with insignificant revenues to what we hope will
be a Company generating substantial revenues, we may not be able to manage our
growth effectively, which could adversely affect our operations and financial
performance. The ability to manage and operate our business as we execute our
growth strategy will require effective planning. Significant rapid growth could
strain our internal resources, leading to a lower quality of customer service,
reporting problems and delays in meeting important deadlines resulting in loss
of market share and other problems that could adversely affect our financial
performance. Our efforts to grow could place a significant strain on our
personnel, management systems, infrastructure and other resources. If we do not
manage our growth effectively, our operations could be adversely affected,
resulting in slower growth and a failure to achieve or sustain profitability.
We do not expect to pay dividends for the foreseeable future, and we may never
pay dividends and, consequently, the only opportunity for investors to achieve a
return on their investment is if a trading market develops and investors are
able to sell their shares for a profit or if our business is sold at a price
that enables investors to recognize a profit. We currently intend to retain any
future earnings to support the development and expansion of our business and do
not anticipate paying cash dividends for the foreseeable future. Our payment of
any future dividends will be at the discretion of our Board of Directors after
taking into account various factors, including but not limited to our financial
condition, operating results, cash needs, growth plans and the terms of any
credit agreements that we may be a party to at the time. In addition, our
ability to pay dividends on our common stock may be limited by state law.
Accordingly, we cannot assure investors any return on their investment, other
than in connection with a sale of their shares or a sale of our business. At the
present time there is a limited trading market for our shares. Therefore,
holders of our securities may be unable to sell them. We cannot assure investors
that an active trading market will develop or that any third party will offer to
purchase our business on acceptable terms and at a price that would enable our
investors to recognize a profit.
Corporate And Other RisksLimitations on director and officer liability and indemnification of our
Company's officers and directors by us may discourage stockholders from bringing
suit against an officer or director. Our Company's certificate of incorporation
and bylaws provide, with certain exceptions as permitted by governing state law,
that a director or officer shall not be personally liable to us or our
stockholders for breach of fiduciary duty as a director, except for acts or
omissions which involve intentional misconduct, fraud or knowing violation of
. . .
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