PICTURE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

Amendment No. 3

to

FORM S-1

 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 

ACOLOGY, INC.
(Exact name of Registrant as specified in its charter)

 

Florida
(State or other jurisdiction of incorporation or organization)

 

3085
(Primary Standard Industrial Classification Code Number)

 

65-0207200
(I.R.S. Employer Identification Number)

 

912 Maertin Lane

Fullerton, CA 92831
Phone: (661) 510-0978
(Address, including zip code, and telephone number,
including area code, of Registrant’s principal executive offices)

 

Curtis Fairbrother

Chief Executive Officer
912 Maertin Lane

Fullerton, CA 92831
Phone: (661) 510-0978
(Name, address, including zip code, and telephone number,
including area code, of agent for service)

 

Copy to:

Barry J. Miller, Esq.
13321 Ludlow St.
Huntington Woods, MI 48070
Phone: (248) 232-8039

 

As soon as practicable after this Registration Statement becomes effective
(Approximate date of commencement of proposed sale to the public)

 

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: [X]

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please 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 this Form is a post-effective amendment filed pursuant to Rule 462(d) 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. [ ]

 

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 [X]
(Do not check if a smaller reporting company)      

 

Calculation of Registration Fee

 

Title of Each Class of

Securities to be Registered

Amount to be Registered 2 Proposed Maximum Offering Price Per Share

Proposed Maximum

Offering Price

Registration Fee
Common Stock, par value $0.00001 per share 1 700,000,000 $0.02 3 $14,000,000 $1,803.20
1 Represents outstanding shares of common stock offered for resale by the selling shareholders named herein.
2 Pursuant to Rule 416 under the Securities Act, the shares of common stock offered hereby also include an indeterminate number of additional shares of common stock as may from time to time become issuable by reason of anti-dilution provisions, stock splits, stock dividends, recapitalizations or other similar transactions.
3 Estimated pursuant to Rule 457(a) of the Securities Act of 1933 solely for the purpose of computing the amount of the registration fee, based on the sales price for the common stock of the Registrant in the private placement described in this Registration Statement, as there is currently no public market price for the Registrant’s common stock.

 

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 this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

     
 

ACOLOGY, INC.
700,000,000 Shares of Common Stock

 

This Prospectus relates to the resale of up to 700,000,000 shares of the common stock, par value $0.00001 per share, of Acology, Inc., a Florida corporation (“Common Stock”), by the selling shareholders.

 

As of the date of this Prospectus, the Common Stock will be quoted on and traded over the market maintained by OTC Markets Group Inc. known as “OTC Pink” (“OTC Pink”) under the symbol “ACOL.” Acology has applied to OTC Markets Group Inc. to have the Common Stock quoted on its “OTCQB” tier (“OTCQB”). As described below, there have been minimal recent public quotations of the Common Stock. For at least 10 years, there has been no active public market for the Common Stock, and the shares are being offered in anticipation of the development of a secondary trading market. For information as to bid and trading prices for the Common Stock since January 1, 2012, see “Market Price, Dividends and Related Shareholder Matters” on page 32.

 

The price to the public at which the selling shareholders will offer their shares will be $0.02 per share unless and until until the Common Stock is quoted on OTCQB; when and if the Common Stock is quoted on OTCQB, the selling shareholders will offer their shares at prevailing market prices; the selling shareholders may also sell their shares in negotiated transactions. The selling shareholders reserve the right to accept or reject, in whole or in part, any proposed purchase of shares. The selling shareholders will pay any underwriting discounts and commissions. We will not receive any proceeds from sales of shares of Common Stock by the selling shareholders and we will bear all costs associated with the registration of their shares under the Securities Act of 1933, as amended, (the “Securities Act”), other than any selling shareholder’s legal or accounting costs or commissions.

 

Acology is an “emerging growth company,” as that term is defined in section 2(a)(19) of the Securities Act.

 

INVESTING IN THE COMPANY’S SECURITIES INVOLVES A HIGH DEGREE OF RISK. SEE “RISK FACTORS” IN THIS PROSPECTUS BEGINNING ON PAGE 4 FOR A DISCUSSION OF INFORMATION THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN OUR COMMON STOCK.

 

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

You should rely only on the information contained in this Prospectus. We have not authorized anyone to provide you with information that is different from that contained in this Prospectus. The selling shareholders are offering to sell and seeking offers to buy shares of the Common Stock only in jurisdictions where offers and sales are permitted. The information contained in this Prospectus is accurate only as of the date of this Prospectus, regardless of the time of delivery of this Prospectus or of any sale of the Common Stock. This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy the securities in any circumstances under which the offer or solicitation is unlawful. Neither the delivery of this Prospectus nor any distribution of securities in accordance with this Prospectus shall, under any circumstances, imply that there has been no change in our affairs since the date of this Prospectus.

 

The date of this Prospectus is July__, 2014.

     
 

Table of Contents

 

Prospectus Summary 1
Where You Can Find Additional Information 4
The Offering 4
Risk Factors 4
Forward-Looking Statements 18
Use of Proceeds 18
Selling Shareholders 18
Plan of Distribution 19
Description of Securities 21
Description of Business 22
Description of Property 27
Legal Proceedings 27
Management’s Discussion and Analysis of Financial Condition and Results of Operations 27
Market Price, Dividends and Related Shareholder Matters 33
Directors, Executive Officers, Promoters and Control Persons 34
Executive Compensation 39
Security Ownership of Certain Beneficial Owners and Management 39
Indemnification 40
Certain Provisions of the Articles of Incorporation 41
Legal Matters 41
Experts 41
Interests of Named Experts and Counsel 41
Transfer Agent 42
Financial Statements 43

     
 

PROSPECTUS SUMMARY

 

This summary highlights certain information contained elsewhere in this Prospectus. This summary does not contain all of the information that you should consider before investing in the Common Stock. You should carefully read the entire Prospectus, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes, before you decide whether to invest in the Common Stock. If you invest in the Common Stock, you are assuming a high degree of risk. See the section entitled “Risk Factors.”

 

References to “our,” “we,” “us,” or “the Company” “our Company,” refer to Acology, Inc. and its subsidiary, unless the context requires otherwise “Acology” refers to Acology, Inc. “D&C” refers to D&C Distributors LLC, a California limited liability company and our wholly owned subsidiary.

 

Overview

 

Through D&C, we are in the business of designing, manufacturing, branding and selling proprietary plastic medical grade containers that can store pharmaceuticals, herbs, teas and other solids or liquids, some of which can grind solids and shred herbs.

 

For more detailed information as to our business and our plans to develop it, see “Description of Business,” which begins on page 22. Acology’s operating subsidiary, D&C, which Acololgy acquired on March 28, 2014, commenced operations on January 29, 2013.

 

The address of the Company is 912 Maertin Lane, Fullerton, CA 92831 and its telephone number is (661) 510-0978.

 

Our audited financial statements for the year ended December 31, 2013, include only the period commencing with the inception of D&C on January 29, 2013, and do not include any historical financial data of Acology, which was incorporated on September 5, 1997, ceased doing business in 2002 and remained dormant until it acquired D&C in the merger that is discussed under the caption “Prospectus Summary – Our History – the Merger” on page 2. Accordingly, these financial statements are those of D&C. Our unaudited financial statements as of the quarter ended March 31, 2014, show our consolidated results for that period and have been prepared on the basis that D&C was the accounting acquirer in the merger which is discussed under the caption “Prospectus Summary – Our History – The Merger” on page 2.

 

Potential investors in the Common Stock should consider, in addition to the Risk Factors commencing on page 4, the fact that Acology has pledged all of the membership units in its operating subsidiary, D&C, for the payment of a convertible promissory note in the principal amount of $400,000, of which $40,000 has been prepaid and of which $360,000 is due in full on March 4, 2015. We are presently unable to repay this promissory note and, unless we are able to develop sufficient revenues and/or obtain sufficient financing, we will be unable to repay the convertible promissory note when due. In that event, the lender could foreclose on and sell all of the membership units in D&C, through which we are required to conduct all of our operations, in order to satisfy, as a whole or in part, the indebtedness outstanding under the convertible promissory note, with the result that Acology would be left with no operations and the shareholders would lose all, or substantially all, of their investment. This note also contains restrictive convenants which limit our ability to make acquisitions and issue publicly traded securities. For further information on the convertible promissory note, the circumstances under which it was issued, certain risks associated with it and the pledge, see “Directors, Executive Officers, Promoters and Control Persons – Related Party Transactions – Exchange Transaction” on page 34.

 

We have a history of net losses. As of March 31, 2014, our accumulated deficit was $366,384.

 

Potential investors in the Common Stock should consider that our two officers and directors beneficially own 85% of the outstanding Common Stock and therefore will exercise significant control over the company and all matters requiring the approval of shareholders.

 

There is no established public trading market for the Common Stock.

Table of Contents - 1 -  
 

 

Our History

 

Prior to the Merger

 

Acology was incorporated on September 9, 1997, in the State of Florida under the name of Synthetic Flowers of America, Inc. (“Synthetic Flowers”) for the purpose of producing and selling silk flowers.

 

On February 15, 1999, Acology amended its articles of incorporation to (i) change its corporate name to Pinecrest Investment Group, Inc., (ii) to increase the aggregate number of shares of common stock that it was authorized to issue be increased to 100,000,000 shares, $.001 par value per share, and (iii) to authorize 25,000,000 shares of preferred stock, $.001 par value per share.

 

On January 10, 2000, Acology’s Board of Directors approved a 5-for-4 forward stock split for shareholders of record on December 31, 1999, with any fractional shares being rounded up to the next whole share.

 

On January 26, 2000, Acology amended its Articles of Incorporation (i) to reduce the number of the authorized shares of common stock to 50,000,000, (ii) reduce the number of authorized shares of preferred stock to 10,000,000 shares, (iii) provide that shares of preferred stock would have no par value and (iv) provide that the preferred stock would be issuable in series.

 

Acology ceased doing business in 2002.

 

On or about October 23, 2008, Acology, was placed in receivership by order of the Circuit Court of the 13th Judicial Circuit in and for Hillsborough County, Florida. As a result, (i) Brian K. Goldenberg was appointed receiver of Acology and (ii) pursuant to his powers as receiver, he appointed Mark Rentschler as its president and sole director, replacing its existing president and directors, who had abandoned their duties as such for several years. The receivership was closed on February 10, 2009. Mr. Rentschler received 35,000,000 shares of Acology’s common stock for his services in these capacities.

 

On October 27, 2009, Mr. Rentschler resigned as President and sole director of the Acology and appointed Mark Astrom, the son of Richard S. Astrom, as its president and sole director.

 

On or about February 17, 2009, Green Fusion Corp., a corporation all of whose shares are owned by Richard S. Astrom, who served as president and sole director of the Acology from January 1, 2012, until March 4, 2014, acquired the above mentioned 35,000,000 shares of common stock from Mr. Rentschler, which gave Mr. Astrom control of Acology.

 

On January 1, 2012, Mark Astrom resigned as President and sole director of Acology and appointed Richard S. Astrom as its President and sole director.

 

On July 5, 2012, Acology amended its Articles of Incorporation to increase the number of the authorized shares of its common stock to 3,000,000,000.

 

Immediately prior to the merger described below, Acology was a nonreporting shell company, as that term is defined in Rule 405 promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933 (the “Securities Act”).

 

The Merger

 

December 24 , 2013, Acology, PNCR, Acquisition, LLC, a California limited liability company and the wholly-owned subsidiary of the Company (“Merger Sub”), and D&C entered into an Agreement and Plan of Merger under which, among other things, Merger Sub would be merged with and into D&C, with the result that D&C would be the surviving entity and become the wholly owned subsidiary of Acology.

Table of Contents - 2 -  
 

On March 4, 2014, the closing under the Merger Agreement took place and on March 28, 2014, D&C and Merger Sub filed the merger certificate with the Secretary of State of the State of California. As a result of the Merger, Acology is no longer a shell company. In connection with the Merger, Acology issued 3,846,000,000 shares of Common Stock to Curtis Fairbrother and Douglas Heldoorn, the holders of all of the membership units in D&C, who thereby became Acology’s controlling shareholders. Upon the closing of the Merger, Richard Astrom resigned as Acology’s sole director and president and Messrs. Fairbrother and Heldoorn became its officers and directors.

 

Also in connection with the Merger:

· On March 4, 2014, Acology completed a private placement with 3 investors, who are the selling shareholders under this Prospectus (the “Private Placement”) of 700,000,000 shares of Common Stock for proceeds of $40,000 in cash. The price paid by each investor was $0.000571429 per share. Acology also entered into Registration Rights Agreements with these investors, under which Acology was obligated to file the registration statement under the Securities Act of which this Prospectus forms a part covering the shares issued in the Private Placement (the “Registration Statement”) and to use its best efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible. The Registration Rights Agreements did not provide for penalties, whether cash or otherwise, for failure to file the Registration Statement or for delays in registering the Common Stock. For further information about the participation of a corporation owned by Richard S. Astrom, our president and sole director until March 4, 2014, in the Private Placement, see “Directors, Executive Officers, Promoters and Control Persons - Related Party Transactions - Private Placement” on page 35.
     
· Prior to the Merger, Richard S. Astrom, Acology’s president and sole director, entered into an Exchange Agreement with Acology, under which 35,000,000 shares of the Common Stock owned by Green Fusion Corp. and $151,269 of Acology’s indebtedness to him were exchanged for the proceeds of the Private Placement and a secured convertible promissory note of Acology payable to him in the principal amount of $400,000 and bearing interest at the rate of 0.28% per annum. The convertible promissory note is due March 4, 2015, is subject to acceleration in the event of certain events of default, contains certain restrictive covenants and is secured by a pledge of all of the shares of common stock of D&C. If an event of default, including failure to pay the convertible promissory note when due, occurs, the unpaid principal amount of the convertible promissory note and the interest accrued thereon will be convertible as a whole or in part from time to time into an indeterminate number of shares of Common Stock at a conversion price per share equal to 50% of the average of the daily closing prices for a share of Common Stock for the three (3) consecutive trading days ending on the trading day immediately prior to the day on which the convertible promissory note is delivered for conversion. For further information respecting the convertible promissory note, certain risks associated with it and the pledge, see “Prospectus Summary – Overview” on page 1, and “Directors, Executive Officers and Control Persons – Related Parties –  Exchange Transaction” on page 34.
     
· On January 9, 2014, Acology amended its Articles of Incorporation (i) to change its corporate name to Acology, Inc., (ii) to increase the number of the authorized shares of common stock to 6,000,000,000 and (iii) to reverse split its common stock on the basis of 1 new share for 1,000 existing shares. The reverse stock split was applicable to shares held by shareholders of record on February 14, 2014, and was implemented on that date.

As a result of the Merger, we are in the business of designing, manufacturing, branding and selling proprietary plastic medical grade containers that can store, and grind and shred, pharmaceuticals, herbs, teas and other solids or liquids. For more detailed information as to our business and our plans to develop it, see “Description of Business,” which begins on page 22.

The Company’s corporate structure is as follows:

Acology, Inc.
(a Florida corporation)
   
D&C Distributors LLC 1
(a California limited liability company)
(100% owned)

Table of Contents - 3 -  
 

1. All of the membership units in D&C have been pledged to secure indebtedness of Acology, Inc. For further information respecting this indebtedness and this pledge, see “Prospectus Summary – Overview” on page 1 and “Directors, Executive Officers, Promoters and Control Persons – Related Party Transactions – Exchange Transaction” on page 34.

 

As of the date of this Prospectus, the Common Stock will be quoted on and will be traded over OTC Pink under the symbol “ACOL.” The Company intends to apply to be quoted on and traded over OTCQB and when and if its application is granted, it will be quoted and traded under that symbol.

 

The information contained in this Prospectus, together with the additional information contained in the registration statement of which this Prospectus forms a part, is intended to constitute “Form 10 Information,” as that term is defined in Rule 144 promulgated by the under the Securities Act.

 

WHERE YOU CAN FIND ADDITIONAL INFORMATION

 Acology has filed a registration statement on Form S-1 under the Securities Act relating to the shares of Common Stock being offered by this Prospectus, and reference is made to such registration statement. This Prospectus constitutes the prospectus of Acology filed as part of that registration statement and it does not contain all information included therein, as certain portions have been omitted in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”).

 

After the effective date of this Prospectus, Acology will be required to file annual, quarterly, and current reports, or other information with the SEC as provided by the Securities Exchange Act. You may read and copy any reports, statements or other information Acology files at the SEC’s public reference facility maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-732-0330 for further information on the operation of the public reference room. Acology’s SEC filings are also available to the public through the SEC’s website at http://www.sec.gov.


THE OFFERING

 

Shares of Common Stock offered by selling shareholders:   Up to 700,000,000 shares of Common Stock issued in the Private Placement to 3 investors.
Offering Price   Market prices; or in private transactions at negotiated prices.
Common stock outstanding before the offering:   4,546,014,785 shares
Common stock to be outstanding after the offering:   4,546,014,785 shares
Use of proceeds:   We will not receive any proceeds from sales of shares of Common Stock by the selling shareholders.
Risk factors:   Investors should carefully read and consider the information set forth under the caption “Risk Factors” beginning on page 4 and all other information set forth in this Prospectus before investing in the Common Stock.
Trading Symbol:   ACOL

 

RISK FACTORS

 

An investment in the Common Stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this Prospectus, before making an investment decision. If any of the events associated with the risk factors described below actually occurs, our business, financial condition or results of operations could suffer or we could be unable to continue to operate. In that case, the trading price of the Common Stock could decline, and you could lose all or a part of your investment. You should read the section entitled “Forward-Looking Statements” on page 4 for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this Prospectus.

 

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Risk Factors Related to Our Financial Condition

 

If we are unsuccessful in obtaining revenues and raising funding, we may cease to continue as a going concern.

 

Our ability to continue as a going concern is dependent on the successful execution of our business plan, which is aimed at developing our business and obtaining market penetration to attain revenues and operating cash flows, investing in research and product development, entering into complementary markets, obtaining satisfactory overall gross margins, and securing financing to fund our operations.

 

This plan includes the generation of revenues, profits and related positive operating cash flows. There are various uncertainties affecting our revenues, including the current market environment, our ability to obtain orders, the development of products, price competition, and the ability of customers to finance purchases. In addition, we will also require substantial funding and there are uncertainties surrounding our ability to access capital, including the volatility in economic conditions in recent months and years.

 

Such funding may be in the form of debt or equity or a hybrid instrument, depending on the demands of the investor. Given economic and credit market conditions, we may not be able to raise cash resources through these sources of financing. Accordingly, while we are continuing to review these sources of financing, we may also explore other sources of financing, such as alliances with strategic partners, sales of assets or licensing of our technology, a combination of operating and related initiatives or a substantial reorganization of our business. Certain provisions contained in a promissory note that we made in favor of Richard S. Astrom, our president and sole director until March 4, 2014, limit our ability to raise capital in the public markets. See “Directors, Executive Officers, Promoters and Control Persons – Related Party Transactions – Exchange Transaction” on page 34.

 

There can be no assurance we will obtain revenue or achieve profitability or positive cash flows or be able to obtain funding or that, if obtained, they will be sufficient, or whether any other initiatives will be successful, such that we will be able to continue as a going concern.

 

We face significant competition in the market for our products. If we are unable to compete successfully, we may not be able to sell products or to sell them at sufficient profit margins.

 

We face intense competition in the sale of our products and compete with multiple companies principally on the basis of price, service, quality, product characteristics and the ability to supply products to customers in a timely manner. Our products also compete with metal, glass, paper and other packaging materials as well as plastic and resin packaging materials made through different manufacturing processes. Most of our existing and potential competitors have greater brand name recognition and their products may enjoy greater initial market acceptance among our potential customers. In addition, many of these competitors have significantly greater financial, technical, sales, marketing, distribution, service and other resources than we have and may also be better able to adapt quickly to customers’ changing demands and changes in technology, to enhance existing products, to develop and introduce new products and new production technologies and to respond timely changing market conditions and customer demands. If we are not able to compete successfully in the face of our competitors’ advantages, our ability to gain market share or market acceptance for the products that we sell could be limited, our revenues and our profit margins could suffer, and we may never become profitable.

 

While we believe that the patent under which our TSOS Container is manufactured (see “Description of Business – Patents, Trademarks and Other Intellectual Property” on page 25) may afford us some protection from competition by similar products, no assurance can be given that a competing product cannot be developed without infringing our patent.

 

Our inability to generate sufficient cash flows, raise capital, and actively manage our liquidity may impair our ability to execute our business plan, and result in our reducing or eliminating product development and commercialization efforts, reducing our sales and marketing efforts, and having to forego attractive business opportunities.

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At December 31, 2013, and March 31, 2014, respectively, we had approximately $3,376 and $1,759 in cash. There are uncertainties related to the timing and use of our cash resources and working capital requirements. These uncertainties include, among other things, our ability to raise capital, to purchase products for resale, to develop additional products, the timing and volume of commercial sales and the associated gross margins of our products and the development of markets for, and customer acceptance of, new products.

 

To the extent possible, we will attempt to limit these risks by; (i) continually monitoring our sales prospects, (ii) continually aiming to reduce product cost and (iii) advancing our technology and product designs. However, because these above factors are not within our control, we may not be able to accurately predict our necessary cash expenditures or obtain financing in a timely manner to cover any shortfalls.

 

If we are unable to generate sufficient cash flows or obtain adequate financing, we may be prevented from executing our business plan on a timely basis or at all. In addition, we may be forced to reduce our sales and marketing efforts or forego attractive business opportunities.

 

In order to remain in business, we are also dependent on funds provided by the Company’s two officers for our day-to-day expenses and their willingness to work for the Company at salaries that are not commensurate with their contributions and abilities. If these officers ceased funding our day-to-day expenses, we could not continue to operate for more than a few weeks. For further information respecting these matters and the risks that they present to us, see “Risk Factors - Risks Related to Our Business - We Could Lose Our Officers” on page 8.

 

We are seeking equity and/or debt financing in an amount of at least $1.5 million that will enable us to continue to meet our capital needs for the next 12 months, but cannot give any assurance as to whether, when or in what amounts we will obtain it. We have met with several sources of financing, but have not been successful in obtaining funds. We intend to persist in seeking financing and intend to identify possible sources of financing and attempt to interest in us.

 

All of the membership units in D&C, which holds substantially all of our assets, have been pledged to secure indebtedness that we may be unable to repay.

 

All of the membership units in D&C, through we operate, and which holds substantially all of our assets, have been pledged to secure our obligations under a convertible promissory note in the principal amount of $400,000, $360,000 of which is unpaid. For further information about this convertible promissory note, the circumstances under which it was issued, its holder and the pledge, see “Directors, Executive Officers and Control Persons – Related Party Transactions – Exchange Transaction” on page 34. If we are unable to pay this convertible promissory note when it is due on March 4, 2015, or arrange for an extension of its maturity date, or if we defaults under any of covenant under this convertible promissory note or the pledge agreement by which it is secured, the holder of the convertible promissory note will be able to foreclose on these membership units.

 

In this event, our shareholders could lose all, or substantially all, of their investment.We do not presently have funds sufficient to pay the holder of this convertible promissory note. No assurance can be given that we will be able to obtain the funds necessary to make payments when due or at all.

 

We incurred losses during 2013 and if we continue to do so, we may not be able to implement our business strategy and the price of the Common Stock may decline.

 

We incurred a net loss of $104,167 for the year ended December 31, 2013. While we made a small profit during the first quarter of 2014, we may incur losses during 2014 and beyond. Our current business strategy is to pursue our business plan as described in this Prospectus. In so doing, we will continue to incur significant expenditures. As a result, we will need to generate and sustain significant revenues and positive gross margins to achieve and sustain profitability.

 

While we hope to execute our business plan successfully, no assurance can be given that we will be able to do so. If we are unable to do so, we may not be able to continue as a going concern and investors may lose their entire investment.

 

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In order to grow, we will need additional financing. If we cannot meet our future capital requirements, our business will suffer or we will be unable to continue to operate. Our shareholders may be adversely affected by the terms of such financing.

 

Since we commenced business, our primary methods to obtain the cash necessary for our operating needs have been investments made by our founders, Curtis Fairbrother and Douglas Heldoorn. We need to raise additional funds through public or private debt or equity financings in order to continue operating and in particular to fund operating losses; increase our sales and marketing capacities; take advantage of opportunities for internal expansion or acquisitions; hire, train and retain employees; develop and complete existing and new products; and respond to economic and competitive pressures. We will not be able to grow and become profitable without additional capital in the form of equity or borrowed money of approximately $1,500,000 to execute our business plan during the next 12 months. Our current liquidity presents a material risk to investors because we do not currently have sufficient funds to finance our business plan. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” on page 26. Although we are seeking additional capital, we have received no commitment for financing from investors or banks and no assurance can be given that any such commitment will be forthcoming or, if so, in what amount.

 

If adequate funds are not available or are not available on acceptable terms, our operating results and financial condition may suffer, the price of the Common Stock may decline and we may not be able to continue as a going business. We can give no assurance that we will be able to obtain such capital in sufficient amounts or on acceptable terms.

 

If our capital needs are met through the issuance of equity or convertible debt securities, the percentage ownership of the holders of the Common Stock will be reduced and may be diluted.

 

Acology’s two officers also comprise its board of directors and may change the terms of their employment with the Company to the detriment of the our shareholders.

 

As the sole directors of the Company, Messrs. Fairbrother and Heldoorn could establish terms of their employment to the detriment of the Company and our shareholders by using funds that would otherwise be available for the development of the business of the Company to pay unreasonable compensation. If they were to do so, the funds available to the Company for such development would be decreased. If their compensation were of sufficient magnitude, the Company would be unable to continue to operate and our shareholders could lose all or substantially all of their investment.

 

Risk Factors Related to Our Business

PICTURE

We could lose our supply contract.

We have entered into an agreement with Polymation Medical Products, LLC (“Polymation”) under which we purchase all of our TSOS Containers. For a description of these containers, see “Description of Business – Source of Products” on page 26 and for a description of this agreement, see “Description of Business – Products” on page 23. We are currently required to purchase at least 30,000 units per month, but this requirement will increase by 10% on each anniversary of the effective date of the agreement, but we have not complied with these purchase requirements. During 2013, we were required to purchase 150,000 units, but purchased only 58,540 units and during the quarter ended March 31, 2014, we were required to purchase 90,000 units, but purchased only 47,000 units. As a result, we are in default under this agreement and Polymation has the right to terminate it. We have discussed this situation with Polymation and have an orally understanding that at some point in the future, we will either purchase the 91,469 units that we failed to purchase in 2013 and the 43,000 units that we failed to purchase in the first quarter of 2014 or reimburse Polymation for its lost profits, the amount of which is unknown to us, but is less than the $67,234 contract price for the units. We have not entered into a written amendment of the agreement memorializing this oral understanding and we may therefore be unable to enforce it. While we believe that Polymation will comply with this oral understanding, we can give no assurance as to whether or for how long it will do so.

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If this agreement were to be terminated, we would be unable to acquire TSOS Containers from another source without the consent of Polymation, because Polymation holds a patent relating to the TSOS Container. If this consent were not forthcoming, our business would likely fail, since we have no other products with which we could replace the TSOS Container. In that case, our shareholders would lose all, or substantially all, of their investment.

 

We Could Lose Our Officers

 

We are unable to pay regular salaries to our officers, who are our only employees. We are currently paying them sporadically and in varying amounts as our financial condition permits and we believe that the amounts that we are paying to them are not commensurate with their contributions and abilities. We also have no employment agreements with them and they are not obligated to continue to be employed by us. While neither of our officers has indicated when or if they would terminate their employment if we continue to pay them on the basis set forth above, we believe that they may not work for us indefinitely without appropriate fixed compensation. If we were to lose one of our officers, our ability to operate would be materially impaired; if we were to lose both officers, we could not continue to operate. For further information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” on page 26.

 

Our business depends substantially on recruiting members of management and key personnel yet to be hired, and our business could be severely disrupted if we were unable to hire such personnel or lose their services.

 

Curtis Fairbrother, our Chairman of the Board and Chief Executive Officer, and Douglas Heldoorn, our President and Chief Operating Officer, are presently the only members of our management and therefore, we will need to attract, hire and retain other managers and key employees. If we were unable to hire additional management or if, after being hired, one or more of the members of our management were unable or unwilling to continue to work for us, we would have to spend a considerable amount of time and resources searching, recruiting, and integrating their replacements, which would substantially divert management’s attention from and severely disrupt our business. We could face difficulties in attracting and retaining additional management and, if we were to lose any of them, in attracting and retaining their replacements, because we are not presently in a position to pay competitive compensation and our future is uncertain.

 

Markets for our products may never develop or may develop more slowly than we anticipate. This would significantly harm our ability to generate revenues and may cause us to be unable to recover the expenses that we expect to incur in the development and acquisition of our products.

 

Markets may never develop for our products or they may develop more slowly than we anticipate. Any such delay or failure would significantly harm our revenues and we may be unable to recover the losses that we have incurred and may continue to incur in our business. If this were to occur, our business could fail. Our ability to market our products may be affected by many factors, some of which are beyond our control, including: the emergence of more competitive technologies and products; the future cost of raw materials; the manufacturing and supply costs for our products; and the perceptions of potential customers and the general public regarding these products.

 

We may not be able to manage successfully an expansion of our operations.

 

Our anticipated expansion in facilities, staff and operations may place serious demands on our managerial, technical, financial and other resources. We may be required to make significant investments in our business, as well as retain, motivate and effectively manage our employees. While we intend continually to monitor our sales outlook and adjust our business plan as necessary, our management skills and systems currently in place may not enable us to implement our strategy or to attract and retain the personnel that are required to expand our business. Our failure to manage our growth effectively or to implement our strategy in a timely manner may significantly harm our ability to achieve profitability.

 

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We may acquire technologies or companies in the future, and these acquisitions could disrupt our business and dilute shareholders’ interests.

 

We may acquire additional technologies or other companies in the future and we cannot assure that we will be able to successfully integrate their operations or that the cost savings we anticipate will be fully realized. Entering into an acquisition entails many risks, any of which could materially harm our business, including: diversion of management’s attention from other business concerns; failure to effectively assimilate the acquired technology, employees or other assets into our business; the loss of key employees from either our current business or the acquired business; and the assumption of significant liabilities of the acquired company.

 

If we complete acquisitions, we may dilute the ownership of current shareholders. In addition, achieving the expected returns and cost savings from acquisitions will depend in part on our ability to integrate the products and services, technologies, research and development programs, operations, sales and marketing functions, finance, accounting and administrative functions, and other personnel of these businesses into our business in an efficient and effective manner. We cannot ensure we will be able to do so or that the acquired businesses will perform at anticipated levels. If we are unable to successfully integrate acquired businesses, our anticipated revenues may be lower and our operational costs may be higher.

 

We may become responsible for unexpected liabilities that we failed or were unable to discover in the course of performing due diligence in connection with our acquisitions. Although we may ask persons from whom we acquire businesses to indemnify us against undisclosed liabilities, we may not be able to obtain satisfactory indemnification and such indemnification, if obtained, may not be enforceable, collectible or sufficient in amount, scope or duration. Such liabilities, individually or in the aggregate, could have a material adverse effect on our business, financial condition and results of operations.

 

Risk Factors Related to the Development of Our Products and Technology

 

We may not be able to sell our products at competitive prices. If we fail to do so, we will not generate sufficient revenues to achieve and sustain profitability.

 

While we plan to sell our products at competitive prices, we may not be able to do so. The prices of our products at which we acquire our products from our manufacturer are dependent largely on material and manufacturing costs. This manufacturer may not be able purchase raw materials at the prices and/or to maintain manufacturing costs at the levels at which it will be able to sell them to us at prices at which we can resell them at satisfactory margins.

 

The manufacture of our products requires large quantities of medical-grade polypropylene no. 5 resin, which is subject to price fluctuations that arise principally from supply shortages and changes in the prices of natural gas, crude oil and other petrochemicals from which this resin is produced. Over the past several years, these prices have fluctuated, sometimes rapidly. These fluctuations could materially and adversely affect us.

 

We may depend on intellectual property and our failure to protect that intellectual property could adversely affect our future growth and success.

 

Failure to protect our intellectual property rights may reduce our ability to prevent others from using technology that we may develop. We will rely on a combination of patent, trade secret, trademark and copyright laws to protect our intellectual property. Some of our intellectual property is currently not covered by any patent or patent application. Patent protection is subject to complex factual and legal criteria that may give rise to uncertainty as to the validity, scope and enforceability of a particular patent. Accordingly, we cannot assure that any patents or third party patents licensed to us will not be invalidated, circumvented, challenged, rendered unenforceable, or licensed to others or that any that we may obtain of our future patent applications will be issued with the breadth of protection that we seek, if at all.

 

In addition, effective patent, trademark, copyright and trade secret protection may be unavailable, limited, not applied for, or unenforceable in foreign countries.

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While we intend to seek to protect our proprietary intellectual property through contracts, including confidentiality and similar agreements, with our customers and employees, we cannot assure that the parties who enter into such agreements with us will not breach them, that we will have adequate remedies for any such breach or that such parties will not assert rights to intellectual property of which they learn from relationships with us.

 

If necessary or desirable, we may seek licenses under the patents or other intellectual property rights of others. However, we cannot as sure we will obtain such licenses or that the terms of any offered licenses will be acceptable to us. Our failure to obtain a license from a third party for intellectual property we use in the future could cause us to incur substantial liabilities and to suspend the manufacture and shipment of products or our use of processes that exploit such intellectual property. In addition, failure to obtain such a license could affect our ability to manufacture competitive products.

 

For information about a patent under which one of our products is manufactured, see “Description of Business – Patents, Trademarks and Other Intellectual Property” on page 25.

 

Our involvement in intellectual property litigation could negatively affect our business.

 

In order to establish and maintain such a competitive position, we may need to prosecute claims against others who we believe are infringing our rights and defend claims brought against us by others who believe that we are infringing their rights. Our involvement in intellectual property litigation could result in significant expense to us, adversely affect sales of any products involved or the use or licensing of related intellectual property and divert the efforts of our technical and management personnel from their principal responsibilities, regardless of whether such litigation is resolved in our favor. If we are found to be infringing on the intellectual property rights of others, we may, among other things, be required to pay substantial damages; cease the development, manufacture, use, sale or importation of products that infringe on such intellectual property rights; discontinue processes incorporating the infringing technology; expend significant resources to develop or acquire non-infringing intellectual property or products; or obtain licenses to the relevant intellectual property.

 

We cannot offer any assurance that we will prevail in any such intellectual property litigation or that, if we were not to prevail in such litigation, licenses to the intellectual property or products we are found to be infringing on would be available on commercially reasonable terms, if at all. The cost of intellectual property litigation as well as the damages, licensing fees or royalties that we might be required to pay could have a material adverse effect on our business and financial results.

 

Current and future regulatory requirements could adversely affect our financial condition and our ability to conduct our business.

 

The Food and Drug Administration (the “FDA”) regulates the material content of our products pursuant to the Federal Food, Drug and Cosmetic Act and the Consumer Product Safety Commission (the “CPSC”) regulates certain aspects of our products pursuant to various federal laws, including the Consumer Product Safety Act and the Poison Prevention Packaging Act. The FDA and the CPSC can require the manufacturer of defective products to repurchase or recall these products and may also impose fines or penalties on the manufacturer. Similar laws exist in some states, cities and other countries in which we sell or intend to sell our products. In addition, certain state laws restrict the sale of packaging with certain levels of heavy metals and impose fines and penalties for noncompliance. Although FDA-approved resins and pigments are used in our products that directly contact food and drugs and we believe our products are in material compliance with all applicable regulatory requirements (although we are not required to submit them to either the FDA or the CPSC for review), we are remain subject to the risk that our products could be found not to be in compliance with these and/or other requirements. A recall of any of our products or any fines and penalties imposed in connection with noncompliance could have a materially adverse effect on us.

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Our officers have limited experience in connection with the fabrication and sale of products similar to those fabricated and sold by the Company.

 

Our officers have limited experience in connection with sale of products similar to those sold by the Company. Accordingly, there is a significant risk that they may not be able to manage the Company and its operations successfully. We act as our own distributor for approximately 26% of our products and may not be able to do so successfully. While these risks can be partially eliminated hiring more experienced personnel, no assurance can be given that the Company will be able to do so. To the extent that our officers are unable to manage the Company and its operations successfully and the Company is unable to hire more experienced personnel, investors may experience diminution or total loss of their investments.

 

Adverse capital and credit market conditions may significantly affect our access to capital and cost of capital.

 

Capital and credit markets have experienced significant volatility in recent years. In many cases, these markets have exerted downward pressure on the availability of liquidity and credit capacity for issuers. We need liquidity for future growth and development of our business. Without sufficient liquidity, we may not be able to purchase additional lots or develop projects, which could adversely affect our financial results.

 

Natural disasters and severe weather conditions could delay deliveries and increase costs.

 

Current and planned operations of the Company and its suppliers are located in areas that are subject to earthquakes and other natural disasters. The occurrence of natural disasters can delay deliveries, increase costs by damaging inventories and reducing the availability of materials in affected areas. Furthermore, since we have no insurance covering business interruptions or losses resulting from these events, our earnings, liquidity, or capital resources could be adversely affected.

 

If we do not effectively implement measures to sell our products, we may not achieve sustained revenues and you could lose your entire investment.

 

We have been manufacturing and selling our products for approximately 1 year and have limited sales. Our sales and marketing efforts may not achieve intended results and therefore may not generate the revenue we hope to achieve. There can be no assurance that our operating plan will be successful. If we are not able to successfully address markets for our products, we may not be able to grow our business, compete effectively or achieve profitability.

 

If we are unable to successfully manage growth, our operations could be adversely affected.

 

Our progress is expected to require the full utilization of our management, financial and other resources, which to date has occurred with limited working capital. Our ability to manage growth effectively will depend on our ability to improve and expand operations, including our financial and management information systems, and to recruit, train and manage sales personnel. There can be no absolute assurance that management will be able to manage growth effectively.

 

If we do not properly manage the growth of our business, we may experience significant strains on our management and operations and disruptions in our business. Various risks arise when companies and industries grow quickly. If our business or industry grows too quickly, our ability to meet customer demand in a timely and efficient manner could be challenged. We may also experience development delays as we seek to meet increased demand for our products. Our failure to properly manage the growth that we or our industry might experience could negatively impact our ability to execute on our operating plan and, accordingly, could have an adverse impact on our business, our cash flow and results of operations, and our reputation with our current or potential customers.

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Our officers have no experience in managing a public company, which increases the risk that we will be unable to establish and maintain all required controls and procedures and internal controls over financial reporting and meet the public reporting and the financial requirements for our business.

 

Our management has a legal and fiduciary duty to establish and maintain disclosure controls and control procedures in compliance with the securities laws, including the requirements mandated by the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002. Although our officers have substantial business experience, they have no experience in managing a public company. The standards that must be met for management to assess the internal control over financial reporting as effective are complex, and require significant documentation, testing and possible remediation to meet the detailed standards. Because our officers have no prior experience with the management of a public company, we may encounter problems or delays in completing activities necessary to make an assessment of our internal control over financial reporting, and disclosure. If we cannot assess our internal control over financial reporting as effective or provide adequate disclosure controls or implement sufficient control procedures, investor confidence and share value may be negatively impacted. 

 

Risk Factors Related to Ownership of the Common Stock

 

Two shareholders own approximately 85% of the Common Stock and may authorize or prevent corporate actions to the detriment of other shareholders.

 

Our two officers and directors beneficially own shares of the outstanding Common Stock representing approximately 85% of the votes eligible to be cast by shareholders in the election of directors and on other matters. Accordingly, they have power to control all matters requiring the approval of the shareholders, including the election of directors and the approval of mergers and other significant corporate transactions. Their interests could conflict with the interests of other shareholders.

The Common Stock is quoted on OTC Pink and the Company has applied for its quotation on OTCQB. Quotation on either OTC Pink or OTCQB may limit the liquidity and price of the Common Stock more than if it were quoted or listed on a national securities exchange, the NASDAQ Stock Market or the OTC Bulletin Board. Further, as long as our Common Stock is quoted on OTC Pink, or if it were to be quoted on OTCQB and were removed from OTCQB back to OTC Pink, its liquidity and price may limited in comparison to OTCQB .

