Forward-Looking Statements
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law and including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our unaudited interim financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles. The following discussion should be read in conjunction with our company’s audited financial statements and 10-K for the year ended December 31, 2010 and unaudited interim financial statements and the related notes that appear elsewhere in this quarterly report.
In this quarterly report, unless otherwise specified, all references to "common stock" refer to common shares in the capital of our company and the terms "we", "us", "our" and "our company" mean Leeward Group Holdings Inc. and our subsidiaries Sangamon Associates, Inc., a New Jersey corporation and Flagship Insurance Agency, Inc., a Massachusetts corporation.
General Overview
We were incorporated in the State of Nevada on November 27, 2006. We have been a development stage company. Through our wholly-owned Canadian subsidiary, Principle Security International Incorporated, we were working towards the establishment of a customer service oriented security firm specializing in uniformed guard services, private investigations and a training facility for security personnel. We have not yet generated or realized any revenues from our business operations.
Since inception, we had been implementing the early phases of our business plans, including the establishment of our office, making application for our security business license, making application and scouting locations for our accredited security training facility, making application for our surety bond, registering the URL address necessary to create our website, building a database of potential clients, commencing interviews to hire a salesperson, designing our corporate logos/badges and ordering uniforms. On December 15, 2006, we obtained our surety bond in the amount of as required by the Private Investigators and Security Agencies Act. This bond enabled us to make application for a security business license. On January 3, 2007, we were granted our security business license. On September 8, 2008, we received a two-year approval to operate a security training school under the name “Principle Security Training Academy”.
However, we have not been able to achieve commercially viable operations for our proposed security company business and as a result had been investigating further opportunities to maintain and enhance shareholder value.
On May 28, 2010, we entered into a share exchange agreement with Leeward Group, Inc., a Delaware corporation, and the shareholders of Leeward Group, Inc. The closing of the transactions contemplated in the share exchange agreement and the acquisition of all of the issued and outstanding common shares in the capital of Leeward Group, Inc. also occurred on May 28, 2010. In accordance with the closing of the share exchange agreement, we issued 65,000,000 shares of our common stock to the former shareholders of Leeward Group, Inc. in exchange for the acquisition, by our company, of all of the 12,105,802 issued and outstanding shares of Leeward Group, Inc.
Our Current Business
As of the closing date of the share exchange agreement on May 28, 2010 we commenced the business of a diversified retail insurance agency and risk consulting group. We sell property, casualty, life and health insurance products to customers; we create and administer insurance programs and risk management services including reinsurance brokerage. We act as a broker or agent. We do not assume any underwriting risks. We provide our customers with insurance contracts underwritten by insurance companies that assume the underwriting risks. We are headquartered in Pennington, New Jersey.
Our insurance agency and program business provides a broad range of insurance products and services to commercial, professional and individual customers. We have multiple locations in the northeast to provide sales and servicing for our customers. The categories of insurance we principally sell include: property insurance relating to physical damage to property; casualty insurance relating to legal liabilities, workers’ compensation, commercial and private passenger automobile coverages; and fidelity and surety bonds. In addition, we sell and service group and individual life, accident, disability, health, hospitalization, medical and dental insurance.
Our program business markets specialty products and services to associations, industries and businesses. We have three insurance programs: 1) hotel umbrella insurance for franchise hotels; 2) personal umbrella for lawyers; and 3) mobile phone insurance program for telecommunications companies.
Our Franchise Hotel Umbrella program provides umbrella insurance policies for limited service franchise hotels and motels and offers limits of $5 million, $10 million and $15 million.
Our Personal Umbrella Product for lawyers provides personal umbrella insurance for lawyers with limits to $10 million.
Our Cellphone Program provides coverage for loss, theft or accidental damage to a cellphone. It is distributed to consumers through rural telecommunications companies nationwide.
