As filed with the Securities and Exchange Commission on October 20, 2010
Registration No. 333-_________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------------
REO PLUS , INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)

Texas
6510
27-0788438
------------------------------------------------------------------------------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
(Primary Standard Industrial Classification Code Number)
(I.R.S. Employer
Identification Number)

Richard J. Church
3014 McCulloch Circle
Houston, Texas 77056
Telephone:  (713) 599-1910
-----------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices.)

Richard J. Church
President
3014 McCulloch Circle
Houston, Texas 77056
Telephone:  (713) 599-1910
Fax: (713) 669-9018
With a copy to:
Randall W. Heinrich
Gillis, Paris & Heinrich, PLLC
8 Greenway Plaza, Suite 818
Houston, Texas 77046
Telephone: (713) 951-9100
Fax: (713) 961-3082
------------------------------------------------------------------------------------------------------------------------------------------------------
(Name, address, including zip code
and telephone number, including
area code, of agent for service.)
 

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

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box:   o

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.   o

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.   o

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.   o


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
o
 
Accelerated filer
o
         
Non-accelerated filer
(Do not check if smaller reporting company)
o
 
Smaller reporting company
x

CALCULATION OF REGISTRATION FEE
         
 
Title of each class
of securities to be
registered
 
 
Amount to be
registered
 
Proposed
maximum offering
price per unit (1)
Proposed
maximum
aggregate
offering price (1)
 
 
Amount of
registration fee
         
Common Stock
934,500
$0.0003
$311.50
$.03
____________________

(1)
The securities will be distributed to the stockholders of Akashic Ventures, Inc. for no consideration from such stockholders.  The figures in the table are estimated solely for purposes of calculating the registration fee pursuant to Rule 457(f)(2) under the Securities Act of 1933, based on one-third of the par value of 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 the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
 

 
 

 

 
PROSPECTUS
REO PLUS, INC.
 
934,500 Shares of Common Stock

This Prospectus relates to the distribution (the "Distribution") by Akashic Ventures, Inc., a Delaware corporation ("Akashic"), to holders of record of Akashic common stock at the close of business on __________________ _____, 2010 (the "Record Date") of 934,500 shares of the common stock, par value $.001 per share (the "Common Stock”), of REO Plus, Inc., a Texas corporation (the "Company").  See "DESCRIPTION OF CAPITAL STOCK."  The Company is a new company formed to acquire real estate properties and assets.  See "BUSINESS."

In connection with the Distribution, each stockholder of Akashic will receive one share of Common Stock for each share of Akashic common stock owned on the Record Date.  The Distribution will result in 50% of the outstanding shares of Common Stock being distributed to holders of Akashic common stock.  Certificates representing the number of shares of Common Stock to which Akashic stockholders are entitled are being delivered to Akashic stockholders simultaneously with this Prospectus.  Management believes that shares of Common Stock comprising the Distribution and received by Akashic's stockholders may have tax consequences to certain stockholders upon receipt.  See "THE DISTRIBUTION -- Certain Federal Income Tax Consequences."  For a discussion of certain risks relating to the ownership of the Common Stock, see "RISK FACTORS."

Akashic’s stockholders will pay no consideration for the shares of Common Stock comprising the Distribution.  The Company will not receive any proceeds from the Distribution.  There is no current public trading market for the shares of Common Stock.  Subject to the sponsorship of a market maker, shares of Common Stock will be traded in the over-the-counter market on the OTC Electronic Bulletin Board.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.  ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

UNTIL ___________________ _____, 2010, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.  THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

The date of this Prospectus is _________________ _____, 2010.

 
 
 

 

 
TABLE OF CONTENTS

PROSPECTUS SUMMARY
3
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
4
RISK FACTORS
5
BUSINESS
16
MANAGEMENT
21
EXECUTIVE COMPENSATION AND CERTAIN TRANSACTIONS
21
PRINCIPAL SHAREHOLDERS
22
THE DISTRIBUTION
22
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
24
OTHER MATTERS
25
DESCRIPTION OF CAPITAL STOCK
26
DIVIDEND POLICY
27
USE OF PROCEEDS
27
EXPERTS
27


 
2

 

 
PROSPECTUS SUMMARY

THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS.
 
 
Company
REO Plus, Inc. (the "Company") is a new Texas corporation formed to acquire real estate properties and assets.  See "BUSINESS."  The Company's offices are located at 3014 McCulloch Circle, Houston, Texas 77056.  The Company's telephone number is (713) 599-1910.
   
Distributing Company
Akashic Ventures, Inc., a Delaware corporation.
   
Primary Purposes
of the Distribution
To separate the business of the Company from a proposed business pursuit to be undertaken by Akashic so that each of Akashic and the Company can (i) adopt strategies and pursue objectives appropriate to its specific business and industry, (ii) better enable itself to make acquisitions using its capital stock as consideration, (iii) better enable itself to obtain financing with respect to its particular business and projects from lenders possibly unwilling to lend to companies in the other's business, (iv) be recognized by the financial community as a distinct business, with the expectation that stockholder value will be enhanced, and (v) implement more focused incentive compensation arrangements that are tied more directly to results of its operations.
   
Securities to be Distributed
934,500 shares of the Company's Common Stock, par value $.001 per share The shares of Common Stock to be distributed will constitute 50% of the outstanding shares of Common Stock of the Company as of the date of the Distribution.
   
Distribution Ratio
Each stockholder of Akashic will receive one share of Common Stock for each share of Akashic common stock owned on the Record Date.
   
Record Date
Close of business on ____________________ _____, 2010.
   
Delivery of
Certificates
Certificates representing the shares of Common Stock to which Akashic stockholders are entitled are being delivered to Akashic stockholders simultaneously with this Prospectus.
   
Tax Consequences
The Distribution is not being structured on a basis tax-free to Akashic stockholders, and management believes that the Distribution could not be structured on such a basis.  However, depending on the tax situation of an Akashic stockholder (particularly the amount of the basis of an Akashic stockholder in his, her or its Akashic stock), an Akashic stockholder may own no tax as a result of the Distribution.  See "THE DISTRIBUTION -- Certain Federal Income Tax Consequences."
   
Trading Market
There is no current public trading market for the shares of Common Stock.  Subject to the sponsorship of a market maker, shares of Common Stock will be traded in the over-the-counter market on the OTC Electronic Bulletin Board.
   
Transfer Agent and
Registrar
The transfer agent and registrar for the Common Stock is Colonial Stock Transfer Co., Inc., with offices at 66 Exchange Place, Salt Lake City, UT 84111.
   
Dividend Policy
The payment and amount of cash dividends on the Common Stock after the Distribution will be at the discretion of the Company's Board of Directors.  The Company has not heretofore paid any dividends, and the Company does not currently anticipate paying any dividends on its Common Stock. The Company's dividend policy will be reviewed by the Company's Board of Directors at such future times as may be appropriate, and payment of dividends will depend upon the Company's financial position, capital requirements and such other factors as the Company's Board of Directors believes relevant.
   
Risk Factors
Shareholders should carefully consider the matters discussed under the section entitled "RISK FACTORS" in this Prospectus.  The Company has only a limited operating history and is subject to all of the inherent risks of a developing business enterprise.  The Company needs additional capital and has no meaningful flow of revenues.
   
Use of Proceeds
The Company will not receive any proceeds from the Common Stock comprising the Distribution.
   
Inquiries Relating to the Distribution
Inquiries relating to the Distribution should contact Richard J. Church, by mail at the Company 's offices at 3014 McCulloch Circle, Houston, Texas 77056, or by telephone at 713/599-1910.

 
 
3

 
 
 
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Prospectus under the captions "PROSPECTUS SUMMARY," "RISK FACTORS," and "BUSINESS" are not historical facts, but are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995).  These statements regard:
 
 * Our belief regarding the tax treatment of the Distribution
 * Our belief regarding ability to expand rapidly in the future
 * Our belief regarding our being subject to the Investment Company Act of 1940
 * Our belief regarding the commercially reasonableness of the terms of the acquisition of our sole current property interest
 * Our belief that the Distribution is in the best interests of the Company, Akashic and Akashic’s stockholders
 * Our belief regarding the opportunities in the real estate market created by the recent recession
 * Our belief regarding the opportunities offered by distressed markets
 *
 
Our belief regarding our ability to identify and acquire under-performing properties and turning them around and repositioning them
 *
 
Our belief regarding our greater ability to procure additional financing and complete additional acquisitions after the completion of the Distribution
 * Our belief regarding the benefits of the Distribution
 * Our belief regarding our ability to grow our business
 *
 
Our belief regarding our ability to reduce our exposure to inflationary cost increases due to escalation clauses included in our leases
 * Our belief regarding the geographic markets throughout the United States on which we may focus
 * Our belief regarding the manner in which potential acquisitions may be brought to our attention
 *
 
Our belief regarding the number of shares of Common Stock that should become generally freely tradable as a result of the Distribution
 *
 
Our belief regarding the natural appreciation in value that properties acquired in the near future should experience as demand for such properties increases
 *
 
Our belief regarding our net leases' typically obligating our tenants to cover costs associated with compliance with the Americans with Disabilities Act of 1990
 * Our belief regarding the types and locations of properties that we will generally seek
 * Our belief regarding our ability to consider numerous additional properties
 *
 
Our belief regarding our payment to our existing or future officers, directors or shareholders or any affiliated entity of any finder’s fee, consulting fee or other compensation
 * Our belief regarding the factors that we will consider in evaluating a prospective target acquisition
 *
 
Our belief regarding the manner in which due diligence investigations of prospective target acquisitions will be conducted and the person who will conduct such investigations
 * Our expectations regarding the purchase of insurance by us or our tenants
 * Our expectations regarding the trading of our stock and its trading price
 * Our expectations regarding our level of employees
 * Our expectations regarding the payment of management and director remuneration
 * Our expectations regarding the payment of dividends
 * Our expectations regarding the manner in which acquisition prospects will be presented to us
 
Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements.  Factors that could cause actual results to differ materially include, but are not limited to, those discussed under "RISK FACTORS."  As a result, these forward-looking statements represent the Company's judgment as of the date of this filing.  The Company does not express any intent or obligation to update these forward-looking statements.

 
 
4

 

 
RISK FACTORS

THE SECURITIES COVERED BY THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK AND, THEREFORE, SHOULD BE CONSIDERED EXTREMELY SPECULATIVE.  PROSPECTIVE INVESTORS SHOULD READ THE ENTIRE PROSPECTUS AND CAREFULLY CONSIDER, AMONG THE OTHER FACTORS AND FINANCIAL DATA DESCRIBED HEREIN, THE FOLLOWING RISK FACTORS:

RISKS RELATED TO OUR BUSINESS

OUR EXTREMELY LIMITED HISTORY MAKES AN EVALUATION OF OUR FUTURE EXTREMELY DIFFICULT, AND PROFITS ARE NOT ASSURED.  AT THIS STAGE OF OUR BUSINESS OPERATIONS, EVEN WITH OUR GOOD FAITH EFFORTS, POTENTIAL INVESTORS HAVE A POSSIBILITY OF LOSING THEIR INVESTMENT.

Our company was organized in August 2009 for the purposes of engaging in the real estate business.  We currently have only one meaningful asset, and we have had no meaningful operating history upon which to base an evaluation of us and our business and prospects.  Our business and prospects must be considered in light of the risks, expenses and difficulties frequently encountered by companies in their early stage of development.  For our business plan to succeed, we must successfully undertake most of the following activities:
 
 *  Raise a sufficient amount of funds
 *  Identify and complete suitable acquisitions
 *   Enter into favorable agreements with third parties regarding a variety of matters
 *   Implement and successfully execute our business and marketing strategy
 *   Respond to competitive developments
 *   Attract, retain and motivate qualified personnel.
 
There can be no assurance that we will be successful in undertaking such activities.  Our failure to undertake successfully most of the activities described above could materially and adversely affect our business, prospects, financial condition and results of operations.  In addition, we could incur operating losses for the foreseeable future.  There can be no assurance that we will ever generate significant revenue, that we will ever generate positive cash flow from our operations or that (if ever attained) we will be able to sustain profitability in any future period.  Moreover, our business may fail for a variety of reasons, such as changes in market conditions, competition, the general economy and the like.  The shares being distributed pursuant hereto should be regarded as speculative investments.  There is no assurance that investors will obtain any return on their investment, and investors will be subject to a risk of losing their entire investment.

WE NEED ADDITIONAL CAPITAL IN THE FUTURE TO FINANCE FUTURE ACQUISITIONS.  WE MAY NOT BE ABLE TO RAISE THIS CAPITAL, OR IT MAY BE AVAILABLE ONLY ON TERMS UNFAVORABLE TO US OR OUR SHAREHOLDERS, WHICH MAY RESULT IN OUR INABILITY TO FUND OUR WORKING CAPITAL REQUIREMENTS AND MAY HARM OUR OPERATIONAL RESULTS.

We need to procure additional financing to finance future acquisitions.  If additional financing is not available on acceptable terms, we would be prevented from acquiring additional properties.  In such event, our business and financial condition could be materially adversely affected.  Moreover, any debt financing undertaken to procure funds may involve restrictions limiting our operating flexibility.  If we obtain funds through the issuance of equity securities, the following results will or may occur:
 
 *   The percentage ownership of our existing shareholders will be reduced
 *   Our shareholders may experience additional dilution in net book value per unit
 *   The new equity securities may have rights, preferences or privileges senior to those of the holders of our Common Stock.
 
 
 
5

 
 
 
In addition, if required operating capital is not available on acceptable terms, we could be forced to dispose of certain of our assets or curtail our operations substantially or completely, which could result in a substantial reduction or elimination of the value of our then-outstanding equity.  Our future liquidity will depend upon numerous factors, including the success of our business efforts and our capital raising activities.

WE MAY EXPERIENCE RAPID GROWTH, AND IN SUCH CASE WE WILL NEED TO MANAGE THIS GROWTH EFFECTIVELY.

We believe that, given the right business opportunities (including the availability of needed capital), we may expand our operations rapidly and significantly.  If rapid growth were to occur, it could place a significant strain on our management, operational and financial resources.  To manage any significant growth of our operations, we will be required to undertake the following successfully:
 
 *   Manage relationships with various strategic partners and other third parties;
 *   Hire and retain skilled personnel necessary to support our business;
 *   Train and manage a growing employee base; and
 *   Continually develop our financial and information management systems.
 
If we fail to make adequate allowances for the costs and risks associated with this expansion or if our systems, procedures or controls are not adequate to support our operations, our business could be harmed.  For example, we could be overwhelmed by an extended number of properties such that we are unable to manage them effectively and to perceive adverse trends.  Thus, under such circumstance we could be acquiring properties at a time when we should be liquidating them.  The adverse effects of occurrence would be compounded by any use by us of debt to acquire our properties.  Our inability to manage growth effectively could materially adversely affect our business, results of operations and financial condition.

WE EXPECT TO DEPEND ON THIRD PARTY SUPPLIERS FOR VARIOUS PURPOSES.

Our operations will depend on a number of third parties, such as real estate brokers and management companies.  We will have limited control over these third parties. We will probably not have many long-term agreements with many of them.  Our inability to maintain satisfactory relationships with such third parties on acceptable commercial terms, or the failure of such third parties to maintain the quality of products and services they provide at a satisfactory standard, could materially adversely affect our business, results of operations and financial condition.

RISKS RELATED TO OUR INDUSTRY

REAL PROPERTY INVESTMENTS INVOLVE CERTAIN GENERAL RISKS NOT WITHIN OUR CONTROL.

All real property investments are subject to considerable risks, many of which are beyond our control.  These risks (many of which are discussed in further detail herein) include:
 
 * adverse changes in international, national, regional or local economic, demographic and market conditions;
 * adverse changes in financial conditions of buyers, sellers and tenants of properties;
 * competition from other real estate investors with significant capital;
 *
reductions in the level of demand for commercial space, and changes in the relative popularity of properties;
 *
 
fluctuations in interest rates, which could adversely effect our ability, or the ability of buyers and tenants of properties, to obtain financing on favorable terms or at all;
 *
 
unanticipated increases in operating expenses, including, without limitation, insurance costs, labor costs, energy prices and costs of compliance with laws, regulations and governmental policies;
 *
 
 
changes in, and changes in enforcement of, laws, regulations and governmental policies, including, without limitation, health, safety,  environmental, zoning and tax laws and governmental fiscal policies, and changes in the related costs of compliance with laws, regulations and governmental polices; and
 *
 
civil unrest, acts of God, including earthquakes, floods and other natural disasters and acts of war or terrorism, including the consequences of terrorist acts such as those that occurred on September 11, 2001, which may result in uninsured losses.
 
 
 
6

 
 
 
Our business and financial condition could be materially adversely affected by any adverse change or development in one or more of the risks listed above.

WE MAY NOT BE ABLE TO IDENTIFY SUITABLE ACQUISITIONS, AND ACQUISITIONS MAY HARM OUR FINANCIAL RESULTS.

We may not be successful in identifying suitable real estate properties or other assets that meet our acquisition criteria, or consummating acquisitions or investments on satisfactory terms.  Failures in identifying or consummating acquisitions would impair the pursuit of our business plan.  Shareholders ultimately may not like the location, lease terms or other relevant economic and financial data of any real properties, other assets or other companies that we may acquire in the future.  Moreover, our acquisition strategy could involve significant risks that could inhibit our growth and negatively impact our operating results, including the following: increases in asking prices by acquisition candidates to levels beyond our financial capability or to levels that would not result in the returns required by our acquisition criteria; diversion of management’s attention to expansion efforts; unanticipated costs and contingent or undisclosed liabilities associated with acquisitions; failure of acquired businesses to achieve expected results; and difficulties entering markets in which we have no or limited experience.

THE CONSIDERATION PAID FOR OUR TARGET ACQUISITION MAY EXCEED FAIR MARKET VALUE, WHICH MAY HARM OUR FINANCIAL CONDITION AND OPERATING RESULTS.