 

The Common Stock will be quoted on OTC Pink, which provides a significantly more limited market and may limit the liquidity and price of the Common Stock more greatly than would be the case if it were listed or quoted on a national securities exchange, the NASDAQ Stock Market, the OTC Bulletin Board or OTC Pink. Some investors may perceive the Common Stock to be less attractive because it is quoted on OTC Pink or, if our application be accepted, on OTCQB. In addition, as a company whose Common Stock is quoted on either OTC Pink or OTCQB, we may not attract the extensive analyst coverage that is received by companies listed or quoted elsewhere. Further, institutional and other investors may have investment guidelines that restrict or prohibit their investing in securities quoted on these tiers. These factors may have an adverse impact on the trading and price of the Common Stock and a long-term adverse impact on our ability to raise capital.

The standards for quotation on OTCQB changed effective May 1, 2014. Prior to that date, shares were eligible to be quoted without regard to their price, upon the effectiveness of a registration statement, but after that date, companies such as ours that are not quoted on the OTCQB must file an application with OTC Markets Group Inc. and meet an initial bid price test of $0.01 per share as of the close of business for each of the previous 30 calendar days. Once the application is accepted, shares must meet an ongoing minimum bid price test of $0.01 per share as of the close of business for at least one of every 30 calendar days; if they fail to do so, they will be removed from OTCQB and be placed in the OTC Pink tier. If this were to occur, the liquidity and price of the Common Stock could be impaired. No assurance can be given our application for quotation on OTCQB will be accepted or, if it be, that the Common Stock will continue to meet the ongoing minimum price test.

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The Company may not attract the attention of major brokerage firms.

 

Securities analysts of major brokerage firms may not provide coverage of the Company since there is little incentive to brokerage firms to recommend the purchase of the Common Stock. There is no assurance that brokerage firms will be interested in conducting secondary offerings on behalf of the Company or in privately placing the Company’s securities with their customers.

 

Sales of the Common Stock in the public market could lower its price and impair our ability to raise funds in securities offerings.

 

If the Company’s shareholders sell substantial amounts of their Common Stock in the public markets, or if it is perceived that such sales may occur, the price of the Common Stock could fall and make it more difficult for the Company to sell equity, or equity-related securities at a price that the Company deems appropriate.

 

The trading price of the Common Stock may decrease due to factors beyond our control.

 

The securities markets, and in particular the market for securities quoted on OTCQB and OTC Pink, have from time to time experienced extreme price and volume fluctuations which have often been unrelated to the financial performance of the companies listed or quoted thereon. These fluctuations may adversely affect the market price of the Common Stock and make it more difficult for the Company to sell equity, or equity-related securities at a price that the Company deems appropriate.

 

The market price of the Common Stock may also fluctuate significantly in response to a number of factors, many of which are unpredictable or beyond our control, regardless of our actual performance. Among these factors are: variations in our quarterly operating results; changes in general economic conditions; changes in market valuations of similar companies; announcements by us or our competitors of significant new contracts, acquisitions, strategic partnerships or joint ventures, or capital commitments; loss of a major supplier, customer, partner or joint venture participant post-merger; and the addition or loss of key management personnel. As a result, holders of Common Stock may be unable to sell their shares, or may be forced to sell them at a loss.

 

The market price for the Common Stock may be particularly volatile given the Company’s status as a relatively unknown company whose shares have been thinly traded, a limited operating history, a lack of profits and an uncertain future. You may be unable to sell the Common Stock at or above your purchase price, which may result in substantial losses to you.

The market for the Common Stock may be subject to significant price volatility for the indefinite future for a number of reasons. The Common Stock has historically been very thinly traded and such trading has been extremely limited, sporadic and highly volatile. During 2012, approximately 203 shares (adjusted for the 1-for-1,000 reverse stock split that was implemented on February 14, 2014) were traded; during 2013, approximately 68 shares (as so adjusted) were traded; and in 2014 through June 30, 2014, 301 shares (as so adjusted) have been traded. If this level of activity persists, the trading of relatively small quantities of shares may disproportionately affect their price. Also, the price for the Common Stock could decline precipitously in the event that a large number of shares were offered or sold without commensurate demand. In addition, the Common Stock is a speculative or “risky” investment due to the Company’s limited operating history, the Company’s lack of profits and its uncertain future. As a consequence, investors may be inclined to sell their shares more quickly and at lower prices than would be the case with the stock of a less risky issuer. We can make no predictions as to the future prices for shares of the Common Stock.

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In light of the facts that there are only 14,785 shares of Common Stock that can be traded in the public markets and that trading in the Common Stock has been sporadic, we do believe that there is not an effective public for the Common Stock or that dealer quotation for these shares will necessarily continue at their present levels.

 

No Dividends. The Company does not intend to pay dividends for the foreseeable future and you must rely on increases in the market price of the Common Stock for returns on your investment. If you are seeking cash dividends, you should not purchase the Common Stock.

 

For the foreseeable future, the Company intends to retain its earnings, if any, to finance the development and expansion of our business, and the Company does not anticipate paying any cash dividends on the Common Stock. Accordingly, investors must be prepared to rely on sales of their Common Stock, after price appreciation, to earn an investment return, but no assurance can be given that the price of the Common Stock will appreciate or, if it does, that it will remain at or rise above the level to which it has appreciated. Any determination to pay dividends in the future will be made at the discretion of the Company’s board of directors and will depend on our results of operations, financial condition, capital needs, contractual restrictions, restrictions imposed by applicable law and other factors the Company’s board of directors deems relevant.

 

The Company will be subject to penny stock regulations and restrictions and you may have difficulty selling shares of the Common Stock.

 

The SEC has adopted regulations which generally define a “penny stock” as an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. The Company expects that initially and for an undeterminable period, the Common Stock will be a “penny stock,” and that transactions in the Common Stock will be subject to Rule 15g-9 under the Exchange Act, or the so-called “Penny Stock Rule,” which imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouses). For transactions subject to Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to effectuate trades in or sell, and in turn the ability of shareholders to sell, the Common Stock.

 

For any transaction involving a penny stock, unless exempt, a disclosure schedule prepared by the SEC relating to the penny stock market must be delivered prior to any transaction. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information as to the limited market for penny stock.

 

There can be no assurance that the Common Stock would qualify for exemption from the Penny Stock Rule. In any event, even if the Common Stock were to be exempt from the Penny Stock Rule, Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock if the SEC finds that such a restriction would be in the public interest, would be applicable.

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Since the Company will be an issuer of “penny stock,” the protection provided by the federal securities laws relating to forward looking statements will not apply to us.

 

Although federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, since the Company will be an issuer of penny stock, it will not have the benefit of this safe harbor protection in the event of any legal action based upon a claim that the material provided by the Company contained a material misstatement of fact or was misleading in any material respect because of the Company’s failure to include any statements necessary to make the statements not misleading. Such an action could adversely affect our financial condition.

 

The Common Stock is subject to risks arising from restrictions on reliance on Rule 144 by shell companies or former shell companies.

 

Under a regulation of the SEC known as “Rule 144,” a person who beneficially owns restricted securities of an issuer and who is not an affiliate of that issuer may sell them without registration under the Securities Act provided that certain conditions have been met. One of these conditions is that such person has held the restricted securities for a prescribed period, which will be 6 months or 1 year, depending on various facts. However, Rule 144 is unavailable for the resale of securities issued by an issuer that is a shell company (other than a business combination related shell company) or, unless certain conditions are met, that has been at any time previously a shell company. The SEC defines a shell company as a company that has (a) no or nominal operations and (b) either (i) no or nominal assets, (ii) assets consisting solely of cash and cash equivalents; or (iii) assets consisting of any amount of cash and cash equivalents and nominal other assets. Until the Merger, the Company was a shell company.

 

Rule 144 is available for the resale of securities of former shell companies, such as ours, if and for as long as the following conditions are met:

 

  (i) the issuer of the securities that was formerly a shell company has ceased to be a shell company,
   
  (ii) the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act,
   
  (iii) the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and
   
  (iv) at least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its status as an entity that is not a shell company known as “Form 10 Information.”

 

Although the Company has filed Form 10 Information with the SEC in the registration statement of which this Prospectus forms a part, shareholders who receive the Company’s restricted securities will not be able to sell them pursuant to Rule 144 without registration until the Company has met the other conditions of this exception and then for only as long as the Company continues to meet the conditions described in subparagraph (iii), above, and is not a shell company. No assurance can be given that the Company will meet these conditions or that, if it has met them, it will continue to do so, or that it will not again be a shell company.

 

The Company would cease to be subject to the reporting requirements of section 13 or 15(d) of the Exchange Act if, at the end of any year in which it was subject to these requirements under said section 13, it had less than 300 record shareholders and failed prior to the end of that year to register the Common Stock under section 12 of the Exchange Act. In that Event, Rule 144 would not be available for resales or our securities until we had so registered the Common Stock and had filed reports under the Exchange Act for 1 year.

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The Company will incur increased costs as a result of being a public company, which could affect our profitability and operating results.

 

The Company is obligated to file annual, quarterly and current reports with the SEC pursuant to the Exchange Act. In addition, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the rules thereunder implemented by the SEC and the Public Company Accounting Oversight Board (the “PCAOB”) have imposed various requirements on public companies. The Company expects these rules and regulations to increase its legal and financial compliance costs and to make some of our activities more time-consuming and costly. The Company expects to spend at least $50,000, and perhaps substantially more, in legal and accounting expenses annually to comply with the Company’s reporting obligations and Sarbanes-Oxley. These costs could affect our profitability and our results of operations. As indicated below, the so-called “Jobs Act” has relieved the Company of certain obligations with respect to reporting.

 

Because the Common Stock is not registered under the Exchange Act, the Company will not be subject to the federal proxy rules and the Company’s directors, executive offices and 10% beneficial holders will not be subject to Section 16 of the Exchange Act. In addition, the Company’s reporting obligations under Section 15(d) of the Exchange Act may be suspended automatically if the Company has fewer than 300 shareholder s of record on the first day of a fiscal year.

 

The Common Stock is not registered under the Exchange Act and the Company does not intend to register the Common Stock thereunder for the foreseeable future. However, the Company will register the Common Stock thereunder if the Company has, after the last day of the Company’s fiscal year, total assets of more than $10,000,000 and 2,000 record holders or 500 record holders who are not accredited investors, in accordance with Section 12(g) of the Exchange Act. As of the date of this Prospectus, the Company had approximately 400 shareholders of record and assets far below $10,000,000. The Company is currently required to file annual, quarterly, and current reports pursuant to Section 15(d) of the Exchange Act. However, the Company will not be subject to Section 14 of the Exchange Act, which, among other things, prohibits companies that have securities registered under the Exchange Act from soliciting proxies or consents from shareholders without filing with the SEC and furnishing to them a proxy or information statement and, in the case of a proxy solicitation a form of proxy complying with the SEC’s rules. In addition, as long as the Common Stock is not registered under Section 12 of the Exchange Act, the Company’s directors, executive officers and beneficial holders of 10% or more of the Company’s outstanding Common Stock and other equity securities will not be subject to Section 16 of the Exchange Act. Section 16(a) of the Exchange Act requires these persons to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports providing information concerning their ownership of Common Stock and other equity securities. Such information will be available only through such periodic reports that the Company files and registration statements that the Company may file with the SEC.

 

Furthermore, as long as the Common Stock is not registered under the Exchange Act, the Company’s obligation to file reports under Section 15(d) of the Exchange Act will be suspended if, on the first day of any fiscal year (other than a fiscal year in which a registration statement under the Securities Act has become effective), the Company has fewer than 300 shareholders of record. This suspension is automatic and does not require any filing with the SEC. In this event, the Company may cease providing periodic reports and current or periodic information, including operational and financial information, may not be available with respect to our results of operations.

 

The JOBS Act has reduced the information that the Company is required to disclose, which could adversely affect the price of the Common Stock.

 

Under the Jumpstart Our Business Startups Act (the “Jobs Act”), the information that the Company is required to disclose has been reduced in a number of ways.

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Before the adoption of the Jobs Act, the Company was required to register the Common Stock under the Exchange Act within 120 days after the last day of the first fiscal year in which the Company had total assets exceeding $1,000,000 and 500 record holders of the Common Stock; the Jobs Act has changed this requirement such that the Company must register the Common Stock under the Exchange Act within 120 days after the last day of the first fiscal year in which the Company has total assets exceeding $10,000,000 and 2,000 record holders or 500 record holders who are not accredited investors. As a result, the Company is now required to register the Common Stock under the Exchange Act substantially later than previously.

 

As a company that had gross revenues of less than $1 billion during the Company’s last fiscal year, the Company is an “emerging growth company,” as defined in the Jobs Act (an “EGC”). The Company will retain that status until the earliest of (A) the last day of the fiscal year which the Company has total annual gross revenues of $1,000,000,000 (as indexed for inflation in the manner set forth in the Jobs Act) or more; (B) the last day of the fiscal year of following the fifth anniversary of the date of the first sale of the Common Stock pursuant to an effective registration statement under the Securities Act (December 20, 2016); (C) the date on which the Company has, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or (D) the date on which the Company is deemed to be a “large accelerated filer,” as defined in Rule 12b-2 under the Exchange Act or any successor thereto. As an EGC, the Company is relieved from the following:

 

The Company is excluded from Section 404(b) of Sarbanes-Oxley, which otherwise would have required the Company’s auditors to attest to and report on the Company’s internal control over financial reporting. The JOBS Act also amended Section 103(a)(3) of Sarbanes-Oxley to provide that (i) any new rules that may be adopted by the PCAOB requiring mandatory audit firm rotation or changes to the auditor’s report to include auditor discussion and analysis (each of which is currently under consideration by the PCAOB) shall not apply to an audit of an EGC and (ii) any other future rules adopted by the PCAOB will not apply to the Company’s audits unless the SEC determines otherwise.

The JOBS Act amended Section 7(a) of the Securities Act to provide that the Company need not present more than two years of audited financial statements in an initial public offering registration statement and in any other registration statement, need not present selected financial data pursuant to Item 301 of Regulation S-K for any period prior to the earliest audited period presented in connection with such initial public offering. In addition, the Company is not required to comply with any new or revised financial accounting standard until such date as a private company (i.e., a company that is not an “issuer” as defined by Section 2(a) of Sarbanes-Oxley) is required to comply with such new or revised accounting standard. Corresponding changes have been made to the Exchange Act, which relates to periodic reporting requirements, which would be applicable if the Company were required to comply with them.

As long as the Company is an EGC, the Company may comply with Item 402 of Regulation S-K, which requires extensive quantitative and qualitative disclosure regarding executive compensation, by disclosing the more limited information required of a “smaller reporting company.”

In the event that the Company registers the Common Stock under the Exchange Act, the JOBS Act will also exempt the Company from the following additional compensation-related disclosure provisions that were imposed on U.S. public companies pursuant to the Dodd-Frank Act: (i) the advisory vote on executive compensation required by Section 14A(a) of the Exchange Act, (ii) the requirements of Section 14A(b) of the Exchange Act relating to shareholder advisory votes on “golden parachute” compensation, (iii) the requirements of Section 14(i) of the Exchange Act as to disclosure relating to the relationship between executive compensation and our financial performance, and (iv) the requirement of Section 953(b)(1)of the Dodd-Frank Act, which requires disclosure as to the relationship between the compensation of the Company’s chief executive officer and median employee pay.

 

Since the Company is not required, among other things, to file reports under Section 13 of the Exchange Act or to comply with the proxy requirements of Section 14 of the Exchange Act until such registration occurs or to comply with certain provisions of Sarbanes-Oxley and the Dodd-Frank Act and certain provisions and reporting requirements of or under the Securities Act and the Exchange Act or to comply with new or revised financial accounting standards as long as the Company is an EGC, and the Company’s officers, directors and 10% shareholders are not required to file reports under Section 16(a) of the Exchange Act until such registration occurs, the Jobs Act has had the effect of reducing the amount of information that the Company and its officers, directors and 10% shareholders are required to provide for the foreseeable future.

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Section 102(b)(1) of the JOBS Act provides that, as an emerging growth company, the Company (A) need not present more than 2 years of audited financial statements in order for the Company’s registration statement with respect to an initial public offering of its common equity securities to be effective, and in any other registration statement that it files with the SEC, the Company need not present selected financial data prescribed by the SEC in its regulations for any period prior to the earliest audited period presented in connection with the Company’s initial public offering; and (B) may not be required to comply with any new or revised financial accounting standard until such date that a company that is not an issuer (as defined under section 2(a) of the Sarbanes-Oxley Act of 2002 is required to comply with such new or revised accounting standard, if such standard applies to companies that are not issuers. The term ‘‘issuer’’ generally means any person who issues or proposes to issue any security, an issuer the securities of which are registered under section 12 of the Exchange Act or that is required to file reports under section of the Exchange Act, or that files or has filed a registration statement that has not yet become effective under the Securities Act and that it has not withdrawn. While the Company is permitted to opt out of these provisions, the Company has not done so and do not intend to do so. As a result, our financial statements may not be comparable to companies that that elect to opt out of these provisions.

 

As a result of such reduced disclosure, the price for the Common Stock may be adversely affected.

 

FORWARD-LOOKING STATEMENTS

 

Statements in this Prospectus may be “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecast in forward-looking statements due to numerous factors, including those described under “Risk Factors” on page 4 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page 26 and elsewhere in this Prospectus and in other documents which the Company will file with the SEC.

 

In addition, the outcome of our forward-looking statements could be affected by risks and uncertainties related to our ability to raise the capital that we require for our operations, competition, government regulations and requirements, pricing and development difficulties, our ability to make acquisitions and successfully integrate them with our business, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date of this Prospectus and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this Prospectus.

 

USE OF PROCEEDS

 

The selling shareholders will receive all of the proceeds from the sale of the Common Stock offered by them under this Prospectus. The Company will not receive any of these proceeds.

 

SELLING SHAREHOLDERS

The selling shareholders may sell up to 700,000,000 shares of Common Stock from time to time in one or more offerings under this Prospectus. All of these shares were acquired by the selling shareholders in the Private Placement. None of the selling shareholders is a broker-dealer.

 

The following table sets forth the name of each selling shareholder, the number of shares of Common Stock owned by each of them before this offering, the number of shares that may be offered by each of them for resale under this Prospectus and the number of shares to be owned by each of them after this offering is completed, assuming that all of the shares offered by each of them are sold. However, because each selling shareholder may offer all, some or none of the shares that he or it holds, and because, based upon information provided to the Company, there are currently no agreements, arrangements, or understandings with respect to the sale of any of the shares, no definitive estimate as to the number of shares that will be held by any selling shareholder after the offering can be provided.

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Name of selling shareholder Amount of
securities of the
class owned by
the selling shareholder before
the offering
Amount of
Securities to be
offered for the
selling shareholder’s
account
Amount and (if one
percent or more)
percentage of the
class to be owned by the selling shareholder after the offering is
complete
Dixie Assets Management, Inc. 1 200,000,000 200,000,000 0
Carrizo LLC 2 200,000,000 200,000,000 0
Rajbir Singh Husson 300,000,000 300,000,000 0
TOTAL 700,000,000 700,000,000 0

 

1 The natural person with voting and dispositive power for Dixie Assets Management, Inc. is Richard S. Astrom. Mr. Astrom served as president and sole director of the Company until March 4, 2014.
2 The natural person with voting and dispositive power for Carrizo LLC is Pamela Astrom, who is the spouse of Richard S. Astrom.

 

None of the Selling Shareholders is an affiliate of the Company. Richard S. Astrom, who is the natural person with voting and dispositive power for Dixie Assets Management, Inc., served as president and sole director of Acology from January 1, 2012, until March 4, 2014. As indicated under the caption “Directors, Executive Officers and Control Persons – Related Parties –Exchange Transaction” on page 34, Mr. Astrom beneficially owned 35,000,000 shares of pre-split common stock, which he surrendered prior to this offering as an incident of the Merger.

 

PLAN OF DISTRIBUTION

 

This Prospectus relates to 700,000,000 shares of Common Stock offered by the selling shareholders.

As of the date of this Prospectus, the Common Stock is quoted on and traded over OTC Pink under the symbol “ACOL.” Acology has applied to OTC Markets Group Inc. to have the Common Stock quoted on OTCQB under the same symbol. No assurance can be given that this application will be accepted or if it be accepted, that Acology will be able to meet the standards for maintaining quotation on OTCQB. If it were to fail to meet the standards the Common Stock would be moved back to and quoted on OTC Pink.

 

The selling shareholders or their respective pledgees, donees, transferees or other successors in interest will publicly offer all or a portion of their shares at market prices prevailing at the time of sale or privately at negotiated prices. The selling shareholders may offer their shares at various times in one or more of the following transactions:

 

on any national securities exchange, or other market on which the Common Stock may be listed at the time of sale;
     
in the over-the-counter market;
     
through block trades in which the broker or dealer so engaged will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
     
through purchases by a broker or dealer as principal and resale by such broker or dealer for its account pursuant to this Prospectus;
     
in ordinary brokerage transactions and transactions in which the broker solicits purchasers;
     
through options, swaps or derivatives;
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in privately negotiated transactions; or
     
in transactions to cover short sales.

 

In addition, the selling shareholders may sell their shares that qualify for sale pursuant to Rule 144 under the Securities Act under the terms thereof rather than pursuant to this Prospectus if that rule becomes available for the sale of their shares.

 

The selling shareholders may sell their shares directly to purchasers or may use brokers, dealers, underwriters or agents to sell their shares upon terms and conditions that will be described in a supplement to this Prospectus. In effecting sales, brokers and dealers engaged by the selling shareholders may arrange for other brokers or dealers to participate. Brokers or dealers may receive commissions, discounts or concessions from the selling shareholders or, if any such broker-dealer acts as agent for the purchaser of such shares, from such purchaser in amounts to be negotiated. Such compensation may, but is not expected to, exceed that which is customary for the types of transactions involved. Broker-dealers may agree with the selling shareholders to sell a specified number of such shares at a stipulated price per share, and, to the extent such broker-dealer is unable to do so acting as agent for the selling shareholders, to purchase as principal any unsold shares at the price required to fulfill the broker-dealer commitment to the selling shareholder. Broker-dealers who acquire shares as principal may thereafter resell such shares from time to time in transactions which may involve block transactions and sales to and through other broker-dealers, including transactions of the nature described above, in the over-the-counter market or otherwise at prices and on terms then prevailing at the time of sale, at prices then related to the then-current market price or in negotiated transactions. In connection with such resales, broker-dealers may pay to or receive from the purchasers of such shares commissions as described above.

 

The selling shareholders and any broker-dealers or agents that participate with the selling shareholders in sales of the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales.

 

In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act of 1933.

 

From time to time the selling shareholders may engage in short sales, short sales against the box, puts and calls and other hedging transactions the Common Stock, to the extent permitted by applicable law and regulations, and may sell and deliver shares in connection with such transactions or in settlement of securities loans. These transactions may be entered into with broker-dealers or other financial institutions. In addition, from time to time, if permitted by applicable law and regulation, the selling shareholders may pledge their shares under the margin provisions of their customer agreements with their respective broker-dealers. Upon delivery of the shares or a default by the selling shareholder, the broker-dealer or financial institution may offer and sell the pledged shares from time to time.

The Common Stock is quoted on and trades over OTC Pink. Acology has applied for quotation on OTCQB. If this application is accepted the Common Stock will be quoted on that tier, until the Common Stock fails to meet the standards for such quotation, in which case, the Common Stock will be quoted on OTC Pink, or the Company determines that it is able to bear the costs of being quoted on the Over-the-Counter Bulletin Board, NASDAQ or a national securities exchange after meeting the costs associated with its business plan and until an application for listing the Common Stock is thereon is accepted, which the Company does not believe will occur during the period in which Common Stock will be offered or sold pursuant to this Prospectus. In addition, if the Company determines that it is desirable for the Common Stock to trade on the Over-the-Counter Bulletin Board, it may not file a listing application on its own behalf, but must find a broker-dealer willing to do so. The Company cannot predict the extent to which investor interest in the Company will lead to the development of an active, liquid trading market. Active trading markets generally result in lower price volatility and more efficient execution of buy and sell orders for investors. There is no assurance as to the price at which the Common Stock will trade as prices for the Common Stock in any public market which may develop will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity of the market for the Common Stock, investor perception of us and general economic and market conditions.

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The selling shareholders, alternatively, may sell all or any part of the shares offered in this Prospectus through an underwriter. To the knowledge of the Company, no selling shareholder has entered into any agreement with an underwriter.

 

If a selling shareholder notifies the Company that it has a material arrangement with a broker-dealer for the resale of the Common Stock, the Company would be required to amend the registration statement of which this Prospectus is a part, and file a prospectus supplement to describe the agreements between the selling shareholder and the broker-dealer.

 

The Company has agreed to use its best efforts to keep this Prospectus effective until the earlier of (i) the date when all of the shares covered by the registration statement of which this prospectus is a part have been sold or (ii) the date on which these shares may be sold without restriction pursuant to Rule 144. 

 

Acology has agreed to indemnify each selling shareholder and certain persons related or connected to each selling shareholder against certain liabilities, including liabilities under the Securities Act or, in the event that such indemnification is unavailable because of a failure or refusal of a governmental authority to enforce such indemnification in accordance with its terms (by reason of public policy or otherwise), to contribute to the payments that the selling shareholder or such persons may be required to make in respect of such liabilities.

 

Acology has agreed to indemnify each of the selling shareholders, or their transferees or assignees, against certain liabilities, including liabilities under the Securities Act or to contribute to payments the selling shareholder or their respective pledgees, donees, transferees or other successors in interest, may be required to make in respect of such liabilities.

 

Acology is paying all fees and expenses incident to the registration of the shares, including fees and disbursements of counsel to the selling shareholders, other than brokerage commissions or underwriter discounts.

 

DESCRIPTION OF SECURITIES

 

Acology’s authorized capital stock consists of 6,000,000,000 shares of Common Stock, par value $0.00001 per share, and 10,000,000 shares of preferred stock, par value $0.00001 per share, which are issuable in series. As of December 31, 2013, there were 49,442,762 shares of Common Stock outstanding and no shares of preferred stock outstanding. For information respecting recent transactions that have affected the number of shares of Acology’s common stock outstanding, see “Prospectus Summary – Our History” on page 1.

 

The following table reflects the number of shares of Common Stock outstanding as a result of the Merger and the Private Placement, as well as the number of shares of Common Stock that are available for issuance after these transactions.

 

Shares of Common Stock Prior to the

Merger

  Shares of Common Stock issued in the Merger  

Shares of Common Stock issued in the

Private

Placement

 

Total Shares of Common Stock

Outstanding

  Shares of Common Stock Available for Issuance   Authorized Shares of Common Stock
14,785 1   3,846,000,000   700,000,000   4,546,014,785   1,453,985,215   6,000,000,000

 

___________

1 After a 1-for-1,000 reverse stock split effective February 14, 2014, and the surrender of 35,000 post-split shares of Common Stock in connection with the Merger.

 

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Common Stock

 

Each shareholder is entitled to one vote for each share of Common Stock held on all matters submitted to a vote of shareholders. Cumulative voting for the election of directors is not authorized. Subject to preferences that may be applicable to any preferred stock outstanding at the time, the holders of Common Stock are entitled to receive dividends out of legally available assets at such times and in such amounts as the Company’s Board of Directors may from time to time determine. However, the Board does not expect to declare dividends for the foreseeable future. See “Risk Factors – Risks Related to Ownership of Common Stock – No Dividends” on page 14.

 

The Common Stock is not subject to conversion or redemption and holders of Common Stock are not entitled to preemptive rights. Upon the liquidation, dissolution or winding up of the Company, the remaining assets legally available for distribution to shareholders, after payment of claims or creditors and the payment of liquidation preferences, if any, on outstanding preferred stock, will be distributable ratably among the holders of Common Stock.

 

Each share of Common Stock is entitled to one vote with respect to each matter on which shareholders are entitled to vote. Under Florida law and the Company’s organizational instruments, directors are elected by plurality and the favorable vote of a majority of the shares present at a meeting and constituting a quorum are required to act on other matters presented for shareholder action. Florida law permits shareholders to act by written consent, which requires a majority of the votes that could be cast if the matter consented to were presented for action at a meeting of shareholders.

 

Preferred Stock

 

The Company’s Board of Directors has power to issue up to 10,000,000 shares of preferred stock in series and to provide for, among other things, the price, rights, preferences and privileges of each such series, which could be senior to those of the Common Stock, without the consent of the holders of the Common Stock. Although the ability to issue preferred stock may provide the Company with flexibility in connection with possible acquisitions and other corporate purposes, the provisions of a series could, among other things, (a) restrict dividends paid to the holders of shares of Common Stock or grant rights to dividends prior to those of the holders of Common Stock; (b) dilute the voting power of the holders of shares of Common Stock or vest voting control of the Company in one or a few holders of a series of preferred stock; (c) impair the liquidation rights of holders of shares of Common Stock and (d) delay or prevent a change in control of the Company. The Board of Directors has not authorized the issuance of any series of the preferred stock.

 

Warrants and Options

 

The Company has no warrants or options outstanding.

 

 

 

DESCRIPTION OF BUSINESS

 

Introduction

 

Acology is the parent of D&C. Acology has no material assets other than all of the outstanding shares of D&C and has no plans to conduct any business activities other than obtaining or guaranteeing financing for the business conducted by D&C or assisting D&C and its subsidiary in obtaining such financing.

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Through D&C, we are in the business of designing, manufacturing, branding and selling containers that can store, grind and shred pharmaceuticals, herbs, teas and other solids or liquids. Our sole product is the “TSOS Container, which is described below under “Products.”

 

Our principal market is sole distributors, who is a wholesalers and who purchases 95% of our products. They resell our products to other businesses that in turn sell them to end users. We sell the remaining 30% of our products over our website, www.themedtainer.com. Our principal market is our sole distributor, who is a wholesaler and who purchases approximately 70% of our products. See “Description of Business – Sales and Distribution” on page 24. This wholesaler resells our products to other businesses that in turn sell them to end users. We sell the remaining 30% of our products over our website, www.themedtainer.com. Our products can store and grind many substances, among them marijuana. In light of the facts that the possession and use of marijuana have been legalized, subject to varying restrictions, in at least 23 states and that several other states are considering such legalization, we believe that our products may be of interest to a large number of users of marijuana in and we advertise our products on our website and elsewhere as suitable for that purpose. However, since we do not seek information from our customers who are end users as to how they intend to utilize our products and have no similar knowledge respecting end users of products sold through our distributor, we are unable to determine the extent of its use in connection with the storage and grinding of marijuana or any other purpose.

 

Products

 

The TSOS Container stores herbs and herbal remedies, medicines, coffee and teas, wines and liquors, foods and other solids and liquids without cross-contamination. Some configurations have a built-in grinder in order that non-liquids that it carries may be ground into powder in the case of medicines or shredded in the case of herbs. The TSOS Container is manufactured from medical-grade polypropylene resin, is air- and water-tight, non-porous and non-leaching. We are now selling the TSOS Container only in the configuration of a 20-dram container with a single storage compartment and a built-in grinder. We plan to sell the TSOS Container in several other configurations, namely, 12, 30 and 110 dram containers with from two to six storage compartments and with or without a grinder. Our inventory includes a configuration that is easy to open and one that is more difficult to open; however, we intend to order only the latter configuration in the future. We have not tested the latter configuration to determine whether it meets FDA standards for child resistance.

 

As indicated by the picture below, the TSOS Container with a grinder/shredder has three components. The top component is a cap, the middle component is a storage cup with grinding/shredding teeth projecting downward from its bottom and the bottom component is a grinding/shredding cup with teeth projecting upward from its bottom. Material is transferred from the storage cup into the grinding/shredding cup, the storage cup is inserted into the grinding/shredding cup, forming a space in which the two sets of teeth intermesh, and the two cups are then rotated manually such that the material passes between the two sets of teeth and is ground or shredded. The ground or shredded material may then be returned to the storage cup for storage or used or dispensed in another manner. The cap attaches to the grinding/shredding cup such that the storage cup is held between them, forming a compact unit which is air- and water-tight between the cap and the storage cup, as well as between the storage cup and the bottom cup.

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TSOS Containers without grinding capacity will have only a cap and a storage container.

 

In the future, we may sell containers other than the TSOS Container that will give consumers the ability to easily store, carry and consume various solids and liquids.

 

Source of Products

 

We do not manufacture, and for the foreseeable future do not plan to manufacture, our products. We acquire our products from Polymation, a pharmaceutical container manufacturer located in Newbury Park, California, under an agreement that we entered into with Polymation on August 13, 2013. The agreement has an initial term of 10 years and is extendible for a like term by mutual consent. Under this agreement, we have the exclusive worldwide right to purchase, promote, advertise, market, distribute and resell the TSOS Container, which respect to which the owner of Polymation holds a patent. We are currently required to purchase at least 30,000 units per month, but this requirement will increase by 10% on each anniversary of the effective date of the agreement. The agreement sets prices for the products that we purchase, subject to increase because of changes in the local consumer-price index and increases in Polymation’s cost of materials, rent and utilities. We believe that Polymation can presently supply from 80,000 to 100,000 TSOS Containers per month.

 

In connection with this agreement, (i) we assigned the registered trademark “Medtainer” to Polymation, (ii) we received an exclusive license to use that trademark, (iii) we received a right of first refusal to acquire Polymation’s business on the same terms offered by a bona fide, arm’s-length, third-party buyer with a 50% discount from the price offered by such buyer, and(iv) we agreed that, in the event that D&C (or its successor, assignee or affiliate) were to form a new corporation for the purpose of selling the products that we acquire under the agreement, D&C would cause such corporation issue to the owner of Polymation one percent of such corporation’s authorized preferred and voting shares.

 

We are in default under this agreement because we have not met its purchase requirements. For details about this matter and the risks that arise from it, see “Risk Factors - Risk Factors Relating to our Business and Industry – We could lose our supply contract” on page 7.

 

We presently have no other suppliers, but may seek them out in connection with the manufacture of containers other than TSOS Containers.

 

Sales and Distribution

 

We sell our approximately 70% of our products to wholesalers, who resell them to businesses and consumers, both in unmarked and custom-labeled form. In 2013, we sold approximately 125,000 units and during 2014 through April 30, we sold 35,000 units. We currently have 66,000 containers in stock. We sell about 30% of our products to retail customers over our website, www.themedtainer.com. We also maintain a corporate website, www.acologyinc.com, over which we do not sell our products.

 

We have entered into a Product License and Distribution Agreement, dated April 1, 2014, with IGreen Planet Store, Ltd. (“IGreen”), a Canadian distribution company located in Vancouver, British Columbia, Canada. Under this agreement, we have granted to IGreen an exclusive license to market, sell and distribute the TSOS Container in Canada. The agreement has a 5-year term. We are required to maintain product liability insurance covering the products sold under the agreement. We are in the process of obtaining such insurance. IGreen is not required to purchase a minimum quantity of our products. The agreement is subject to yearly reviews by the parties in respect of price, quantities ordered and other matters. Based upon these reviews, the parties may modify, amend or revoke the agreement. IGreen is currently purchasing approximately 70% of our products.

 

We entered into an oral agreement, on September 30, 2013, with TSD Worldwide (“TSD”), a distribution company located in Santa Fe Springs, California. Under this agreement, as amended in writing on November 18, 2013, TSD acted as our exclusive U.S. seller of designated products, except that we retained the right to sell products over our website.

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Although TSD was not required to purchase a minimum quantity of our products the agreement set forth performance guidelines that were to be the subject of periodic reviews and that set forth goals ranging from purchases of 10,500 units in the first month to 57,500 units in the final month. TSD failed to meet these goals and terminated the agreement on June 18, 2014. The failure of TSD to meet these goals is a significant factor in relation to our default under our supply agreement with Polymation. For details about this default and the risks that arise from it, see “Risk Factors – Risk Factors Relating to our Business and Industry – We could lose our supply contract” on page 7.

 

Presently, IGreen is our only distributor. We are seeking one or more distributors to distribute our products in the United States and are presently distributing products in the United States ourselves. We are also seeking distributors in Europe, South America and Australia. Our criteria for distributors are a successful record of distributing products, financial stability and a sales staff with the size and capacity to create demand for our products.

 

Our sales staff presently comprises our two officers. We plan to hire a sales manager and then hire sales personnel as our business expands. Inasmuch as we sell 70% of our products to a wholesaler, the principal function of our sales staff will be to find and enter into contracts with distributors and provide it with information about our products.

 

As indicated above, we have a website through which we sell our products. We also have approximately 26,000 followers on Instagram and approximately 80,000 followers on Facebook, Twitter and other social media. We believe that social media are important to our marketing program for our products.

 

Product Development

 

We are seeking a person to direct our research and development with a view to improving existing products and developing new products.

 

Patents, Trademarks and Other Intellectual Property

 

Our TSOS Container is covered by a patent held by Polymation. As we develop our own products, we may rely on a combination of patents, trade secrets, unpatented know-how, trademarks, copyrights and other intellectual property rights, nondisclosure agreements and other protective measures to protect our proprietary rights. We believe that the patent owned by Polymation is material to our business, but we cannot presently ascertain the extent to which intellectual property that we may develop or license will be important to us.

 

We employ various methods, including confidentiality and non-disclosure agreements with third parties, employees and consultants, to protect our trade secrets and know-how. We have licensed a patent that we own to Polymation and may license in the future, patents, trademarks, trade secrets, and similar proprietary rights to and from third parties.

 

Competition

 

We believe that the TSOS Container is a unique product and that there is presently no product that competes with it. However, even though it is patented, we cannot assure that a product that can store and grind substances without conflicting with this patent cannot be developed. We may compete with other companies in respect of container products that we develop in the future. These firms may be larger, better established and better financed than we are and we may not be able to compete successfully with them. See “Risk Factors – We face significant competition in the market for our products” on page 5.

 

We seek to differentiate ourselves from our competitors by the uniqueness of our products, by building a reputation for high-quality products and innovation and by maintaining strong relationships with our distributors and, where possible, their and our customers.

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Regulation

 

The Food and Drug Administration sets standards for the medical-grade polypropylene resin used in the manufacture of the TSOS Container is regulated by and we are subject to the general safety standards promulgated by the Consumer Products Safety Commission. We are not required to submit the TSOS Container for review by either agency. For further information about such regulation, see “Risk Factors – Current and future environmental and other governmental requirements could adversely affect our financial condition and our ability to conduct our business – Risk Factors Related to the Development of Our Products and Technology – The FDA and the CPSC” on page 10.

 

Employees

 

As of April 30, 2014, we had 2 employees, namely, the Company’s two officers. We intend to hire other employees, as indicated above under “Sales and Distribution” on page 24.

 

DESCRIPTION OF PROPERTY

 

We have an office at 912 Maerton Road, Fullerton, California, comprising approximately 2,000 square feet, which is made available to us by our chief executive officer without cost. In connection with our plan of operations (see Management’s Discussion and Analysis of Financial Condition and Results of Operations – Plan of Operations” on page 29), we plan to lease a building during the next 12 months and to lease other facilities, as and when needed.

 

LEGAL PROCEEDINGS

 

We are not a party to nor do we expect the institution of any litigation by or against us.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

 

The following discussion should be read in conjunction with the financial statements and accompanying notes and the information contained in other sections of this prospectus, particularly under the headings “Risk Factors” and “Business.” It contains forward-looking statements that involve risks and uncertainties, and is based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Our actual results could differ materially from those anticipated by our management in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this prospectus, particularly under the heading “Risk Factors.” We do not believe that the results set forth in these consolidated financial statements are necessarily indicative of our future performance.

 

Overview

 

In the period ended December 31, 2013, which started with the formation of D&C on January 29, 2013, we organized, acquired our office space, entered into contracts for the purchase and distribution of our products, established one of our websites, sold products to our distributors and end users, entered into the Merger Agreement and completed the Merger and the Private Placement. We conducted no business prior to January 29, 2013. In the quarter ended March 31, 2014, we closed the Merger Agreement and continued to make sales and develop our business.

 

We will need a substantial amount of additional capital to fund our business plan. No assurance can be given that any additional capital can be obtained or, if obtained, will be adequate to meet our needs. If adequate capital cannot be obtained on a timely basis and on satisfactory terms, our operations would be materially negatively impacted or we could be forced to terminate operating.

 

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Our audited financial statements for the period ended December 31, 2013, include only the period commencing with the inception of D&C on January 29, 2013, and do not include any historical data of Acology, which was incorporated on September 5, 1997, ceased doing business in 2002 and remained dormant until it acquired D&C in the Merger. Accordingly, these financial statements are those of D&C. Our unaudited financial statements for the quarter ended March 31, 2014, show our consolidated results for that period and were prepared on the basis that D&C was the accounting acquirer in the Merger.

