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Definitive Materials Filed by Investment Companies. (497)
Date : 01/31/2014 @ 4:03PM
Source : Edgar (US Regulatory)
Stock : Andalay Solar, Inc. (QB) (WEST)
Quote : 0.0225 0.0005 (2.27%) @ 5:00PM
Definitive Materials Filed by Investment Companies. (497)
Print
Alert
Filed pursuant to Rule 497(c)
1933 Act File No. 333-12745
1940 Act File No. 811-07831
PROSPECTUS
January 31, 2014
FMI Large Cap Fund
(Ticker Symbol: FMIHX)
FMI Common Stock Fund
(Ticker Symbol: FMIMX)
FMI International Fund
(Ticker Symbol: FMIJX)
FMI Large Cap Fund is a non-diversified, no-load mutual fund seeking long-term capital appreciation by investing mainly in a limited number of large capitalization value stocks.
FMI Common Stock Fund is a no-load mutual fund seeking long-term capital appreciation by investing mainly in small- to medium-capitalization value stocks.
FMI International Fund is a non-diversified, no-load mutual fund seeking long-term capital appreciation by investing mainly in a limited number of large capitalization value stocks of non-U.S. companies.
The FMI Large Cap Fund and the FMI Common Stock Fund are closed to new investors. Except as specified in this Prospectus, only investors of the FMI Large Cap Fund as of June 30, 2013 or investors of the predecessor fund to the FMI Common Stock Fund as of December 31, 2009 are eligible to purchase shares of the respective Fund.
FMI Funds
100 East Wisconsin Avenue, Suite 2200
1-800-811-5311
Milwaukee, Wisconsin 53202
www.fmifunds.com
NO-LOAD MUTUAL FUNDS
The Securities and Exchange Commission has not approved or disapproved these securities or determined if this Prospectus is accurate or complete. Any representation to the contrary is a criminal offense.
FMI Funds
Advised by Fiduciary Management, Inc.
FMI Funds
TABLE OF CONTENTS
Summary Sections
3
FMI Large Cap Fund Summary
3
FMI Common Stock Fund Summary
7
FMI International Fund Summary
11
Additional Information About the Funds
16
Management of the Funds
16
The Funds’ Share Price
17
Purchasing Shares
18
Redeeming Shares
23
Market Timing Procedures
25
Exchanging Shares
26
Dividends, Distributions and Taxes
26
Index Descriptions
28
Financial Highlights
29
- 2 -
SUMMARY SECTIONS
FMI LARGE CAP FUND SUMMARY
Investment Objective: FMI Large Cap Fund seeks long-term capital appreciation.
Fees and Expenses of the Fund: The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
No Sales Charge
Maximum Deferred Sales Charge (Load)
No Deferred Sales Charge
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends and Distributions
No Sales Charge
Redemption Fee (transfer agent charge of $15 for each wire redemption)
None
Exchange Fee
None
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
Management Fees
0.75%
Distribution and/or Service (12b-1) Fees
None
Other Expenses
0.21%
Total Annual Fund Operating Expenses
0.96%
Example
This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of these periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions, your costs would be:
1 Year
3 Years
5 Years
10 Years
$98
$306
$531
$1,178
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 30% of the average value of its portfolio.
Principal Investment Strategies: The Fund invests mainly in a limited number of large capitalization (namely, companies with more than $5 billion market capitalization) value stocks of companies listed or traded on a national securities exchange or on a national securities association, including foreign securities traded on a national securities exchange or on a national securities association. In addition, the Fund invests in American Depositary Receipts (“ADRs”) or American Depositary Shares (“ADSs”), which are dollar-denominated securities of foreign issuers traded in the U.S.
The Fund may invest in ADRs through both sponsored and unsponsored arrangements. Issuers of the securities underlying sponsored ADRs, but not unsponsored ADRs, are contractually obligated to disclose material information in the United States. Therefore, the market value of unsponsored ADRs is less likely to reflect the effect of such information.
- 3 -
The Fund uses fundamental analysis to look for stocks of good businesses that are selling at value prices in an effort to achieve above average performance with below average risk. The Fund believes good businesses have some or all of the following characteristics:
•
A strong, defendable market niche or products and services niche that is difficult to replicate
•
A high degree of relative recurring revenue
•
Modestly priced products or services
•
Attractive return-on-investment economics (namely, where return on investment exceeds a company’s cost of capital over a three to five year period)
•
Above-average growth or improving profitability prospects
The Fund considers valuation:
•
On both an absolute and relative to the market basis
•
Utilizing both historical and prospective analysis
In reviewing companies, the Fund applies the characteristics identified above on a case-by-case basis as the order of importance varies depending on the type of business or industry and the company being reviewed.
The Fund’s portfolio managers will generally sell a portfolio security when they believe:
•
The security has achieved its value potential
•
Such sale is necessary for portfolio diversification
•
Changing fundamentals signal a deteriorating value potential
•
Other securities have a better value potential
Principal Risks: There is a risk that you could lose all or a portion of your money on your investment in the Fund. This risk may increase during times of significant market volatility. The risks below could affect the value of your investment, and because of these risks the Fund is a suitable investment only for those investors who have long-term investment goals:
•
Stock Market Risk: The prices of the securities in which the Fund invests may decline for a number of reasons. The price declines of common stocks, in particular, may be steep, sudden and/or prolonged. Price changes may occur in the market as a whole, or they may occur in only a particular company, industry, or sector of the market.
•
Medium Capitalization Companies Risk: Medium capitalization companies tend to be more susceptible to adverse business or economic events than large capitalization companies, and there is a risk that the securities of medium capitalization companies may have limited liquidity and greater price volatility than securities of large capitalization companies.
•
Large Capitalization Companies Risk: Large capitalization companies may grow more slowly than the overall economy and tend to go in and out of favor based on market and economic conditions, and the Fund may underperform investments that focus on small or medium capitalization companies.
•
Non-Diversification Risk: Because the Fund is non-diversified (meaning that compared to diversified mutual funds, the Fund may invest a greater percentage of its assets in a particular issuer), the Fund’s shares may be more susceptible to adverse changes in the value of a particular security than would be the shares of a diversified mutual fund. Thus, the Fund is more sensitive to economic, business and political changes which may result in greater price fluctuations of the Fund’s shares.
•
Value Investing Risk: The Fund’s portfolio managers may be wrong in their assessment of a company’s value and the stocks the Fund holds may not reach what the portfolio managers believe are their full values. From time to time “value” investing falls out of favor with investors. During these periods, the Fund’s relative performance may suffer.
- 4 -
•
Foreign Securities Risk: Stocks of non-U.S. companies (whether directly or in ADRs or ADSs) as an asset class may underperform stocks of U.S. companies, and such stocks may be less liquid and more volatile than stocks of U.S. companies. The costs associated with securities transactions are often higher in foreign countries than in the U.S. The U.S. dollar value of foreign securities traded in foreign currencies (and any dividends and interest earned) held by the Fund or by ETFs in which the Fund invests may be affected unfavorably by changes in foreign currency exchange rates. An increase in the U.S. dollar relative to these other currencies will adversely affect the Fund, if the positions are not fully hedged. Additionally, investments in foreign securities, whether or not publicly traded in the United States, may involve risks which are in addition to those inherent in domestic investments. Foreign companies may not be subject to the same regulatory requirements of U.S. companies and, as a consequence, there may be less publicly available information about such companies. Also, foreign companies may not be subject to uniform accounting, auditing and financial reporting standards and requirements comparable to those applicable to U.S. companies. Foreign governments and foreign economies often are less stable than the U.S. Government and the U.S. economy.
Performance: The following bar chart and table provide some indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year and how the Fund’s average annual returns over time compare to the performance of the Standard & Poor’s Composite Index of 500 Stocks ® (“S&P 500”). For additional information on this index, please see “Index Descriptions” in the Prospectus. The Fund’s past performance (before and after taxes) is not necessarily an indication of how the Fund will perform in the future. Updated performance information is available on the Fund’s website at http://www.fmifunds.com.
FMI Large Cap Fund
(Annual total return as of 12/31)
During the ten year period shown on the bar chart, the Fund’s highest total return for a quarter was 14.85% (quarter ended June 30, 2009) and the lowest total return for a quarter was -18.29% (quarter ended December 31, 2008).
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or Individual Retirement Accounts (IRAs).
Average Annual Total Returns
One
Five
Ten
( for the periods ended December 31, 2013)
Year
Years
Years
FMI Large Cap Fund
Return before taxes
30.48%
17.06%
9.61%
Return after taxes on distributions
28.46%
16.40%
9.00%
Return after taxes on distributions and sale of Fund shares
18.86%
13.88%
7.84%
S&P 500 Index (reflects no deduction for fees, expenses or taxes)
32.39%
17.94%
7.41%
- 5 -
Investment Adviser: Fiduciary Management, Inc. is the investment adviser for the Fund.
Portfolio Managers: The Fund’s investment decisions are made by a Portfolio Management Committee (“PMC”) that is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio, which is comprised of the following individuals:
Years with
PMC Member
Title with Adviser
Adviser
Patrick J. English
Chief Executive Officer and Chief Investment Officer
27
John S. Brandser
President, Chief Operating Officer and Chief Compliance Officer
19
Andy P. Ramer
Director of Research and Research Analyst
11
Jonathan T. Bloom
Research Analyst
4
Matthew J. Goetzinger
Research Analyst
9
Robert M. Helf
Research Analyst
16
Karl T. Poehls
Research Analyst
6
Daniel G. Sievers
Research Analyst
5
Matthew T. Sullivan
Research Analyst
1
Purchase and Sale of Fund Shares: The minimum initial investment amount for all new accounts is $1,000. The subsequent investments in the Fund for existing accounts may be made with a minimum investment of $50 if purchased through the Automatic Investment Plan, $1,000 for telephone purchases and $100 for all other accounts. The Fund is closed to new investors, subject to certain conditions.
You may purchase, redeem and exchange shares of the Fund each day the New York Stock Exchange is open. You may purchase, redeem or exchange Fund shares: through the mail (FMI Large Cap Fund, c/o U.S. Bancorp Fund Services, LLC, P.O. Box 701, Milwaukee, WI 53201-0701); by wire transfer; by telephone at 1-800-811-5311; or through a financial intermediary. Investors who wish to purchase or redeem shares through a broker-dealer or other financial intermediary should contact the intermediary regarding the hours during which orders may be placed.
Tax Information: The Fund’s distributions are taxable, and will be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account, in which case such distributions may be taxable at a later date.
Payments to Broker-Dealers and Other Financial Intermediaries: If you purchase Fund shares through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. If made, these payments may create conflicts of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
- 6 -
FMI COMMON STOCK FUND SUMMARY
Investment Objective: FMI Common Stock Fund seeks long-term capital appreciation.
Fees and Expenses of the Fund: The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
No Sales Charge
Maximum Deferred Sales Charge (Load)
No Deferred Sales Charge
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends and Distributions
No Sales Charge
Redemption Fee (transfer agent charge of $15 for each wire redemption)
None
Exchange Fee
None
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
Management Fees
1.00%
Distribution and/or Service (12b-1) Fees
None
Other Expenses (1)
0.19%
Total Annual Fund Operating Expenses
1.19%
(1)
“Other Expenses” for the Fund are based on the current fiscal year expenses of the FMI Common Stock Fund of FMI Common Stock Fund, Inc. (the “Predecessor Fund”), which was reorganized into the Fund on January 31, 2014.
Example
This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of these periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions, your costs would be:
1 Year
3 Years
5 Years
10 Years
$121
$378
$654
$1,443
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 24% of the average value of its portfolio.
Principal Investment Strategies: The Fund invests mainly in small- to medium-capitalization companies (namely, companies with less than $5 billion market capitalization) listed or traded on a national securities exchange or on a national securities association. Under normal market conditions, the Fund invests 80% of its net assets in common stocks, including for purposes of this limitation common stocks of foreign companies traded as American Depositary Receipts (“ADRs”) or American Depositary Shares (“ADSs”).
The Fund may invest in ADRs through both sponsored and unsponsored arrangements. Issuers of the securities underlying sponsored ADRs, but not unsponsored ADRs, are contractually obligated to disclose material information in the United States. Therefore, the market value of unsponsored ADRs is less likely to reflect the effect of such information.
- 7 -
The Fund uses fundamental analysis to look for stocks of good businesses that are selling at value prices in an effort to achieve above average performance with below average risk. The Fund believes good businesses have some or all of the following characteristics:
•
A strong, defendable market niche or products and services niche that is difficult to replicate
•
A high degree of relative recurring revenue
•
Modestly priced products or services
•
Attractive return-on-investment economics (namely, where return on investment exceeds a company’s cost of capital over a three to five year period)
•
Above-average growth or improving profitability prospects
The Fund considers valuation:
•
On both an absolute and relative to the market basis
•
Utilizing both historical and prospective analysis
In reviewing companies, the Fund applies the characteristics identified above on a case-by-case basis as the order of importance varies depending on the type of business or industry and the company being reviewed.
The Fund’s portfolio managers will generally sell a portfolio security when they believe:
•
The security has achieved its value potential
•
Such sale is necessary for portfolio diversification
•
Changing fundamentals signal a deteriorating value potential
•
Other securities have a better value potential
Principal Risks: There is a risk that you could lose all or a portion of your money on your investment in the Fund. This risk may increase during times of significant market volatility. The risks below could affect the value of your investment, and because of these risks the Fund is a suitable investment only for those investors who have long-term investment goals:
•
Stock Market Risk: The prices of the securities in which the Fund invests may decline for a number of reasons. The price declines of common stocks, in particular, may be steep, sudden and/or prolonged. Price changes may occur in the market as a whole, or they may occur in only a particular company, industry, or sector of the market.
•
Medium Capitalization Companies Risk: Medium capitalization companies tend to be more susceptible to adverse business or economic events than large capitalization companies, and there is a risk that the securities of medium capitalization companies may have limited liquidity and greater price volatility than securities of large capitalization companies.
•
Small Capitalization Companies Risk: Small capitalization companies typically have relatively lower revenues, limited product lines and lack of management depth, and may have a smaller share of the market for their products or services, than large and medium capitalization companies. There is a risk that the securities of small capitalization companies may have limited liquidity and greater price volatility than securities of large and medium capitalization companies, which can negatively affect the Fund’s ability to sell these securities at quoted market prices. Finally, there are periods when investing in small capitalization company stocks falls out of favor with investors and these stocks may underperform.
•
Value Investing Risk: The Fund’s portfolio managers may be wrong in their assessment of a company’s value and the stocks the Fund holds may not reach what the portfolio managers believe are their full values. From time to time “value” investing falls out of favor with investors. During these periods, the Fund’s relative performance may suffer.
•
Foreign Securities Risk: Stocks of non-U.S. companies (whether directly or in ADRs or ADSs) as an asset class may underperform stocks of U.S. companies, and such stocks may be less liquid and more volatile than
- 8 -
stocks of U.S. companies. The costs associated with securities transactions are often higher in foreign countries than in the U.S. The U.S. dollar value of foreign securities traded in foreign currencies (and any in dividends and interest earned) held by the Fund may be affected unfavorably by changes in foreign currency exchange rates. An increase in the U.S. dollar relative to these other currencies will adversely affect the Fund, if the positions are not fully hedged. Additionally, investments in foreign securities, whether or not publicly traded in the United States, may involve risks which are in addition to those inherent in domestic investments. Foreign companies may not be subject to the same regulatory requirements of U.S. companies and, as a consequence, there may be less publicly available information about such companies. Also, foreign companies may not be subject to uniform accounting, auditing and financial reporting standards and requirements comparable to those applicable to U.S. companies. Foreign governments and foreign economies often are less stable than the U.S. Government and the U.S. economy.
Performance: The following bar chart and table provide some indication of the risks of investing in the Fund by showing changes in the Fund’s performance from year to year and how the Fund’s average annual returns over time compare to the performance of the Russell 2000 Index ® . The Fund is the successor to the investment performance of the Predecessor Fund as a result of the reorganization of the Predecessor Fund into the Fund after the close of business on January 31, 2014. Accordingly, the performance information shown below for periods on or prior to January 31, 2014 is that of the Predecessor Fund. The Predecessor Fund was also advised by the Adviser and had the same investment objective and strategies as the Fund. For additional information on this index, please see “Index Descriptions” in the Prospectus. The Predecessor Fund’s past performance (before and after taxes) is not necessarily an indication of how the Fund will perform in the future. Updated performance information is available on the Fund’s website at http://www.fmifunds.com.
FMI Common Stock Fund
(Annual total return as of 12/31)
During the ten year period shown on the bar chart, the Predecessor Fund’s highest total return for a quarter was 21.52% (quarter ended June 30, 2009) and the lowest total return for a quarter was -19.88% (quarter ended December 31, 2008).
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or Individual Retirement Accounts (IRAs).
Average Annual Total Returns
One
Five
Ten
( for the periods ended December 31, 2013)
Year
Years
Years
FMI Common Stock Fund
Return before taxes
32.01%
19.98%
11.44%
Return after taxes on distributions
29.05%
18.60%
9.82%
Return after taxes on distributions and sale of Fund shares
20.39%
16.41%
9.28%
Russell 2000 Index ® (reflects no deduction for fees, expenses or taxes)
38.82%
20.08%
9.07%
- 9 -
Investment Adviser: Fiduciary Management, Inc. is the investment adviser for the Fund.
Portfolio Managers: The Fund’s investment decisions are made by a Portfolio Management Committee (“PMC”) that is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio, which is comprised of the following individuals:
Years with
PMC Member
Title with Adviser
Adviser
Patrick J. English
Chief Executive Officer and Chief Investment Officer
27
John S. Brandser
President, Chief Operating Officer and Chief Compliance Officer
19
Andy P. Ramer
Director of Research and Research Analyst
11
Jonathan T. Bloom
Research Analyst
4
Matthew J. Goetzinger
Research Analyst
9
Robert M. Helf
Research Analyst
16
Karl T. Poehls
Research Analyst
6
Daniel G. Sievers
Research Analyst
5
Matthew T. Sullivan
Research Analyst
1
Purchase and Sale of Fund Shares: The minimum initial investment amount for all new accounts is $1,000. The subsequent investments in the Fund for existing accounts may be made with a minimum investment of $50 if purchased through the Automatic Investment Plan, $1,000 for telephone purchases and $100 for all other accounts. The Fund is closed to new investors, subject to certain conditions.
You may purchase, redeem, and exchange shares of the Fund each day the New York Stock Exchange is open. You may purchase, redeem, or exchange Fund shares: through the mail (FMI Common Stock Fund, c/o U.S. Bancorp Fund Services, LLC, P.O. Box 701, Milwaukee, WI 53201-0701); by wire transfer; by telephone at 1-800-811-5311; or through a financial intermediary. Investors who wish to purchase or redeem shares through a broker-dealer or other financial intermediary should contact the intermediary regarding the hours during which orders may be placed.
Tax Information: The Fund’s distributions are taxable, and will be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account, in which case such distributions may be taxable at a later date.
Payments to Broker-Dealers and Other Financial Intermediaries: If you purchase Fund shares through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. If made, these payments may create conflicts of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
- 10 -
FMI INTERNATIONAL FUND SUMMARY
Investment Objective: FMI International Fund seeks long-term capital appreciation.
Fees and Expenses of the Fund: The following table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
Shareholder Fees
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
No Sales Charge
Maximum Deferred Sales Charge (Load)
No Deferred Sales Charge
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends and Distributions
No Sales Charge
Redemption Fee (transfer agent charge of $15 for each wire redemption)
None
Exchange Fee
None
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
Management Fees
0.75%
Distribution and/or Service (12b-1) Fees
None
Other Expenses
0.40%
Total Annual Fund Operating Expenses
1.15%
Fee Waiver and/or Expense Reimbursement (1)
-
0.15%
Net Annual Fund Operating Expenses
1.00%
(1)
The Fund’s investment adviser has contractually agreed in the investment advisory agreement to waive its advisory fee to the extent necessary to ensure that net expenses (excluding federal, state and local taxes, interest, brokerage commissions and extraordinary items) do not exceed 1.75% of the average daily net assets of the Fund. The investment advisory agreement may be terminated by the Fund or the Fund’s investment adviser for any reason upon sixty days prior written notice, but is expected to continue indefinitely. In addition to the reimbursement required under the investment advisory agreement, the investment adviser has voluntarily agreed to reimburse the Fund to the extent necessary to ensure that total annual fund operating expenses do not exceed 1.00% at least through January 31, 2015.
Example
This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of these periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses are equal to the net annual fund operating expenses for the first year and the total annual fund operating expenses for the remaining years. Although your actual costs may be higher or lower, based on these assumptions, your costs would be:
1 Year
3 Years
5 Years
10 Years
$102
$350
$618
$1,384
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Annual Fund Operating Expenses or in the Example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 21% of the average value of its portfolio.
Principal Investment Strategies: The Fund invests mainly in a limited number of large capitalization (namely, companies with more than $5 billion market capitalization) value stocks of foreign companies (also referred to as non-U.S. companies). The Fund normally invests at least 65% of its total assets in the equity securities of non-U.S. companies. Non-U.S. companies are companies domiciled or headquartered outside of the United States, or whose primary business activities or principal trading markets are located outside of the United States. Sometimes these non-U.S. companies are traded in the U.S. on a national securities exchange, or through
- 11 -
American Depositary Receipts (“ADRs”) or American Depositary Shares (“ADSs”). The Fund invests in common stocks and other equity securities, including preferred stocks, convertible preferred stocks, warrants, ADRs, ADSs and exchange-traded funds (“ETFs”) based on an international equity index.
The Fund may invest in ADRs through both sponsored and unsponsored arrangements. Issuers of the securities underlying sponsored ADRs, but not unsponsored ADRs, are contractually obligated to disclose material information in the United States. Therefore, the market value of unsponsored ADRs is less likely to reflect the effect of such information.
Unlike many international funds, the majority of the Fund’s investments will be in companies that have global operations rather than in companies whose business is limited to a particular country or geographic region. Because the Fund’s investments will be limited in number and investing in emerging market securities will not be a principal investment strategy, a substantial amount of the Fund’s assets (namely, more than 25% of its assets) may be in issuers located in a limited number of countries, and it is likely that the geographical and industry weightings of the Fund will differ significantly from popular international benchmarks. When determining whether an investment is in emerging market securities, the Fund views an investment in the securities of a company domiciled or headquartered in an emerging market, or whose primary business activities or principal trading markets are located in an emerging market as an investment in an emerging market.
The Fund uses fundamental analysis to look for stocks of good businesses that are selling at value prices in an effort to achieve above average performance with below average risk. The Fund believes good businesses have some or all of the following characteristics:
•
A strong, defendable market niche or products and services niche that is difficult to replicate
•
A high degree of relative recurring revenue
•
Modestly priced products or services
•
Attractive return-on-investment economics (namely, where return on investment exceeds a company’s cost of capital over a three to five year period)
•
Above-average growth or improving profitability prospects
The Fund considers valuation:
•
On both an absolute and relative to the market basis
•
Utilizing both historical and prospective analysis
In reviewing companies, the Fund applies the characteristics identified above on a case-by-case basis as the order of importance varies depending on the type of business or industry and the company being reviewed.
The Fund’s portfolio managers will generally sell a portfolio security when they believe:
•
The security has achieved its value potential
•
Such sale is necessary for portfolio diversification
•
Changing fundamentals signal a deteriorating value potential
•
Other securities have a better value potential
Principal Risks: There is a risk that you could lose all or a portion of your money on your investment in the Fund. This risk may increase during times of significant market volatility. The risks below could affect the value of your investment, and because of these risks the Fund is a suitable investment only for those investors who have long-term investment goals:
•
Stock Market Risk: The prices of the securities in which the Fund invests may decline for a number of reasons. The price declines of common stocks, in particular, may be steep, sudden and/or prolonged. Price changes may occur in the market as a whole, or they may occur in only a particular company, industry, or sector of the market.
- 12 -
•
Non-Diversification Risk: Because the Fund is non-diversified (meaning that compared to diversified mutual funds, the Fund may invest a greater percentage of its assets in a particular issuer), the Fund’s shares may be more susceptible to adverse changes in the value of a particular security than would be the shares of a diversified mutual fund. Thus, the Fund is more sensitive to economic, business and political changes which may result in greater price fluctuations of the Fund’s shares.
•
Value Investing Risk: The Fund’s portfolio managers may be wrong in their assessment of a company’s value and the stocks the Fund holds may not reach what the portfolio managers believe are their full values. From time to time “value” investing falls out of favor with investors. During these periods, the Fund’s relative performance may suffer.
•
Foreign Securities Risk: Stocks of non-U.S. companies (whether directly or in ADRs or ADSs) as an asset class may underperform stocks of U.S. companies, and such stocks may be less liquid and more volatile than stocks of U.S. companies. The costs associated with securities transactions are often higher in foreign countries than in the U.S. The U.S. dollar value of foreign securities traded in foreign currencies (and any dividends and interest earned) held by the Fund or by ETFs in which the Fund invests may be affected unfavorably by changes in foreign currency exchange rates. An increase in the U.S. dollar relative to these other currencies will adversely affect the Fund, if the positions are not fully hedged. Additionally, investments in foreign securities, whether or not publicly traded in the United States, may involve risks which are in addition to those inherent in domestic investments. Foreign companies may not be subject to the same regulatory requirements of U.S. companies and, as a consequence, there may be less publicly available information about such companies. Also, foreign companies may not be subject to uniform accounting, auditing and financial reporting standards and requirements comparable to those applicable to U.S. companies. Foreign governments and foreign economies often are less stable than the U.S. Government and the U.S. economy.
•
Geographic Concentration Risk: Concentrating investments in a limited number of countries or particular geographic regions makes the Fund more susceptible to adverse economic, political, social, regulatory and other developments in that country, countries or region. Additionally, the Fund’s performance may be more volatile when the Fund’s investments are less diversified across countries.