The consideration that we pay will be based upon numerous factors, and the target acquisition may be purchased in a negotiated transaction rather than through a competitive bidding process. We cannot assure anyone that the purchase price that we pay for a target acquisition or its appraised value will be a fair price, that we will be able to generate an acceptable return on such target acquisition, or that the location, lease terms or other relevant economic and financial data of any properties that we acquire will meet acceptable risk profiles. We may also be unable to lease vacant space or renegotiate existing leases at market rates, which would adversely affect our returns on a target acquisition. As a result, our investments in our target acquisition may fail to perform in accordance with our expectations, which may substantially harm our operating results and financial condition.

WE HAVE NO ASSURANCE OF PROPERTY APPRECIATION OR COMPANY PROFITS.

There is no assurance that our real estate investments will appreci­ate in value or will ever be sold at a profit. The marketability and value of the properties will depend upon many factors beyond the control of our management.  There is no assurance that there will be a ready market for the properties, since investments in real property are generally non-liquid.  The real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates and other factors, including supply and demand, that are beyond our control.  We cannot predict whether we will be able to sell any property for the price or on the terms set by it, or whether any price or other terms offered by a prospective purchaser would be acceptable to us.  We also cannot predict the length of time needed to find a willing purchaser and to close the sale of a property.  Moreover, we may be required to expend funds to correct defects or to make improvements before a property can be sold.   We cannot assure any person that we will have funds available to correct those defects or to make those improvements.  In acquiring a property, we may agree to lockout provisions that materially restrict us from selling that property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that property.  These lockout provisions would restrict our ability to sell a property. These factors and any others that would impede our ability to respond to adverse changes in the performance of our properties could significantly harm our financial condition and operating results.

 
 
7

 
 
 
       ILLIQUIDITY OF REAL ESTATE INVESTMENTS COULD SIGNIFICANTLY IMPEDE OUR ABILITY TO RESPOND TO ADVERSE CHANGES IN THE PERFORMANCE OF OUR PROPERTIES AND HARM OUR FINANCIAL CONDITION.

           Because real estate investments are relatively illiquid, our ability to promptly sell one or more properties or investments in our portfolio in response to changing economic, financial and investment conditions may be limited. In particular, these risks could arise from weakness in or even the lack of an established market for a property, changes in the financial condition or prospects of prospective purchasers, changes in national or international economic conditions, and changes in laws, regulations or fiscal policies of jurisdictions in which the property is located.  We may be unable to realize our investment objectives by sale, other disposition or refinance at attractive prices within any given period of time or may otherwise be unable to complete any exit strategy.

COMPETITION FOR THE ACQUISITION OF REAL ESTATE PROPERTIES IS INTENSE.

We compete with many other entities engaged in real estate investment activities for acquisitions of desirable properties.  These competitors may drive up the price we must pay for real estate properties, other assets or other companies that we seek to acquire or may succeed in acquiring those companies or assets themselves.  In addition, our potential acquisition targets may find our competitors to be more attractive suitors because they may have greater resources, may be willing to pay more, or may have a more compatible operating philosophy.  In particular, real estate investment trusts (“REITs”) may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. In addition, the number of entities and the amount of funds competing for suitable investment properties may increase.  This will result in increased demand for these assets and therefore increased prices paid for them.  If we pay higher prices for properties, our profitability will be reduced, and shareholders may experience a lower return on their investment.  Moreover, prices could become so lofty that we are unable to pay them (or we decide not to run the risks associated with these prices) such that we are effectively precluded from pursuing our business plan in a meaningful manner.

RISING OPERATING EXPENSES AND DECREASE IN RENTS AT OUR PROPERTIES COULD REDUCE OUR CASH FLOW AND FUNDS AVAILABLE FOR FUTURE DIVIDENDS.

           Our properties will likely be subject to operating risks common to real estate in general, any or all of which may negatively affect us. If any property is not fully occupied or if rents are being paid in an amount that is insufficient to cover operating expenses, we could be required to expend funds for that property’s operating expenses. If our competitors offer space at rental rates below market rates, or below the rental rates we charge our tenants, we may lose existing or potential tenants and we may be pressured to reduce our rental rates below those we charge in order to retain tenants when our tenants’ leases expire.  Our properties could also be subject to increases in real estate and other tax rates, utility costs, operating expenses, insurance costs, repairs and maintenance and administrative expenses.  Such rise in operating expenses and loss of rents could reduce our cash flows and funds available for future dividends.

FAILURE OF OUR TENANTS TO PAY RENT COULD SERIOUSLY HARM OUR OPERATING RESULTS AND FINANCIAL CONDITION.

           We may rely on rental payments from tenants of a target acquisition as a source of cash. At any time, any of our tenants may experience a downturn in its business that may weaken its financial condition. As a result, a tenant may delay lease commencement, fail to make rental payments when due, decline to extend a lease upon its expiration, become insolvent or declare bankruptcy. Any tenant bankruptcy, insolvency, or failure to make rental payments when due could result in the termination of the tenant’s lease and material losses to our company. A default by a large tenant on one of these properties could have a material adverse effect on our operating results and financial condition.  In particular, if any of our significant tenants becomes insolvent, suffers a downturn in its business and decides not to renew its lease or vacates a property and prevents us from leasing that property by continuing to pay base rent for the balance of the term, it may seriously harm our business. Failure on the part of a tenant to comply with the terms of a lease may give us the right to terminate the lease, repossess the applicable property and enforce the payment obligations under the lease; however, we would be required to find another tenant. We cannot assure anyone that we would be able to find another tenant without incurring substantial costs, or at all, or that, if another tenant was found, we would be able to enter into a new lease on favorable terms.

 
 
8

 
 
 
      THE BANKRUPTCY OR INSOLVENCY OF OUR TENANTS UNDER THEIR LEASES COULD SERIOUSLY HARM OUR OPERATING RESULTS AND FINANCIAL CONDITION.

           Any bankruptcy filings by or relating to one of our tenants could bar us from collecting pre-bankruptcy debts from that tenant or its property. A tenant bankruptcy could delay our efforts to collect past due balances under the relevant leases, and could ultimately preclude full collection of these sums. If the tenant assumes a lease in bankruptcy, all pre-bankruptcy balances due under the lease must be paid to us in full. However, if a tenant rejects a lease in bankruptcy, we would have only a general unsecured claim for damages. Any unsecured claim we hold against a bankrupt entity may be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims. We may recover substantially less than the full value of any unsecured claims, which would harm our operating results and financial condition.

IF WE ARE UNABLE TO PROMPTLY RELET OR RENEW LEASES AS THEY EXPIRE, OUR CASH FLOW AND ABILITY TO SERVICE OUR INDEBTEDNESS, IF ANY, MAY BE ADVERSELY AFFECTED.

           We are subject to the risks that upon expiration of leases for space located in our buildings (a) such leases may not be renewed, (b) such space may not be re-let or (c) the terms of renewal or re-letting, taking into account the cost of required renovations, may be less favorable than the current lease terms. If we are unable to promptly re-let, or renew the leases for, a substantial portion of the space located in our buildings, or if the rental rates upon such renewal or re-letting are significantly lower than expected rental rates, or if our reserves for these purposes prove inadequate, our cash flow and ability to service our indebtedness, if any, may be adversely affected.

INCREASES IN OUR PROPERTY TAXES COULD ADVERSELY AFFECT OUR CASH FLOW AND FINANCIAL CONDITION.

            Each of our properties will be subject to real and personal property taxes. These taxes on our properties may increase as tax rates change and as the properties are assessed or reassessed by taxing authorities.  Many states and localities are considering increases in their income and/or property tax rates (or increases in the assessments of real estate) to cover revenue shortfalls. If property taxes increase, it may adversely affect our cash flow and financial condition.

WE MAY EXPERIENCE INCREASES IN OUR EXPENSES, INCLUDING DEBT SERVICE, AS WELL AS DECREASED OCCUPANCY RATES AS A RESULT OF INFLATION.

           We may experience increases in our expenses, including debt service, as a result of inflation and increase in interest rates. Our exposure to inflationary cost increases in property level expenses may be reduced by escalation clauses that are included in our leases.  However, market conditions may prevent us from escalating rents.  Inflationary pressure may increase operating expenses, including labor and energy costs and, indirectly, real estate taxes, above expected levels at a time when it may not be possible for us to increase lease rates to offset these higher operating expenses. In addition, inflation can have secondary effects upon occupancy rates by decreasing the demand for office space in many of the markets in which we operate.

 
 
9

 
 
 
ONE OR MORE OF OUR PROPERTIES COULD BECOME SUBJECT TO FORECLOSURE.

If, after our purchase of any real estate property is concluded, we cannot meet the periodic payments required by our outside financing, we might be required to sell or refinance the property to meet our obligations.  If refinancing is not obtained or a sale is not consummated, we could default in our obligations. The remedy of the outside financier would be, among other things, to institute foreclosure proceed­ings against the related property, which could result in the partial or total loss of any equity in such property.

WE COULD SUFFER UNINSURED LOSSES.

We expect that our tenants or we will purchase comprehensive insurance, including liability and extended coverage, with respect to our properties with limits customary for such properties.  However, certain types of losses may be either uninsurable or not economically insurable.  Such excluded risks generally include war, earthquakes, floods and punitive damages.  Should a loss occur (whether insured or uninsured), we might suffer a loss of invested capital and any profits that might be anticipated from our real estate investment and might also be unable to meet our obligations.  For example, even if insured, we would have to pay insurance deductibles, and the insurance coverage may not be sufficient to pay the full current market value or current replacement cost of the property.  Moreover, in the event of an underinsured loss with respect to a property relating to a title defect, the insurance proceeds we receive might not be adequate to restore our economic position with respect to such property.

ENVIRONMENTAL REGULATION AND ISSUES, CERTAIN OF WHICH WE MAY HAVE NO CONTROL OVER, MAY ADVERSELY IMPACT OUR BUSINESS.

           Federal, state and local laws and regulations impose environmental controls, disclosure rules and zoning restrictions that directly impact the management, development, use, and/or sale of real estate. Such laws and regulations tend to discourage sales and leasing activities and mortgage lending with respect to some properties, and may therefore adversely affect us specifically, and the real estate industry in general. Failure by us to uncover and adequately protect against environmental issues in connection with a target acquisition may subject us to liability as buyer of such property or asset. Environmental laws and regulations impose liability on current or previous real property owners or operators for the cost of investigating, cleaning up or removing contamination caused by hazardous or toxic substances at the property. We may be held liable for such costs as a subsequent owner of such property. Liability can be imposed even if the original actions were legal and we had no knowledge of, or were not responsible for, the presence of the hazardous or toxic substances. Further, we may also be held responsible for the entire payment of the liability if we are subject to joint and several liability and the other responsible parties are unable to pay. We may also be liable under common law to third parties for damages and injuries resulting from environmental contamination emanating from the site, including the presence of asbestos containing materials. Insurance for such matters may not be available. Additionally, new or modified environmental regulations could develop in a manner that could adversely affect us.

OUR PROPERTIES MAY CONTAIN ASBESTOS THAT COULD LEAD TO LIABILITY FOR ADVERSE HEALTH EFFECTS AND COSTS OF REMEDIATING ASBESTOS.

           Certain laws and regulations govern the removal, encapsulation or disturbance of asbestos containing materials (or “ACMs”), when those materials are in poor condition or in the event of building renovation or demolition, impose certain worker protection and notification requirements and govern emissions of and exposure to asbestos fibers in the air. These laws may also impose liability for a release of ACMs and may enable third parties to seek recovery against us for personal injury associated with ACMs.  We may be required to make substantial capital expenditures if properties we acquire contain ACMs, and these expenditures could materially adversely affect us and our operating results and financial condition.

 
 
10

 
 
 
       COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT AND FIRE, SAFETY AND OTHER REGULATIONS MAY REQUIRE US TO MAKE UNEXPECTED EXPENDITURES THAT MATERIALLY ADVERSELY AFFECTS US.

           Certain properties we acquire may be required to comply with the Americans with Disabilities Act of 1990, or the “ADA.” The ADA has separate compliance requirements for “public accommodations” and  “commercial facilities,” but generally requires that buildings be made accessible to people with disabilities. Compliance with the ADA requirements could require removal of access barriers and non-compliance could result in imposition of fines by the U.S. government or an award of damages to private litigants, or both. While the tenants to whom we lease properties will be obligated by law to comply with the ADA provisions, and under our net leases will typically be obligated to cover costs associated with compliance, if required changes involve greater expenditures than anticipated, or if the changes must be made on a more accelerated basis than anticipated, the ability of such tenants to cover costs could be adversely affected and we could be required to expend our own funds to comply with the provisions of the ADA, which could adversely affect our results of operations and financial condition and our ability to make distributions to shareholders. In addition, we will be required to operate our properties in compliance with fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to our properties. We may be required to make substantial capital expenditures to comply with those requirements, and these expenditures could materially adversely affect us and our operating results and financial condition.

WE ARE NOT A REAL ESTATE INVESTMENT TRUST OR AN INVESTMENT COMPANY.

We are not a real estate investment trust and enjoy a broader range of permissible activities. We are also not, and we intend to operate in such manner as not to be, classified as an "investment company" within the meaning of the Investment Company Act of 1940.  The management and the investment practices and policies of ours are not supervised or regulated by any Federal or state authority.  As a result, investors will be exposed to certain risks that would not be present if we were subjected to a more restrictive regulatory situation.
 
 
IF WE ARE DEEMED TO BE AN INVESTMENT COMPANY, WE MAY BE REQUIRED TO INSTITUTE BURDENSOME COMPLIANCE REQUIREMENTS AND OUR ACTIVITIES MAY BE RESTRICTED.

           If we are ever deemed to be an investment company under the Investment Company Act of 1940, we may be subject to certain restrictions including:
 
 * restrictions on the nature of our investments; and
 * restrictions on the issuance of securities.
 
 In addition, we may have imposed upon us certain burdensome requirements, including:
 
 * registration as an investment company;
 * adoption of a specific form of corporate structure; and
  reporting, record keeping, voting, proxy, compliance policies and procedures and disclosure requirements and other rules and regulations.
 
We do not believe that our anticipated principal activities will subject us to the Investment Company Act of 1940.


 
11

 

 
RISKS RELATED TO THE MANAGEMENT OF OUR BUSINESS

 
WE HIGHLY DEPEND ON RICHARD J. CHURCH. THE LOSS OF MR. CHURCH’S SERVICES WOULD PROBABLY HARM OUR ABILITY TO EXECUTE OUR BUSINESS PLAN.
 
Our success depends heavily upon the continued contributions of Richard J. Church, our sole director and officer.  Mr. Church has not entered into an employment agreement or a non-compete agreement with us.   As a result, he may discontinue providing his services to us at any time and for any reason, and even thereafter might be able to commence competition with us.  We currently maintain no key person insurance on Mr. Church's life.   If we were to lose the services of Mr. Church, our ability to execute our business plan could be harmed and we may be forced to cease operations until such time as we could hire a suitable replacement for him.

MANAGEMENT OWNS A LARGE PERCENTAGE OF OUR OUTSTANDING STOCK, AND CUMULATIVE VOTING AND PREEMPTIVE RIGHTS ARE DENIED TO SHAREHOLDERS.

Richard J. Church, our sole director and officer, will own (immediately after the completion of the Distribution) approximately 90% of our outstanding common stock.  Cumulative voting in the election of Directors is denied as permitted by law.  Accordingly, the holder or holders of a majority of the outstanding shares of Common Stock after completion of the Distribution (i.e. Mr. Church) may elect all of our Board of Directors.  Our management will exclusively make nearly all decisions with respect to the management of our business.  Investors will have little right or power to take part in the management of our business.  Although an investor is entitled to vote on certain matters, a person should not purchase any shares of Common Stock unless he is willing to entrust all aspects of the management of our business to our current management.  There are no preemptive rights in connection with our Common Stock.  Thus, the percentage ownership of existing shareholders may be diluted if we issue additional shares in the future.  In all, investors will have little (if any) ability to change the direction of our company if they believe such direction to be misguided, and we will suffer the consequence of any such misguided direction.

OUR CURRENT MANAGEMENT RESOURCES MAY NOT BE SUFFICIENT FOR THE FUTURE, AND WE HAVE NO ASSURANCE THAT WE CAN ATTRACT ADDITIONAL QUALIFIED PERSONNEL.

There can be no assurance that the current level of management will remain sufficient to perform all responsibilities necessary or beneficial for management to perform.  Our success in attracting additional qualified personnel will depend on many factors, including our ability to provide them with competitive compensation arrangements, equity participation and other benefits.  There is no assurance that (if we need to) we will be successful in attracting highly qualified individuals in key management positions.  The inability to attract such individuals will be particularly felt if we experience rapid growth, in which case we will be exposed to the risks described in the risk factor captioned “WE MAY EXPERIENCE RAPID GROWTH, AND IN SUCH CASE WE WILL NEED TO MANAGE THIS GROWTH EFFECTIVELY” above.

OUR SOLE OFFICER AND DIRECTOR WILL ALLOCATE SOME PORTION OF HIS TIME TO OTHER BUSINESSES THEREBY CAUSING CONFLICTS OF INTEREST IN HIS DETERMINATION AS TO HOW MUCH TIME TO DEVOTE TO OUR AFFAIRS AS WELL AS OTHER MATTERS.

           Richard J. Church, our current sole executive officer and director, is not required to commit his full time to our affairs, which could create a conflict of interest when allocating his time between our operations and his other commitments.  Mr. Church is not obligated to devote any specific number of hours to our affairs.  If Mr. Church’s other activities require him to devote more substantial amounts of time to them, it could limit his ability to devote time to our affairs and could have a negative impact on our ability to pursue our business plan.  Additionally, Mr. Church and future company officers and directors may become aware of business opportunities that may be appropriate for presentation to us and the other entities to which they owe fiduciary duties.  Accordingly, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented.  We cannot assure anyone that these conflicts will be resolved in our favor.

 
 
12

 
 
 
      LIMITATIONS ON CLAIMS AGAINST OUR OFFICERS AND DIRECTORS, AND OUR OBLIGATION TO INDEMNIFY THEM, COULD PREVENT OUR RECOVERY FOR LOSSES CAUSED BY THEM.