 

The Company raised $40,000 in the Private Placement and paid the proceeds to Richard Astrom, who served as the Company’s president and sole director until March 4, 2014, pursuant to the provisions of the Merger Agreement. For further information, see “Our History – The Merger” on page 2 and “Directors, Executive Officers and Control Persons – Related Parties – Exchange Transaction” on page 34.

 

Results of Operations

 

The following table summarizes the operating results of the Company for the period beginning with our inception on January 29, 2014, and ending December 31, 2013 and for the quarter ended March 31, 2014:

 

    Fiscal Year 2013   Three Months Ended March 31, 2014
                 
Gross Profit   $ 166,361     $ 53,575  
                 
Operating expenses:                
                 
    General and administrative   $ 219,052     $ 43,750  
     Selling expense   $ 51,476       9,198  
Net Income (Loss)   $ (104,167 )   $ 807  

 

Discussion of Significant Financial Components

 

Period Ended December 31, 2013

 

Sales: Our sales were $254,992 during this period, from which were earned a gross profit of $166,361.

 

General and Administrative Expenses: We incurred $51,476 of advertising and marketing expenses during this period. Costs and expenses of $270,528 were incurred, including $219,052 for general and administrative expenses, of which $137,157 was for compensation to our shareholders and officers.

 

Net Loss: During this period, our net loss was $104,167.

 

Quarter Ended March 31, 2014, Compared with the Quarter Ended March 31, 2014

 

Sales: Our sales for the Quarter Ended March 31, 2014, were $73,919, from which were earned a gross profit of $53,575. Our sales for the Quarter Ended March 31, 2013, from which we earned a gross profit of $23,105. The principal reason for the increase in sales and gross profit from the earlier to the later quarter is that the earlier quarter began on January 29, 2013, and was therefore substantially shorter than the earlier quarter.

 

General and Administrative Expenses: For the quarter ended March 31, 2014, costs and expenses of $52,768 were incurred, including $43,570 for general and administrative expenses, of which $30,518 was for compensation to our officers and we incurred $9,198 of advertising and marketing expenses during this period. For the quarter ended March 31, 2013, costs and expenses of $28,175 were incurred, including $28,850 for general and administrative expenses, of which $18,200 was for compensation to our officers and we incurred $1,325 of advertising and marketing expenses during this period.

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The principal reason for the increase in sales and gross profit from the earlier to the later quarter is that the earlier quarter began on January 29, 2013, and was therefore substantially shorter than the earlier quarter. During the earlier quarter, administrative expenses were not in proportion to those of the latter quarter because of organizational expenses incurred with respect to the earlier quarter.

 

Net Profit: During the quarter ended March 31, 2013, our net profit was $807, as compared with a net loss of $5,070 for the quarter ended March 31, 2013. The principal reason for this difference was the disproportionally high level of general and administrative expenses during the earlier quarter, although this was partially offset by the disproportionally low level of advertising and marketing expenses incurred in the earlier quarter

 

Liquidity and Capital Resources

 

As of December 31, 2013, we had $1,759 in cash. We financed our operations from the inception of our business on January 19, 2013, through March 31, 2014, through capital contributions of $141,986 made by our officers.

 

We began commenced business in January 2013. Our sales grew over the course of 2013, averaging 11,500 units per month for 2013 and ranging from 8,000 units to 30,000 units for a total of 125,000 units. During the first quarter of 2014, we sold 35,000 units. Gross sales for 2013 were $254,992 and for the first quarter of 2014, were $73,919. We have a current inventory of 66,000 containers, which we believe will be sold to our distributors for approximately $150,000.

 

As of December 31, 2013, our officers had made capital contributions of $141,986 in D&C.

 

The Company believes that it will require approximately $1.5 million in additional funding for its operations for the next 12 months. The Company plans to fund its activities, including those of D&C, during the balance of 2014 and beyond through loans from banks and other financial institutions and the sale of debt or equity securities to private investors. The Company can give no assurance that it will be successful in so doing or that such funding, if available, can be obtained on acceptable terms.

 

On March 4, 2014, the Company issued a convertible promissory note payable to Richard S. Astrom in the principal amount of $400,000, which was reduced to $360,000 by virtue of a prepayment of $40,000 on that date. This convertible promissory note is due on March 4, 2015, bears interest at the rate of 0.28% per annum and is secured by a Pledge Agreement, dated as of March 4, 2014, between the Company and Mr. Astrom, under which the Company pledged all of its membership interests in D&C to Mr. Astrom. The terms of and circumstances under which the convertible promissory note was issued and the pledge agreement signed are set forth under the caption “Directors, Executive Officers, Promoters and Control Persons – Related Party Transactions – Exchange Agreement” on page 34.

 

While we are not in default under the convertible promissory note that we issued to or the pledge agreement that we entered into with Mr. Astrom, we do not presently have funds available to pay the convertible promissory note when due. The amount of the funds required to pay the convertible promissory note to Mr. Astrom is included in the $1,500,000 that we will require to fund our operations for the next 12 months. We plan to obtain such funds through the sale of debt or equity securities. In the event that we are unable to pay Mr. Astrom when required, we intend to ask for an extension of the due date, but Mr. Astrom is not obligated to grant any extension. Further, we have no information as to whether or on what terms any such extension would be granted.

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We can give no assurance that any of the funding described above will be available on acceptable terms, or available at all. If we are unable to raise funds in sufficient amount, when required or on acceptable terms, we may have to significantly reduce, or discontinue, our operations. To the extent that we raise additional funds by issuing equity securities or securities that are convertible into Acology’s equity securities, its shareholders may experience significant dilution.

 

We have provided no comparison of results for the year ended December 31, 2013, because we began operating in 2013, and there is accordingly no prior period with which a comparison may be made. Likewise, there is no quarter in 2013 to compare with the quarter ended March 31, 2014.

 

Plan of Operations

 

Our significant objectives for the next 12 months are as follows:

 

· Secure funding of $1.5 million to support our operations over the next 12 months. This activity has commenced through personal contacts by our officers and will ongoing. As yet, we have not been successful in obtaining any funding. We can give no assurance that funding in this or any lesser amount will be available on acceptable terms, or available at all. The costs associated with this activity, which would arise principally from travel and legal expenses, are estimated to be $15,000. We cannot predict when we will obtain funding in whole or in part, but as indicated below, we cannot begin to attain several of our other objectives until we reach the levels of funding set forth below.
· Hire sales, administrative personnel and technical personnel. We will commence this activity when we have attained financing of at least $200,000 and will continue to fill positions as necessary in accordance with our ability to pay salaries and benefits. The compensation and other costs associated with these personnel are estimated to be $40,000 per month if all of these employees are hired. We have interviewed candidates for certain positions, but have not yet hired or committed to hire any of them.
· Increasing sales volume to 50,000 containers per month (600,000 units per year) in the first 12 months after we have attained funding of at least $200,000.
· Lease a building for our operations, including administrative and warehouse space and acquire office furniture, equipment and materials (forms, corporate stationary and business cards). We will commence this activity contemporaneously with our hiring of the above sales, administrative and technical personnel and complete it soon thereafter. The costs associated with this activity are estimated to be approximately $8,000 per month in rent and $10,000 for other expenses.
· Obtain additional international distributors with sales force of at least 100 full time employees and obtain firm orders from them. We estimate the costs associated with this activity to be approximately $5,000 per month. Our officers are presently engaged in these activities and absorbing their costs and have advised us that they intend to continue doing so whether or not funding is offered.
· Increase retail sales by attending trade shows, expos and conferences. We estimate the costs associated with this activity to be approximately $10,000 per month. Our officers are presently engaged in these activities and absorbing their costs and they have advised us that they intend to continue doing so whether or not financing is obtained.
· Begin a marketing and advertising campaign. We will commence this activity, which will continue throughout the 12-month period, when we have attained financing of at least $200,000. This activity, which includes updating our websites, brochures and other advertising materials and attending industry events, is estimated to be $35,000.
· Pay a promissory note in the principal amount of $360,000 to Richard S. Astrom on March 4, 2015 (see “Directors, Executive Officers and Control Persons – Related Parties – Exchange Transaction” on page 34).
· Pay officers’ salaries of $10,000 per month to each of Messrs. Fairbrother and Heldoorn on a regular basis after the other goals are completed.

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We cannot give firm dates for the attainment of any goal that depends on financing or a firm date for the receipt of revenues from orders because these dates depend on our obtaining financing and we cannot predict when, if or in what amount we will obtain it. We cannot commence most of the tasks in our plan of operations until we have raised $200,000 and we cannot fully implement our plan of operations until we raise $1,500,000.

 

Contractual Obligations

 

The following table sets forth information with respect to our known contractual obligations as of December 31, 2013, setting forth their types and the times at which they are due.

    Payments due by period
Contractual obligations     Total       Less than 1 year       1-3 years       3- 5 years       More than 5 Years  
Long-Term Debt Obligations   $ 360,000     $ 360,000       0       0       0  
Capital Lease Obligations     0       0       0       0       0  
Operating Lease Obligations     0       0       0       0       0  
Purchase Obligations*   $ 2,889,377     $ 192,000     $ 607,800     $ 720,918     $ 1,778,459  
Other Long-Term Liabilities Reflected on Our Balance Sheet under GAAP     0       0       0       0       0  
Total   $ 3,249,377     $ 552,000     $ 607,800     $ 720,918     $ 1,778,459  

_________

* All of these purchase obligations arise under our agreement with Polymation, at current prices, which are subject to escalation to a presently unknowable extent for inflation and certain increased costs.

 

Off-Balance Sheet Arrangements

 

None.

 

Controls and Procedures

 

Following the effectiveness of the registration statement of which this Prospectus forms a part, pursuant to Section 404 of Sarbanes-Oxley, the Company’s management will be required to report on the effectiveness of its internal control over financial reporting in each of its annual reports, commencing with its first annual report after the Company has been required to file an annual report with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act for the prior fiscal year, which the Company anticipates will be its annual report for the year ended December 31, 2014. While we plan to implement controls and procedures, we have not yet done so. If we fail to do so, we may not be able favorably to assess the effectiveness of the Company’s internal controls over financial reporting as of December 31, 2014, or beyond. If this occurs, investor confidence and the price of the Common Stock could be adversely affected.

 

Risks and Uncertainties

 

We operate in an industry that is subject to rapid and sometimes unpredictable change. Our operations will be subject to significant risk and uncertainties, including financial, operational and other risks, including the risk of business failure. Further, as noted in this Prospectus, in order to develop its business, the Company will require substantial capital resources. See for a full statement of the risks and uncertainties to which the Company is subject, see “Risk Factors” on page 4.

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Critical Accounting Policies and Estimates

 

Use of Estimates.

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

 

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from estimates.

 

Revenue Recognition .

 

The Company followed the guidance of the SEC’s Staff Accounting Bulletin No. 104 for revenue recognition. The Company records revenue when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) product delivery has occurred, (3) the sales price to the customer is fixed or determinable, and (4) collectability is reasonably assured.

 

JOBS Act

 

Section 102(b)(1) of the JOBS Act provides that, as an emerging growth company, Acology (A) need not present more than 2 years of audited financial statements in order for Acology’s registration statement with respect to an initial public offering of common equity securities to be effective, and in any other registration statement that Acology files with the SEC, Acology need not present selected financial data prescribed by the SEC in its regulations for any period prior to the earliest audited period presented in connection with Acology’s initial public offering; and (B) may not be required to comply with any new or revised financial accounting standard until such date that a company that is not an issuer (as defined under section 2(a) of Sarbanes-Oxley is required to comply with such new or revised accounting standard, if such standard applies to companies that are not issuers. The term ‘‘issuer’’ generally means any person who issues or proposes to issue any security, the securities of which are registered under section 12 of the Exchange Act or that is required to file reports under section 15(d) of the Exchange Act, or that files or has filed a registration statement that has not yet become effective under the Securities Act and that it has not withdrawn.

 

While Acology is permitted to opt out of these provisions of the JOBS Act, it has not done so and do not intend to do so. As a result, our financial statements may not be comparable to companies that that elect to opt out of these provisions.

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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.

 

MARKET PRICE, DIVIDENDS AND RELATED SHAREHOLDER MATTERS

 

As of the date of this Prospectus, the Common Stock is quoted on OTC Pink under the symbol “ACOL.” As indicated above, Acology has applied to have the Common Stock quoted on on OTCQB, but not assurance can be given that this application will be accepted, or, if it be accepted, that the criteria for such quotation can continue to be met. The following table sets forth the quarterly high bid and low bid prices for the Common Stock has been quoted on OTC Pink for the last two fiscal years and the subsequent interim periods. The prices set forth below represent interdealer quotations, without retail markup, markdown or commission and may not be reflective of actual transactions. The Common Stock has been very thinly traded: during 2012, approximately 203 shares (adjusted for the 1-for-1,000 reverse stock split that was implemented on February 14, 2014) were traded; during 2013, approximately 68 shares (as so adjusted) were traded; and in 2014 through June 30, 280 shares (as so adjusted) have been traded. Thus, there is no established trading market for the Common Stock. We do not believe that the prices at which the Common Stock has historically traded necessarily represent its fair market value or are a good indicator of the prices at which the Common Stock might trade in the future.

 

 

     Quarter Ended   Bid High Bid Low
                 
Fiscal Year 2014                
September 30 (through July ___, 2014                
    June 30, 2014   $ 1.25     $ 1.25  
    March 31, 2014   $ 3.00     $ 1.25  
                 
Fiscal Year 2013                
    December 31, 2013   $ 3.00     $ 1.50  
    September 30, 2013   $ 1.30     $ 1.30  
    June 30, 2013   $ 1.30     $ 1.30  
    March 31, 2013   $ 1.30     $ 1.30  
                 
Fiscal Year 2012                
    December 31, 2012   $ 3.00     $ 1.20  
    September 30, 2012   $ 3.00   $ 1.20  
    June 30, 2012   $ 1.20     $ 1.10  
    March 31, 2012   $ 1.10     $ 1.10  

 

The prices in the above table have been adjusted for a 1-for-1,000 reverse stock split that was implemented on February 14, 2014.

 

As of June 30, 2013, there were 4,546,014,785 shares of Common Stock issued and outstanding of which only 14,785 shares were free trading. At that date, there were 397 holders of record of the Common Stock and an indeterminate number of shareholders holding Common Stock in street name.

 

Acology has never declared or paid cash or other dividends on the capital stock. It currently intends to retain all available funds and any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.

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There are (i) no shares of Common Stock that are subject to outstanding options or warrants to purchase, (ii) no securities that are convertible into shares of Common Stock, (iii) no shares of Common Stock that may be sold pursuant to Rule 144, (iv) except for the shares offered by this Prospectus, no shares of Common Stock that Acology has agreed to register under the Securities Act for sale by security holders and (v) no shares of Common Stock that are being or have been publicly proposed to be, publicly offered by Acology, the offering of which could have a material effect on the market price of the Common Stock.

 

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

 

The following sets forth information about the Company’s directors and executive officers as of the date of this Prospectus:

 

Name Age Position
     
Curtis Fairbrother 52 Chairman of the Board; CEO; Director
Douglas Heldoorn 45 President; COO; Director

 

Curtis Fairbrother, age 52, is the Co-Founder of D&C together with Douglas Heldoorn. Mr. Fairbrother has served since March 4, 2014, as Chairman of the Board and Chief Executive Officer of Acology. From January 2013 to March 4, 2014, he served as a manager of D&C. From October 2011 until December 2012, he conducted preparatory work for the establishment of D&C and its business together with Mr. Heldoorn. From September 2005 to September 2011, he was with New Century Automotive Group acting as Service and Parts Director for BMW and Mini Cooper Dealerships. Mr. Fairbrother has over 20 years’ experience in business start-ups and consolidation. He has managed multi-million dollar budgets in connection with the distribution and sales of in the automotive retail and wholesale parts industry and in that industry, he has overseen national parts distribution and management, research and development, brand recognition and new product development. Mr. Fairbrother graduated from La Mirada High School in La Mirada, California, in 1980.

 

Douglas Heldoorn, age 45, has over 20 years of management and executive experience. He has served since March 4, 2014, as President and Chief Operating Officer of Acology. From January 2013 to March 4, 2014, he served as a manager of D&C. From October 2011 until December 2012, he conducted preparatory work for the establishment of D&C and its business together with Mr. Fairbrother. Prior thereto, from November 2006 to September 2011 he was employed by Caliber Promotions, a used car sales organization, as a motivational speaker. From 2009 to 2012 he also served as President of Medeq-USA, overseeing the manufacture, sales and distribution health and nutrition products in Europe and Scandinavia. Mr. Heldoorn graduated from Perris High School in Perris, California, in 1986.

 

Messrs. Fairbrother and Heldoorn will serve as directors until the next annual meeting of Acology’s shareholders or until their respective successors have been elected and duly qualified. Thereafter, directors will be elected for one-year terms at the annual shareholders’ meeting. Officers hold their positions at the pleasure of the board of directors, absent any employment agreement. There was and is no arrangement or understanding between any director or officer of Acology and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and, to our knowledge, there is no arrangement, agreement, plan or understanding (a) as to whether non-management shareholders will exercise their voting rights to continue to elect the current directors to Acology’s board and or (b) between non-management shareholders and management under which non-management shareholders may directly or indirectly participate in or influence the management of our affairs.

 

The prior experience of Mr. Fairbrother in management, together with his willingness to spend substantially all of his time as an officer of Acology and his willingness to provide capital to us, led to the conclusion that he was a desirable person to serve as a director. The prior experience of Mr. Heldoorn in sales and management, together with his willingness to spend substantially all of his time as an officer of Acology and his willingness to provide capital to us, led to the conclusion that he was a desirable person to serve as a director.

 

Family Relationships

 

None.

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Related Party Transactions

 

TSD

 

Mr. Fairbrother, his son and Mr. Heldoorn serve on the Board of Directors of TSD as three of six directors. They received no compensation for these services and neither they nor we have any financial interest in TSD. From our date of inception in January 2013 to December 31, 2013, we received $19,150 for products that we sold to TSD and during the current year through May 31, we received $31,234 for products that we sold to TSD. We believe that the prices at which we sold these products to TSD were those that at which we could have sold them to other distributors.

Capital Contributions

Messrs. Fairbrother and Heldoom, our two officers and directors, made capital contributions to D&C on several occasions during 2013, totalling $141,896. Of this amount, $19,825 was paid directly to D&C and the remainder was paid by them to third parties for inventory and general and administrative expenses.

As an incident of these contributions, each of them acquired his membership units in D&C, for which he received shares of Common Stock as merger consideration in the Merger. See “Prospectus Summary – The Merger” on page 2.

 

Employment Arrangements

 

There are no employment agreements between us and our officers and directors. During the year ended December 31, 2013, we paid $78,357 and $58,800 to Mr. Fairbrother and Mr. Heldoorn, respectively, on an informal and irregular basis for services rendered as officers.

 

Merger

 

In connection with the Merger, each of Messrs. Fairbrother and Heldoorn received 1,923,000,000 shares of Common Stock as merger consideration for his 100,000 membership units in D&C. This merger consideration was fixed in negotiations at arms’ length between Acology and D&C prior to the time that either of them was an officer or director of Acology.

 

Exchange Transaction

 

Prior to the Merger, Richard S. Astrom owned 35,000,000 shares of pre-reverse-split common stock through Green Fusion Corp., of which he was the sole shareholder, and was owed $151,269 for advances that he had made to the Acology, which indebtedness was carried as related party debt on the books of Acology. In satisfaction of a condition precedent to the Merger, Mr. Astrom and Acology entered into an Exchange Agreement, dated as of March 4, 2014, pursuant to which (i) these 35,000,000 shares were surrendered, (ii) the indebtedness to Mr. Astrom of $151,269 was extinguished, (iii) Acology made a convertible promissory note, dated March 4, 2014, in favor of Mr. Astrom and (iv) Acology entered into a pledge agreement, dated March 4, 2014, securing the indebtedness of the Company to Mr. Astrom under the convertible promissory note. Mr. Astrom represented and warranted to Acology that (i) the indebtedness of $151,269 was the only indebtedness of Acology owed to him, (ii) all other indebtedness of the Acology owing to any other person or entity had been discharged and (iii) no shares of any class or series of the capital stock of Acology, other than its common stock, had been issued. Also on March 4, 2014, Acology prepaid $40,000 of the principal amount of the convertible promissory note. The principal terms of the convertible promissory note and the pledge agreement are as follows:

 

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· The Convertible Promissory Note . The convertible promissory note is due March 4, 2015, is subject to acceleration in the event of certain events of default, contains certain restrictive covenants and is secured by a pledge of all of the membership units in D&C. If an event of default, including failure to pay the convertible promissory note when due, occurs, the unpaid principal amount of the convertible promissory note and the interest accrued thereon will be convertible as a whole or in part from time to time into an indeterminate number of shares of Common Stock at a conversion price per share equal to 50% of the average of the daily closing prices for a share of Common Stock for the three (3) consecutive trading days ending on the trading day immediately prior to the day on which the convertible promissory note is delivered for conversion. The convertible promissory note also contains certain covenants under which Acology may not consummate a merger, consolidation, business combination, tender offer, exchange of shares, recapitalization, reorganization, redemption or other similar event or to transfer any of its property or assets outside the ordinary course of business without the consent of Mr. Astrom; may conduct business only through wholly owned subsidiaries; may not sell, transfer, mortgage, pledge or otherwise dispose of any shares or interests in any of its subsidiaries or permit any of them to transfer, mortgage, pledge or otherwise dispose of any shares or interests in a subsidiary held by it; is required to file reports timely under and remain subject to the reporting requirements of the Securities Exchange Act of 1934; and may not file a registration statement under the Securities Act until one year after the date on which Mr. Astrom shall first have converted any portion of the convertible promissory note into shares of Common Stock.

The convertible promissory note constitutes a material risk to our business because:

1. We may not be able to repay it when it is due on March 4, 2015, in which case Mr. Astrom could foreclose on the units of D&C which he holds as security for its payment (see “Pledge Agreement,” immediately below). In that event, we would not have any operations, our business would fail and our shareholders would lose their investments.
2. We may not engage in transactions under which we could acquire or combine with other businesses or reorganize without Mr. Astrom’s consent, which he may withhold in his discretion. If Mr. Astrom did not consent to a proposed acquisition, we could lose a desirable business opportunity.
3. Our inability to file a registration statement restricts our ability to obtain financing in the public markets. As a result, until the convertible promissory note is paid, we may not be able to raise some or all of the funding required to execute our business plan, expand our business or take advantage of other opportunities. While Mr. Astrom could waive this restriction, he is not obligated to do so.

 

· The Pledge Agreement . The pledge agreement provides, among other things, that all of the membership units in D&C are pledged to Mr. Astrom to secure the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the obligations of Acology under the convertible promissory note. In the event that Acology were to default under the convertible promissory note, Mr. Astrom would be entitled to foreclose on and sell the shares of D&C at a public or private sale and apply the proceeds of such sale to satisfy the convertible promissory note. Inasmuch as all of our operations are conducted through D&C, the result of such sale would be that Acology would have no operations and the holders of Common Stock would lose all or substantially all of their investment.

Private Placement

On March 4, 2014, pursuant to a Stock Purchase Agreement, dated January 29, 2014, between Acology and Carrizo LLC, a limited liability company controlled by Mr. Astrom, our former president and sole director, Carrizo LLC purchased the 200,000,000 shares of Common Stock to be offered by Carrizo LLC pursuant to this Prospectus for the purchase price of $11,428.57, at the price per share on which and on the same terms at which all of the participants in the Private Placement acquired such shares. On March 24, 2014, Acology and Carrizo LLC also entered into a Registration Rights Agreement, dated that date, pursuant to which Acology filed the registration statement of which this Prospectus is a part, on the same terms at which all of the participants in the Private Placement entered into like agreements.

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Board Ratification

 

On March 4, 2014, following the appointment of Messrs. Fairbrother and Heldoorn directors and the resignation of Richard Astrom as a director, the new board ratified, confirmed, adopted and approved all resolutions adopted by Mr. Astrom, as sole director of Acology, in connection with the adoption, approval and consummation of the Merger Agreement and all instruments executed and delivered and actions taken by him, as President of Acology or otherwise, pursuant to said resolutions, including his execution and delivery of the above mentioned exchange agreement, convertible promissory note and pledge agreement in the name and on behalf of Acology.

 

Involvement in Certain Legal Proceedings

 

None of Acology’s directors or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past five years that resulted in a judgment, decree, or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters, if any, that were dismissed without sanction or settlement.

 

Director Compensation

 

Currently, Acology is not paying its directors any cash or other compensation. In the future, Acology may consider appropriate forms of compensation, including cash compensation and the issuance of Common Stock and stock options.

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Director Independence

 

Currently, Acology does not have any directors who are independent. We have used the definition of “independent director” set forth in NASDAQ Stock Market Listing Rule 5605(a)(2) to make this determination. This rule provides that an “independent director” is a person other than an officer or employee of Acology or any other individual having a relationship which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. This rule further provides that a director cannot be considered independent if:

 

he is, or at any time during the past three years was, an employee of the company;
     
he or his family member accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions);
     
his family member is, or at any time during the past three years was, an executive officer of the company;
     
he or his family member is a partner in, controlling shareholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
     
he or his family member is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the Company served on the compensation committee of such other entity; or
     
he or his family member is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

 

Committees

 

Acology has not established any committees of its Board of Directors, including a compensation committee, nominating committee or an audit committee, although it is permitted to do so under the Florida Business Corporation Act (the “FBCA”) and its by-laws. Acology believes that, until it begins to develop a compensation plan for its officers and directors, a compensation committee is not necessary.

 

Compliance with Section 16(a) of the Exchange Act

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the officers and directors, and persons who own more than 10% of a registered class of equity securities registered under section 12 of the Exchange Act, to file reports of ownership and changes in ownership of equity securities of Acology with the SEC. Officers, directors and greater-than-10% shareholders are required by SEC regulations to furnish the corporations which they serve or in which they hold equity securities with copies of all forms that they file pursuant to Section 16(a). Since no class of Acology’s equity securities is registered under Section 12, none of these persons is required to comply with Section 12 with respect to Acology.

 

Code of Ethics

 

We have a Code of Business Ethics that applies to all employees, including our Chief Executive Officer and senior financial officers. These standards are designed to deter wrongdoing and to promote the highest ethical, moral and legal conduct of all employees. Our Code of Business Ethics may be found on our website, www.acologyinc.com.

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EXECUTIVE COMPENSATION

 

The following table provides certain information for the fiscal years ended December 31, 2013, 2012, and 2011 concerning compensation earned for services rendered in all capacities by Acology’s named executive officers.

 

Summary Compensation Table

 

 

Name Year Salary Bonus Stock
Awards
Option
Awards
Non-Equity
Incentive Plan
Compensation
Nonqualified
Deferred
Compensation
Earnings
All Other
Compensation
Total
Curtis Fairbrother, CEO 1 2013 $78,357 0 0 0 0 0 0 $78,357
2012 0 0 0 0 0 0 0 0
2011 0 0 0 0 0 0 0 0
Douglas Heldoorn, COO 1 2013 $58,800   0   0 0 0 $58,800
2012 0 0 0   0 0 0 0
2011 0 0 0   0 0 0 0
Richard S. Astrom, President 2 2013 0 0 0 0 0 0 0 0
2012 0 0 0 0 0 0 0 0
2011 0 0 0 0 0 0 0 0

 

1 Held office since March 4, 2014.

2 Held office until March 4, 2014.

 

Equity Awards, Grant Based Awards, Stock Options, Pension Benefits and Deferred Compensation

 

Acology has never granted equity or grant based awards, stock options or pension benefits and has not entered into any deferred compensation plan or arrangement.

 

Compensation Analysis

 

Acology is presently paying compensation to its officers on an irregular and inadequate basis. We believe that regular and adequate compensation will eventually be required to retain their services. In particular, we believe that adequate compensation for persons with Messrs. Fairbrother’s and Heldoorn’s credentials and experience at a like stage of its development would involve a salary of approximately $120,000 per year, a cash bonus and non-cash incentive compensation based on performance, and stock options. We recognize that we needs to develop compensation programs that will provide adequate cash and short- and long-term incentive compensation in order to attract and retain qualified officers and key employees, but we has not yet determined what the compensation program is designed to reward; the various elements of compensation; the bases for selecting each element; how we will determine the amount to be paid for each element (or the formula for such payment); and how our decisions regarding that element fit into our overall compensation objectives and affect decisions regarding other elements.

 

SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information as of the date of this Prospectus, with respect to the holdings of: (1) each person known to Acology to be the beneficial owner of more than 5% of the Common Stock; (2) each of its directors, nominees for director and named executive officers; and (3) all directors and executive officers as a group. This information is as of the above date, except as otherwise indicated. The person named in the table below as beneficially owning the shares set forth therein has sole voting power and sole investment power with respect to such shares. The address of such person is in care of Acology at 912 Maerton Road, Fullerton, CA 92831.

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  Name and Address
of Beneficial Owner
Nature and Amount
of Beneficial Ownership
of Common Stock
Percent of Class
       
  Curtis Fairbrother 1,923,000,000 1 42.3%
  Douglas Heldoorn 1,923,000,000 1 42.3%
  All directors and executive
officers as a group (1 person)
3,846,000,000 84.6%

______________

1 Acquired in the Merger as merger consideration for his 100,000 membership units in D&C.

 

INDEMNIFICATION

 

Acology has power under the FBCA to indemnify its directors, officers, employees and to the extent provided in such statute. Unless a determination is made by a court, the determination of whether a director, officer or employee has acted in accordance with the applicable standard of conduct must be made by (i) a majority vote of a quorum consisting of directors who were not parties to the proceeding or a committee consisting solely of two or more directors who were not parties to the proceeding, (2) independent legal counsel selected by a majority vote of a quorum consisting of directors who were not parties to the proceeding or committee of directors (or selected by the full board if a quorum or committee cannot be obtained), or (3) the affirmative vote of the majority of a quorum consisting of the corporation’s shareholders who were not parties to the proceeding (or by a majority vote of the corporation’s shareholders who were not parties to the proceeding if a quorum cannot be obtained).

 

The FBCA further provides that a corporation may make any other or further indemnity by resolution, bylaw, agreement, vote of shareholder or disinterested directors or otherwise, except with respect to certain enumerated acts or omissions of such persons. Florida law prohibits indemnification or advancement of expenses if a judgment or other final adjudication establishes that the actions of a director, officer or employee constitute (i) a violation of criminal law, unless he had reasonable cause to believe his conduct was lawful, (ii) a transaction from which he derived an improper personal benefit, (iii) willful misconduct or conscious disregard for the best interests of the corporation in the case of a derivative action by a shareholder, or (iv) in the case of a director, a circumstance under which he would be liable for an improper distribution. The FBCA does not affect a director’s responsibilities under any other law, such as federal securities laws.

 

Pursuant to the FBCA, Acology has provided for such indemnification under in its articles of incorporation and by-laws. The articles of incorporation provide that Acology shall indemnify any director, officer, employee, or agent thereof, whether current or former, together with his or her personal representatives, devisor heirs, in the manner and to the extent contemplated by FBCA §607.0850, if in the judgment of a majority of the entire Board of Directors (excluding from such majority any director under consideration for indemnification), (i) he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful or (ii) with respect to any proceeding by, or in the right of, the corporation), if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation (except that no indemnification shall be made in respect of any claim, issue, or matter as to which he shall have been adjudged to be liable unless, and only to the extent that, the court in which such proceeding was brought, or any other court of competent jurisdiction, shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, he person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.

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Article 7 of the by-laws provides that Acology shall indemnify and reimburse and advance expenses for any director and officer, and for any director and officer of another corporation, partnership, joint venture, trust or other enterprise serving at the request of Acology, whether or not then in office, and his or her executor, administrator and heirs, and may indemnify and reimburse and advance expenses to employees and agents of Acology, against all reasonable expenses actually and necessarily incurred, including but not limited to, judgments, costs and counsel fees in connection with the defense of any litigation, civil or administrative action, suit or proceeding, to which he may have been made a party because he is or was a director, officer, employee or agent of Acology or he was serving at the request of Acology as a director or officer of another corporation, partnership, joint venture, trust or other enterprise.

 

No pending material litigation or proceeding involving Acology’s directors, executive officers, employees or other agents as to which indemnification is being sought exists, and Acology is not aware of any pending or threatened material litigation that may result in claims for indemnification by any of its directors or executive officers.

 

CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION

 

Acology’s articles of incorporation, as amended, contain certain provisions that may affect the rights of its shareholders, as follows:

 

Limitation of liabilities of directors and officers . Article X of the amended articles of incorporation provide that, to the fullest extent permitted by law, no director or officer shall be personally liable to Acology or its shareholders for damages for breach of any duty owed to it or its shareholders.

 

Vacancies in the Board of Directors . Acology’s by-laws provide that any vacancy in the board of directors, including any vacancy created by reason of an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the board of directors, or by the shareholders. Each director so elected shall hold office until the expiration of the term of the other directors. Each of such directors shall hold office until his successor is elected and qualified, or until the earlier of his death, resignation or removal.

 

Special Meetings of Shareholders . Under the by-laws, special meetings of the shareholders, for any purpose or purposes, shall be held only when directed by the Chairman of the Board, or at the request of the holders of not less than one-tenth of all outstanding shares of the corporation entitled to vote at the meeting.

 

Cumulative Voting . The FBCA provides that shareholders do not have a right to cumulate their votes for directors unless the articles of incorporation so provide. The articles of incorporation do not provide for cumulative voting.

 

LEGAL MATTERS

 

The validity of the Common Stock offered hereby has been passed upon by Barry J. Miller, Esq., of Huntington Woods, Michigan.

 

EXPERTS

 

The financial statements appearing in this Prospectus and registration statement on Form S-1 have been audited by Paritz & Company, P.A., an independent registered public accounting firm, as set forth in their report thereon appearing in this Prospectus and such report is included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing.

 

INTERESTS OF NAMED EXPERTS AND COUNSEL

 

No expert or counsel named in this Prospectus as having prepared or certified any part of this Prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the Common Stock was employed on a contingency basis or had, or is to receive, in connection with the offering, a substantial interest, directly or indirectly, in Acology or its subsidiary.

Table of Contents - 41 -  
 

TRANSFER AGENT

 

Acology’s transfer agent is Pacific Stock Transfer, 4045 South Spencer Street Suite 403 Las Vegas, NV 89119, an SEC registered transfer agent.

Table of Contents - 42 -  
 

FINANCIAL STATEMENTS

 

Contents

  Page(s)
   
Audited Financial Statements  
   
Report of Independent Registered Public Accounting Firm 43
   
Balance Sheet – As at December 31, 2013 44
   
Statement of Operations – Period Ended December 31, 2013 45
   
Statement of Cash Flows – Period Ended December 31, 2013 46
   
Statement of Members’ Equity 47
   
Notes to Financial Statements – December 31, 2013 48-50
   
Unaudited Consolidated Financial Statements  
   
Consolidated Balance Sheet 51
   
Consolidated Statement of Operations – Three Months Ended March 31, 2014 and from Inception (January 29, 2013) to March 31, 2014 52
   
Consolidated Statement of Cash Flows – Three Months Ended March 31, 2014 and from Inception (January 29, 2013) to March 31, 2014 53
   
Consolidated Statement of Shareholders’ Equity (Deficiency) – Three Months Ended March 31, 2014 and from Inception (January 29, 2013) to March 31, 2014 54
   
Notes to Consolidated Financial Statements – Three Months Ended March 31, 2014 and from Inception (January 29, 2013) to March 31, 2014 55-59

Table of Contents - 43 -  
 

 

  Paritz & Company, P.A. 15 Warren Street, Suite 25
Hackensack, New Jersey 07601
(201) 342-7753
Fax: (201) 342-7598
E-Mail: PARITZ@paritz.com
   
Certified Public Accountants  

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  

To the Board of Directors

D&C Distributors, LLC

 

We have audited the accompanying balance sheet of D&C Distributors, LLC as of December 31, 2013 and the related statements of operations, changes in members’ equity and cash flows for the period January 29, 2013 (Inception) to December 31, 2013. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of D&C Distributors, LLC as of December 31, 2013, and the results of its operations and cash flows for the period January 29, 2013 (Inception) to December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.

 

/s/ Paritz & Company, P.A.

 

Hackensack, New Jersey

May 2, 2014

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D&C DISTRIBUTORS, LLC
BALANCE SHEET
    December 31, 2013
     
ASSETS        
         
CURRENT ASSETS:        
         
Cash   $ 1,759  
Inventories     37,660  
Advance to supplier     2,152  
TOTAL ASSETS     41,571  
         
Office equipment,  net of accumulated depreciation of $945     3,248  
         
      44,819  
         
LIABILITIES AND MEMBERS' EQUITY        
         
CURRENT LIABILITIES:        
         
Accrued expenses     7,000  
         
TOTAL CURRENT LIABILITIES     7,000  
         
Members Capital Contribution     141,986  
Accumulated Deficit     (104,167 )
TOTAL MEMBERS' EQUITY     37,819  
         
TOTAL LIABILITIES AND MEMBERS' EQUITY   $ 44,819  
         
         
The accompanying notes are an integral part of these financial statements  

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D&C DISTRIBUTORS, LLC
STATEMENTS OF OPERATIONS
FROM INCEPTION (JANUARY 29, 2013) TO DECEMBER 31, 2013
     
         
         
Sales   $ 254,992  
         
Cost of Sales     88,631  
         
Gross Profit     166,361  
         
COSTS AND EXPENSES:        
General and administrative     219,052  
Advertising and marketing     51,476  
Total Cost and expenses     270,528  
         
NET LOSS   $ (104,167 )
         

The accompanying notes are an integral part of these financial statements

 

 

 

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D&C DISTRIBUTORS, LLC
STATEMENTS OF CASH FLOWS
FROM INCEPTION (JANUARY 29, 2013) TO DECEMBER 31, 2013
     
         
OPERATING ACTIVITIES:        
Net loss   $ (104,167 )
Adjustments to reconcile net loss to net        
  cash used in operating activities:        
 Depreciation expense     945  
Changes in operating assets and liabilities        
  Inventories     (37,660 )
  Advance to supplier     (2,152 )
  Accrued expenses     7,000  
NET CASH USED IN OPERATING ACTIVITIES     (136,034 )
         
INVESTING ACTIVITIES:        
  Acqusition of office equipment     (4,193 )
NET CASH USED IN INVESTING ACTIVITIES     (4,193 )
         
         
         
FINANCING ACTIVITIES:        
    Member capital contributions     141,986  
NET CASH PROVIDED BY FINANCING ACTIVITIES     141,986  
         
INCREASE IN CASH     1,759  
         
CASH - BEGINNING OF PERIOD     —    
         
CASH - END OF PERIOD   $ 1,759  
         
The accompanying notes are an integral part of these financial statements

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D&C DISTRIBUTORS, LLC
STATEMENTS OF CHANGES IN MEMBERS' EQUITY
FROM INCEPTION (JANUARY 29, 2013) TO DECEMBER 31, 2013
     
     
     
Balance at inception - January 29, 2013     —    
         
Members' capital contributions     141,986  
         
Net Loss     (104,167 )
         
Balance December 31, 2013     37,819  
         
         
         
The accompanying notes are an integral part of these financial statements

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D&C DISTRIBUTORS, LLC

Notes to Financial Statements

December 31, 2013

 

NOTE 1 – Business

 

D&C Distributors, LLC (“the Company”) was formed under the laws of the State of California on January 29, 2013. The Company is a wholesaler of proprietary polypropylene containers used for controlled dispensing and storage of pharmaceuticals and medicine.

   

NOTE 2 - Summary of Significant Accounting Policies

 

  Use of Estimates

 

The preparation of the financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Certain of the Company’s estimates could be affected by external conditions, including those unique to its industry, and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from its estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and record adjustments when necessary.

 

  Cash

 

The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.

 

Revenue Recognition

 

The Company follows the guidance of the Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition”.. We record revenue when persuasive evidence of an arrangement exists, product delivery has occurred, the selling price to the customer is fixed or determinable and collectability of the revenue is reasonably assured. The Company has not experienced any significant returns from customers and accordingly, in management’s opinion, no reserve for returns has been provided.

 

Inventories

 

Inventories, which consist of the Company’s product held for resale, are stated at the lower of cost, determined using the first-in, first-out, and net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product.

 

If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their realizable value in the period in which the impairment is first identified.  Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales in the Company's statements of operations.

 

Fair Value Measurements

 

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

Table of Contents - 49 -  
 

 

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.

 

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

 

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

 

The Company does not have any assets or liabilities measured at fair value on a recurring basis.