We are compensated for our services primarily by the commissions received from the sale of insurance contracts to our clients. The commissions are usually a percentage of the insurance premiums paid by the insured. Commission rates generally vary with the type of insurance sold and the insurance company that underwrites the insurance policy. We may also receive a profit sharing contingent commission from an insurance company which is primarily based on the underwriting results, growth, overall volume and/or retention. The amount of revenue from commissions and fees fluctuates based on factors such as insurance premiums, retention rates of existing customers, growth rates of new customers, and the type of insurance.
Cash Requirements
We have made insurance agency asset acquisitions each year, since beginning operations in 2007. We intend to continue to acquire insurance agency assets. We had an independent, certified appraisal performed on company assets acquired as of March 31, 2009. This appraisal valued our acquired insurance agency assets based on customer base and cash flow. As of March 31, 2009 our assets acquired to date were valued at over $1,800,000. We estimate that 26,000 independent insurance agencies can be categorized as having less than 1.25 million in annual commission revenue. Our target acquisition has less than $1.25 million in commission revenue. Our company’s plan of action over the next twelve months is to continue its operations to market and sell insurance products and raise additional capital financing, if necessary, to acquire agency assets and grow operations.
Acquisitions will be based on our ability to internally finance from cash flow, raise equity and/or debt to acquire the assets. The disruption in the credit and financial markets had made the availability of equity and/or debt uncertain.
Over the next 12 months we anticipate that we will incur the following operating expenses:
|
General, Administrative and Corporate Expenses
|
$525,000
|
|
Depreciation and amortization
|
$139,545
|
|
Salaries, and wages
|
$650,000
|
|
Professional fees
|
$60,000
|
|
Total
|
$1,374,545
|
Our estimated cash flow from operations is estimated to be approximately $13,827 and our cash position as at March 31, 2011 is $46,000. On May 28, 2010, we changed our year end from May 31 to December 31. We will need additional funds to meet our working capital requirements over the twelve month period. We anticipate that we will have to raise additional funds through private placements of our equity securities and/or debt financing to complete our business plan. There is no assurance that the financing will be completed as planned or at all. We have not yet been successful raising the funding necessary to proceed with our business plan. If we are unable to secure adequate capital to continue our planned operations, our shareholders may lose some or all of their investment and our business may fail.
Results of Operations – Three months Ended March 31, 2011 and 2010
The following summary of our results of operations should be read in conjunction with our financial statements for the three month period ended March 31, 2011 which are included herein.
Our operating results for the three months ended March 31, 2011, for the three months ended March 31, 2010 and the changes between those periods for the respective items are summarized as follows:
|
|
Three months Ended
March 31, 2011
$
|
Three months Ended
March 31, 2010
$
|
Change Between
Three Month Period Ended
March 31, 2011 and March 31, 2010
$
|
|
Revenue
|
388,928
|
322,909
|
66,019
|
|
Depreciation and amortization
|
31,911
|
32,194
|
283
|
|
Salaries and wages
|
220,259
|
209,575
|
10,684
|
|
General and administrative
|
97,009
|
139,373
|
42,364
|
|
Other income (expense)
|
(11,757)
|
(32,860)
|
21,103
|
|
Net loss for the period
|
27,992
|
(90,956)
|
118,948
|
Revenues
We had revenues of $388,928 during the three months ended March 31, 2011 as compared to revenues of $322,909 during the three months ended March 31, 2010. The increase is a result of organic growth and commission incentives from prior year insurance sales.
Depreciation and amortization
Depreciation and amortization decreased by $283 for the three months ended March 31, 2011.
Salaries and wages
The $10,684 increase in salaries and wages for the three months ended March 31, 2011 was primarily due to normal fluctuations in our operations. We expect our salaries and wages to increase as we continue to acquire insurance agencies.
General and administrative
The $42,364 decrease in general and administration for the three months ended March 31, 2011 was primarily due to the fact that we completed acquisitions in late 2009 that resulted in redundant operating expenses while operations were consolidated. Accordingly we have seen a decrease in operating expenses such as travel expenses, leases expenses, relocation expenses, as other general expenses.