The corporation law of Texas allows a Texas corporation to limit the liability of its directors to the corporation and its shareholders to a certain extent, and our Certificate of Formation has eliminated our directors' and officers’ personal liability to the maximum extent permitted by law.  The corporation law of Texas allows a Texas corporation to indemnify each director, officer, agent and/or employee to the extent that certain standards are met, and our Certificate of Formation provides that each director is indemnified to the maximum extent permitted by law.  Further, we may purchase and maintain insurance on behalf of any such persons whether or not we have the power to indemnify such person against the liability insured against.  Consequently, because of the actions or omissions of officers, directors, agents and employees, we could incur substantial losses and be prevented from recovering such losses from such persons.  Further, the U.S. Securities and Exchange Commission maintains that indemnification for liabilities arising under the Securities Act of 1933 (the “Securities Act”) is against the public policy expressed in the Securities Act, and is therefore unenforceable.

WE ACQUIRED OUR SOLE CURRENT PROPERTY INTEREST FROM THE PERSON WHO OWNS A CONTROLLING INTEREST IN OUR COMPANY.

           We acquired our sole current property interest from Richard J. Church, our sole director and officer for 934,500 shares of our common stock and a promissory note in the amount of $190,000.  Mr. Church originally acquired this interest in 2004 for approximately $106,000.  Based on substantive back-up procured shortly prior to these transactions, Mr. Church believes that such transactions were commercially reasonable.  However, there can be no assurance that the terms and conditions of the interest acquisition are as favorable to us as those that could have been obtained in true arms-length negotiations.  Moreover, because Mr. Church is the sole member of management for us and for Akashic, there can be no assurance that we would enforce a claim against Mr. Church arising out of any problem related to the acquisition.  Overall, the risks that we assumed in connection with this related party transaction include the possibilities that we paid too much for the property, that insufficient due diligence was conducted on the property, that the documentation governing the transaction does not adequately protect us, and that we might not enforce any rights and claims that we have or may have against Mr. Church relating to the transaction.

RISKS RELATED TO OUR SHARES

THERE HAS NOT BEEN ANY PRIOR TRADING MARKET FOR OUR SHARES, AND A TRADING MARKET FOR OUR SHARES MAY NOT DEVELOP.

No established public market for the trading of shares of our Common Stock now exists.  Subject to the sponsorship of a market maker, shares of our Common Stock will be traded in the over-the-counter market on the OTC Electronic Bulletin Board.  There can be no assurance as to the prices at which the shares of our Common Stock will trade. Until the shares of Common Stock comprising the Distribution are fully distributed, and an orderly market develops and even thereafter, the prices of our Common Stock may fluctuate significantly.  Prices for shares of our Common Stock will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity of the markets for shares of Common Stock, investor perception of the Company and the industry in which the Company participates, and general economic and market conditions.

WE MAY ISSUE SHARES OF OUR CAPITAL STOCK TO COMPLETE PROPERTY ACQUISITIONS, WHICH WOULD REDUCE THE EQUITY INTEREST OF OUR SHAREHOLDERS.

            Our certificate of formation authorizes the issuance of up to 500,000,000 shares of common stock, par value $.001 per share, and 10,000,000 shares of preferred stock, par value $.001 per share.  Immediately after the Distribution, we will have over 498,000,000 authorized but un-issued shares of our common stock available for issuance and all of the 10,000,000 shares of preferred stock available for issuance.  Although we have no commitment as of the date hereof, we could in the future issue a substantial number of additional shares of our common or preferred stock, or a combination of common and preferred stock, to complete one or more property acquisitions.  The issuance of additional shares of our common stock or any number of shares of our preferred stock:

 
 * may significantly reduce the equity interest of existing shareholders;
 *
 
may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded to our common stock; and
 * may adversely affect prevailing market prices for our common stock.
 
 
 
13

 
 
 
SUBSTANTIAL SALES OF OUR SHARES MAY HAVE AN ADVERSE IMPACT ON THE TRADING PRICE OF OUR COMMON STOCK.

           Presently, 1,869,000 shares of Common Stock are issued and outstanding, all of which are "restricted securities" as that term is defined in Rule 144 promulgated under the Securities Act of 1933, as amended (the "Act").  Approximately 93,450 of the shares of Common Stock being registered in connection with the Distribution should become generally freely tradable as a result thereof.  The remaining 1,775,550 restricted shares that will be held by an affiliate of ours could be sold under specific circumstances pursuant to Rule 144.   See "DESCRIPTION OF CAPITAL STOCK – Shares Eligible for Future Sale" for the circumstances under which these shares could be sold.  In any event, after the Distribution, the sale of these restricted shares may dilute an investor's percentage of freely tradable shares and may have a depressive effect on the price of the Common Stock.  Moreover, some of the recipients of shares in the Distribution may decide that they do not want to continue to hold their shares and may decide to sell them.  Any substantial sales of Common Stock could materially adversely affect its trading price, and might also adversely affect the Company's ability to raise additional equity capital.

THE TRADING PRICE OF OUR COMMON STOCK MAY ENTAIL ADDITIONAL REGULATORY REQUIREMENTS, WHICH MAY NEGATIVELY AFFECT SUCH TRADING PRICE.

We expect that the trading price of our common stock will start below $5.00 per share.  If this occurs, trading in our common stock will be subject to the requirements of certain rules promulgated under the Exchange Act of 1934.  These rules require additional disclosure by broker-dealers in connection with any trades generally involving any non-NASDAQ equity security that has a market price of less than $5.00 per share, subject to certain exceptions.  Such rules require the delivery, before any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith, and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors (generally institutions).  For these types of transactions, the broker-dealer must determine the suitability of the penny stock for the purchaser and receive the purchaser's written consent to the transaction before sale.  The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our common stock.  As a consequence, the market liquidity of our common stock could be severely affected or limited by these regulatory requirements.

OUR AUTHORIZED PREFERRED STOCK EXPOSES HOLDERS OF OUR COMMON STOCK TO CERTAIN RISKS.

Our Certificate of Formation authorizes the issuance of up to 10,000,000 shares of preferred stock, par value $.001 per share.  The authorized but un-issued preferred stock constitutes what is commonly referred to as "blank check" preferred stock.  This type of preferred stock may be issued by the Board of Directors from time to time on any number of occasions, without shareholder approval, as one or more separate series of shares comprised of any number of the authorized but un-issued shares of preferred stock, designated by resolution of the Board of Directors stating the name and number of shares of each series and setting forth separately for such series the relative rights, privileges and preferences thereof, including, if any, the: (i) rate of dividends payable thereon; (ii) price, terms and conditions of redemption; (iii) voluntary and involuntary liquidation preferences; (iv) provisions of a sinking fund for redemption or repurchase; (v) terms of conversion to common stock, including conversion price, and (vi) voting rights.  Such preferred stock may provide our Board of Directors the ability to hinder or discourage any attempt to gain control of us by a merger, tender offer at a control premium price, proxy contest or otherwise.  Consequently, the preferred stock could entrench our management.  The market price of our common stock could be depressed to some extent by the existence of the preferred stock.  As of the date of this Prospectus, no shares of preferred stock had been issued.


 
14

 
 
 
         BECAUSE OUR BOARD OF DIRECTORS DOES NOT INTEND TO PAY DIVIDENDS ON OUR COMMON STOCK IN THE FORESEEABLE FUTURE, SHAREHOLDERS MAY HAVE TO SELL THEIR SHARES OF OUR COMMON STOCK TO REALIZE A RETURN ON THEIR INVESTMENT IN THE COMPANY.

The holders of our common stock are entitled to receive dividends when, as and if declared by our Board of Directors out of funds legally available therefor.  To date, we have paid no dividends.  Our Board of Directors does not intend to declare any dividends in the foreseeable future, but instead intends to retain all earnings, if any, for use in our business operations.  Accordingly, a return on an investment in shares of our common stock may be realized only through a sale of such shares, if at all.

RISKS RELATED TO THE DISTRIBUTION

          BECAUSE THERE IS NO UNDERWRITER, YOU WILL NOT RECEIVE THE BENEFITS OF AN UNDERWRITTEN OFFERING.

              There is no underwriter for this offering. Therefore, you will not have the benefit of an underwriter's due diligence efforts, which would typically include underwriter involvement in the preparation of information for disclosure as well as other matters.

THE DISTRIBUTION MAY RESULT IN TAX LIABILITY TO YOU.

           You may be required to pay income tax on the value of your shares received in connection with the Distribution.  We believe that the Distribution will not be taxable to you as a dividend because Akashic does not have tax earnings and profits.  However, the Distribution may be taxable to you as a capital gain, depending upon the extent of your basis in your Akashic stock.  You are advised to consult your own tax advisor as to the specific tax consequences of the Distribution.

FOR ALL OF THE AFORESAID REASONS AND OTHERS SET FORTH HEREIN, THE SHARES COVERED BY THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK.  SHAREHOLDERS SHOULD BE AWARE OF THESE AND OTHER FACTORS SET FORTH IN THIS PROSPECTUS.


 
15

 


BUSINESS

Introduction

REO Plus, Inc. (the "Company") was incorporated on August 10, 2009 under the laws of the State of Texas.  The address of the Company is 3014 McCulloch Circle, Houston, Texas 77056, and its telephone number is 713/599-1910.

The Company was formed by Akashic Ventures, Inc., a Delaware corporation (“Akashic”), for purposes of acquiring financially attractive real estate properties and assets.  Akashic is a publicly held corporation that once filed reports with the Commission.  Akashic has been dormant from a business perspective for more than a decade.  Richard J. Church acquired control of Akashic in May 18, 2008.  He is now the sole director and officer of both the Company and Akashic.  Since the time of his acquisition of control of Akashic, Mr. Church has been exploring various business opportunities that Akashic could undertake.  In view of his background in the real estate business and the general condition of the real estate industry in the United States, he recently decided to cause Akashic to pursue the acquisition of financially attractive real estate properties and assets, and he caused Akashic to form the Company as a wholly owned subsidiary for this purpose.  Due to recent developments described in the section captioned “THE DISTRIBUTION - Reasons for the Distribution,” Mr. Church believes that the Distribution is in the best interests of the Company, Akashic and Akashic’s stockholders.

Industry Background

The Company’s management believes that recession in the United States economy that began in December 2007 created opportunities in the real estate market.  CNNMoney.com has reported that this recession, which is frequently referred to as “the Great Recession,” is generally regarded as “the worst economic downturn since the Great Depression.”  Huliq News has reported that total residential foreclosures in the United States for the two years and nine months ending with the third quarter of 2009 numbered 7,827,219, with the possibility of the total number of foreclosures reaching 25 million before the housing crisis ends.  These adverse developments in the United States residential market have had a devastating effect on housing prices.  On September 29, 2009, SEATTLEPI.COM reported that the S&P/Case-Shiller Home Price Index released on that date indicated that home prices in 20 metropolitan areas in the United States were down about 33% from a mid-2006 peak.  Moreover, CNNMoney.com has reported that United States commercial real estate is worth about $6.5 trillion and is financed by an estimated $3.1 trillion in debt, and forecasts now call for the current downturn in the commercial real estate market to rival – and perhaps even exceed – the plunge of the early 1990s, when nearly 8% of all commercial real estate loans went sour.

Due to the current economic decline and the more restrictive lending conditions in the country and the state of Texas, the demand for real estate is, and therefore the prices real estate command are, currently low relative to historic levels.  This is reflective in the higher capitalization rates (indicating lower prices) that real estate sellers are asking and willing to accept for the sale of their properties.  The low prices, in conjunction with the continuing low interest rates available in the market, makes this an attractive period to acquire real estate, if financing can also be acquired.

With the gradual resurgence of the United States and Texas economies and easing of capital restraints, properties acquired during this period should experience a natural appreciation in value with greater demand.  The company feels that the forward looking U.S. stock market and the recent upward movement of the S&P/Case-Shiller Home Prices Index indicate the real estate market has bottomed and a gradual climb into a stronger market cycle can be expected.  Richard J. Church, the Company’s current sole executive officer and director, is a veteran of the 1990s Houston real estate market when just such a bottoming and resurgence took place.  Properties acquired in the early 1990s were sold in future years for annual compounded returns of greater than ten percent (10%) per annum and often twice this level, depending on the length of time properties were held.


 
16

 


Strategy

The company will be generally seeking well-located properties in need of capital infusion, or total redevelopment, as properties requiring more extensive real estate skills and effort, allow for the greatest appreciation on invested capital.  The properties and assets to be acquired by the Company will most likely include commercial, retail, residential and mixed-use properties.  Such properties and assets will less likely include office properties, and will almost certainly not include industrial properties.  Thus far, the Company has acquired only an interest in one property.  See “Sole Property Interest” below.

The Company will not limit itself geographically, except that the Company intends to target initially acquisitions located in the Houston, Texas area and eventually other parts of Texas.  However, as opportunities present themselves, the Company may focus its efforts on secondary and tertiary geographic markets throughout the United States, particularly in areas that have had significant declines in property values and thus possibly offer opportunities for significant appreciation.  The Company believes that distressed markets offer opportunities for the Company to acquire under-performing properties that it believes it has the capability of turning around and repositioning, thereby increasing cash flow, profitability and asset value.  The Company believes it can successfully identify such a potential target acquisition based upon the depth and the breadth of the industry experience, contacts and industry knowledge of the Company’s current management.  Richard J. Church, the Company’s current sole executive officer and director, has extensive experience in the real estate industry through his various real estate enterprises.
 
 
While the Company has not yet identified any additional assets or properties to acquire, the Company believes that it will be able to consider numerous additional properties.  The Company anticipates that target acquisitions will be brought to its attention from a number of brokers and other real estate professionals with whom the Company’s current management has business relationships.  Moreover, potential acquisitions may be brought to the Company’s attention by sources as a result of being solicited by the Company through calls or mailings.  In no event will any of the Company’s existing or future officers, directors or shareholders or any entity with which they are affiliated be paid any finder’s fee, consulting fee or other compensation prior to, or for any services they render in order to effectuate, the consummation of an acquisition.

The Company does not have any specific property acquisition under consideration, and the Company has not (nor has anyone on its behalf) contacted any prospective target acquisition or had any discussions, formal or otherwise, with respect to such a transaction.  Moreover, no one has approached the Company regarding the possible sale of any of its properties to the Company.  Additionally, the Company has not, nor has anyone on its behalf, taken any measure, directly or indirectly, to identify or locate any suitable property acquisition, nor has the Company engaged or retained any agent or other representative to identify or locate any such acquisition candidate. As a result, the Company has no assurance that it will be able to complete any further acquisitions.  In the future, the Company expects to be identifying and evaluating prospective property acquisition, performing business due diligence on prospective property acquisitions, traveling to and from the property and asset locations that represent prospective acquisitions, reviewing corporate, title, environmental, and financial documents and material agreements regarding prospective property acquisitions, selecting properties to acquire and striving to structure, negotiate and consummate acquisitions.  The Company will have certain burdens and costs with respect to these activities and certain additional risks associated with the subsequent integration of additional assets or properties into the Company’s operations.

Acquisition Selection

           The Company’s management will have virtually unrestricted flexibility in identifying and selecting prospective target acquisitions.  The Company has not established any other specific attributes or criteria (financial or otherwise) for prospective target acquisitions. In evaluating a prospective target acquisition, the Company’s management will consider, among other factors, the following:
 
 
 
17

 

 
 * Management’s understanding of conditions of the particular market;
 *
Management’s assessment of the attractiveness of the timing of the acquisition;
 *
 
Management’s assessment of the financial attractiveness of a particular target relative to other available targets, and its potential for upside appreciation and return on investment;
 * Capital requirements and management’s assessment of the ability to finance a particular target;
 * Macro-economic trends;
 * Environmental risks;
 * Physical condition of the target;
 * Management’s assessment of the ability to redevelop, improve and manage a particular target;
 * Occupancy in the target vs. market;
 * Tenant profile; and
 * Lease rollover.

           These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular acquisition will be based, to the extent relevant, on the above factors as well as other considerations believed relevant by the Company’s management in effecting an acquisition consistent with the Company’s business objective. In evaluating a prospective target acquisition, the Company will conduct an extensive due diligence review which will encompass, among other things, physical inspection of the property or assets, a review of all environmental, zoning, permitted use and title issues, and a review of all relevant financial and other information which is made available to the Company. This due diligence review will be conducted either by the Company’s management or by unaffiliated third parties the Company may engage, although the Company has no current intention to engage any such third parties.

           The time and costs required to select and evaluate a target acquisition and to structure and complete the acquisition cannot presently be ascertained with any degree of certainty.  Any costs incurred with respect to the identification and evaluation of a prospective target acquisition that is not ultimately completed will result in a loss to the Company and reduce the amount of capital available to otherwise complete other acquisitions.

To the extent the Company acquires financially poor assets or properties, the Company may be affected by numerous risks inherent in the business and operations of such properties or assets.  Although the Company’s management will endeavor to evaluate the risks inherent in a particular property acquisition, the Company cannot assure anyone that the Company will properly ascertain or assess all significant risk factors.

Sole Property Interest

Although the Company is beginning to consider additional real estate properties and assets, the Company's only asset acquired to date consists of 400 units of limited liability company member interest (the “Units”) in Ananda Investments, LLC, a Texas limited liability company (“Ananda”).  The Units represent a 40% interest in Ananda.  Ananda was formed in 2004 to own a particular real estate property.  This property features a three-story building containing 5,793 sq. ft. situated on the southeast corner of 315 Fairview and Morgan, in the Montrose district, near and west of downtown Houston, Texas.  The American Planning Association recently honored Montrose as one of the country's 10 great neighborhoods.  The entire property is leased to Fairview Cowboy Ventures, Inc., a Texas corporation (“Fairview”), until July 31, 2012 at a monthly rental rate of $6,941.  Fairview has an option to extend the lease for five years at escalating rates.  Fairview operates the 2,076 sq. ft. first floor as a neighborhood bar and or subleases the 3,713 sq. ft. second and third floor for a single residence.  This property is exceptional to Houston and the country in the following ways:
 
 * it is situated in an historical, eclectic and more pedestrian area,
 * the property was originally built in the 1930’s (with renovations beginning in 2006), and
 *
 
has an added third floor containing a 20 foot long by 5.5 feet tall butt glass window and an attached 641 ft. wooden outside deck, both providing a spectacular view of downtown.