   

Office Equipment

 

Office equipment is stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.

 

Advertising

 

Advertising and marketing expenses are charged to operations as incurred.

 

Income Taxes

 

No provision for income taxes is made since the Company is treated as a partnership and the income or loss is passed through to its members.

 

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions.

 

NOTE 3 – Members’ Equity

 

During the period January 29, 2013 to December 31, 2013 the members of the Company contributed $141,986 consisting of direct contribution to the Company of $19,825 and direct payments by the members for purchases of inventory and general and administrative expenses of $123,038

 

The Company’s member received payments from the company aggregating $137,157 which have been recorded as compensation and are included in general and administrative expenses on the accompanying statement of operations.

Table of Contents - 50 -  
 

  

NOTE 4 – Related Party

 

The Company uses office space from a family member of a member of the Company at no rent.

 

The Company made sales to a company in which two members of the Company are members of the board of directors for the amount of $19,150 during the period from January 29, 2013 to December 31, 2013.

 

NOTE 5 – Concentrations

 

For the period January 29, 2013 to December 31, 2013, the Company’s largest customer accounted for approximately 51% of sales.

 

For the period January 29, 2013 to December 31, 2013, the Company purchased approximately 81% of its products on one distributor.

  

NOTE 6 – Subsequent events

 

Management has evaluated subsequent events through May 2, 2014, the date which the financial statements were available to be issued.

 

On March 4, 2014 the Company completed a merger with Acology, Inc, a public shell company. In connection with the merger the shareholders of the Company received 3,846,000,000 shares of Acology in exchange for their shares of the Company. The merger will be accounted for as a recapitalization of Acology, whereby the Company will be the accounting acquirer and surviving reporting company. In connection with the merger, Acology completed a private placement of 700,000,000 shares of its common stock for proceeds of $40,000. Also in connection with the merger, the president and sole director of Acology exchanged 35,000,000 shares of common stock of Acology owned by him and $151,269 of indebtedness to him for a convertible promissory note in the amount of $400,000 and the proceeds from the private placement referred to above.

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ACOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
         
    March 31, 2014   December 31, 2013
    (Unaudited)    
                 
ASSETS                
                 
CURRENT ASSETS:                
                 
Cash   $ 3,376     $ 1,759  
Inventories     40,760       37,660  
Advance to supplier     931       2,152  
TOTAL ASSETS     45,067       41,571  
                 
Office equipment,  net of accumulated depreciation of $1,033 and $945     3,059       3,248  
                 
      48,126       44,819  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIENCY                
                 
CURRENT LIABILITIES:                
                 
Accrued expenses     9,500       7,000  
Note payable - related party     360,000       —    
TOTAL CURRENT LIABILITIES     369,500       7,000  
                 
STOCKHOLDERS' DEFICIENCY                
Common Stock, $0.000001 par value, 6,000,000,000 shares authorized                
   4,546,014,334 and 3,846,000,000 shares issued and outstanding                
  March 31, 2014 and December 31, 2013, respectively     4,546       3,846  
Additional Paid in Capital     —         138,140  
Accumulated Deficit     (325,920 )     (104,167 )
TOTAL STOCKHOLDERS' DEFICIENCY     (321,374 )     37,819  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY   $ 48,126     $ 44,819  
                 
                 
The accompanying notes are an integral part of these financial statements

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ACOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
         
         
    Three months ended March 31, 2014 (Unaudited)   From Inception (January 29, 2013) to March 31, 2013 (Unaudited)
                 
                 
                 
Sales   $ 73,919     $ 38,616  
                 
Cost of Sales     20,344       15,511  
                 
Gross Profit     53,575       23,105  
                 
COSTS AND EXPENSES:                
General and administrative     43,570       26,850  
Advertising and marketing     9,198       1,325  
Total Cost and expenses     52,768       28,175  
                 
NET LOSS   $ 807     $ (5,070 )
                 
                 
Loss per common share     0.00       0.00  
                 
Weighted average common shares outstanding     4,058,363,899       3,846,000,000  
                 
The accompanying notes are an integral part of these financial statements

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ACOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
    Three months ended March 31, 2014 (Unaudited)   From Inception (January 29, 2013) to March 31, 2013 (Unaudited)
                 
                 
OPERATING ACTIVITIES:                
Net loss   $ 807     $ (5,070 )
Adjustments to reconcile net loss to net                
  cash used in operating activities:                
 Depreciation expense     188       —    
Changes in operating assets and liabilities                
  Inventories     (3,099 )     (3,665 )
  Advance to supplier     1,221       —    
  Accrued expenses     2,500       9,197  
NET CASH PROVIDED BY OPERATING ACTIVITIES     1,617       462  
                 
FINANCING ACTIVITIES:                
     Proceeds from issuance of private placement     40,000       —    
     Repayment of related party loan     (40,000 )     —    
    Capital contributions     —         6,500  
NET CASH PROVIDED BY FINANCING ACTIVITIES     —         6,500  
                 
INCREASE IN CASH     1,617       6,962  
                 
CASH - BEGINNING OF PERIOD     6,962       —    
                 
CASH - END OF PERIOD   $ 8,579     $ 6,962  
                 
                 
Supplemental disclosures of cash flow information:                
  Non-cash financing activities                
    Note issued to prior shareholder in connection with reverse merger   $ 400,000       —    
                 
The accompanying notes are an integral part of these financial statements

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ACOLOGY, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIENCY
 
    ------COMMON STOCK------   Additional Paid-In   Accumulated    
    Shares   Amount   Capital   Deficit   Total
                                         
BALANCE – January 29, 2013 (Inception)     —       $ —       $ —       $ —         —    
                                         
Common stock issued to founders     3,846,000,000       3,846       (3,846 )     —         —    
                                         
Capital Contribution                     141,986               141,986  
                                         
Net Loss                             (104,167 )     (104,167 )
                                         
BALANCE – December 31, 2013     3,846,000,000     $ 3,846     $ 138,140     $ (104,167 )   $ 37,819  
                                         
Effect of Reverse Merger     14,334       —         (177,440 )     (222,560 )     (400,000 )
                                         
Issuance of common stock in private placement     700,000,000       700       39,300               40,000  
                                         
Net income                             807       807  
                                         
                                         
BALANCE – March 31, 2014 (Unaudited)     4,546,014,334     $ 4,546     $ —       $ (325,920 )   $ (321,374 )
                                         
The accompanying notes are an integral part of these financial statements

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ACOLOGY, INC.

Notes to Consolidated Financial Statements

March 31, 2014

(Unaudited)

 

NOTE 1 – Business

 

On March 4, 2014 Acology, Inc. (“Acology”) completed an agreement and plan of merger with D&C Distributors, LLC (“D&C”), collectively (the “Company”). In connection with the merger the shareholders of the D&C received 3,846,000,000 shares of Acology in exchange for their shares of D&C. The merger was accounted for as a recapitalization of Acology, whereby D&C is the accounting acquirer and surviving reporting company. In connection with the merger, the president and sole director of the Company exchanged 35,000,000 shares of common stock of the Acology owned by him and $151,269 of indebtedness to him for a convertible promissory note in the amount of $400,000 and the proceeds from a private placement.

  

D&C was formed under the laws of the State of California on January 29, 2013. The Company is a wholesaler of proprietary polypropylene containers used for controlled dispensing and storage of pharmaceuticals and medicine.

 

NOTE 2 - Summary of Significant Accounting Policies

 

Principals of Consolidation

 

The Consolidated financial statements represent the historical financial statement of D&C, which was considered the accounting acquirer in the recapitalization of Acology.

 

Acology is an inactive company and there have been no intercompany transactions or balances in any of the periods presented.

  

Use of Estimates

 

The preparation of the financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Certain of the Company’s estimates could be affected by external conditions, including those unique to its industry, and general economic conditions. It is possible that these external factors could have an effect on the Company’s estimates that could cause actual results to differ from its estimates. The Company re-evaluates all of its accounting estimates at least quarterly based on these conditions and record adjustments when necessary.

  

Cash

 

The Company considers all short-term highly liquid investments with an original maturity at the date of purchase of three months or less to be cash equivalents.

 

Revenue Recognition

 

The Company follows the guidance of the Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition”.. We record revenue when persuasive evidence of an arrangement exists, product delivery has occurred, the selling price to the customer is fixed or determinable and collectability of the revenue is reasonably assured. The Company has not experienced any significant returns from customers and accordingly, in management’s opinion, no reserve for returns has been provided.

   

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Inventories

 

Inventories, which consist of the Company’s product held for resale, are stated at the lower of cost, determined using the first-in, first-out, and net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product.

 

If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their realizable value in the period in which the impairment is first identified.  Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales in the Company's statements of operations.

 

Fair Value Measurements

 

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

 

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.

 

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

 

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

 

The Company does not have any assets or liabilities measured at fair value on a recurring basis.

  

Office Equipment

 

Office equipment is stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.

 

Advertising

 

Advertising and marketing expenses are charged to operations as incurred.

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Income Taxes

 

The Company use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

 

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions.

 

The Company has not recognized a provision for income taxes due to D&C being an LLC whereby, until the closing of the merger referred to above, is treated as a partnership and the income or loss is passed through to its members.

   

NOTE 3 – Note payable – Related Party

 

In connection with the merger, the Company issued a promissory note in the amount of $400,000 to Acology’s former president and sole director. The note bears interest at 0.28% per annum and is due March 4, 2015. The note is subject to acceleration in the event of certain events of default, contains certain restrictive covenants, and is secured by a pledge of all the share of common stock of D&C. If an event of default occurs, the unpaid principal amount and interest accrued thereon will be convertible into shares of the Company’s common stock at a conversion price per share equal to 50% of the average daily closing price for three consecutive trading days ending on the trading day immediately prior to the conversion date.

 

NOTE 4 – Stockholders’ Deficiency

 

On January 9, 2014, Acology amended its Certificate of Incorporation to raise its authorized common stock to 6 billion shares with a par value of .000001 per share.

 

In connection with the merger referred to in Note 1, the shareholders of the D&C received 3,846,000,000 shares of Acology in exchange for their shares of D&C..

 

In connection with the merger, the former president and sole director of the Acology exchanged 35,000,000 shares of common stock of Acology owned by him and indebtedness owed to him for a convertible promissory note in the amount of $400,000 and the proceeds from the private placement referred to below.

 

In connection with the Merger, the Company completed a private placement. 700,000,000 shares of common stock were issued for proceeds of $40,000.

 

During the period January 29, 2013 to December 31, 2013 the members of the Company contributed $141,986 consisting of direct contribution to the Company of $19,825 and direct payments by the members for purchases of inventory and general and administrative expenses of $123,038. These amounts have been recorded as capital contributions in the consolidated financial statements.

 

The Company’s shareholders received payments from the company aggregating $30,518 and $18,200 for the three months ended March 31, 2014 and for the period January 29 (inception) to March 31, 2013, respectively which have been recorded as compensation and are included in general and administrative expenses on the accompanying statement of operations.

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NOTE 5 – Related Party

 

The Company uses office space from a family member of a stockholder of the Company at no rent.

 

The Company made sales to a company in which two shareholders of the Company are members of the board of directors for the amount of $31,234 during the three months ended March 31, 2014.

   

NOTE 6 – Concentrations

 

For the three months ended March 31, 2014 and for the period January 29 (inception) to March 31, 2013, the Company’s largest customer accounted for approximately 70% and 27% of sales. In addition during the period January 29 (inception) to March 31, 2013 one other customer accounted for approximately 39% of sales.

 

For the three months ended March 31, 2014 and for the period January 29 (inception) to March 31, 2013, the Company purchased approximately 100% and of its products from one distributor.

  

NOTE 7 – Subsequent events

 

Management has evaluated subsequent events through May 11, 2014, the date which the financial statements were available to be issued.

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Dealer Prospectus Delivery Obligation

 

Until ___, 2014, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

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PART II - INFORMATION NOT REQUIRED IN PROSPECTUS

 

Item 13. Other Expenses of Issuance and Distribution

 

The expenses to be paid by the Registrant are as follows. All amounts, other than the SEC registration fee, are estimates. 

 

    Amount to
Be Paid
         
SEC registration fee   $ 1,803.20  
Legal fees and expenses   $ 15,000.00  
Accounting fees and expenses   $ 13,000.00  
Transfer agent fees   $ 2,000.00  
Miscellaneous   $ 1,500.00  
Total   $ 33,303.20  


Item 14. Indemnification of Directors and Officers

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Registrant pursuant to the foregoing provisions, the Registrant has been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of the Registrant’s counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by the Registrant is against public policy as expressed hereby in the Securities Act and the Registrant will be governed by the final adjudication of such issue.

 

Item 15. Recent Sales of Unregistered Securities

 

Following the consummation of the Merger on March 28, 2014, the Registrant issued 3,846,000,000 shares of Common Stock to the former holders of the membership units in D&C as merger consideration under the Merger Agreement for the membership units in D&C held by them. On January 29, 2014, the Registrant entered into Securities Purchase Agreements with three investors, who are the selling shareholders under this Registration Statement, pursuant to which the Registrant issued collectively 700,000,000 shares of the Common Stock at the price of $0.000571429 per share for an aggregate purchase price of $40,000.

 

The shares of Common Stock issued in the above transactions were exempt from registration under Section 4(2) of the Securities Act as sales by an issuer not involving a public offering and under Regulation D promulgated pursuant to the Securities Act. These shares of Common Stock were not registered under the Securities Act, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Section 4(2) and/or Regulation D (Rule 506) under the Securities Act and corresponding provisions of state securities laws, which exempts transactions by an issuer not involving any public offering. Such securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements and certificates representing such shares contain a legend to that effect.

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Item 16. Exhibits and Financial Statement Schedules

Exhibit No. Description
2.1 Agreement and Plan of Merger, dated as of December 24, 2013, by and among the Registrant, PNCR, Acquisition, LLC and D&C Distributors, LLC. Filed Exhibit 2.1 to Registration Statement on Form S-1 (File No 333-195866) and incorporated herein by reference.
2.2 Amendment of Agreement and Plan of Merger, dated as of March 4, 2014, by and among the Registrant, PNCR, Acquisition, LLC and D&C Distributors, LLC. Filed Filed as Exhibit 2.2 to Registration Statement on Form S-1 (File No 333-195866) and incorporated herein by reference.
3.1 Articles of Incorporation of the Registrant, filed September 5, 1997. Filed as Exhibit 3.1 to Registration Statement on Form S-1 (File No 333-195866) and incorporated herein by reference
3.2 Amendment to Articles of Incorporation of the Registrant, filed February 15, 1999. Filed as Exhibit 3.2 to Registration Statement on Form S-1 (File No 333-195866) and incorporated herein by reference.
3.3 Amendment to Articles of Incorporation of the Registrant, filed January 26, 2000. Filed as Exhibit 3.3 to Registration Statement on Form S-1 (File No 333-195866) and incorporated herein by reference.
3.4 Amendment to Articles of Incorporation of the Registrant, filed July 5, 2012. Filed as Exhibit 3.4 to Registration Statement on Form S-1 (File No 333-195866).
3.5 Amendment to Articles of Incorporation of the Registrant, filed January 9, 2014. Filed as Exhibit 3.5 to Registration Statement on Form S-1 (File No 333-195866) and incorporated herein by reference.
3.6 By-laws of the Registrant. Filed as Exhibit 3.6 to Registration Statement on Form S-1 (File No 333-195866) and incorporated herein by reference.
5.1 Opinion of Barry J. Miller, Esq. Filed Filed as Exhibit 5.1 to Registration Statement on Form S-1 (File No 333-195866) and incorporated herein by reference.
10.1 Form of Stock Purchase Agreement. Filed as Exhibit 10.1 to Registration Statement on Form S-1 (File No 333-195866) and incorporated herein by reference.
10.2 Form of Registration Rights Agreement. Filed as Exhibit 10.2 to Registration Statement on Form S-1 (File No 333-195866) and incorporated herein by reference.
10.3 Exchange Agreement, dated as of March 4, 2013, by and between Registrant and Richard S. Astrom. Filed as Exhibit 10.3 to Registration Statement on Form S-1 (File No 333-195866) and incorporated herein by reference.
10.4 Convertible Promissory Note, dated March 4, 2014, made by the Registrant in favor of Richard S. Astrom. Filed as Exhibit 10.4 to Registration Statement on Form S-1 (File No 333-195866) and incorporated herein by reference.
10.5 Pledge Agreement, dated March 4, 2014, by and between the Registrant and Richard S. Astrom. Filed as Exhibit 10.5 to Registration Statement on Form S-1 (File No 333-195866) and incorporated herein by reference.
10.6 Distributorship Agreement, dated August 11, 2013, by and between Polymation LLC and D&C Distributors, LLC. Filed as Exhibit 10.6 to Registration Statement on Form S-1 (File No 333-195866) and incorporated herein by reference.
10.7 Summary of Oral Product License and Distribution Agreement by and between D&C Distributors, LLC and TSD Worldwide, Inc. Filed as Exhibit 10.7 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-195866) and incorporated herein by reference.
10.8 Product License and Distribution Agreement, dated April 28, 2014, by and between D&C Distributors, LLC and IGreen Planet Store Ltd. Filed as Exhibit 10.8 to Registration Statement on Form S-1 (File No 333-195866) and incorporated herein by reference.
10.9 Addendum, dated November 18, 2013 to Oral Agreement between D&C Distributors, LLC and TSD Worldwide, Inc. (summarized in Exhibit 10.7). Filed as Exhibit 10.9 to Amendment No. 2 to Registration Statement on Form S-1 (File No. 333-195866) and incorporated herein by reference.
21.1 Subsidiaries of the Registrant. Filed Filed as Exhibit 21.1 to Registration Statement on Form S-1 (File No 333-195866) and incorporated herein by reference.
23.1 Consent of Paritz & Company, P.A. Filed herewith.
23.2 Consent of Barry J. Miller, Esq. Included in Exhibit 5.1.

 

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Item 17. Undertakings

 

1. The undersigned registrant hereby undertakes to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933.

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

(iii)

To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

 

Provided, however, that paragraphs (B)(1)(i) and (B)(1)(ii) of this section do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in the registration statement.

2. The undersigned Registrant hereby undertakes that, for the purpose of determining any liability under the Securities Act of 1933, as amended, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

3. The undersigned Registrant hereby undertakes to remove from registration by means of a post-effective amendment any of the securities being registered that remain unsold at the termination of the offering.

4.

The undersigned Registrant hereby undertakes that each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§ 230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

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5. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the undersigned Registrant according the foregoing provisions, or otherwise, the undersigned Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such issue.

 

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Signatures

 

In accordance with the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this amendment to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Fullerton, State of California, on July 18, 2014.

 

ACOLOGY, INC.

 

By: /s/ Curtis Fairbrother      
       Curtis Fairbrother
       Chief Executive Officer

 

In accordance with the Securities Act of 1933, as amended, this amendments to the Registration Statement has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

 

Name Title Date
     
/s/ Curtis Fairbrother Chairman of the Board; CEO; July 18, 2014
Curtis Fairbrother principal executive officer;
principal accounting officer; director
 
     
     
/s/ Douglas Heldoorn President; COO; July 18, 2014
Douglas Heldoorn director  

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Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger, dated as of December 24 , 2013, is entered into by and among PINECREST INVESTMENTS GROUP, INC., a Florida corporation (“ PNCR ”), PNCR, ACQUISITION, LLC., a California limited liability company and the wholly-owned subsidiary of PNCR (“ Merger Sub ”), and D&C DISTRIBUTORS, LLC, a California limited liability company (the “ Company ”).

RECITALS:

A. The Parties desire to set forth the terms and conditions pursuant to which Merger Sub shall merge with and into the Company (the Merger ”), following which the separate corporate existence of Merger Sub shall cease and the Company shall continue as the Surviving Entity ;
B. The board of directors of PNCR and the member or members of the other Parties deem it advisable and in the best interests of their respective companies that they consummate the Merger and have approved this Agreement and the other matters contemplated hereby; and
C. This Agreement, the Merger and the other matters contemplated hereby have been approved by PNCR, the sole member of Merger Sub, and by the respective members of the Company and Merger Sub in accordance with applicable law .

 

NOW THEREFORE, in consideration of covenants and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto agree each with the other as follows:

ARTICLE 1. DEFINITIONS

The following terms shall have the following meanings, unless the context indicates otherwise:

Affiliate has the meaning set forth in Rule 12b-2 of the rules and regulations promulgated under the Securities Exchange Act of 1934.

Agreement means this Agreement and Plan of Merger, and all the exhibits, schedules and other documents attached to or referred to in this Agreement, and all amendments and supplements, if any, to this Agreement, all of which are incorporated herein and shall be a part hereof.

PICTURE Business Day ” means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the State of New York generally are authorized or required by law or other government action to close.

CCC ” means the California Corporations Code

Certificate of Merger ” has the meaning set forth in Section 2.2.

Closing means the completion of the transactions contemplated by this Agreement, in accordance with Section 2 hereof, at which time the papers, instruments and documents required to be executed and delivered at the Closing pursuant to this Agreement will be exchanged by the Parties.

Closing Date means the date on which the Closing shall occur.

Code means the Internal Revenue Code of 1986, as amended.

Company has the meaning set forth in the first paragraph of this Agreement.

Company Financial Statements ” means the unaudited financial statements of the Company for the period ended July 31, 2013.

Company Operating Agreement ” means the Operating Agreement of D & C Distributors, LLC, dated as of February 5, 2013.

Company Units ” means “Units,” as that Term is defined in the Company Operating Agreement.

Effective Time ” has the meaning set forth in Section 2.2.

Employee Benefit Plan ” means any “employee benefit plan,” as that term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, and any other material employee benefit plan, program or arrangement of any kind.

1
 

Employment Benefit Agreement ” means when used with reference to a party, (i) any agreement with any director, executive officer or other key employee of such Party (A) the benefits of which are contingent, or the terms of which are altered, upon the occurrence of a transaction involving such Party of the nature of any of the transactions contemplated by this Agreement, (B) providing any term of employment or compensation guarantee, or (C) providing severance benefits or other benefits after the termination of employment of such Manager, executive officer or key employee; (ii) any agreement, plan or arrangement under which any person may receive payments from such Party that may be subject to the tax imposed by Section 4999 of the Code or included in the determination of such person’s “parachute payment” under Section 280G of the Code; and (iii) any agreement or plan binding such Party, including, without limitation, any option plan, equity appreciation right plan, restricted equity plan, equity purchase plan, severance benefit plan, or any Employee Benefit Plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement.

GAAP ” means United States generally accepted accounting principles as in effect from time to time, consistently applied.

Governmental Body means any: (i) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (ii) federal, state, local, municipal, foreign, supranational or other government (including the European Union); or (iii) governmental, self-regulatory or quasi-governmental authority of any nature, including any governmental division, department, agency, commission, instrumentality, official, organization, unit, body or Person and any court or other tribunal.

Intellectual Property means all intellectual property owned or used in the conduct of the business of any Party, as it is currently conducted, including, but not limited to, (i) all United States and foreign patents that have been issued or applied for), (ii) all trademarks, trade names, service marks, copyrights, and all applications for such trademarks, trade names, service marks and copyrights, and all patent rights, and (iii) all trade secrets, schematics, technology, know how, computer software programs or applications and tangible or intangible proprietary information or material, and all Third Party Intellectual Property Rights including, without limitation, issued United States and foreign patents, patent rights and patent applications (excluding packaged commercially available licensed software programs sold to the public) owned by or for which any Party has acquired the rights to use whether by license or otherwise.

Knowledge , when used with reference to a Party, means the actual knowledge of any of the executive officers of such Party.

Legal Proceeding ” means any ongoing or threatened action, suit, litigation, arbitration, proceeding, hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Governmental Body or any arbitrator or arbitration panel.

Legal Requirements means any federal, state, local, municipal, foreign, international, multinational or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Governmental Body.

Liabilities means any debts, obligations, duties or liabilities of any nature (including unknown, undisclosed, unmatured, unaccrued, contingent, or indirect liabilities), whether any such debt, obligation, duty or liability would be required to be disclosed on a balance sheet prepared in accordance with GAAP and whether such debt, obligation, duty or liability is immediately due and payable.

Lien means any mortgage, pledge, lien, encumbrance, charge, or other security interest other than (a) liens for Taxes not yet due and payable or for Taxes that the taxpayer is contesting in good faith through appropriate proceedings, (b) purchase money liens and liens securing rental payments under capital lease arrangements, and (c) other liens arising in the Ordinary Course of Business and not incurred in connection with the borrowing of money.

Loss means any and all demands, claims, actions or causes of action, assessments, losses, damages, liabilities, costs, and expenses, including without limitation, interest, penalties, fines and reasonable attorneys, accountants and other professional fees and expenses, but excluding any indirect, consequential or punitive damages suffered by the Parties including damages for lost profits or lost business opportunities.

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Material Adverse Effect means any effect or change that would be (or could reasonably be expected to be) materially adverse to the business, assets, condition (financial or otherwise), operating results, operations, or business prospects of a Party taken as a whole or to the ability of such Party to consummate timely the transactions contemplated hereby (regardless of whether or not such adverse effect or change can be or has been cured at any time or whether any of the other Parties hereto has knowledge of such effect or change on the date hereof); provided that none of the following shall be deemed to constitute, and none of the following shall be taken into account in determining whether there has been a Material Adverse Effect: any adverse change, event, development, or effect arising from or relating to (1) general business or economic conditions, including such conditions related to the business of such Party, (2) national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon the United States, or any of its territories, possessions, or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States, (3) financial, banking, or securities markets (including any suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange or NASDAQ Stock Market for a period in excess of three hours or any decline of either the Dow Jones Industrial Average or the Standard & Poor’s Index of 500 Industrial Companies by an amount in excess of 15% measured from the close of business on the date hereof), (4) changes in GAAP, (5) changes in laws, rules, regulations, orders, or other binding directives issued by any governmental entity, and (6) the taking of any action contemplated by this Agreement and the other agreements contemplated hereby.

Material Contract ” means any contract, series of contracts or a commitment requiring payments or other consideration by or from a party in excess of $5,000 during the term of the contract.

Merger Sub has the meaning set forth in the first paragraph of this Agreement.

Merger Sub Units means “Units,” as that Term is defined in the Merger Sub Operating Agreement.

Merger Sub Operating Agreement ” means the Operating Agreement, dated as of December 17, 2013, of Merger Sub.

Order means any writ, decree, permanent injunction, order or similar action used in a legal proceeding.

Ordinary Course of Business ” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).

Permits means all permits, licenses, registrations, certificates, Orders or approvals received from any Governmental Body (including, without limitation, those issued or required under applicable export laws or regulations).

Person means any natural person, corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, limited liability company, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or entity.

Pledge Agreement ” has the meaning set forth in Section 5.3(l).

PNCR Financial Statements ” has the meaning set forth in Section 4.7.

PNCR has the meaning set forth in the first paragraph of this Agreement.

PNCR Common Stock means the common stock, par value $0.001 per share, of PNCR authorized by its Articles of Incorporation on the date hereof.

PNCR New Common Stock ” means the common stock, par value $0.000001 per share, to be issued by PNCR as a result of the Reverse Split.

Private Placement ” has the meaning set forth in Section 5.3(n).

Promissory Note ” has the meaning set forth in Section 5.3(l).

Reverse Split ” has the meaning set forth in Section 6.1(b).

SEC means the United States Securities and Exchange Commission.

Securities Act ” means the Securities Act of 1933, as amended.

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Subsequent Events ” when used with respect to a Party means any one or more of the following:

(a) its sale, lease, transfer, or assignment any of its assets, tangible or intangible, other than for a fair consideration in the Ordinary Course of Business;

(b) its entering into any agreement, contract, lease, or license outside the Ordinary Course of Business;

(c) the acceleration, termination, modification or cancellation of any agreement, contract, lease, or license (or series of related agreements, contracts, leases, and licenses) to which it is a party or by which it is bound;

(d) the imposition of or its permitting to exist any Lien upon any of its assets, tangible or intangible, other than purchase money Liens on acquired assets granted in connection with their acquisition;

(e) its making of any capital expenditure outside the Ordinary Course of Business;

(f) its making of any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person outside the Ordinary Course of Business;

(g) its issuance of any note, bond, or other debt security or created, incurred, assumed, or guaranteed any indebtedness for borrowed money or capitalized lease obligation;

(h) the delay or postponement of the payment of its accounts payable and other Liabilities outside the Ordinary Course of Business;

(i) its cancellation, compromise, waiver, or release of any right or claim outside the Ordinary Course of Business;

(j) its transfer, assignment, or grant of any license or sublicense of any rights under or with respect to any Intellectual Property;

(k) a change in its certificate or articles of incorporation or by-laws;

(l) its issuance, sale or other disposition of any of its capital stock, or the grant of any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its capital stock;

(m) its declaration, setting aside, or payment of paid any dividend or its making of any distribution with respect to its capital stock (whether in cash or in kind) or its redemption, purchase, or other acquisition of any of its capital stock;

(n) its experiencing any damage, destruction, or loss (whether or not covered by insurance) to its property;

(o) its making of any loan to, or entering into any other transaction with, any of its directors, officers, and employees;

(p) its entering into any employment contract or collective bargaining agreement, written or oral, or modification of the terms of any existing such contract or agreement;

(q) its grant of any increase in the compensation of any of its directors, officers, and employees;

(r) its adoption, amendment, modification, or termination of any bonus, profit sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its directors, officers, and employees (or the taking of any such action with respect to any other Employee Benefit Plan);

(s) its making any other change in employment terms for any of its directors, officers, and employees;

(t) its making of any charitable or other capital contribution;

(u) its payment of any amount to any third party with respect to any Liability (including any costs and expenses it has incurred or may incur in connection with this Agreement and the transactions contemplated hereby) that would not be assumed by the Surviving Entity if in existence as of the Closing;

(v) any other material occurrence, event, incident, action, failure to act, or transaction outside its Ordinary Course of

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Business;

(w) its discharge of a material Liability or Lien outside the Ordinary Course of Business;

(x) its making of loans or advances of money;

(y) its disclosure of confidential information in contravention of Section 9.5; and

(z) its committing to any of the foregoing.

Surviving Entity ” has the meaning set forth in Section 2.1.

Tax ” or “ Taxes ” means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Internal Revenue Code 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not and including any obligations to indemnify or otherwise assume or succeed to the Tax liability of any other Person.

Tax Return means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

Third Party Intellectual Property Rights means all material written licenses, sublicenses and other agreements as to which the Company is a party and pursuant to which any of them is authorized to use any third party patents, patent rights, trademarks, service marks, trade secrets or copyrights, including software which is used in the Company’s business or which form a part of any existing product or service of the Company, excluding commercially available licensed software programs sold to the public.

ARTICLE 2. THE MERGER

2.1 Merger . Upon and subject to the terms and conditions of this Agreement, Merger Sub shall merge with and into the Company at the Effective Time in accordance with the provisions of Section 17550 et seq. of the CCC . From and after the Effective Time, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving entity (the “ Surviving Entity ”). The Merger shall have the effects set forth in Sections 17554 and 17554.5 of the CCC .

2.2 Closing; Effective Time . The closing of the transactions contemplated by this Agreement (the Closing ”) shall take place by electronic delivery of signed documents, as quickly as practicable after all of the conditions precedent to the obligations of the parties have been satisfied. The date on which such closing occurs is the Closing Date ”. Certificate of Merger shall be prepared, signed by the Company and Merger Sub and filed in accordance with Section 17552(a) of the CCC (the Certificate of Merger ”) as quickly as practicable after the Closing, and the Parties shall make all such other filings or recordings as may be required to effectuate the Merger. The Merger shall be effective when the Certificate of Merger is filed (the Effective Time ”).

2.3 Organizational Structure of the Surviving Entity . At the Effective Time, (i) the articles of organization of the Company immediately prior to the Effective Time shall remain the articles of organization of the Surviving Entity, (ii) the Merger Sub Operating Agreement shall become the operating agreement of the Surviving Entity and shall replace the Company Operating Agreement in its entirety and (iii) the manager of Merger Sub shall become the manager of the Surviving Entity.

2.4 Conversion of Company Units and Merger Sub Units .

 

(a) At the Effective Time and without any further action on the part of PNCR, Merger Sub, the Surviving Entity or any other Person, (i) each of the Company Units outstanding immediately prior to the Effective Time shall be converted into the right to receive 19,230 shares of newly issued PNCR New Common Stock, such that all of the outstanding Company Units shall be converted into the right to receive an aggregate of 3,846,000,000 shares of PNCR New Common Stock (subject to adjustments made pursuant to Section 2.6 hereof) and (ii) the 10,000 Merger Sub Units outstanding immediately prior to the Effective Time shall be converted into a like number of Company Units and a certificate representing such Company Units shall be issued to PNCR, as the former sole holder of Merger Sub Units. No terms or provisions of any of the securities of PNCR shall be affected by the Merger.

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(b) Within twenty (20) days after the Closing Date, PNCR shall deliver to each of the former holders of Company Units a certificate representing the number of shares of PNCR New Common Stock into which his Company Units were converted by virtue of the Merger. At the Closing, the Company shall deliver a list of the holders of Company Units on the Closing Date.

 

(c) If any of the certificates to be delivered pursuant to Subsection (b) of this Section 2.4 is to be issued in the name of a person other than that in which the certificate surrendered in exchange therefor is registered, it shall be a condition to the issuance thereof that (i) the request therefor shall be in writing and properly documented (e.g., assigned, endorsed or accompanied by an appropriate transfer power, with the signature thereon guaranteed by a so-called “Medallion Guarantee,” (ii) such transfer shall otherwise be proper and in accordance with all applicable federal and state laws, rules and regulations, and (iii) the Person requesting such transfer shall pay to PNCR or its transfer agent any transfer or other taxes payable by reason of the foregoing or establish to the satisfaction of PNCR that such taxes have been paid or are not required to be paid.

 

(d) In the event that shares of PNCR Series New Common Stock issued to any Person pursuant to Subsections (b) and (c) of this Section 2.4 are not claimed by the holders thereof and are thereafter delivered to a public official pursuant to applicable abandoned property, escheat or similar law, PNCR, the Surviving Entity and their Affiliates, subsidiaries, directors, managers, officers, agents or employees shall not be liable to any former holder of Company Units or any Person in whose name the shares of PNCR New Common Stock to which such former holder of Company Units was otherwise entitled by virtue of the Merger were issued at his request.

 

(e) In the event that any evidence of the ownership of Company Units shall have been lost, stolen or destroyed, the Board of Directors of PNCR may, in its sole discretion and as a condition precedent to the issuance of a certificate representing the shares of PNCR New Common Stock into which the shares represented by such lost, stolen or destroyed certificate were converted by virtue of the Merger, require the holder of such lost, stolen or destroyed certificate to submit to PNCR an affidavit stating that such certificate was lost, stolen or destroyed and to provide PNCR a bond of indemnity satisfactory to PNCR against any claim that may be made against PNCR with respect thereto.

 

(f) At the Effective Time, each of the former holders of Company Units shall cease to have any rights as such and shall not have any rights as a member of or a holder of units in the Surviving Entity, except for the right to receive the shares of PNCR New Common Stock to be received by him by pursuant to Section 2.4(a). The Company shall make no transfer of Company Units after the Effective Time.

 

2.5 Actions at the Closing .

(a) The Company shall deliver to PNCR and Merger Sub at the Closing the various certificates, instruments and documents required to be delivered to them by the Company in order to satisfy the conditions precedent to their obligations set forth in Article 5.3

(b) PNCR and Merger Sub shall deliver to the Company at the Closing the various certificates, instruments and documents required to be delivered to the Company by them in order to satisfy the conditions precedent to its obligations specified in Article 5.2.

(c) The parties shall take all other actions required by this Agreement in order to complete the Closing.

2.6 Fractional Shares .

No fractional shares of PNCR New Common Stock shall be issued in connection with the Merger. In lieu of issuance of any such fractional shares that would otherwise be issuable, such fractional shares shall be rounded up to the nearest whole number.

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2.7 Legend . The shares of PNCR New Common Stock to be issued pursuant to this Article 2 shall not have been registered and will be “restricted securities,” as that term is defined in Rule 144 promulgated under the Securities Act. Accordingly, such shares may be disposed of without registration under the Securities Act and any applicable state securities laws only in certain limited circumstances. Each certificate evidencing such shares shall bear the following legend, in addition to any other legends required by law:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, WHICH COUNSEL AND THE SUBSTANCE OF WHICH OPINION SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

2.8 Tax and Accounting Consequences . For federal income tax purposes, the Merger is intended to constitute a reorganization within the meaning of Section 368 of the Internal Revenue Code, and the Parties shall report the transactions contemplated herein consistent with such intent and shall take no position inconsistent therewith. The Parties to this Agreement hereby adopt this Agreement as a “plan of reorganization” within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.

2.9 Issuance of Company Units . At the Effective Time, the Company shall indicate on its books in accordance with applicable law that PNCR is the owner of the number of Company Units to which PNCR is entitled by virtue of the conversion of Merger Sub Units into Company Units and shall issue a certificate representing such Company Units in the name of PNCR in accordance with the operating agreement of the Company as in effect following the Effective Time and such certificate shall be delivered as specified in Section 6.5(c).

2.10 Taking of Necessary Action; Further Action . If, at any time after the Effective Time, any further lawful and necessary action is necessary or desirable to carry out the purposes of this Agreement and to vest the Surviving Entity with full right, title and possession to all assets, property, rights, privileges, powers and franchises of the Company; and the manager or managers of the Company and the Surviving Entity are fully authorized in their respective names and in the name of Merger Sub to take action.

ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to PNCR and Merger Sub that the statements contained in this Article 3 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article 3, except when a statement made in this Article 3 is made with reference to a specific date:

3.1 Organization, Qualification and Corporate Power . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of California. The Company has all necessary corporate power and authority: (i) to conduct its business in the manner in which it is currently being conducted and as proposed to be conducted; (ii) to own and use its assets in the manner in which they are currently owned and used; and (iii) to perform its obligations under this Agreement. The Company is not been required to be qualified, authorized, registered or licensed to do business as a foreign corporation or entity in any jurisdiction. The Company has no subsidiaries and does not own any controlling interest in any Person. The Company has not agreed and is not obligated to make any future investment in or capital contribution to any Person. No dissolution or liquidation of the Company is pending and neither the Company nor its stockholders has approved such dissolution or liquidation.

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3.2 Organizational Instruments; Records . The Company has delivered to PNCR accurate and complete (through the date hereof) copies of: (A)(i) the Company’s articles of organization, as presently in effect, (ii) the Company Operating Agreement, as presently in effect and (iii) the minutes and other records of the meetings and other proceedings (including any actions taken by written consent or otherwise without a meeting) of the managers and members of the Company (the items described in the clauses (i) though (iii), inclusive, of this Section 3.2(A) being collectively referred to herein as the Company Documents ”) There have been no material corporate actions taken by the managers or the members of the Company that are not fully reflected in the Company Documents. At no time has there been any violation of the Company Documents, and at no time has the Company taken any action that is inconsistent in any material respect with the Company Documents. The books of account, unitholder records, minute books and other records of the Company are accurate, up-to-date and complete in all material respects, and have been maintained in accordance with prudent business practices.

3.3 Capitalization .

(a) The Company is authorized to issue 1,000,000 Company Units, 200,000 of which are issued and outstanding and held in the amounts and by the persons set forth in the Company Operating Agreement. All outstanding Company Units have been duly authorized and validly issued, and are fully paid and nonassessable, and all have been issued in compliance with all applicable federal and state securities laws. The Company Units that have been issued are, to the Company’s Knowledge, free and clear of any liens, pledges, encumbrances, charges, agreements adversely effecting title thereto or claims or restrictions (other than those imposed by applicable federal and state securities laws or created by virtue of this Agreement) and are not subject to pre-emptive rights or rights of first refusal created by statute or its articles of incorporation or any agreement to which it is a party or by which it is bound. To the Company’s Knowledge, the issued Company Units are not subject to any agreement or arrangement between the holders thereof, other than the Company Operating Agreement.

(b) There are no: (i) outstanding subscriptions, options, calls, warrants, rights or agreements (whether or not currently exercisable) to acquire any securities of or interests in the Company; (ii) outstanding notes, instruments or obligations that are or may become convertible into or exchangeable for any securities of or interests in the Company; (iii) contracts (other than this Agreement) under which the Company is or may become obligated to sell, transfer, exchange or issue any securities of or interests in the Company or; (iv) agreements, voting trusts, proxies or understandings with respect to the voting, or registration under the Securities Act, or any Company Units; or (v) conditions or circumstances that may give rise to or provide a basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive any securities of or interests in the Company.