Liquidity and Financial Condition
Working Capital
|
|
|
At
March 31, 2011
|
|
|
At
December 31,
2010
|
|
|
|
|
|
|
|
|
Current assets
|
$
|
196,460
|
|
$
|
167,016
|
|
|
Current liabilities
|
|
381,338
|
|
|
398,162
|
|
|
Working capital
|
$
|
(184,878)
|
|
$
|
(231,146)
|
|
Cash Flows
|
|
|
Three months Ended
|
|
|
|
|
March 31
|
|
|
|
|
2011
|
|
|
2010
|
|
|
Cash flows provided by (used in) operating activities
|
$
|
13,827
|
|
$
|
(65,530)
|
|
|
Cash flows provided by (used in) investing activities
|
|
Nil
|
|
|
Nil
|
|
|
Cash flows provided by (used in) financing activities
|
|
(17,476)
|
|
|
(49,477)
|
|
|
Increase (decrease) in cash and cash equivalents
|
$
|
(3,649)
|
|
$
|
(115,007)
|
|
Operating Activities
Net cash used in operating activities was $13,827 for the three months ended March 31, 2011 compared with cash used in operating activities of $(65,530) in the same period in 2010. The increase is primarily due to our realization of a net income in the first quarter of 2011.
Investing Activities
Net cash provided by investing activities was $Nil for the three months ended March 31, 2011 compared to net cash used in investing activities of $Nil in the same period in 2010.
Financing Activities
Net cash used in financing activities for the three months ended March 31, 2011 was $17,476 compared to net cased used in financing activities of $49,477 for the three months ended March 31, 2011. The decrease was mainly attributable to the fact that in 2010 the Company worked to repay notes issued in conjunction with acquisitions made during the 2009 year.
Contractual Obligations
As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Reclassification of Financial Statement Accounts
Certain amounts in the March 31, 2010 financial statements have been reclassified to conform to the presentation in the March 31, 2011 financial statements.
Recent Accounting Pronouncements
Our company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact on our company’s financial position, or statements
Going Concern
Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Our company has incurred a net income of $27,992 for the three month period ended March 31, 2011 [2010 - $(90,956)]. Our company has generated revenue, however we have a substantial accumulated deficit and negative working capital of $(184,878) as at March 31, 2011 [2010 - $(231,146)]. We require additional funds to maintain our existing operations and to acquire new business assets. These conditions raise substantial doubt about our ability to continue as a going concern. Management’s plans in this regard are to raise equity and debt financing as required, but there is no certainty that such financing would be available or that it would be available at acceptable terms. The outcome of these matters cannot be predicted at this time.
Our financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from our directors, shareholders or investors to meet our obligations over the next twelve months. We do not have any further arrangements in place for any future debt or equity financing.
Item 4. Controls and Procedures
Management’s Report on Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the
Securities Exchange Act of 1934
, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (also our principal executive officer and our principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure.
As of the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (also our principal executive officer and our principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (also our principal executive officer and our principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were not effective in providing reasonable assurance in the reliability of our financial reports as of the end of the period covered by this quarterly report due to the lack of adequate segregation of duties and no audit committee. Our company plans to remedy these weaknesses as funds become available.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the quarter ended March 31, 2011 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, executive officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.
Item 1A. Risk Factors
Much of the information included in this quarterly report includes or is based upon estimates, projections or other "forward-looking statements". Such forward-looking statements include any projections or estimates made by us and our management in connection with our business operations. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions, or other future performance suggested herein. We undertake no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of such statements.
Such estimates, projections or other "forward-looking statements" involve various risks and uncertainties as outlined below. We caution readers of this quarterly report that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other "forward-looking statements". In evaluating us, our business and any investment in our business, readers should carefully consider the following factors.
Risks Related to our Business
Volatility or declines in premiums or other adverse trends in the insurance industry may seriously undermine our profitability.
We derive much of our revenue from commissions and fees for our brokerage services. We do not determine the insurance premiums on which our commissions are generally based. Moreover, insurance premiums are cyclical in nature and may vary widely based on market conditions. Because of these market cycles for insurance product pricing, which we cannot predict or control, our brokerage revenues and profitability can be volatile or remain depressed for significant periods of time.