•
Currency Hedging Risk: The Fund may hedge a significant portion of its foreign stock investments against foreign currency changes in an effort to have its returns more closely reflect the market performance of its investments, rather than the value of the currency. To the extent the Fund hedges portions of its portfolio, its relative performance may differ from that of unhedged portfolios or indices. There is no guarantee the hedges will fully protect against adverse currency movements.
•
Large Capitalization Companies Risk: Large capitalization companies may grow more slowly than the overall economy and tend to go in and out of favor based on market and economic conditions, and the Fund may underperform investments that focus on small or medium capitalization companies.
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Performance: The following bar chart and table provide some indication of the risks of investing in the Fund by showing how the Fund’s performance from year to year and how the Fund’s average annual returns over time compare to the performance of the Morgan Stanley Capital International Europe, Australasia and Far East Index ® (“MSCI EAFE”). For additional information on this index, please see “Index Descriptions” in the Prospectus. The Fund’s past performance (before and after taxes) is not necessarily an indication of how the Fund will perform in the future. Updated performance information is available on the Fund’s website at http://www.fmifunds.com.
FMI International Fund
(Annual total return as of 12/31)
During the period shown on the bar chart, the Fund’s highest total return for a quarter was 10.23% (quarter ended March 31, 2013) and the lowest total return for a quarter was -12.16% (quarter ended September 30, 2011).
After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their shares through tax-deferred arrangements such as 401(k) plans or Individual Retirement Accounts (IRAs).
Average Annual Total Returns
One
Since Inception
( for the periods ended December 31, 2013)
Year
(December 31, 2010 )
FMI International Fund
Return before taxes
24.65%
13.10%
Return after taxes on distributions
23.91%
12.83%
Return after taxes on distributions and sale of Fund shares
14.64%
10.39%
MSCI EAFE (LOC) (reflects no deduction for fees, expenses or taxes)
26.93%
9.36%
MSCI EAFE (USD) (reflects no deduction for fees, expenses or taxes)
22.78%
8.17%
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Investment Adviser: Fiduciary Management, Inc. is the investment adviser for the Fund.
Portfolio Managers: The Fund’s investment decisions are made by a Portfolio Management Committee (“PMC”) that is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio, which is comprised of the following individuals:
Years with
PMC Member
Title with Adviser
Adviser
Patrick J. English
Chief Executive Officer and Chief Investment Officer
27
John S. Brandser
President, Chief Operating Officer and Chief Compliance Officer
19
Andy P. Ramer
Director of Research and Research Analyst
11
Jonathan T. Bloom
Research Analyst
4
Matthew J. Goetzinger
Research Analyst
9
Robert M. Helf
Research Analyst
16
Karl T. Poehls
Research Analyst
6
Daniel G. Sievers
Research Analyst
5
Matthew T. Sullivan
Research Analyst
1
Purchase and Sale of Fund Shares: The minimum initial investment amount for all new accounts is $2,500. The subsequent investments in the Fund for existing accounts may be made with a minimum investment of $50 if purchased through the Automatic Investment Plan, $1,000 for telephone purchases and $100 for all other accounts.
You may redeem and purchase shares of the Fund each day the New York Stock Exchange is open. You may redeem or purchase Fund shares: through the mail (FMI International Fund, c/o U.S. Bancorp Fund Services, LLC, P.O. Box 701, Milwaukee, WI 53201-0701); by wire transfer; by telephone at 1-800-811-5311; or through a financial intermediary. Investors who wish to redeem or purchase shares through a broker-dealer or other financial intermediary should contact the intermediary regarding the hours during which orders may be placed.
Tax Information: The Fund’s distributions are taxable, and will be taxed as ordinary income or capital gains, unless you are investing through a tax-deferred arrangement, such as a 401(k) plan or an individual retirement account, in which case such distributions may be taxable at a later date.
Payments to Broker-Dealers and Other Financial Intermediaries: If you purchase Fund shares through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of Fund shares and related services. If made, these payments may create conflicts of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediary’s website for more information.
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ADDITIONAL INFORMATION ABOUT THE FUNDS
INVESTMENT OBJECTIVES AND STRATEGIES
The FMI Large Cap Fund seeks long-term capital appreciation. Although the Fund has no intention of doing so, the Fund may change its investment objective without obtaining shareholder approval.
The FMI Common Stock Fund seeks long-term capital appreciation. Although the Fund has no intention of doing so, the Fund may change its investment objective without obtaining shareholder approval.
The FMI International Fund seeks long-term capital appreciation. Although the Fund has no intention of doing so, the Fund may change its investment objective without obtaining shareholder approval. The Fund normally invests at least 65% of its total assets in the equity securities of non-U.S. companies.
Each Fund’s portfolio managers are patient investors. The Funds do not attempt to achieve their investment objectives by active and frequent trading of common stocks.
NON-PRINCIPAL INVESTMENT STRATEGIES AND RISKS
Temporary Investments: Each Fund may, in response to adverse market, economic, political or other conditions, take temporary defensive positions. This means that a Fund will invest some or all of its assets in money market instruments (like U.S. Treasury Bills, commercial paper or repurchase agreements). A Fund will not be able to achieve its investment objective of long-term capital appreciation to the extent that it invests in money market instruments since these securities do not appreciate in value. When a Fund is not taking a temporary defensive position, it still will hold some cash and money market instruments so that it can pay its expenses, satisfy redemption requests or take advantage of investment opportunities.
DISCLOSURE OF PORTFOLIO HOLDINGS
The Funds’ Statement of Additional Information (“SAI”), which is incorporated by reference into this Prospectus, contains a description of the Funds’ policies and procedures regarding disclosure of their portfolio holdings.
MANAGEMENT OF THE FUNDS
Fiduciary Management, Inc. (the “Adviser”) is the investment adviser to each Fund. The Adviser’s address is:
100 East Wisconsin Avenue
Suite 2200
Milwaukee, Wisconsin 53202
The Adviser has been in business since 1980 and has been the Funds’ only investment adviser. As the investment adviser to each Fund, the Adviser manages the investment portfolio for such Fund. The Adviser makes the decisions to buy and sell the investments of each Fund.
Pursuant to Investment Advisory Agreements, the Adviser is entitled to receive a fee at an annual rate of 0.75% of the average daily net assets of the FMI Large Cap Fund and FMI International Fund, and a fee at an annual rate of 1.00% of the average daily net assets of the FMI Common Stock Fund. The Adviser may periodically waive all or a portion of its advisory fee with respect to each Fund.
For the past fiscal year ended September 30, 2013, the FMI Large Cap Fund, the Predecessor Fund to FMI Common Stock Fund and the FMI International Fund paid advisory fees, after waiver or reimbursement, at the rate of 0.75%, 1.00%, and 0.60%, respectively.
A discussion regarding the basis for the Board of Directors approving each Fund’s investment advisory agreement with the Adviser is available in the Funds’ semi-annual report to shareholders for the most recent period ended March 31.
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Each Fund’s investment decisions are made by a Portfolio Management Committee (“PMC”). The investment process employed by the PMC is team-based utilizing primarily in-house, fundamental research, and the PMC as a whole, not any individual PMC member, is primarily responsible for the day-to-day management of each Fund’s portfolio.
Patrick J. English, CFA, has been employed by the Adviser in various capacities since 1986, currently serving as Chief Executive Officer, Chief Investment Officer and Treasurer. John S. Brandser has been employed by the Adviser in various capacities since 1995, currently serving as President, Secretary, Chief Operating Officer and Chief Compliance Officer. Andy P. Ramer, CFA, has been employed by the Adviser since 2002 as a Research Analyst and is the Director of Research. Jonathan T. Bloom has been employed by the Adviser since 2010 as a Research Analyst; from 2008 through the spring of 2009 Mr. Bloom attended the Columbia University Graduate School of Business in New York. Mr. Bloom has passed all three levels of the CFA exam and his charter is pending his completion of the work experience requirement. Matthew J. Goetzinger, CFA, has been employed by the Adviser since July 2004 as a Research Analyst. Robert M. Helf, CFA, has been employed by the Adviser since 1997 as a Research Analyst. Karl T. Poehls, CFA, has been employed by the Adviser since 2008 as a Research Analyst; from August 2006 to May 2008 Mr. Poehls attended Graduate School at the University of Wisconsin, Madison. Daniel G. Sievers, CFA, has been employed by the Advisor since 2009 as a Research Analyst; from May 2008 to August 2009 Mr. Sievers was employed as an Investment Analyst with Evergreen Investments, Boston, Massachusetts. Matthew T. Sullivan has been employed by the Adviser since 2013 as a Research Analyst. From 2009 to 2013 Mr. Sullivan attended Brown University.
The Funds’ SAI, which is incorporated by reference into this Prospectus, provides additional information about the portfolio managers’ compensation, other accounts managed by the portfolio managers and the portfolio managers’ ownership of shares in each Fund.
THE FUNDS’ SHARE PRICE
The price at which investors purchase shares of the Funds and at which shareholders redeem shares of the Funds is called the net asset value. Each Fund normally calculates its net asset value as of the close of regular trading on the New York Stock Exchange (“NYSE”) (normally 4:00 p.m. Eastern Time) on each day the NYSE is open for trading. The NYSE is closed on most national holidays, on Good Friday, and on the weekends. The NYSE also may be closed on national days of mourning or due to natural disasters or other extraordinary events or emergencies. Each Fund calculates its net asset value based on the market prices of the securities (other than money market instruments) it holds. Each Fund values most money market instruments it holds, which mature in 60 days or less, at their amortized cost.
If market quotations are not readily available, the Funds will value securities at their fair value as determined in good faith by the Adviser in accordance with procedures approved by the Board of Directors. The fair value of a security is the amount which the Fund might reasonably expect to receive upon a current sale. In determining fair value, the Funds’ Board considers all relevant qualitative and quantitative information available including news regarding significant market or security specific events. For securities that do not trade during NYSE hours, fair value determinations are based on analyses of market movements after the close of those securities’ primary markets, and may include reviews of developments in foreign markets, the performance of U.S. securities markets, and the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities. The Board utilizes a service provided by an independent third party to assist in fair valuation of certain securities.
Attempts to determine the fair value of securities introduce an element of subjectivity to the pricing of securities. As a result, the fair value of a security may differ from the last quoted price and the Funds may not be able to sell a security at the fair value. Market quotations may not be available, for example, if trading in particular securities was halted during the day and not resumed prior to the close of trading on the NYSE. Other types of securi-
- 17 -
ties that the Funds may hold for which fair value pricing might be required include, but are not limited to: (a) illiquid securities; (b) securities of an issuer that has entered into a restructuring; (c) securities whose trading has been halted or suspended or primary market is closed; and (d) securities whose value has been impacted by a significant event that occurred before the close of the NYSE but after the close of the securities’ primary markets.
The FMI International Fund may invest in securities principally traded in markets outside the U.S. The foreign markets in which the International Fund may invest are sometimes open on days when the NYSE is not open and the International Fund does not calculate its net asset value, and sometimes are not open on days when the International Fund does calculate its net asset value. Even on days on which both the foreign market and the NYSE are open, several hours may pass between the time when trading in the foreign market closes and the time in which the International Fund calculates its net asset value. As a result, the value of the International Fund’s portfolio may be affected on days when the International Fund does not calculate its net asset value and you cannot purchase or redeem shares of the International Fund.
Each Fund will process purchase orders and redemption orders that it receives in good order prior to the close of regular trading on a day in which the NYSE is open at the net asset value determined later that day. Each Fund will process purchase orders and redemption orders that it receives in good order after the close of regular trading at the net asset value determined at the close of regular trading on the next day the NYSE is open.
The Funds consider a purchase, redemption or exchange request to be in “good order” if it is timely submitted and contains the name of the Fund, the number of shares or dollar amount to be purchased, redeemed or exchanged, your name and (if applicable) your account number and your signature. Servicing agents are responsible for timely transmitting any purchase, exchange and redemption orders they receive to the Funds.
PURCHASING SHARES
FMI Large Cap Fund and FMI Common Stock Fund – Limited Availability
The FMI Large Cap Fund and FMI Common Stock Fund (together, the “Closed Funds”) are closed to new investors. Except as indicated below, only investors of the FMI Large Cap Fund as of June 30, 2013, or investors of the Predecessor Fund to the FMI Common Stock Fund as of December 31, 2009, whether owning shares of record or through a processing intermediary, are eligible to purchase shares of the respective closed Fund. Exceptions include:
•
Participants in an employee retirement plan for which the Closed Fund is an eligible investment alternative and whose records are maintained by a processing intermediary having an agreement with the FMI Large Cap Fund in effect on June 30, 2013 or an agreement with the Predecessor Fund to the FMI Common Stock Fund in effect on December 31, 2009.
•
Clients of a financial adviser or planner who had client assets invested in the FMI Large Cap Fund in effect on June 30, 2013 or with the Predecessor Fund to the FMI Common Stock Fund on December 31, 2009.
•
Employees, officers and directors of the Closed Funds or the Adviser, and members of their immediate families (namely, spouses, siblings, parents, children and grandchildren).
•
Firms having an existing business relationship with the Adviser, whose investment the officers of the Closed Funds determine, in their sole discretion, would not adversely affect the Adviser’s ability to manage the Closed Funds effectively.
•
An investment in a Closed Fund that officers of the Closed Funds determine, in their sole discretion, would not adversely affect the Adviser’s ability to manage the Closed Funds effectively.
The FMI Large Cap Fund and the FMI Common Stock Fund reserve the right, at any time, to re-open or modify the extent to which the future sales of shares are limited.
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How to Purchase Shares from the Funds
1.
Read this Prospectus carefully.
2.
Determine how much you want to invest keeping in mind the following minimums (the Funds reserve the right to waive or reduce the minimum initial investment amount for purchases made through certain retirement, benefit and pension plans)*:
FMI
FMI Large
FMI Common
International
Cap Fund
Stock Fund
Fund
New accounts
• All Accounts
$1,000
$1,000
$2,500
Existing Accounts
• Dividend reinvestment
No Minimum
No Minimum
No Minimum
• Automatic Investment Plan
$50
$50
$50
• Telephone Purchase
$1,000
$1,000
$1,000
• All other accounts
$100
$100
$100
* Servicing Agents may impose different minimums.
3.
Complete the New Account Application available on our website (www.fmifunds.com), carefully following the instructions. For additional investments, complete the remittance form attached to your individual account statements. (The Funds have additional New Account Applications and remittance forms if you need them.) If you have any questions, or, if you need additional assistance when completing your application, please call the Funds’ transfer agent, U.S. Bancorp Fund Services, LLC (“USBFS”), at 1-800-811-5311.
In compliance with the USA PATRIOT Act of 2001 (Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act) please note that the transfer agent will verify certain information on your application as part of the Funds’ Anti-Money Laundering Program. As requested on the application, you must supply your full name, date of birth, social security number and permanent street address. The Funds may request additional information about you (which may include certain documents, such as articles of incorporation for companies) to help the transfer agent verify your identity. Permanent addresses containing only a P.O. Box will not be accepted. The Funds’ Anti-Money Laundering Program is supervised by the Funds’ Anti-Money Laundering Officer, subject to the oversight of the Board of Directors.
If the Funds do not have a reasonable belief of the identity of a customer, the account will be rejected or the customer will not be allowed to perform a transaction on the account until such information is received. The Funds reserve the right to close the account within 5 business days if clarifying information/documentation is not received.
4.
Make your check payable to “FMI Large Cap Fund,” “FMI Common Stock Fund” or “FMI International Fund,” as applicable. All checks must be in U.S. dollars and drawn on U.S. banks. The Funds will not accept payment in cash or money orders. The Funds also do not accept cashier’s checks in amounts of less than $10,000. To prevent check fraud, the Funds will not accept third party checks, Treasury checks, credit card checks, traveler’s checks or starter checks for the purchase of shares. The Funds are unable to accept post-dated checks, post-dated on-line bill paychecks, or any conditional order or payment. USBFS, the Funds’ transfer agent, will charge a $25 fee against a shareholder’s account for any payment returned to the transfer agent. The shareholder will also be responsible for any losses suffered by the Funds as a result.
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5.
Send the application and check to:
BY FIRST CLASS MAIL
FMI Funds
c/o U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
BY OVERNIGHT DELIVERY SERVICE OR REGISTERED MAIL
FMI Funds
c/o U.S. Bancorp Fund Services, LLC
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202-5207
Please do not mail letters by overnight delivery service or registered mail to the Post Office Box address. The Funds do not consider the U.S. Postal Service or other independent delivery services to be their agents. Therefore, deposit in the mail or with such services, or receipt at the U.S. Bancorp Fund Services, LLC post office box of purchase orders or redemption requests does not constitute receipt by the transfer agent or the Funds.
6.
You may purchase shares by wire transfer.
Initial Investment by Wire – If you wish to open an account by wire, you must call 1-800-811-5311 or 1-414-765-4124 before you wire funds in order to make arrangements with a telephone service representative to submit your completed application via mail, overnight delivery, or facsimile. Upon receipt of your completed application, your account will be established and a service representative will contact you within 24 hours to provide an account number and wiring instructions. You may then contact your bank to initiate the wire using the instructions you were given.
Subsequent Investments by Wire – You must call 1-800-811-5311 or 1-414-765-4124 before you wire funds in order to advise the transfer agent of your intent to wire funds. This will ensure prompt and accurate credit upon receipt of your wire.
Wire Information:
You should transmit funds by wire to:
U.S. Bank, N.A.
777 East Wisconsin Avenue
Milwaukee, WI 53202
ABA #075000022
For credit to:
U.S. Bancorp Fund Services, LLC
Account #112-952-137
For further credit to:
(name of FMI Fund)
(shareholder registration)
(shareholder account number)
Please remember that U.S. Bank, N.A. must receive your wired funds prior to the close of regular trading on the NYSE for you to receive same day pricing. The Funds and U.S. Bank, N.A. are not responsible for the consequences of delays resulting from the banking or Federal Reserve Wire system, or from incomplete wiring instructions.
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Purchasing Shares from Broker-dealers, Financial Institutions and Others
Some broker-dealers may sell shares of the Funds. These broker-dealers may charge investors a fee either at the time of purchase or redemption. The fee, if charged, is retained by the broker-dealer and not remitted to the Funds or the Adviser. Some broker-dealers may purchase and redeem shares on a three-day settlement basis.
The Funds may enter into agreements with broker-dealers, financial institutions or other service providers (“Servicing Agents”) that may include the Funds as an investment alternative in the programs they offer or administer. Servicing Agents may:
•
Become shareholders of record of the Funds. This means all requests to purchase additional shares and all redemption requests must be sent through the Servicing Agent. This also means that purchases made through Servicing Agents may not be subject to the Funds’ minimum purchase requirements.
•
Use procedures and impose restrictions that may be in addition to, or different from, those applicable to investors purchasing shares directly from the Funds.
•
Charge fees to their customers for the services they provide them. Also, the Funds and/or the Adviser may pay fees to Servicing Agents to compensate them for the services they provide their customers.
•
Be allowed to purchase shares by telephone with payment to follow the next day. If the telephone purchase is made prior to the close of regular trading on the NYSE, it will receive same day pricing.
•
Be authorized to receive purchase orders on the Funds’ behalf (and designate other Servicing Agents to accept purchase orders on the Funds’ behalf). If the Funds have entered into an agreement with a Servicing Agent pursuant to which the Servicing Agent (or its designee) has been authorized to accept purchase orders on the Funds’ behalf, then all purchase orders received in good order by the Servicing Agent (or its designee) before 4:00 p.m. Eastern Time will receive that day’s net asset value, and all purchase orders received in good order by the Servicing Agent (or its designee) after 4:00 p.m. Eastern Time will receive the next day’s net asset value.
If you decide to purchase shares through Servicing Agents, please carefully review the program materials provided to you by the Servicing Agent because particular Servicing Agents may adopt policies or procedures that are separate from those described in this Prospectus. Investors purchasing or redeeming through a Servicing Agent need to check with the Servicing Agent to determine whether the Servicing Agent has entered into an agreement with such Fund. When you purchase shares of the Funds through a Servicing Agent, it is the responsibility of the Servicing Agent to place your order with the Funds on a timely basis. If the Servicing Agent does not place the order on a timely basis, or if it does not pay the purchase price to the Funds within the period specified in its agreement with the Funds, the Servicing Agent may be held liable for any resulting fees or losses.
Telephone Purchases
Unless you declined “telephone option” in the Telephone Options section on the account application, you may make subsequent investments by telephone directly from a bank checking or savings account. Only bank accounts held at domestic financial institutions that are Automated Clearing House (“ACH”) members may be used for telephone transactions. The telephone purchase option may not be used for initial purchases of a Fund’s shares, but may be used for subsequent purchases, including by IRA shareholders. Telephone purchases must be in amounts of $1,000 or more, however, the Adviser reserves the right to waive the minimum telephone purchase amount for certain accounts. IRA shareholders are not subject to the $1,000 minimum telephone purchase amount restriction. To have Fund shares purchased at the net asset value determined at the close of regular trading on a given date, USBFS must receive your purchase order prior to the close of regular trading on such date. Most transfers are completed within one business day. Telephone purchases may be made by calling 1-800-811-5311. Once a telephone transaction has been placed, it cannot be canceled or modified.
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If you currently do not have the telephone purchase option, you may write to USBFS requesting the telephone purchase option. This option will become effective approximately 15 business days after the application form is received by the Funds’ transfer agent, USBFS. The Telephone Option form is also available on our website (www.fmifunds.com). You may be required to provide a signature(s) guarantee or other acceptable signature verification. If an account has more than one owner or authorized person, the Funds will accept telephone instructions from any one owner or authorized person.
Automatic Investment Plan
Once your account has been opened with the initial minimum investment you may make additional purchases at regular intervals through the Automatic Investment Plan (the “Plan”). This Plan provides a convenient method to have monies deducted from your bank account, for investment into a Fund, on a monthly or quarterly basis. In order to participate in the Plan, each purchase must be in the amount of $50 or more, and your financial institution must be a member of the Automated Clearing House (ACH) network. If your bank rejects your payment, the Funds’ transfer agent will charge a $25 fee to your account. To begin participating in the Plan, please complete the Automatic Investment Plan section on the account application or call the Funds’ transfer agent at 1-800-811-5311. Any request to change or terminate your Automatic Investment Plan should be submitted to the transfer agent 5 days prior to the effective date.
Other Information about Purchasing Shares of the Funds
The Funds may reject any New Account Application for any reason. A Fund will not accept initial purchase orders made by telephone, unless they are from a Servicing Agent which has an agreement with the Fund.
Shares of the Funds have not been registered for sale outside of the United States. The Funds generally do not sell shares to investors residing outside of the United States, even if they are U.S. citizens or lawful permanent residents, except to investors with U.S. military APO or FPO addresses.
The Funds will not issue certificates evidencing shares purchased. The Funds will send investors a written confirmation for all purchases of shares.
The Funds offer an automatic investment plan allowing shareholders to make subsequent purchases on a regular and convenient basis. The Funds also offer the following retirement plans:
• Traditional IRA
• Roth IRA
• Coverdell Education Savings Account
• SEP-IRA
• Simple IRA
Investors can obtain further information about the automatic investment plan and the retirement plans by calling the Funds at 1-800-811-5311. The Funds recommend that investors consult with a competent financial and tax advisor regarding the retirement plans before investing through them.
Address Changes
To change the address on your account, call the Funds at 1-800-811-5311. Any written redemption requests received within 30 days after an address change must be accompanied by a signature guarantee.
No telephone redemptions will be allowed within 30 days of an address change.
Householding
To reduce expenses, we generally mail only one copy of the Funds’ prospectus and each annual and semi-annual report to those addresses shared by two or more accounts. If you wish to receive individual copies of these documents, please call the Funds at 1-800-811-5311. Individual copies will be sent upon request.
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REDEEMING SHARES
How to Redeem (Sell) Shares by Mail
1.
Prepare a letter of instruction containing:
•
account number(s) and name of the FMI Fund
•
the amount of money or number of shares being redeemed
•
the name(s) on the account
•
daytime phone number
•
additional information that the Funds may require for redemptions by corporations, executors, administrators, trustees, guardians, or others who hold shares in a fiduciary or representative capacity. Please contact the Funds, in advance, at 1-800-811-5311 if you have any questions.
2.
Sign the letter of instruction exactly as the shares are registered. Joint ownership accounts must be signed by all owners.
3.
Have the signatures guaranteed by a commercial bank or trust company in the United States, a member firm of the NYSE or other eligible guarantor institution in the following situations:
•
When the redemption proceeds are payable or sent to any person, address or bank account not on record.
•
If a change of address was received by USBFS within the last 30 days.
•
If ownership on an account is being changed.
In addition to the situations described above, the Funds and/or the transfer agent reserve the right to require a signature guarantee in other instances based on the circumstances relative to the particular situation.
A notarized signature is not an acceptable substitute for a signature guarantee.
The Funds may waive the signature guarantee requirement in certain circumstances.
Non-financial transactions, including establishing or modifying certain services on an account, may require a signature guarantee, a signature verification from a Signature Validation Program (“SVP”) member, or other acceptable form of authentication from a financial institution source. You can get a signature guarantee or SVP stamp from most banks, credit unions, federal savings and loan associations, or securities dealers, but not from a notary public .
4.
Send the letter of instruction to:
BY FIRST CLASS MAIL
FMI Funds
c/o U.S. Bancorp Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
BY OVERNIGHT DELIVERY SERVICE OR REGISTERED MAIL
FMI Funds
c/o U.S. Bancorp Fund Services, LLC
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202-5207
Please do not mail letters by overnight delivery service or registered mail to the Post Office Box address. The Funds do not consider the U.S. Postal Service or other independent delivery services to be their agent. Therefore, deposit in the mail or with such services, or receipt at the U.S. Bancorp Fund Services, LLC post office box of purchase orders or redemption requests does not constitute receipt by the transfer agent or the Funds.
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How to Redeem (Sell) Shares by Telephone
1.
The telephone redemption option will automatically be established on your account unless declined on the original account application. If you declined this option and would like to add it at a later date, you should write to USBFS requesting the telephone option. When you do so, please sign the request exactly as your account is registered. You may be required to provide a signature(s) guarantee or other acceptable signature verification. If an account has more than one owner or authorized person, the Funds will accept telephone instructions from any one owner or authorized person.