3.4 Authorization of Transaction . The Company has all requisite power and authority to enter into and to perform its obligations under this Agreement and any agreements to be executed and delivered by it pursuant to this Agreement, the execution, delivery and performance by the Company of all of which have been duly authorized by all requisite action on the part of its Members. Each of the aforesaid Agreements is enforceable against the Company in accordance with its terms, subject to: (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.

3.5 Noncontravention . Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Company is subject or any provision of the organizational instruments of the Company or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which the Company is a party or by which it is bound or to which any of their respective assets is subject (or result in the imposition of any Lien thereon). The Company is not required to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any Governmental Body in order for the Parties to consummate the transactions contemplated by this Agreement, except for the filing of the Certificate of Merger, which if not obtained or made, could not be reasonably expected to have a Material Adverse Effect on the Company and could not be reasonably expected to prevent or materially alter or delay any of the transactions contemplated by this Agreement .

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3.6 Financial Statements . PNCR acknowledges receipt of the Company Financial Statements. The Company Financial Statements have been prepared in accordance with GAAP, except as may be otherwise specified therein or in the notes thereto; and the Company Financial Statements fairly present in all material respects the financial position of the Company as of and for the dates thereof and the results of operations and cash flows for the periods then ended.

3.7 Absence of Certain Changes . Since its date of inception, (i) the Company has conducted its business in the Ordinary

Course of Business, (ii) no Subsequent Event or Subsequent Events has occurred after the date of the Company Financial Statements involving $5,000.00 in the aggregate have occurred with respect to the Company and (iii) since said date, there has not occurred any change, event or condition (whether or not covered by insurance) that has resulted in, or would reasonably be expected to result in any Material Adverse Effect with respect to the Company.

3.8 Undisclosed Liabilities . The Company has no Liabilities (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated and whether due or to become due), except for (a) Liabilities accrued, reflected, or reserved against in the Company Financial Statements, (b) Liabilities which have arisen since the date of the Company Financial Statements in the Ordinary Course of Business, (c) contractual or statutory Liabilities incurred in the Ordinary Course of Business, none of which are material in nature or exceeds $5,000.00 in the aggregate (d) Liabilities incurred in connection with the negotiation of this Agreement and the transactions contemplated thereby and (e) other Liabilities which would not have a Material Adverse Effect on the Company.

3.9 Tax Matters . All Tax Returns required to be filed by or on behalf of the Company with any Governmental Body before the date hereof (the “ Tax Returns ”): (i) have been or will be filed on or before the applicable due date (including any extensions of such due date); (ii) have been, or will be when filed, accurately and completely prepared in all material respects in compliance with all applicable Legal Requirements; and (iii) have been provided or made available to PNCR. All Taxes owed by the Company have been withheld and paid when due, whether or not such amounts are shown on any Tax Returns. The Company Financial Statements fully accrue all actual and contingent Liabilities for unpaid Taxes with respect to all periods through the date thereof and the Company has made adequate provision for unpaid Taxes after that date in their respective books and records. No Tax Return is currently under examination or audit by any Governmental Body. No claim or Legal Proceeding is pending or has been threatened against or with respect to the Company in respect of any Tax. There are no unsatisfied Liabilities for Taxes, including Liabilities for interest, additions to tax and penalties thereon and related expenses, with respect to which any notice of deficiency or similar document has been received by the Company (other than Liabilities for Taxes asserted under any such notice of deficiency or similar document which are being contested in good faith by the Company and with respect to which adequate reserves for payment have been established). There are no Liens for Taxes upon any of the assets of the Company except Liens for current Taxes not yet due and payable. The Company is not currently the beneficiary of any extension of time within which to file any Tax Return. There are no Liens on any of the assets of the Company that arose in connection with any failure (or alleged failure) to pay any Tax. The Company has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party, and all forms and statements required with respect thereto have been properly completed and timely filed.

3.11 Assets; Equipment and Real Property . Except for property reflected in the Company Financial Statements, the Company has no material assets, whether real property or leases of or other interests in real property, leases or personal property or lease thereof, or other property.

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3.12 Intellectual Property . The Company has no interest in any material Intellectual Property (“ Intellectual Property Rights ”). No further Intellectual Property is necessary for the conduct of their respective businesses as conducted and as currently proposed to be conducted by the Company. There are no outstanding options, licenses or agreements of any kind relating Intellectual Property and Intellectual Property Rights, nor is the Company bound by or a party to any options, licenses or agreements of any kind with respect to any of Intellectual Property, Intellectual Property Rights and the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information and other proprietary rights and processes of any other Person other than such licenses or agreements arising from the purchase of “off the shelf” or standard products. The Company has not received any communications alleging that it has violated or, by conducting its business as conducted and as currently proposed to be conducted by it, violates any Third Party Intellectual Property Rights and to the Company’s Knowledge, the business of the Company as conducted and as currently proposed to be conducted by the Company will not cause it to infringe or violate any Third Party Intellectual Property Rights. There is no defect in the title to any of the Intellectual Property or, to the extent that the Company has title to Intellectual Property Rights to any Intellectual Property Rights. To the Company’s Knowledge, no Person obligated under any contract (including any license, covenant or commitment of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would conflict or interfere with the performance of such Person’s obligations to the Company, the use of such person’s best efforts to promote the interests of its business as conducted or as currently proposed to be conducted by it. No prior employer of any current or former employee of the Company has any right, title or interest in Intellectual Property and to the Company’s Knowledge, no Person has any right, title or interest in any Intellectual Property of the Company. It is not and will not be with respect to the business of the Company as currently proposed to be conducted necessary for the Company to use any inventions of any of their respective employees made prior to their employment by the Company.

3.13 Contracts . The Company is not a party to any Material Contract, whether written or oral, that has not been disclosed to PNCR. The Company has delivered to PNCR accurate and complete copies of all written Material Contracts of the Company. Each such Material Contract is valid, binding and enforceable by the Company in accordance with its terms subject to: (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies. The Company has not violated or breached, or committed any default under, any Material Contract, and, to the Company’s Knowledge, no other Person has violated or breached, or committed any default under, any Material Contract, each Material Contract is in full force and effect and the Company has not agreed to terminate any Material Contract. There are no Consents required under any Material Contract to consummate the transactions contemplated by the Transaction Documents.

3.14 Finders’ Fees . No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Merger or any of the other transactions contemplated by the Transaction Documents based upon any arrangements or agreements made by or on behalf of the Company.

3.15 Insurance . The Company is not a party to or an insured under any policy of insurance.

3.16 Litigation .

(a) There is no pending Legal Proceeding, and to the Company’s Knowledge, no Person has threatened to commence any Legal Proceeding, that (i) involves or affects the Company or any of the assets owned or used by it, or (ii) that challenges the Merger or any of the other transactions contemplated by the Transaction Documents. There is no Order in which the Company is named or to which any of the assets of the Company is subject.

(b) The Company and its assets are not affected by any judgment or decree and there are no material agreements or other documents or instruments settling any Legal Proceeding or any oral agreements with respect thereto.

3.17 Legal Compliance; Restrictions on Business Activities . The Company is and has at all times been, in compliance with all applicable Legal Requirements, except to the extent that failure to comply would not be likely to have a Material Adverse Effect on it. The Company never received any notice or other communication from any Person regarding any actual or possible violation of, or failure to comply with, any Legal Requirement. The Company has obtained all material Permits, certificates and licenses required by any Legal Requirement for the conduct of its business and the ownership of its assets. The Company is not in violation of any such Permit, certificate or license, and no Legal Proceedings are pending or, to the Knowledge of the Company, threatened to revoke or limit any such Permit, certificate or license.

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3.18 Employees .

(a) To the Company’s Knowledge, no employee of the Company has any plans to terminate employment with it within six months of the date hereof. The Company is a party to or bound by any collective bargaining agreement, nor has it experienced any material strikes, grievances, claims of unfair labor practices or other collective bargaining disputes. The Company has no Knowledge of any organizational effort made or threatened, either currently or within the past two years, by or on behalf of any labor union with respect to employees of the Company. The Company is in compliance in all material respects with all currently applicable laws and regulations respecting wages, hours, occupational safety, or health, fair employment practices, and discrimination in employment terms and conditions, and is not engaged in any unfair labor practice except, in each case, where such practice or failure to comply would not reasonably be expected to have a Material Adverse Effect. There are no pending claims against the Company under any workers compensation plan or policy or for long term disability. There are no proceedings pending or, to the Company’s Knowledge, threatened, between the Company and the employees of the Company, which proceedings have or would reasonably be expected to have a Material Adverse Effect on the Company.

(b) No employee has been terminated by the Company during the previous 90 days. The Company has no liability to any former employee by reason of his termination or otherwise, whether or not such termination occurred within said 90-day period.

3.19 Employee Benefits .

(a) The Company does not maintain or contribute to, and has never maintained or contributed to, any Employee Benefit Plan and does not have, and has never had, any ERISA Affiliate.

(b) The Company is not a party to any Employment Benefit Plan.

3.20 Permits . The Company holds all Permits that are required for it to conduct its business as presently conducted, except for those the absence of which would not have a Material Adverse Effect on the Company.

3.21 Related Party Transactions . The Material Contracts of the Company and do not include any agreement with or any other commitment to (a) manager or member of the Company; (b) any individual related by blood or marriage to any such manager or member; (c) any Person in which the Company, or any such manager or member or related person has an equity or participating interest or (d) any other Affiliate of the Company.

3.22 Nonoccurrence of Certain Events . (a) During the past five (5) years, none of the following events has occurred with respect to the Company or any of its managers or any person intended at or after the Closing to be an officer or director of PNCR:

(1) A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of the Company or such officer or person, or any partnership in which it or he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer or manager at or within two years before the time of such filing;
(2) The Company or such officer, manager or person was charged or convicted in a criminal proceeding or is a named subject of a pending criminal proceeding;
(3) The Company or such officer, manager or person was the subject of any order, judgment, or decree of any court of competent jurisdiction, permanently or temporarily enjoining it or him from, or otherwise limiting, the following activities:
(i) Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
(ii) Engaging in any type of business practice; or

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(iii) Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
(4) The Company or such officer, manager or person was the subject of any order, judgment or decree of any Federal or State authority barring, suspending or otherwise limiting the right of such person to engage in any activity described in Subsection (3)(i) of this Section 3.22, or to be associated with persons engaged in any such activity; or
(5) The Company or such officer, manager or person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law.
(6) The Company or such officer, manager or person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law.

 (b) None of the Company; any predecessor of the Company; any manager or executive of the Company; any person named in Section 5.3(j) of this Agreement or expected to be an executive officer or director of PNCR within 2 years following the Merger; or any beneficial owner of 20% or more of the Company’s outstanding voting equity securities or expected to be the beneficial owner of 20% or more of the Company’s outstanding voting equity securities within 2 years following the Merger, calculated on the basis of voting power has ever been:

(i) Subject to any order, judgment or decree of any court of competent jurisdiction that restrains or enjoins him or it from engaging or continuing to engage in any conduct or practice:
(A) In connection with the purchase or sale of any security;
(B) Involving the making of any false filing with the Commission; or
(C) Arising out of the conduct of the business of an underwriter, broker, dealer, municipal securities dealer, investment adviser or paid solicitor of purchasers of securities.
(ii) Subject to a final order of a state securities commission (or an agency or officer of a state performing like functions); a state authority that supervises or examines banks, savings associations, or credit unions; a state insurance commission (or an agency or officer of a state performing like functions); an appropriate federal banking agency; the U.S. Commodity Futures Trading Commission; or the National Credit Union Administration that:
(A) Bars him or it from:
(1) Association with an entity regulated by such commission, authority, agency, or officer;
(2) Engaging in the business of securities, insurance or banking; or
(3) Engaging in savings association or credit union activities; or
(B) Constitutes a final order based on a violation of any law or regulation that prohibits fraudulent, manipulative, or deceptive conduct;
(iii) Subject to an order of the Commission that, at the time of such sale:
(A) Suspends or revokes his or its registration as a broker, dealer, municipal securities dealer or investment adviser;
(B) Places limitations on his or its activities, functions or operations; or
(C) Bars him or it from being associated with any entity or from participating in the offering of any penny stock.
(iv) Subject to any order of the Commission that orders him or it to cease and desist from committing or causing a violation or future violation of any law.
(vi) Suspended or expelled from membership in, or suspended or barred from association with a member of, a registered national securities exchange or a registered national or affiliated securities association for any act or omission to act constituting conduct

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(vii) Subject to a United States Postal Service false representation order or is subject to a temporary restraining order or preliminary injunction with respect to conduct alleged by the United States Postal Service to constitute a scheme or device for obtaining money or property through the mail by means of false representations.

 

3.23 Disclosure . The Company has not made any representation, warranty or statement in this Agreement that contains any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements made herein and therein, in the light of the circumstances under which they were made, not misleading.

3.24 Investment. The Company understands that the shares of PNCR New Common Stock to be issued in the Merger will not have been registered under the Securities Act, or under any state securities laws, and are being offered and sold in reliance upon federal and state exemptions for transactions not involving any public offering. To the Company’s Knowledge, each of the holders of Company Units (i) is acquiring the shares of PNCR New Common Stock to be issued as a result of the Merger solely for his own account for investment purposes, and not with a view to the distribution thereof , (ii) is a sophisticated investor with knowledge and experience in business and financial matters, (iii) has received certain information concerning PNCR and has had the opportunity to obtain additional information as desired in order to evaluate the merits and the risks inherent in holding the shares of PNCR New Common Stock, (iv) is able to bear the economic risk and lack of liquidity inherent in holding the shares of PNCR New Common Stock, and (v) is an Accredited Investor as that term is defined in Regulation D promulgated by the SEC under the Securities Act.

ARTICLE 4. REPRESENTATIONS AND WARRANTIES

OF PNCR AND MERGER SUB

PNCR and Merger Sub hereby represent and warrant to the Company that the statements contained in this Article 4 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this Article 4, except when a statement made in this Article is made with reference to a specific date:

4.1 Organization of PNCR and Merger Sub . PNCR is a corporation and Merger Sub is a limited liability company validly existing, and in good standing under the laws of the States Florida and California, respectively. Each of PNCR and Merger Sub has power to own its properties and to carry on its business as now being conducted and as proposed to be conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the failure to be so qualified and in good standing could reasonably be expected to have a Material Adverse Effect on PNCR. PNCR has delivered a true and correct copy of the articles of incorporation and y-laws of PNCR and the articles of organization and the Merger Sub Operating Agreement, respectively, each as amended to date, to Seller. Neither PNCR nor Merger Sub is in violation of any of the provisions of its organizational instruments. Merger Sub is the sole subsidiary of PNCR.

4.2 Authorization of Transaction. Each of PNCR and Merger Sub has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of PNCR and Merger Sub, enforceable against each of them in accordance with its terms and conditions, except as enforcement may be limited by bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance or transfer, moratorium or other laws or court decisions, now or hereinafter in effect, relating to or affecting the rights of creditors generally and as may be limited by general principles of equity and the discretion of the court having jurisdiction in an enforcement action (regardless of whether such enforceability is considered in a proceeding in equity or at law). The execution, delivery and performance of this Agreement and all other agreements contemplated hereby have been duly authorized by PNCR and Merger Sub.

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4.3 Non-contravention. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which PNCR or Merger Sub is subject or any provision of its charter, By-laws, or other governing documents or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which PNCR or Merger Sub is a party or by which it is bound or to which any of its assets are subject, except in the case of each of clauses (i) and (ii), such as could not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. Neither PNCR nor Merger Sub needs to give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement, other than (i) the filing of Certificate of Merger with the Secretary of State of the State of California; (ii) any filings required any filings required by state securities laws, (iii) the filing of a Notice of a Sale of Securities on Form D with the SEC under Regulation D of the Securities Act, if required and (iv) the approval of PNCR’s stockholders for PNCR to amend its Articles of Incorporation to change its corporate name as provided in Section 6.4.

4.4 Capitalization.

(a) PNCR is authorized to issue 3,000,000,000 shares of PNCR Common Stock and 10,000,000 shares of preferred stock, issuable in series. As of the date hereof there are 49,442,762 shares of PNCR Common Stock and no shares of its preferred stock issued and outstanding. No securities of PNCR are entitled to preemptive or similar rights, and no entity or person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by this Agreement unless any such rights have been waived. Except for the agreement of PNCR to issue shares of PNCR New Common Stock to the holders of Company Units upon the consummation of the Merger, as provided in this Agreement, and for the 700,000,000 shares of PNCR New Common Stock to be issued in the Private Placement, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any entity or person any right to subscribe for or acquire, any shares of PNCR’s capital stock, or contracts, commitments, understandings or arrangements by which PNCR is or may become bound to issue additional shares of its capital stock or securities or rights convertible or exchangeable into shares of its capital stock.

(b) Merger Sub is authorized to issue 1,000,000 units (“ Merger Sub Units ”), 10,000 of which are issued and outstanding and held by PNCR. No securities of Merger Sub are entitled to preemptive or similar rights, and no entity or person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by this Agreement unless any such rights have been waived. There are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any entity or person any right to subscribe for or acquire, any Merger Sub Units, or contracts, commitments, understandings or arrangements by which Merger Sub is or may become bound to issue additional Merger Sub Units, or securities or rights convertible or exchangeable into Merger Sub Units.

4.5 Merger Shares. The shares of PNCR New Common Stock to be issued in connection with the Merger will, on the Closing Date, have been duly authorized and, when issued in satisfaction of the rights of the former holders of Company Units to receive their shares of PNCR New Common Stock as a result of the Merger, will be validly issued, fully paid and nonassessable, and not subject to any Liens or any other rights or interests of third parties created by, under or through PNCR or any restrictions of any kind except for those imposed by this Agreement or by applicable federal and state securities laws.

4.6 Business of the Company and Merger Sub. PNCR is presently conducting no business. Merger Sub is a newly formed corporation and does not have, nor has it ever had, more than nominal assets nor has it ever conducted any operations. Merger Sub is not and has never been a party to any material agreement other than this Agreement and has not conducted any activities other than in connection with the organization of Merger Sub, the issuance of Merger Sub Units to PNCR, the negotiation and execution of this Agreement and the consummation of the transactions contemplated hereby. Merger Sub has not incurred or assumed any expenses or liabilities prior to the Closing.

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4.7 PNCR Financial Statements. The Company acknowledges its receipt of a copy of the unaudited financial statements of PNCR for the years ended December 31, 2009, and December 31, 2008 (the “ PNCR Financial Statements ”). The PNCR Financial Statements were prepared in accordance with GAAP, except as may be otherwise specified therein or in the notes thereto; and the PNCR Financial Statements fairly present in all material respects the financial position of PNCR as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of the financial statements forming said unaudited portion, to normal year-end audit adjustments.

4.8 Absence of Certain Changes . Since December 31, 2009, (i) PNCR has conducted its business in the Ordinary Course of Business, (ii) no Subsequent Event or Subsequent Events involving $5,000.00 in the aggregate have occurred with respect to PNCR or Merger Sub and (iii) there has not occurred any change, event or condition (whether or not covered by insurance) that has resulted in, or would reasonably be expected to result in any Material Adverse Effect with respect to PNCR or Merger Sub.

4.9 Undisclosed Liabilities. Neither PNCR nor Merger Sub has any Liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated and whether due or to become due), except for (a) Liabilities accrued, reflected, reserved against in the PNCR Financial Statements, (Liabilities which have arisen since the date of the PNCR Financial Statements in the Ordinary Course of Business or the negotiation of this Agreement, (c) contractual or statutory Liabilities incurred in the Ordinary Course of Business, none of which are material in nature, or the negotiation of this Agreement and (d) Liabilities which would not have a Material Adverse Effect on PNCR or Merger Sub.

4.10 Tax Matters . All Tax Returns required to be filed by or on behalf of PNCR with any Governmental Body before the date hereof (the “ PNCR Returns ”): (i) have been or will be filed on or before the applicable due date (including any extensions of such due date); (ii) have been, or will be when filed, accurately and completely prepared in all material respects in compliance with all applicable Legal Requirements; and (iii) have been provided or made available to the Company. All Taxes owed by PNCR have been withheld and paid when due, whether or not such amounts are shown on any PNCR Returns. The PNCR Financial Statements fully accrue and/or reflect all actual and contingent Liabilities for unpaid Taxes with respect to all periods through the date thereof and PNCR has made adequate provision for unpaid Taxes after that date in its books and records. No PNCR Return is currently under examination or audit by any Governmental Body. No claim or Legal Proceeding is pending or has been threatened against or with respect to PNCR in respect of any Tax. There are no unsatisfied Liabilities for Taxes, including Liabilities for interest, additions to tax and penalties thereon and related expenses, with respect to which any notice of deficiency or similar document has been received by PNCR (other than Liabilities for Taxes asserted under any such notice of deficiency or similar document which are being contested in good faith by PNCR and with respect to which adequate reserves for payment have been established). There are no Liens for Taxes upon any of the assets of PNCR except Liens for current Taxes not yet due and payable. PNCR is not currently the beneficiary of any extension of time within which to file any Tax Return. There are no Liens on any of the assets of PNCR that arose in connection with any failure (or alleged failure) to pay any Tax. PNCR has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party, and all forms and statements required with respect thereto have been properly completed and timely filed.

4.11 Intellectual Property. PNCR does not currently own or have rights to any Intellectual Property.

4.12 Finder’s Fees. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Merger or any of the other transactions contemplated hereby based upon any arrangements or agreements made by or on behalf of PNCR or Merger Sub.

4.13 Litigation.

(a) There is no pending Legal Proceeding, and to PNCR’s Knowledge, no Person has threatened to commence any Legal Proceeding, that (i) involves or affects PNCR or Merger Sub or any of the assets owned or used by either of them, or (ii) that challenges the Merger or any of the other transactions contemplated by the Transaction Documents. No Legal Proceeding has ever been commenced that involves or affects PNCR or Merger Sub or the assets owned by either of them.

(b) There are no material agreements or other documents or instruments settling any Legal Proceeding.

4.14 Contracts. PNCR is a party to no Material Contract other than this Agreement and to no contract with its officers and directors, whether written or oral.

4.15 Insurance. The Company is not a party to or an insured under any policy of insurance.

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4.16 Legal Compliance; Restrictions on Business Activities. PNCR is, and has at all times been, in compliance with all applicable Legal Requirements, except to the extent that failure to comply would not be likely to have a Material Adverse Effect on PNCR. PNCR has never received any notice or other communication from any Person regarding any actual or possible violation of, or failure to comply with, any Legal Requirement. PNCR requires no Permits, certificates and licenses required by any Legal Requirement for the conduct of its business and the ownership of its assets, except as required to maintain its good standing a Delaware corporation.

4.17 Employees . PNCR has no employees.

4.18 Employee Benefits.

(a) PNCR does not maintain or contribute to, and has never maintained or contributed to, any Employee Benefit Plan and does not have, and has never had, any ERISA Affiliate.

(b) PNCR is not a party to any Employment Benefit Agreement.

4.19 Disclosure. Neither PNCR nor Merger Sub has made any representation, warranty or statement in this Agreement that contains any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements made herein and therein, in the light of the circumstances under which they were made, not misleading.

ARTICLE 5. CONDITIONS TO CLOSING

5.1 Conditions to Each Party’s Obligations .

The respective obligations of each Party to take the actions to be taken by it at the Closing are subject to the satisfaction of the following conditions unless any such condition is waived, in writing, by the Party or Parties for whose benefit such condition is intended:

(a) Each of PNCR and the Company shall be satisfied that the issuance of the shares of PNCR New Common Stock by virtue of the Merger will be exempt from registration under the Securities Act.

(b) No temporary restraining order, preliminary or permanent injunction or other order shall have been issued by any court of competent jurisdiction or other legal or regulatory restraint or prohibition preventing the consummation of the Merger shall have been issued, nor shall any proceeding have been brought by any Governmental Body, seeking any of the foregoing be pending; nor shall any action have been taken, or any statute, rule, regulation or Order enacted, entered, enforced or deemed applicable to the Merger which makes the consummation of the Merger illegal.

(c) No proceeding in which any Party shall be a debtor, defendant or party seeking an Order for its own relief or reorganization shall have been brought or be pending by or against the such Party under any United States or state bankruptcy or insolvency law.

5.2 Conditions to Obligations of PNCR and Merger Sub .

The obligation of each of PNCR and Merger Sub to take the actions to be taken by it at the Closing is subject to the satisfaction or written waiver of the following conditions:

(a) this Agreement and the Merger shall have been approved and adopted by the members of the Company in accordance with the provisions of Section 17551(a) of the CCC;

(b) the Company shall have obtained all of the waivers, Permits, consents, assignments, approvals or other authorizations, and effected all of the registrations, filings and notices required on its part to be obtained in order to consummate the Merger, except for (i) any which if not obtained or effected would not have a Material Adverse Effect on the Company or on the ability of the Parties to consummate the transactions contemplated by this Agreement and (ii) filing of the Certificate of Merger with the Secretary of State of the State of California;

(c) the representations and warranties of the Company set forth in Article 3 shall be true and correct as of the Closing Date, except for representations and warranties made as of a specified date, which shall be true and correct as of such date;

(d) the Company shall have performed or complied with, in all material respects, its agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Closing;

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(e) PNCR and Merger Sub shall have received a certificate signed by the managers of the Company (i) certifying that the Company’s articles of organization and the Company Operating Agreement have not been amended since the date of this Agreement; (ii) certifying the approval of this Agreement and the Merger by the vote required by Section 17551(a) of the CCC; and (iii) attesting to the incumbency of each manager of the Company;

(f) PNCR and Merger Sub shall have received a certificate signed by the managers of the Company certifying that (i) the Company has satisfied and complied with all of the obligations under this Agreement and satisfied all of the conditions precedent which are required to be complied with or satisfied by it prior to the Closing Date and (ii) all of the Company’s representations and warranties set forth in this Agreement are true and accurate as of the Closing Date; and

(g) all actions to be taken by the Company in connection with the consummation of the transactions contemplated hereby, and all certificates, opinions, instruments and other documents required to effect the transactions contemplated hereby shall be reasonably satisfactory in form and substance to PNCR and Merger Sub.

5.3 Conditions to Obligations of the Company .

The obligation of the Company to take the actions to be taken by it at the Closing is subject to the satisfaction of the following additional conditions, unless any such condition is waived, in writing, by the Company:

(a) this Agreement and the Merger shall have been adopted and approved by PNCR’s board of directors in accordance with the laws of the State of Florida and by the members of Merger Sub by the vote required by Section 17551(a) of the CCC;

(b) PNCR and Merger Sub shall have obtained all of the waivers, Permits, consents, approvals or other authorizations, and effected all of the registrations, filings and notices (including, but not limited to any filings that are required pursuant to applicable federal and state securities laws) required on its part to be obtained in order to consummate the Merger, except for any which if not obtained or effected would not have a Material Adverse Effect on PNCR and Merger Sub or on the ability of the Parties to consummate the transactions contemplated by this Agreement;

(c) each of PNCR and Merger Sub shall have performed or complied with in all material respects its agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Closing;

(d) the representations and warranties of PNCR and Merger Sub set forth in Article 4 shall be true and correct as of the Closing Date, except for representations and warranties made as of a specified date, which shall be true and correct as of such date;

(e) the Company shall have received from the Secretary of PNCR a certificate (i) certifying that the certificate of incorporation of PNCR and by-laws of PNCR have not been amended since the date hereof, to which shall be attached copies of said amendment or amendments; (ii) certifying the resolutions of the Board of Directors of PNCR adopting and approving this Agreement and the Merger and authorizing the issuance of the shares of PNCR New Common Stock to be issued by virtue of the Merger; and (iii) attesting to the incumbency of the officers of PNCR;

(f) the Company shall have received from the manager of Merger Sub a certificate (i) certifying that the certifying that its articles of organization and the Merger Sub Operating Agreement have not been amended since the date of this Agreement; (ii) certifying the approval of the Merger by the vote required by Section 17551(a) of the CCC; and (iii) attesting to the incumbency of the manager of Merger Sub;

(g) the Company shall have received from the President of PNCR a certificate certifying (i) PNCR has satisfied and complied with all of the obligations under this Agreement and satisfied all of the conditions precedent which are required to be complied with or satisfied by it prior to the Closing Date; and (ii) all of PNCR’s representations and warranties set forth in this Agreement are true and accurate as of the Closing Date;

(h) the Company shall have received from the manager of Merger Sub a certificate certifying (i) Merger Sub has satisfied and complied with all of the obligations under this Agreement and satisfied all of the conditions precedent which are required to be complied with or satisfied by it prior to the Closing Date; and (ii) all of Merger Sub’s representations and warranties set forth in this Agreement are true and accurate as of the Closing Date;

(i) PNCR shall have delivered all other documents required to be delivered to the Company on or before the Closing Date;

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(j) Curt Fairbrother and Douglas Heldoorn, who are members of the Company, shall be the directors of PNCR on the Closing Date and Richard S. Astrom shall have resigned as a director of PNCR;

(l) Richard S. Astrom, the holder of 35,000,000 shares of PNCR Common Stock and the holder of the indebtedness of PNCR described as “Officer Loan” in the financial statements contained in the Company Financial Statements shall have agreed to (i) surrender said shares, (ii) to extinguish or procure the extinguishment of the indebtedness of $151,269 recorded on the balance sheet contained in the PNCR Financial Statements as “Related Party Payable” and (iii)  indemnify PNCR from and hold it harmless against all other indebtedness that would be set forth in the financial statements of PNCR prepared as of the Closing Date, all in exchange for (i) PNCR’s payment to him of $40,000.00 and (ii) PNCR’s issuance to him of a Promissory Note in the principal amount of $400,000.00 in the form annexed hereto as Exhibit A (the “Promissory Note”), secured by a Pledge Agreement, in the form annexed hereto as Exhibit B (the “Pledge Agreement”) and said Promissory Note and Pledge Agreement shall have been executed and delivered;

(m) all actions to be taken by PNCR and Merger Sub in connection with the consummation of the transactions contemplated hereby, and all certificates, instruments and other documents required to effect the transactions contemplated hereby shall be reasonably satisfactory in form and substance to the Company; and

(n) PNCR shall have completed the closing of a private offering of 700,000,000 shares of PNCR New Common Stock in which it will have raised $40,000.00 (the “Private Placement”).

ARTICLE 6. OTHER AGREEMENTS AND COVENANTS

6.1 Actions Prior to Closing . As quickly as possible after the execution and delivery of this agreement, PNCR shall take all such actions as are necessary:

(a) to implement and complete a reverse stock split (the “Reverse Split”) in which each 1,000 shares of PNCR Common Stock shall become one share of new common stock, having a par value of $.000001 per share (“PNCR New Common Stock”); and
(b) to amend its articles of incorporation to provide for the issuance of 6,000,000,000 shares of PNCR New Common Stock and to change its corporate name to a name specified by the Company.

PNCR shall not be liable for breach of the covenant set forth in Section 6.1(a) to the extent that its failure to comply therewith is the result of its failure to obtain any requisite regulatory approval.

6.2 Access Prior to Closing . Each of the Parties will permit the other Parties and their respective agents reasonable access to its files, books, records and offices, including, without limitation, any and all information relating to their respective taxes, commitments, contracts, leases, licenses, and real, personal and intangible property and financial condition and will cause their respective accountants to cooperate with the other Parties and their respective agents in making available all financial information reasonably requested, including without limitation the right to examine all working papers pertaining to their respective financial statements.

6.3 Best Efforts and Further Assurances . Each of the Parties shall use its best efforts to effectuate the transactions contemplated hereby and to fulfill and cause to be fulfilled the conditions to Closing under this Agreement. Each Party hereto, at the reasonable request of another Party hereto, shall execute and deliver such other instruments and do and perform such other acts and things as may be necessary or desirable for effecting completely the consummation of this Agreement and the transactions contemplated hereby.

6.4 Post- Closing Covenants of the Company and PNCR .

(a) After the Closing and prior to the Effective Time, the Company shall not (i) take any action that would cause its representations and warranties set forth in Section 3.3 to be untrue if made as of the Effective Time or (b) amend its articles of organization or the Company Operating Agreement or the articles of organization of Merger Sub or the Merger Sub Operating Agreement as in effect at the Closing.

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(b) At no time after the Effective Time shall the Surviving Company amend or PNCR permit the amendment of its operating agreement in contravention of its provisions without the prior written consent of the holder of the Promissory Note, who shall be the beneficiary of this provision and may enforce it as if he were a party to this Agreement and the provisions of Section 2.3 that specify that, after the Effective Time the Merger Sub Operating Agreement shall become the operating agreement of the Surviving Entity .

(c) Immediately following the Effective Time, the Surviving Entity shall ratify, adopt and approve the adoption, pursuant to the provisions of this Agreement, of the Merger Sub Operating Agreement as the operating agreement of the Surviving Entity.

6.5 Covenants of the Company in Respect of the Pledge Agreement . The Company covenants that, after the Closing,

(a) the terms of Section 9 of the Pledge Agreement shall apply to the Company, mutatis mutandis , with respect to all actions that are specified in or that arise out of said Section 9;

(b) it will issue the units of the Company into which the units of Merger Sub will be converted by virtue of the Merger in the name of PNCR;

(c) it will deliver the certificate representing said units of the Company directly to the aforesaid Secured Party immediately upon the issuance thereof; and

(d) it will comply with instructions originated by the aforesaid Secured Party without the further consent of PNCR with respect to any of the Collateral (as defined in the Pledge Agreement) that may now or hereafter consist of uncertificated securities of the Company.

The covenants of the Company set forth in this Section 6.5 are for the benefit of the aforesaid Secured Party, who may enforce them as if the aforesaid Secured Party were a party to this Agreement.

The Company acknowledges and agrees that (i) the units of the Company specified in subsections (c) and (d) of this Section 6.5 will be subject to the pledge under and the provisions of the Pledge Agreement, (ii) at the Effective Time, it will become the Issuer, as that term is defined in said Pledge Agreement and (iii) all of the covenants of the Company in this Agreement that are binding on the Company after the Closing shall be binding on the Surviving Company after the Effective Time.

PNCR consents to the performance by the Company of its covenants set forth in this Section 6.5.

ARTICLE 7. TERMINATION

7.1 Termination . This Agreement may be terminated at any time prior to the Closing Date by:

(a) The mutual agreement of the Parties;

(b) PNCR, if there has been a material breach by the Company of any material representation, warranty, covenant or agreement set forth in this Agreement on the part of the Company that is not cured, to the reasonable satisfaction of PNCR, within 10 business days after notice of such breach is given by PNCR (except that no cure period will be provided for a breach by the Company that by its nature cannot be cured);

(c) The Company, if there has been a material breach by PNCR of any material representation, warranty, covenant or agreement set forth in this Agreement on the part of PNCR that is not cured, to the reasonable satisfaction of the Company, within 10 business days after notice of such breach is given by the Company (except that no cure period will be provided for a breach by PNCR that by its nature cannot be cured);

(d) PNCR or the Company, if the Closing has not been occurred prior to February 28, 2014, unless the Parties agree to extend such date in writing, provided that, if the failure of Financial Industry Regulatory Authority (“FINRA”) to take any required action or give any required approval in respect of the Reverse Split is the sole reason that the Closing has not so occurred, no party shall have the right to terminate this Agreement until the earlier of (i) the time FINRA has indicated that such action will not be taken or such approval will not be given or May 31, 2014; or

(e) PNCR or the Company, if any injunction or other order of a governmental entity of competent authority prevents the consummation of the transactions contemplated by this Agreement.

19
 

7.2 Effect of Termination. In the event of the termination of this Agreement as provided in Section 7.1 hereto, this Agreement will be of no further force or effect, and no Party shall be liable to any other Party; provided, however, that no termination of this Agreement will relieve any Party of liability for any breach of this Agreement as the result of its wrongful refusal or failure to perform any of its obligations.

ARTICLE 8. SURVIVAL

None of the representations and warranties of any Party shall survive the Closing. All covenants of the Parties contained expressly or by their nature to be performed after the Closing shall survive the Closing and shall remain operative for such periods of time as necessary for the applicable Party to fulfill such covenant, unless otherwise agreed in writing by the other Parties or by the express beneficiary of such covenant.

ARTICLE 9. MISCELLANEOUS

9.1 No Third Party Beneficiaries . Except as may otherwise be specifically provided in this Agreement, this Agreement shall not confer any rights or remedies upon any person other than the Parties and their respective successors and permitted assigns.

9.2 Entire Agreement . This Agreement constitutes the entire agreement among the Parties and supersede any prior understandings, agreements or representations by or among the Parties, written or oral, with respect to the subject matter hereof.

9.3 Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors, heirs, legal representatives and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Parties.

9.4 Public Announcement . PNCR may issue such press releases, and make such other filings and disclosures regarding this Agreement and the Merger as it determines are required under applicable securities laws or regulatory rules. The Company shall not issue or make such filings and disclosures without the prior written approval of PNCR, which shall not be unreasonably be delayed or denied.

9.5 Confidentiality . PNCR and the Company each recognizes that it has received confidential information concerning the other during the course of the negotiation of this Agreement. Accordingly, PNCR and the Company each agrees (a) to use its respective best efforts to prevent the unauthorized disclosure of any confidential information concerning the other that was or is disclosed during the course of such negotiations and preparations, and is clearly designated in writing as confidential at the time of disclosure, and (b) to not make use of or permit to be used any such confidential information other than for the purpose of effectuating the Merger and related transactions. The obligations of this Section 9.5 will not apply to information that (i) is or becomes part of the public domain, (ii) is disclosed by the disclosing party to third parties without restrictions on disclosure, (iii) is received by the receiving party from a third party without breach of a nondisclosure obligation to the other party, or (iv) is required to be disclosed by law.

9.6 Counterparts, Facsimile Signatures . This Agreement and any documents to be delivered at the Closing may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. The delivery of this Agreement and of such documents by facsimile transmission or by email transmission in portable digital format (so-called “PDF” format), or any other format that permits the legible printing of the document so transmitted, shall constitute effective delivery of such instrument(s) as to the Parties and may be used in lieu of the original Agreement for all purposes. The signature of a Person or of an individual who signed on behalf of such Person that is reproduced in or on any document so transmitted shall be deemed to be the original signature of such Person or individual for all purposes, including, without limitation, evidentiary purposes.

9.7 Headings . The Section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

20
 

9.8 Notices . All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be notified; (ii) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient; if not, then on the next Business Day; (iii) 3 Business Days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (iv) 1 Business Day after deposit with a nationally recognized overnight courier, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective Parties at the following addresses (or at such other addresses as shall be specified by notice given in accordance with this Section 9.8):

  If to the Company: If to PNCR or Merger Sub:  
       
  D&C Distributors, LLC Pinecrest Investments Group, Inc.  
  912 Maerton Lane 11415 NW 123d Lane  
  Fullerton, CA 92831 Reddick, FL 32686  

9.9 Governing Law; Jurisdiction; Arbitration . All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of Florida, without regard to the principles of conflicts of law thereof. Each Party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any instruments contemplated hereby brought against a Party or its respective Affiliates, directors, officers, stockholders, employees or agents) shall be submitted to binding arbitration with the American Arbitration Association in Marion County, Florida. This is an exclusive jurisdiction provision and material provision to this contract. The prevailing Party shall be entitled to recover from the other Party or Parties all reasonable attorneys’ fees, expert witness fees and expenses incurred by the prevailing party in connection therewith.

9.10 Severability . If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the maximum extent possible.

9.11 Expenses . Each Party shall be responsible for its own costs and expenses incurred in connection with the preparation, execution, and performance of this Agreement and the transactions contemplated hereby, including all fees and expenses of agents, representatives, counsel, printers, accountants, etc., except that fees and expenses arising under the Registration Rights Agreement shall be allocated as set forth therein.

9.12 Construction . Each of the Parties has been represented by counsel during the negotiation, preparation and execution of this Agreement and the other agreements and instruments to be executed and delivered pursuant hereto and therefore, each Party waives the application of any law, regulation, holding, doctrine or rule of construction providing that ambiguities in an agreement or other document will be construed for or against any Party. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.

21
 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

PINECREST INVESTMENTS GROUP, INC.