As traditional risk-bearing insurance companies continue to outsource the production of premium revenue to non-affiliated brokers or agents such as our company, those insurance companies may seek to reduce further their expenses by reducing the commission rates payable to insurance agents or brokers. The reduction of these commission rates, along with general volatility and/or declines in premiums, may significantly affect our profitability. Because we do not determine the timing or extent of premium pricing changes, we cannot accurately forecast our commission revenues, including whether they will significantly decline. As a result, our budgets for future acquisitions, capital expenditures, dividend payments, loan repayments and other expenditures may have to be adjusted to account for unexpected changes in revenues, and any decreases in premium rates may adversely affect the results of our operations.
In addition, there have been and may continue to be various trends in the insurance industry toward alternative insurance markets including, among other things, greater levels of self-insurance, captives, rent-a-captives, risk retention groups and non-insurance capital markets-based solutions to traditional insurance. While we historically have been able to participate in certain of these activities on behalf of our customers and obtain fee revenue for such services, there can be no assurance that we will realize revenues and profitability as favorable as those realized from our traditional brokerage activities.
Our company faces significant competitive pressures in each of our businesses.
The insurance brokerage and service business is highly competitive and there are many insurance brokerage and service organizations as well as individuals on a global basis who actively compete with our company in one or more areas of our business. We compete with many firms that are significantly larger than our company, in terms of revenues, in the brokerage markets. In addition, there are various other competing firms that operate nationally or that are strong in a particular region or locality and may have, in that region or locality, an office that is as large as or larger than, in terms of revenues, the particular local office of our company. We believe that the primary factors determining our competitive position with other organizations in our industry are the quality of the services rendered and the overall costs to our clients. Losing business to competitors offering similar products at lower prices or having other competitive advantages would adversely affect our company’s business.
In addition, the increase in competition due to new legislative or industry developments could adversely affect our company. These developments include:
|
-
|
An increase in capital-raising by insurance underwriting companies, which could result in new capital in the industry, which in turn may lead to lower insurance premiums and commissions;
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|
-
|
The selling of insurance by insurance companies directly to insureds without the involvement of a broker or other intermediary;
|
|
-
|
Changes in our company’s business compensation model as a result of regulatory developments;
|
|
-
|
The establishment of programs by Federal and state governments to provide health insurance or, in certain cases, property insurance in catastrophe-prone areas or other alternative market types of coverage, which compete with, or completely replace, insurance products offered by insurance carriers; and
|
|
-
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An increase in competition from new market participants such as banks, accounting firms and consulting firms offering risk management or insurance brokerage services.
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New competition as a result of these or other competitive or industry developments could cause the demand for our products and services to change, which could in turn adversely affect our company’s results of operations and financial condition.
The current disruption in the global credit markets and instability of financial systems, and a continuation or worsening of the current economic recession, may adversely affect our results of operations and financial condition.
The current disruption in the global credit markets, the repricing of credit risk and the deterioration of the financial and real estate markets have created increasingly difficult conditions for financial institutions and certain insurance companies. These conditions include significant losses, greater volatility, significantly less liquidity, widening of credit spreads and a lack of price transparency in certain markets. These conditions have resulted in the failure of a number of financial institutions and unprecedented action by governmental authorities and central banks around the world, including investing in or lending money to financial institutions and insurance companies that are perceived to need additional capital. It is difficult to predict how long these conditions will persist and the extent to which our markets, products and business will be adversely affected.
These unprecedented disruptions in the credit and financial markets and the resulting impact on a number of financial institutions have limited access to capital and credit for many companies. The failure of a lender could adversely affect our ability to borrow on that facility, which over time could negatively impact our ability to consummate significant acquisitions or make other significant capital expenditures. Continued adverse conditions in the credit markets in future years could adversely affect the availability and terms of future borrowings, renewals or refinancings.