2.
Shares held in individual retirement accounts may be redeemed by telephone. You will be asked whether or not to withhold taxes from any distribution.
3.
Assemble the same information that you would include in the letter of instruction for a written redemption request.
4.
Call USBFS at 1-800-811-5311. Please do not call the Adviser. Redemption requests received in good order before 4:00 p.m. Eastern Time will receive that day’s net asset value, and redemption requests received after 4:00 p.m. Eastern Time will receive the next day’s net asset value. (The maximum redemption allowed by telephone is $100,000, however, the Adviser reserves the right to waive the maximum redemption amount for certain accounts, such as omnibus or certain retirement plan accounts.) Once a telephone transaction has been placed, it cannot be canceled or modified.
How to Redeem (Sell) Shares through Servicing Agents
If your shares are held by a Servicing Agent, you must redeem your shares through the Servicing Agent. Contact the Servicing Agent for instructions on how to do so. Servicing Agents may charge you a fee for this service.
Redemption Price
The redemption price per share you receive for redemption requests is the next determined net asset value after:
•
USBFS receives your written request in good order with all required information and documents as necessary. Shareholders should contact USBFS for further information concerning documentation required for redemption of Fund shares for certain account types.
•
USBFS receives your authorized telephone request in good order with all required information.
•
If a Fund has entered into an agreement with a Servicing Agent pursuant to which the Servicing Agent (or its designee) has been authorized to receive redemption requests on behalf of the Fund, then all redemption requests received in good order by the Servicing Agent (or its designee) before 4:00 p.m. Eastern Time will receive that day’s net asset value, and all redemption requests received in good order by the Servicing Agent (or its designee) after 4:00 p.m. Eastern Time will receive the next day’s net asset value.
Payment of Redemption Proceeds
•
USBFS will normally send redemption proceeds no later than the seventh day after it receives the request, along with all required information.
•
If you request in the letter of instruction, USBFS will transfer the redemption proceeds to your designated bank account by either Electronic Funds Transfer (“EFT”) or wire. Proceeds sent via an EFT generally take 2 to 3 business days to reach the shareholder’s account whereas USBFS generally wires redemption proceeds on the business day following the calculation of the redemption price. USBFS currently charges $15 for each wire redemption but does not charge a fee for EFTs.
•
Those shareholders who redeem shares through Servicing Agents will receive their redemption proceeds in accordance with the procedures established by the Servicing Agent.
- 24 -
Other Redemption Considerations
When redeeming shares of the Funds, shareholders should consider the following:
•
The redemption may result in a taxable gain.
•
Shareholders who redeem shares held in an IRA must indicate on their redemption request whether or not to withhold federal income taxes. If not so indicated, these redemptions, as well as redemptions of other retirement plans not involving a direct rollover to an eligible plan, will be subject to federal income tax withholding.
•
As permitted by the Investment Company Act, the Funds may delay the payment of redemption proceeds for up to seven days in all cases. In addition, the Funds can suspend redemptions and/or postpone payments of redemption proceeds beyond seven days at times when the NYSE is closed or during emergency circumstances as determined by the Securities and Exchange Commission (the “SEC”).
•
If you purchased shares by check, or by EFT, the Funds may delay the payment of redemption proceeds until they are reasonably satisfied the check and/or transfer of funds has cleared (which may take up to 15 business days from the date of purchase).
•
Unless previously authorized on the account, USBFS will transfer the redemption proceeds by EFT or by wire only if the shareholder has sent in a written request with signatures guaranteed.
•
Redemption proceeds will be sent to the USBFS address of record. USBFS will send the proceeds of a redemption to an address or account other than that shown on its records only if the shareholder has sent in a written request with signatures guaranteed.
•
The Funds reserve the right to refuse a telephone redemption request if they believe it is advisable to do so. Both the Funds and USBFS may modify or terminate their procedures for telephone redemptions at any time. Neither the Funds nor USBFS will be liable for following instructions for telephone redemption transactions that they reasonably believe to be genuine, provided they use reasonable procedures to confirm the genuineness of the telephone instructions. They may be liable for unauthorized transactions if they fail to follow such procedures. These procedures include requiring some form of personal identification prior to acting upon the telephone instructions and recording all telephone calls. During periods of substantial economic or market change, you may find telephone redemptions difficult to implement and may encounter higher than usual call waits. Telephone trades must be received by or prior to market close. Please allow sufficient time to place your telephone transaction. If a Servicing Agent or shareholder cannot contact USBFS by telephone, they should make a redemption request in writing in the manner described earlier.
•
If your account balance falls below $1,000 because you redeem or exchange shares, the Funds reserve the right to notify you to make additional investments within 60 days so that your account balance is $1,000 or more. If you do not, the Funds may close your account and mail the redemption proceeds to you.
•
While the Funds generally pay redemption requests in cash, the Funds reserve the right to pay redemption requests “in kind.” This means that the Funds may pay redemption requests entirely or partially with liquid securities rather than cash. Shareholders who receive a redemption “in kind” may incur costs upon the subsequent disposition of such securities.
MARKET TIMING PROCEDURES
Frequent purchases and redemptions of Fund shares by a shareholder may harm other Fund shareholders by interfering with the efficient management of the applicable Fund’s portfolio, increasing brokerage and administrative costs, and potentially diluting the value of their shares. Notwithstanding the foregoing, the Funds’ Board of Directors have determined not to adopt policies and procedures that discourage frequent purchases and redemptions of Fund shares because the Funds have not experienced frequent purchases and redemptions of Fund shares that have been disruptive to the Funds.
- 25 -
The officers of the Funds receive reports on a regular basis as to purchases and redemptions of Fund shares and review these reports to determine if there is any unusual trading in Fund shares. The officers of the Funds will report to the Board of Directors any such unusual trading in Fund shares that is disruptive to the Funds. In such event, the Funds’ Board of Directors may reconsider their decision not to adopt policies and procedures.
EXCHANGING SHARES
Shares of a Fund may be exchanged for shares of:
• FMI Large Cap Fund
• FMI Common Stock Fund
• FMI International Fund
• First American Prime Obligations Fund
at the relative net asset values. An affiliate of USBFS advises the First American Prime Obligations Fund. This is a money market mutual fund offered to respond to changes in your goals or market conditions. Neither USBFS nor First American Prime Obligations Fund is affiliated with the Funds nor the Adviser. You may have a taxable gain or loss as a result of an exchange because the Internal Revenue Code treats an exchange as a sale of shares. The registration of both the account from which the exchange is being made and the account to which the exchange is being made must be identical. Exchanges may be authorized by telephone unless the option was declined on the account application.
How to Exchange Shares
1.
Read this Prospectus (and the current prospectus for the fund for which shares are to be exchanged) carefully. (Please note that FMI Common Stock Fund and FMI Large Cap Fund are currently closed to new investors, subject to certain limited exceptions as set forth under the section titled “Purchasing Shares” above.)
2.
Determine the number of shares you want to exchange keeping in mind that exchanges to open a new account are subject to a $1,000 minimum ($2,500 with regard to the FMI International Fund and the First American Prime Obligations Fund).
3.
Write to FMI Funds, c/o U.S. Bancorp Fund Services, LLC, P.O. Box 701, Milwaukee, Wisconsin 53201-0701.
Once a telephone transaction has been placed, it cannot be canceled or modified.
Call the transfer agent at 1-800-811-5311 to obtain the necessary exchange authorization forms and the First American Prime Obligations Fund Prospectus. This exchange privilege does not constitute an offering or recommendation on the part of the FMI Funds or the Adviser of an investment in any of the foregoing mutual funds.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund distributes substantially all of its net investment income and substantially all of its capital gains annually. As long as the Fund meets the requirements of a regulated investment company, which is its intent, it pays no federal income tax on the earnings it distributes to shareholders.
You have four distribution options:
•
All Reinvestment Option – Both dividend and capital gains distributions will be reinvested in additional Fund shares.
•
Distribution Only Reinvestment Option – Dividends will be paid in cash and capital gains distributions will be reinvested in additional Fund shares.
- 26 -
•
Dividend Only Reinvestment Option – Dividends will be reinvested in additional Fund shares and capital gains distributions will be paid in cash.
•
All Cash Option – Both dividend and capital gains distributions will be paid in cash.
You may make this election on the New Account Application. You may change your election by writing to USBFS or by calling 1-800-811-5311.
If you elect to receive dividends and distributions in cash, and your dividend or distribution check is returned to a Fund as undeliverable or remains uncashed for six months, the Fund reserves the right to reinvest such dividends or distributions and all future dividends and distributions payable to you in additional Fund shares at the Fund’s then current net asset value. No interest will accrue on amounts represented by uncashed distribution or redemption checks.
A Fund’s distributions, whether received in cash or additional shares of the Fund, may be subject to federal, state, and local income tax. These distributions may be taxed as ordinary income, dividend income, or capital gains (which may be taxed at different rates depending on the length of time the Fund holds the assets generating the capital gains). Each Fund expects that its distributions generally will consist primarily of long-term capital gains. Distributions of net long-term capital gain are subject to tax as long-term capital gain regardless of the length of time you have held Fund shares. If you purchase shares at a time when a Fund has recognized income or capital gains which have not yet been distributed, the subsequent distribution may result in taxable income to you even though such distribution may be, for you, the economic equivalent of a return of capital.
Each Fund will notify you of the tax status of ordinary income distributions and capital gain distributions after the end of each calendar year.
You will generally recognize taxable gain or loss on a redemption of shares in an amount equal to the difference between the amount received and your tax basis in such shares. This gain or loss will generally be capital and will be long-term capital gain or loss if the shares were held for more than one year. Any loss recognized by a shareholder upon a taxable disposition of shares held for six months or less will be treated as a long-term capital loss to the extent of any capital gain dividends received with respect to such shares. A loss realized on the disposition of shares of a Fund will be disallowed to the extent identical (or substantially identical) shares are acquired in a 61-day period beginning 30 days before and ending 30 days after the date of such disposition. In that event, the basis of the replacement shares of a Fund will be adjusted to reflect the disallowed loss. You should be aware that an exchange of shares in a Fund for shares in other Funds is treated for federal income tax purposes as a sale and a purchase of shares, which may result in recognition of a gain or loss and be subject to federal income tax.
Federal law requires a mutual fund company to report its shareholders’ cost basis, gain/loss, and holding period with respect to “covered shares” of the mutual fund to the Internal Revenue Service on the shareholders’ Consolidated Form 1099s when the “covered” shares are sold. Covered shares are any Fund and/or dividend reinvestment plan shares acquired on or after January 1, 2012.
The Funds have chosen average cost as their standing (default) tax lot identification method for all shareholders, which means this is the method the Funds will use to determine which specific shares are deemed to be sold when there are multiple purchases on different dates at differing net asset values, and the entire position is not sold at one time. The Funds’ standing tax lot identification method is the method it will use to report the sale of covered shares on your Consolidated Form 1099 if you do not select a specific tax lot identification method. You may choose a method other than the Funds’ standing method at the time of your purchase or upon the sale of covered shares.
The cost basis method a shareholder elects may not be changed with respect to a redemption of shares after the settlement date of the redemption. Fund shareholders should consult with their tax advisors to determine the best IRS-accepted cost basis method for their tax situation and to obtain more information about how the new cost basis reporting rules apply to them.
- 27 -
For those securities defined as “covered” under current IRS cost basis tax reporting regulations, the Funds are responsible for maintaining accurate cost basis and tax lot information for tax reporting purposes. The Funds are not responsible for the reliability or accuracy of the information for those securities that are not “covered.”
If you hold shares in a Fund through a broker (or another nominee), please contact that broker (or nominee) with respect to the reporting of cost basis and available elections for your account.
The preceding discussion is meant to be only a general summary of the potential federal income tax consequences of an investment in the Funds by U.S. shareholders. The SAI contains a more detailed summary of federal tax rules that apply to the Funds and their shareholders. This summary is not intended to be and should not be construed to be legal or tax advice to any current holder of the shares of the Funds. Legislative, judicial, or administrative action may change the tax rules that apply to the Funds or their shareholders and any such change may be retroactive. You should consult your tax advisers to determine the federal, state, local, and non-U.S. tax consequences of owning Fund shares.
INDEX DESCRIPTIONS
Standard & Poor’s 500 Index ®
The Standard & Poor’s 500 Index ® consists of 500 selected common stocks, most of which are listed on the NYSE. The Standard & Poor’s Ratings Group designates the stocks to be included in the Index on a statistical basis. A particular stock’s weighting in the Index is based on its relative total market value (namely, its market price per share times the number of shares outstanding.) Stocks may be added or deleted from the Index from time to time. A direct investment in an index is not possible.
Russell 2000 Index ®
The Russell 2000 Index ® measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which comprises the 3,000 largest U.S. companies based on total market capitalization. A direct investment in an index is not possible.
Morgan Stanley Capital International Europe, Australasia and Far East Index ®
The Morgan Stanley Capital International Europe, Australasia and Far East Index ® (“MSCI EAFE”) is an unmanaged index composed of securities of 22 developed market country indices, excluding the U.S. and Canada. The MSCI EAFE Index is a recognized international index and is weighted by market capitalization. A direct investment in an index is not possible.
- 28 -
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each Fund’s financial performance for the past five years, or since inception in the case of the FMI International Fund. Certain information reflects financial results for a single Fund share. The total returns in the table represent the rate that an investor would have earned on an investment in the Funds (assuming reinvestment of all dividends and distributions). The information shown for the FMI Common Stock Fund is for the Predecessor Fund. This information has been audited by PricewaterhouseCoopers LLP, whose report, along with the Funds’ financial statements, are included in the Annual Report, which is available upon request.
FMI Large Cap Fund
Years Ended September 30,
2013
2012
2011
2010
2009
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year
$ 17.38 $ 14.31 $ 14.46 $ 13.27 $ 13.65
Income from investment operations:
Net investment income
0.18 0.20 0.16 0.17 0.20
Net realized and unrealized gains (losses) on investments
3.37 3.46 (0.17 ) 1.19 (0.47 )
Total from investment operations
3.55 3.66 (0.01 ) 1.36 (0.27 )
Less distributions:
Distributions from net investment income
(0.20 ) (0.17 ) (0.14 ) (0.17 ) (0.11 )
Distributions from net realized gains
(0.21 ) (0.42 ) — — —
Total from distributions
(0.41 ) (0.59 ) (0.14 ) (0.17 ) (0.11 )
Net asset value, end of year
$ 20.52 $ 17.38 $ 14.31 $ 14.46 $ 13.27
TOTAL RETURN
20.94 % 26.17 % (0.13 %) 10.33 % (1.79 %)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000’s $)
8,122,016 6,167,813 4,008,758 3,318,364 2,051,701
Ratio of expenses to average net assets
0.96 % 0.96 % 0.97 % 0.97 % 0.97 %
Ratio of net investment income to average net assets
0.95 % 1.25 % 1.03 % 1.18 % 1.80 %
Portfolio turnover rate
30 % 21 % 28 % 20 % 32 %
- 29 -
FMI Common Stock Fund
Years Ended September 30,
2013
2012
2011
2010
2009
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year
$ 25.43 $ 22.63 $ 22.98 $ 21.07 $ 21.20
Income from investment operations:
Net investment income (loss)
0.07 0.09 0.03 (0.00 )* 0.05
Net realized and unrealized gains on investments
6.05 4.79 0.44 1.96 0.86
Total from investment operations
6.12 4.88 0.47 1.96 0.91
Less distributions:
Distributions from net investment income
(0.09 ) (0.04 ) — (0.04 ) (0.06 )
Distributions from net realized gains
(2.41 ) (2.04 ) (0.82 ) (0.01 ) (0.98 )
Total from distributions
(2.50 ) (2.08 ) (0.82 ) (0.05 ) (1.04 )
Net asset value, end of year
$ 29.05 $ 25.43 $ 22.63 $ 22.98 $ 21.07
TOTAL RETURN
26.63 % 22.38 % 2.03 % 9.30 % 6.04 %
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (in 000’s $)
1,259,158 1,118,501 945,991 925,630 872,557
Ratio of expenses to average net assets
1.19 % 1.20 % 1.21 % 1.24 % 1.26 %
Ratio of net investment income (loss) to average net assets
0.26 % 0.38 % 0.13 % (0.01 %) 0.32 %
Portfolio turnover rate
24 % 43 % 26 % 30 % 35 %
*
Amount less than $0.005 per share.
FMI International Fund
For the Period from
December 31,
2010* to
Years Ended September 30,
September 30,
2013
2012
2011
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period
$ 22.12 $ 18.06 $ 20.00
Income from investment operations:
Net investment income
0.25 0.22 0.16
Net realized and unrealized gains (loss) on investments
4.29 4.00 (2.10 )
Total from investment operations
4.54 4.22 (1.94 )
Less distributions:
Distributions from net investment income
(0.08 ) (0.16 ) —
Distributions from net realized gains
(0.24 ) — —
Total from distributions
(0.32 ) (0.16 ) —
Net asset value, end of period
$ 26.34 $ 22.12 $ 18.06
TOTAL RETURN
20.87 % 23.52 % (9.70 %) (1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000’s $)
137,906 67,316 13,514
Ratio of expense to average net assets:
Before expense reimbursement
1.15 % 1.45 % 2.91 % (2)
After expense reimbursement
1.00 % 1.00 % 1.00 % (2)
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement
0.89 % 0.62 % (0.86 )% (2)
After expense reimbursement
1.04 % 1.07 % 1.05 % (2)
Portfolio turnover rate
21 % 20 % 12 % (1)
*
Commencement of Operations.
(1)
Not annualized.
(2)
Annualized.
- 30 -
Not part of the Prospectus
FMI Funds
PRIVACY POLICY
We collect the following nonpublic personal information about you:
• Information we receive from you on or in applications or other forms, correspondence or conversations.
• Information about your transactions with us, our affiliates, or others.
We do not disclose any nonpublic personal information about our current or former shareholders to anyone, except as permitted by law. For example, we are permitted by law to disclose all of the information we collect, as described above, to our transfer agent to process your transactions. Furthermore, we restrict access to your nonpublic personal information to those persons who require such information to provide products or services to you. We maintain physical, electronic and procedural safeguards that comply with federal standards to guard your nonpublic personal information.
In the event that you hold shares of a Fund through a financial intermediary, including, but not limited to, a broker-dealer, bank or trust company, the privacy policy of your financial intermediary may govern how your nonpublic personal information would be shared with nonaffiliated third parties.
FMI Large Cap Fund FMI Common Stock Fund FMI International Fund
To learn more about the FMI Large Cap Fund, FMI Common Stock Fund and FMI International Fund, you may want to read the Funds’ SAI which contains additional information about the Fund. Each Fund has incorporated by reference the SAI into this Prospectus. This means that you should consider the contents of the Funds’ SAI to be part of the Prospectus.
You also may learn more about each Fund’s investments by reading the Funds’ annual and semi-annual reports to shareholders. The annual report includes a discussion of the market conditions and investment strategies that significantly affected the performance of each Fund during its last fiscal year.
The SAI and the annual and semi-annual reports are all available to shareholders and prospective investors without charge, by calling USBFS at 1-800-811-5311 or by visiting the Funds’ website (http://www.fmifunds.com).
Prospective investors and shareholders who have questions about the Funds may also call the following number or write to the following address.
FMI Funds
100 East Wisconsin Avenue,
Suite 2200
Milwaukee, Wisconsin 53202
1-800-811-5311
www.fmifunds.com
The general public can review and copy information about each Fund (including the SAI) at the SEC’s Public Reference Room in Washington, D.C. (Please call 1-202-551-8090 for information on the operations of the Public Reference Room.) Reports and other information about the Funds are also available on the EDGAR Database at the SEC’s Internet site at http://www.sec.gov and copies of this information may be obtained, upon payment of a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to: Public Reference Section, Securities and Exchange Commission, Washington, D.C. 20549-1520.
Investment Company Act File No. 811-07831
FMI Funds
1-800-811-5311
www.fmifunds.com
Mortgage Bonds Poised for Biggest Gains Since 2008 in Reversal
http://www.bloomberg.com/news/2014-01-31/mortgage-bonds-poised-for-biggest-gains-since-2008-in-reversal.html?cmpid=yhoo
PATIENCE IS A VIRTUE & JUDGEMENT DAY WILL COME.
THANKS
GREAT POST I LOVE IT.
THERE IS A PLAN ‘No Fear’
“There is no longer the fear of mortgage-credit contraction through FHFA policy mandates,” Boltansky said.
The improving financial condition of Fannie Mae and Freddie Mac has also helped quiet calls for change. Thanks to record earnings the companies have paid a total of $185.2 billion to the U.S. in dividends. Under terms of the takeover, that money technically counts as a return on the government’s stake and not as a repayment of the $187.5 billion bailout.
“There’s high danger of getting this wrong, with catastrophic results, and there’s low pressure to do it quickly,” said Mike Calhoun, president of the Center for Responsible Lending, a consumer advocacy group.
“So all that leads us to think a slow, cautious approach is best,” Calhoun said. “In normal times, a major bill like this would be a 10-year-long process in Congress.”
To contact the reporters on this story: Clea Benson in Washington at cbenson20@bloomberg.net; Cheyenne Hopkins in Washington at chopkins19@bloomberg.net
To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net
Fannie Mae Fix Fades as Senate Democrats Split on Plans
http://www.bloomberg.com/news/2014-01-31/fannie-mae-fix-fades-as-senate-democrats-split-on-plans.html?cmpid=yhoo
Arch Capital Group Ltd. Completes Acquisition of CMG Mortgage Insurance CompanyFont
8:41 PM ET 1/30/14 | PR Newswire
Arch U.S. MI Holdings, Inc. (Arch), the U.S.-based subsidiary of Arch Capital Group Ltd. (Nasdaq: ACGL) today completed the acquisition of CMG Mortgage Insurance Company (CMG MI) from CUNA Mutual Group and PMI Mortgage Insurance Co. (PMI). The acquisition of CMG MI and the operating platform will form the foundation for Arch Mortgage Insurance Company (Arch MI) to offer mortgage insurance throughout the United States.
This transaction was first announced in February 2013, and earlier this month Arch received approval from Fannie Mae and Freddie Mac for the acquisition of CMG MI as well as the expansion of its charter to conduct non-credit union mortgage insurance business. With the completion of the transaction, Arch MI enters the market as a government-sponsored enterprise (GSE)-approved mortgage insurer with the infrastructure to begin operations immediately. This includes nationwide mortgage insurance licenses and a tested, reliable, and secure mortgage insurance operating platform.
As part of the transaction, CUNA Mutual Group has entered into a distribution agreement with Arch MI to exclusively manage the distribution of mortgage insurance to credit unions. The CMG MI sales team will remain CUNA Mutual Group employees dedicated to serving their credit union customers. Credit union systems interfaces and key support personnel, including underwriters, will not change, making this a seamless transition for credit union customers.
This transaction does not impact any credit unions with existing CMG MI policies. The transaction also provides that a CUNA Mutual Group affiliate will reinsure a portion of the post-closing mortgage insurance business issued by CMG MI to credit unions, under the terms of a quota share reinsurance agreement.
"This relationship with Arch MI allows CUNA Mutual Group to better focus on its strengths, while maintaining our commitment to delivering superior product solutions to the credit unions and members we serve," said Robert Trunzo, CUNA Mutual Group president and chief executive officer. "Our marketplace knowledge and distribution abilities combined with Arch's strength as a global insurer and strong credit ratings will allow us to continue delivering superior service and a reliable private mortgage insurance product to credit unions," Trunzo said.
Constantine (Dinos) Iordanou, chairman and chief executive officer of Arch Capital Group Ltd. commented, "We are extremely pleased to complete this transaction and expand our existing mortgage insurance and reinsurance capabilities, which will enable our company to provide a strong and diversified source of private capital to the U.S. mortgage insurance market. We believe the impressive operational, managerial and risk management expertise of Arch, together with the mortgage insurance professionals we have assembled, will form an industry-leading team with broad capabilities to meet our clients' needs."
"All of us at Arch thank Fannie Mae, Freddie Mac, the FHFA and the Wisconsin and Arizona Departments of Insurance for their approval of this acquisition, as well as their support of our Company," said Marc Grandisson, chairman and chief executive officer of Arch Worldwide Reinsurance Group. "We are open for business and look forward to strengthening relationships with our existing credit union customers, as well as broadening our relationships with lenders nationwide."
To learn more, follow @CUNAMutualGroup on Twitter, circle +CUNA Mutual Group on Google+, or visit http://www.cunamutual.com/pressroom.
CUNA Mutual Group insurance, retirement and investment products provide financial security and protection to credit unions and their members worldwide. With more than 75 years of true market commitment, CUNA Mutual Group's vision is unwavering: To be a trusted business partner who delivers service excellence through customer-focused products and market-driven insight. More information on the company is available on the company's website at www.cunamutual.com.
CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and affiliates. Life, accident, health and annuity insurance products are issued by CMFG Life Insurance Company. Property and casualty insurance products are issued by CUMIS Insurance Society, Inc. Each insurer is solely responsible for the financial obligations under the policies and contracts it issues. Corporate headquarters are located in Madison, Wisconsin.
PR-0114-89A5(C) 2014 CUNA Mutual Group, All Rights Reserved
SOURCE CUNA Mutual Group
http://rt.prnewswire.com/rt.gif?NewsItemId=SF56579&Transmission_Id=201401302041PR_N
I love mcet but what's this joke after hours.
Last Price
0.0007
Today's Change
-0.0001(-12.50%)
Volume
50
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported): January 22, 2014
ANDALAY SOLAR, INC.
(Exact name of registrant as specified in its charter)
Delaware
001-33695
90-0181035
(State or other jurisdiction of incorporation)
(Commission File No.)
(I.R.S. Employer Identification No.)