By /s/ Richard Astrom  
  Richard S. Astrom  
  President  

PNCR, ACQUISITION, LLC

By /s/ Richard Astrom  
  Richard S. Astrom  
  Manager  

 

D&C DISTRIBUTORS, LLC  

By /s/ Douglas Heldoorn By /s/ Curtis Fairbrother  
  Douglas Heldoorn     Curtis Fairbrother  
  Manager     Manager  

 

 

Exhibit 21.1

 

Subsidiaries of the Registrant

 

 

 

Name Jurisdiction of Organization Percentage Owned
D&C Distributors, LLC California 100%

 

Exhibit 2.2

AMENDMENT OF AGREEMENT AND PLAN OF MERGER

This Amendment of Agreement and Plan of Merger, dated as of March 4 , 2014, is entered into by and among ACOLOGY, INC. (formerly named PINECREST INVESTMENTS GROUP, INC. ), a Florida corporation (“ PNCR ”), PNCR, ACQUISITION, LLC., a California limited liability company and the wholly-owned subsidiary of PNCR (“ Merger Sub ”), and D&C DISTRIBUTORS, LLC, a California limited liability company (the “ Company ”).

RECITALS:

A. The Parties entered into an Agreement and Plan of Merger, dated December 24 , 2013 (the “Merger Agreement”), whereunder, among other things, Merger Sub will be merged with and into the Company and the Company will become the wholly owned subsidiary of PNCR; and

B. The Parties desire to amend the Merger Agreement as set forth herein.

NOW THEREFORE, in consideration of covenants and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto agree each with the other as follows:

1. Change of Exhibits . Exhibit A to the Merger Agreement is replaced by Exhibit A hereto and Exhibit B to the Merger Agreement is replaced by Exhibit B hereto.

 

2. General Provisions .  

(a) Modification; Full Force and Effect . Except as expressly modified and superseded by this instrument, the terms, representations, warranties, covenants and other provisions of the Merger Agreement are and shall continue to be in full force and effect in accordance with their respective terms.
(b) References to the Merger Agreement . After the date hereof, all references to “this Agreement,” “the transactions contemplated by this Agreement,” “the Merger Agreement” and phrases of similar import, shall refer to the Merger Agreement as amended by this instrument (it being understood that all references to “the date hereof” or “the date of this Agreement” shall continue to refer to December 23, 2013).
(c) Defined Terms . Terms used herein that are defined in the Merger Agreement, as it existed prior to the execution and delivery of this instrument, shall have the same meaning as ascribed to them therein.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

ACOLOGY, INC. PNCR, ACQUISITION, LLC.

By: /s/Richard S. Astrom   By: /s/ Richard S. Astrom  
  Richard S. Astrom      Richard S. Astrom  
  Chief Executive Officer     Manager  

D&C DISTRIBUTORS, LLC  

By: /s/ Douglas Heldoorn   By: /s/ Curtis Fairfbrother  
  Douglas Heldoorn     Curtis Fairfbrother  
  Manager:     Manager  

 

Exhibit 3.1

ARTICLES OF INCORPORATION

OF

SYNTHETIC FLOWERS OF AMERICA, INC.

The undersigned, desiring to form a corporation (the "Corporation") under the laws of Florida, hereby adopts the following Articles of Incorporation:

ARTICLE I

CORPORATE NAME

The name of the Corporation is SYNTHETIC FLOWERS OF AMERICA, INC.

ARTICLE II
PURPOSE

The Corporation shall be organized for any and all purposes authorized under the laws of the state of Florida.

ARTICLE III

PERIOD OF EXISTENCE

The period during which the Corporation shall continue is perpetual.

ARTICLE IV
SHARES

The capital stock of this corporation shall consist of 50,000,000 shares of common stock, $.001 par value.

ARTICLE V

PLACE OF BUSINESS

The initial address of the principal place of business of this corporation in the State of Florida shall be 200 East Robinson, Street, Suite 450, Orlando, FL 32801. The Board of Directors may at any time and from time to time move the principal office of this corporation.

ARTICLE VI

DIRECTORS AND OFFICERS

The business of this corporation shall be managed by its Board of Directors. The number of such directors shall be not be less than one (1) and, subject to such minimum may be increased or decreased from time to time in the manner provided in the By-Laws.

The number of persons constituting the initial Board of Directors shall be 1. The Board of Directors shall be elected by the Stockholders of the corporation at such time and in such manner as provided in the By-Laws. The name and addresses of the initial Board of Directors and officers are as follows:

  Sheila Langley President/Director
  774 S. Pennsylvania Avenue  
  Winter Park, FL 32789  

ARTICLE VII

DENIAL OF PREEMPTIVE RIGHTS

No shareholder shall have any right to acquire shares or other securities of the Corporation except to the extent such right may be granted by an amendment to these Articles of Incorporation or by a resolution of the board of Directors.

ARTICLE VIII

AMENDMENT OF BYLAWS

Anything in these Articles of Incorporation, the Bylaws, or the Florida Corporation Act notwithstanding, bylaws shall not be adopted, modified, amended or repealed by the shareholders of the Corporation except upon the affirmative vote of a simple majority vote of the holders of all the issued and outstanding shares of the corporation entitled to vote thereon.

 
 

ARTICLE IX

SHAREHOLDERS

9. Inspection of Books. The board of directors shall make reasonable rules to determine at what times and places and under what conditions the books of the Corporation shall be open to inspection by shareholders or a duly appointed representative of a shareholder.

9.2. Control Share Acquisition. The provisions relating to any control share acquisition as contained in Florida Statutes now, or hereinafter amended, and any successor provision shall not apply to the Corporation.

9.3. Quorum. The holders of shares entitled to one-third of the votes at a meeting of shareholder's shall constitute a quorum.

9.4. Required Vote. Acts of shareholders shall require the approval of holders of 50.01% of the outstanding votes of shareholders.

ARTICLE X

LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

To the fullest extent permitted by law, no director or officer of the Corporation shall be personally liable to the Corporation or its shareholders for damages for breach of any duty owed to the Corporation or its shareholders. In addition, the Corporation shall have the power, in its By-Laws or in any resolution of its stockholders or directors, to undertake to indemnify the officers and directors of this corporation against any contingency or peril as may be determined to be in the best interests of this corporation, and in conjunction therewith, to procure, at this corporation's expense, policies of insurance.

ARTICLE XI
SUBSCRIBER

The name and address of the person signing these Articles of Incorporation as subscriber is:

Eric P. Littman

8th Floor

1428 Brickell Avenue

Miami, FL 33131

PICTURE ARTICLE XII
CONTRACTS

No contract or other transaction between this corporation and any person, firm or corporation shall be affected by the fact that any officer or director of this corporation is such other party or is, or at some time in the future becomes, an officer, director or partner of such other contracting party, or has now or hereafter a direct or indirect interest in such contract.

ARTICLE XIII

RESIDENT AGENT

The name and address of the initial resident agent of this corporation is:

Eric P. Littman

1428 Brickell Avenue

8th Floor

Miami, FL 33131

IN WITNESS WHEREOF, I have hereunto subscribed to and executed these Articles of Incorporation this on September 4, 1997.

 

/s/ Eric P. Littman  
Eric P. Littman, Subscriber  

Exhibit 3.2

ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
SYNTHETIC FLOWERS OF AMERICA, INC.

Pursuant to the provisions of section 607.1006, Florida Statutes, this corporation adopts the following articles of amendment to its articles of incorporation:

ARTICLE I

Corporate Name

The name of this corporation shall be changed from Synthetic Flowers of America, Inc. to Pinecrest Investment Group, Inc.

ARTICLE IV

Capital Stock

The aggregate number of shares of capital stock that this corporation shall be authorized to have outstanding at any one time shall be one hundred million shares of common stock at $.001 par value per share and twenty five million shares of preferred stock at $.001 par value per share. Each share of issued and outstanding common stock shall entitle the holder thereof to participate in all shareholder meetings, to cast one vote on each matter with respect to which shareholders have the right to vote, and to share ratably in all dividends and other distributions declared and paid with respect to the common stock, as well as in the net assets of the corporation upon liquidation or dissolution.

ARTICLE V

Place of Business

The address of the principal place of business of this corporation in the State of Florida shall be 1211 Tech Blvd., Suite 101, Tampa, FL 33619. The Board of Directors may at any time and from time move the principal office of this corporation.

ARTICLE VI

Directors and Officers

The business of this corporation shall be managed by its Board of Directors: The number of such directors shall not be less than one (1) and, subject to such minimum may be increased or decreased from time to time in the manner provided in the By-Laws. The Board of Directors shall be elected by the Stockholders of the corporation at such time and in such manner as provided by the By-Laws. The name and address of the new Board of Director and Officers are as follows:

  David B. Howe   Chairman of the Board
  1211 Tech Blvd., Suite 101   President/Chief Executive Officer
  Tampa, FL. 33619    
       
  Sheryl B. Salvadore   Secretary/Treasurer
  1211 Tech Blvd. Suite 101    
  Tampa, FL. 33619    

 

ARTICLE X

Indemnification

 

If in the judgment of a majority of the entire Board of Directors, (excluding from such majority any director under consideration for indemnification), the criteria s et forth in 607.0850 (1) or (2), Florida Statutes, as then in effect, have been met, then the corporation shall indemnify any director, officer, employee, or agent thereof, whether current or former, together with his or her personal representatives, devisor heirs, in the manner and to the extent contemplated by 607.0850, as then in effect or by any successor law thereto.

 
 

ARTICLE XIII

Registered Agent

The name and street address of the registered agent of the corporation shall be Walter H. C. Drakeford, 2212 4 th Ave., Tampa, Fl. 33605.

PICTURE The date of each amendment’s adoption is January 16, 1999.

The amendments were adopted by the board of directors without shareholder action and shareholder action was not required.

IN WITNESS WHEREOF, the undersigned has executed these Articles of Amendment of the Articles this 16th day of January, 1999.

PINECREST INVESTMENT GROUP, INC.

By: /s/ David B. Howe  

David B. Howe

Chairman of the Board

President and Chief Executive Officer

PICTURE

Exhibit 3.3

ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
PINECREST INVESTMENT GROUP, INC.

PINECREST INVESTMENT GROUP, INC., a Florida corporation (the "Corporation"), hereby certifies as follows:

1. The Articles of Incorporation of the Corporation are hereby amended by deleting the present form of each of Articles I and IV in their entirety and by substituting, in lieu thereof, the following:

ARTICLE I

Corporate Name and Principal Office

The name of this corporation is Pinecrest Investment Group, Inc. and its principal office and mailing address is 1211 Tech Blvd., Suite 100, Tampa, Florida 33619.

ARTICLE II

Commencement of Corporate Existence

The corporation came into existence on September 5, 1997.

ARTICLE III

General Nature of Business

This corporation may engage in any activity or business permitted under the laws of the United States or of the State of Florida.

ARTICLE IV

Capital Stock

The aggregate number of shares of capital stock authorized to be issued by this Corporation shall be 50,000,000 shares of common stock, .001 par value per share (the "Common Stock"), and 10,000,000 shares of preferred stock, no par value per share (the "Preferred Stock"). Each share of issued and outstanding common stock shall entitle the holder thereof to one vote on each matter with respect to which shareholders have the right to vote, to fully participate in all shareholder meetings, and to share ratably in the net assets of the corporation upon liquidation or dissolution, but each such share shall be subject to the rights and preferences of the Preferred Stock as hereinafter set forth. The preferred Stock may be issued from time to time by the Board of Directors and stated in any resolution providing for the issuance of such shares adopted by the Board of Directors pursuant to authority hereby vested in it, each series to be appropriately designated, prior to the issuance of any shares thereof, by some distinguishing letter, number or title. All shares of each series of preferred Stock shall be alike in every particular and equal rank, have the same powers, preferences and rights and be subject to same qualifications limitations and restrictions, without distinction between the shares of different series thereof, except in regard to the following particulars, which may differ as to different series:

a. the annual rate of dividends payable and the dates from which such dividends shall commence to accrue, if at all:
     
b. the amount payable upon a share redemption and the manner in which shares of a particular series may be redeemed;
     
c. the amount payable upon any voluntary or involuntary liquidation, dissolution or winding up of the corporation;
     
d. the provisions of any sinking fund established with respect to the shares of a series.;
     
e. the terms and rates of conversion or exchange, if shares of a series are convertible or exchangeable; and
     
f. the provisions as to voting rights, if any; provided that the shares of any series of Preferred Stock having voting power shall not have more than one vote per share.

 

 
 

Before any shares of a particular series of Preferred Stock are issued, the designations of such series and its terms in respect of the foregoing particulars shall be fixed and determined by the Board of Directors in any manner permitted by law and stated in a resolution providing for the issuance of such shares adopted by the Board of Directors pursuant to authority hereby vested in it. Such shares adopted by the Board of Directors pursuant to authority hereby vested in it. Such designations and terms shall set forth in full or summarized on the certificates for such series. The Board of Directors may increase the number of such shares by providing that any unissued shares of Preferred Stock shall constitute part of such series, or may decrease (but not below the number of shares thereof then outstanding) the number of shares of any series of Preferred Stock already created by providing that any unissued shares previously assigned to such series shall no longer constitute part thereof. The Board of Directors is hereby empowered to classify or reclassify any unissued shares of Preferred Stock by fixing or altering the terms thereof in respect to the above-referenced particulars and by assigning the same to an existing or newly established series from time to time before the issuance of such shares.

The holders of shares of each series shall be entitled to receive, out of any funds legally available therefor, when and as declared by the Board of Directors, cash dividends at such rate per annum as shall be fixed by resolution of the Board of Directors for such series, payable periodically on the dates fixed by the Board of Directors for the series. Such dividends may be cumulative or noncumulative, deemed to accrue from day to day regardless of whether or not earned or declared, and may commence to accrue on each share of Preferred Stock from such date or dates, and as may be determined and stated by the Board of Directors prior to the issuance thereof The corporation shall make dividend payments ratably upon all outstanding shares of Preferred Stock in proportion to the amount of dividends thereon to the date of such dividend payment, if any.

As long as any shares of Preferred Stock shall remain outstanding, no dividend (other than as dividend payable in shares ranking junior to such Preferred Stock with respect to the payment of dividends or liquidated assets) Shall be declared or paid upon, nor shall any distribution be made or ordered in respect of, shares of the Common Stock or any other class of shares ranking junior to the shares of such Preferred Stock as to the payment or dividends or liquidating assets, nor shall any monies (other than the net proceeds received from the sale of shares ranking junior to the shares of such Preferred Stock as to the payment of dividends or liquidating assets) be set aside for or applied to the purchase or redemption (through a sinking fund or otherwise) of shares of the Common Stock or of any other class of shares ranking junior to the shares of such Preferred Stock as to dividends or assets unless:

(a) all dividends on the shares of Preferred Stock of all series for past dividend periods shall have been paid and the full dividend on all outstanding shares of Preferred Stock of all series for the then current dividend period shall have been paid or declared and set apart for payment; and
     
(b) the corporation shall have set aside all amounts, if any, required to be set aside as and for sinking funds, if any, for the shares of Preferred Stock of all series for the then current year, and all defaults, if any, in complying with any such sinking fund requirements in respect of previous years shall have cured.

 

The corporation, at the option of the Board of Directors, may at any time redeem the whole, or from time to time any part, of any series of Preferred Stock, subject to such limitations as may be adopted by the Board authorizing the issuance of such shares, by paying therefor in cash the amount which shall have been determined by the Board of Directors, in the resolution authorizing such series, to be payable upon the redemption of such shares at such time. Redemption may be made of the whole or any part of the outstanding shares of any one or more series, in the discretion of the Board of Directors; but if the redemption shall be effected only with respect to a part of a series, the shares to be redeemed may be selected by lot, or all of the shares of such series may be redeemed pro rata, in such manner as may be prescribed by resolution of the Board of Directors.

Subject to the foregoing provisions and to any qualifications, limitations, or restrictions applicable to any particular series of Preferred Stock which may be stated in the resolution providing for the issuance of such series, the Board of Directors shall have authority to prescribe from time to time the manner in which any series of Preferred Stock be redeemed.

 
 

Upon any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, the shares of Preferred Stock of each series shall be entitled, before any distribution shall be made with respect to shares of Common Stock or to any other class of shares junior to the shares of Preferred Stock as to the payment of dividends or liquidating assets, to be paid the full preferential amount fixed by the Board of Directors for such series as herein authorized; but the shares of Preferred Stock shall not be entitled to any further payment and any remaining net assets shall be distributed ratably to all outstanding shares of Common Stock. If upon such liquidation or dissolution of the corporation, whether voluntary or involuntary, the net assets of the corporation shall be insufficient to permit the payment to all outstanding shares of Preferred Stock of all series of the full preferential amounts to which they are respectively entitled, the entire net assets of the corporation shall be distributed ratably to all outstanding shares of Preferred Stock in proportion to the full preferential amount to which each such share is entitled. Neither as consolidation nor a merger of the corporation with or into any other entity nor the sale of all or substantially all of the assets of the corporation shall be deemed to be a liquidation or dissolution within the meaning of this paragraph."

2. The foregoing amendment shall become effective as of the close of business on the date these Articles of Amendment are approved by the Florida Department of State and all filing fees then due have been paid, all in accordance with the corporation laws of the State of Florida.

3. The amendment recited in Section 1 above has been duly adopted in accordance with the provisions of §607.1003, Florida Statutes, the Board of Directors of the corporation having adopted a resolution setting forth such amendment, declaring its advisability and directing that such amendment be considered by the shareholders of the corporation; a majority in interest of the corporation's single class of voting stock having voted in favor thereof by written action dated December 31, 1999; and the number of votes cast for amendment by the shareholders was sufficient for approval.

IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be prepared under the signature of its Chief Executive Officer and the attestation of its Vice President, this 10th day of January, 2000.

Attest: PINECREST INVESTMENT GROUP. INC.

By: /s/ Sheryl B. Salvadore   By: /s/ David B. Howe  

Sheryl B. Salvadore David B. Howe
Secretary President

Exhibit 3.4 

Articles of Amendment
to
Articles of Incorporation
of  

Pinecrest Investment Group, Inc.

(Name of Corporation as currently filed with the Florida Dept. of State)

 

P97000076929

(Document Number of Corporation (if known)

 

Pursuant to the provisions of section 607.1006, Florida Statutes, this Florida Profit Corporation adopts the following amendments to its Articles of Incorporation:

 

A. If amending name, enter the new name of the corporation:

 

B. Enter new principal office address, if applicable: 11415 NW 123 Lane
Reddick, FL 32686
C. Enter new mailing address. if applicable:
D. If amending the registered agent and/or registered office address enter the name of the new registered agent and/or the new registered office address:

PICTURE

Name of New Registered Agent   Richard Astrom
     
New Registered Office Address   11415 NW 123 Lane
    Reddick, FL 32686

 

New Registered Agent's Signature, if changing Registered Agent:

 

I hereby accept the appointment as registered agent. I am familiar with and accept the obligations of the position.

 

/s/ Richard Astrom

Signature of New Registered Agent, if changing

 

If amending the Officers and/or Directors, enter the title and name of each officer/director being removed and title, name, and address of each Officer and/or Director being added:

 

(Attach additional sheets, if necessary)

 

Please note the officer/director title by the first letter of the office title:

 

P = President; V= Vice President; T= Treasurer; S= Secretary; D= Director; TR= Trustee; C = Chairman or Clerk; CEO = Chief Executive Officer; CFO = Chief Financial Officer. If an officer/director holds more than one title, list the first letter of each office held President, Treasurer, Director would be PTD.

 

Changes should be noted in the following manner. Currently John Doe is listed as the PST and Mike Jones is listed as the V. There is a change, Mike Jones leaves the corporation, Sally Smith is named the V and S. These should be noted as John Doe, PT as a Change, Mike Jones, Vas Remove, and Sally Smith, SV as an Add.

 

Example:

 

X Change PT John Doe

 

X Remove V Mike Jones

 

X Add SV Sally Smith

 
 

  Type of Action   Title   Name   Address
  (Check One)            
               
1) Change   CEO   Mark Astrom   2202 N. West Shore Blvd.
  Add           Suite 200
[x] Remove           Tampa, FL 33607
               
2) Change   CEO   Richard Astrom   11415 NW 123 Lane
[x] Add           Reddick, FL 32686
  Remove            

E. If amending or adding additional Articles, enter change(s) here:

(attach additional sheets. if necessary). (Be specific)

 

ARTICLE VI CAPITAL STOCK

The total number of shares of stock which the Corporation shall have the authority to issue is Three billion and ten million (3,010,000,000) shares, consisting of three billion (3,000,000,000) shares of common stock, par value $0.000001 per share and a class of ten million (10,000,000) shares of preferred stock, par value $0.000001 per share. The Board of Directors of the Corporation is vested with the authority to determine and state the designations and preferences, limitations, relative rights and voting rights, if any, of each series by the adoption and filing in accordance with Florida General Corporation Law, before the issuance of such shares of such series, of an amendment or amendments to the Certificate of incorporation determining the terms of such series, which an amendment or amendments to the Certificate of incorporation determining the terms of such series, which amendment need not be approved by the stockholders or the holders of any class or series of shares except as provided by law.

 

The date of each amendment(s) adoption: June 25, 2012

 

Effective date if applicable : June 30, 2012

(no more than 90 days after amendment file date)

 

Adoption of Amendment(s) (CHECK ONE)

 

X     The amendment(s) was/were adopted by the shareholders. The number of votes cast for the amendment(s) by the shareholders was/were sufficient for approval.

___   The amendment(s) was/were approved by the shareholders through voting groups.

___ The amendment(s) was/were adopted by the board of directors without shareholder action and shareholder action was not required.

___ The amendment(s) was/were adopted by the incorporators without shareholder action and shareholder action was not required.

 

Dated: June 28 , 2012

Signature /s/ Richard Astrom                 

Richard Astrom

CEO

Exhibit 3.5

ARTICLES OF AMENDMENT

TO THE

ARTICLES OF INCORPORATION

OF

PINECREST INVESTMENT GROUP, INC.

 

PINECREST INVESTMENT GROUP, INC., a Florida corporation (the "Corporation"), hereby certifies as follows:

 

1. PICTURE The name of the Corporation is PINECREST INVESTMENT GROUP, INC. and its Document Number is P97000076929.

2. Pursuant to the provisions of section 607.1006 of the Florida Business Corporation Act, the Corporation adopts the following amendments to its Articles of Incorporation:

a. Article I of the Articles of Incorporation is amended to read as follows:

ARTICLE I 

Corporate Name and Principal Office

The name of the Corporation is ACOLOGY, INC. and its principal office and mailing address is 912 Maertin Lane. Fullerton: CA 92831. 

b. Article IV of the Articles of Incorporation is amended to read as follows:

 

ARTICLE IV

Capital Stock

The Corporation is authorized to issue six billion (6,000,000.000) shares of common stock, par value $0.00001 per share, and ten million (10,000,000) shares of preferred stock, without par value.

Common Stock

Each share of issued and outstanding common stock shall entitle the holder thereof to one vote on each matter with respect to which shareholders have the right to vote, to fully participate in all shareholder meetings, and to share ratably in the net assets of the corporation upon liquidation or dissolution, but each such share shall be subject to the rights and preferences of the Preferred Stock as hereinafter set forth.

On February 14, 2014, at 5:00 p.m. local time in Tallahassee. Florida (the "Effective Time"), each one thousand (1,000) shares of the Corporation's common stock issued and outstanding immediately prior to the Effective Time shall be combined into one (I) validly issued, fully paid and non-assessable share of common stock, par value $0.0000l per share, without any further action by the Corporation or the holder thereof (the "Reverse Stock Split"). Any fractional share to which a shareholder may be entitled by virtue of the Reverse Stock Split shall be rounded up to a whole share.

Each certificate that immediately prior to the Effective Time represented shares of common stock (an "Old Certificate") shall thereafter represent the number of shares of common stock into which the shares of common stock represented by the Old Certificate shall have been combined at the Effective Time, subject to the rounding up of fractional shares as described above.

 
 

Preferred Stock

The preferred stock may be issued in one or more series. The board of directors may determine, in whole or part, the preferences, limitations, and relative rights (within the limits set forth in section 607.0601 of the Florida Business Corporation Act) of each such series in the manner provided by the Florida Business Corporation Act. Such preferences, limitations, and relative rights may include, without limitation:

a. the annual rate of dividends payable and the date from which such dividends shall accrue;
b. the amount payable upon a redemption and the manner in which shares may be redeemed;
c. the amount payable upon any voluntary or involuntary liquidation, dissolution or winding up of the corporation;
d. the provisions of any sinking fund;
e. the terms and rates of conversion or exchange, if the shares of such series are convertible or exchangeable; and
f. the voting rights, if any, of the individual shares of such series and of such series as a whole.
3. The amendments were adopted in accordance with the provisions of §607.1003, Florida Business Corporation Act by the shareholders on January 14, 2014. The number of votes cast for the amendments by the shareholders was sufficient for approval.
4. The amendment shall be effective on February 14, 2014, at 5:00 p.m. local time in Tallahassee, Florida.

 

IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed this 14th day of January 2014.

PINECREST INVESTMENT GROUP, INC.

By: /s/ Richard S. Astrom  
Richard S. Astrom
President  

Exhibit 3.6

Bylaws of

Acology, Inc.

a Florida Corporation

 

Article I.--Shareholders

 

1.1 Annual Meeting. A meeting of shareholders shall be held each year for the election of directors and for the transaction of any other business that may come before the meeting. The time and place of the meeting shall be designated by the Board of Directors.

 

1.2 Special Meeting. Special meetings of the shareholders, for any purpose or purposes, shall be held when directed by the Chairman of the Board, or at the request of the holders of not less than one tenth of all outstanding shares of the corporation entitled to vote at the meeting.

 

1.3 Place of Meeting. The Board of Directors may designate any place, either within or without the State of Florida, as the place of meeting for any annual or special meeting of the shareholders. If no designation is made, the place of meeting shall be the principal office of the corporation in the state of Florida.

 

1.4 Action without a Meeting. Unless otherwise provided in the articles of incorporation, action required or permitted to be taken at any meeting of the shareholders may be taken without a meeting, without prior notice, and without a vote if the action is taken by the holders of outstanding shares of each voting group entitled to vote on it having not less than the minimum number of votes with respect to each voting group that would be necessary to authorize or take such action at a meeting at which all voting groups and shares entitled to vote were present and voted. In order to be effective, the action must be evidenced by one or more written consents describing the action taken, dated and signed by approving shareholders having the requisite number of votes of each voting group entitled to vote, and delivered to the corporation at its principal office in Florida or its principal place of business, or to the corporate secretary or another office or agent of the corporation having custody of the book in which proceedings of meetings of shareholders are recorded. No written consent shall be effective to take corporate action unless, within 60 days of the date of the earliest dated consent delivered in the manner required by this section, written consents signed by the number of holders required to take action are delivered to the corporation.

 

Any written consent may be revoked before the date that the corporation receives the required number of consents to authorize the proposed action. No revocation is effective unless in writing and until received by the corporation at its principal office or its principal place of business, or received by the corporate secretary or other office or agency of the corporation having custody of the book in which proceedings of meetings of shareholders are recorded.

 

Within ten days after obtaining authorization by written consent, notice must be given to those shareholders who have not consented in writing or who are not entitled to vote on the action. The notice shall fairly summarize the material features of the authorized action and, if the action is one for which dissenters' rights are provided under the articles of incorporation or by law, the notice shall contain a clear statement of the right of shareholders dissenting there from to be paid the fair value of their shares upon compliance with applicable law.

 

A consent signed as required by this section has the effect of a meeting vote and may be described as such in any document.

 

Whenever action is taken as provided in this section, the written consent of the shareholders consenting or the written reports of inspectors appointed to tabulate such consents shall be filed with the minutes of proceedings of shareholders.

 

1.5 Notice of Meeting. Except as provided in F.S. Chapter 607, the Florida Business Corporation Act, written or printed notice stating the place, day, and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 60 days before the date of the meeting, either personally or by first-class mail, by, or at the direction of, the president or the secretary, or the officer or other persons calling the meeting, to each shareholder of record entitled to vote at the meeting. If the notice is mailed at least 30 days before the date of the meeting, it may be effected by a class of United States mail other than first-class. If mailed, the notice shall be effective when mailed, if mailed, postage prepaid and correctly addressed to the shareholder's address shown in the current record of shareholders of the corporation.

     
 

When a meeting is adjourned to another time or place, it shall not be necessary to give any notice of the adjourned meeting if the time and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken. At the adjourned meeting any business may be transacted that might have been transacted on the original date of the meeting. If, however, after the adjournment the Board of Directors fixes a new record date for the adjourned meeting, a notice of the adjourned meeting shall be given as provided in this section to each shareholder of record on the new record date entitled to vote at such meeting.

 

1.6 Waiver of Notice of Meeting. Whenever any notice is required to be given to any shareholder, a waiver in writing signed by the person or persons entitled to such notice, whether signed before, during, or after the time of the meeting and delivered to the corporation for inclusion in the minutes or filing with the corporate records, shall be equivalent to the giving of such notice. Attendance of a person at a meeting shall constitute a waiver of (a) lack of, or defective notice of the meeting, unless the person objects at the beginning of the meeting to the holding of the meeting or the transacting of any business at the meeting or (b) lack of defective notice of a particular matter at a meeting that is not within the purpose or purposes described in the meeting notice, unless the person objects to considering the matter when it is presented.

 

1.7 Fixing of Record Date. In order that the corporation may determine the shareholders entitled to notice of, or to vote at, any meeting of shareholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to demand a special meeting, the board of directors may fix, in advance, a record date, not more than 70 days before the date of the meeting or any other action. A determination of shareholders of record entitled to notice of, or to vote at, a meeting of shareholders shall apply to any adjournment of the meeting unless the board fixes a new record date, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.

 

If no prior action is required by the board, the record date for determining shareholders entitled to take action without a meeting is the date the first signed written consent is delivered to the corporation under Section 1.4 of this Article.

 

1.8 Voting Record. After fixing a record date for a meeting of shareholders, the corporation shall prepare an alphabetical list of the names of all its shareholders entitled to notice of the meeting, arranged by voting group with the address of, and the number, class, and series, if any, of shares held by, each shareholder. The shareholders' list must be available for inspection by any shareholder for a period of ten days before the meeting or such shorter time as exists between the record date and the meeting and continuing through the meeting at the corporation's principal office, at a place identified in the meeting notice in the city where the meeting will be held, or at the office of the corporation's transfer agent or registrar. Any shareholder of the corporation or the shareholder's agent or attorney is entitled on written demand to inspect the shareholders' list (subject to the requirements of F.S. 607.1602[3]) during regular business hours and at the shareholder's expense, during the period it is available for inspection. The corporation shall make the shareholders' list available at the meeting of shareholder, and any shareholder or the shareholder's agent or attorney is entitled to inspect the list at any time during the meeting or any adjournment.

 

1.9 Voting Per Share. Except as otherwise provided in the articles of incorporation or by F.S. 607.0721, each shareholder is entitled to one vote for each outstanding common share held by him or her on each matter voted at a shareholders' meeting.

 

1.10 Voting of Shares. A shareholder may vote at any meeting of shareholders of the corporation, either in person or by proxy. Shares standing the name of another corporation domestic or foreign, may be voted by the officer, agent, or proxy designated by the by-laws of the corporate shareholder, or in the absence of any applicable by-law, by a person or persons designated by the board of directors of the corporate shareholder. In the absence of any such designation or, in case of conflicting designation by the corporate shareholder, the chairman of the board, the president, any vice president, the secretary, and the treasurer of the corporate shareholder, in that order, shall be presumed to be fully authorized to vote the shares. Shares held by an administrator, executor, guardian, personal representative, or conservator may be voted by him or her, either in person or by proxy, without a transfer of such shares into his or her name. Shares standing in the name of a trustee may be voted by him or her, either in person or by proxy, but no trustee shall be entitled to vote shares held by him or her without a transfer of such shares into his or her name or the name of his or her nominee. Shares held by or under the control of, a receiver, a trustee in bankruptcy proceedings, or any assignee for the benefit of creditors may be voted by such person without the transfer into his or her name.

     
 

If shares stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the secretary of the corporation is given notice to the contrary and furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, then acts with respect to voting shall have the following effect: (a) if only one votes, in person or by proxy, that act binds all (b) if more than one vote, in person or by proxy, 51% out of the majority so voting binds all (c) if more than one votes, in person or by proxy, but the vote is evenly split on any particular matter, each faction is entitled to vote the share or shares in question proportionally or (d) if the instrument or order so filed shows that any such tenancy is held in unequal interest, a majority or a vote evenly split for purposes hereof shall be a majority or a vote evenly split in interest. The principles of this paragraph shall apply, insofar as possible, to execution of proxies, waivers, consents, or objections and for the purpose of ascertaining the presence of a quorum.

 

1.11 Proxies. Any shareholder of the corporation, other person entitled to vote on behalf of a shareholder pursuant to F.S. 607.0721, or attorney-in-fact for such persons, may vote the shareholder's shares in person or by proxy. Any shareholder may appoint a proxy to vote or otherwise act for him or her by signing an appointment form, either personally or by an attorney-in-fact. An executed telegram or cablegram appearing to have been transmitted by such person, or a photographic, photostatic, or equivalent reproduction of an appointment form, shall be deemed a sufficient appointment form.

 

An appointment of a proxy is effective when received by the secretary of the corporation or such other officer or agent authorized to tabulate votes, and shall be valid for up to 11 months, unless a longer period is expressly provided in the appointment form. The death or incapacity of the shareholder appointing a proxy does not affect the right of the corporation to accept the proxy's authority unless notice of the death or incapacity is received by the secretary or other officer or agent authorized to tabulate votes before the proxy exercises authority under the appointment.

 

An appointment of a proxy is revocable by the shareholder unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest.

 

1.12 Quorum. Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. Except as otherwise provided in the articles of incorporation or by law, a majority of the shares entitled to vote on the matter by each voting group, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, but in no event shall a quorum consist of less than one third of the shares of each voting group entitled to vote. If less than a majority of outstanding shares entitled to vote are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. After a quorum has been established at any shareholders' meeting, the subsequent withdrawal of shareholders, so as to reduce the number of shares entitled to vote at the meeting below the number required for a quorum, shall not affect the validity of any action taken at the meeting or any adjournment thereof.

 

Once a share is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting.

 

1.13 Manner of Action. If a quorum is present, action on a matter (other than the election of directors) by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless a greater or lesser number of affirmative votes is required by the articles of incorporation or by law.

 

1.14 Voting for Directors. Unless otherwise provided in the articles of incorporation, directors will be elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present.

 

1.15 Inspectors of Election. Before each shareholders' meeting, the board of directors or president shall appoint one or more Inspectors of Election. Upon appointment, each inspector shall take and sign an oath faithfully to execute the duties of inspector at the meeting with strict impartiality and to the best of his or her ability. Inspectors shall determine the number of shares outstanding, the number of shares present at the meeting, and whether a quorum is present. The inspectors shall receive votes and ballots and determine all challenges and questions as to the right to vote. The inspectors shall count and tabulate all votes and ballots and determine the results. Inspectors shall perform other duties as are proper to conduct elections of directors and votes on other matters with fairness to all shareholders. Inspectors shall make a certificate of the results of elections of directors and votes on other matters. No inspector shall be a candidate for election as a director of the corporation.

     
 

Article 2 -- Board of Directors

 

2.1 General Powers. Except as provided in the articles of incorporation and by law, all corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be managed under the direction of, its board of directors.

 

2.2 Number, Terms, Classification and Qualification. The board of directors of the corporation shall consist of a minimum of one person but no more than 21 people. The number of directors may at any time and from time to time be increased or decreased by action of either the shareholders or the board of directors, but no decrease in the number of directors shall have the effect of shortening the term of any incumbent director. A director must be a natural person of at least 18 years of age, but need not be a citizen of the United States of America, a resident of the State of Florida, nor a shareholder of the corporation. Each director shall hold office until a successor has been elected and qualified or until an earlier resignation, removal from office, or death.

 

2.3 Regular Meetings. An annual regular meeting of the board of directors shall be held without notice immediately after, and at the same place as, the annual meeting of the shareholders and at such other time and place as may be determined by the board of directors. The board may, at any time and from time to time, provide by resolution the time and place, either within or without the State of Florida, for the holding of the annual regular meeting or additional regular meeting of the board without other notice than the resolution.

 

2.4 Special Meetings. Special meetings of the board of directors may be called by the chairman of the board, the president, or any two directors.

 

The person or persons authorized to call special meetings of the board may designate any place, either within or without the State of Florida, as the place for holding any special meeting of the board called by them. If no designation is made, the place of the meeting shall be the principal office of the corporation in Florida.

 

Notice of any special meeting of the board may be given by any reasonable means, oral or written, and at any reasonable time before the meeting. The reasonableness of notice given in connection with any special meeting of the board shall be determined in light of all pertinent circumstances. It shall be presumed that notice of any special meeting given at least two days before the meeting either orally (by telephone or in person), or by written notice delivered personally or mailed to each director at his or her business or residence address, is reasonable. If mailed, the notice of any special meeting shall be deemed to be delivered on the second day after it is deposited in the United States mail, so addressed, with postage prepaid. If notice is given by telegram, it shall be deemed to be delivered when the telegram is delivered to the telegraph company. Neither the business to be transacted at, nor the purpose or purposes of, any special meeting need to be specified in the notice or in any written waiver of notice of the meeting.

 

2.5 Waiver of Notice of Meeting. Notice of a meeting of the board of directors need not be given to any director who signs a written waiver of notice before, during, or after the meeting. Attendance of a director at a meeting shall constitute a waiver of notice of the meeting and a waiver of any and all objections to the place of the meeting, the time of the meeting, and the manner in which it has been called or convened, except when a director states, at the beginning of the meeting or promptly upon arrival at the meeting, any objection to the transaction of business because the meeting is not lawfully called or convened.

 

2.6 Quorum. A majority of the number of directors fixed by, or in the manner provided in, these by-laws shall constitute a quorum for the transaction of business provided however, that whenever, for any reason, a vacancy occurs in the board of directors, a quorum shall consist of a majority of the remaining directors until the vacancy has been filled.

 

2.7 Manner of Action. The act of a majority of the directors present at a meeting at which a quorum is present when the vote is taken shall be the act of the board of directors.

 

2.8 Presumption of Assent. A director of the corporation who is present at a meeting of the board of directors or a committee of the board when corporate action is taken shall be presumed to have assented to the action taken, unless he or she objects at the beginning of the meeting, or promptly upon arrival, to holding the meeting or transacting specific business at the meeting, or he or she votes against or abstains from the action taken.

     
 

2.9 Action without a Meeting. Any action required or permitted to be taken at a meeting of the board of directors or a committee of it may be taken without a meeting if a consent in writing, stating the action so taken, is signed by all the directors. Action taken under this section is effective when the last director signs the consent, unless the consent specifies a different effective date. A consent signed under this section shall have the effect of a meeting vote and may be described as such in any document.

 

2.10 Meetings by Means of Conference Telephone Call or Similar Electronic Equipment. Members of the board of directors may participate in a meeting of the board by means of a conference telephone call or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation by such means constitutes presence in person at a meeting.

 

2.11 Resignation. Any director may resign at any time by giving written notice to the corporation, the board of directors, or its chairman. The resignation of any director shall take effect when the notice is delivered unless the notice specifies a later effective date, in which event, the board may fill the pending vacancy before the effective date if they provide that the successor does not take office until the effective date.

 

2.12 Removal. Any director, or the entire board of directors, may be removed at any time, with or without cause, by action of the shareholders, unless the articles of incorporation provide that directors may be removed only for cause. If a director was elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove that director. The notice of the meeting at which a vote is taken to remove a director must state that the purpose or one of the purposes of the meeting is the removal of the director or directors.

 

2.13 Vacancies. Any vacancy in the board of directors, including any vacancy created by reason of an increase in the number of directors, may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the board of directors, or by the shareholders.

 

2.14 Compensation. Each director may be paid the expenses, if any, of attendance at each meeting of the board of directors, and may be paid a stated salary as a director of a fixed sum for attendance at each meeting of the board of directors or both, as may from time to time be determined by action of the board of directors. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefore.

 

Article 3 -- Committees of the Board of Directors

 

The board of directors, by resolution adopted by a majority of the full board, may designate from among its members an executive committee and one or more other committees each of which, to the extent provided in the resolution, shall have and may exercise all the authority of the board of directors, except as prohibited by F.S.607.0825(1).

 

Each committee must have two or more members who serve at the pleasure of the board. The board of directors, by resolution adopted in accordance with this article, may designate one or more directors as alternate members of any committee, who may act in the place and stead of any absent member or members at any meeting of the committee.

 

Article 4 - Officers

 

4.1 Officers. The officers of this corporation shall be a chief executive officer, president, vice president, secretary, treasurer and any other officers and assistant officers as may be deemed necessary, and as shall be approved by the board of directors. Any two or more offices may be held by the same person.