The disruptions in the credit and financial markets also led to a general deterioration in the economy, which could adversely impact our company in future years as a result of reductions in the overall amount of insurance coverage that our clients purchase due to reductions in their headcount, payroll, properties, and the market values of assets, among other factors. Such reductions could also adversely impact our company’s commission revenues when exposure audits by the carriers are performed and if subsequent downward premium adjustments are determined. The income effects of subsequent premium adjustments are recorded when the adjustments become known, and, as a result, any improvement in our results of operations and financial condition may lag an improvement in the economy. In addition, some of our clients may cease operations completely in the event of a prolonged deterioration in the economy, which would have an adverse effect on our company’s results of operations and financial condition. We also have a significant amount of trade accounts receivable from some of the insurance companies with which it places insurance. If those insurance companies experience liquidity problems or other financial difficulties, we could encounter delays or defaults in payments owed to our company, which could have a significant adverse impact on our company’s consolidated financial condition and results of operations. In addition, if a significant insurer fails or withdraws from writing certain insurance coverages that we offer our clients, overall capacity in the industry could be negatively affected, which could reduce our company’s placement of certain lines and types of insurance and, as a result, reduce our revenues and profitability. The failure of an insurer with whom our company places business could also result in errors and omissions claims by our company’s clients, which could adversely affect our results of operations and financial condition.
We have historically engaged in a number of acquisitions of insurance brokers and agencies. We may not be able to continue to implement such an acquisition strategy in the future and there are risks associated with such acquisitions.
In the past several years, we have completed numerous acquisitions of insurance brokers and agencies and may continue to make such acquisitions in the future. Our acquisition program has been an important part of our historical growth and our company believes that similar acquisition activity will be critical to maintaining comparable growth in the future. Failure to successfully identify and complete acquisitions likely will result in our company achieving slower growth. Moreover, even if we are able to identify appropriate acquisition targets, it may not be able to execute acquisition transactions on favorable terms or integrate such targets following acquisition in a manner that allows our company to realize the anticipated benefits of such acquisitions. Additionally, we may incur or assume unanticipated liabilities or contingencies in connection with our acquisitions. If any of these developments occur, our results of operations could be adversely affected.
We have incurred significant losses since commencing business and expect losses to continue for the foreseeable future.
We have had modest revenues to date. We had a net income of $27,992 for the three months ended March 31, 2011 and a net loss of $90,956 for the three months ended March 31, 2010. As of March 31, 2011, we had cash of $46,000 and a working capital deficit of $184,878.
Our ability to continue as a going concern is in substantial doubt.
The ability of our company to continue as a going concern is in substantial doubt and is dependent on achieving profitable operations and obtaining the necessary financing in order to develop our business. The outcome of these matters cannot be predicted at this time. Our future operations are dependent on the market’s acceptance of our services in order to ultimately generate future profitable operations, and our ability to secure sufficient financing to fund future expansion or operations. There can be no assurance that our services will be able to secure market acceptance. Management plans to raise additional equity financing to enable our company to complete our development plans. However, there can be no assurance that we will be successful in raising additional financing. Our financial statements do not include any adjustments that might result from the outcome of these uncertainties.
We are subject to specific risks of litigation that are unique to the insurance industry.
We are subject to various potential claims relating principally to alleged errors and omissions in connection with the placement or servicing of insurance in the ordinary course of business. Because we often assist clients with matters involving substantial amounts of money, including the placement of insurance, clients may assert errors and omissions claims against us alleging potential liability for all or part of the amounts in question. Claimants may seek large damage awards, and these claims may involve potentially significant legal costs. While most of the errors and omissions claims made against us would be covered by our professional indemnity insurance, our business results of operations, financial condition and liquidity may be adversely affected if, in the future, our insurance coverage proves to be inadequate or unavailable. Our ability to obtain professional indemnity insurance in the amounts and with the deductibles we desire in the future may be adversely impacted by general developments in the market for such insurance or our own claims experience. In addition, claims, lawsuits and other proceedings may harm our reputation or divert management resources away from operating our business.
We have limited financial and management resources to pursue our growth strategy.
Our growth strategy may place a significant strain on our management, operational and financial resources. We have negative cash flow from operations and continue to seek additional capital. We will have to obtain additional capital either through debt or equity financing. There can be no assurance, however, that we will be able to obtain such financing on terms acceptable to our company.