2071 Ringwood Avenue, Unit C
San Jose, CA 95131
(Address of principal executive offices)
(408) 402-9400
Registrant’s telephone number, including area code:
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On January 22, 2014, Andalay Solar, Inc. (the “Company”) entered into a Settlement of Potential Claims Agreement (“Agreement”) with ASC Recap LLC (“ASC”). Pursuant to the Agreement, ASC has offered to purchase (and in one (1) case has already purchased) approximately $3.7 million of the Company’s prior debt owed to four creditors (“Creditors”) for past due services at a substantial discount to face value to which the Company has agreed to issue to ASC certain shares of its common stock in a §3(a)(10) 1933 Act proceeding. The shares of common stock that the Company has agreed to issue to ASC in full payment for, and as a release of any debt it purchases from the Creditors, is anticipated to have, upon issuance, a market value equal to approximately 25% of the principal amount of the outstanding debt of the Company. In the case of the debt ASC already purchased from one (1) Creditor, the value of the stock that the Company agreed to issue was two hundred and fifty percent (250%) of the discounted purchase price ASC paid to purchase the debt from the Creditor, and approximately 25% of the original amount the Company owed to the Creditor. The stock to be issued by the Company and the purchase of the debt by ASC of the remaining three Creditors is subject to the acceptance of offers by the Creditors.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: January 28, 2014
ANDALAY SOLAR, INC.
By: /s/ Margaret R. Randazzo
Margaret R. Randazzo,
Chief Executive Officer
Andalay Solar, Inc.
2071 Ringwood Avenue, Unit C
San Jose, CA 95131
Phone: (408) 402-9400
January 24, 2014
VIA EDGAR
Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549
Re: Request to Withdraw Registration Statement on Form S-1 (File No. 333-192539)
Ladies and Gentlemen:
Pursuant to Rule 477 under the Securities Act of 1933, as amended (the “Securities Act”), Andalay Solar, Inc. (the “Registrant”) hereby respectfully requests that the Securities and Exchange Commission (“SEC”) consent to the withdrawal, effective as of the date hereof or at the earliest practicable date hereafter, of its registration statement on Form S-1 (File No. 333-192539) together with all exhibits (the “Registration Statement”) initially filed with the SEC on November 26, 2013.
The Registrant is requesting to withdraw the Registration Statement because it plans to amend the Equity Purchase Agreement incorporated by reference as an exhibit to the Registration Statement. The Registrant confirms that no securities were sold in connection with the offering contemplated by the Registration Statement.
The Registrant acknowledges that no refund will be made for fees paid to the SEC in connection with the filing of the Registration Statement.
Should you have any questions regarding this request, please do not hesitate to contact counsel to the Registrant, Leslie Marlow at (212) 907-6457.
Sincerely,
/s/ Margaret Randazzo
Margaret Randazzo
President and Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
Form 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported): January 23, 2014
ANDALAY SOLAR, INC.
(Exact name of registrant as specified in its charter)
Delaware
001-33695
90-0181035
(State or other jurisdiction of incorporation)
(Commission File No.)
(I.R.S. Employer Identification No.)
2071 Ringwood Avenue, Unit C
San Jose, CA 95131
(Address of principal executive offices)
1475 S. Bascom Ave. Suite 101
Campbell, CA 95008
(Former name or former address, if changed since last report)
(408) 402-9400
Registrant’s telephone number, including area code:
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
On January 23, 2014, we entered into a new Equity Purchase Agreement (the “New Equity Purchase Agreement”) with Southridge Partners II, LP (“Southridge”), that superseded our prior Equity Purchase Agreement with Southridge that was entered into on November 25, 2013 (the “Prior Equity Purchase Agreement”). The terms of the new Equity Purchase Agreement are identical to those of the Prior Equity Purchase Agreement other than that the New Equity Purchase Agreement provides that the Agreement may not be amended by either party.
Pursuant to the New Equity Purchase Agreement and as provided in the Prior Equity Purchase Agreement, Southridge has committed to purchase up to $5,000,000 worth of our common stock, over a period of time terminating on the earlier of: (i) 18 months from the effective date of the registration statement to be filed by us for the New Equity Purchase Agreement; or (ii) the date on which Southridge has purchased an aggregate maximum purchase price of $5,000,000 pursuant to the New Equity Purchase Agreement; Southridge’s commitment to purchase our common stock is subject to various conditions, including, but not limited to, limitations based on the trading volume of our common stock.
We intend to draw on the facility from time to time, as and when we determine appropriate in accordance with the terms and conditions of the New Equity Purchase Agreement. The purchase price for our shares to be paid by Southridge will be 90% of the lowest closing bid price of our common stock during the Valuation Period. On the date of the Draw Down Notice is delivered to Southridge, we are required to deliver an estimated amount of shares to Southridge’s brokerage account equal to 125% of the Draw Down Amount indicated in the Draw Down Notice divided by the closing bid price of the trading day immediately prior to the date of the Draw Down Notice (“Estimated Shares”). The Valuation Period will begin the first trading day after the Estimated Shares have been delivered to Southridge’s brokerage account and have been cleared for trading and terminates on the tenth day thereafter. At the end of the Valuation Period, if the number of Estimated Shares delivered to Southridge is greater than the shares issuable pursuant to a Draw Down, then Southridge is required to return to us the difference between the Estimated Shares and the actual number of shares issuable pursuant to the Draw Down. If the number of Estimated Shares is less the shares issuable under the Draw Down, then we are required to issue additional shares to Southridge equal to the difference; provided that the number of shares to be purchased by Southridge may not exceed the number of shares that, when added to the number of shares of our common stock then beneficially owned by Southridge, would exceed 9.99% of our shares of common stock outstanding. As a result, our existing shareholders will experience immediate dilution upon the purchase of any of the shares by Southridge. If we fail to satisfy the applicable closing conditions, we will not be able to sell the put shares to Southridge.
There are put restrictions applied on days between the put notice date and the closing date with respect to that particular put. During such time, we are not entitled to deliver another put notice.
The conditions under which we will not be entitled to put shares to Southridge, including the following:
·
we will not be entitled to put shares to Southridge unless there is an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), to cover the resale of the shares by Southridge;
·
we will not be entitled to put shares to Southridge unless our common stock continues to be quoted on the OTC-QB and has not been suspended from trading;
·
we will not be entitled to put shares to Southridge if an injunction shall have been issued and remain in force against us, or action commenced by a governmental authority which has not been stayed or abandoned, prohibiting the purchase or the issuance of the shares to Southridge;
·
we will not be entitled to put shares to Southridge if we have not complied with our obligations and are otherwise in breach of or in default under, the New Equity Purchase Agreement, our registration rights agreement with Southridge (the “Registration Rights Agreement”) or any other agreement executed in connection therewith with Southridge;
·
we will not be entitled to put shares to Southridge to the extent that such shares would cause Southridge’s beneficial ownership to exceed 9.99% of our outstanding shares; and
·
we will not be entitled to put shares to Southridge if we take any of the following actions on any trading day after a Draw Down Notice is delivered:
a)
subdivide or combine shares of common stock;
b)
pay a dividend in shares of common stock or make any other distribution of shares of common stock, except for dividends paid with respect to any series of preferred stock authorized by us, whether existing now or in the future;
c)
issue any options or other rights to subscribe for or purchase shares of common stock other than pursuant to the New Equity Purchase Agreement, and other than options or stock grants issued or issuable to directors, officers and employees pursuant to a stock option program, whereby the price per share for which shares of common stock may at any time thereafter be issuable pursuant to such options or other rights shall be less than the closing bid price in effect immediately prior to such issuance;
d)
issue any securities convertible into or exchangeable for shares of common stock and the consideration per share for which shares of common stock may at any time thereafter be issuable pursuant to the terms of such convertible or exchangeable securities shall be less than the closing bid price in effect immediately prior to such issuance;
e)
issue shares of common stock otherwise than as provided in the foregoing subsections (a) through (d), at a price per share less, or for other consideration lower, than the closing bid price in effect immediately prior to such issuance, or without consideration; or
f)
make a distribution of our assets or evidences of indebtedness to the holders of common stock as a dividend in liquidation or by way of return of capital or other than as a dividend payable out of earnings or surplus legally available for dividends under applicable law or any distribution to such holders made in respect of the sale of all or substantially all of our assets (other than under the circumstances provided for in the foregoing subsections (a) through (e).
The New Equity Purchase Agreement further provides that Southridge is entitled to customary indemnification from us for any losses or liabilities it suffers as a result of any material misrepresentation, breach of warranty or nonfulfillment of or a failure to perform any material covenant or agreement contained in the New Equity Purchase Agreement.
The New Equity Purchase Agreement also contains representations and warranties of each of the parties.
Pursuant to the terms of the New Equity Purchase Agreement we agreed to pay Southridge a commitment fee of 1,000,000 shares of our common stock (having a value of $24,300 based upon the closing price of our common stock on January 22, 2014), of which 500,000 shares of our common stock are to be issued to Southridge on the date that the registration statement is declared effective and the remaining 500,000 shares of common stock are to be issued on the date that we deliver our first Draw Down Notice to Southridge.
On January 23, 2014, we also entered into a Registration Rights Agreement with Southridge pursuant to which we agreed to register shares of the common stock to be issued to Southridge in connection with the New Equity Purchase Agreement.
The preceding description of the New Equity Purchase Agreement and Registration Rights Agreement with Southridge does not purport to be complete and is qualified in its entirety by reference to each of the New Equity Purchase Agreement and Registration Rights Agreement, which are attached hereto as Exhibits 10.1 and 10.2 respectively and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
The following Exhibits are filed as part of this Report.
Exhibit Number
Description
10.1
Equity Purchase Agreement dated as of January 23, 2014 between Andalay Solar, Inc. and Southridge Partners II, LP.
10.2 Registration Rights Agreement dated as of January 23, 2014 between Andalay Solar, Inc. and Southridge Partners II, LP
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: January 24, 2014
ANDALAY SOLAR, INC.
By: /s/ Margaret R. Randazzo
Margaret R. Randazzo
Chief Executive Officer
Exhibit Index
Exhibit Number
Description
10.1
Equity Purchase Agreement dated as of January 23, 2014 between Andalay Solar, Inc. and Southridge Partners II, LP.
10.2 Registration Rights Agreement dated as of January 23, 2014 between Andalay Solar, Inc. and Southridge Partners II, LP
EXHIBIT 10.1
EQUITY PURCHASE AGREEMENT
BY AND BETWEEN
ANDALAY SOLAR, INC .
AND
SOUTHRIDGE PARTNERS II, LP
Dated
January 23, 2014
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THIS EQUITY PURCHASE AGREEMENT entered into as of the 23 rd day of January, 2014 (this "AGREEMENT"), by and between SOUTHRIDGE PARTNERS II, LP, a Delaware limited partnership ("INVESTOR"), and ANDALAY SOLAR, INC., a Delaware corporation (the "COMPANY").
WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall issue and sell to Investor, from time to time as provided herein, and Investor shall purchase up to Five Million Dollars ($5,000,000) of the Company’s Common Stock (as defined below); and
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 DEFINED TERMS as used in this Agreement, the following terms shall have the following meanings specified or indicated (such meanings to be equally applicable to both the singular and plural forms of the terms defined)
"AGREEMENT" shall have the meaning specified in the preamble hereof.
"BY-LAWS" shall have the meaning specified in Section 4.7.
"CLAIM NOTICE" shall have the meaning specified in Section 9.3(a).
“CLEARING DATE” shall be the date in which the Estimated Put Shares (as defined in Section 2.2(a)) have been deposited into the Investor’s brokerage account..
"CLOSING" shall mean one of the closings of a purchase and sale of shares of Common Stock pursuant to Section 2.3.
"CLOSING CERTIFICATE" shall mean the closing certificate of the Company in the form of Exhibit B hereto.
"CLOSING PRICE" shall mean the closing bid price for the Company’s common stock on the Principal Market on a Trading Day as reported by Bloomberg Finance L.P.
"COMMITMENT PERIOD" shall mean the period commencing on the Effective Date, and ending on the earlier of (i) the date on which Investor shall have purchased Put Shares pursuant to this Agreement for an aggregate Purchase Price of the Maximum Commitment Amount, or (ii) the date occurring eighteen (18) months from the date of commencement of the Commitment Period.
"COMMON STOCK" shall mean the Company's common stock, $0.001 par value per share, and any shares of any other class of common stock whether now or hereafter authorized, having the right to participate in the distribution of dividends (as and when declared) and assets (upon liquidation of the Company).
"COMMON STOCK EQUIVALENTS" shall mean any securities that are convertible into or exchangeable for Common Stock or any options or other rights to subscribe for or purchase Common Stock or any such convertible or exchangeable securities.
"COMPANY" shall have the meaning specified in the preamble to this Agreement.
"DAMAGES" shall mean any loss, claim, damage, liability, cost and expense (including, without limitation, reasonable attorneys' fees and disbursements and costs and expenses of expert witnesses and investigation).
"DISPUTE PERIOD" shall have the meaning specified in Section 9.3(a).
"DOLLAR VOLUME" shall mean the product of (a) the Closing Price multiplied by (b) the trading volume on the Principal Market on a Trading Day.
"DTC" shall have the meaning specified in Section 2.3.
"DWAC" shall have the meaning specified in Section 2.3.
"EFFECTIVE DATE" shall mean the date that the Registration Statement is declared effective by the SEC.
“ESTIMATED PUT SHARES” shall have the meaning specified in Section 2.2(a)
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder.
"FAST" shall have the meaning specified in Section 2.3.
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"FINRA" shall mean the Financial Industry Regulatory Authority, Inc.
“FLOOR PRICE” shall have the meaning specified in Section 2.2(c).
"INDEMNIFIED PARTY" shall have the meaning specified in Section 9.3(a).
"INDEMNIFYING PARTY" shall have the meaning specified in Section 9.3(a).
"INDEMNITY NOTICE" shall have the meaning specified in Section 9.3(b).
"INVESTMENT AMOUNT" shall mean the dollar amount to be invested by Investor to purchase Put Shares with respect to any Put as notified by the Company to Investor in accordance with Section 2.2.
"INVESTOR" shall have the meaning specified in the preamble to this Agreement.
"LEGEND" shall have the meaning specified in Section 8.1.
"MARKET PRICE" shall mean the lowest Closing Price on the Principal Market for any Trading Day during the Valuation Period, as reported by Bloomberg Finance L.P.
"MATERIAL ADVERSE EFFECT" shall mean any effect on the business, operations, properties, or financial condition of the Company that is material and adverse to the Company and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company to enter into and perform its obligations under any of this Agreement.
"MAXIMUM COMMITMENT AMOUNT" shall mean Five Million Dollars ($5,000,000).
“PAR VALUE PAYMENT” shall have the meaning specified in Section 2.2(a).
"PERSON" shall mean an individual, a corporation, a partnership, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
"PRINCIPAL MARKET" shall mean any of the national exchanges (i.e. NYSE, NYSE AMEX, Nasdaq), OTCQX, the OTC Bulletin Board, or other principal exchange which is at the time the principal trading exchange or market for the Common Stock.
"PURCHASE PRICE" shall mean 90% of the Market Price on such date on which the Purchase Price is calculated in accordance with the terms and conditions of this Agreement.
"PUT" shall mean the right of the Company to require the Investor to purchase shares of Common Stock, subject to the terms and conditions of this Agreement.
"PUT DATE" shall mean any Trading Day during the Commitment Period that a Put Notice is deemed delivered pursuant to Section 2.2(b).
"PUT NOTICE" shall mean a written notice, substantially in the form of Exhibit A hereto, to Investor setting forth the Investment Amount with respect to which the Company intends to require Investor to purchase shares of Common Stock pursuant to the terms of this Agreement.
"PUT SHARES" shall mean all shares of Common Stock issued or issuable pursuant to a Put that has been exercised or may be exercised in accordance with the terms and conditions of this Agreement.
"REGISTERED SECURITIES" shall mean the (a) Put Shares, and (b) any securities issued or issuable with respect to any of the foregoing by way of exchange, stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. As to any particular Registered Securities, once issued such securities shall cease to be Registrable Securities when (i) a Registration Statement has been declared effective by the SEC and such Registrable Securities have been disposed of pursuant to a Registration Statement, (ii) such Registrable Securities have been sold under circumstances under which all of the applicable conditions of Rule 144 are met, (iii) such time as such Registrable Securities have been otherwise transferred to holders who may trade such shares without restriction under the Securities Act or (iv) in the opinion of counsel to the Company, which counsel shall be reasonably acceptable to Investor, such Registrable Securities may be sold without registration under the Securities Act or the need for an exemption from any such registration requirements and without any time, volume or manner limitations pursuant to Rule 144(b)(i) (or any similar provision then in effect) under the Securities Act.
"REGISTRATION STATEMENT" shall mean the Company’s effective registration statement on file with the SEC, and any follow up registration statement or amendment thereto.
"REGULATION D" shall mean Regulation D promulgated under the Securities Act.
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"RULE 144" shall mean Rule 144 under the Securities Act or any similar provision then in force under the Securities Act.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall have the meaning specified in the recitals of this Agreement.
"SEC DOCUMENTS" shall mean, as of a particular date, all reports and other documents filed by the Company pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of the Company's then most recently completed and reported fiscal year as of the time in question (provided that if the date in question is within ninety days of the beginning of the Company's fiscal year, the term shall include all documents filed since the beginning of the preceding fiscal year).
“SHORT SALES” shall mean all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).
"SUBSCRIPTION DATE" shall mean the date on which this Agreement is executed and delivered by the Company and Investor.
"THIRD PARTY CLAIM" shall have the meaning specified in Section 9.3(a).
“TRADING DAY” shall mean a day on which the Principal Market shall be open for business.
“TRANSACTION DOCUMENTS” shall mean this Agreement and the Registration Rights Agreement.
"TRANSFER AGENT" shall mean the transfer agent for the Common Stock (and to any substitute or replacement transfer agent for the Common Stock upon the Company's appointment of any such substitute or replacement transfer agent).
"UNDERWRITER" shall mean any underwriter participating in any disposition of the Registered Securities on behalf of Investor pursuant to the Registration Statement.
"VALUATION EVENT" shall mean an event in which the Company at any time during a Valuation Period takes any of the following actions:
(a) subdivides or combines the Common Stock;
(b) pays a dividend in shares of Common Stock or makes any other distribution of shares of Common Stock, except for dividends paid with respect to any series of preferred stock authorized by the Company, whether existing now or in the future;
(c) issues any options or other rights to subscribe for or purchase shares of Common Stock other than pursuant to this Agreement, and other than options or stock grants issued or issuable to directors, officers and employees pursuant to a stock option program, whereby the price per share for which shares of Common Stock may at any time thereafter be issuable pursuant to such options or other rights shall be less than the Closing Price in effect immediately prior to such issuance;
(d) issues any securities convertible into or exchangeable for shares of Common Stock and the consideration per share for which shares of Common Stock may at any time thereafter be issuable pursuant to the terms of such convertible or exchangeable securities shall be less than the Closing Price in effect immediately prior to such issuance;
(e) issues shares of Common Stock otherwise than as provided in the foregoing subsections (a) through (d), at a price per share less, or for other consideration lower, than the Closing Price in effect immediately prior to such issuance, or without consideration; or
(f) makes a distribution of its assets or evidences of indebtedness to the holders of Common Stock as a dividend in liquidation or by way of return of capital or other than as a dividend payable out of earnings or surplus legally available for dividends under applicable law or any distribution to such holders made in respect of the sale of all or substantially all of the Company's assets (other than under the circumstances provided for in the foregoing subsections (a) through (e).
"VALUATION PERIOD" shall mean the period of ten (10) Trading Days immediately following the Clearing Date associated with the applicable Put Notice during which the Purchase Price of the Common Stock is valued; provided, however, that if a Valuation Event occurs during any Valuation Period, a new Valuation Period shall begin on the Trading Day immediately after the occurrence of such Valuation Event and end on the tenth (10 th ) Trading Day thereafter. Investor shall notify the Company in writing of the occurrence of the Clearing Date associated with a Put Notice. The Valuation Period shall begin the first Trading Day following such written notice from Investor.
"VWAP" shall mean the daily volume weighted average price for the Company’s common stock on the Principal Market on a Trading Day as reported by Bloomberg Finance L.P.
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ARTICLE II
PURCHASE AND SALE OF COMMON STOCK
Section 2.1 INVESTMENTS.
(a) PUTS. Upon the terms and conditions set forth herein (including, without limitation, the provisions of Article VII), on any Put Date the Company may exercise a Put by the delivery of a Put Notice. The number of Put Shares that Investor shall purchase pursuant to such Put shall be determined by dividing the Investment Amount specified in the Put Notice by the Purchase Price with respect to such Put Notice.
(b) COMMON STOCK. As a condition for the execution of this Agreement by the Investor, the Company shall issue to the Investor a total of 1,000,000 shares of restricted common stock (“Restricted Stock”), 500,000 of which shall be issuable on the Effective Date, and 500,000 of which shall be issuable upon the first Put Notice. The Restricted Stock shall have no registration rights.
Section 2.2 MECHANICS.
(a) PUT NOTICE. At any time and from time to time during the Commitment Period, the Company may deliver a Put Notice to Investor, subject to the conditions set forth in Section 7.2; provided, however, that the Investment Amount identified in the applicable Put Notice, when taken together with all prior Put Notices, shall not exceed the Maximum Commitment Amount. On the Put Date the Company shall deliver to Investor’s brokerage account estimated put shares equal to the Investment Amount indicated in the Put Notice divided by the Closing Price on the Trading Day immediately preceding the Put Date, multiplied by one hundred twenty five percent (125%) (the “Estimated Put Shares”). On the Trading Date immediately following delivery of the Estimated Put Shares, Investor shall deliver payment by check or wire transfer to the Company an amount equal to the par value of the Estimated Put Shares (“Par Value Payment”).
(b) DATE OF DELIVERY OF PUT NOTICE. A Put Notice shall be deemed delivered on (i) the Trading Day it is received by facsimile or otherwise by Investor if such notice is received on or prior to 12:00 noon New York time, or (ii) the immediately succeeding Trading Day if it is received by facsimile or otherwise after 12:00 noon New York time on a Trading Day or at any time on a day which is not a Trading Day.
(c) FLOOR PRICE. In the event that, during a Valuation Period, the Closing Price on any Trading Day falls more than twenty percent (20%) below the average of the closing trade prices for the ten (10) trading days immediately preceding the date of the Company’s Put Notice (a “Low Bid Price”), for each such Trading Day, the parties shall have no right to sell and shall be under no obligation to purchase one tenth (1/10th) of the Investment Amount specified in the Put Notice, and the Investment Amount shall accordingly be deemed reduced by such amount. In the event that during a Valuation Period there exists a Low Bid Price for any three (3) Trading Days—not necessarily consecutive—then the balance of each party’s right and obligation to sell and purchase the Investment Amount under such Put Notice shall terminate on such third Trading Day (“Termination Day”), and the Investment Amount shall be adjusted to include only one-tenth (1/ 10th ) of the initial Investment Amount for each Trading Day during the Valuation Period prior to the Termination Day that the Bid Price equals or exceeds the Low Bid Price.
Section 2.3 CLOSINGS. At the end of the Valuation Period the Purchase Price shall be established and the number of Put Shares shall be determined for a particular Put. If the number of Estimated Put Shares initially delivered to Investor is greater than the Put Shares purchased by Investor pursuant to such Put, then immediately after the Valuation Period the Investor shall deliver to Company any excess Estimated Put Shares associated with such Put. If the number of Estimated Put Shares delivered to Investor is less than the Put Shares purchased by Investor pursuant to a Put, then immediately after the Valuation Period the Company shall deliver to Investor the difference between the Estimated Put Shares and the Put Shares issuable pursuant to such Put. The Closing of a Put shall occur upon the first Trading Day following the completion of the Valuation Period, whereby Investor shall deliver the Investment Amount specified in the Put Notice, less the Par Value Payment, by wire transfer of immediately available funds to an account designated by the Company. In lieu of delivering physical certificates representing the Common Stock issuable in accordance with clause (a) of this Section 2.3, and provided that the Transfer Agent then is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of Investor, but subject to the applicable provisions of Article VIII hereof, the Company shall use its commercially reasonable efforts to cause the Transfer Agent to electronically transmit, prior to the applicable Closing Date, the applicable Put Shares by crediting the account of the Investor's prime broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system, and provide proof satisfactory to the Investor of such delivery. In addition, on or prior to such Closing Date, each of the Company and Investor shall deliver to each other all documents, instruments and writings required to be delivered or reasonably requested by either of them pursuant to this Agreement in order to implement and effect the transactions contemplated herein.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor represents and warrants to the Company that:
Section 3.1 INTENT. Investor is entering into this Agreement for its own account and Investor has no present arrangement (whether or not legally binding) at any time to sell the Registered Securities to or through any person or entity; provided, however, that Investor reserves the right to dispose of the Registered Securities at any time in accordance with federal and state securities laws applicable to such disposition.
Section 3.2 NO LEGAL ADVICE FROM THE COMPANY. The Investor acknowledges that it has had the opportunity to review this Agreement and the transactions contemplated by this Agreement with its own legal counsel and investment and tax advisors. The Investor is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of its representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction.
Section 3.3 SOPHISTICATED INVESTOR. Investor is a sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited investor (as defined in Rule 501 of Regulation D), and Investor has such experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Registered Securities. Investor acknowledges that an investment in the Registered Securities is speculative and involves a high degree of risk.
Section 3.4 AUTHORITY. (a) Investor has the requisite power and authority to enter into and perform its obligations under this Agreement and the transactions contemplated hereby in accordance with its terms; (b) the execution and delivery of this Agreement and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action and no further consent or authorization of Investor or its partners is required; and (c) this Agreement has been duly authorized and validly executed and delivered by Investor and constitutes a valid and binding obligation of Investor enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application.
Section 3.5 NOT AN AFFILIATE. Investor is not an officer, director or "affiliate" (as that term is defined in Rule 405 of the Securities Act) of the Company.
Section 3.6 ORGANIZATION AND STANDING. Investor is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Investor is duly qualified and in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, other than those in which the failure so to qualify would not have a material adverse effect on Investor.