 

4.2 Appointment and Term of Office. The officers of the corporation shall be appointed annually by the board of directors at the first meeting of the board held after the shareholders' annual meeting. If the appointment of officers does not occur at this meeting, the appointment shall occur as soon thereafter as practicable. Each officer shall hold office until a successor has been duly appointed and qualified, or until an earlier resignation, removal from office, or death.

     
 

4.3 Resignation. Any officer of the corporation may resign from his or her respective office or position by delivering notice to the corporation. The resignation is effective when delivered unless the notice specifies a later effective date. If a resignation is made effective at a later date and the corporation accepts the future effective date, the board of directors may fill the pending vacancy before the effective date if the board provides that the successor does not take office until the effective date.

 

4.4 Removal. Any officer of the corporation may be removed from his or her respective office or position at any time, with or without cause, by the board of directors.

 

4.5 Chief Executive Officer. The chief executive officer (CEO) of the corporation shall, subject to the control of the board of directors, generally supervise and control the business and affairs of the corporation as such business and affairs related to financing issues, public stock offerings, and stockholder relations. These responsibilities shall include, but not be limited to, filings and correspondence with the SEC, stock exchanges and any other governmental agencies related to or regulating the corporation's public stock issues. The CEO shall preside at all meetings of the shareholders, the board of directors and committees of the board of directors on which he or she may serve. In addition, the CEO shall possess, and may exercise, such power and authority, and shall perform such duties, as may from time to time be assigned to him or her by the board of directors, and as are incident to the office of the chief executive officer.

 

4.6 President. The president shall be the chief operating officer of the corporation and shall, subject to the control of the board of directors, generally supervise and control the day to day business and affairs of all operations of the corporation. These duties shall include, but not be limited to, the management and supervision of all employees, design and implementation of employee benefits plans, determine non-officer employee compensation plans, determine appropriate production quantities, types of products, and product mixes, approve all sales and marketing programs and oversee all vendor and customer relations. The president shall, in the absence of the CEO, preside at all meetings of the shareholders, the board of directors and committees of the board of directors on which he or she may serve. In addition, the president shall possess, and may exercise, such power and authority, and shall perform such duties, as may from time to time be assigned to him or her by the board of directors, and as are incident to the office of president and chief operating officer.

 

4.7 Vice Presidents. Each vice president shall possess, and may exercise, such power and authority and shall perform such duties, as may from time to time be assigned to him or her by the board of directors.

 

4.8 Secretary. The secretary shall keep the minutes of the proceedings of the shareholders and of the board of directors in one or more books provided for that purpose; see that all notices are duly given in accordance with the provisions of these bylaws or as required by law; be custodian of the corporate records and of the seal of the corporation; and keep a register of the post office address of each shareholder of the corporation. In addition, the secretary shall possess, and may exercise, such power and authority, and shall perform such duties, as may from time to time be assigned to him or her by the board of directors and as are incident to the office of secretary.

 

4.9 Treasurer. The treasurer shall have charge and custody of, and be responsible for, all funds and securities of the corporation; receive and give receipts for money due and payable to the corporation from any source whatsoever; and deposit all such money in the name of the corporation in such banks, trust companies or other depositories as shall be used by the corporation. In addition, the treasurer shall possess, and may exercise such power and authority, and shall perform such duties, as may from time tom time be assigned to him or her by the board of directors and as are incident to the office of treasurer.

 

4.10 Other Officers Employees, and Agents. Each and every other officer, employee, and agent of the corporation shall possess, and may exercise, such power and authority, and shall perform such duties, as may from time to time be assigned to him or her by the board of directors, the officer appointing him or her, and such officer or officers who may from time to time be designated by the board to exercise supervisory authority.

 

4.11 Compensation. The compensation of the officers of the corporation shall be fixed from time to time by the board of directors.

     
 

Article 5--Certificates of Stock

 

5.1 Certificates for Shares. The board of directors shall determine whether shares of the corporation shall be uncertificated or certificated. If certificated shares are issued, certificates representing shares in the corporation shall be signed (either manually or by facsimile) by the president or chairman and the secretary or an assistant secretary and may be sealed with the seal of the corporation or a facsimile thereof. A certificate that has been signed by an officer or officers who later ceases to be such officer shall be valid.

 

5.2 Transfer of Shares; Ownership of Shares. Transfers of shares of stock of the corporation shall be made only on the stock transfer books of the corporation, and only after the surrender to the corporation of the certificates representing such shares. Except as provided by F.S. 607.0721, the person in whose name shares stand on the books of the corporation shall be deemed by the corporation to be the owner thereof for all purposes and the corporation shall not be bound to recognize any equitable or other claim to, or interest in, such shares on the part of any other person, whether or not it shall have express or other notice thereof.

 

5.3 Lost Certificates. The corporation shall issue a new stock certificate in the place of any certificate previously issued if the holder of record of the certificate (a) makes proof in affidavit form that the certificate has been lost, destroyed, or wrongfully taken (b) requests the issuance of a new certificate before the corporation has notice that the lost, destroyed, or wrongfully taken certificate has been acquired by a purchaser for value in good faith and without notice of any adverse claim (c) at the discretion of the board of directors, gives bond in such form and amount as the corporation may direct, to indemnify the corporation, the transfer agent, and registrar against any claim that may be made on account of the alleged loss, destruction, or theft of a certificate and (d) satisfies any other reasonable requirements imposed by the corporation.

 

Article 6 – Actions With Respect to Securities of Other Corporations

 

Unless otherwise directed by the board of directors, the president or a designee of the president shall have power to vote and otherwise act on behalf of the corporation, in person or by proxy, at any meeting of shareholders of, or with respect to any action of shareholders of, any other corporation in which this corporation may hold securities and to otherwise exercise any and all rights and powers that the corporation may possess by reason of its ownership of securities in other corporations.

 

Article 7 – Indemnification

 

The Company shall indemnify and reimburse and advance expenses for any Director and officer, and for any Director and officer of another corporation, partnership, joint venture, trust or other enterprise serving at the request of the Company, whether or not then in office, and his or her executor, administrator and heirs, and may indemnify and reimburse and advance expenses to employees and agents of the Company, against all reasonable expenses actually and necessarily incurred, including but not limited to, judgments, costs and counsel fees in connection with the defense of any litigation, civil or administrative action, suit or proceeding, to which he or she may have been made a party because he or she is or was a Director, officer, employee or agent of the Company or he or she was serving at the request of the Company as a Director or officer of another corporation, partnership, joint venture, trust or other enterprise.

 

Article 8 – Amendments

 

These by-laws may be altered, amended, or repealed, and new by-laws may be adopted, by action of the board of directors, subject to the limitations of F.S. 607.1020(1). The shareholders of the corporation may alter, amend, or repeal these bylaws or adopt new by-laws even though these by-laws may also be amended or repealed by the board of directors.

 

Article 9 – Corporate Seal

 

The board of directors shall provide for a corporate seal which shall be circular and shall have the name of the corporation, the year of its incorporation, and the state of incorporation inscribed on it.

     

PICTURE EXHIBIT 5.1

Barry J. Miller

Attorney at Law

13321 Ludlow

Huntington Woods, MI 48070

Tel.: 248 232-8039

E-Mail: bjmiller@panalaw.net

May 5, 2014

Acology, Inc.

912 M aer ti n L a n e

F u ll er t on, C A 92831

Ladies and Gentlemen:

I have acted as counsel to Acology, Inc., a corporation organized under the laws of the State of Florida (the “Company”), in connection with the preparation of a Registration Statement on Form S-1 (as amended, the “Registration Statement”) to be filed by the Company with the United States Securities and Exchange Commission, relating to the offer and sale by certain stockholders of the Company of up to 700,000,000 shares (the “Selling Stockholder Shares”) of the common stock of the Company, par value $.000001 per share.

I have examined copies of the articles of incorporation of the company and the by-laws of the Company, each as amended to date, all relevant resolutions adopted by the Company’s board of directors and such other agreements, records and documents that I have deemed necessary for the purpose of this opinion. I have also examined and are familiar with originals or copies, certified or otherwise identified to our satisfaction, of such other documents, corporate records, papers, statutes and authorities as I have deemed necessary to form a basis for the opinions hereinafter expressed.

In my examination, I have assumed the genuineness of all signatures and the conformity to original documents of all copies submitted to me. As to various questions of fact material to my opinion, I have relied on statements and certificates of officers and representatives of the Company and public officials.

Based on the foregoing, and subject to the qualifications, assumptions and limitations stated herein, I am of the opinion that:

1. The Company is validly existing and in good standing as a corporation under the laws of the State of Florida.

2. The Selling Stockholder Shares have been duly and validly authorized and are validly issued, fully paid and non-assessable.

I hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to me under the heading “Legal Matters” in the prospectus included as part of the Registration Statement. In giving such consent, I do not thereby admit that I am in the category of persons whose consent is required under Section 7 of the Act.

Very truly yours,

/s/ Barry J. Miller

Exhibit 10.1 

SHARE PURCHASE AGREEMENT

THIS SHARE PURCHASE AGREEMENT (the “ Agreement ”), dated as of January 29, 2014, is entered into by and between ACOLOGY, INC., a Florida corporation (the “ Company ”), and ________________________________ (“ Purchaser ”).

WHEREAS, subject to the terms and conditions set forth in this Agreement, the Company wishes to sell to the Buyer, and the Buyer wishes to buy from the Company shares of the Company’s common stock, par value $0. PICTURE 000001 per share, authorized after the Reverse Split, as that term is hereinafter defined (“ New Common Stock ”), on the terms and conditions set forth herein, which shares are part of an offering by the Company of 700,000,000 shares of New Common Stock for the aggregate price of $40,000.00 (the “ Private Placement ”),

NOW THEREFORE, in consideration of the covenants and agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:

ARTICLE I.  PURCHASE AND SALE

1.1 Purchase and Sale of the Shares . Subject to and upon the terms and conditions hereof, the Company will issue and sell to Purchaser, and Purchaser will purchase from the Company, in consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the number of shares of New Common Stock set forth opposite its name under the caption “Shares to be Purchased” for the purchase price set forth opposite its name under the caption “Purchase Price.” Such number of shares and the purchase price therefor are respectively referred to herein as the “ Shares ” and the “ Purchase Price .” The Company and Purchaser are executing and delivering this Agreement and performing their respective obligations hereunder in accordance with and in reliance upon the exemption from registration under the Securities Act of 1933 (the “ Securities Act ”), afforded by Rule 506 of Regulation D (“ Regulation D ”) promulgated by the United States Securities and Exchange Commission (the “ Commission ”) under the Securities Act, Section 4(2) of the Securities Act or one or more other applicable exemptions from registration. As used herein, the term “ Reverse Split ” means the 1-for 1,000 share reverse split of the Existing Common Stock to occur on February 14, 2014, as provided in the Company’s Articles of Incorporation, as amended, and the term “ Existing Common Stock means the common stock, par value $0.000001 per share, authorized prior to the occurrence of the Reverse Split.

1.2 Closing . The closing of the purchase and sale of the Shares (the “ Closing ”) shall take place upon the closing under that certain Agreement and Plan of Merger, dated as of December 24 , 2013, by and among the Company (under its former corporate name, Pinecrest Investments Group, Inc., PNCR, ACQUISITION, LLC., a California limited liability company and the wholly-owned subsidiary of PNCR (“ Merger Sub ”), and D&C DISTRIBUTORS, LLC, a California limited liability company (the “ Target ”)(the “ Merger Agreement ”). The time and date of the Closing is referred to herein as the “ Closing Time ”. At the Closing, (A) the Company shall deliver to Purchaser the duly executed Registration Rights Agreement and (B) Purchaser shall deliver to the Company (i) the Purchase Price and (ii) the duly executed Registration Rights Agreement in the form annexed hereto as Exhibit A (the “ Registration Rights Agreement ”), to be dated as of the date on which the Closing occurs. As quickly as shall be practicable after the Closing, the Company shall cause the Shares to be issued in book entry form in the name of Purchaser. The Shares shall be held in such form until (i) they are registered under the Securities Act

 
 

pursuant to the Registration Rights Agreement (as that term is hereinafter defined), in which case, the Company shall deliver to Purchaser, upon the effectiveness of such registration, certificates (in such denominations as Purchaser shall request) representing the Shares without any restrictive legend or (ii) the Company has defaulted in its obligations to Purchaser under the Registration Rights Agreement, in which case, the Company shall deliver to Purchaser, upon Purchaser’s request, certificates a single certificate representing the Shares bearing the restrictive legend prescribed by Section 5.1 hereof.

By completing the Closing, Purchaser shall be deemed to have confirmed to the Company, with the same effect as if Purchaser had so confirmed in writing, that Purchaser’s representations and warranties made in Section 2.2 were true and correct in all material respects as of the Closing Time, the compliance by Purchaser with its covenants in this Agreement to be complied with by it prior to the Closing Time and, except to the extent that any of the conditions precedent to the obligation of the Company set forth in Section 4.1 have been waived by the Company in writing, Purchaser’s satisfaction thereof.

By completing the Closing, the Company shall be deemed to have confirmed to Purchaser, with the same effect as if the Company had so confirmed in writing, that the Company’s representations and warranties made in Section 2.1 were true and correct in all material respects as of the Closing Time, the compliance by the Company with its covenants in this Agreement to be complied with by it prior to the Closing Time and, except to the extent that any of the conditions precedent to the obligation of Purchaser set forth in Section 4.2 have been waived by Purchaser in writing, the Company’s satisfaction thereof.

1.3 Merger . The parties acknowledge that simultaneously with the Closing, the Company will complete the Closing under and as defined in the Merger Agreement, under which, upon the filing of a certificate of merger pursuant to the California Corporations Code, Merger Sub will merge with and into Target, with Target being the surviving entity and the Company’s wholly-owned subsidiary. Among other things, at the effective time of the merger (the “ Effective Time of the Merger ”), the shares of the common stock of Target outstanding immediately prior to such effective time will be converted into an aggregate of 3,846,000,000 shares of New Common Stock. The transactions occurring pursuant to the Merger Agreement are collectively referred to as the “ Merger ”). Purchaser acknowledges receipt of a copy of the Merger Agreement.

ARTICLE II.    REPRESENTATIONS AND WARRANTIES

2.1 Representations and Warranties of the Company . The Company hereby represents and warrants to Purchaser, as of the date hereof and as of the Closing Time (except as set forth on the Schedule of Exceptions attached hereto with each numbered Schedule corresponding to the section number herein), as follows:

(a) Organization, Good Standing and Power . The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Florida and has all requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. The Company has no subsidiaries other than Merger Sub, which was organized as a vehicle for the Merger and has not engaged in any business operations. 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 except for any one or more jurisdictions in which, in the aggregate, the failure to be so qualified will not have a Material Adverse Effect (as defined in Section 2.1(c)

 
 

hereof) on the Company’s financial condition. The Company has furnished or made available to Purchaser true and correct copies of the Company’s Articles of Incorporation, as amended (the “ Charter ”), and the Company’s By-laws (the “ By-laws ”), each as in effect on the date hereof.

(b) Authorization; Enforceability . The Company has all requisite corporate power and authority to execute and deliver and to perform this Agreement and the Registration Rights Agreement of even date herewith (collectively, the “ Transaction Documents ”) and to issue and sell the Shares in accordance with the terms hereof. The execution, delivery and performance of the Transaction Documents by the Company, the consummation by it of the transactions contemplated thereby and the issuance and delivery of the Shares have been duly and validly authorized by all requisite corporate action and no further consent or authorization on the part of the Company, its Board of Directors or its stockholders is required in order for the Company to enter into and perform its obligations under the Transaction Documents. Each of the Transaction Documents constitutes, or when executed and delivered will constitute, the legal, 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, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting the enforcement of, creditors’ rights and remedies generally or by equitable principles of general application.

(c) Capitalization . The authorized capital stock of the Company consists of: (i) 6,000,000,000 shares of Existing Common Stock, of which 49,442,762 shares are issued and outstanding, and after the occurrence of the Reverse Split, will consist of a like number of shares of New Common Stock, no more than 50,000 shares of which will be issued and outstanding; and (ii) 10,000,000 shares of preferred stock, issuable in series, of which no shares are or after the Reverse Split will be issued and outstanding. All of the outstanding shares of the Existing Common Stock and the Preferred Shares have been, and upon the occurrence of the Reverse Split, all of the outstanding shares of New Common Stock will be, duly and validly authorized, issued and outstanding.

No shares of Existing Common Stock are, and upon the occurrence of the Reverse Split, no shares of New Common Stock will be, entitled to preemptive rights or registration rights and there are no outstanding options, warrants, scrip, rights to subscribe to, call or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company. There are no contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue additional shares of the capital stock of the Company or options, securities or rights convertible into shares of capital stock of the Company, except for (i) this Agreement, (ii) securities purchase agreements substantially in the form of this Agreement, which, together with this Agreement and when executed and delivered, will relate to 700,000,000 shares of New Common Stock, (iii) the Merger Agreement and (iv) registration rights agreements granting registration rights to the Persons, including Purchaser, who are purchasing shares of New Common Stock in the Private Placement; and except for such agreements, the Company is not a party to any agreement granting registration or anti-dilution rights to any person with respect to any of its equity or debt securities. The Company is not a party to, and it has no knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of the Company, other than agreements that limit such transfer as required by federal or state securities laws. The offer and sale of all capital stock, convertible securities, rights, warrants, or options of the Company issued prior to the Closing Time complied with all applicable

 
 

Federal and state securities laws, and no stockholder has a right of rescission or claim for damages with respect thereto which would have a Material Adverse Effect (as defined below). For purposes of this Agreement, “ Material Adverse Effect ” means any material adverse effect on the business, operations, properties, or financial condition of the Company and Merger Sub, taken as a whole, and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company to perform any of its obligations under this Agreement in any material respect.

(d) The Shares . At the Closing Time, the Shares will be duly authorized by all requisite corporate action and, when paid for, issued and delivered in accordance with the terms hereof, will be duly and validly issued, fully paid and nonassessable.

(e) No Conflicts . The execution and delivery of the Transaction Documents by the Company and performance by the Company of its obligations thereunder do not and will not (i) violate any provision of the Charter or By-laws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party or by which it or its properties or assets are bound, (iii) except as may be contemplated by the Merger Agreement, create or impose a lien, mortgage, security interest, charge or encumbrance of any nature on any property of the Company under any agreement or any commitment to which the Company is a party or by which the Company is bound or by which any of its respective properties or assets are bound or (iv) result in a violation of any federal, state or local statute, rule, regulation, order, judgment or decree (including Federal and state securities laws and regulations) applicable to the Company or Merger Sub or by which any property or asset of the Company or Merger Sub 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. The business of the Company is not being conducted in violation of any laws, ordinances or regulations of any governmental entity, except for violations, if any, which 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 the Transaction Documents, or issue and sell the shares of New Common Stock in accordance with the terms hereof or thereof (other than (i) any consent, authorization or order that has been obtained as of the date hereof, (ii) any filing or registration that has been made as of the date hereof or (iii) any filings which may be required to be made by the Company with the Commission or state securities administrators subsequent to the Closing; provided, that, for purposes of the representation and warranty made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations, warranties and agreements of Purchaser made herein.

(f) Subsidiaries . Merger Sub is the wholly-owned and sole Subsidiary of the Company. For the purposes of this Agreement, “ Subsidiary ” shall mean any corporation or other juridical entity of which at least a majority of the securities or other ownership interest having ordinary voting power (absolutely or contingently) for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by such corporation or other entity. All of the outstanding shares of capital stock of Merger Sub have been and at the

 
 

Effective Time of the Merger, all of the outstanding shares of capital stock of the company resulting from the Merger will be, duly authorized, validly issued, fully paid and nonassessable.

(g) Financial Statements . Purchaser acknowledges its receipt of a copy of (i) the unaudited financial statements of the Company for the years ended December 31, 2009, and December 31, 2008 and (ii) the unaudited financial statements of Target for the period ended July 31, 2013 (the “ Target Financial Statements ”), and collectively with the Company Financial Statements, the “ Financial Statements ”). The Financial Statements were prepared in accordance with generally accepted accounting principles in the United States consistently applied (“ GAAP ”), except as may be otherwise specified therein or in the notes thereto; and each of the Financial Statements fairly presents in all material respects the financial position of the entity to which it relates as at the dates thereof and the results of operations and cash flows for the periods then ended. If the Company or Target were to prepare a financial statement in accordance with GAAP as of the date hereof, it would not differ materially from the Financial Statement that relates to it.

(h) No Material Adverse Effect . Other than as disclosed in the Financial Statements or in the Merger Agreement, neither the Company nor Target has experienced or suffered any Material Adverse Effect.

(i) No Undisclosed Liabilities . Except as disclosed in the Financial Statements or in the Merger Agreement, neither the Company nor Target has any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) other than those incurred in the ordinary course of their respective businesses and which, individually or in the aggregate, have a Material Adverse Effect on the Company or Target.

(j) No Undisclosed Events or Circumstances . To the Company’s knowledge, no event or circumstance has occurred or exists with respect to the Company or its business, properties, prospects, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by it but which has not been so publicly announced or disclosed.

(k ) Indebtedness . Each of the Financial Statements sets forth all outstanding secured and unsecured Indebtedness of the entity to which it relates or for which such entity has commitments. For the purposes of this Agreement, “ Indebtedness ” shall mean (i) any liabilities for borrowed money or amounts owed (other than trade accounts payable incurred in the ordinary course of business), (ii) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in the balance sheets (or the notes thereto) of the Company contained in the Company Financial Statements or of Target contained in the Target Financial Statements, except for guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; and (iii) the present value of any lease payments due under leases required to be capitalized in accordance with GAAP. Neither the Company nor Target is in default with respect to any Indebtedness.

(l) Title to Assets . Each of the Company and Target has good and marketable title to all real and personal property reflected in the Financial Statement related to it, free and clear of any mortgages, pledges, charges, liens security interests or other encumbrances, except for those that are disclosed in such Financial Statement or that may be contemplated by the Merger

 
 

Agreement. Except as disclosed in the Financial Statement related to it, neither the Company nor Target leases any material real or personal property.

(m) Actions Pending . There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or any other proceeding pending, or to the knowledge of the Company threatened, against the Company, Merger Sub or Target which questions the validity of the Merger Agreement or the Transaction Documents or the transactions contemplated thereby or any action taken or to be taken pursuant thereto. There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or any other proceeding pending, or to the knowledge of the Company, threatened, against or involving the Company, Merger Sub or Target or any of their respective properties or assets. There are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company, Merger Sub or Target or any of their executive officers, directors or managers in their capacities as such.

(n) Compliance with Law . The business of the Company has been and is presently being conducted in material compliance with all applicable federal, state and local governmental laws, rules, regulations and ordinances. The Company holds all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business in all material respects as now being conducted by it unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

(o) Taxes . Each of the Company has accurately prepared and filed all tax returns required by law to be filed by it and has paid or made provisions for the payment of all taxes shown to be due and all additional assessments; and adequate provisions have been and are reflected in the financial statements of the Company for all current taxes and other charges for which it is liable and which are not currently due and payable. None of the income tax returns of the Company has been audited. The Company has no knowledge of any additional assessments, adjustments or contingent tax liability of any nature whatsoever, whether pending or threatened against the Company for any period, nor of any basis for any such assessment, adjustment or contingency.

(p) Certain Fees . No brokers, finders or financial advisory fees or commissions will be payable by the Company with respect to the transactions contemplated by the Transaction Documents.

(q) Operation of Business . The Company owns or possesses all patents, trademarks, domain names (whether or not registered) and any patentable improvements or copyrightable derivative works thereof, websites and intellectual property rights relating thereto, service marks, trade names, copyrights, licenses and authorizations, and all rights with respect to the foregoing, which are necessary for the conduct of its business as now conducted without any conflict with the rights of others, except where the failure to so own or possess would not have a Material Adverse Effect.

(r) Environmental Compliance . Since its inception, the Company has not been in violation of any applicable law relating to the environment or occupational health and safety, where such violation would have a material adverse effect on its business or financial condition. The Company has operated all facilities and properties owned, leased or operated by it in

 
 

material compliance with the Environmental Laws. “ Environmental Laws ” means all applicable laws relating to the protection of the environment including, without limitation, all requirements pertaining to reporting, licensing, permitting, controlling, investigating or remediating emissions, discharges, releases or threatened releases of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, materials or wastes, whether solid, liquid or gaseous in nature, into the air, surface water, groundwater or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, material or wastes, whether solid, liquid or gaseous in nature. The Company has all necessary governmental approvals required under all Environmental Laws and used in its business and is also in compliance with all other limitations, restrictions, conditions, standards, requirements, schedules and timetables required or imposed under all Environmental Laws. There are no past or present events, conditions, circumstances, incidents, actions or omissions relating to or in any way affecting the Company that violate or may violate any Environmental Law after the Closing Time or that may give rise to any environmental liability, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, study or investigation (i) under any Environmental Law, or (ii) based on or related to the manufacture, processing, distribution, use, treatment, storage (including without limitation underground storage tanks), disposal, transport or handling, or the emission, discharge, release or threatened release of any hazardous substance.

(s) Material Agreements . Except for the Merger Agreement and the Transaction Documents, the Company is not, and at the Closing Time will not be, a party to any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the Commission as an exhibit to a registration statement on Form S-1 if the Company were immediately after the Closing Time registering its securities on such form under the Securities Act. The Company and Merger Sub have in all material respects performed all of the obligations required to be performed by them to date under the Merger Agreement and has received no notice of default and is not in default thereunder. No existing provision of the Charter, the By-laws, the Transaction Documents or any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement of the Company will limit the payment of dividends on the New Common Stock.

(t) Transactions with Affiliates . Except as may be contemplated by the Merger Agreement, there are no loans, leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions of the Company with or relating to any Affiliate, employee or consultant of the Company or any member of the immediate family of such Affiliate, officer, director, employee or consultant or any corporation or other juridical entity controlled by such Affiliate, officer, director, employee, consultant, director or stockholder, or a member of the immediate family of such Affiliate, officer, director, employee or consultant. As used herein, the term “ Affiliate ” has the meaning ascribed to it in Rule 405 promulgated under the Securities Act.

(u) Securities Act . Neither the Company nor any of its Affiliates, officers or directors nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of any Common Shares.

(v) Governmental Approvals . Except for the filing of any notice prior or subsequent to the Closing Time that may be required under applicable state and/or federal securities

 
 

laws, including the filing of a Form D, and a registration statement to be filed pursuant to the Registration Rights Agreement, no authorization, consent, approval, license, exemption, filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is or will be necessary for, or in connection with, the execution or delivery of the Shares, or for the performance by the Company or Merger Sub of its obligations under the Transaction Documents.

(w) Employees . The Company is not and has never been a party to any collective bargaining arrangement or agreement covering any of its employees or any employment contract, agreement regarding proprietary information, non-competition agreement, non-solicitation agreement, confidentiality agreement, or any other similar contract or restrictive covenant, relating to the right of any officer, employee or consultant employed or to be employed or engaged by the Company that the Company would be required to disclose in any report that it would be required to file with the Commission a copy of which would be required to be filed with the Commission as an exhibit to a registration statement on Form S-1 if the Company were immediately after the Closing Time registering its securities on such form under the Securities Act.

(x) Absence of Certain Developments . Since the date of the Financial Statement relating to it, neither the Company nor Target has:

(i) issued any stock, bonds, interest units or other securities or any rights, options or warrants with respect thereto, except for shares of the Company described herein as being issued and outstanding;

(ii) borrowed any amount or incurred or become subject to any liabilities (absolute or contingent) except current liabilities incurred in the ordinary course of business which are comparable in nature and amount to the current liabilities incurred in the ordinary course of business during the comparable portion of its prior fiscal year, as adjusted to reflect the current nature and volume of the its respective business;

(iii) discharged or satisfied any lien or encumbrance or paid any obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of its business;

(iv) declared or made any payment or distribution of cash or other property to stockholders with respect to its stock, or purchased or redeemed, or made any agreements so to purchase or redeem, any shares of its capital stock;

(v) sold, assigned or transferred any other tangible assets, or cancelled any debts or claims, except in the ordinary course of business;

(vi) sold, assigned or transferred any patent rights, trademarks, trade names, copyrights, trade secrets or other intangible assets or intellectual property rights, or disclosed any proprietary confidential information to any person except to customers in the ordinary course of its business;

(vii) suffered any substantial losses or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of prospective business;

(viii) made any changes in employee compensation except in the ordinary course of business and consistent with past practices;

 
 

(ix) made capital expenditures or commitments therefor in excess of $50,000 in the aggregate;

(x) except for the Company in connection with this Agreement and the Company and Target in connection with the Merger Agreement, entered into any other transaction other than in the ordinary course of business, or entered into any other material transaction, whether or not in the ordinary course of business;

(xi) made charitable contributions or pledges in excess of $10,000 in the aggregate;

(xii) suffered any material damage, destruction or casualty loss, whether or not covered by insurance;

(xiii) experienced any material problems with labor or management in connection with the terms and conditions of their employment;

(xiv) effected any two or more events of the foregoing kind which would be material to the Company or Target; or

(xv) except for the Company in connection with this Agreement and the Company and Target in connection with the Merger Agreement, entered into an agreement, written or otherwise, to take any of the foregoing actions.

(y) Public Utility Holding Company Act and Investment Company Act Status . The Company is not a “holding company” or a “public utility company” as such terms are defined in the Public Utility Holding Company Act of 1935. The Company is not, and immediately upon the Closing will not be, an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

(z) ERISA . Neither the Company nor Target has any “employee pension benefit plan” (as that term is defined in Section 3 of the Employee Income Retirement Act of 1974.)

(aa) No Integrated Offering . Neither the Company nor any of its Affiliates, officers or directors nor any person acting on its or their behalf, has directly or indirectly made any offer or sale of any security or solicited any offer to buy any security under circumstances that would cause the offering of the Shares purchased and sold pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the Securities Act so as to prevent the Company from selling the Shares pursuant to Rule 506 under the Securities Act, nor will the Company take, or permit any of its Affiliates, officers, directors or employees to take, any action or steps that would cause the offering of the Shares to be integrated with other offerings.

(bb) No Registration Statement . The Company does not have any registration statement pending before the Commission or currently under the Commission’s review and for at least one year prior to the date hereof, has not offered or sold any of its equity securities or debt securities convertible into shares of Existing Common Stock or New Common Stock, except to the persons who are purchasing shares of New Common Stock in the Private Placement or to the persons who will be entitled to receive shares of New Common Stock at the Effective Time of the Merger.

(cc) Disclosure . Neither this Agreement nor any other documents, certificates or instruments furnished to Purchaser by or on behalf of the Company in connection with this Agreement contains any untrue statement of a material fact or omits to state a material fact nec

 
 

essary in order to make the statements made herein or therein, taken as a whole and in the light of the circumstances under which they were made herein or therein, not false or misleading.

2.2 Representations and Warranties of Purchaser . Purchaser hereby makes the following representations and warranties to the Company as of the date hereof and the Closing Time:

(a) Organization and Good Standing of Purchaser . If Purchaser not a natural person, it is a corporation, partnership or limited liability company validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization.

(b) Authorization and Power . Purchaser has all requisite power and authority to execute and deliver and to perform to enter into and perform the Transaction Documents. The execution, delivery and performance of the Transaction Documents and the consummation by it of the transactions contemplated thereby have been duly authorized by all requisite action, and no further consent or authorization of Purchaser or, if Purchaser is not a natural person, its Board of Directors, stockholders, members, or partners, as the case may be, is required for such authorization. Each of the Transaction Documents constitutes, or when executed and delivered will constitute, the legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting the enforcement of, creditors’ rights generally and remedies or by other equitable principles of general application.

(c) No Conflicts . The execution and delivery and the performance of the Transaction Documents do not and will not: (i) if Purchaser is not a natural person, result in a violation of Purchaser’s articles or certificate of incorporation or organization, by-laws, operating agreement, partnership agreement or similar instrument or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of any agreement, indenture or instrument or obligation to which Purchaser is a party or by which its properties or assets are bound, or result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency applicable to Purchaser or its properties (except for such conflicts, defaults and violations as would not, individually or in the aggregate, have a material adverse effect on Purchaser). Purchaser is not required 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 the Transaction Documents, provided that, for purposes of the representation made in this sentence, Purchaser is assuming and relying upon the accuracy of the relevant representations, warranties and agreements of the Company set forth in this Agreement.

(d) Acquisition for Investment . Purchaser is acquiring the Shares solely for its own account for the purpose of investment and not with a view to or for sale in connection with distribution. Purchaser does not have a present intention to sell the Shares, nor a present arrangement (whether or not legally binding) or intention to effect any distribution of the Shares to or through any person or entity; provided, however, that by making the representations herein and subject to Section 2.2(h) below, Purchaser does not agree to hold the Shares for any minimum or other specific term, otherwise than to satisfy any condition for their disposition pursuant to an exemption from registration under the Securities Act and reserves the right to dispose of the

 
 

Shares at any time in compliance with federal and state securities laws applicable to such disposition.

Purchaser acknowledges that it is able to bear the financial risks associated with an investment in the Shares and has sufficient knowledge and experience in investing in companies similar to the Company in terms of the Company’s stage of development and otherwise so as to be able to evaluate the risks and merits of its investment in the Company.

(e) Status of Purchaser . Purchaser is an “accredited investor” as defined in Rule 501 promulgated under the Securities Act or has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its investment in the Private Placement. Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act and Purchaser is not a broker-dealer or an Affiliate of a broker-dealer.

(f) Opportunities for Additional Information . Purchaser acknowledges that it has had access to the books and records of the Company and Target and has had the opportunity to ask questions of and receive answers from, or obtain additional information from, the executive officers of the Company and Target concerning the business of the Company (including the manner in which such business is intended to be conducted after the consummation of the Merger) and Target and the financial and other affairs of the Company and Target.

(g) No General Solicitation . Purchaser acknowledges that the Shares were not offered to Purchaser by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine, or similar media, or broadcast over television or radio, or (ii) any seminar or meeting to which such Purchaser was invited by any of the foregoing means of communications.

(h) Limitations on Resale . Purchaser understands and acknowledges that the Shares must be held indefinitely unless they are registered under the Securities Act or an exemption from such registration is available. Purchaser is familiar with Rule 144 of the rules and regulations of the Commission promulgated pursuant to the Securities Act (“ Rule 144 ”), and it understands that Rule 144 permits resales only under certain limited circumstances and understands and acknowledges that, to the extent that Rule 144 is not available for resales of the Shares, Purchaser will be unable to sell any Shares without either registration under the Securities Act or the availability of another exemption from such registration requirement.

(i) General . Purchaser understands and acknowledges that the Shares are being offered and sold in reliance on a transactional exemption from the registration requirements of federal and state securities laws and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of Purchaser set forth herein in order to determine the applicability of such exemptions and the suitability of Purchaser to acquire the Shares.

(j) Independent Investment . Except as may be disclosed in any filings with the Commission that Purchaser may be required to make under Section 13 and/or Section 16 of the Exchange Act, Purchaser is acting independently with respect to its investment in the Shares.

(k) Brokers . Purchaser has no knowledge of any brokerage or finder’s fees or commissions that are or will be payable by the Company or any Subsidiary to any broker, financial

 
 

advisor or consultant, finder, placement agent, investment banker, bank or other person or entity with respect to the transactions contemplated by this Agreement.

ARTICLE III.    COVENANTS

3.1 Covenants of the Company . The Company covenants with Purchaser as follows:

(a) Securities Compliance . The Company shall notify the Commission in accordance with its rules and regulations of the transactions contemplated by any of the Transaction Documents, including filing a reports on Form D with respect to the Shares if required under Regulation D and reports under applicable “blue sky” laws, and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Shares to Purchaser and their lawful transfer to Purchaser’s immediate transferees.

(b) Registration, Etc . The Company shall: (i) comply in all respects with its reporting and filing obligations, if any, under the Exchange Act, (ii) comply with all requirements related to any registration statement filed pursuant to the Registration Rights Agreement, and (iii) not take any action or file any document (whether or not permitted by the Securities Act, the Exchange Act or the rules promulgated thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations, if any, under the Exchange Act or the Securities Act, except as permitted under the Transaction Documents. Nothing in this Agreement shall require the Company to register its New Common Stock under Section 12 of the Exchange Act.

(c) Inspection Rights . Until the Closing Time and thereafter until the earlier of (i) 1 year after the Closing Time or (ii) until Purchaser has disposed of all of its Shares, the Company shall permit, during normal business hours and upon reasonable request and reasonable notice and in a manner that does not unduly disrupt the Company’s business, Purchaser or any employees, agents or representatives thereof may, for purposes reasonably related to Purchaser’s interests as a prospective or existing stockholder, to examine and make reasonable copies of and extracts from the records and books of account of, and visit and inspect the properties, assets, operations and business of the Company and any Subsidiary, and to discuss the affairs, finances and accounts of the Company and any Subsidiary with any of its officers, consultants, directors, and key employees.

(d) Compliance with Laws . The Company shall comply, and cause each Subsidiary to comply in all material respects, with all applicable laws, rules, regulations and orders.

(e) Keeping of Records and Books of Account . The Company shall keep and cause each Subsidiary to keep adequate records and books of account, in which complete entries will be made in accordance with GAAP, reflecting all financial transactions of the Company and Merger Sub, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made.

(f) Other Agreements . The Company shall not enter into any agreement the terms of which would restrict or impair the right or ability of the Company to perform its obligations under the Transaction Documents.

 
 

(g) Use of Proceeds . The proceeds from the sale of the Shares hereunder shall be used by the Company to reduce the principal amount of the Promissory Note, as that term is defined in the Merger Agreement.

( h ) Disclosure of Material Information . The Company covenants and agrees that neither it nor any other person acting on its behalf has provided or will provide Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information (other than with respect to the transactions contemplated by this Agreement), unless prior thereto Purchaser shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that Purchaser shall be relying on the Company’s compliance with this covenant in effecting transactions in the Shares.

(i) Pledge of Shares . The Shares may be pledged by Purchaser in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Shares. Such pledge shall not be deemed to be a transfer, sale or assignment of the Shares, and if Purchaser effects such pledge, it shall not be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to any Transaction Document, except for such delivery as may be reasonably necessary for the Company to perform its obligations under the next sentence; provided that Purchaser and the pledgee shall be required to comply with the provisions of Article V hereof in order to effect a sale, transfer or assignment of the Shares to or by such pledgee. At Purchaser’s expense, the Company hereby agrees to execute and deliver such documentation as a pledgee of New Common Stock may reasonably request in connection with such pledge.

3.2 Covenants of Purchaser . Purchaser covenants with the Company as follows:

(a) Trading Activities . Purchaser agrees that it shall not, directly or indirectly, engage in any short sales with respect to the Shares for a period of one (1) year following the effective date of the registration statement to be filed pursuant to the Registration Rights Agreement.

(b) Confidentiality . Purchaser agrees that it and its employees, agents and representatives will keep confidential and will not disclose, divulge or use (other than for purposes of monitoring its investment in the Company) any confidential information which it may obtain from the Company pursuant to financial statements, reports and other materials made available by the Company to Purchaser pursuant to this Agreement or Purchaser’s inspection rights hereunder, unless such information is known to the public through no fault of such Purchaser or its employees or representatives; provided, however, that Purchaser may disclose such information (a) to its attorneys, accountants and other professionals in connection with their representation of Purchaser with respect to all matters related to this Agreement and (b) upon prior written notice to the Company, to any prospective permitted transferee of the Shares, so long as the prospective permitted transferee agrees to be bound by the provisions of this subsection. At the request of the Company, Purchaser will execute a confidentiality agreement in form and substance reasonably acceptable to the Company as a prerequisite to the exercise of Purchaser’s inspection rights pursuant to Section 3.1(c). The Company may require any prospective permitted transferee of the Shares to execute such a confidentiality agreement prior to Purchaser’s disclosure of any such confidential information to such prospective permitted transferee.

 
 

ARTICLE IV.  CONDITIONS

4.1 Conditions Precedent to the Obligation of the Company . The obligation of the Company to perform its obligations hereunder at and after the Closing is subject to the satisfaction or written waiver, at or before the Closing, of all of the following conditions:

(a) Accuracy of Purchaser’s Representations and Warranties . All of the representations and warranties of Purchaser set forth herein shall be true and correct in all material respects as of the date when made and as of the Closing Time, as though made at that time, except for representations and warranties that are expressly made as of a particular date.

(b) Performance . Purchaser 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 Purchaser at or prior to the Closing.

(c) No Injunction . No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority which prohibits the consummation of any of the transactions contemplated by this Agreement.