If we raise additional funds through the issuance of equity or convertible securities, these new securities may contain certain rights, preferences or privileges that are senior to those of our common shares. Additionally, the percentage of ownership of our company held by existing shareholders will be reduced.
We are dependent upon our officers for management and direction, and the loss of any of these persons could adversely affect our operations and results.
We are dependent upon our officers for execution of our business plan. The loss of any of our officers could have a material adverse effect upon our results of operations and financial position. We do not maintain “key person” life insurance for any of our officers. The loss of any of our officers could delay or prevent the achievement of our business objectives
Risks Associated with Our Common Stock
Trading on the OTC Bulletin Board may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.
Our common stock is quoted on the OTC Bulletin Board service of the Financial Industry Regulatory Authority. Trading in stock quoted on the OTC Bulletin Board is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Bulletin Board is not a stock exchange, and trading of securities on the OTC Bulletin Board is often more sporadic than the trading of securities listed on a quotation system like NASDAQ or a stock exchange like Amex. Accordingly, shareholders may have difficulty reselling any of their shares.
Our stock is a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations and FINRA’s sales practice requirements, which may limit a stockholder’s ability to buy and sell our stock.
Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and our salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, our common stock.
In addition to the “penny stock” rules promulgated by the Securities and Exchange Commission, the Financial Industry Regulatory Authority has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the Financial Industry Regulatory Authority believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The Financial Industry Regulatory Authority requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.
Other Risks
Trends, Risks and Uncertainties
We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to our common stock.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Default upon Senior Securities
None.
Item 4. [Removed and Reserved]
Item 5. Other Information
None.
Item 6. Exhibits
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Exhibit Number
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Description
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(3)
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Articles of Incorporation and By-laws
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3.1
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Articles of Incorporation (Incorporated by reference to our Registration Statement on Form SB-2 filed on August 27, 2007)
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3.2
|
Bylaws (Incorporated by reference to our Registration Statement on Form SB-2 filed on August 27, 2007)
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3.3
|
Certificate of Amendment of the Nevada Secretary of State changing the name of our company to Leeward Group Holdings Inc. (Incorporated by reference to our Form 8-K filed on September 13, 2010)
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(10)
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Material Contracts
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10.1
|
Share Exchange Agreement dated May 28, 2010 with Leeward Group, Inc. (Incorporated by reference to our Form 425 filed on June 9, 2010)
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|
10.2
|
Agreement of Sale between Sangamon Associates, Inc., and Flagship Insurance, Inc. (Incorporated by reference to our Form 425 filed on June 9, 2010)
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|
10.3
|
Agreement of Sale between Leeward Group, Inc. and its wholly owned subsidiaries Sangamon Associates, Inc., Flagship Insurance Agency, Inc., and Brady-Rogers Inc. (Incorporated by reference to our Form 425 filed on June 9, 2010)
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|
10.4
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Agreement of Sale between Leeward Group, Inc. and its wholly owned subsidiaries Sangamon Associates, Inc., Flagship Insurance Agency, Inc., and Waughtal - D. P. Domestic and International Insurance, LLC. (Incorporated by reference to our Form 425 filed on June 9, 2010)
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(21)
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Subsidiaries
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21.1
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Leeward Group, Inc. a Delaware corporation
Sangamon Associates, Inc. a New Jersey corporation
Flagship Insurance Agency, Inc., a Massachusetts corporation
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(31)
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Rule 13a-14(a)/15d-14(a) Certifications
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31.1*
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Section 302 Certification under Sarbanes-Oxley Act of 2002
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(32)
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Section 1350 Certifications
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32.1*
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Section 906 Certification under Sarbanes-Oxley Act of 2002
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* Filed herewith.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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LEEWARD GROUP HOLDINGS INC.
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(Registrant)
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Dated: May 20, 2011
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/s/ Kevin M. Coughlin
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Kevin M. Coughlin
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President, Chief Executive Officer,
Chief Financial Officer and Director
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(Principal Executive Officer, Principal Financial Officer
and Principal Accounting Officer)
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