Section 3.7 ABSENCE OF CONFLICTS. The execution and delivery of this Agreement and any other document or instrument contemplated hereby, and the consummation of the transactions contemplated hereby and thereby, and compliance with the requirements hereof and thereof, will not (a) violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on Investor, (b) violate any provision of any indenture, instrument or agreement to which Investor is a party or is subject, or by which Investor or any of its assets is bound, or conflict with or constitute a material default thereunder, (c) result in the creation or imposition of any lien pursuant to the terms of any such indenture, instrument or agreement, or constitute a breach of any fiduciary duty owed by Investor to any third party, or (d) require the approval of any third-party (that has not been obtained) pursuant to any material contract, instrument, agreement, relationship or legal obligation to which Investor is subject or to which any of its assets, operations or management may be subject.
Section 3.8 DISCLOSURE; ACCESS TO INFORMATION. Investor had an opportunity to review copies of the SEC Documents filed on behalf of the Company and has had access to all publicly available information with respect to the Company.
Section 3.9 MANNER OF SALE. At no time was Investor presented with or solicited by or through any leaflet, public promotional meeting, television advertisement or any other form of general solicitation or advertising.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Investor that, except as disclosed in the SEC Documents:
Section 4.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly organized and validly existing and in good standing under the laws of the State of Delaware and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, other than those in which the failure so to qualify would not have a Material Adverse Effect.
Section 4.2 AUTHORITY. (a) The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement and to issue the Put Shares; (b) the execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action and no further consent or authorization of the Company or its Board of Directors or stockholders is required; and (c) each of this Agreement and has been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application.
Section 4.3 CAPITALIZATION. As of the date hereof, the authorized capital stock of the Company consists of 500,000,000 shares of Common Stock, $0.001 par value per share, of which 117,873,138 shares were issued and outstanding as of January 16, 2014, Series B, C and D Preferred stock, 1,000,000 shares authorized, 1,384 shares issued and outstanding; at January 16, 2014.
Except as otherwise disclosed in the SEC Documents or on Schedule 4.3 , there are no outstanding securities which are convertible into shares of Common Stock, whether such conversion is currently exercisable or exercisable only upon some future date or the occurrence of some event in the future.
All of the outstanding shares of Common Stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable.
Section 4.4 COMMON STOCK. The Company is in full compliance with all reporting requirements of the Exchange Act, and the Company has maintained all requirements for the continued listing or quotation of the Common Stock, and such Common Stock is currently listed or quoted on the Principal Market which is presently the OTCQX.
Section 4.5 SEC DOCUMENTS. The Company may make available to Investor true and complete copies of the SEC Documents (including, without limitation, proxy information and solicitation materials). To the Company’s knowledge, the Company has not provided to Investor any information that, according to applicable law, rule or regulation, should have been disclosed publicly prior to the date hereof by the Company, but which has not been so disclosed. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act, and other federal laws, rules and regulations applicable to such SEC Documents, and none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form and substance in all material respects with applicable accounting requirements and the published rules and regulations of the SEC or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except (a) as may be otherwise indicated in such financial statements or the notes thereto or (b) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).
Section 4.6 VALID ISSUANCES. When issued and paid for as herein provided, the Put Shares shall be duly and validly issued, fully paid, and non-assessable. The sales of the Put Shares pursuant to this Agreement, and the Company's performance of its obligations hereunder, shall not (a) result in the creation or imposition of any liens, charges, claims or other encumbrances upon the Put Shares, or any of the assets of the Company, or (b) entitle the holders of outstanding shares of Common Stock to preemptive or other rights to subscribe to or acquire the Common Stock or other securities of the Company. The Put Shares shall not subject Investor to personal liability, in excess of the subscription price by reason of the ownership thereof.
Section 4.7 NO CONFLICTS. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby, including without limitation the issuance of the Put Shares, do not and will not (a) result in a violation of the Company’s Articles of Incorporation or By-Laws or (b) conflict with, or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture, instrument or any "lock-up" or similar provision of any underwriting or similar agreement to which the Company is a party, or (c) result in a violation of any federal, state or local law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect) nor is the Company otherwise in violation of, conflict with or in default under any of the foregoing. The business of the Company is not being conducted in violation of any law, ordinance or regulation of any governmental entity, except for possible violations that either singly or in the aggregate do not and will not have a Material Adverse Effect. The Company is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or issue and sell the Common Stock in accordance with the terms hereof (other than any SEC, FINRA or state securities filings that may be required to be made by the Company subsequent to any Closing, any registration statement that may be filed pursuant hereto); provided that, for purposes of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of Investor herein.
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Section 4.8 NO MATERIAL ADVERSE CHANGE. Since September 30, 2013 no event has occurred that would have a Material Adverse Effect on the Company.
Section 4.9 LITIGATION AND OTHER PROCEEDINGS. Except as disclosed in the Company’s SEC filings, there are no lawsuits or proceedings pending or to the knowledge of the Company threatened, against the Company, nor has the Company received any written or oral notice of any such action, suit, proceeding or investigation, which would have a Material Adverse Effect. No judgment, order, writ, injunction or decree or award has been issued by or, so far as is known by the Company, requested of any court, arbitrator or governmental agency which would have a Material Adverse Effect.
Section 4.10 DILUTION. The number of shares of Common Stock issuable as Put Shares may increase substantially in certain circumstances, including, but not necessarily limited to, the circumstance wherein the trading price of the Common Stock declines during the period between the Effective Date and the end of the Commitment Period. The Company’s executive officers and directors have studied and fully understand the nature of the transactions contemplated by this Agreement and recognize that they have a potential dilutive effect. The board of directors of the Company has concluded in its good faith business judgment that such issuance is in the best interests of the Company. The Company specifically acknowledges that, subject to Section 2.2(c), its obligation to issue the Put Shares is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company.
ARTICLE V
COVENANTS OF INVESTOR
Section 5.1 COMPLIANCE WITH LAW; TRADING IN SECURITIES. Investor's trading activities with respect to shares of the Common Stock will be in compliance with all applicable state and federal securities laws, rules and regulations and the rules and regulations of FINRA and the Principal Market on which the Common Stock is listed or quoted.
Section 5.2 SHORT SALES AND CONFIDENTIALITY. Neither Investor nor any affiliate of the Investor acting on its behalf or pursuant to any understanding with it will execute any Short Sales during the period from the date hereof to the end of the Commitment Period. For the purposes hereof, and in accordance with Regulation SHO, the sale after delivery of a Put Notice of such number of shares of Common Stock reasonably expected to be purchased under a Put Notice shall not be deemed a Short Sale.
Other than to other Persons party to this Agreement, Investor has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction).
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 RESERVATION OF COMMON STOCK. The Company will, from time to time as needed in advance of a Closing Date, reserve and keep available until the consummation of such Closing, free of preemptive rights sufficient shares of Common Stock for the purpose of enabling the Company to satisfy its obligation to issue the Put Shares to be issued in connection therewith. The number of shares so reserved from time to time, as theretofore increased or reduced as hereinafter provided, may be reduced by the number of shares actually delivered hereunder.
Section 6.2 LISTING OF COMMON STOCK. If the Company applies to have the Common Stock traded on any other Principal Market, it shall include in such application the Put Shares, and shall take such other action as is necessary or desirable in the reasonable opinion of Investor to cause the Common Stock to be listed on such other Principal Market as promptly as possible. The Company shall use its commercially reasonable efforts to continue the listing and trading of the Common Stock on the Principal Market (including, without limitation, maintaining sufficient net tangible assets) and will comply in all respects with the Company's reporting, filing and other obligations under the bylaws or rules of the FINRA and the Principal Market.
Section 6.3 CERTAIN AGREEMENTS. So long as this Agreement remains in effect, the Company covenants and agrees that it will not, without the prior written consent of the Investor, enter into any other equity line of credit agreement with a third party during the Commitment Period having terms and conditions substantially comparable to this Agreement. For the avoidance of doubt, nothing contained in the Transaction Documents shall restrict, or require the Investor's consent for, any agreement providing for the issuance or distribution of (or the issuance or distribution of) any equity securities pursuant to any agreement or arrangement that is not commonly understood to be an "equity line of credit."
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ARTICLE VII
CONDITIONS TO DELIVERY OF
PUT NOTICES AND CONDITIONS TO CLOSING
Section 7.1 CONDITIONS PRECEDENT TO THE OBLIGATION OF THE COMPANY TO ISSUE AND SELL COMMON STOCK. The obligation hereunder of the Company to issue and sell the Put Shares to Investor is subject to the satisfaction of each of the conditions set forth below.
(a) ACCURACY OF INVESTOR'S REPRESENTATIONS AND WARRANTIES. The representations and warranties of Investor shall be true and correct in all material respects as of the date of this Agreement and as of the date of each such Closing as though made at each such time.
(b) PERFORMANCE BY INVESTOR. Investor shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by Investor at or prior to such Closing.
(c) PRINCIPAL MARKET REGULATION. The Company shall not issue any Put Shares, and the Investor shall not have the right to receive any Put Shares, if the issuance of such shares would exceed the aggregate number of shares of Common Stock which the Company may issue without breaching the Company’s obligations under the rules or regulations of the Principal Market (the “EXCHANGE CAP”).
Section 7.2 CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER A PUT NOTICE AND THE OBLIGATION OF INVESTOR TO PURCHASE PUT SHARES. The right of the Company to deliver a Put Notice and the obligation of Investor hereunder to acquire and pay for the Put Shares is subject to the satisfaction of each of the following conditions:
(a) EFFECTIVE REGISTRATION STATEMENT. The Registration Statement, and any amendment or supplement thereto, shall remain effective for the sale by Investor of the Registered Securities subject to such Put Notice, and (i) neither the Company nor Investor shall have received notice that the SEC has issued or intends to issue a stop order with respect to such Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of such Registration Statement, either temporarily or permanently, or intends or has threatened to do so and (ii) no other suspension of the use or withdrawal of the effectiveness of such Registration Statement or related prospectus shall exist.
(b) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company shall be true and correct in all material respects (except for representations and warranties specifically made as of a particular date), except for any conditions which have temporarily caused any representations or warranties herein to be incorrect and which have been corrected with no continuing impairment to the Company or Investor.
(c) PERFORMANCE BY THE COMPANY. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company.
(d) NO INJUNCTION. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or adopted by any court or governmental authority of competent jurisdiction that prohibits or directly and materially adversely affects any of the transactions contemplated by this Agreement, and no proceeding shall have been commenced that may have the effect of prohibiting or materially adversely affecting any of the transactions contemplated by this Agreement.
(e) ADVERSE CHANGES. Since the date of filing of the Company's most recent SEC Document, no event that had or is reasonably likely to have a Material Adverse Effect has occurred.
(f) NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The trading of the Common Stock shall not have been suspended by the SEC, the Principal Market or the FINRA and the Common Stock shall have been approved for listing or quotation on and shall not have been delisted from the Principal Market.
(g) [INTENTIONALLY OMITTED]
(h) TEN PERCENT LIMITATION. On each Closing Date, the number of Put Shares then to be purchased by Investor shall not exceed the number of such shares that, when aggregated with all other shares of Common Stock then owned by Investor beneficially or deemed beneficially owned by Investor, would result in Investor owning more than 9.99% of all of such Common Stock as would be outstanding on such Closing Date, as determined in accordance with Section 16 of the Exchange Act and the regulations promulgated thereunder. For purposes of this Section, in the event that the amount of Common Stock outstanding as determined in accordance with Section 16 of the Exchange Act and the regulations promulgated thereunder is greater on a Closing Date than on the date upon which the Put Notice associated with such Closing Date is given, the amount of Common Stock outstanding on such Closing Date shall govern for purposes of determining whether Investor, when aggregating all purchases of Common Stock made pursuant to this Agreement, would own more than 9.99% of the Common Stock following such Closing Date.
(i) Principal Market Regulation . The Company shall not issue any Put Shares, and the Investor shall not have the right to receive any Put Shares, if the issuance of such shares would exceed the Exchange Cap.
(j) NO KNOWLEDGE. The Company shall have no knowledge of any event more likely than not to have the effect of causing such Registration Statement to be suspended or otherwise ineffective (which event is more likely than not to occur within the fifteen (15) Trading Days following the Trading Day on which such Put Notice is deemed delivered).
(k) NO VIOLATION OF SHAREHOLDER APPROVAL REQUIREMENT. The issuance of shares of Common Stock with respect to the applicable Closing, if any, shall not violate the shareholder approval requirements of the Principal Market .
(l) NO VALUATION EVENT. No Valuation Event shall have occurred since the Put Date.
(m) OTHER. On the date of delivery of each Put Notice, Investor shall have received a certificate in substantially the form and substance of Exhibit B hereto, executed by an executive officer of the Company and to the effect that all the conditions to such Closing shall have been satisfied as at the date of each such certificate.
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ARTICLE VIII
LEGENDS
Section 8.1 NO STOCK LEGEND OR STOCK TRANSFER RESTRICTIONS. No legend shall be placed on the share certificates representing the Put Shares.
Section 8.2 INVESTOR'S COMPLIANCE. Nothing in this Article VIII shall affect in any way Investor's obligations under any agreement to comply with all applicable securities laws upon the sale of the Common Stock.
ARTICLE IX
NOTICES; INDEMNIFICATION
Section 9.1 NOTICES. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (a) personally served, (b) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (c) delivered by reputable air courier service with charges prepaid, or (d) transmitted by hand delivery, telegram, facsimile, or email as a PDF, addressed as set forth below or to such other address as such party shall have specified most recently by written notice given in accordance herewith. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (i) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, or email as a PDF, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (ii) on the second business day following the date of mailing by express courier service or on the fifth business day after deposited in the mail, in each case, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
The addresses for such communications shall be:
If to the Company:
If to the Company:
ANDALAY SOLAR, INC.
2071 Ringwood Avenue, Unit C
San Jose, CA 95131
Attn: Margaret R. Randazzo
Chief Executive Officer
Copy to (which shall not constitute notice):
GRACIN & MARLOW
Chrysler Building
405 Lexington Ave., 26 th Floor
New York, New York 10174
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
4931
(Primary Standard Industrial Classification Code Number)
90-0181035
(I.R.S. Employer Identification No.)
2071 Ringwood Ave. Unit C
San Jose, CA 95131
(408) 402-9400
(Address and telephone number of principal executive offices)
2071 Ringwood Ave. Unit C
San Jose, CA 95131
(Address of principal place of business or intended principal place of business)
Copy to:
Leslie Marlow, Esq.
Hank Gracin, Esq.
Gracin & Marlow, LLP
The Chrysler Building
405 Lexington Avenue, 26 th Floor
New York, New York 10174
(212) 907-6457
(Name, address and telephone number of agent for service)
Approximate Date of Proposed Sale to the Public: From time to time after the date this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. þ
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨
If delivery of the prospectus is expected to be made pursuant to Rule 424, check the following box. ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
¨
Smaller reporting company
þ
CALCULATION OF REGISTRATION FEE
Title of each class of securities to be registered
Amount to be
registered (1)
Proposed maximum
offering price per
share (2)
Proposed
maximum
aggregate offering
price (1)
Amount of
registration fee (3)
Common Stock, $.001 par value per share 35,000,000 $ 0.0243 $ 850,500 $ 110
(1) In accordance with Rule 416(a), the registrant is also registering hereunder an indeterminate number of shares that may be issued and resold resulting from stock splits, stock dividends or similar transactions.
(2) Estimated in accordance with Rule 457(c) of the Securities Act of 1933 solely for the purpose of computing the amount of the registration fee based on the closing price of our common stock on January 21, 2014.
(3) Calculated under Section 6(b) of the Securities Act of 1933 as .0001288 of the aggregate offering price.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
Table of Contents
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS DECLARED 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.
SUBJECT TO COMPLETION, DATED JANUARY 2014
PRELIMINARY PROSPECTUS
ANDALAY SOLAR, INC.
35,000,000 Shares of Common Stock
This prospectus relates to the offer and resale of up to 35,000,000 shares of our common stock, par value $0.001 per share, by the selling stockholder, Southridge Partners II LP, a Delaware limited partnership (“Southridge”). All of such shares represent shares that Southridge has agreed to purchase if put to it by us pursuant to the terms of the Equity Purchase Agreement we entered into with them on January 23, 2014, which superceded our prior Equity Purchase Agreement that we entered into on November 25, 2013, subject to the volume limitations and other limitations in the Equity Purchase Agreement. Pursuant to the terms of the Equity Purchase Agreement we agreed to pay Southridge a commitment fee of 1,000,000 shares of our common stock (having a value of $27,800 based upon the closing price of our common stock on January 22, 2014 of which 500,000 shares of our common stock will be issued to Southridge on the date that the registration statement of which this prospectus forms a part is declared effective and the remaining 500,000 shares of common stock will be issued on the date that we deliver our first Draw Down Notice to Southridge. None of the commitment fee shares are included in the 35,000,000 shares of common stock being registered under the registration statement of which this prospectus forms a part. Subject to the terms and conditions of the Equity Purchase Agreement, which we refer to in this prospectus as the “Equity Purchase Agreement,” we have the right to “put,” or sell, up to $5,000,000 worth of shares of our common stock to Southridge. This arrangement is sometimes referred to as an “Equity Line.”
For more information on the selling stockholder, please see the section of this prospectus entitled “Selling Security Holder” beginning on page 41.
We will not receive any proceeds from the resale of these shares of common stock offered by Southridge. We will, however, receive proceeds from the sale of shares directly to Southridge pursuant to the Equity Line. When we put an amount of shares to Southridge, the per share purchase price that Southridge will pay to us in respect of the put will be determined in accordance with the formula set forth in the Equity Purchase Agreement. There will be no underwriter’s discounts or commissions so we will receive all of the proceeds of our sale to Southridge.
We may draw upon the Equity Line periodically during the Term (a “Draw Down”) by delivering to Southridge a written notice (a “Draw Down Notice”) requiring Southridge to purchase a dollar amount in shares of common stock (a “Draw Down Amount”). Southridge has committed to purchase up to $5,000,000 worth of shares of our common stock over a period of time terminating on the earlier of: (i) 18 months from the effective date of the registration statement filed in connection with the Equity Purchase Agreement; or (ii) the date on which Southridge has purchased shares of our common stock pursuant to the Equity Line for an aggregate maximum purchase price of $5,000,000. In no event may the shares issuable pursuant to a Draw Down Notice, when aggregated with the shares then held by Southridge on the date of the Draw Down, exceed 9.99% of the Company’s outstanding common stock.
The purchase price per share of common stock purchased under the Equity Line will equal 90% of the lowest closing bid price during the Valuation Period (the “Purchase Price”). On the date that a Draw Down Notice is delivered to Southridge, we are required to deliver an estimated amount of shares to Southridge’s brokerage account equal to 125% of the Draw Down Amount indicated in the Draw Down Notice divided by the closing bid price of our common stock for the trading day immediately prior to the date of the Draw Down Notice (“Estimated Shares”). The Valuation Period will begin the first trading day after the Estimated Shares have been delivered to Southridge’s brokerage account and have been cleared for trading, and terminates ten days thereafter. At the end of the Valuation Period, if the number of Estimated Shares delivered to Southridge is greater than the shares issuable pursuant to a Draw Down, then Southridge is required to return to us the difference between the Estimated Shares and the actual number of shares issuable pursuant to the Draw Down. If the number of Estimated Shares is less than the shares issuable under the Draw Down, then we are required to issue additional shares to Southridge equal to the difference; provided that the number of shares to be purchased by Southridge may not exceed the number of such shares that, when added to the number of shares of our common stock then beneficially owned by Southridge, would exceed 9.99% of the outstanding number of shares of our common stock.
We will specify in each Draw Down Notice a minimum threshold market price under which no shares may be sold (the “Floor Price”). The Floor Price shall not be less than 80% of the average of the closing trade prices for the ten (10) trading days ending immediately prior to delivery of the Draw Down Notice. In the event that during a Valuation Period, the closing bid price on any trading day is below the Floor Price (the “Low Bid Price”), Southridge is under no obligation to purchase and we are under no obligation to sell 1/10th of the Draw Down Amount for each such trading day, and the Draw Down Amount will be adjusted accordingly. In the event that during a Valuation Period there exists a Low Bid Price for any three trading days then our obligation to sell and Southridge’s obligation to purchase the Draw Down Amount under a Draw Down Notice will terminate on such third trading day (the “Termination Date”) and the Draw Down Amount shall be adjusted to include only 1/10 th of the initial Draw Down Amount for each day during the Valuation Period prior to the Termination Date that the bid price equals or exceed the Low Bid Price.
Southridge may sell any shares offered under this prospectus at prevailing market prices or privately negotiated prices. Southridge is an “underwriter” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), in connection with the resale of our common stock under the Equity Line. For more information, please see the section of this prospectus titled “Plan of Distribution” beginning on page 16.
Our common stock became eligible for trading on the OTCQB on September 6, 2012. Our common stock is quoted on the OTCQB under the symbol “WEST”. The closing price of our stock on January 22, 2014, was $0.0243.
You should understand the risks associated with investing in our common stock. Before making an investment, read the “Risk Factors,” which begin on page 3 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is January 24, 2014
Table of Contents
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY
1
RISK FACTORS
3
USE OF PROCEEDS
15
DETERMINATION OF OFFERING PRICE
17
BUSINESS
19
MARKET PRICE OF COMMON STOCK AND OTHER STOCKHOLDER MATTERS
28
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
30
MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
31
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
52
EXECUTIVE COMPENSATION
54
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
58
TRADING MARKET
60
SELLING SECURITY HOLDER
60
RELATIONSHIP BETWEEN THE ISSUER AND THE SELLING SECURITY HOLDER
61
PLAN OF DISTRIBUTION
61
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
62
DESCRIPTION OF SECURITIES
63
SHARES ELIGIBLE FOR FUTURE SALE
66
EXPERTS
66
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
66
LEGAL MATTERS
66
WHERE YOU CAN FIND MORE INFORMATION
66
PART II 67
Table of Contents
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that which is contained in this prospectus. This prospectus may be used only where it is legal to sell these securities. The information in this prospectus may only be accurate on the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of securities.
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus; it does not contain all of the information you should consider before investing in our common stock. You should read the entire prospectus before making an investment decision.
Throughout this prospectus, the terms the “Company,” “Andalay Solar,”“we,” “us,” “our,” and “our company” refer to Andalay Solar, Inc., a Delaware corporation.
Company Overview
We are a designer and manufacturer of solar power systems and solar panels with integrated microinverters (which we call AC solar panels). We design, market and sell these solar power systems to solar installers, trade workers and do-it-yourself customers in the United States and Canada through distribution partnerships, our dealer network and retail outlets. Our products are designed for use in solar power systems for residential and commercial rooftop customers. Prior to September 2010, we were also in the solar power installation business.
In September 2007, we introduced our “plug and play” solar panel technology (under the brand name “Andalay”), which we believe significantly reduces the installation time and costs, and provides superior reliability and aesthetics, when compared to other solar panel mounting products and technology. Our panel technology offers the following features: (i) mounts closer to the roof with less space in between panels; (ii) no unsightly racks underneath or beside panels; (iii) built-in wiring connections; (iv) approximately 70% fewer roof-assembled parts and approximately 50% less roof-top labor required; (v) approximately 25% fewer roof attachment points; (vi) complete compliance with the National Electric Code and UL wiring and grounding requirements. We have five U.S. patents (Patent No. 7,406,800, Patent No. 7,832,157, Patent No. 7,866,098, Patent No. 7,987,614 and Patent No. 8,505,248) that cover key aspects of our Andalay solar panel technology, as well as U.S. Trademark No. 3481373 for registration of the mark “Andalay.” In addition to these U.S. patents, we have 9 foreign patents. Currently, we have 14 issued patents and 15 other pending U.S. and foreign patent applications that cover the Andalay technology working their way through the USPTO and foreign patent offices.
In February 2009, we announced a strategic relationship with Enphase, a leading manufacturer of microinverters, to develop and market solar panel systems with ordinary AC house current output instead of high voltage DC output. We introduced Andalay AC panel products and began offering them to our customers in the second quarter of 2009. Andalay AC panels cost less to install, are safer, and generally provide higher energy output than ordinary DC panels. Andalay AC panels deliver 5-25% more energy compared to ordinary panels, produce safe household AC power, and have built-in panel level monitoring, racking, wiring, grounding and microinverters. With 80% fewer parts and 5 – 25% better performance than ordinary DC panels, we believe Andalay AC panels are an ideal solution for solar installers, trade workers and do-it-yourself customers.
On May 30, 2013, we entered into a supply agreement for assembly of our proprietary modules with Environmental Engineering Group Pty Ltd (“EEG”), an assembler of polycrystalline modules located in Australia. In August 2013, we began receiving product from EEG and began shipping product to customers during the third calendar quarter of this year. We anticipate increased shipments to customers during the fourth quarter of 2013. In September 2013, we entered into a second supply agreement for assembly of our proprietary modules with Tianwei New Energy Co, Ltd. (“Tianwei”), a panel supplier located in China. We anticipate receiving initial shipments from this new supplier in January 2014.
We were incorporated in February 2001 as Akeena Solar, Inc. in the State of California and elected at that time to be taxed as an S corporation. During June 2006, we reincorporated in the State of Delaware and became a C corporation. On August 11, 2006, we entered into a reverse merger transaction with Fairview Energy Corporation, Inc. (“Fairview”). Pursuant to the merger, our stockholders received one share of Fairview common stock for each issued and outstanding share of our common stock. Our common shares were also adjusted from $0.01 par value to $0.001 par value at the time of the merger. On May 17, 2010, we entered into an exclusive worldwide license agreement with Westinghouse, Inc, which permitted us to manufacture, distribute and market solar panels under the Westinghouse name and in connection therewith, on April 6, 2011, we changed our name to Westinghouse Solar, Inc. On August 23, 2013, the license agreement with Westinghouse, Inc. was terminated and on September 19, 2013, we changed our name to our current name, Andalay Solar, Inc.
Our principal executive offices are located at 2071 Ringwood Ave. Unit C, San Jose, CA 95131 and our telephone number is (408) 402-9400. Additional information about our company is available on our website at http://www.andalaysolar.com . The information on our website is not incorporated herein by reference.