Although the Company carries the Units on its balance sheet at their original cost in accordance with generally accepted accounting principles, substantive back-up obtained in connection with the acquisition of the Units indicates that the Units probably have a fair market value of approximately $225,000.

 
 
18

 
 
 
     For information about the acquisition of the Units, see “EXECUTIVE COMPENSATION AND CERTAIN TRANSACTIONS” and the risk factor captioned “WE ACQUIRED OUR SOLE CURRENT PROPERTY INTEREST INDIRECTLY FROM THE PERSON WHO WILL OWN A CONTROLLING INTEREST IN OUR COMPANY AFTER THE DISTRIBUTION.”

Plan of Operation

The Company only recently began its pursuit of real estate acquisitions.  Currently, the Company has only one real estate interest, which is described in the section captioned “Sole Property Interest” immediately above.  The Company cannot assure anyone that it will be able to acquire any additional real estate properties and assets due to the Company’s limited financial resources at the present.  The Company is currently trying to determine the scope of the acquisitions that it wishes to pursue.  The amount of capital that the Company will need will depend on the scope of the acquisitions that the Company ultimately decides to pursue, which is uncertain at this time.  However, for the Company to acquire any additional real estate properties and assets, the Company would be required to undertake certain financing activities.  The Company currently does not have any binding commitments for, or readily available sources of, additional financing.  The Company cannot assure anyone that additional financing will be available to it when needed or, if available, that such financing can be obtained on commercially reasonably terms.  If the Company does not obtain additional financing, it will not be able to acquire any additional real estate properties and assets, and perhaps will not even be able to stay in business for that matter.  If the Company does not obtain necessary additional financing, it may be constrained to attempt to sell the sole interest that it has heretofore acquired or additional interests that it may hereafter acquire.  However, the Company cannot assure anyone that it will be able to find interested buyers or that the funds received from any such sale would be adequate to fund the Company’s activities.  Under certain circumstances, the Company could be forced to cease its operations and liquidate its remaining assets, if any.  The Company cannot assure anyone that it will be successful in obtaining necessary capital and in its acquisition activities, although the Company believes that the procurement of additional financing and the completion of additional acquisitions will be easier after the completion of the Distribution.

Regulations

Environmental Regulations

           Federal, state and local laws and regulations impose environmental controls, disclosure rules and zoning restrictions that directly impact the management, development, use, and/or sale of real estate. Such laws and regulations tend to discourage sales and leasing activities and mortgage lending with respect to some properties, and may therefore adversely affect the Company specifically, and the real estate industry in general. Failure by the Company to uncover and adequately protect against environmental issues in connection with a target acquisition may subject the Company to liability as buyer of such property or asset. Environmental laws and regulations impose liability on current or previous real property owners or operators for the cost of investigating, cleaning up or removing contamination caused by hazardous or toxic substances at the property. The Company may be held liable for such costs as a subsequent owner of such property. Liability can be imposed even if the original actions were legal and the Company had no knowledge of, or were not responsible for, the presence of the hazardous or toxic substances. Further, the Company may also be held responsible for the entire payment of the liability if the Company is subject to joint and several liability and the other responsible parties are unable to pay.  The Company may also be liable under common law to third parties for damages and injuries resulting from environmental contamination emanating from the site, including the presence of asbestos containing materials. Insurance for such matters may not be available. Additionally, new or modified environmental regulations could develop in a manner that could adversely affect the Company.

Certain laws and regulations govern the removal, encapsulation or disturbance of asbestos containing materials (“ACMs”), when those materials are in poor condition or in the event of building renovation or demolition, impose certain worker protection and notification requirements and govern emissions of and exposure to asbestos fibers in the air. These laws may also impose liability for a release of ACMs and may enable third parties to seek recovery against the Company for personal injury associated with ACMs. There may be ACMs at certain of the properties the Company acquires.

 
 
19

 
 
 
Americans with Disabilities Act

           Certain properties the Company acquires may be required to comply with the Americans with Disabilities Act of 1990, or the ADA. The ADA has separate compliance requirements for “public accommodations” and  “commercial facilities,” but generally requires that buildings be made accessible to people with disabilities. Compliance with the ADA requirements could require removal of access barriers and non-compliance could result in imposition of fines by the U.S. government or an award of damages to private litigants, or both. While the tenants to whom the Company leases properties will be obligated by law to comply with the ADA provisions, and under the Company’s leases will typically be obligated to cover costs associated with compliance, if required changes involve greater expenditures than anticipated, or if the changes must be made on a more accelerated basis than anticipated, the ability of such tenants to cover costs could be adversely affected and the Company could be required to expend its own funds to comply with the provisions of the ADA, which could adversely affect the Company’s results of operations and financial condition and its ability to make distributions to shareholders. In addition, the Company will be required to operate its properties in compliance with fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to the Company’s properties. The Company may be required to make substantial capital expenditures to comply with those requirements and these expenditures could have a material adverse effect on its ability to pay dividends to shareholders at historical levels or at all.

Employees

           The Company currently has no employees, and the Company expects that it will not have any employees until its business expands appreciably.  Richard J. Church, the Company’s sole director and officer, is currently the only person providing labor services on behalf of the Company.  Mr. Church is not obligated to devote any specific number of hours to the Company’s business, and he intend to devote only as much time to the Company’s business as he believes necessary.  See the risk factors in the section captioned “RISKS RELATED TO THE MANAGEMENT OF OUR BUSINESS.”

Properties and Facilities

The only significant property that the Company owns at this time is the Company’s interest in Ananda Investments, LLC, the Texas limited liability company, which owns a 5,793 sq. ft. building situated in the Montrose district near and west of downtown Houston, Texas.  See “Sole Property Interest” above.  For now and for the foreseeable future, Richard J. Church, the Company’s sole director and officer, is making available gratuitously a small amount of office space for the Company’s corporate offices.  If the Company’s business expands appreciably, the Company will probably procure its own office space or will commence paying some reasonable fee to Mr. Church for providing office space.

Legal Proceedings

Since the date of its organization through the date of this Prospectus, the Company has not been involved in any legal proceedings.  There can be no assurance, however, that the Company will not in the future be involved in litigation incidental to the conduct of its business.

Available Information

           The Company has filed with the U.S. Securities & Exchange Commission (the “Commission”) a Registration Statement on Form S-1 and exhibits relating thereto (the "Registration Statement") under the Securities Act of 1933, as amended (the "Act"), of which this Prospectus is a part.  This Prospectus does not contain all the information set forth in the Registration Statement.  Reference is made to such Registration Statement for further information with respect to the Company and the securities of the Company covered by this Prospectus.  Statements contained herein concerning the provisions of documents are necessarily summaries of such documents, and each statement is qualified in its entirety by reference to the copy of the related document filed with the Commission.


 
20

 


        After the Distribution, the Company will be a reporting company under the Securities Exchange Act of 1934 (the "Exchange Act").  As a consequence, the Company will file with the Commission Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K.  The Annual Reports on Form 10-K will contain audited financial statements.  After they are filed, these reports can be inspected at, and copies thereof may be obtained at prescribed rates, at the Commission's Public Reference Room located at 101 F Street, N.E., Washington, D.C. 20549, between the hours of 9:00 a.m. and 5:00 p.m. Eastern Time, except federal holidays and official closings.  The Commission maintains a Web site that contains reports, proxy statements and information statements and other information (including the Registration Statement) regarding issuers that file electronically with the Commission.  The address of such site is http://www.sec.gov.  The Company's reports can be inspected at, and copies downloaded from, the Commission's Web site.  Please call the Commission’s Office of Investor Education and Advocacy at 202/551-8090 for further information on inspecting reports on the Commission's Web site or requesting a paper copy.
 
MANAGEMENT

The sole director and executive officer of the Company is Richard J. Church, who is 57 years old.  Mr. Church has served as the Company's sole director, and the Company’s President, Treasurer and Secretary, since the Company’s formation.  In 1986, Mr. Church co-founded Church Realty, a commercial and investment real estate company involved in the acquisition, holding, disposition, brokerage and management of commercial and investment properties.  In 2004, Mr. Church dissolved Church Realty to pursue personal investments in real estate and securities, activities with respect to which he has continued through the present.  Mr. Church is a licensed real estate agent and sits on the Board of Directors of Southwestern Manufacturing Co., Inc.  Mr. Church graduated from the University of Texas at Austin, Texas in 1976 with a Bachelor of Science in electrical engineering.

EXECUTIVE COMPENSATION AND CERTAIN TRANSACTIONS

As of the date of this Prospectus, the Company has paid no compensation to any member of management.  In addition, the Company has not adopted any retirement, pension, profit sharing, stock option or insurance programs or other similar programs for the benefit of its management or employees.  Management does not expect to pay any remuneration to itself (other than expense reimbursements) until such time as it is able to raise enough funds or has enough positive cash flow to do so.  Any salaries paid would be at market levels, consistent with any restrictions on salaries imposed by the investors providing the additional funds or by other financial constraints.

The Company has not entered into an employment agreement with its sole executive officer.

The authorized number of directors of the Company is presently fixed at one.  Each director will serve for a term of one year that expires at the following annual shareholders' meeting.  Each officer serves at the pleasure of the Board of Directors and until a successor has been qualified and appointed. Currently, the Company’s policy is that directors will receive no remuneration for their services as such, but that the Company will reimburse directors for any expenses incurred in attending any directors meeting.

There are no family relationships, or other arrangements or understandings between or among any of the directors, executive officers or other person pursuant to which such person was selected to serve as a director or officer.
 
 
 
21

 

        
        The Company acquired its sole current property interest from Richard J. Church, the Company’s sole director and officer for 934,500 shares of the Company’s common stock and a promissory note in the amount of $190,000.  Mr. Church originally acquired this interest in 2004 for approximately $106,000.  Based on substantive back-up obtained in connection with the transactions described immediately preceding, Mr. Church believes that such transactions were commercially reasonable.  However, there can be no assurance that the terms and conditions of the interest acquisition are as favorable to us as those that could have been obtained in true arms-length negotiations.  Moreover, because Mr. Church is the sole member of the Company’s management and for Akashic, there can be no assurance that the Company would enforce a claim against Mr. Church arising out of any problem related to the acquisition.   Although the Company carries the interest on its balance sheet at its original cost (less allocated losses) in accordance with generally accepted accounting principles, substantive back-up obtained in connection with the acquisition of the interest indicates that it probably has a fair market value of approximately $225,000.


PRINCIPAL SHAREHOLDERS

The following table sets forth as of October 20, 2010 information regarding the beneficial ownership of Common Stock (i) by each person who is known by the Company to own beneficially more than 5% of the outstanding Common Stock; (ii) by each director; and (iii) by all directors and officers as a group.

 
Name and Address of
Beneficial Owner
Beneficial Ownership
Prior to Distribution
Beneficial Ownership
After Distribution
Number
Percent
Number
Percent
         
Richard J. Church
3014 McCulloch Circle
Houston, Texas 77056
 
1,869,000(1)
 
100%
 
1,775,550(2)
 
95%
         
Akashic Ventures, Inc.
3014 McCulloch Circle
Houston, Texas 77056
 
934,500(3)
 
50%
 
-0-
 
-0-
 
 (1)
 
 
Includes 934,500 shares owned outright and 934,500 shares owned by Akashic Ventures, Inc., a corporation that is controlled by Mr. Church.  Of these shares, 934,500 are also included in the table in the figure of shares beneficially owned by Akashic Ventures, Inc.
 (2) All of these shares will be owned outright.
 (3) These shares are also included in the table in the figure of shares beneficially owned by Mr. Church.

 
THE DISTRIBUTION

Reasons for the Distribution .

The Company was formed by Akashic Ventures, Inc., a Delaware corporation (“Akashic”), for purposes of pursuing real estate acquisitions.  Akashic is a publicly held corporation that once filed reports with the Commission and traded under the symbol LPTI when named Logiphone, Inc.  Akashic has been dormant from a business perspective for more than a decade.  Richard J. Church acquired control of Akashic on May 18, 2008.  He is now the sole director and officer of both the Company and Akashic.  Since the time of his acquisition of control of Akashic, Mr. Church has been exploring various business opportunities that Akashic could undertake.  In view of his background in the real estate business and the general condition of the real estate industry in the United States, he recently decided to cause Akashic to pursue the acquisition of financially attractive real estate properties, and he caused Akashic to form the Company as a wholly-owned subsidiary for this purpose.


 
22

 


         Shortly after the formation of the Company, another business opportunity presented itself to Akashic.  This opportunity involves an experimental and proprietary treatment for the acquired immunodeficiency syndrome, more frequently referred to as “AIDS,” a disease of the human immune system caused by the human immunodeficiency virus (“HIV”).  Akashic is currently exploring the formation of another wholly owned subsidiary to pursue this more recent business opportunity.

Mr. Church recognizes that publicly traded companies have certain advantages in comparison to privately traded companies because of Federal and state securities laws and certain market realities.  First, the stock of publicly traded (once properly registered) can be offered to any person.  Moreover, once purchased, the purchaser legally can sell the stock immediately or at any time thereafter to any person whom the purchaser chooses.  In addition, for many publicly traded stocks, an active trading market develops for the stock, making the stock fairly liquid and marketable.  Because of these advantages, publicly traded stock generally commands appreciably higher values than privately traded or restricted stock in comparable companies.  The advantages of publicly traded stock increases a corporation's ability to raise funds more easily and in larger amounts.  These advantages also give a corporation the flexibility to use such publicly traded stock (instead of cash or debt) to acquire properties and assets.  Sellers of properties and assets may prefer to receive stock rather than cash because they can do so without recognizing gain on the sale under the Federal tax code.  However, they may refuse to accept privately traded or restricted stock because of its illiquidity or unmarketability when they will readily accept publicly traded stock because of its liquidity and marketability.  Moreover, publicly traded stock permits a corporation to establish more attractive management and employee incentive plans to motivate management and employees to perform at their highest level.

Notwithstanding the advantages described above, the Company’s business and AIDs treatment opportunity that Akashic would like to pursue are considerably different. The respective Board of Directors of Akashic and the Company (which both comprise Mr. Church as their sole member) have determined that it is in the best interests of Akashic and the Company to undertake the Distribution, thereby separating the business of the Company from the proposed additional business of Akashic, for the reasons described herein.

The Distribution is designed to establish the Company as a stand alone, independent company that can adopt strategies and pursue objectives appropriate to its specific business. The Distribution will enable each of Akashic and the Company to better focus on the profitable growth opportunities in their respective industries. Also, the Distribution will enhance each of Akashic's and the Company's respective abilities, as and when appropriate, to engage in strategic acquisitions in their respective existing and new lines of business through acquisitions using their own respective capital stock. Moreover, the Distribution should better enable the Company's ability, as and when appropriate, to procure financing from lenders that might otherwise be unwilling to provide financing because of the business in which Akashic proposes to engage.  In addition, Akashic and the Company believe that the separation of Akashic's proposed AIDs treatment business from the Company's recently commenced real estate business will cause the two entities to be recognized by the financial community as distinct businesses with different investment risk and return profiles. As a result of the Distribution, Akashic will be viewed in the investment community primarily as an AIDs treatment business while the Company should develop its following primarily as a real estate business. In this regard, investors will be better able to evaluate the merits and future prospects of the businesses of Akashic and the Company, enhancing the likelihood that each will achieve appropriate market recognition for its performance and potential, and thereby enhance shareholder value.  Furthermore, current shareholders and potential investors will be able to direct their investments to their specific areas of interest.  The Distribution will also allow the Company to establish its own employee stock ownership plan and other equity-based compensation plans so that there will be a more direct alignment between the performance of the Company and the compensation of employees of the Company, which, among other things, is intended to strengthen and support the Company's ability to achieve cost savings, greater efficiencies and sales growth.

For the reasons stated above, the Akashic Board of Directors of which Mr. Church is currently the sole member believes that the Distribution is in the best interest of the Company, Akashic and Akashic’s shareholders. In reaching its conclusions, the Akashic Board of Directors has determined that the Distribution is fair, from a financial point of view, to Akashic’s shareholders, although the Board of Directors has not sought the opinion of any financial advisor to such effect.

 
 
23

 
 
 
Manner of Effecting the Distribution .
 
 
The Distribution consists of an aggregate of 934,500 shares of Common Stock.  The Distribution will result in 50% of the outstanding shares of Common Stock being distributed to holders of Akashic common stock.  In connection with the Distribution, each stockholder of Akashic will receive one share of Common Stock for each share of Akashic common stock owned on the Record Date.  Certificates representing the number of shares of Common Stock to which Akashic stockholders are entitled are being delivered to Akashic stockholders simultaneously with this Prospectus.  The shares of Common Stock will be fully paid and non-assessable.  The holders thereof will not be entitled to preemptive rights nor cumulative voting rights. See "DESCRIPTION OF CAPITAL STOCK."  No holder of Akashic common stock will be required to pay any cash or other consideration for the shares of Common Stock received in the Distribution or to surrender or exchange shares of Akashic common stock in order to receive shares of Common Stock.

Shares of Common Stock distributed to Akashic stockholders in connection with the Distribution generally will be freely transferable.  The Company expects that such shares will be traded in the over-the-counter market, and thus may be purchased and sold through the usual investment channels, including securities broker/dealers.  Subject to the sponsorship of a market maker, the Company expects that the shares of Common Stock will be traded on the OTC Electronic Bulletin Board.  Notwithstanding the above, shares of Common Stock received in connection with the Distribution by persons who are deemed "affiliates" of the Company under the Act will be subject to certain restrictions.  Persons who may be deemed to be affiliates of the Company after the Distribution generally include individuals or entities that control, are controlled by, or are under common control with the Company and may include the directors and principal executive officers of the Company as well as any principal shareholder of the Company.  Persons who are affiliates of the Company will be permitted to sell their shares of Common Stock only pursuant to an effective registration statement under the Act or an exemption from the registration requirements of the Act, such as the exemptions afforded by Rule 144 under the Act.
 
CERTAIN FEDERAL INCOME TAX CONSEQUENCES

Neither the Company nor Akashic has obtained a private letter ruling from the Internal Revenue Service nor an opinion of tax counsel with respect to possible Federal income tax consequences of the Distribution.  However, the Company and Akashic are generally aware of the taxability of a corporate distribution of property pro rata to its stockholders.