(d) Closing . The Closing under the Merger Agreement shall have occurred.

(e) Verification of Status as Accredited Investor . Purchaser shall have verified its status as an accredited investor, as represented and warranted in Section 2.2(e), by providing written confirmation thereof from one of the following persons or entities that such person or entity has taken reasonable steps to verify that Purchaser is an accredited investor within the prior 3 months and has determined that Purchaser is an accredited investor:

(1) a broker-dealer registered with the Commission;

(2) an investment adviser registered with the Commission;

(3) a licensed attorney who is in good standing under the laws of the jurisdictions in which he or she is admitted to practice law; or

(4) a certified public accountant who is duly registered and in good standing under the laws of the place of his or her residence or principal office.

4.2 Conditions Precedent to Purchaser’s Obligation . The obligation of Purchaser to perform its obligations hereunder at and after the Closing is subject to the satisfaction or written waiver, at or before the Closing, of all of the following conditions:

(a) Accuracy of the Company’s Representations and Warranties . All of the representations and warranties of the Company set forth herein shall be true and correct in all respects as of the date when made and as of the Closing Time, as though made at that time, except for representations and warranties that are expressly made as of a particular date, which need be true and correct in all material respects only as of such date.

(b) Performance by the Company . The Company 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 the Company at or prior to the Closing.

 
 

(c) No Injunction . No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority which prohibits the consummation of any of the transactions contemplated by this Agreement.

(d) No Proceedings or Litigation . No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and no investigation by any governmental authority shall have been threatened, against the Company or any Subsidiary, or any of the Affiliates, officers, directors or employees of the Company or Merger Sub seeking to restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages in connection with such transactions.

(e) Secretary’s Certificate . The Company shall have delivered to Purchaser a secretary’s certificate, dated as of the date of the Closing, as to (i) the resolutions of the board of directors of the Company authorizing this Agreement and the issuance of the Shares, (ii) the absence of any amendment to Charter or the By-laws after the date of this Agreement, and (iii) the incumbency of the officers of the Company executing the Transaction Documents and any other documents required to be executed or delivered in connection therewith.

(f) Material Adverse Effect . No Material Adverse Effect shall have occurred at or before the Closing Time.

(g) Closing under Merger Agreement . Prior to the Closing, the closing under the Merger Agreement shall have occurred.

ARTICLE V.  STOCK CERTIFICATE LEGEND

5.1 Legend . Each certificate representing the Shares shall be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required by applicable state securities or “blue sky” laws):

THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE “SECURITIES”) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

The Company will reissue certificates representing any of the Shares, without the legend set forth above, if at such time, prior to making any transfer of any such Shares, the holder thereof shall give written notice to the Company describing the manner and terms of such transfer as the Company may reasonably request. Such proposed transfer and reissuance will not be effected until: (a)(i) the Company has received an opinion of counsel reasonably satisfactory to the Company to the effect that the registration of the Shares under the Securities Act is not required in connection with such proposed transfer, (ii) a registration statement under the Securities Act covering such proposed disposition has been filed by the Company with the Commission under

 
 

the Securities Act and has become effective, (iii) the Company has received an opinion of such to the effect that that such registration is not required, or (iv) the Company has received an opinion of such counsel to the effect that the Shares may be sold pursuant to the exemption from registration provided by Rule 144 under the Securities Act; and (b)(i) the Company has received an opinion of such counsel to the effect that registration or qualification under the securities or “blue sky” laws of any state is not required in connection with such proposed disposition, or (ii) compliance with applicable state securities or “blue sky” laws has been effected. The Company will respond to any such notice from a holder within five (5) business days. In the case of any proposed transfer under this Section 5.1, the Company will use reasonable efforts to comply with any such applicable state securities or “blue sky” laws, but shall in no event be required (i) to qualify to do business in any state where it is not then qualified, (ii) to take any action that would subject it to tax or to the general service of process in any state where it is not then subject thereto, or (iii) to comply with state securities or “blue sky” laws of any state for which registration by coordination is unavailable to the Company. The restrictions on transfer contained in this Section 5.1 shall be in addition to, and not by way of limitation of, any other restrictions on transfer contained in any other section of this Agreement or imposed by law or regulation.

ARTICLE VI.    INDEMNIFICATION

6.1 Indemnity . The Company will indemnify and hold harmless Purchaser and, as applicable, his or its directors, officers, managers, partners, members, shareholders, employees, consultants and agents, together with his or its respective heirs, successors and assigns, from and against any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by Purchaser as a result of any inaccuracy in or breach of the representations, warranties or covenants made by the Company herein. Purchaser agrees to indemnify and hold harmless the Company and, as applicable, his or its directors, officers, managers, partners, members, shareholders, employees, consultants and agents, together with his or its respective heirs, successors and assigns, from and against any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by the Company as a result of any inaccuracy in or breach of the representations, warranties or covenants made by Purchaser herein.

6.2 Indemnification Procedure . A party entitled to indemnification under this Article VI (an “ indemnified party ”) will give written notice to the party from whom it seeks indemnification (an “ indemnifying party ”) of any matter giving rise to a claim for indemnification; provided, however, that the failure of any party entitled to indemnification hereunder to give notice as provided herein shall not relieve the indemnifying party of its obligations under this Article VI, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In the event that any action, proceeding or claim is brought against an indemnified party in respect of which indemnification is sought hereunder, the indemnifying party shall be entitled to participate in and, unless in the reasonable judgment of the indemnified party a conflict of interest between it and the indemnifying party may exist with respect of such action, proceeding or claim, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. In the event that the indemnifying party advises an indemnified party that it will contest such a claim for indemnification hereunder, or fails, within thirty (30) days of receipt of any indemnification notice to notify, in writing, such person of its election to defend, settle or compromise, at its sole cost and expense, any action, proceeding or claim (or discontinues its defense at any time

 
 

after it commences such defense), the indemnified party may, at its option, defend, settle or otherwise compromise or pay such action or claim. In any event, unless and until the indemnifying party elects in writing to assume and does assume the defense of any such claim, proceeding or action, the indemnified party’s costs and expenses arising out of the defense, settlement or compromise of any such action, claim or proceeding shall be losses subject to indemnification hereunder. The indemnified party shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the indemnified party which relates to such action or claim. The indemnifying party shall keep the indemnified party fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. If the indemnifying party elects to defend any such action or claim, then the indemnified party shall be entitled to participate in such defense with counsel of its choice at its sole cost and expense.

Notwithstanding anything in this Article VI to the contrary, (i) the indemnifying party shall not be liable for any settlement of any action, claim or proceeding effected without its prior written consent and (ii) the indemnifying party shall not, without the indemnified party’s prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof which imposes any future obligation on the indemnified party or which does not include, as an unconditional term thereof, the giving by the claimant or the plaintiff to the indemnified party of a release from all liability in respect of such claim.

Indemnification under this Article VI shall be made by periodic payments of the amount thereof during the course of investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred, so long as the indemnified party irrevocably agrees to refund such moneys if it is ultimately determined by a court of competent jurisdiction that such party was not entitled to indemnification. The indemnity agreements contained herein shall be in addition to (a) any cause of action or similar rights of the indemnified party against the indemnifying party or others, and (b) any liabilities the indemnifying party may be subject to pursuant to the law.

ARTICLE VII.   MISCELLANEOUS

7.1 Fees and Expenses . Except as otherwise set forth in the Transaction Documents, each party shall pay the fees and expenses of its advisors, counsel, accountants and other experts, if any, and all other expenses, incurred by such party incident to the negotiation, preparation, execution, delivery and performance thereof.

7.2 Specific Enforcement, Consent to Jurisdiction .

(a) The Company and Purchaser acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent or cure breaches of the provisions hereof and to enforce specifically the terms and provisions hereof, this being in addition to any other remedy to which either party may be entitled by law or equity.

(b) All matters relating to this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Florida, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings in respect of this Agreement (whether brought against a party hereto or its respective Affiliates, directors, manag

 
 

ers, officers, shareholders, members, employees or agents) shall be submitted to binding arbitration with the American Arbitration Association in Marion County, Florida. This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted.

7.3 Entire Agreement; Amendment . This Agreement sets forth the entire understanding and agreement of the parties with respect to the matters covered hereby and, except as specifically set forth herein, neither party makes any representation, warranty or covenant or gives any undertaking with respect to such matters. This Agreement supersedes all prior understandings and agreements with respect to said subject matter hereof, all of which are merged herein. This Agreement may be amended only by a written instrument signed by the parties and no provision hereof may be waived other than by a written instrument signed by the party against whom enforcement of any such waiver is sought.

7.4 Notices . Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be delivered by a recognized courier service, fully prepaid and properly addressed upon the earlier of (i) actual receipt thereof, as shown by the records of such courier or (ii) five days after the receipt thereof by the courier from the party giving it. The addresses for such notice, demand, request, waiver or other communication shall be:

If to the Company:

Prior to the Closing, at: After the Closing, at

Acology, Inc. Acology, Inc.

11415 NW 123d Lane 912 M aer ti n L a n e

Reddick, FL 32686 F u ll er t on, C A 92831

If to Purchaser:

 

 

Either party may from time to time change its address for notice by giving at least five (5) days written notice of such changed address to the other party.

7.5 Waiver . No waiver by any party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provisions, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.

7.6 Headings . The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof.

7.7 Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.

7.8 No Third Party Beneficiaries . This Agreement is intended for the benefit of the parties and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

 
 

7.9 Survival . The representations and warranties of the Company and Purchaser shall survive the execution and delivery hereof and the Closing hereunder for a period of two years following the Closing Time.

7.10 Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement and shall become effective when counterparts have been signed by each party and delivered to the other party hereto, it being understood that all parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature were the original thereof.

7.12 Publicity . The Company agrees that it will not disclose, and will not include in any public announcement, the name of Purchaser without the consent of Purchaser unless and until such disclosure is required by law or applicable regulation, and then only to the extent of such requirement.

7.13 Severability . The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions hereof shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision hereof and such provision or part shall be construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein.

7.14 Attorney’s Fees . If any Party hereto initiates any legal or equitable action arising out of or in connection with this Agreement, the prevailing party in such action shall be entitled to recover from the other party all reasonable attorneys’ fees, expert witness fees and expenses incurred by the prevailing party in connection therewith.

7.15 Further Assurances . From and after the date of this Agreement, upon the request of either party, the other party shall execute and deliver such instrument, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.

ACOLOGY, INC.

By:

Richard Astrom

President

Shares to be Purchased Purchase Price

$_________

 

Exhibit 10.2

REGRISTRATION RIGHTS AGREEMENT  

 

THIS REGISTRATION RIGHTS AGREEMENT (the “ Agreement ”), dated as of _________ ___, 2014, by and between ACOLOGY, INC., a Florida corporation (the “ Company ”), and __________________________ (“ Purchaser ”),

WITNESSETH:

WHEREAS, the Company and Purchaser have entered into a Securities Purchase Agreement, dated as of January 27, 2014 (the “ Securities Purchase Agreement ”), whereunder, among other things, Purchaser will purchase the Registrable Securities from the Company; and

WHEREAS, the execution of this Agreement by the Company and its delivery to Purchaser is required by the Securities Purchase Agreement,

NOW THEREFORE, in consideration of the premises and the covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which the Parties hereto acknowledge, the Parties agree as follows:

ARTICLE 1. DEFINITIONS

Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Securities Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

Advice ” shall have meaning set forth in Section 3.2(b).

Affiliate ” means, with respect to any Person, any other Person that directly or indirectly controls or is controlled by or under common control with such Person. For the purposes of this definition, “control,” when used with respect to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise; and the terms of “affiliated,” “controlling” and “controlled” have meanings correlative to the foregoing.

Board ” shall have meaning set forth in Section 3.3.

Business Day ” means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in the States of New York or Florida generally are authorized or required by law or other government action to close.

Closing Date ” shall have the meaning set forth in the Securities Purchase Agreement.

Commission ” means the United States Securities and Exchange Commission.

Common Stock ” means the Company’s Common Stock, par value $0.00001 per share, authorized after the reverse split to occur on February 14, 2014, pursuant to the Company’s articles of incorporation, as amended.

Effectiveness Period ” shall have the meaning set forth in Section 2.1.

Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 
 

Filing Date ” means the date on which the Registration Statement is initially filed.

Indemnified Party ” shall have the meaning set forth in Section 5.3.

Indemnifying Party ” shall have the meaning set forth in Section 5.3.

Losses ” shall have the meaning set forth in Section 5.1.

Other Registrable Securities ” means the shares of Common Stock held by the Persons, other than Purchaser, who purchased such shares in the offering of which the shares of Common Stock purchased by Purchaser were a part.

Person ” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

Proceeding ” means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

Prospectus ” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference in such Prospectus.

Registrable Securities ” means the number of shares of Common Stock purchased by Purchaser pursuant to the Securities Purchase Agreement, which number is also set forth opposite Purchaser’s signature to this Agreement.

Registration Statement ” means any registration statement contemplated by this Agreement, including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference in such registration statement.

Rule 144 ” means Rule 144 promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

Rule 158 ” means Rule 158 promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

Rule 415 ” means Rule 415 promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 
 

Rule 424 ” means Rule 424 promulgated by the Commission under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

Securities Act ” means the Securities Act of 1933, as amended.

Securities Purchase Agreement ” has the meaning set forth in the Recitations.

ARTICLE 2. RESALE REGISTRATION STATEMENT

2.1 Registration Statement . The Company shall prepare and file with the Commission the Registration Statement, which shall be a “resale” registration statement providing for the resale of the Registrable Securities pursuant to an offering to be made on a continuous basis under Rule 415. The Registration Statement shall be on Form S-1 and shall cover to the extent allowable under the Securities Act and the rules promulgated thereunder, such indeterminate number of additional shares of Common Stock resulting from stock splits, stock dividends or similar transactions of and/or from the Registrable Securities. The Registration Statement may include only the Registrable Securities and the Other Registrable Securities. The Registration Statement shall contain “Form 10 Information,” as that term is defined in Rule 144, and shall state, if true, that the Company has ceased to be an issuer described in paragraph (i)(1)(i) of Rule 144. The Company shall use its best efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof and to keep the Registration Statement continuously effective under the Securities Act until the earlier of (x) the date when all Registrable Securities covered by such Registration Statement have been sold or (y) the date on which all Registrable Securities then held by Purchaser may be sold without restriction as to volume pursuant to Rule 144, as determined by counsel satisfactory to the Company in a written opinion addressed to the Company and its transfer agent (the “ Effectiveness Period ”).

2.2 Certain Matters . In the event that, due to limits imposed by the Commission, the Company is unable on the Registration Statement to register for resale under Rule 415 of Regulation C under the Securities Act all of the Registrable Securities that it has agreed to file pursuant to the first sentence of Section 2.1, the Company shall include in the Registration Statement (which may be a subsequent Registration Statement if the Company is required, or determines that it is desirable, to withdraw the original Registration Statement and file a new Registration Statement in order to rely on Rule 415 with respect to the full such amount of the Registrable Securities permitted by the Commission.

ARTICLE 3. REGISTRATION PROCEDURES

3.1 Obligations of the Company . The Company shall:

(a)     After it has prepared and filed the Registration Statement with the Commission as provided herein, the Securities Act and the rules promulgated thereunder, use its best efforts to cause the Registration Statement to become effective and remain effective as provided herein; provided, however, that not less than five (5) Business Days prior to the filing of the Registration Statement or any related Prospectus or any amendment or supplement thereto, the Company shall (i) furnish to Purchaser copies of all such documents proposed to be filed, which documents will be subject to the review of Purchaser, and (ii) cause its officers and directors, counsel and

 
 

independent certified public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of Purchaser, to conduct a reasonable review of such documents. The Company shall not file the Registration Statement or any such Prospectus or any amendments or supplements thereto to which the holders of a majority in interest of the Registrable Securities and the Other Registrable Securities shall reasonably object in writing within three (3) Business Days of their receipt thereof.

(b)    (i) Prepare and file with the Commission such amendments, including post-effective amendments, to the Registration Statement, as may be necessary to keep it continuously effective as to the Registrable Securities covered thereby for the applicable Effectiveness Period and prepare and file with the Commission any additional Registration Statement as necessary in order to register for resale under the Securities Act all of the Registrable Securities; (ii) cause any related Prospectus to be amended or supplemented by any required Prospectus supplement, and as so supplemented or amended to be filed pursuant to Rule 424 (or any similar provisions then in force) promulgated under the Securities Act; (iii) respond as promptly as possible, but in no event later than ten (10) Business Days (unless response during such period would be impossible or unduly burdensome), to any comments received from the Commission with respect to any such Registration Statement or any amendment thereto; (iv) file the final Prospectus pursuant to Rule 424 of the Securities Act no later than 9:00 a.m. Eastern Time within three (3) Business Days following the date on which any such Registration Statement is declared effective by the Commission; and (v) comply in all material respects with the provisions of the Securities Act and the Exchange Act with respect to the disposition of all Registrable Securities covered by the Registration Statement during the Effectiveness Period in accordance with the intended methods of disposition by Purchaser set forth in the Registration Statement as so amended or in the Prospectus as so supplemented.

(c)        Notify Purchaser as promptly as possible (and, in the case of (i)(A) below, not less than three (3) Business Days prior to such filing, and in the case of (iii) below, on the same day of receipt by the Company of such notice from the Commission) and (if requested by any such Person) confirm such notice in writing no later than one (1) Business Day following the day (i)(A) when a Prospectus or any Prospectus supplement or post-effective amendment to any Registration Statement is filed; (B) when the Commission notifies the Company whether there will be a “review” of the Registration Statement and whenever the Commission comments in writing on the Registration Statement; and (C) with respect to the Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to the Registration Statement or a Prospectus or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement covering any of the Registrable Securities or the initiation or threatening of any proceedings for that purpose; (iv) if at any time any of the representations and warranties of the Company contained herein or in any agreement contemplated hereby ceases to be true and correct in all material respects; (v) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose; and (vi) of the occurrence of any event that makes any statement made in the Registration Statement or a Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to the Registration Statement,

 
 

Prospectus or other documents so that the Registration Statement or a Prospectus, as the case may be, will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(d)        Use its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal of, as promptly as possible, (i) any order suspending the effectiveness of the Registration Statement or (ii) any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction.

(e)        If requested by the holders of a majority in interest of the Registrable Securities and the Other Registrable Securities, (i) promptly incorporate in a Prospectus supplement or amend the Registration Statement such information as the Company reasonably agrees should be included therein and (ii) make all required filings of such a supplement to a Prospectus or a post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in a Prospectus supplement or post-effective amendment.

(f)        If requested by Purchaser, furnish to it, without charge, at least one conformed copy of the Registration Statement and each amendment thereto, including financial statements and schedules, all documents incorporated or deemed to be incorporated therein by reference, and all exhibits to the extent requested by such Purchaser of such documents with the Commission, provided, that any such item which is available on the EDGAR system (or successor thereto) need not be furnished.

(g)       Promptly deliver to Purchaser, without charge, as many copies of the Prospectus or Prospectuses (including each form of prospectus) and each amendment or supplement thereto as Purchaser may reasonably request; and subject to the provisions of Sections 3(m) and 3(n), the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by Purchaser in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto; provided that any such item which is available on the EDGAR system (or successor thereto) need not be furnished.

(h)       Prior to any public offering of Registrable Securities, use its best efforts to register or qualify or cooperate with Purchaser in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as Purchaser requests in writing, to keep each such registration or qualification (or exemption therefrom) effective during the Effectiveness Period and to do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the Registration Statement; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or subject the Company to any material tax in any such jurisdiction where it is not then so subject.

(i)         Cooperate with Purchaser to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold pursuant to the Registration Statement, which certificates, to the extent permitted by the Securities Purchase Agreement and applicable federal and state securities laws, shall be free of all restrictive legends, and to enable such

 
 

Registrable Securities to be in such denominations and registered in such names as Purchaser may request in connection with any sale of Registrable Securities.

(j) Upon the occurrence of any event contemplated by Section 3.1(c)(vi), as promptly as possible, prepare a supplement or amendment, including a post-effective amendment, to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, and file any other required document so that, as thereafter delivered, neither the Registration Statement nor such Prospectus will contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(k) Use its best efforts to cause all Registrable Securities relating to any Registration Statement to continue to be listed or quoted on the website maintained by OTC Markets Group at or above the OTCQB level.

(l) Comply in all material respects with all applicable rules and regulations of the Commission and make generally available to its security holders all documents filed or required to be filed with the Commission, including, but not limited, to, earning statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 not later than forty five (45) days after the end of any 12-month period (or ninety (90) days after the end of any 12-month period if such period is a fiscal year) commencing on the first day of the first fiscal quarter of the Company after the effective date of the Registration Statement, which statement shall conform to the requirements of Rule 158.

(m) Within three (3) Business Days after the Registration Statement is declared effective by the Commission, deliver, or cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to Purchaser) confirmation that the Registration Statement has been declared effective by the Commission.

3.2 Obligations of Purchaser . Purchaser shall:

(a) not sell any Registrable Securities under the Registration Statement until the Company has electronically filed the related Prospectus as then amended or supplemented and notice from the Company that such Registration Statement and any post-effective amendments thereto have become effective.

(b) upon receipt of a notice from the Company of the occurrence of any event of the kind described in Section 3.1(c)(ii), 3.1(c)(iii), 3.1(c)(iv), 3.1(c)(v) or 3.1(c)(vi), Purchaser will forthwith discontinue disposition of such Registrable Securities under the Registration Statement until Purchaser’s receipt of the copies of the supplemented Prospectus and/or amended Registration Statement contemplated by Section 3.1(j), or until it is advised in writing (the “ Advice ”) by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such Prospectus or Registration Statement.

(c) promptly after request by the Company, furnish to the Company information regarding Purchaser and the distribution of the Registrable Securities as is required by law to be disclosed in the Registration Statement, Prospectus, or any amendment or supplement thereto, and

 
 

the Company may exclude from such registration the Registrable Securities if Purchaser unreasonably fails to furnish such information within a reasonable time after receiving such request. If the Registration Statement refers to Purchaser by name or otherwise as the holder of any securities of the Company, then Purchaser may require (if such reference to Purchaser by name or otherwise is not required by the Securities Act or any similar federal statute then in force) the deletion of the reference to Purchaser in any amendment or supplement to the Registration Statement filed or prepared subsequent to the time that such reference ceases to be required.

3.3 Suspension of Registration Obligation . If (i) there is material non-public information regarding the Company which the Company’s Board of Directors (the “ Board ”) determines not to be in the Company’s best interest to disclose and which the Company is not otherwise required to disclose, (ii) there is a significant business opportunity (including, but not limited to, the acquisition or disposition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer or other similar transaction) available to the Company which the Board determines not to be in the Company’s best interest to disclose, or (iii) if applicable, the Company is required to file a post-effective amendment to the Registration Statement in order to incorporate the Company’s quarterly and annual reports and audited financial statements on Forms 10-Q and 10-K, then the Company may (x) postpone or suspend filing of a registration statement for a period not to exceed thirty (30) consecutive days or (y) postpone or suspend effectiveness of a registration statement for a period not to exceed twenty (20) consecutive days; provided that the Company may not postpone or suspend effectiveness of the Registration Statement under this Section 3(o) for more than forty-five (45) days in the aggregate during any three hundred sixty (360) day period; and provided further, however, that no such postponement or suspension shall be permitted for consecutive twenty (20) day periods arising out of the same set of facts, circumstances or transactions.

ARTICLE 4. REGISTRATION EXPENSES

All fees and expenses incident to the performance of or compliance with this Agreement by the Company, except as and to the extent specified in this Section 4, shall be borne by the Company whether or not the Registration Statement is filed or becomes effective and whether or not any Registrable Securities are sold pursuant to the Registration Statement. The fees and expenses referred to in the foregoing sentence shall include, without limitation, and to the extent applicable (i) all registration and filing fees (including, without limitation, fees and expenses (A) with respect to filings required to be made with each securities exchange or market on which Registrable Securities are required hereunder to be listed, if any, (B) with respect to filing fees required to be paid to the Financial Industry Regulatory Authority and (C) in compliance with state securities or Blue Sky laws (including, without limitation, fees and disbursements of counsel for Purchaser in connection with Blue Sky qualifications of the Registrable Securities and determination of the eligibility of the Registrable Securities for investment under the laws of such jurisdictions as the Company may designate)), (ii) printing expenses (including, without limitation, expenses of printing certificates for Registrable Securities and of printing prospectuses if the printing of prospectuses is requested by the Company, (iii) messenger, telephone and delivery expenses, (iv) Securities Act liability insurance, if the Company elects to purchase such insurance, and (v) fees and expenses of all other Persons retained by the Company in connection with the consummation of the transactions contemplated by this Agreement, including, without limitation, the Company’s independent public accountants (including the expenses of any comfort letters or costs associated with the delivery by independent public accountants of a comfort letter or comfort

 
 

letters). In addition, the Company shall be responsible for all of its internal expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange if required hereunder. The Company shall not be responsible for any discounts, commissions, transfer taxes or other similar fees incurred by Purchaser in connection with the sale of the Registrable Securities.

ARTICLE 5. INDEMNIFICATION

5.1 Indemnification by the Company . The Company shall, notwithstanding any termination of this Agreement, indemnify and hold harmless Purchaser, its officers, directors, managers, partners, members, shareholders, agents, brokers, investment advisors and employees, each Person who controls Purchaser (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) and the officers, directors, agents and employees of each such controlling Person, to the full extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, costs (including, without limitation, costs of preparation and attorneys’ and expert witnesses’ fees) and expenses (collectively, “ Losses ”) (as determined by a court of competent jurisdiction in a final judgment not subject to appeal or review), as incurred, arising out of or relating to any violation of securities laws or untrue or alleged untrue statement of a material fact contained in any Registration Statement, any Prospectus or any form of prospectus or in any amendment or supplement thereto or in any preliminary prospectus, or arising out of or relating to any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, except to the extent, but only to the extent, that such untrue statements or omissions are based solely upon information regarding Purchaser furnished in writing to the Company by Purchaser expressly for use therein. The Company shall notify Purchaser promptly of the institution, threat or assertion of any Proceeding of which the Company is aware in connection with the transactions contemplated by this Agreement.

5.2 Indemnification by Purchaser . Purchaser shall indemnify and hold harmless the Company, its directors, officers, agents and employees, each Person who controls the Company (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, agents and employees of such controlling Persons, to the full extent permitted by applicable law, from and against all Losses (as determined by a court of competent jurisdiction in a final judgment not subject to appeal or review), as incurred, arising solely out of or based solely upon any untrue statement of a material fact contained in any Registration Statement, any Prospectus, or any form of prospectus, or in any amendment or supplement thereto, or arising solely out of or based solely upon any omission of a material fact required to be stated therein or necessary to make the statements therein (in the case of any Prospectus or form of prospectus or supplement thereto, in the light of the circumstances under which they were made) not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information so furnished in writing by Purchaser to the Company specifically for inclusion in the Registration Statement or such Prospectus. Notwithstanding anything to the contrary contained herein, Purchaser shall be liable under this Section 5(b) for only that amount as does not exceed the

 
 

net proceeds to Purchaser as a result of the sale of Registrable Securities pursuant to such Registration Statement.

5.3 Conduct of Indemnification Proceedings . If any Proceeding shall be brought or asserted against any Person entitled to indemnity hereunder (an “ Indemnified Party ”), such Indemnified Party promptly shall notify the Person from whom indemnity is sought (the “ Indemnifying Party ”) in writing, and the Indemnifying Party shall be entitled to assume the defense thereof, including the employment of counsel reasonably satisfactory to the Indemnified Party and the payment of all fees and expenses incurred in connection with defense thereof; provided, that the failure of any Indemnified Party to give such notice shall not relieve the Indemnifying Party of its obligations or liabilities pursuant to this Agreement, except (and only) to the extent that it shall be finally determined by a court of competent jurisdiction (which determination is not subject to appeal or further review) that such failure shall have proximately and materially adversely prejudiced the Indemnifying Party.

An Indemnified Party shall have the right to employ separate counsel in any such Proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed in writing to pay such fees and expenses; or (2) the Indemnifying Party shall have failed promptly to assume the defense of such Proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3) the named parties to any such Proceeding (including any impleaded parties) include both such Indemnified Party and the Indemnifying Party, and such parties shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party (in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense thereof and such counsel shall be at the expense of the Indemnifying Party). The Indemnifying Party shall not be liable for any settlement of any such Proceeding effected without its written consent, which consent shall not be unreasonably withheld or delayed. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, effect any settlement of any pending or threatened Proceeding in respect of which any Indemnified Party is a party and indemnity has been sought hereunder, unless such settlement includes an unconditional release of such Indemnified Party from all liability on claims that are the subject matter of such Proceeding.

All fees and expenses of the Indemnified Party (including reasonable fees and expenses to the extent incurred in connection with investigating or preparing to defend such Proceeding in a manner not inconsistent with this Section) shall be paid to the Indemnified Party, as incurred, within ten (10) Business Days of written notice thereof to the Indemnifying Party (regardless of whether it is ultimately determined that an Indemnified Party is not entitled to indemnification hereunder; provided, that the Indemnified Party shall reimburse all such fees and expenses to the extent it is finally judicially determined that such Indemnified Party is not entitled to indemnification hereunder).

5.4 Contribution . If a claim for indemnification under Section 5.1 or 5.2 is due but unavailable to an Indemnified Party because of a failure or refusal of a governmental authority to enforce such indemnification in accordance with its terms (by reason of public policy or otherwise), then each Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall

 
 

contribute to the amount paid or payable by such Indemnified Party as a result of such Losses, in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Party on the one hand and the Indemnified Party on the other from the offering of the Shares. If, but only if, the allocation provided by the foregoing sentence is not permitted by applicable law, the allocation of contribution shall be made in such proportion as is appropriate to reflect not only the relative benefits referred to in the foregoing sentence but also the relative fault, as applicable, of the Indemnifying Party and Indemnified Party in connection with the actions, statements or omissions that resulted in such Losses as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission of a material fact, has been taken or made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action, statement or omission. The amount paid or payable by a party as a result of any Losses shall be deemed to include, subject to the limitations set forth in Section 5.3, any reasonable attorneys’ or other reasonable fees or expenses incurred by such party in connection with any Proceeding to the extent such party would have been indemnified for such fees or expenses if the indemnification provided for in this Section was available to such party in accordance with its terms. In no event shall the Company be required to contribute an amount under this Section 5(d) in excess of the net proceeds received by it upon the sale of its Registrable Securities pursuant to a Registration Statement giving rise to such contribution obligation.

The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 5(d) were determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the immediately preceding paragraph. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not also guilty of such fraudulent misrepresentation.

The indemnity and contribution agreements contained in this Section are in addition to any liability that the Indemnifying Parties may have to the Indemnified Parties pursuant to the law.

ARTICLE 6. RULE 144

As long as Purchaser owns Registrable Securities, the Company will timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Section 13(a) or 15(d) of the Exchange Act and, if the Company is not required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act, but the availability of “current public information” (as that term is defined in Rule 144) will enable Purchaser to dispose of Registrable Securities under Rule 144, it will prepare and make publicly available in accordance with Rule 144 such current public information. The Company will also take such further action as Purchaser may reasonably request, all to the extent required from time to time to enable such Person to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act, other than providing legal opinions, within five (5) Business Days from the date of such request. Upon the request of Purchaser, the Company shall deliver to the Company a certificate of a duly authorized officer as to whether it has complied with such requirements. Notwithstanding anything in this Agreement, the Company shall not be

 
 

required to register any of its equity securities under Section 12 of the Exchange Act in order to enable Purchaser to dispose of Registrable Securities under Rule 144.

ARTICLE 7. MISCELLANEOUS

7.1 Remedies . In the event of a breach by the Company or Purchaser of any of their respective obligations under this Agreement, the Company or Purchaser, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company and Purchaser acknowledge and agree that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by either of them of any of the provisions of this Agreement and each hereby further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate.

7.2 No Inconsistent Agreements . The Company has not as of the date hereof entered into any agreement currently in effect with respect to its securities, nor shall the Company or any of its subsidiaries, on or after the date of this Agreement, enter into any such agreement that is inconsistent with the rights granted to Purchaser in this Agreement or otherwise conflicts with the provisions hereof; provided, however, that, without the consent of Purchaser, the Company may enter into agreements of like tenor to this Agreement respecting the Other Registrable Securities. Without limiting the generality of the foregoing, without the written consent of the holders of a majority of the then outstanding Registrable Securities and Other Registrable Securities, the Company shall not grant to any Person the right to request the Company to register any securities of the Company under the Securities Act unless the rights so granted are subject in all respects to the prior rights in full of the Company set forth herein and of the holder of the Registrable Securities hereunder and are not otherwise in conflict with the provisions of this Agreement or unless the registration statement with respect thereto is filed not less than one (1) year after the Registration Statement is declared effective by the Commission.

7.3 Amendments and Waivers . The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and Purchaser and the holders of the Registrable Securities and Other Registrable Securities shall have consented thereto.

7.4 Notices . Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be delivered by a recognized courier service, fully prepaid and properly addressed upon the earlier of (i) actual receipt thereof, as shown by the records of such courier or (ii) five days after the receipt thereof by the courier from the party giving it. The addresses for such notice, demand, request, waiver or other communication shall be:

If to the Company:

Acology, Inc.

912 M aer ti n L a n e

F u ll er t on, C A 92831

 
 

If to Purchaser:

 

 

Either party may from time to time change its address for notice by giving at least five (5) days written notice of such changed address to the other party.

7.5               Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns and shall inure to the benefit of each holder of the Registrable Securities and Other Registrable Securities and its successors and assigns. Neither party may assign this Agreement or any of its rights or obligations hereunder without the prior written consent of the other party and the Company may not assign this Agreement unless it also assigns to the same assignee all agreements relating to the registration of the Registrable Securities and Other Registrable Securities between the Company and such holders.

7.6 Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same Agreement and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature were the original thereof.

7.7 Governing Law; Jurisdiction . This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to any conflicts of law principles which would result in the application of the substantive law of another jurisdiction. This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted. The exclusive jurisdiction for the resolution of any conflicts regarding this Agreement shall be in the courts of Delaware. This exclusive jurisdiction is a material provision to this Agreement.

7.8 Cumulative Remedies . The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

7.9 Severability . If any term, provision, covenant or restriction of this Agreement is held to be invalid, illegal, void or unenforceable in any respect, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

 

 

 
 

7.10 Section Headings . The Section headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed by a person thereunto authorized as of the date first indicated above.

ACOLOGY, INC.

By:

Richard Astrom

President

[NAME OF PURCHASER] Registrable Securities

_________ shares

of Common Stock

By:

[Name]

[Title]

  Exhibit 10.3 PICTURE

EXCHANGE AGREEMENT

THIS EXCHANGE AGREEMENT, dated as of March 4, 2014, by and between ACOLOGY, INC., a Florida corporation formerly named “Pinecrest Investments Group, Inc.” (the “Corporation”), and RICHARD S. ASTROM (“Astrom”),

WITNESSETH:

WHEREAS, Astrom is the indirect holder of 35,000,000 shares of the Corporation’s Common Stock (the “Stock”); and

WHEREAS, the Corporation is indebted to Astrom in the amount of $151,269.00 (the “Debt”); and

WHEREAS, the parties wish to provide for the surrender of the Stock for extinguishment and for the extinguishment of the Debt; and

WHEREAS, the parties have determined to their satisfaction that the extinguishment of the Stock and the Debt constitutes sufficient consideration for the promissory note specified below; and

WHEREAS, the parties wish to satisfy the condition precedent set forth in Section 5.3(l) of that certain Agreement and Plan of Merger, dated as of December 24, 2013, and amended on March 4, 2014, by and among the Corporation, PNCR, ACQUISITION, LLC, a California limited liability company, and D&C DISTRIBUTORS, LLC, a California limited liability company, which is referred to herein as “ D&C ” (as so amended the “Merger Agreement”), to the effect that an agreement between the Corporation and Astrom respecting the subject matter hereof be executed and delivered at or prior to the Closing, as that term is defined therein.

NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. Promissory Note . Upon the execution and delivery of this Agreement, the Corporation shall execute and deliver to Astrom a convertible promissory note in the principal amount of $400,000 in the form annexed to the Merger Agreement as Exhibit A.

2. Pledge Agreement . Upon the execution and delivery of this Agreement, the Corporation and Astrom shall execute and deliver to one another the pledge agreement annexed in the form annexed to the Merger Agreement as Exhibit B.

3. Surrender of Certificate . Upon the execution and delivery of this Agreement, Astrom shall deliver to the Corporation a certificate or certificates representing the Stock, accompanied by a stock power by which the holder of the Shares shall transfer them to the Corporation, which stock power shall bear a signature guarantee of the signature of the holder of such certificate obtained from a participant in the Securities Transfer Agents Medallion Program, the Stock Exchanges Medallion Program or the New York Stock Exchange Medallion Signature Program.

4. Repayment of Debt . By virtue of the execution and delivery of the instruments specified in Sections 1 and 2, the Debt shall be extinguished.

5. Representation and Warranty of Astrom . Astrom represents and warrants to the Corporation that (i) the Debt is the only indebtedness of the Corporation owed to him, (ii) all

 
 

other indebtedness of the Corporation owing to any other person or entity has been discharged and (iii) no shares of any class or series of the capital stock of the Corporation, other than its common stock, have been issued.

6. Notices . All notices, requests and demands under this Agreement shall be given, and shall be deemed effective, in accordance with the provisions of the aforesaid promissory note. Either party may change its address for notice by notice in the manner provided in the aforesaid promissory note.

7. Severability . Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

8.                   Section Headings . The section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or to be taken into consideration in the interpretation hereof.

9.                   Successors and Assigns . This Agreement shall be binding upon the successors and assigns of the Pledgor and shall inure to the benefit of the parties and their respective heirs, administrators, successors and assigns.

10.               Governing Law . THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF). Each of the Parties hereby:

a. irrevocably consents and submit to the jurisdiction of the Courts of the State of Florida and waives any objection based on venue or forum non conveniens with respect to any action instituted therein arising under this Agreement, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agrees that any dispute arising out of the relationship between the Parties or their conduct in connection with this Agreement or otherwise shall be heard only in the courts described above; and
b. WAIVES TO THE FULL EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written.

ACOLOGY, INC. /s/ Richard S. Astrom Richard S. Astrom

By: /s/ Richard S. Astrom

Richard S. Astrom

Chief Executive Officer

Exhibit 10.4

PICTURE CONVERTIBLE PROMISSORY NOTE

 

US$400,000.00 Reddick, Florida

March 4, 2014

FOR VALUE RECEIVED, ACOLOGY, INC., a Florida corporation formerly named “Pinecrest Investments Group, Inc.” (the “ Maker ”), hereby promises to pay to the order of Richard S. Astrom (the “ Payee ”), on the Maturity Date (as that term is hereinafter defined) at 11415 NW 123rd Lane, Reddick, FL 32686, in accordance with the terms herein set forth, the principal amount of FOUR HUNDRED THOUSAND AND NO/100 DOLLARS (US$400,000.00), together with accrued and unpaid interest thereon. As used herein, the term “ Maturity Date ” shall mean the date which is one (1) year after the date hereof.

This Convertible Promissory Note is issued by Maker (a) in consideration of (i) the surrender to Maker of 35,000,000 shares of the common stock of the Maker, (ii) the extinguishment of all indebtedness of Maker to Payee on the date hereof, including, without limitation, the indebtedness of $151,269 recorded on the balance sheet contained in the balance sheet of Maker as at December 31, 2009, and (iii) Payee’s agreement to indemnify Maker from and hold it harmless against all other indebtedness that would be set forth in the financial statements of Maker prepared as of the Closing Date under and as defined in that certain Agreement and Plan of Merger, dated as of December 24, 2013, by and among Maker, PNCR, ACQUISITION, LLC, a California limited liability company, and D&C DISTRIBUTORS, LLC, a California limited liability company, which is referred to herein as “ D&C ” (the “Merger Agreement”), and (b) in satisfaction of the condition precedent set forth in Section 5.3(l) of the Merger Agreement. The merger to be consummated pursuant to the Merger Agreement is referred to herein as the “ Merger .”

1.       Interest . This Convertible Promissory Note shall bear interest at the rate of twenty-eight hundredths of one percent (0.28%) per annum [to be the Applicable Federal Rate for 1-year loans when this Convertible Promissory Note is signed] unless and until the occurrence of an Event of Default (as defined below) occurs. After an Event of default, this Convertible Promissory No