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The Offering
Common stock that may be offered by selling stockholder
35,000,000 shares
Common stock currently outstanding
117,873,138 shares
Total proceeds raised by offering
We will not receive any proceeds from the resale or other disposition of the shares covered by this prospectus by the selling shareholder. We will receive proceeds from the sale of shares to Southridge. Southridge has committed to purchase up to $5,000,000 worth of shares of our common stock over a period of time terminating on the earlier of: (i) 18 months from the effective date of the registration statement filed in connection with the Equity Purchase Agreement; or (ii) the date on which Southridge has purchased shares of our common stock pursuant to the Equity Purchase Agreement (the “Equity Line”) for an aggregate maximum purchase price of $5,000,000. The purchase price to be paid by Southridge will be 90% of the lowest closing bid price during the Valuation Period. On the date of the Draw Down Notice is delivered to Southridge, we are required to deliver an estimated amount of shares to Southridge’s brokerage account equal to 125% of the Draw Down Amount indicated in the Draw Down Notice divided by the closing bid price of the trading day immediately prior to the date of the Draw Down Notice (“Estimated Shares”). The Valuation Period begins on the first trading day after the Estimated Shares have been delivered to Southridge’s brokerage account and have been cleared for trading and terminates on the tenth day thereafter. At the end of the Valuation Period, if the number of Estimated Shares delivered to Southridge is greater than the shares issuable pursuant to a Draw Down, then Southridge is required to return to us the difference between the Estimated Shares and the actual number of shares issuable pursuant to the Draw Down. If the number of Estimated Shares is less than the shares issuable under the Draw Down, then we are required to issue additional shares to Southridge equal to the difference; provided that the number of shares to be purchased by Southridge may not exceed the number of shares that, when added to the number of shares of our common stock then beneficially owned by Southridge, would exceed 9.99% of our shares of common stock outstanding.
Risk Factors
There are significant risks involved in investing in our company. For a discussion of risk factors you should consider before buying our common stock, see “Risk Factors” beginning on page 3.
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RISK FACTORS
Investing in our common stock involves a high degree of risk, and you should be able to bear the complete loss of your investment. You should carefully consider the risks described below, the other information in this prospectus when evaluating our company and our business. If any of the following risks actually occur, our business could be harmed. In such case, the trading price of our common stock could decline and investors could lose all or a part of the money paid to buy our common stock.
RISKS RELATING TO OUR BUSINESS
We will need additional capital in the future to fund our business, and financing may not be available.
We expect our currently available capital resources and cash flows from operations to be insufficient to meet our working capital and capital expenditure requirements. Our cash requirements will depend on numerous factors, including the amount of our sales, the timing and levels of products purchased, pricing, payment terms and credit limits from manufacturers, the availability and terms of asset-based credit facilities, the timing and level of our accounts receivable collections, and our ability to manage our business towards profitability.
We expect to need to raise additional funds through public or private debt or equity financings or enter into new asset-based or other credit facilities, but such financings will likely dilute our stockholders. Although we have recently entered into a loan and security agreement with Alpha Capital Anstalt (the “Lender”) and Collateral Services, LLC for the Lender’s provision of financing for one year, against our accounts receivable and inventory, the loans to be made by the Lender are discretionary, they are based upon our accounts receivable and inventory and we must comply with certain conditions in order to obtain funding and therefore, there can be no assurance that such loans will be made. The Equity Purchase Agreement that we entered into with Southridge also contains conditions that must be met prior to funding and therefore there can be no assurance that such conditions will be met when funding is needed. We cannot assure you that any additional financing that we may need will be available on terms favorable to us, or at all. Our loss of S-3 eligibility in September 2012 due to our Nasdaq delisting and limited availability of authorized and unissued common stock may make it more difficult to raise such funds. In addition, on July 19, 2013 we announced the termination of the agreement and plan of merger which contemplated a merger in which CBD Energy Limited (“CBD”) would become our parent company. This event may diminish our access to additional financing. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of business opportunities, develop new products or otherwise respond to competitive pressures. In any such case, our business, operating results or financial condition could be materially adversely affected.
If we default on our secured loan with the Lender, we could lose all of our assets
Our loan and security agreement with the Lender and Collateral Services, LLC is secured by all of our assets. The agreement contains both affirmative and negative covenants, including covenants regarding incurrence of indebtedness, liens, mergers and acquisitions, subject to materiality and other qualifications and exceptions customary for a credit facility of this size and type. Our obligations under the agreement may be accelerated upon the occurrence of an event of default in accordance with the terms of the Agreement, which includes customary events of default, including payment defaults, the inaccuracy of representations or warranties, cross-defaults related to material indebtedness, bankruptcy and insolvency related defaults, defaults relating to certain other matters, and loss of perfected lien status. If we fail to comply with these covenants or if we fail to make certain payments under the secured loans when due, the Lender could declare our loans in default. If we default on the loan, the Lender has the right to seize our assets that secure the loan, which would force us to suspend all operations.
We have a history of losses and there can be no assurance that we will generate or sustain positive earnings.
For the years ended December 31, 2012 and December 31, 2011, we had a net loss of ($8,622,393) and ($4,631,621), respectively, and for the nine months ended September 30, 2013 and September 30, 2012, we had a net loss of ($2,235,799) and ($7,286,454), respectively. We cannot be certain that our business strategy will ever be successful. Our likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with any emerging business operations. If we fail to address any of these risks or difficulties adequately, our business will likely suffer. Future revenues and profits, if any, will depend upon various factors, including the success, if any, of our expansion plans, marketability of our instruments and services, our ability to maintain favorable relations with manufacturers and customers, and general economic conditions. There is no assurance that we can operate profitably or that we will successfully implement our plans. There can be no assurance that we will ever generate positive earnings.
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Our financial statements had been prepared assuming that we will continue as a going concern.
Our significant operating losses, negative cash flow from operations, and challenges in rapidly securing alternative sources of supply for solar panels, raise substantial uncertainty about our ability to continue as a going concern. The consolidated financial statements for the three and nine months ended September 30, 2013 and years ended December 31, 2012 and 2011 do not include any adjustments that might result from the outcome of this uncertainty, and contemplate the realization of assets and the settlement of liabilities and commitments in the normal course of business. The report of our independent registered public accounting firm for the years ended December 31, 2012 and 2011 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 a result of our delisting from the Nasdaq Capital Market in September 2012, we are no longer eligible to file new registration statements on Form S-3, which may make it more costly and more difficult for us to obtain additional equity financing. We currently anticipate that we will retain all of our earnings, if any, for development of our business and do not anticipate paying any cash dividends on common stock in the foreseeable future.
We are dependent upon our solar panel suppliers for regular shipments of products; however we have not been timely in payment to them in recent periods, which has resulted in disruption in our supply of products. If we do not quickly establish replacement sources of supply, our operations will be further adversely affected.
Historically, we obtained virtually all of our solar panels from Suntech and Lightway. During 2012, because of our cash position and liquidity constraints, we were late in making payments to both of these suppliers. On March 30, 2012, pursuant to our Supply Agreement with Lightway, we issued 1,900,000 shares of our common stock to Lightway in partial payment of our past due account payable to them. At the time of issuance, the shares were valued at $1,045,000. On May 1, 2012, Suntech filed a complaint for breach of contract, goods sold and delivered, account stated and open account against us in the Superior Court of the State of California, County of San Francisco. Suntech alleged that it delivered products and did not receive full payment from us. On July 31, 2012, we and Suntech entered into a settlement of this dispute. Because of our inability to make scheduled settlement payments, on March 15, 2013, Suntech entered a judgment against us in the amount of $946,438. As of September 30, 2013, Suntech has not sought to enforce its judgment. As of September 30, 2013, we have included in our Condensed Consolidated Balance Sheets a balance due to Suntech America of $946,438. We currently have no unshipped orders from Suntech or Lightway.
In May 2013, we entered into a new supply agreement for assembly of our proprietary modules with Environmental Engineering Group Pty Ltd (“EEG”), an assembler of polycrystalline modules located in Australia. In August 2013, we began receiving product from EEG and began shipping product to customers during the third calendar quarter of this year. We anticipate increased shipments to customers during the fourth quarter of 2013. We have remaining panel inventory on hand as of September 30, 2013 and anticipate receiving a final shipment of product in November 2013, fulfilling our purchase order with EEG. In September 2013, we entered into a second supply agreement for assembly of our proprietary modules with Tianwei New Energy Co, Ltd., a panel supplier located in China. We anticipate beginning to receive product from this new supplier beginning in January 2014. Although we believe we can find alternative suppliers for solar panels manufactured to our specifications, our operations would be disrupted unless we are able to rapidly secure alternative sources of supply, our inventory and revenue could diminish significantly, causing disruption to our operations.
We are dependent upon our key suppliers for the components used in our systems and we must arrange for cost competitive manufacturing of our proprietary solar panels in order to grow our business; our suppliers are dependent upon the continued availability and pricing of silicon and other raw materials used in solar modules.
Historically, we obtained virtually all of our solar panels from Suntech and Lightway. During 2012, because of our cash position and liquidity constraints, we were late in making payments to both of these suppliers. We currently have no unshipped orders from Suntech or Lightway. In May 2013, we entered into a new supply agreement for assembly of our proprietary modules with Environmental Engineering Group Pty Ltd (“EEG”), an assembler of polycrystalline modules located in Australia. In August 2013, we began receiving product from EEG and began shipping product to customers during the third calendar quarter of this year. We anticipate increased shipments to customers during the fourth quarter of 2013. We have remaining panel inventory on hand as of September 30, 2013 and anticipate receiving a final shipment of product in November 2013, fulfilling our purchase order with EEG. In September 2013, we entered into a second supply agreement for assembly of our proprietary modules with Tianwei New Energy Co, Ltd., a panel supplier located in China. We anticipate beginning to receive product from this new supplier beginning in January 2014.
It is critical to the growth of our revenue that our products be high quality while offered at competitive pricing. We believe that we will need to reduce the unit production cost of our products over time to obtain and maintain our ability to offer competitively priced products. Our ability to achieve cost reductions will depend on our ability to maintain favorable supplier contracts and to increase sales volumes so we can achieve economies of scale. We cannot provide assurance that we will be able to achieve any such production cost reductions. If we fail to negotiate better terms and maintain our relationships with our current suppliers or develop new supplier relationships, we may not achieve production cost reductions necessary to competitively price our products, which could adversely affect or limit our sales and growth.
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We are currently subject to market prices for the components that we purchase, which are subject to fluctuation beyond our control. An increase in the price of components used in our systems could result in an increase in costs to our customers and could have a material adverse effect on our revenues and demand for our products.
Interruptions in our ability to procure needed components for our systems, whether due to discontinuance by our suppliers, delays or failures in delivery, shortages caused by inadequate production capacity or unavailability, financial failure, manufacturing quality, or for other reasons, would adversely affect or limit our sales and growth. There is no assurance that we will continue to find qualified manufacturers on acceptable terms and, if we do, there can be no assurance that product quality will continue to be acceptable, which could lead to a loss of sales and revenues.
The U.S. Government imposed tariffs on solar panels manufactured in China causing the prices we pay for solar panels to increase. This could cause customer demand for our products to decrease.
A group of solar panel manufacturers with domestic U.S. production facilities requested the U.S. Government to impose tariffs on the import of solar panels manufactured in China, based on allegations of unfair competition and of subsidization of prices for Chinese-made solar panels by the Chinese Government. In March 2012, the United States Commerce Department issued a preliminary decision imposing tariffs between 2.9% and 4.73%. In May 2012, a further decision by the Commerce Department was issued providing for a provisional tariff averaging 31% on 61 Chinese manufacturers caused by “dumping” solar panels into the U.S. market at prices below their actual cost. On October 11, the Commerce Department announced its final decision on these tariffs affirming its preliminary findings that modules containing cells of Chinese origin are subject to anti-dumping and countervailing duties (AD/CVD) when imported into the United States. The AD rates to be applied at the border range from 7.78% to 21.19% for participating respondents and up to 239.42% for non-participants. The CVD rates range from 14.78 to 15.97%. The AD and CVD rates will be applied collectively. The final step in the proceedings occurred on November 7, 2012, when the International Trade Commission (ITC) rendered a final affirmative injury determination concluding that the subject Chinese imports caused injury to U.S. manufacturers of crystalline-silicon solar cells and modules. The ITC also decided that the AD and CVD duties should not apply retroactively and rendered a negative "critical circumstances" determination. Thus, the effective dates were March 26, 2012 for CVD duties and May 25, 2012 for AD duties. Given the large current market share of solar panels manufactured in China, the imposition of these tariffs will have had far reaching, industry-wide effects, and have been disruptive to many established supply relationships. In fact, the imposition of these tariffs have caused prices for solar power systems in the United States to increase and resulted in reduced market demand for the purchase of solar power systems.
Our historical solar panel suppliers, Suntech and Lightway, both manufactured panels for us in China. As a result, aggregate AD and CVD duties of 30.66% (for Lightway) and 35.97% (for Suntech) were imposed on our purchases. The resulting increase in our product prices harmed our competitive position in selling our products, and adversely affected our results of operations. Our new supply agreements with EEG and Tianwei provides for solar modules made with Taiwan cells and therefore are not subject to punitive Chinese tariffs.
We have experienced significant customer concentration in recent periods, and our revenue levels could be adversely affected if any significant customer fails to purchase products from us at anticipated levels.
The relative magnitude and the mix of revenue from our largest customers have varied significantly quarter to quarter, but have been concentrated on a small number of large customers. During the last two years, two customers have accounted for a significant portion of our revenues: Lennox International Inc. (Lennox), a global leader in the heating and air conditioning markets and Lennar Corporation (Lennar), a leading national homebuilder. Through June 30, 2013, Lennar had historically only ordered solar power systems from us for installation on 234 new homes, which was below their 600 home order commitment volume. No further orders have been received from Lennar since April 25, 2012. On December 28, 2012, we filed a complaint against Lennar in the United States District Court for the Southern District of Florida stating claims for breach of contract under a supply agreement with us. On May 21, 2013, we entered into a final and comprehensive settlement of this legal dispute with Lennar. Terms of the settlement are confidential per the parties' settlement agreement. The volume of orders from key customers is difficult to predict. Fluctuations in order levels from significant customers could cause our revenue levels to correspondingly fluctuate, and the failure by any significant customer to maintain anticipated order levels could cause our revenue to fall short of expectations and adversely affect our results of operations.
We may fail to realize some or all of the anticipated benefits of our shift to a design and manufacturing business model in California and throughout North America, which may adversely affect the value of our common stock.
The success of our exit from the solar system installation business in California in September 2010, and our shift to focus exclusively on a design and manufacturing business model will depend, in large part, on our ability to successfully expand our distribution channels to include authorized dealers in California, as well as elsewhere in North America, and to accelerate the growth of our design and manufacturing business. California is the largest state in the country for solar products, accounting for approximately 50 percent of the U.S. market. Therefore, we continue to pursue developing distribution channel partners in California and North America.
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If we are not able to achieve the expansion of our design and manufacturing business and meet our revenue growth and cost reduction objectives within the anticipated time frame, or at all, the anticipated benefits and cost savings of our change in strategic focus and our restructuring may not be realized or may take longer to realize than expected, and the value of our common stock may be adversely affected.
Specifically, risks in the operations of our business in order to realize the anticipated benefits of the change to a design and manufacturing business model include, among other things:
failure to arrange for cost competitive manufacturing of our proprietary solar panels;
failure to find and develop distribution relationships with new channel partners, particularly in California and the North America market;
failure to successfully manage existing distribution relationships;
failure to effectively coordinate sales and marketing efforts to communicate the capabilities of our company;
unpredictability and delays in the timing of projected distribution orders, and resulting accumulation of excess product inventory;
failure to focus and develop our distribution product and service offerings quickly and effectively;
failure to successfully develop new products and services on a timely basis that address the market opportunities; and
unexpected revenue attrition or delays.
In addition, the shift in our business model may result in additional or unforeseen expenses, and the anticipated cost reduction benefits may not be realized.
We are exposed to risks associated with the weak global economy, which increase the uncertainty of project financing for solar installations and the risk of non-payment from customers.
The continuing tight credit markets and weak global economy are contributing to an ongoing slowdown in the solar industry, which may worsen if these economic conditions are prolonged or deteriorate further. The market for installation of solar power systems depends largely on commercial and consumer capital spending. Economic uncertainty exacerbates negative trends in these areas of spending, and may cause customers to push out, cancel, or refrain from placing orders, which may reduce our net sales. Difficulties in obtaining capital and adverse market conditions may also lead to the inability of some customers to obtain affordable financing, including traditional project financing and tax-incentive based financing and home equity based financing, resulting in lower sales to potential customers with liquidity issues, and may lead to an increase of incidents where our customers are unwilling or unable to pay for systems they purchase, and additional bad debt expense for us. Further, these conditions and uncertainty about future economic conditions make it challenging for us to obtain equity and debt financing to meet our working capital requirements to support our business, forecast our operating results, make business decisions, and identify the risks that may affect our business, financial condition and results of operations. If we are unable to timely and appropriately adapt to changes resulting from the difficult macroeconomic environment, our business, financial condition or results of operations may be materially and adversely affected.
Our technology may encounter unexpected problems or may not be protectable, which could adversely affect our business and results of operations.
Our technology is relatively new and has not been tested in installation settings for a sufficient period of time to prove its long-term effectiveness and benefits. Problems may occur with products or their underlying components that are unexpected and could have a material adverse effect on our business or results of operations. We have been issued several U.S. and foreign patents that cover our Andalay solar panel technology. We have several other pending patent applications covering Andalay technology. Ultimately, we may not be able to realize the benefits from any patent that is issued.
Because our industry is highly competitive and has low barriers to entry, we may lose market share to larger companies that are better equipped to weather a decline in market conditions due to increased competition.
Our industry is highly competitive and fragmented, is subject to rapid change and has low barriers to entry. Competition in the solar power services industry may increase in the future, partly due to low barriers to entry, as well as from other alternative energy sources now in existence or developed in the future. Increased competition could result in price reductions, reduced margins or loss of market share and greater competition for qualified technical personnel. There can be no assurance that we will be able to compete successfully against current and future competitors. If we are unable to compete effectively, or if competition results in a deterioration of market conditions, our business and results of operations would be adversely affected.
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Our profitability depends, in part, on our success and brand recognition and we could lose our competitive advantage if we are not able to protect our trademarks and patents against infringement, and any related litigation could be time-consuming and costly.
On August 23, 2013, we received formal notice of termination of our license agreement with Westinghouse Electric Corporation due to the non-payment of past due license fees. To date, we owe Westinghouse $1,020,856. Due to our limited resources, it is unlikely that payment will be made for past due license fees any time in the near future. While the Westinghouse trademark is an important, world-wide recognized brand, we believe the most important competitive factors relating to our products are their effectiveness, efficiency and consumer cost, i.e., price point, and ultimately to the extent the cost of the Westinghouse license becomes prohibitive, it negatively impacts our cost of goods. However, we do not have the ability to accurately estimate the true impact of the loss of the use of such trademark. We have registered the “Andalay” trademark with the United States Patent and Trademark Office related to our panel technology. Use of our trademarks or similar trademarks by competitors in geographic areas in which we have not yet operated could adversely affect our ability to use or gain protection for our brand in those markets, which could weaken our brand and harm our business and competitive position. In addition, any litigation relating to protecting our trademarks and patents against infringement could be time consuming and costly.
We may have warranty obligations to Real Goods Solar, Inc. that could adversely affect our results of operations.
In connection with our exit from the solar system installation business in California, Real Goods Solar, Inc. (Real Goods) agreed to undertake primary, “first responder” responsibility for future warranty service obligations relating to the approximately 800 installations for SunRun that we have previously completed (the “Andalay Installations”). We retain secondary warranty responsibility on the Andalay Installations, in the event that Real Goods fails to perform the warranty. We will reimburse Real Goods for actual warranty service work completed by Real Goods related to these “first responder” installations. Other than solar panels and inverters that are covered under the manufacturer warranty, we provided our customers for Andalay Installations a 5-year or a 10-year warranty. We have accrued, and included within “Liabilities of Discontinued Operations” in our condensed consolidated balance sheets for September 30, 2013 and our consolidated balance sheets for December 31, 2012, a liability of approximately $1.0 million and $1.1 million, respectively, to cover these warranty obligations. That amount is intended to cover both the Andalay Installations and certain installation projects assigned to Real Goods. The terms of the Warranty Agreements provided that we establish an escrow account as a source of funds from which to satisfy our obligation to pay Real Goods for its fees and reimburse it for its expenses for warranty work performed by it pursuant to the Warranty Agreements which are not paid to Real Goods from the company directly. In March 2011, we entered into an Escrow Agreement with Real Goods and deposited $200,000 into an escrow fund. The amount is reflected in long-term assets of discontinued operations in our consolidated balance sheets. The escrow deposit will be released to us in the amount of $40,000, or one-fifth of the remaining escrow funds, per year after each of the fifth through the ninth anniversary of the escrow agreement. If Real Goods fails to perform under the assigned warranty coverage, or the actual warranty expenses exceed the amounts we have accrued, we could incur significant unexpected additional expenses, which would adversely affect our results of operations.
Impairment charges could reduce our results of operations.
In accordance with the provisions of Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) 350, Goodwill and Other Intangible Assets (ASC 350), we test intangible assets with indefinite useful lives for impairment on an annual basis, and on an interim basis if an event occurs that might reduce the fair value of the reporting unit below its carrying value. We also assess the fair value of our inventory and other tangible assets as of the end of each reporting period. During the year ended December 31, 2012, we recorded a $206,000 non-cash inventory write-down, which represented an adjustment to the carrying value of our older, smaller-format solar panels and older micro-inverter inventory to reflect the decline in market prices compared to our original cost, a $65,000 write-off of accumulated inventory overhead costs and a $112,000 non-cash inventory write-off of obsolete inventory. As a result of our exit from the installation business, during the year ended December 31, 2010, we impaired approximately $2.0 million for inventory, equipment and other assets no longer needed in our business. We may determine that further asset impairment charges are needed in the future. Although any such impairment charge would be a non-cash expense, further impairment of our tangible or intangible assets could materially increase our expenses and reduce our results of operations.
Our success depends on our key personnel, including our executive officers, and the loss of key personnel or the transition of key personnel, including our Chief Executive Officer, could disrupt our business.
Our success greatly depends on the continued contributions of our senior management and other key sales, marketing and operations personnel. These employees may voluntarily terminate their employment at any time. We may not be able to successfully retain existing personnel or identify, hire and integrate new personnel; and we do not have key person insurance policies in place for these employees. Since May 7, 2012, Margaret Randazzo, our Chief Financial Officer and a director, has acted as our Chief Executive Officer. We are currently conducting a search for a successor to Ms. Randazzo, who will be resigning as our Chief Executive Officer and Chief Financial Officer effective June 30, 2014. There can be no assurance that we will be able to find a suitable candidate to fill both roles or that there will be a smooth transition. Changes in our key positions can be disruptive and could have a material adverse effect on our operations and business.
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If we are unable to attract, train and retain highly qualified personnel, the quality of our services may decline and we may not successfully execute our internal growth strategies.
Our success depends in large part upon our ability to continue to attract, train, motivate and retain highly skilled and experienced employees, including technical personnel. Qualified technical employees periodically are in great demand and may be unavailable in the time frame required to satisfy our customers’ requirements. While we currently have available technical expertise sufficient for the requirements of our business, expansion of our business could require us to employ additional highly skilled technical personnel. We expect competition for such personnel to increase as the market for solar power systems expands.
There can be no assurance that we will be able to attract and retain sufficient numbers of highly skilled technical employees in the future including a successor CEO or CFO. The loss of personnel or our inability to hire or retain sufficient personnel at competitive rates of compensation could impair our ability to secure and complete customer engagements and could harm our business.
Unexpected warranty expenses or service claims could reduce our profits.
We maintain a warranty reserve on our balance sheet for potential warranty or service claims that could occur in the future. This reserve is adjusted based on our ongoing operating experience with equipment and installations. It is possible, perhaps due to bad supplier material or defective installations, that we would have actual expenses substantially in excess of the reserves we maintain. Our failure to accurately predict future warranty claims could result in unexpected profit volatility.
RISKS RELATING TO OUR INDUSTRY
We have experienced technological changes in our industry. New technologies may prove inappropriate and result in liability to us or may not gain market acceptance by our customers.
The solar power industry (and the alternative energy industry, in general) is subject to technological change. Our future success will depend on our ability to appropriately respond to changing technologies and changes in function of products and quality. If we adopt products and technologies that are not attractive to consumers, we may not be successful in capturing or retaining a significant share of our market. In addition, some new technologies are relatively untested and unperfected and may not perform as expected or as desired, in which event our adoption of such products or technologies may cause us to lose money.
A drop in the retail price of conventional energy or non-solar alternative energy sources may negatively impact our profitability.
We believe that an end customer’s decision to purchase or install solar power capabilities is primarily driven by the cost and return on investment resulting from solar power systems. Fluctuations in economic and market conditions that affect the prices of conventional and non-solar alternative energy sources, such as decreases in the prices of oil and other fossil fuels, could cause the demand for solar power systems to decline, which would have a negative impact on our profitability. Changes in utility electric rates or net metering policies could also have a negative effect on our business.
Existing regulations, and changes to such regulations, may present technical, regulatory and economic barriers to the purchase and use of solar power products, which may significantly reduce demand for our products and services.
New government regulations or utility policies pertaining to solar power systems are unpredictable and may result in significant additional expenses or delays and, as a result, could cause a significant reduction in demand for solar energy systems and our services. For example, there currently exist metering caps in certain jurisdictions which effectively limit the aggregate amount of power that may be sold by solar power generators into the power grid.
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Our business depends on the availability of rebates, tax credits and other financial incentives; reduction, elimination or uncertainty of which would reduce the demand for our products and services.