Distributions by corporations to their stockholders may be taxable.  In general, where the distribution is made out of the earnings and profits of the corporation, the amount received is taxable as ordinary income.  Where distributions are made in excess of the corporation's earnings and profits, the recipient is normally not taxed to the extent of its basis in the stock.  Distributions in excess of earnings and profits and basis are normally taxed as if the stockholder had sold his stock.

As of the date of this Prospectus, Akashic had no accumulated earnings and profits.  Therefore, distributions of shares of Common Stock to Akashic stockholders are not taxable as ordinary income.  The amount of such distribution is the fair market value of the Common Stock on the date of distribution.  In this case, valuation of Common Stock is not easily possible, given the limited operating history of the Company.  There has been no attempt to place a value on the Common Stock by the management of the Company or of Akashic, and such valuation is the responsibility of each Akashic stockholder who receives Common Stock, and his or her own tax advisor.  However, in the opinion of Company management, such valuation might be reasonably placed at $0.12 per Company share as of the date of this registration statement.  This valuation is based on the Company’s estimated fair market value as a publicly registered company with no significant assets or operating history.

 
 
24

 


         If an individual Akashic stockholder agrees with this estimate, the tax consequences to him are that if the adjusted tax basis of his Akashic shares is in excess of $0.12 per share (one share of Common Stock is distributed for every one Akashic share), then such Common Stock distribution to him should be considered a "non-taxable return of capital."  If an individual Akashic stockholder agrees with our estimate, the excess of $0.12 per share over the adjusted tax basis of an individual Akashic stockholder’s share will be treated as a “capital gain” and taxed accordingly.  Such $0.12 per share should then be deducted from such stockholder's Akashic per share tax basis and $0.12 per share will be the new cost basis of his or her Company stockholdings.

For domestic corporations which hold Akashic common stock, the amount of the Distribution for purposes of determining dividend income, return of capital, or capital gain will be the lesser of (i) the fair market value of the Common Stock at the date of the Distribution, or $0.12 per share if such corporate stockholder accepts the Company's valuation methodology, or (ii) its adjusted per share basis of its investment in Akashic common stock.  A domestic corporation's basis in Akashic common stock will also be the lesser of the foregoing amounts.

STATE AND LOCAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION WILL VARY FROM JURISDICTION TO JURISDICTION.  STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS TO DETERMINE APPLICABLE TAX CONSEQUENCES OF THE ISSUANCE AND DISPOSITION OF THE SHARES BEING DISTRIBUTED.

Receipt of Shares .

The receipt of shares of Common Stock will result in a taxable capital gain to Akashic stockholders to the extent that such fair value of Common Stock exceeds their tax basis in Akashic common stock at the time of issuance.

Sale of Shares .

An Akashic stockholder whose shares of Common Stock are sold will realize capital gain or loss measured by the difference between the amount realized and the stockholder's tax basis in such shares.

Holding Period .

The holding period of the shares of Common Stock received in connection with the Distribution is measured from the date that the shares are distributed to Akashic stockholders.

Other Tax Consequences .

There may be other Federal, state, local or foreign tax considerations (including potential withholding requirements) applicable to the circumstances of particular Akashic stockholders who should consult with their own tax advisors to determine the applicable tax consequences of the issuance and disposition of the shares of Common Stock being distributed.

OTHER MATTERS

The Distribution is not being made in any states or other jurisdictions in which it in unlawful to do so.  The Company may delay the commencement of the Distribution in certain states or other juris­dictions in order to comply with the securities law requirements of such states or other jurisdictions.  It is not anticipated that there will be any changes in the terms of the Distribution.  The Company may, if it so determines in its sole discretion, decline to make modifications to the terms of the Distribution requested by certain states or other jurisdictions, in which event Akashic stockholders resident in such states or other jurisdictions will not be eligible to participate in the Distribution.
 
 
 
25

 
 
 
DESCRIPTION OF CAPITAL STOCK

Capital Stock .

The Company's authorized capital stock consists of 500,000,000 shares of Common Stock, $.001 par value per share and 10,000,000 shares of Preferred Stock, $.001 par value per share.

Common Stock .

The authorized Common Stock of the Company consists of 500,000,000 shares, par value $0.001 per share.  As of the date of this Prospectus, 1,869,000 shares of Common Stock were outstanding.  All of the shares of Common Stock are validly issued, fully paid and non-assessable.  Holders of record of Common Stock will be entitled to receive dividends when and if declared by the Board of Directors out of funds of the Company legally available therefor.  In the event of any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or otherwise, after payment of provision for payment of the debts and other liabilities of the Company, including the liquidation preference of all classes of preferred stock of the Company, each holder of Common Stock will be entitled to receive his pro rata portion of the remaining net assets of the Company, if any.  Each share of Common stock has one vote, and there are no preemptive, subscription, conversion or redemption rights.  Shares of Common Stock do not have cumulative voting rights, which means that the holders of a majority of the shares voting for the election of directors can elect all of the directors.

Preferred Stock .

The Company's Certificate of Formation authorizes the issuance of up to 10,000,000 shares of the Company's $0.001 par value preferred stock (the "Preferred Stock").  As of the date of this Prospectus, no shares of Preferred Stock were outstanding.  The Preferred Stock constitutes what is commonly referred to as "blank check" preferred stock.  "Blank check" preferred stock allows the Board of Directors, from time to time, to divide the Preferred Stock into series, to designate each series, to issue shares of any series, and to fix and determine separately for each series any one or more of the following relative rights and preferences: (i) the rate of dividends; (ii) the price at and the terms and conditions on which shares may be redeemed; (iii) the amount payable upon shares in the event of involuntary liquidation; (iv) the amount payable upon shares in the event of voluntary liquidation; (v) sinking fund provisions for the redemption or purchase of shares; (vi) the terms and conditions pursuant to which shares may be converted if the shares of any series are issued with the privilege of conversion; and (vii) voting rights.  Dividends on shares of Preferred Stock, when and as declared by the Board of Directors out of any funds legally available therefor, may be cumulative and may have a preference over Common Stock as to the payment of such dividends.  The provisions of a particular series, as designated by the Board of Directors, may include restrictions on the ability of the Company to purchase shares of Common Stock or to redeem a particular series of Preferred Stock.  Depending upon the voting rights granted to any series of Preferred Stock, issuance thereof could result in a reduction in the power of the holders of Common Stock.  In the event of any dissolution, liquidation or winding up of the Company, whether voluntary or involuntary, the holders of each series of the then outstanding Preferred Stock may be entitled to receive, prior to the distribution of any assets or funds to the holders of the Common Stock, a liquidation preference established by the Board of Directors, together with all accumulated and unpaid dividends.  Depending upon the consideration paid for Preferred Stock, the liquidation preference of Preferred Stock and other matters, the issuance of Preferred Stock could result in a reduction in the assets available for distribution to the holders of the Common Stock in the event of liquidation of the Company.  Holders of Preferred Stock will not have preemptive rights to acquire any additional securities issued by the Company.  Once a series has been designated and shares of the series are outstanding, the rights of holders of that series may not be modified adversely except by a vote of at least a majority of the outstanding shares constituting such series.

One of the effects of the existence of authorized but un-issued shares of Common Stock or Preferred Stock may be to enable the Board of Directors of the Company to render it more difficult or to discourage an attempt to obtain control of the Company by means of a merger, tender offer at a control premium price, proxy contest or otherwise and thereby protect the continuity of or entrench the Company's management, which concomitantly may have a potentially adverse effect on the market price of the Common Stock.  If in the due exercise of its fiduciary obligations, for example, the Board of Directors were to determine that a takeover proposal were not in the best interests of the Company, such shares could be issued by the Board of Directors without shareholder approval in one or more private placements or other transactions that might prevent or render more difficult or make more costly the completion of any attempted takeover transaction by diluting voting or other rights of the proposed acquirer or insurgent shareholder group, by creating a substantial voting block in institutional or other hands that might support the position of the incumbent Board of Directors, by effecting an acquisition that might complicate or preclude the takeover, or otherwise.

 
 
26

 
 
 
Shares Eligible for Future Sale .

Prior to the Distribution, there has been no public market for the Common Stock.  Sales of a substantial amount of Common Stock in the public market, or the perception that such sales may occur, could adversely affect the market price of the Common Stock prevailing from time to time in the public market and could impair the Company's ability to raise additional capital through the sale of its equity securities in the future.

Upon completion of the Distribution, the Company will have issued and outstanding 1,869,000 shares of Common Stock, approximately 1,775,550 of which are believed to be "restricted" or "control" shares for purposes of the Act.  "Restricted" shares are those acquired from the Company or an "affiliate" other than in a public offering, while "control" shares are those held by affiliates of the Company regardless as to how they were acquired.  All of these restricted and control shares of Common Stock will become eligible for sale once the Company has been a reporting company with the U.S. Securities & Exchange Commission (“Commission”) for 90 days, subject to the requirements and restrictions of Rule 144.

In general, under Rule 144, six months must have elapsed since the later of the date of acquisition of restricted shares from the Company or any affiliate of the Company (the “Acquisition Date”).  No time needs to have lapsed in order to sell control shares.   Under Rule 144, if more than six months have elapsed since the Acquisition Date, and the holder is deemed not to have been an affiliate of the Company at any time during the 90 days preceding a sale, such holder will be entitled to sell such Common Stock in the public market free of any restrictions and requirements; provided, however, that if such sale occurs less than one year after the Acquisition Date the Company must be current in its primary filings with the Commission.  Moreover, under Rule 144, if more than six months have elapsed since the Acquisition Date, and the holder is deemed to be or have been an affiliate of the Company at any time during the 90 days preceding a sale, such affiliate will be entitled to sell within any three-month period such number of restricted or control shares that does not exceed the greater of (a) 1% of the then outstanding shares or (b) (in certain cases not expected to apply to us soon) the average weekly trading volume during the four calendar weeks prior to such sale, provided that such affiliate complies with certain other restrictions on the manner of selling and certain notice requirements, and the Company is current in its primary filings with the Commission.
 
DIVIDEND POLICY

The Company has paid no cash dividends on its Common Stock, and the Company presently intends to retain earnings to finance the expansion of its business.  Payment of future dividends, if any, will be at the discretion of the Board of Directors after taking into account various factors, including the Company's financial condition, results of operations, current and anticipated cash needs and plans for expansion.
 
USE OF PROCEEDS

The Company will not receive any proceeds from the Distribution.

EXPERTS

           The financial statements and schedules of REO Plus, Inc. as of June 30, 2010 and for the period from August 11, 2009 (inception) through June 30, 2010 have been included herein and in the registration statement in reliance upon the report of Child, Van Wagoner & Bradshaw, PLLC, independent certified public accountants, included herein, and upon the authority of said firm as experts in accounting and auditing.

 
 
27

 
 
 
 REO PLUS, INC.

INDEX TO FINANCIAL STATEMENTS

 
Page
   
Independent Auditor's Report
F-1
Balance Sheets as of June 30, 2010 and December 31, 2009
 
F-2
Statement of Operations for the six months ended June 30, 2010, for the period from August 11, 2009 (date of inception) through December 31, 2009, and for the period from August 11, 2009 (date of inception) through June 30, 2010
 
 
 
F-3
Statement of Changes in Stockholders' Equity (Deficit) six months ended June 30, 2010, and for the period from August 11, 2009 (date of inception) through December 31, 2009 and June 30, 2010
 
 
F-4
Statement of Cash Flows for the six months ended June 30, 2010, for the period from August 11, 2009 (date of inception) through December 31, 2009, and for the period from August 11, 2009 (date of inception) through June 30, 2010
 
 
 
F-5
Notes to Financial Statements
F-6


 
 

 

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To The Board of Directors
REO Plus, INC.

 
We have audited the accompanying  balance sheets of  REO Plus, INC.  (a Texas  development stage company) (the Company) as of June 30, 2010 and December 31, 2009, and the related  statements of operations, changes in  stockholders’ equity (deficit), and cash flows for the  six months ended June 30, 2010, the period  from August 11, 2009 (inception) through December 31, 2009, and the period from August 11, 2009 (inception) through June 30, 2010. 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 audit.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the  financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 REO Plus, INC.   as of June 30, 2010 and December 31, 2009, and the results of its operations and its cash flows for the  six months ended June 30, 2010, the  period from August 11, 2009 (inception) to December 31, 2009, and the period from August 11, 2009 (inception) to June 30, 2010,   in conformity with accounting principles generally accepted in the United States of America.
 
The accompanying  financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the  financial statements, the Company has  an accumulated deficit, and has not yet produced revenues from operations. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The  financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Child, Van Wagoner & Bradshaw, PLLC
Child, Van Wagoner & Bradshaw, PLLC
Salt Lake City, Utah
September 17, 2010
 
 
 
F-1

 

 
REO Plus, INC.  
( A Development Stage Company)  
   
Balance Sheets  
   
ASSETS
 
             
   
June 30,
2010
   
December 31, 2009
 
Current Assets:
           
   Cash
  $ 8,548     $ 17,963  
   Prepaid Expenses
    5,000       0  
                 
      Total Current Assets     13,548       17,963  
                 
Investment in unconsolidated affiliate     48,944     $ 0  
                 
     Total Assets   $ 62,492     $ 17,963  
                 
                 
  LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
                 
Current Liabilities:                
   Accounts payable and accrued expenses   $ 2,400      $  
                 
     Total Current Liabilites     2,400         
                 
Note payable, stockholder     190,000         
                 
Stockholders' (Deficit) Equity:                
     Preferred stock, $.001 par value, 10,000,000 shares                
     authorized and "0" shares issued and outstanding                
     Common stock, $.001 par value, 500,000,000 shares                
     authorized, 1,869,000 and 934,500 shares, respectively                
     issued and outstanding     1,870        935   
   Additional paid-in capital      53,130        26,565   
   Accumulated deficit     (184,908  )     (9,537  )
                 
    Total Stockholders' (Deficit) Equity     (129,908      17,963   
                 
      Total Liabilities and Stockholders' Equity   $ 62,492      17,963   
                 
 
 
See accompanying notes.

 
 
F-2

 

 
REO Plus, INC.
 
(A Development Stage Company)  
   
Statements of Operations  
                   
   
For the
Six Months Ended
June 30, 2010
   
For the Period from Inception (August 11,2009) to
December 31, 2009
   
For the Period from Inception (August 11,2009) to
 June 30,
 2010
 
                   
Costs and Expenses:                  
   Professional fees   $ 6,815     $ 9,537     $ 16,352  
                         
Net Income (Loss) from Operations     (6,815 )     (9,537 )     (16,352 )
                         
Other Income (Expenses):                        
  Equity in (Loss) of Unsonsolidated Affiliate      (2,816 )     0       (2,816 )
                         
Net (Loss) before Income Tax     (9,631 )     (9,537 )     (19,168 )
                         
Income Tax (Provision) Benefit     0       0       0  
                         
Net Loss   $ (9,631 )   $ (9,537 )   $ (19,168 )
                         
Net Loss per Share   $ (0.01 )   $ (0.01 )        
                         
Fully Diluted Loss per Share   $ (0.01 )   $ (0.01 )        
                         
Weighted Average Shares Outstanding     1,869,000       934,500          
                         
                         

 
See accompanying notes.

 
F-3

 
 
   
REO Plus, INC.  
(A Development Stage Company)  
   
   
Statements of Changes in Stockholders' Equity (Deficit)  
   
For the Six Months Ended June 30, 2010  
and  
For the Period from Inception (August 11, 2009) through December 31, 2009  
and June 30, 2010  
   
    Common                          
    Stock           Additional              
    Subscription     Common Stock     Paid-In     Accumulated        
    Receivable     Shares     Amount     Capital     Deficit     Total  
                                     
 Stock subscription,                                    
   August 11, 2009   $ (27,500 )     934,500     $ 935     $ 26,565     $ 0     $ 0  
                                                 
 Stock subscription                                                
    receipts                                                
    November 4, 2009     13,750       0       0       0       0       13,750  
                                                 
 Stock subscription                                                
    receipts                                                 
    November 14, 2009     13,750       0       0       0       0       13,750  
                                                 
 Net loss                                                
    August 11, 2009 -                                                
    December 31, 2009     0       0       0       0       (9,537     (9,537 )
                                                 
 Balance,                                                
    December 31, 2009     0       934,500       935       26,565       (9,537 )     17,963  
                                                 
 Issuance of stock for                                                
    investment,                                                
    January 2, 2010     0       934,500       935       26,565       0       27,500  
                                                 
 Deemed Dividend     0       0       0       0       (165,740     (165,740 )
                                                 
 Net Loss                                                
    January 1, 2010 -                                                
    June 30, 2010     0       0       0       0       (9,631     (9,631
                                                 
 Balance,                                                
    June 30, 2010   $ 0     $ 1,869,000     $ 1,870     $ 53,130     $ (184,908 )   $ (129,908 )
                                                 
                                                 

 
See accompanying notes.
 

 
F-4

 


  REO Plus, INC.
  (A Development Stage Company)
 
 Statements of Cash Flows
 
   
For the Six Months Ended
June 30, 2010
   
For the Period from Inception (August 11, 2009) to December 31, 2009
   
For the Period from Inception (August 11, 2009) to June 30,
2010
 
Cash flows from Operating Activities:
                 
Net income (loss)
  $ (9,631 )   $ (9,537 )   $ (19,168 )
Adjustments to reconcile net income (loss) to cash used by operating activities:
                       
Equity in loss of unconsolidated affiliate
    2,816       0       2,816  
Increase in prepaid expenses
    (5,000  )     0       (5,000 )
Accounts payable
    2,400       0       2,400  
                         
Total Adjustments
    216       0       216  
                         
Net Cash Used by Operating Activities
    (9,415 )     (9,537 )     (18,952 )
                         
Cash Flows from Financing Activities:
                       
Issuance of common stock
    0       27,500       27,500  
                         
Net Cash Provided by Financing Activities
    0       27,500       27,500  
                         
Net Increase (Decrease) in Cash
    (9,415 )     17,963       8,548  
                         
Cash, Beginning Period
    17,963       0       0  
                         
Cash, End of Period
  $ 8,548     $ 17,963     $ 8,548  
                         
                         
                         
Schedules of
 
Non-Cash Investing and Financing Activities
 
                         
Acquisition of investment in affiliate
  $ 51,760     $ 0     $ 51,760  
                         
Issuance of note payable for investment in affiliate
  $ 190,000     $ 0     $ 190,000  
                         
Issuance of common stock for investment in affiliate
  $ 27,500     $ 0     $ 27,500  
                         
Dividend related to acquisition of investment
  $ 165,740     $ 0     $ 165,740  
                         
                         


See accompanying notes.


 
F-5

 
REO Plus, INC.
(A Development Stage Company)

Notes to Financial Statements

For the Six Months Ended June 30, 2010
and
For the Period from Inception (August 11, 2009) through December 31, 2009
and June 30, 2010
 
 


NOTE 1.                          ORGANIZATION AND BACKGROUND

REO Plus, INC. (“the Company”) was organized on August 11, 2009 for the purpose of investing in real estate.  The Company has had no operations other than its acquisition of 40% of Ananda Investments, LLC. (“Ananda”).

NOTE 2.                          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

Income Taxes

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the bases of certain assets and liabilities for financial and income tax reporting.  Deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.  Deferred taxes also are recognized for operating losses that are available to offset future federal income taxes.  Valuation allowances are established when necessary to reduce deferred tax assets to amounts expected to be realized.
Investments in Unconsolidated Entities

The Company accounts for investments in less than 50% owned and more than 20% owned entities using the equity method of accounting.  The Company’s share of earnings (loss) of such entities is recorded as a single amount as equity (loss) in earnings of unconsolidated entities.  Dividends, if any, are recorded as a reduction of the investment.

Goodwill

Cost of investments in purchased companies in excess of the underlying fair value of net assets at dates of acquisition is recorded as goodwill and assessed annually for impairment.  If considered impaired, goodwill will be written down to fair value and a corresponding impairment loss recognized.

Use of Estimates

The preparation of financial statements in conformity with 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.
 
The more significant areas requiring the use of management estimates relate to the valuation of deferred tax assets and investments in unconsolidated affiliates.  Accordingly, actual results could differ from those estimates.


 
F-6

REO Plus, INC.
(A Development Stage Company)

Notes to Financial Statements

For the Six Months Ended June 30, 2010
and
For the Period from Inception (August 11, 2009) through December 31, 2009
and June 30, 2010
 
 


NOTE 2.                          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As shown in the accompanying financial statements, the Company incurred losses of $19,168 since its inception and has not yet produced revenues from operations.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.
 
The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event that the Company cannot continue as a going concern.  Management anticipates that it will be able to raise additional working capital through the issuance of stock through an S-1 offering.
 
The ability of the Company to continue as going concern is dependent upon the Company’s ability to attain a satisfactory level of profitability and obtain suitable and adequate financing.  There can be no assurance that management’s plan will be successful.

NOTE 3.                          INVESTMENT IN AFFILIATE

On January 2, 2010 the Company acquired a 40% interest in Ananda, a Texas limited liability company, which owns a commercial real estate rental property in Houston, Texas.  This acquisition was accomplished by the issuance of 934,500 shares of the Company’s common stock valued at $27,500 and the issuance of a promissory note in the amount of $190,000. The investment was acquired from and recorded at the controlling shareholder’s cost basis with a resulting “deemed” dividend.  The transaction was treated as a transfer between entities under common control as follows.
 
 Issuance of common stock  $  27,500  
 Issuance of promissory note    190,000  
     217,500  
       
 Deemed dividend    (165,740
       
 Purchase price of investment in affiliate  $  51,760  

 
 
F-7

 
REO Plus, INC.
(A Development Stage Company)

Notes to Financial Statements

For the Six Months Ended June 30, 2010
and
For the Period from Inception (August 11, 2009) through December 31, 2009
and June 30, 2010
 
 


NOTE 3.                          INVESTMENT IN AFFILIATE (continued)

Summary financial results of Ananda for the six months ended June 30, 2010 are as follows:
 
Operations     Financial Position  
                 
 Rental income   $ 25,806      Cash   $ 9,503  
 Operating expenses     (32,846 )    Other current assets     5,962  
 Net loss   $ (7,040 )    Land, buildings and improvements     558,002  
             Total Assets   $ 573,467  
                     
 Equity in loss of            Deposits and accrued expenses     10,480  
    unconsolidated affiliate   $ (2,816 )    Mortgage payable     440,628  
                     
             Total Liabilities     451,108  
                     
             Members' equity     277,845  
             Accumulated deficit     (155,486
                     
             Total Equity     122,359  
                     
             Total Liabilities and Equity   $ 573,467  
                     
             Investment in unconsolidated affiliate   $ 48,944  
                     

 
NOTE 4.                          NOTE PAYABLE, RELATED PARTY

In connection with the Company’s acquisition of its investment in Ananda, the Company executed a note payable to a 95% stockholder in the amount of $190,000 with interest accruing at 7% per annum commencing on the first day of the fourth month after Ananda has obtained occupancy permits for certain properties it owns in Houston, Texas.  The permit was obtained on April 1, 2010, therefore the note of $190,000 will begin accruing interest on July 1, 2010.  On October 1, 2010, interest is due in the amount of $3,325, from July 1, 2010 through September 30, 2010.  Thereafter, $3,325 is due on January 1, 2011 and each subsequent third month until January 1, 2020 when a final balloon payment of $190,000 plus accrued interest is due and payable.

NOTE 5.                          RELATED PARTIES

A 95% stockholder is the sole director of the Company and the payee of the Company’s $190,000 note payable.


 
F-8

 
REO Plus, INC.
(A Development Stage Company)

Notes to Financial Statements

For the Six Months Ended June 30, 2010
and
For the Period from Inception (August 11, 2009) through December 31, 2009
and June 30, 2010
 
 

 
NOTE 6.                          COMMON STOCK

The Company is authorized to issue 500,000,000 shares of $.001 par value common stock and 10,000,000 shares of $.001 par value preferred stock.

NOTE 7.                          INCOME TAX BENEFIT

No income tax benefit has been recognized for the Company’s loss for the period from Inception (August 11, 2009) through December 31, 2009 and for the six months ended June 30, 2010, as the Company has no assurance of any future financial or taxable income.

NOTE 8.                          FAIR VALUE

The fair value of the Company’s financial assets and liabilities approximates their respective carrying values, due to their relatively short-term nature.

NOTE 9.                          COMPREHENSIVE INCOME

The Company has no other comprehensive income.

NOTE 10.                          SUBSEQUENT EVENTS

Subsequent events have been evaluated by management for potential recognition or disclosure through the date these financial statements were issued.  Subsequent events did not have a significant impact on the financial condition or results of operations.

 
F-9

 

 
PART II
 
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under the provisions of Chapter 8 of the Texas Business Organizations Code, the Company may indemnify its directors, officers, employees and agents and maintain liability insurance for those persons.  Section 8.101 of the Texas Business Organizations Code provides that a corporation may indemnify a governing person, or delegate, who was, is or is threatened to be made a named defendant or respondent in a proceeding if it is determined that the person: (i) conducted himself in good faith; (ii) reasonably believed that (a) in the case of conduct in his official capacity that his conduct was in the corporation’s best interest and (b) in all other cases, that his conduct was at least not opposed to the corporation’s best interest; and (iii) in the case of any criminal proceeding, had no reasonable cause to believe his conduct was unlawful. However, if the person is found liable to the corporation, or if the person is found liable on the basis that he received an improper personal benefit, indemnification under Texas law is limited to the reimbursement of reasonable expenses actually incurred by the person in connection with the proceedings and does not include a judgment, a penalty, a fine, and an excise or similar tax, and no indemnification will be available if the person is found liable for willful or intentional misconduct, breach of the person’s duty of loyalty, or an act or omission not committed in good faith that constitutes a breach of a duty owed by the person to the corporation. Under Texas law, indemnification by the corporation is mandatory if the person is wholly successful on the merits or otherwise, in the defense of the proceeding.

The Company’s Certificate of Formation obligates the Company to indemnify its directors and officers to the fullest extent permitted under Texas law. Additionally, the Company’s Bylaws grant it the authority to the maximum extent permitted by Texas law to purchase and maintain insurance providing such indemnification.

ITEM 25.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

     The estimated expenses set forth below, will be borne by the Company.

Item
Amount
     
SEC Registration Fee
$ 0.03
Blue Sky Filing Fees and Expenses
  5,000.00
Legal Fees and Expenses
  15,000.00
Accounting Fees and Expenses
  7,500.00
Miscellaneous
  2,000.00
     
Total
$ 29,500.03

ITEM 26.  RECENT SALES OF UNREGISTERED SECURITIES

In connection with (and in partial consideration of) the acquisition of 400 units of limited liability company member interest in Ananda Investments, LLC during January 2010, the Company issued to Richard J. Church, the Company’s sole director and officer,   934,500 shares of the Company's common stock (the "Common Stock").  These shares are believed to have had a fair market value of $27,500 at the time of issuance.  The issuance of Common Stock to Mr. Church is claimed to be exempt pursuant Section 4(2) of the Act.
 

 
II-1

 

 
In connection with the formation of the Company during August 2009, the Company issued to Akashic Ventures, Inc., a Delaware corporation ("Akashic"), 934,500 shares of Common Stock, in consideration of an aggregate cash purchase price of $27,500.  The issuance of Common Stock to Akashic is claimed to be exempt pursuant Section 4(2) of the Act.

ITEM 27.  EXHIBITS

Exhibit
Number
 
  Description
   
3.01
  Certificate of Formation
3.02
  Bylaws
4.01
  Specimen Common Stock Certificate
5.01
  Opinion and Consent of Randall W. Heinrich, PC, as to the legality of securities being registered
10.01
  Promissory note in the original principal amount of $190,000 made payable by the Company to Richard J. Church
23.01
  Consent of Child, Van Wagoner & Bradshaw, PLLC
23.02
  Consent of Randall W. Heinrich, PC contained in Exhibit 5.01
 
ITEM 28.  UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. 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 Act and will be governed by the final adjudication of such issue.
 

 
II-2

 
 
 
SIGNATURES

           Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirement for filing on Form S-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas on October 20, 2010.
 
   REO PLUS, INC.
   
   
   By: /s/ Richard J. Church            
   Richard J. Church, President

           Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following person in the capacities and on the date indicated.

 
  Name   Title   Date
     
/s/ Richard J. Church
  Sole Director, President and Treasurer (Principal
Executive Officer, Principal Financial Officer
and Principal Accounting Officer  )
October 20, 2010
 

 
II-3

 

 
CERTIFICATE OF FORMATION
of
REO PLUS, INC.

Pursuant to the provisions of the Texas Business Organizations Code, the undersigned, for purposes of forming a corporation under the laws of the State of Texas, hereby adopts the following Certificate of Formation:
Article 1 - Entity Name and Type

The filing entity being formed is a corporation.  The name of the entity is REO Plus, Inc.
 
Article 2 - Term

The period of duration of the corporation is perpetual.

Article 3 - Purpose and Powers

The purpose for which the corporation is organized is to transact any and all lawful business for which corporations may be organized under the Texas Business Organizations Code.  The corporation shall have the powers provided for in the Texas Business Organizations Code with respect to corporations.
 
Article 4 - Registered Agent and Registered Office

The initial registered agent is an individual resident of the state whose name is Richard J. Church.  The business address of the registered agent and the registered office address is 3014 McCulloch Circle, Houston, Texas 77056.
Article 5 – Directors

The number of Directors constituting the initial Board of Directors is one (1).  The name and address of the person who is to serve as the sole Director until the first annual meeting of the shareholders or until his successors is elected and qualified are:


Name
Address
   
Richard J. Church
3014 McCulloch Circle
 
Houston, Texas 77056


 
 

 
 
 
Article 6 – Authorized Shares

(a)            Authorized Shares .  The aggregate number of shares that the corporation shall have authority to issue is Five Hundred Million (500,000,000) shares of common stock of the par value of One Tenth of One Cent ($0.001) each, and Ten Million (10,000,000) shares of preferred stock of the par value of One Tenth of One Dollar ($0.001) each.

(b)            Common Stock Except as otherwise specifically required by law, herein, or in any resolution of the Board of Directors providing for the issue of any particular series of preferred stock (such a resolution is referred to hereinafter as a "Resolution"), the exclusive voting power of the corporation shall be vested in the holders of the common stock of the corporation.  Each share of common stock entitles the holder thereof to one vote at all meetings of the stockholders of the corporation.

The common stock shall be junior to the preferred stock and shall be subject to all rights, privileges, preferences and priorities of the preferred stock specifically set forth herein or in any Resolution.  After payment shall have been made in full to the holders of the preferred stock in the event of any liquidation, dissolution or winding upon of the affairs of the corporation, the remaining assets and funds of the corporation shall be distributed to the holders of common stock according to their respective shares.

(c)            Preferred Stock

(1)            Authority to Establish Series of Shares .  The Board of Directors of the corporation shall have the authority to establish one or more series of un-issued shares of the preferred stock by fixing and determining the relative rights and preferences of the shares of any series so established within the limitations set forth in the Texas Business Organization Code and these certificate of formation

(2)            Designation and Number of Shares .  A series shall have the designation and shall consist of the number of shares provided for herein or in a Resolution.  Except as otherwise provided herein or a Resolution, the number of shares of any series may be increased or decreased (but not below the number of shares of such series then outstanding) by a resolution adopted by the Board of Directors.

(3)            Voting .  Except as otherwise provided by law, herein or in a Resolution, no voting rights shall attach to the ownership of any shares of any series.

(4)            Dividends .  The holders of shares in any series shall be entitled to dividends only to the extent that dividends for that series are provided for herein or in a Resolution, and then only to the extent permitted by law.  Unless specified otherwise and unless the corporation has obtained all necessary approvals, any new series of preferred stock shall have dividend rights inferior to the dividend rights of each series of preferred stock outstanding at the time of the creation of the new series.

(5)            Redemption .  Shares of any series may be made redeemable upon the terms set forth herein or in a Resolution.  Such redemption may be made in whole or part, by the majority vote of all the members of the Board of Directors, during the time period set forth herein or in a Resolution, at a redemption price set forth herein or in a Resolution.  In case of a redemption of less than all of the shares of a series at such time outstanding, such redemption shall be effected by lot or in such manner as a majority of all the members of the Board of Directors shall direct.

 
 
2

 
 
 
Notice of every such redemption shall be given by mailing written notice, not less than 30 days nor more than 60 days prior to the date fixed for redemption, to each holder of record who will have some or all of such holder’s shares of the series redeemed.  Any notice of redemption shall be addressed to such holder at the address shown in the corpora­tion's records, mailed first class postage prepaid, and in addition to specifying the date of redemption shall specify the number of shares to be redeemed and the aggregate redemption price for such shares.  Notice given in the foregoing fashion shall be sufficient for all purposes and shall be deemed to have been received by all addressees thereof.

On or after the date of redemption, each holder of shares to be redeemed shall present and surrender such holder’s one or more certificates representing such shares to the corporation at the place designated in such notice, and thereupon the redemption price of such shares shall be payable to, or on the order of, the person whose name appears on such certificate as the owner thereof.  In case less than all of the shares represented by a certificate are redeemed, a new certificate shall be issued representing the shares not redeemed.  If notice of redemption shall have been duly given and if on the date fixed in any such notice as the date of redemption, funds necessary for the redemp­tion shall be available therefor, from and after the date fixed in any such notice as the date of redemption, all rights of the holders thereof as stockholders of the corporation, except the right to receive the redemption price without interest, shall cease and terminate, whether or not the certificates have been surrendered, and such shares shall not thereafter be transferred on the books of the corpora­tion, and such shares shall not be deemed to be outstanding for any purpose whatsoever other than as stated above.

The corporation may, at its option at any time after such notice of redemption has been given, deposit the redemption price of all shares designated for redemption and not yet redeemed with one or more banks or trust companies, as a trust fund for the benefit of the respective holders of the shares designated for redemption and not yet redeemed. Any balance of such moneys remaining unclaimed at the end of six years from the date fixed for redemption shall be repaid to the corporation on its request expressed in a resolution of its Board of Directors.


 
3

 
 
 
 Except as otherwise provided in a Resolution, shares redeemed or otherwise acquired by the corporation shall assume the status of authorized but unissued preferred stock and shall be unclassified as to series and may thereafter, subject to the provisions of these Articles or a Resolution, be reissued in the same manner as other authorized but unissued preferred stock.

(6)            Conversion Rights .

The shares of any series may be made convertible at such conversion rate and after the occurrence of such events as may be stated herein or in a Resolution, in accordance with the provisions hereof.

In order to exercise any conversion right­, the holder of any shares to be converted shall surrender the certificate representing such shares, accompanied (if so required by the corporation) by the proper instrument or instruments of transfer, in form satisfactory to the corporation, duly executed by the registered holder thereof or by such holder’s attorney duly authorized in writing, together with any requisite Federal, state or local transfer taxes, to the corpora­tion at its principal executive office, and shall give written notice to the corporation at such office that the holder elects to convert such shares.  Any payment, or adjustment of conversion ratio, made upon any conversion on account of dividends declared or accrued on the common stock or relevant series of preferred stock, shall be as provided herein or in a Resolution.  Converted shares shall be deemed to have been converted immediately prior to the close of business on the date of surrender of such certificate for conversion in accordance with the foregoing provisions, and at such time the rights of the holder of such converted shares as such holder shall cease, and the holder thereof shall be treated for all purposes as the record holder of common stock from and after such time.  As promptly as practicable after receipt of such notice and the surrender of such certificate as aforesaid, the corporation shall issue and deliver at such office a certificate or certificates for the number of full shares of common stock issuable upon conversion.

No fractional shares of common stock shall be issued upon conversion of any shares of a series. Instead of any fractional share of common stock which would otherwise be issuable upon conversion of any shares of a series, the corporation shall pay a cash adjustment equal to such fraction multiplied by the fair market value of a share of common stock on the business day next preceding the date of conversion.