Many states offer incentives to offset the cost of solar power systems. These systems can take many forms, including direct rebates, state tax credits, system performance payments and Renewable Energy Credits (RECs). Moreover, the federal government currently offers a 30% tax credit for the installation of solar power systems. Businesses may also elect to accelerate the depreciation on their system over five years. Uncertainty about the introduction of, reduction in or elimination of such incentives or delays or interruptions in the implementation of favorable federal or state laws could substantially increase the cost of our systems to our customers, resulting in significant reductions in demand for our services, which would negatively impact our sales.
If solar power technology is not suitable for widespread adoption or sufficient demand for solar power products does not develop or takes longer to develop than we anticipate, our sales would decline and we would be unable to achieve or sustain profitability .
The market for solar power products is emerging and rapidly evolving, and its future success is uncertain. Many factors will influence the widespread adoption of solar power technology and demand for solar power products, including:
·
cost effectiveness of solar power technologies as compared with conventional and non-solar alternative energy technologies;
·
performance and reliability of solar power products as compared with conventional and non-solar alternative energy products;
·
capital expenditures by customers that tend to decrease if the U.S. economy slows; and
·
availability of government subsidies and incentives.
If solar power technology proves unsuitable for widespread commercial deployment or if demand for solar power products fails to develop sufficiently, we would be unable to generate enough revenue to achieve and sustain profitability. In addition, demand for solar power products in the markets and geographic regions we target may not develop or may develop more slowly than we anticipate.
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RISKS RELATING TO OUR COMMON STOCK
We were delisted from the Nasdaq Capital Market and there is a limited trading volume for our common stock on the OTCQB.
In September 2012, our common stock was delisted from the Nasdaq Capital Market. Our common stock, which currently trades on the OTCQB, does not have substantial trading volume. As a result, relatively small trades of our common stock may have a significant impact on the price of our common stock and, therefore, may contribute to the price volatility of our common stock. Because of the limited trading volume in our common stock and the price volatility of our common stock, you may be unable to sell your shares of common stock when you desire or at the price you desire. The inability to sell your shares in a declining market because of such illiquidity or at a price you desire may substantially increase your risk of loss.
In addition, the delisting of our common stock from the Nasdaq Capital Market could materially adversely affect our ability to raise capital on terms acceptable to us or at all and could adversely affect institutional investor interest.
On February 17, 2011, we entered into a Securities Purchase Agreement with accredited investors, pursuant to which we sold to such investors our Series B 4% Convertible Preferred (“Series B Preferred”), and our Series K Warrants. On October 18, 2012, we entered into a Securities Purchase Agreement with accredited investors, pursuant to which we sold to such investors our Series C 8% Convertible Preferred (Series C Preferred). On February 15, 2013, we entered into a Securities Purchase Agreement with accredited investors pursuant to which we sold to such investors our Series D 8% Convertible Preferred Stock (Series D Preferred), and together with the Series B and C Preferred (the “Preferred Stock”). The conversion price of the Preferred Stock is subject to adjustment downward in the event that we sell common stock (or securities convertible into or exercisable for shares of common stock) at an effective price below the conversion price of such Preferred Stock. If the price adjustment provisions are triggered, then the number of shares of common stock issuable upon conversion of the Preferred Stock are subject to increase. On each of August 30, 2013 and November 25, 2013, we entered into a securities purchase agreement with certain institutional accredited investors relating to the sale and issuance of a convertible note in the principal amount of $200,000 that matures August 29, 2015 and November 25, 2015, respectively, and is convertible into shares of our common stock, at any time after issuance, at the option of the purchaser, at a conversion price equal to $0.02, subject to adjustment upon the happening of certain events, including stock dividends, stock splits and the issuance of common stock equivalents at a price below the conversion price. On December 19, 2013, we entered into a securities purchase agreement with certain institutional accredited investors relating to the sale and issuance of a (i) convertible note in the principal amount of $250,000 that matures December 19, 2015, and is convertible into shares of our common stock, at any time after issuance, at the option of the purchaser, at a conversion price equal to $0.02, subject to adjustment upon the happening of certain events and (ii) five-year warrant exercisable for 6,250,000 shares of common stock at an exercise price of $0.02, subject to adjustment upon the happening of certain events .
When the investors convert our Preferred Stock and convertible notes or exercise the warrant, our stockholders may experience dilution in the net tangible book value of their common stock. In addition, the sale or availability for sale of the underlying shares in the marketplace could depress our stock price. As a result, the investors could resell the underlying shares immediately upon issuance, which may result in significant downward pressure on the market price of our stock. In connection with the Series D Preferred and convertible notes, we have granted the purchasers “piggy-back” registration rights to include the underlying shares of common stock issuable upon conversion of the Series D Preferred in future registration statements, if any are filed by us.
In addition, the terms of our Preferred Stock include various agreements and negative covenants on our part, including covenants on our part to maintain and keep available sufficient authorized shares of our common stock to support the conversion in full of our outstanding shares of preferred stock. As a result of our financing on August 30, 2013, the effective conversion price of various shares of outstanding Preferred Stock was adjusted downward to $0.02 per share of common stock. In the event we fail to comply with those provisions, or if a “change of control” of the Company occurs, it could constitute a “triggering event” (as defined in the Certificates of Designation which designate the rights of the three series of Preferred Stock), and the holders of our Preferred Stock could then demand that all of the outstanding shares of Preferred Stock be redeemed for cash (in certain circumstances generally within our control), or under certain circumstances, for shares of our common stock. Any such demand for redemption in cash could have a material adverse affect on our financial position and liquidity, and any demand for redemption in stock could have a material dilutive effect for our stockholders. In addition, in certain such triggering events, the dividend rate on our outstanding Preferred Stock is subject to increase to 18% per annum thereafter.
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Future sales of common stock by our existing stockholders may cause our stock price to fall.
The market price of our common stock could decline as a result of sales by our existing stockholders of shares of common stock in the market, or the perception that these sales could occur. These sales might also make it more difficult for us to sell equity securities at a time and price that we deem appropriate. As of January 22, 2014, we had 117,873,138 shares of common stock outstanding (which includes 1,890,952 unvested shares of restricted stock granted to our directors and our employees), 830 shares of Series D Preferred that are convertible into 41,500,000 shares of common stock, 87 shares of Series C Preferred that are convertible into 4,333,350 shares of common stock, 467 shares of Series B Preferred that are convertible into 21,020,232 shares of common stock, and we had warrants to purchase 3,360,546 shares of common stock and options to purchase 5,368,233 shares of common stock outstanding.
All of the shares of common stock issuable upon exercise of our outstanding vested options will be freely tradable without restriction under the federal securities laws unless purchased by our affiliates.
Our stock price may be volatile, which could result in substantial losses for investors.
The market price of our common stock is likely to be highly volatile and could fluctuate widely in response to various factors, many of which are beyond our control, including the following:
·
technological innovations or new products and services by us or our competitors;
·
announcements or press releases relating to the energy sector or to our business or prospects;
·
additions or departures of key personnel;
·
regulatory, legislative or other developments affecting us or the solar power industry generally;
·
our ability to execute our business plan;
·
operating results that fall below expectations;
·
volume and timing of customer orders;
·
industry developments;
·
economic and other external factors; and
·
period-to-period fluctuations in our financial results.
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also significantly affect the market price of our common stock.
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Our stock is a penny stock and therefore may be less attractive to investors.
Our stock is considered to be a penny stock. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling our securities.
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RISKS RELATING TO OUR COMPANY
The recently terminated Merger Agreement with CBD could have a material adverse effect on our business, results of operations, and financial condition.
On May 7, 2012, we entered into a merger agreement with CBD Energy Limited, an Australian corporation (CBD). We had originally targeted completion of the merger during the third quarter of 2012, however the target date for completion had been repeatedly delayed, and the necessary registration statement had yet to be completed and filed. The uncertainty resulted in a disruption in our supply relationships, leading to a significant decline in our revenue and the implementation of significant cost reductions including the layoff of employees during the time we pursued the merger. Given the continued delays and uncertainty of whether and when the closing conditions for the merger as set for in the merger agreement will be satisfied, we terminated the merger agreement with CBD effective July 18, 2013. We are now committed to focus our attention on rebuilding our core business, expanding our current product offerings and exploring strategic opportunities.
If we are unable to successfully rebuild our core business, expand our current product offerings or determine viable strategic opportunities, our business, operating results or financial condition could be materially adversely affected.
We are subject to the reporting requirements of the federal securities laws, which impose additional burdens on us.
We are a public reporting company and, accordingly, subject to the information and reporting requirements of the Exchange Act and other federal securities laws, including compliance with the Sarbanes-Oxley Act of 2002. As a public company, these rules and regulations result in increased compliance costs and make certain activities more time consuming and costly.
Our Certificate of Incorporation authorizes our board to create new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our common stock.
Our Board of Directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our Board of Directors also has the authority to issue preferred stock without further stockholder approval. As a result, our Board of Directors could authorize the issuance of new series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. In addition, our Board of Directors could authorize the issuance of new series of preferred stock that has greater voting power than our common stock or that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing stockholders.
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RISKS RELATING TO THE OFFERING
Future issuances of common shares may be adversely affected by the Equity Line.
The market price of our common stock could decline as a result of issuances and sales by us, including pursuant to the Equity Purchase Agreement, or sales by our existing shareholders, of common stock, or the perception that these issuances and sales could occur. Sales by our shareholders might also make it more difficult for us to issue and sell common stock at a time and price that we deem appropriate. It is likely that the sale of shares by Southridge will depress the market price of our common stock.
Draw downs under the Equity Line may cause dilution to existing shareholders.
Southridge has committed to purchase up to $5,000,000 worth of shares of our common stock. From time to time during the term of the Equity Line, and at our sole discretion, we may present Southridge with a Draw Down Notice requiring Southridge to purchase shares of our common stock. The purchase price to be paid by Southridge will be 90% of the lowest closing bid price during the Valuation Period. On the date the Draw Down Notice is delivered to Southridge, we are required to deliver an estimated amount of shares to Southridge’s brokerage account equal to 125% of the Draw Down Amount indicated in the Draw Down Notice divided by the closing bid price of the trading day immediately prior to the date of the Draw Down Notice (“Estimated Shares”). The Valuation Period will begin the first trading day after the Estimated Shares have been delivered to Southridge’s brokerage account and have been cleared for trading and terminate on the tenth day thereafter. At the end of the Valuation Period, if the number of Estimated Shares delivered to Southridge is greater than the shares issuable pursuant to a Draw Down, then Southridge is required to return to us the difference between the Estimated Shares and the actual number of shares issuable pursuant to the Draw Down. If the number of Estimated Shares is less than the shares issuable under the Draw Down, then we are required to issue additional shares to Southridge equal to the difference; provided that the number of shares to be purchased by Southridge may not exceed the number of shares that, when added to the number of shares of our common stock then beneficially owned by Southridge, would exceed 9.99% of our shares of common stock outstanding. As a result, our existing shareholders will experience immediate dilution upon the purchase of any of the shares by Southridge. The issue and sale of the shares under the Equity Purchase Agreement may also have an adverse effect on the market price of the common shares. Southridge may resell some, if not all, of the shares that we issue to it under the Equity Purchase Agreement and such sales could cause the market price of the common stock to decline significantly. To the extent of any such decline, any subsequent puts would require us to issue and sell a greater number of shares to Southridge in exchange for each dollar of the put amount. Under these circumstances, the existing shareholders of our company will experience greater dilution. The effect of this dilution may, in turn, cause the price of our common stock to decrease further, both because of the downward pressure on the stock price that would be caused by a large number of sales of our shares into the public market by Southridge, and because our existing stockholders may disagree with a decision to sell shares to Southridge at a time when our stock price is low, and may in response decide to sell additional shares, further decreasing our stock price. If we draw down amounts under the Equity Line when our share price is decreasing, we will need to issue more shares to raise the same amount of funding.
There is no guarantee that we will satisfy the conditions to the Equity Purchase Agreement.
Although the Equity Purchase Agreement provides that we can require Southridge to purchase, at our discretion, up to $5,000,000 worth of shares of our common stock in the aggregate, there can be no assurances given that we will be able to satisfy the closing conditions applicable for each put. Further, there are limitations on the number of shares in that each draw down amount is limited to the lowest closing bid price during the Valuation Period, subject to the floor. In addition, the number of shares to be purchased by Southridge may not exceed the number of shares that, when added to the number of shares of our common stock then beneficially owned by Southridge, would exceed 9.99% of our shares of common stock outstanding. Other conditions include requiring that the registration statement of which this prospectus forms a part remains effective at all times during the term of the Equity Purchase Agreement, that there is no material adverse change to our business on the date of delivery of a Draw Down Notice and that our common stock continues to trade of the OTCQB. If we fail to satisfy the applicable closing conditions, we will not be able to sell the put shares to Southridge.
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There is no guarantee that we will be able to fully utilize the Equity Line .
There are limitations on the number of put shares that may be sold in each put. The number of put shares that Southridge shall be obligated to purchase in a given put shall not exceed the number of shares that, when added to the number of shares of our common stock then beneficially owned by Southridge, would exceed 9.99% of our shares of common stock outstanding. Thus, our ability to access the bulk of the funds available under the Equity Line depends in part on Southridge’s resale of stock purchased from us in prior puts. If with regard to a particular put, the share volume limitation is reached, we will not be able to sell the proposed put shares to Southridge. Accordingly, the Equity Line may not be available at any given time to satisfy our funding needs.
Sales of put shares under the Equity Purchase Agreement could result in the possibility of short sales.
Although Southridge has agreed not to enter into any “short sale” (as such term is defined in Rule 200 of Regulation SHO of the Securities Exchange Act of 1934), of our common stock, the sale after delivery of a put notice of such number of shares of common stock reasonably expected to be purchased under a put notice is not deemed a “short sale.” Accordingly, Southridge may enter into sales or other arrangements it deems appropriate with respect to shares of our common stock after it receives a put notice under the Equity Purchase Agreement so long as such sales or arrangements do not involve more than the number of put shares expected to be purchased under the applicable put notice. Any downward pressure on the market price of our common stock due to the issue and sale of common stock under the Equity Line could encourage short sales. If the market price of our common stock decreases during the put period it will reduce the amount paid by Southridge for the put shares. In a short sale, a prospective seller borrows common shares from a shareholder or broker and sells the borrowed common shares. The prospective seller hopes that the common share market price will decline, at which time the seller can purchase common shares at a lower price for delivery back to the lender. The seller profits when the common share market price declines because it is purchasing common shares at a price lower than the sale price of the borrowed common shares. Such sales could place downward pressure on the market price of the common stock by increasing the number of common shares being sold, which could further contribute to any decline of the market price of the common shares.
There is uncertainty as to number of subscription shares and the amount Southridge will pay for the put shares.
The actual number of shares we will issue in any particular put or in total under the Equity Purchase Agreement is uncertain. Subject to certain limitations in the Equity Purchase Agreement, we have the discretion to give a put notice at any time throughout the term. The number of shares we must issue after giving a put notice will fluctuate based on the market price of the common shares during the put pricing period. Southridge will receive more shares if the market price of our common stock declines. Since the price per share of each put share will fluctuate based on the market price of our common stock during the put pricing period, the actual amount Southridge will pay for the put shares included in any particular put will decrease if the market price of our common stock declines. Based on our current market price of $0.02, if we put all 35,000,000 shares to Southridge (ignoring all caps on the number of shares of common stock that Southridge can own), we would receive $630,000.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock by the selling security holder pursuant to this prospectus. All proceeds from the sale of the shares will be for the account of the selling security holder.
We have agreed to bear the expenses relating to the registration of the shares for the selling security holder. We anticipate receiving proceeds from any “puts” tendered to Southridge under the Equity Line. Such proceeds from the Equity Line are intended to be used approximately as follows: to fund our research and development, marketing and advertising, distribution efforts, technology development, product line expansion and enhancement and working capital needs.
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DILUTION
Although the fixed offering price of $0.0243 was based on the closing price of our shares of common stock as listed on the OTCQB on January 22, 2014, it may not be the actual sales price of the shares registered hereunder at the time they are sold, if shares were to be sold at such price, investors would experience an immediate and substantial dilution in the projected net tangible book value of the common stock from the price that the investors in our recent private placement offering. The net tangible book value of our common stock as of September 30, 2013 was ($4,336,008), or ($0.0472) per share of common stock. Net tangible book value per share is equal to our total tangible assets, less total liabilities, divided by the number of shares of common stock outstanding. If you buy stock registered in this offering at $0.0243 per share, you will pay substantially more than our current common shareholders paid for their shares. The difference between the initial public offering price per share and the pro forma net tangible book value per share of our common stock after this offering constitutes the dilution to investors in this offering.
The following table illustrates the dilution to the new investors on a per-share basis:
Initial public offering price
$ 0.0243
Net tangible book value per share before offering
$ (0.0472 )
Increase in net tangible book value per share attributable to new investors
$ 0.0188
Pro forma net tangible book value per share after offering
$ (0.0284 )
Dilution to new investors
$ 0.0527
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DETERMINATION OF OFFERING PRICE
The offering price for the shares sold to Southridge under the put will equal 90% of the lowest closing bid price during the Valuation Period. To the extent that the disparity between the offering price and market price of the common stock is material, such disparity was determined by our company to be fair in consideration of Southridge establishing a line of credit to facilitate our ongoing operations.
Equity Purchase Agreement
We entered into the Equity Purchase Agreement with Southridge on January 23, 2014, which superseded our prior Equity Purchase Agreement that we entered into on November 25, 2013. Pursuant to the Equity Purchase Agreement, Southridge committed to purchase up to $5,000,000 worth of our common stock, over a period of time terminating on the earlier of: (i) 18 months from the effective date of a registration statement to be filed in connection therewith; or (ii) the date on which Southridge has purchased shares of our common stock pursuant to the Equity Purchase Agreement for an aggregate maximum purchase price of $5,000,000; such commitment is subject to certain conditions, including limitations based on the trading volume of our common stock. The aggregate number of shares issuable by us and purchasable by Southridge pursuant to the Equity Purchase Agreement is $5,000,000 worth of stock, which was determined by our board of directors.
Ms. Randazzo will be resigning as Chief Executive Officer and Chief Financial Officer of the Company effective June 30, 2014
http://biz.yahoo.com/e/140123/west8-k.html
Home prices rise 0.1% in November: FHFA
9:09 AM ET 1/23/14 | MarketWatch
WASHINGTON (MarketWatch) -- Home prices ticked up 0.1% in November, and were up 7.6% from the year-earlier period, the Federal Housing Finance Agency reported Thursday. In October, prices rose 0.5%. FHFA's data are based on sales information from mortgages sold to or guaranteed by federally controlled mortgage buyers Fannie Mae (FNMA) and Freddie Mac (FMCC).
-Ruth Mantell; 415-439-6400; AskNewswires@dowjones.com
> Dow Jones Newswires
January 23, 2014 09:09 ET (14:09 GMT)
Copyright (c) 2014 Dow Jones & Company, In
Of the new transaction, Watt said, "This and other risk-sharing transactions undertaken by Fannie Mae and Freddie Mac provide valuable insight as to how to restore private sector participation in housing finance and reduce losses for taxpayers."
YOU HAVE TO LOVE THIS NEWS.....About one week later, the FHFA also announced that Fannie Mae is close to the completion of its second Connecticut Avenue Securities, or C-deals, transaction, which effectively allows institutional investors to invest in the credit risk of mortgages that Fannie Mae retains on its books. This move essentially helps manage and transfer the risk posed to Fannie Mae by bringing in private investment.
2 Big Moves Show the Future Direction of Fannie Mae and Freddie Mac
http://www.fool.com/investing/general/2014/01/23/2-big-moves-show-the-future-direction-of-fannie-ma.aspx
I love this kind of news it is coming patient please. The GSEs have nearly paid back their $180bn bailout from the Treasury, thanks to the recovery in home prices since the financial crisis of 2008. That has fuelled talk that reform was not required at this time, particularly with midterm elections later this year dominating the agenda in Washington.
http://www.ft.com/intl/cms/s/7a056cc0-839a-11e3-86c9-00144feab7de,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F7a056cc0-839a-11e3-86c9-00144feab7de.html%3Fsiteedition%3Dintl&siteedition=intl&_i_referer=#axzz2rBDWnr6t
http://www.ft.com/intl/cms/s/0/7a056cc0-839a-11e3-86c9-00144feab7de.html
[John Marr Joins Greystone as Managing Director to Boost Loan Origination in Northeast and Midwest
9:00 AM ET | BusinessWire
Greystone, a leading national provider of multifamily and healthcare mortgage loans, today announced the addition of John Marr to the firm's production team. As a Managing Director, Marr will focus on origination for debt-financing solutions across Fannie Mae, Freddie Mac, FHA, CMBS, as well as Greystone's proprietary lending platforms. Marr brings over 30 years of experience financing various types of real estate projects to Greystone. Based in Connecticut, he will report to Joe Mosley, Executive Vice President and Head of Agency Production. "We are excited for John to join the team at Greystone," said Mosley. "An industry veteran, his experience in commercial, mortgage and investment banking and broad expertise in project finance will be a valuable resource as we continue to expand our offerings." Marr joins Greystone from Alliant/ACRE Capital LLC, where he served as Senior Vice President and was responsible for originating new multifamily loans across the Northeast and Midwest. Previously, Marr held roles at PaineWebber and Citibank, where he arranged financing for healthcare facilities and multifamily housing. Marr received a Bachelor's Degree in Economics from Hartwick College and an MBA in Finance from the Wharton School of the University of Pennsylvania. Greystone was the number one FHA lender in 2013 and is ranked as a top-10 Fannie Mae lender. For more information about Greystone's multifamily financing solutions please visit http://www.greyco.com/multifamily. About Greystone Greystone is a financial services and private investment group whose original core business is real estate lending. Over the years, Greystone has added business lines that are related to, and are natural extensions of, its core business. Headquartered in New York with offices across the U.S., Greystone is active in three major business segments: Mortgage Finance, Real Estate and Healthcare. Greystone's mission is to apply unparalleled creativity while modeling corporate compassion. Loans are offered through Greystone Servicing Corporation, Inc., Greystone Funding Corporation and/or other Greystone affiliates. For more information about Greystone's multifamily and healthcare financing solutions please visit www.greyco.com. http://cts.businesswire.com/ct/CT?id=bwnews&sty=20140121005066r1&sid=cmtx6&distro=nx SOURCE: Greystone Greystone Karen Marotta, 212-896-9149 PR Manager, Greystone KMarotta@Greyco.com/b]
I think it is let me check on that. What ever the case is I love it $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ coming in.
1.4 billion euros to settle claims
[/bThe bank agreed to pay U.S. financing companies Fannie Mae (FNMA) and Freddie Mac 1.4 billion euros to settle claims that it didn’t provide adequate disclosure about mortgage-backed securities. The European Commission fined Deutsche Bank 725 million euros on Dec. 4 for its part in rigging interest rates linked to the London interbank offered rate. The company said Dec. 19 that it reached a settlement to forfeit 221 million euros to end a derivatives contract with Italian bank Banca Monte dei Paschi di Siena SpA. ]
http://www.bloomberg.com/news/2014-01-19/deutsche-bank-posts-eu1-2-billion-fourth-quarter-pretax-loss.html?cmpid=yhoo
Thank you
Institutional ownership is 21% I love it.
http://finance.yahoo.com/q/mh?s=FNMA+Major+Holders
New House Democrat proposal would sell off Fannie, Freddie
http://blogs.marketwatch.com/capitolreport/2014/01/16/new-house-democrat-proposal-would-sell-off-fannie-freddie/
[bBrokers after shares]
Last Price
3.29
Today's Change
+0.01(+0.30%)
The proposal by John Delaney, John Carney and Jim Himes substantially winds down Fannie and Freddie over five years, creating a path for their eventual sale
http://www.ft.com/cms/s/0/7f0588f2-7eec-11e3-8642-00144feabdc0.html#axzz2qbHlEnbR
I LOVE IT $$O$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ SORYY I AM GOING CRAZY HERE.
The proposal by John Delaney, John Carney and Jim Himes substantially winds down Fannie and Freddie over five years, creating a path for their eventual sale.
http://www.ft.com/cms/s/0/7f0588f2-7eec-11e3-8642-00144feabdc0.html#axzz2qbHlEnbR
Next Earnings Date 2/10/14
To be Sold as Independent Companies without Government Support[/b I LOVE IT $$$$$$$$$$$$$$$$$$$$
I
Walker & Dunlop Announces 2013 Loan Origination Volume of $8.4 Billion and Details for Fourth Quarter and Full Year 2013 Earnings Conference Call
4:15 PM ET 1/15/14 | PR Newswire
Walker & Dunlop, Inc. (the "Company") (NYSE: WD) announced today 2013 loan origination volume of $8.4 billion, an increase of 18% over 2012. Fourth quarter loan origination volume of $2.3 billion was above the mid-point of fourth quarter origination guidance of $1.5 to $3.0 billion. The Company ended the year with a loan servicing portfolio of $38.9 billion, an increase of 11% over 2012.
"The 18% year-on-year increase in origination volume represents our fifth consecutive year of origination volume growth, for a compound annual growth rate of 33%," stated Willy Walker, Walker & Dunlop's Chairman and CEO. "Fannie Mae and Freddie Mac origination volumes were capped in 2013, and Walker & Dunlop's GSE originations were down 10.8% year-on-year, in line with the cap. HUD volumes, in a very challenging year from a political standpoint, grew extremely well at 33%. And our diversification strategy to grow capital markets and proprietary capital originations made fantastic progress, growing 117% and 449%, respectively. Posting 18% aggregate origination growth in a year when Fannie Mae and Freddie Mac had origination caps and now account for only 53% of our originations, down from 71% in 2012, demonstrates the strength in the commercial real estate market and is exactly why we embarked on our diversification strategy."
Loan origination volumes by investor were as follows:
View data
Loan Origination Volume by Investor For the years ended: December 31, 2013(1)(2) December 31, 2012(1)(2) % Change Fannie Mae $2,763 $3,330 -17% Freddie Mac $1,710 $1,685 1% HUD/Ginnie Mae $1,137 $855 33% Brokered(3) $2,593 $1,197 117% Interim Loans(4) $192 $35 449% Total $8,395 $7,102 18% (1) Dollars in millions (2) Amounts are unaudited (3) Includes loans brokered to CMBS, life insurance companies and commercial banks (4) Includes our on-Balance Sheet interim loans and loans made through our large loan bridge program
Origination and servicing volumes in this release are unaudited, and these amounts may be adjusted as the Company completes its year-end audit. The Company is releasing the unaudited 2013 loan origination and servicing volumes in order to participate in industry surveys. No conclusions should be drawn about the Company's fourth quarter and full year 2013 results from these announced volumes.
The Company will release its fourth quarter and full year 2013 results before the market opens on Thursday, February 13, 2014, and will host a conference call to discuss the results on February 13, 2014 at 8:30 a.m. Eastern time. Analysts and investors interested in participating are invited to call (866) 952-1906 from within the United States or (785) 424-1825 from outside the United States and are asked to reference the Conference ID: WDQ413. A simultaneous webcast of the call will be available on the Investor Relations section of the Company's website at www.walkerdunlop.com.
A telephonic replay of the call will be available from approximately 11:00 a.m. Eastern time February 13, 2014 through February 27, 2014. To access the replay, please call (800) 283-4216 from within the United States or (402) 220-9033 from outside the United States. An audio replay also will be available on the Investor Relations section of the Company's website.
About Walker & Dunlop
Through its subsidiary Walker & Dunlop, LLC, Walker & Dunlop, Inc. (NYSE: WD) is one of the leading commercial real estate finance companies in the United States, with a primary focus on multifamily lending. As a Fannie Mae DUS(R), Freddie Mac Program Plus(R) and MAP- and LEAN-approved FHA lender, the Multifamily and FHA Finance groups are focused on lending to property owners, investors, and developers of multifamily properties across the country. The Capital Markets group specializes in financing commercial real estate for owners and investors across the United States, securing capital from large institutions such as life insurance companies, commercial banks, CMBS lenders, pension funds, and specialty finance companies. The Proprietary Capital group develops new financial products and provides institutional advisory, asset management, and investment management services with respect to debt and equity, including bridge financing. Walker & Dunlop, LLC has more than 400 employees located in 21 offices nationwide. For more information about the Company, please visit www.walkerdunlop.com or follow us on Twitter at @Walkerdunlop.
Forward Looking Statements Some of the statements contained in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as ''may,'' ''will,'' ''should,'' ''expects,'' ''intends,'' ''plans,'' ''anticipates,'' ''believes,'' ''estimates,'' ''predicts,'' or ''potential'' or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.
The forward-looking statements contained in this press release reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement.
While forward-looking statements reflect our good faith projections, assumptions and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes, except as required by applicable law. Factors that could cause our results to differ materially include, but are not limited to: (1) general economic conditions and multifamily and commercial real estate market conditions, (2) regulatory and or legislative changes to Freddie Mac, Fannie Mae or HUD, (3) our ability to retain and attract loan originators and other professionals, and (4) changes in federal government fiscal and monetary policies, including any constraints or cuts in federal funds allocated to HUD for loan originations.
For a further discussion of these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements, see the section entitled ''Risk Factors" in our most recent Annual Report on Form 10-K and in our subsequent SEC filings. Such filings are available publicly on our Investor Relations web page at www.walkerdunlop.com.
SOURCE Walker & Dunlop, Inc.
http://rt.prnewswire.com/rt.gif?NewsItemId=PH46920&Transmission_Id=201401151615PR_
NEWS OUT
MultiCell Technologies Files Patent Application Covering New Class of RNA Therapeutics
http://finance.yahoo.com/news/multicell-technologies-files-patent-application-133900771.html
[bFBI fears Fannie, Freddie getting fleeced: report
8:31 AM ET 1/14/14 | MarketWatch
NEW YORK (MarketWatch) -- The Federal Bureau of Investigation is probing whether traders are front-running mortgage giants Fannie Mae (FNMA) and Freddie Mac (FMCC) in the swaps market, Reuters reported Tuesday. The report, citing an FBI intelligence bulletin, said some traders were using "unsophisticated tradecraft" such as hand signals and special ring tones as they conspired to rig rates on large orders submitted by Fannie and Freddie. According to the bulletin, the information came from a former high-level employee at a U.S. bank and a Canadian bank employee, Reuters reported. The bulletin didn't name any of the traders or banks suspected of the activity or whether it might extend beyond the two banks, the report said. Reuters said spokesmen for Fannie and Freddie didn't immediately return requests for comment, while the Securities and Exchange Commission and the Commodity Futures Trading Commission declined comment.
-MarketWatch; 415-439-6400; AskNewswires@dowjones.com
> Dow Jones Newswires
January 14, 2014 08:31 ET (13:31 GMT)
Copyright (c) 2014 Dow Jones & Company, Inc]
The objective of the transaction is to transfer credit risk from Fannie Mae to private investors with respect to a $29 billion pool of mortgage loans currently held in previously issued MBS guaranteed by Fannie Mae where principal repayment of the notes are subject to the performance of a reference pool of mortgage loans. As loans become 180 day delinquent or other credit events occur, the outstanding principal balance of the debt notes will be reduced by a pre-defined, tiered loss severity percentage related to those credit events.
FULL ARTICLE BELOW.
Fitch Expects to Rate Fannie Mae's Connecticut Ave Securities, Series 2014-C01; Presale IssuedFont
5:19 PM ET 1/13/14 | BusinessWire
Fitch Ratings expects to assign the following rating and Rating Outlook to Fannie Mae's second risk transfer transaction, Connecticut Avenue Securities, series 2014-C01:
--$375,000,000 class M-1 notes 'BBB-sf'; Outlook Stable.
The following classes will not be rated by Fitch:
--$28,429,457,323 class A-H reference tranche;
--$20,667,705 class M-1H reference tranche;
--$375,000,000 class M-2 notes;
--$20,667,705 class M-2H reference tranche;
--$87,926,156 class B-H reference tranche.
The 'BBB-sf' rating for the M-1 notes reflects the 1.65% subordination provided by the 1.35% class M-2 Notes and the non-offered 0.30% B-H Reference Tranche. The notes are general senior unsecured obligations of Fannie Mae (rated 'AAA on Negative Watch by Fitch) subject to the credit and principal payment risk of a pool of certain residential mortgage loans held in various Fannie Mae-guaranteed MBS.
Connecticut Avenue Securities, series 2014-C01 (CAS 2014-C01) is Fannie Mae's second risk transfer transaction issued as part of the Federal Housing Finance Agency's Conservatorship Strategic Plan for 2013 - 2017 for each of the government sponsored enterprises (GSEs) to demonstrate the viability of multiple types of risk transfer transactions involving single family mortgages.
The objective of the transaction is to transfer credit risk from Fannie Mae to private investors with respect to a $29 billion pool of mortgage loans currently held in previously issued MBS guaranteed by Fannie Mae where principal repayment of the notes are subject to the performance of a reference pool of mortgage loans. As loans become 180 day delinquent or other credit events occur, the outstanding principal balance of the debt notes will be reduced by a pre-defined, tiered loss severity percentage related to those credit events.
While the transaction structure simulates the behavior and credit risk of traditional RMBS mezzanine and subordinate securities, Fannie Mae will be responsible for making monthly payments of interest and principal to investors. Because of the counterparty dependence on Fannie Mae, Fitch's expected rating on the M-1 notes will be based on the lower of: the quality of the mortgage loan reference pool and credit enhancement available through subordination; and Fannie Mae's Issuer Default Rating. The M-1 notes will be issued as uncapped LIBOR-based floaters and will carry a 10-year legal final maturity.
KEY RATING DRIVERS
Sustainable Home Value Rising: Fitch's sustainable home price values increased for 48 of the top 50 metropolitan statistical areas (MSAs) between the second and third quarters of 2013 due to continued improvement in the economic indicators factored into Fitch's view. However, the Case Shiller home price index continued to increase at a faster pace than is supported by economic fundamentals, causing only 14 of the 50 MSAs to move closer to sustainable values. As a result, Fitch's market value decline assumption slightly increased over the prior transaction, raising its loss expectation to 1.65% for this reference pool from 1.60%. There was virtually no credit drift in the collateral attributes.
Fewer Due Diligence Findings: Compared to Fannie Mae's prior transaction, fewer findings in the due diligence review were noted. The findings are reflective of the improvements made to Fannie Mae's risk management and quality control processes, which have evolved over time, with the majority of the processes developed following the crisis and implemented prior to 2013. The findings also reflect the revised scope of the due diligence review to better reflect Fannie Mae's quality control process.
Improved Aggregator Platform: Based on a comprehensive review of the platform, Fitch believes that Fannie Mae has a robust lender quality assurance and loan quality control review platform in place. Fitch applied a modest reduction to its default expectations to account for the lower risk associated with the recent acquisitions.
Fixed Loss Severity: One of the unique structural features of the transaction is a fixed-loss severity schedule that is tied to cumulative net credit events. If actual loan loss severity is above the set schedule, Fannie Mae absorbs the higher losses. Fitch views the fixed loss severity positively as it reduces uncertainty that may be driven by future changes in Fannie Mae loss mitigation or loan modification policies. The fixed severity also offers investors greater protection against natural disaster events where properties are severely damaged and there is limited or no recourse to insurance.
Advantageous Payment Priority: The payment priority of the M-1 class will result in a shorter life and more stable credit enhancement than mezzanine classes in private-label (PL) RMBS, providing a relative credit advantage. Unlike PL mezzanine RMBS, which often do not receive a full pro rata share of the pool's unscheduled principal payment until year 10, the M-1 class can receive a full pro rata share of unscheduled principal immediately as long as a minimum credit enhancement level is maintained. Additionally, unlike PL mezzanine classes, which lose subordination over time due to scheduled principal payments to more junior classes, the M-2 and B-H classes will not receive any scheduled or unscheduled allocations until the M-1 is paid in full. The B-H class will not receive any scheduled or unscheduled principal allocations until the M-2 is paid in full.
10-Year Hard Maturity: The M-1 and M-2 notes benefit from a 10-year legal final maturity. As a result, any collateral losses on the reference pool that occur beyond year 10 are borne by Fannie Mae and do not affect the transaction. Fitch accounted for the 10-year hard maturity in its default analysis and applied a 10% reduction to its lifetime default expectations.
Rep and Warranty Gaps: While the loan defect risk for 2014-C01 is notably lower than for agency and non-agency mortgage pools securitized prior to 2009, Fitch believes the risk is greater for this transaction than for recently issued U.S. PL RMBS. Notably, neither Fannie Mae nor an independent third party will conduct loan file reviews for credit events and Fannie Mae will not conduct any reviews of loans from a seller once it has filed for bankruptcy. Fitch incorporated this risk into its analysis by treating all historical repurchases as if they were defaulted loans that were not repurchased. Consequently, the rating analysis includes an assumption that the loans will experience defect rates consistent with historical rates and that those defects will not be repurchased.
Solid Alignment of Interests: While the transaction is designed to transfer credit risk to private investors, Fitch believes the transaction benefits from solid alignment of interests. Fannie Mae will be retaining credit risk in the transaction by holding the senior reference tranche A-H, which has 3% of loss protection as well as the first loss B-H reference tranche, sized at 30bps. Fannie Mae is also retaining a 5.2% vertical slice/interest in the M-1 and M-2 tranches.
Limited Size and Scope of Third-Party Diligence: Only 608 of the loans eligible to be included in the reference pool were selected for review by a third-party diligence provider. Of the 608 loans, 359 were part of this transaction's reference pool. This sample selection was also limited to a population of 1,477 loans that had been previously reviewed by Fannie Mae. Furthermore, the third-party due diligence scope was limited to reflect Fannie Mae's post-close loan review for compliance. Fitch's review of Fannie Mae's risk management and quality control process/infrastructure, which has been significantly improved over the past several years, indicates a robust control environment that should minimize loan quality risk.
Special Hazard Leakage: Fitch believes the structure is vulnerable to special hazard risk as there is no consideration for payment disruptions related to natural disaster events in the credit event definition. As such, credit protection in the transaction may be eroded by natural disasters that may cause extended delinquencies (that may in part be allowed by disaster relief programs) but where borrowers ultimately cure. Fitch considered this risk in its analysis, conducted sensitivity analysis and found, based on prior observed performance in post-natural disaster events including Hurricane Katrina and the Northridge earthquake, the risk exposure is relatively low.
Receivership Risk Considered: Under the Federal Housing Finance Regulatory Reform Act, the Federal Housing Finance Agency (FHFA) must place Fannie Mae into receivership if it determines that Fannie Mae's assets are less than its obligations for longer than 60 days following the deadline of its SEC filing, as well as for other reasons. As receiver, FHFA could repudiate any contract entered into by Fannie Mae if it is determined that it would promote an orderly administration of Fannie Mae's affairs. Fitch believes that the U.S. government will continue to support Fannie Mae, which is reflected in its current rating of Fannie Mae. However, if at some point Fitch views the support as being reduced and receivership likely, the ratings of Fannie Mae could be downgraded and the M-1 notes rating affected.
RATING SENSITIVITIES
Fitch's analysis incorporates a sensitivity analysis to demonstrate how the ratings would react to steeper market value declines (MVDs) than assumed at the state or MSA level. The implied rating sensitivities are only an indication of some of the potential outcomes and do not consider other risk factors that the transaction may become exposed to or be considered in the surveillance of the transaction. Two sets of sensitivity analyses were conducted at the state and national level to assess the effect of higher MVDs for the subject pool.
Historical Economic Data Incorporated in sMVD Projections: In its analysis, Fitch considered placing a greater emphasis on recent economic performance in determining MVDs for the pool. While Fitch's current loan loss model looks to three years of historical data and one year of projections, this does not incorporate recent notable economic improvement. To reflect the more recent economic environment, a sensitivity analysis was performed using two years historical economic data and two years of projections.
California sMVDs: Roughly 30% of the pool is located in California, in areas with both high and low MVD projections. The MVD projections are key contributors to Fitch's default assessment of this pool. Fitch conducted sensitivity analysis assuming sMVDs were 5%, 10%, and 15% higher than that for California. The sensitivity analysis indicated an impact on ratings for the rated bond.
Additional Decline in sMVD at the National Level: This set of sensitivity analysis demonstrates how the rating would react to steeper MVDs at the national level. The analysis assumes MVDs of 5%, 10% and 15% in addition to the model-projected 31% at the 'BBB-sf' rating level for this pool. The analysis indicates a rating impact with a further 5% MVD from the current model projection with further rating migration for the additional 10% and 15% MVD assumptions.
Key Rating Drivers and Rating Sensitivities are further detailed in Fitch's accompanying presale report, available at 'www.fitchratings.com' or by clicking on the above link.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research
--'U.S. RMBS Mortgage Loan Loss Model Criteria' (August 2013);
--'U.S. RMBS Originator Review and Third-Party Due Diligence Criteria' (April 2013);
--'U.S. RMBS Cash Flow Analysis Criteria' (April 2013);
--'U.S. RMBS Representations and Warranties Criteria' (June 2013);
--'U.S. RMBS Rating Criteria' (July 2013);
--'Global Structured Finance Rating Criteria'(May 2013);
--'Global Rating Criteria for Single- and Multi-Name Credit-Linked Notes' (February 2013);
--'Connecticut Avenue Securities Series 2014-C01 Representations and Warranties Presale Appendix' (January 2014).
Applicable Criteria and Related Research: Connecticut Avenue Securities, Series 2014-C01 (Fannie Mae Risk Transfer Transaction) (US RMBS)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=729578
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=814364
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
http://cts.businesswire.com/ct/CT?id=bwnews&sty=20140113006642r1&sid=cmtx6&distro=nx
SOURCE: Fitch Ratings
View data
Fitch Ratings Primary Analyst: Rachel Brach, +1-212-908-0224 Director Fitch Ratings, Inc. One State Street Plaza New York, NY 10004 or Secondary Analyst: Christine Yan, +1-212-908-0838 Director or Committee Chairperson: Grant Bailey, +1-212-908-0544 Managing Director or Media Relations: Sandro Scenga, New York, +1 212-908-0278 sandro.scenga@fitchratings.com
#5 NOW.
[/
UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C.
FORM D
OMB APPROVAL
OMB Number: 3235-0076
Estimated Average burden hours per response: 4.0
Notice of Exempt Offering of Securities
1. Issuer's Identity
CIK (Filer ID Number) Previous Name(s) o None Entity Type
0001347452
Westinghouse Solar, Inc.
Akeena Solar, Inc.
Fairview Energy Corporation, Inc.
x Corporation
o Limited Partnership
o Limited Liability Company
o General Partnership
o Business Trust
o Other
Name of Issuer
Andalay Solar, Inc.
Jurisdiction of Incorporation/Organization
DELAWARE
Year of Incorporation/Organization
x Over Five Years Ago
o Within Last Five Years (Specify Year)
o Yet to Be Formed
2. Principal Place of Business and Contact Information
Name of Issuer
Andalay Solar, Inc.
Street Address 1 Street Address 2
2071 Ringwood Ave. Unit C
City State/Province/Country ZIP/Postal Code Phone No. of Issuer
San Jose CALIFORNIA 95131 408-402-9400
3. Related Persons
Last Name First Name Middle Name
Randazzo Margaret
Street Address 1 Street Address 2
2071 Ringwood Ave. Unit C
City State/Province/Country ZIP/Postal Code
San Jose CALIFORNIA 95131
Relationship: x Executive Officer x Director x Promoter
Clarification of Response (if Necessary)
Last Name First Name Middle Name
Bernstein Edward L
Street Address 1 Street Address 2
2071 Ringwood Ave. Unit C
City State/Province/Country ZIP/Postal Code
San Jose CALIFORNIA 95131
Relationship: o Executive Officer x Director o Promoter
Clarification of Response (if Necessary)
Last Name First Name Middle Name
Kalow Mark L
Street Address 1 Street Address 2
2071 Ringwood Ave. Unit C
City State/Province/Country ZIP/Postal Code
San Jose CALIFORNIA 95131
Relationship: o Executive Officer x Director o Promoter
Clarification of Response (if Necessary)
Last Name First Name Middle Name
Kenedi Ron
Street Address 1 Street Address 2
2071 Ringwood Ave. Unit C
City State/Province/Country ZIP/Postal Code
San Jose CALIFORNIA 95131
Relationship: o Executive Officer x Director o Promoter
Clarification of Response (if Necessary)
Last Name First Name Middle Name
Roffman Edward
Street Address 1 Street Address 2
2071 Ringwood Ave. Unit C
City State/Province/Country ZIP/Postal Code
San Jose CALIFORNIA 95131
Relationship: o Executive Officer x Director o Promoter
Clarification of Response (if Necessary)
4. Industry Group
o Agriculture Health Care o Retailing
Banking & Financial Services o Biotechnology o Restaurants
o Commercial Banking o Health Insurance Technology
o Insurance o Hospitals & Physicians o Computers
o Investing o Pharmaceuticals o Telecommunications
o Investment Banking o Other Health Care o Other Technology
o Pooled Investment Fund
Travel
o Other Banking & Financial Services o Manufacturing o Airlines & Airports
Real Estate o Lodging & Conventions
o Commercial o Tourism & Travel Services
o Construction o Other Travel
o REITS & Finance o Other
o Residential
o Other Real Estate
o Business Services
Energy
o Coal Mining
o Electric Utilities
o Energy Conservation
o Environmental Services
o Oil & Gas
x Other Energy
5. Issuer Size
Revenue Range Aggregate Net Asset Value Range
o No Revenues o No Aggregate Net Asset Value
o $1 - $1,000,000 o $1 - $5,000,000
o $1,000,001 - $5,000,000 o $5,000,001 - $25,000,000
o $5,000,001 - $25,000,000 o $25,000,001 - $50,000,000
o $25,000,001 - $100,000,000 o $50,000,001 - $100,000,000
o Over $100,000,000 o Over $100,000,000
x Decline to Disclose o Decline to Disclose
o Not Applicable o Not Applicable
6. Federal Exemption(s) and Exclusion(s) Claimed (select all that apply)
o Rule 504(b)(1) (not (i), (ii) or (iii)) o Rule 505
o Rule 504 (b)(1)(i) x Rule 506(b)
o Rule 504 (b)(1)(ii) o Rule 506(c)
o Rule 504 (b)(1)(iii) o Securities Act Section 4(a)(5)
o Investment Company Act Section 3(c)
7. Type of Filing
x New Notice Date of First Sale 2013-12-19 o First Sale Yet to Occur
o Amendment
8. Duration of Offering
Does the Issuer intend this offering to last more than one year? o Yes x No
9. Type(s) of Securities Offered (select all that apply)
o Pooled Investment Fund Interests o Equity
o Tenant-in-Common Securities x Debt
o Mineral Property Securities o Option, Warrant or Other Right to Acquire Another Security
o Security to be Acquired Upon Exercise of Option, Warrant or Other Right to Acquire Security x Other (describe)
Debt is convertible into shares of common stock.
10. Business Combination Transaction
Is this offering being made in connection with a business combination transaction, such as a merger, acquisition or exchange offer? o Yes x No
Clarification of Response (if Necessary)
11. Minimum Investment
Minimum investment accepted from any outside investor $ 250000 USD
12. Sales Compensation
Recipient Recipient CRD Number o None
(Associated) Broker or Dealer o None (Associated) Broker or Dealer CRD Number o None
Street Address 1 Street Address 2
City State/Province/Country ZIP/Postal Code
State(s) of Solicitation o All States
13. Offering and Sales Amounts
Total Offering Amount $ 350000 USD o Indefinite
Total Amount Sold $ 250000 USD
Total Remaining to be Sold $ 100000 USD o Indefinite
Clarification of Response (if Necessary)
14. Investors
o Select if securities in the offering have been or may be sold to persons who do not qualify as accredited investors,
Number of such non-accredited investors who already have invested in the offering
Regardless of whether securities in the offering have been or may be sold to persons who do not qualify as accredited investors, enter the total number of investors who already have invested in the offering: 1
15. Sales Commissions & Finders' Fees Expenses
Provide separately the amounts of sales commissions and finders' fees expenses, if any. If the amount of an expenditure is not known, provide an estimate and check the box next to the amount.
Sales Commissions $ 0 USD o Estimate
Finders' Fees $ 0 USD o Estimate
Clarification of Response (if Necessary)
16. Use of Proceeds
Provide the amount of the gross proceeds of the offering that has been or is proposed to be used for payments to any of the persons required to be named as executive officers, directors or promoters in response to Item 3 above. If the amount is unknown, provide an estimate and check the box next to the amount.
$ 0 USD o Estimate
Clarification of Response (if Necessary)
Signature and Submission
Please verify the information you have entered and review the Terms of Submission below before signing and clicking SUBMIT below to file this notice.
Terms of Submission
In submitting this notice, each Issuer named above is:
Notifying the SEC and/or each State in which this notice is filed of the offering of securities described and undertaking to furnish them, upon written request, the information furnished to offerees.
Irrevocably appointing each of the Secretary of the SEC and, the Securities Administrator or other legally designated officer of the State in which the Issuer maintains its principal place of business and any State in which this notice is filed, as its agents for service of process, and agreeing that these persons may accept service on its behalf, of any notice, process or pleading, and further agreeing that such service may be made by registered or certified mail, in any Federal or state action, administrative proceeding, or arbitration brought against it in any place subject to the jurisdiction of the United States, if the action, proceeding or arbitration (a) arises out of any activity in connection with the offering of securities that is the subject of this notice, and (b) is founded, directly or indirectly, upon the provisions of: (i) the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company Act of 1940, or the Investment Advisers Act of 1940, or any rule or regulation under any of these statutes, or (ii) the laws of the State in which the issuer maintains its principal place of business or any State in which this notice is filed.
Certifying that the Issuer is not disqualified from relying on any Regulation D exemption it has identified in Item 6 above for one of the reasons stated in Rule 505(b)(2)(iii).
Each Issuer identified above has read this notice, knows the contents to be true, and has duly caused this notice to be signed on its behalf by the undersigned duly authorized person.
For signature, type in the signer's name or other letters or characters adopted or authorized as the signer's signature.
Issuer Signature Name of Signer Title Date
Andalay Solar, Inc. /s/ Margaret Randazzo Margaret Randazzo President, CEO and Director 2014-01-08
b]
Wells Fargo Reaches Agreement Resolving Fannie Mae Repurchase Demands on Loans Originated Prior to 2009
8:30 AM ET 12/30/13 | BusinessWire
Wells Fargo & Co. (NYSE:WFC) announced today that the Company has reached an agreement with the Federal National Mortgage Association (Fannie Mae) that resolves substantially all repurchase liabilities related to loans sold to Fannie Mae that were originated prior to Jan. 1, 2009.
The $591 million agreement was adjusted for credits related to certain prior repurchases, resulting in a one-time cash payment to Fannie Mae of approximately $541 million. At Sept. 30 2013, Wells Fargo had fully accrued for the cost of the agreement.
About Wells Fargo
Wells Fargo Home Mortgage is the nation's leading mortgage lender and services one of every six mortgage loans in the nation. A division of Wells Fargo Bank, N.A., it has a national presence in mortgage stores and banking stores, and also serves the home financing needs of customers nationwide through its call centers, Internet presence and third-party production channels. Wells Fargo Bank, N.A. is an equal housing lender.
Wells Fargo & Company (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.5 trillion in assets. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, insurance, investments, mortgage, and consumer and commercial finance through more than 9,000 stores, 12,000 ATMs, and the Internet (wellsfargo.com), and has offices in more than 35 countries to support the bank's customers who conduct business in the global economy. With more than 270,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 25 on Fortune's 2013 rankings of America's largest corporations. Wells Fargo's vision is to satisfy all our customers' financial needs and help them succeed financially. Wells Fargo perspectives are also available at blogs.wellsfargo.com.
http://cts.businesswire.com/ct/CT?id=bwnews&sty=20131230005076r1&sid=cmtx6&distro=nx
SOURCE: Wells Fargo & Co.
Wells Fargo & Co.
Catherine Pulley, 917-260-1673 (Media)
Jim Rowe, 415-396-8216 (Investors)