Notwithstanding any restriction on the period of time during which a share of preferred stock may be converted, in the event of the dissolution or liquidation of the corporation, or any statutory merger, statutory consolidation, or sale of all or substantially all of the assets of the corporation, written notice thereof shall be given to the holders of any convertible preferred stock, and within thirty days after notice is given to the holders, such holders shall be permitted to convert their shares in the manner set forth above.

The ratio at which the shares of any series may be converted to common stock (the "Ratio") shall be subject to adjustment from time to time as follows.  If at any time the corporation pays a dividend on its common stock payable in common stock, subdivides its outstanding common stock into a larger number of shares, or combines the outstanding shares of common stock into a smaller number of shares by reclassification or otherwise, the Ratio in effect immediately prior to the related event shall be adjusted by multiplying the Ratio by a fraction, the numerator of which shall be the number of shares of common stock outstanding immediately after the related event (on a fully diluted basis), and the denominator of which shall be the number of shares of common stock outstanding immediately prior to the related event (on a fully diluted basis).


 
4

 
 
 
(7)            Liquidation Right .  If, in any voluntary or involuntary liquidation, dis­solution or winding up of affairs of the corporation, the assets of the corporation are sufficient therefor, holders of all of the shares in each series shall be entitled, with respect to each share thereof held, out of the assets of the corporation available for distribution to the stockholders, to receive an amount in cash per share equal to the price per share at which such share was issued (the "Original Issue Price"), as adjusted for stock dividends, subdivisions and combinations, plus any accrued, but unpaid dividends provided for herein or in a Resolution.

If, in any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the corporation, the assets of the corporation shall be insufficient to permit payment of an amount equal to the entire amount computed above to the holders of all of the shares in each series, then the assets of the corporation shall be distri­buted first to the holders of the series having the highest priority as set forth herein or in a Resolution.  If the assets of the corporation are sufficient to permit payment of the entire amount to which the holders of all of the shares in such series are entitled to as computed above, then the remaining assets of the corporation shall be distributed next to the holders of the series having the next highest priority as set forth herein or in a Resolution.  This procedure shall be repeated until the assets of the corporation are insufficient to permit payment of the entire amount the holders of the series then receiving distribu­tions are entitled to as computed above.  Once the assets of the corporation have become so insufficient, the remaining assets of the corporation shall be distributed ratably among the holders of such series according to the number of such shares held and the Original Issue Price thereof (as adjusted for stock dividends, subdivisions and combinations).

The Board of Directors shall not create, or increase the number of shares authorized with respect to, any class or series of stock, having as to liquidation or dividends, a preference over, or being on parity with, any series without first obtaining the approval, by vote or written consent, as provided by law, of the holders of at least two-thirds of the then outstanding shares of such series.  Unless specified otherwise and unless the corporation has obtained all necessary approvals, any new series of preferred stock shall have liquidation and rights inferior to the liquidation rights of each series of preferred stock outstanding at the time of the creation of the new series.

A consolidation or merger of the corporation with one or more other corporations shall not be deemed to be a liquidation, dissolution or winding up within the meaning of this Paragraph.
 
Article 7 – Limitation on Liability

To the full extent permitted by the Texas Business Organizations Code, no director of the corporation shall be liable to the corporation or its shareholders for monetary damages for an act or omission in such director's capacity as a director of the corporation, except to the extent that such an act or omission constitutes gross negligence or willful misconduct or to the extent that the Texas Business Organizations Code provides that liability for such an act or omission cannot be eliminated or limited.  Any repeal or amendment of this Article by the shareholders of the corporation shall be prospective only and shall not adversely affect any limitation on the liability of a director existing at the time of such repeal or amendment.  The foregoing elimination of the liability to the corporation or its shareholders shall not be deemed exclusive of any other rights or limitations of liability or indemnity to which a director may be entitled under any other provision of this certificate of formation or any bylaw of the corporation, contract or agreement, vote of shareholders and/or disinterested directors of the corporation, or otherwise.

Article 8 – Indemnification

(a)           The corporation shall indemnify and hold harmless its directors (each an Indemnified Person”) to the fullest extent permitted by law from and against any and all losses, claims, demands, costs, damages, liabilities, joint or several, expenses of any nature (including reasonable attorneys’ fees and disbursements), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, whether civil, criminal, the Indemnified Person may be involved or threatened to be involved, as a party or otherwise, arising out of or incidental to the business or activities of or relating to the corporation regardless of whether the Indemnified Person continues to be a director at the time any such liability or expense is paid or incurred.  The indemnification provided in this Article 8 may not be made to or on behalf of any director if a final adjudication establishes that the Indemnified Person’s acts or omissions involved intentional misconduct, fraud or a knowing violation of the law.

 
 
5

 
 
 
(b)           Expenses (including reasonable attorneys’ fees and disbursements) incurred by an Indemnified Person in defending any claim, demand, action, suit, or proceeding subject to this Article 8 shall, from time to time, upon request by this Indemnified Person, be advanced by the corporation prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the corporation if (i) a written affirmation by such Indemnified Person of his, her or its good faith belief that he, she or it has met the standard of conduct necessary for indemnification under this Article 8, and (ii) a written undertaking, by or on behalf of such Indemnified Person, to repay such amount if it shall ultimately be determined, by a court of competent jurisdiction that such indemnified person is not entitled to be indemnified as authorized by this Article 8 or otherwise.

(c)           Any indemnification hereunder shall be satisfied only out of the assets of the corporation, and the shareholders shall not be subject to personal liability by reason of these indemnification provisions.

(d)            An Indemnified Person shall not be denied indemnification in whole or in part under this Article 8 or otherwise by reason of the fact that the Indemnified Person had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted or not expressly prohibited by the terms of this certificate of formation.

(e)            The provisions of this Article 8 are for the benefit of the Indemnified Persons, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other person(s) or entity(ies).

Article 9 – Quorum, Majority Voting, and Written Consents

(a)           Shareholders having in the aggregate one-third or more of the shares entitled to vote, present at a meeting of shareholders in person or by proxy, shall constitute a quorum.

(b)           With respect to any matter for which the affirmative vote of the holders of a specified portion of the shares entitled to vote is required by the Texas Business Organizations Code, the affirmative vote of a majority of the shares entitled to vote on that matter, rather than the affirmative vote otherwise required by the Texas Business Organizations Code, shall be the act of the shareholders on that matter.  With respect to any matter for which the affirmative vote of the holders of a specified portion of the shares of any class or series is required by the Texas Business Organizations Code, the affirmative vote of a majority of the shares of that class or series on that matter, rather than the affirmative vote of the holders of shares of that class or series otherwise required by the Texas Business Organizations Code, shall be the act of the holders of shares of that class or series on that matter.

 
 
6

 
 
 
(c)           Any action required by the Texas Business Organizations Code to be taken at any annual or special meeting of shareholders, or any action which may be taken at any annual meeting or special meeting of the shareholders, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holder or holders of shares having not less than the minimum number of votes that would be necessary to take such action at a meeting at which the holders of all shares entitled to vote on the action were present and voted.
 
Article 10 – Preemptive Rights and Cumulative Voting

(a)           No holder of any shares of the corporation shall be entitled as a matter of right to purchase or subscribe for any part of any shares of the corporation authorized by this certificate of formation or of any additional stock of any class to be issued by reason of any increase of the authorized shares of the corporation or of any bonds, certificates of indebtedness, debentures, warrants, options or other securities convertible into any class of shares of the corporation, but any shares authorized by this certificate of formation or any such additional authorized issue of any shares or securities convertible into any shares may be issued and disposed of by the board of directors to such persons, firms, corporations or associations for such consideration and upon such terms and in such manner as the board of directors may in its discretion determine without offering any thereof on the same terms or on any terms to the shareholders then of record or to any class of shareholders, provided only that such issuance may not be inconsistent with any provision of law or with any of the provisions of this certificate of formation.

(b)           Cumulative voting is expressly prohibited. At each election of directors, every shareholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by him with respect to each of the persons nominated for election as a director and for whose election he has a right to vote; no shareholder shall be entitled to cumulate his votes by giving one candidate a number of votes equal to the number of directors to be elected, multiplied by the number of shares owned by such shareholder, or by distributing such votes on the same principle among any number of candidates.
 
Article 11 – Bylaws

The Board of Directors is expressly authorized to adopt, amend and repeal the bylaws.  The corporation’s shareholders are hereby expressly prohibited from amending or repealing the bylaws.

Organizer

The name and address of the organizer are set forth below:

Randall W. Heinrich
8 Greenway Plaza, Suite 818
Houston, Texas 77046
 
Effectiveness of Filing

This document becomes effective when it is filed with the secretary of state.


 
7

 
 
 
Execution

The undersigned signs this document subject to the penalties imposed by law for the submission of a materially false or fraudulent instrument.

This Certificate of Formation is executed on behalf of the Company on August 7, 2009.
 
 
  /s/ Randall W. Heinrich                  
   Randall W. Heinrich

 
 
8

 

 
BYLAWS
OF
REO PLUS, INC.

 
ARTICLE 1. OFFICES

Registered Office

1.01.          The registered office of the corporation required by the Texas Business Organizations Code to be maintained in the State of Texas may be, but need not be, identical with the principal office in the State of Texas, and the ad­dress of the regis­tered office may be changed from time to time by the Board of Directors.

Principal Office

1.02.          The principal office of the corporation in the State of Texas shall be located in the City of Houston, County of Harris.  The corporation may have such other offices, either within or without the State of Texas, as the Board of Direc­tors may designate or as the business of the corpora­tion may require from time to time.

Other Offices

1.03.          The corporation may also have offices at other places, within or without the State of Texas, where the corporation is qualified to do business, that the Board of Directors may from time to time designate, or the business of the corporation may require.

ARTICLE 2. SHAREHOLDERS’ MEETINGS

Place of Meetings

 2.01.          Meetings of shareholders will be held at any place within or without the State of Texas designated by the Board of Directors pursuant to the authority granted to the Board in these Bylaws, or by the written consent of all persons entitled to vote at shareholder meetings. In the absence of any designation, shareholders’ meetings will be held at the principal office of the corporation. Any meeting is valid wherever held if held by the written consent of all the persons entitled to vote at the meeting, given either before or after the meeting and filed with the Secretary of the corporation.

Time of Annual Meeting; Business Transacted
 
          2.02.          Unless otherwise determined by the Board of Directors, the annual meeting of shareholders will be held on the second Tuesday of June of each year, at the hour of 9:00 AM. If this day falls on a legal holiday, the annual meeting will be held at the same time on the next following business day. At annual meetings, Directors will be elected, reports of the affairs of the corporation will be considered, and any other business may be transacted that is within the powers of the shareholders.


 
 

 

Failure to Hold Annual Meeting
 
          2.03.          If, within any 13-month period, an annual meeting of shareholders is not held and a written consent of shareholders has not been executed instead of the meeting, any shareholder who has previously submitted a written request to the corporation that an annual meeting be held may apply to any court of competent jurisdiction in the county in which the principal office of the corporation is located for a summary order that an annual meeting be held, unless by law the meeting is not required to be held.

Conduct of Meetings

 2.04.          At every meeting of the shareholders, the President, or, in the President’s absence, a Vice President designated by the President, or, in the absence of designation, any other person chosen by a majority of the sharehold­ers of the corporation present in person or by proxy and entitled to vote, may act as chairperson of the shareholders’ meeting. The Secretary of the corpora­tion, or, in the Secretary’s absence, an Assistant Secretary, may act as Secretary of all meetings of the shareholders. In the absence of the Secretary or Assistant Secretary, the chairperson may appoint another person to act as Secretary of the meeting.

Action Without Meeting

 2.05.          Any action that, under any provision of the Texas Business Organizations Code, may be taken at any meeting of the shareholders, may be taken without a meeting, without prior notice and without a vote, if authorized by a writing signed by the holders of all of the shares that would be entitled to vote on that action at a meeting, and filed with the Secretary of the corporation. Any signed consent, or a signed copy of the consent, will be placed in the minute book of the corporation.
 
Telephone Meetings

 2.06.          Subject to the notice provisions required by these Bylaws and by the Texas Business Organizations Code, shareholders may participate in and hold a meeting by means of conference telephone or similar communications equipment by which all persons participating can hear each other. Participation in the meeting consti­tutes presence in person at the meeting, except participation for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

Notice of Meetings
 
          2.07.       (1)       Notice of all meetings of shareholders will be given in writing to all shareholders entitled to vote by or at the direction of the President, the Secretary, or the officer or person calling the meeting, or, in case of that person’s neglect or refusal, or if there is no person charged with the duty of giving notice, by any Director or shareholder. The notice will be given to each shareholder, either personally or by prepaid mail, addressed to the shareholder at his or her address as it appears on the share transfer records of the corporation. Notice may also be provided by facsimile, e-mail, or other form of electronic transmission.


 
 

 

Time of Notice

 (2)            Notice of any meeting of shareholders will be sent to each shareholder entitled to notice not less than 10 nor more than 60 days before the meeting, except in the case of a meeting for the purpose of approving a merger agreement, in which case the notice must be given not less than 20 days before the date of the meeting.

Contents of Notice

 (3)            Notice of any meeting of shareholders will specify the place; date; and hour of the meeting. The notice will also specify the purpose of the meeting if it is a special meeting, or if its purpose, or one of its purposes, will be to consider a proposed amendment of the Certificate of Formation, to consider a proposed reduction of stated capital in the manner and amount proposed by the Board without amendment, to consider a proposed merger, to consider a voluntary dissolution or the revoca­tion of a voluntary dissolution by act of the corporation, or to consider a proposed disposition of all, or substantially all, of the assets of the corporation outside of the ordinary course of business. When a purpose of the meeting is to consider a proposed amendment of the Certificate of Merger or a proposed plan of merger, the notice must contain or be accompanied by a copy or summary of the proposed change or plan.

Notice of Adjourned Meeting

 (4)            When a shareholders’ meeting is adjourned for 30 days or more, notice of the adjourned meeting will be given as in the case of an original meeting. When a meeting is adjourned for less than 30 days, it is not necessary to give any notice of the time and place of the adjourned meeting or of the business to be transacted at the meeting other than by announcement at the meeting at which the adjournment is taken.

When Notice Is Excused

 (5)            Any notice required to be given to a shareholder under any provision of the Texas Business Organiza­tions Code or the Certificate of Formation or the Bylaws need not be given to the shareholder if (1) notice of two consecutive annual meetings and all notices of meetings held during the period between those annual meetings, if any, or (2) all (but in no event less than two) payments (if sent by first-class mail) of distributions or interest on securities during a 12-month period have been mailed to that shareholder, addressed at his or her address as shown on the share transfer records of the corporation, and have been returned undeliverable. Any action or meeting taken or held without notice to the person has the same force and effect as if the notice had been duly given and, if the action taken by the corporation is reflected in any document filed with the secretary of state, that document may state that notice was duly given to all persons to whom notice was required to be given. If such a person delivers to the corporation a written notice setting forth his or her then current address, the requirement that notice be given to that person will be reinstated.

Waiver of Notice
 
          2.08.          Any notice required by law or by these Bylaws may be waived by execution of a written waiver of notice executed by the person entitled to the notice or a waiver by electronic transmission by the person entitled to notice. The waiver may be signed before or after the time stated in the notice.


 
 

 
 
 
Persons Entitled to Call Special Meetings

2.09.        (1) Special meetings of the shareholders, for any purpose whatsoever, may be called at any time by any of the following: (a) the President; (b) the Board of Directors; (c) the holders of at least 25 percent of all the shares entitled to vote at the proposed special meeting; or (d) the executive committee, if any.

Calling of Special Meetings

 (2)            Any person or persons entitled under Subparagraph (1), above, to call a special meeting of shareholders may do so only by written request sent by registered mail or delivered in person to the President or Secretary. The officer receiving the written request shall, within 10 days from the date of its receipt, cause notice of the meeting to be given in the manner provided in Paragraph 2.07 of these Bylaws to all shareholders entitled to vote at the meeting. If the officer does not give notice of the meeting within 10 days after the date of receipt of the written request, the person or persons calling the meeting may fix the time of meeting and give the notice in the manner provided in Paragraph 2.07 of these Bylaws. Nothing contained in this section will be construed as limiting, fixing, or affecting the time or date when a meeting of shareholders called by action of the Board of Directors may be held.

Quorum of Shareholders

 2.10.       (1)            Unless otherwise provided in the Certificate of Formation, the presence in person or by proxy of the persons entitled to vote a majority of the voting shares on any matter at any meeting constitutes a quorum with respect to that matter.

Adjournment for Lack of Quorum

 (2)            Unless otherwise provided in the Certificate of Formation, in the absence of a quorum, any meeting of shareholders may be adjourned from time to time by the vote of a majority of the shares, the holders of which are either present in person or represented by proxy, but no other business may be transacted.

Withdrawal Causing Loss of Quorum

 (3)            Once a quorum is present at a meeting of the shareholders, the subsequent withdrawal from the meeting of any shareholder, or the refusal of any shareholder represented in person or by proxy to vote, will not affect the presence of a quorum. The shareholders represented in person or by proxy at the meeting may conduct business that is properly brought before the meeting until it is adjourned.

Determination of Eligible Shareholders

 2.11.       (1)            For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment of such a meeting, or entitled to receive a distribution (other than a purchase or redemption of any of the corporation’s own shares) or a share dividend, or in order to make a determination of shareholders for any other proper purpose other than determining shareholders entitled to consent to action by shareholders pro­posed to be taken without a meeting of shareholders, the Board of Directors may provide that the share transfer records will be closed for a stated period not to exceed, in any case, 60 days. If the share transfer records are closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, the records will be closed for at least 10 days immediately preceding the meeting.


 
 

 

Record Date for Determination of Shareholders

 (2)            In lieu of closing the share transfer records, the Board of Directors may fix in advance a date as the record date for any determination of shareholders. However, the date in any case to be not more than 60 days and, in case of a meeting of shareholders, not less than 10 days before the date on which the action requiring that determination of shareholders is to be taken.


Date of Notice or Resolution for Determination of Shareholders

 (3)            If the share transfer records are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive a distribution (other than a distribution involving a purchase or redemption by the corpora­tion of any of its own shares) or a share dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring the distribution or share dividend is adopted, as the case may be, is the record date for determination of shareholders.

Adjourned Meetings

 (4)            When any determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this Paragraph, that determina­tion will apply to any adjournment of the meeting unless the determination has been made through closing of the share transfer records and the stated period of closing has expired, in which case the Board of Directors will make a new determination as provided above.

Determination of Eligible Shareholders for Consents to Action

 (5)            Unless a record date has previously been fixed or determined pursuant to this Paragraph, when action by shareholders is proposed to be taken by consent in writing without a meeting of shareholders, the Board of Directors may fix a record date for the purpose of determining shareholders entitled to consent to that action, which date will not precede, and will not be more than 10 days after, the date on which the resolution fixing the record date is adopted by the Board of Directors. If no record date has been fixed by the Board of Directors and the prior action, of the Board of Directors is not required by the Texas Business Organizations Code, the record date for determining shareholders entitled to consent to action in writing without a meeting will be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office, registered agent, principal place of business, transfer agent, registrar, exchange agent, or an officer or agent of the corporation having custody of the books in which proceedings of meetings of shareholders are recorded. Delivery will be by hand or by certified or registered mail, return receipt requested. Delivery to the corporation’s principal place of business will be addressed to the President or the principal executive officer of the corporation. If no record date has been fixed by the Board of Directors and prior action of the Board of Directors is required by the Texas Business Organiza­tions Code, the record date for determining shareholders entitled to consent to action in writing without a meeting will be at the close of business on the date on which the Board of Directors adopts a resolution taking prior action.


 
 

 

Distributions Held in Suspense or Paid Into Escrow

 (6)            Distributions made   by the corporation, including those that were payable but not paid to a holder of shares, or to the holder’s heirs, successors, or assigns, and have been held in suspense by the corporation or were paid or delivered by it into an escrow account or to a trustee or custodian, will be payable by the corporation, escrow agent, trustee, or custodian to the holder of the shares as of the record date determined for that distribution as provided in Paragraph 2.11(1)—(4), or to the holder’s heirs, successors, or assigns.

Voting List
 
          2.12.          At least 10 days before each meeting of shareholders, the officer or agent having charge of the stock transfer books for shares of the corporation will make a complete list of the shareholders entitled to vote at that meeting or any adjournment of that meeting, arranged in alphabetical order, with the address of and the number of shares held by each. The list will be kept on file at the principal place of business of the corporation for a period of 10 days before the meeting, and will be subject to inspection by any shareholder at any time during usual business hours. The list also may be kept on a reasonably accessible electronic network, if the information required to gain access to the list is provided with the notice of the meeting. The list will also be produced and kept open at the time and place of the meeting and will be subject, during the whole time of the meeting, to the inspection of any shareholder. If the meeting is held by remote communication, the list will be open to shareholder examination for the duration of the meeting on a reasonably accessible electronic network, and the information required to access the list will be provided to shareholders with the notice of the meeting. The original share transfer books are prima facie evidence as to the shareholders entitled to examine the list or transfer books or to vote at any meeting of shareholders. However, failure to prepare and to make the list available in the manner provided above will not affect the validity of any action taken at the meeting.

Votes Per Share

 2.13.          Except as otherwise provided by law, the Certificate of Formation, or these By­laws, each shareholder shall have one vote for each share hav­ing voting rights registered in his name on the books of the Corporation at the time of the closing of the stock trans­fer books (or at the record date) for such meeting.

Number of Votes Necessary to Take Action
 
          2.14.          Unless otherwise provided in the Certificate of Formation, the vote of the holders of a majority of the shares entitled to vote and represented at a meeting at which a quorum is present will be the act of the shareholders’ meeting.


 
 

 

Cumulative Voting
 
          2.15.          No shareholder shall be entitled to cumulate votes vote in any election for Directors.

Voting by Voice and Ballot
 
          2.16.          Elections for Directors need not be by ballot unless a shareholder demands election by ballot at the election and before the voting begins.

Other Corporations as Shareholders
 
          2.17.       (1)            Shares standing in the name of another corporation, domestic or foreign (including a foreign corporation without a permit to do business in Texas), may be voted by the officer, agent, or proxy as the bylaws of that other corporation may authorize, or in the absence of such authorization, as the board of directors of that corporation may determine.

Administrators, Executors, Guardians, and
Conservators as Shareholders

 (2)            Shares held by an administrator, executor, guardian, or conservator may be voted by that person without a transfer of the shares into his or her name, provided those shares form a part of the estate being served and are in the possession of that person. The shares may be voted either in person or by proxy.

Trustees as Shareholders

 (3)            Shares   standing in the name of a trustee may be voted by that trustee, either in person or by proxy, but only if the shares to be voted are in his or her name as trustee.

Receivers as Shareholders

 (4)            Shares standing in the name of a receiver may be voted by that receiver. Shares held by or under the control of a receiver may be voted by that receiver without being transferred into his or her name if authority to do so is contained in an appropriate order of the court by which that receiver was appointed.

Pledged Shares

 (5)            A shareholder whose shares are pledged is entitled to vote those shares until the shares have been transferred into the name of the pledgee. Once the shares have been transferred, the pledgee is entitled to vote the transferred shares.


 
 

 

Proxies
 
          2.18.       (1) A shareholder may vote either in person or by proxy executed in writing by the shareholder. A telegram, telex, cablegram, or similar transmission by the shareholder, or a photographic, photostatic, facsimile, or similar reproduction of a writing executed by the shareholder, will be treated as an execution in writing for purposes of this Paragraph. No proxy will be valid after 11 months from the date of it€ execution, unless otherwise provided in the proxy. Each proxy is revocable unless the proxy form conspicuously states that the proxy is irrevocable and the proxy is coupled with an interest. Proxies coupled with an interest include the appointment as proxy of: (1) a pledgee; (2) a person who purchased or agreed to purchase, or owns or holds an option to purchase, the shares; (3) a creditor of the corporation who extended it credit under terms requiring the appointment; (4) an employee of the corporation whose employment contract requires the appointment; or (5) a party to a voting agreement created under Section 6.252 of the Texas Business Organizations Code and Paragraph 2.20 of these Bylaws.

 (2)            An irrevocable proxy, if noted conspicuously on the certificate represent­ing the shares that are subject to the irrevocable proxy or, in the case of uncertificated shares, if notation of the irrevocable proxy is contained in the notice sent pursuant to Section 3.205 of the Texas Business Organizations Code with respect to the shares that are subject to the irrevocable proxy, will be specifically enforceable against the holder of those shares or any successor or transferee of the holder. Unless noted conspicuously on the certificate representing the shares that are subject to the irrevocable proxy or, in the case of uncertificated shares, unless notation of the irrevocable proxy is contained in the notice sent pursuant to Section 3.205 of the Texas Business Organizations Code with respect to the shares that are subject to the irrevocable proxy, an irrevocable proxy, even though otherwise enforceable, is ineffective against a transferee for value without actual knowledge of the existence of the irrevocable proxy at the time of the transfer or against any subsequent transferee (whether or not for value), but such an irrevocable proxy will be specifically enforceable against any other person who is not a transferee for value from and after the time that the person acquires actual knowledge of the existence of the irrevocable proxy.

Voting Trusts

 2.19.          Any number of shareholders of the corporation may enter into a written voting trust agreement for the purpose of conferring on a trustee or trustees the right to vote or otherwise represent shares of the corporation. The shares that are to be subject to the agreement must be transferred to the trustee or trustees for purposes of the agreement, and a counterpart of the agreement must be deposited with the corporation at its principal place of business or registered office. The counterpart of the agreement will be subject to the same right of examination by any shareholder of the corporation, in person or by agent or attorney, as the rest of the books and records of the corporation, and will be subject to examination by any holder of a beneficial interest in the voting trust, either in person or by agent or attorney, at any reasonable time for any proper purpose.


 
 

 

Voting Agreement

 2.20.          Any number of shareholders of the corporation, or any number of shareholders of the corporation and the corporation itself, may enter into a written voting agreement for the purpose of providing that shares of the corporation will be voted in the manner prescribed in the agreement. A counterpart of the agreement must be deposited with the corporation at its principal place of business or registered office and will be subject to the same right of examination by a shareholder of the corporation, in person or by agent or attorney, as are the books and records of the corporation. The agreement, if noted conspicuously on the certificate representing the shares that are subject to it or, in the case of uncertificated shares, if notation of the agreement is contained in the notice sent pursuant to Section 3.205 of the Texas Business Organizations Code with respect to the shares that are subject to the agreement, will be specifically enforceable against the holder of those shares or any successor or transferee of the holder. Unless noted conspicuously on the certificate repre­senting the shares that are subject to the agreement or, in the case of uncertificated shares, unless notation of the agreement is contained in the notice sent pursuant to Section 3.205 of the Texas Business Organizations Code with respect to the shares that are subject to the agreement, the agreement, even though otherwise enforceable, is ineffective against a transferee for value without actual knowledge of the existence of the agreement at the time of the transfer or against any subsequent transferee (whether or not for value). However, the agreement will be specifically enforceable against any other person who is not a transferee for value from and after the time that the person acquires actual knowledge of the existence of the agreement. A voting agree­ment entered into pursuant to this Paragraph is not subject to the provisions of Paragraph 2.19 governing a voting trust.

Appointment’ of Inspectors of Election
 
          2.21.       (1) In advance of any meeting of shareholders, the Board of Directors may appoint any persons, other than nominees for office, as inspectors of election to act at that meeting or any adjournment of that meeting. If inspectors of election are not appointed, the chairperson of any meeting may, and on the request of any shareholder or shareholder’s proxy must, appoint inspectors of election at the meeting. The number of inspectors will be either one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares present will determine whether one or three inspectors are to be appointed. In case any person appointed as inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment by the Board of Directors in advance of the meeting, or at the meeting by the person acting as chairperson.

Duties of Inspectors

 (2)            The inspectors of election will determine the number of shares outstand­ing and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies. The inspectors will also receive votes, ballots, or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine the result, and do other acts that may be proper to conduct the election or vote with fairness to all shareholders. The inspectors of election will perform their duties impartially, in good faith, to the best of their ability, and as expeditiously as is practical.

Vote of Inspectors

 (3)            If there are three inspectors of election, the decision, act, or certificate of a majority is effective in all respects as the decision, act, or certificate of all.

Report of Inspectors

 (4)            On request of the chairperson of the meeting or of any shareholder or the shareholder’s proxy, the inspectors will make a report in writing of any challenge or question or matter determined by them and execute a certificate of any fact found by them. Any report or certificate made by them is prima facie evidence of the facts stated in it.


 
 

 

ARTICLE 3. DIRECTORS

Directors Defined
 
          3.01.          “Directors,” when used in relation to any power or duty requiring collective action, means “Board of Directors.”

Powers
 
          3.02.          The business and affairs of the corporation and all corporate powers will be exercised by or under authority of the Board of Directors, subject to limitations imposed by the Texas Business Organizations Code, the Certificate of Formation, or these Bylaws as to action that requires authorization or approval by the shareholders.

Number of Directors

 3.03.          The num­ber of direc­tors of the Corporation shall be determined from time to time by resolution adopted by a majority of the Board of Directors or by the shareholders (but in no event shall be less than one); pro­vided, how­ever, that no decrease in the number of directors by the Board of Directors shall have the ef­fect of shortening the term of any incumbent director.  If the Board of Directors makes no such determination, the number of directors shall be the number set forth in the Certificate of Formation.

Term of Office

 3.04.          The Directors named in the Certificate of Formation will hold office until the first annual meeting of shareholders and until their successors are elected and qualified, either at an annual or a special meeting of shareholders. Directors, other than those named in the Certificate of Formation, will hold office until the next annual meeting and until their successors are elected and qualified.

Vacancies
 
          3.05.       (1)       Vacancies on the Board of Directors will exist in the case of the occurrence of any of the following events: (a) the death, resignation, or removal of any Director; (b) the authorized number of Directors is increased; or (c) at any annual or special meeting of shareholders at which any Director is elected, the shareholders fail to elect the full authorized number of Directors to be voted for at that meeting.

Declaration of Vacancy

 (2)            The Board of Directors may declare vacant the office of a Director in either of the following cases: (a) if the Director is adjudged incompetent by an order of court, or finally convicted of a felony; or (b) if within 60 days after notice of election, the Director does not accept the office either in writing or by attending a meeting of the Board of Directors.

 
 
 

 

Filling Vacancies by Directors

 (3)            Vacancies occurring after the issuance of shares (other than those caused by an increase in the number of Directors), and vacancies occurring in the initial Board of Directors before the issuance of shares, may be filled by a majority of the remaining Directors, though less than a quorum, or by a sole remaining Director. Each Director so elected will hold office until a successor is elected at an annual or special meeting of the shareholders. Vacancies occurring because of an increase in the number of Directors may be filled by the Board of Directors for a term of office continuing only until the next election of one or more Directors by the shareholders; however, the Board of Directors may not fill more than two directorships during the period between any two successive annual shareholders’ meetings.

Filling Vacancies by Shareholders or Incorporators

 (4)            Vacancies caused by an increase in the number of Directors, and any other vacancies occurring after the issuance of shares, may be filled by the shareholders at an annual meeting or at a special meeting called for that purpose if not filled by the Directors. Vacancies occurring in the initial Board of Directors before the issuance of shares may be filled by the affirmative vote or written consent of a majority of the incorporators if not filled by the remaining Director(s).

Reduction of Authorized Number of Directors

 (5)            A reduction of the authorized number of Directors will not remove any Director before the expiration of that Director’s term of office.

Removal of Directors

 3.06.          The entire Board of Directors or any individual Director may be removed from office with or without cause at a meeting of shareholders called expressly for that purpose, by a vote of shareholders holding a majority of the outstanding shares entitled to vote at an election of Directors.  If any or all Directors are so removed, new Directors may be elected at the same meeting.

Place of Meetings
 
          3.07.          Regular meetings of the Board of Directors will be held at any place within or without the State of Texas that may be designated from time to time by resolution of the Board or by written consent of all members of the Board. In the absence of any designation, regular meetings will be held at the principal office of the corporation. Special meetings of the Board may be held either at a place so designated or at the principal office. Any regular or special meeting is valid, wherever held, if held on written consent of all members of the Board given either before or after the meeting and filed with the Secretary of the corporation.


 
 

 

Regular Meetings

 
 3.08.       (1)            Regular meetings of the Board of Directors will be held at times that from time to time are determined by the Board.

Call of Regular Meetings

 (2)            All regular meetings of the Board of Directors of this corporation will be called by the President, or, if the President is absent or is unable or refuses to act, by any Vice President or by any two Directors.

Notice of Regular Meetings

 (3)            Written notice of the time and place of the regular meetings of the Board of Directors will be delivered personally to each Director, or sent to each Director by mail or by other form of written communication at least seven days before the meeting. Notice may also be provided by electronic transmis­sion in a form specified by the director. If the address of a Director is not shown on the records and is not readily ascertainable, notice will be addressed to that Director at the city or place in which the meetings of the Directors are regularly held. Notice of the time and place of holding an adjourned meeting need not be given to absent Directors if the time and place are fixed at the meeting adjourned.

Validation of Meeting Defectively Called or Noticed

         (4)            The transactions of any meeting of the Board of Directors, however called and noticed or wherever held, are as valid as though made at a meeting duly held after regular call and notice; if a quorum is present and if, either before or after the meeting, each of the Directors not present signs a waiver of notice, a consent to holding the meeting, or an approval of the minutes thereof. All waivers, consents, or approvals will be filed with the corporate records or made a part of the minutes of the meeting. Attendance by a Director at a meeting will constitute a waiver of notice of the meeting, unless the express purpose for the attendance is to present the objection that the meeting is not lawfully called or convened.

Call of Special Meeting
 
 3.09.       (1)       Special meetings of the Board of Directors of this corporation will be called by the President, or, if the President is absent or is unable or refuses to act, by any Vice President or by any two Directors.

         (2)            Written notice of the time, place, and purpose of special meetings of the Board of Directors will be delivered personally to each Director, or sent to each Director by mail or by other form of written communication, at least seven days before the meeting. Notice may also be provided by electronic transmission in a form specified by the Director. If the address of a Director is not shown on the records and is not readily ascertainable, notice will be addressed to him or her at the city or place in which the meetings of the Directors are regularly held. Notice of the time and place of holding an adjourned meeting need not be given to absent Directors if the time and place are fixed at the meeting adjourned.


 
 

 

Quorum

 3.10.          A majority of the authorized number of Directors constitutes a quorum of the Board for the transaction of business.
 Majority Action

 3.11.          Every act or decision done or made by a majority of the Directors present at any duly held meeting at which a quorum is present is an act of the Board of Directors. Each Director who is present at a meeting will be deemed to have assented to any action taken at such meeting unless the Director’s dissent to the action is entered in the minutes of the meeting, or unless the Director files a written dissent to the action with the Secretary of the meeting before adjournment or forwards that dissent by registered mail to the Secretary of the corporation immediately after adjournment of the meeting.

Action by Consent of Board Without Meeting
 
 3.12.         Any action required or permitted to be taken by the Board of Directors may be taken without a meeting, if all members of the Board individually or collectively consent in writing to the action. The written consent or consents will be filed with the minutes of the proceedings of the Board. Any action by written consent will have the same force and effect as a unanimous vote of the Directors. Any certificate or other document filed under any provision of the Texas Business Organiza­tions Code that relates to action so taken must state that the action was taken by unanimous written consent of the Board of Directors without a meeting and that these Bylaws authorize the Directors to so act, and that statement is prima facie evidence of such authority.

Adjournment
 
          3.13.       (1)       In the absence of a quorum, a majority of the Directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board.

Notice of Adjourned Meeting

 (2)            Notice of the time and place of holding an adjourned meeting need not be given to absent Directors if the time and place are fixed at the meeting adjourned.

Conduct of Meetings

3.14.          At every meeting of the Board of Directors, the chairperson of the Board of Directors, if there is such an officer, and if not, the President, or in the President’s absence, a Vice President designated by the President, or in the absence of such designation, a chairperson chosen by a majority of the Directors present, will preside. The Secretary of the corporation will act as Secretary of the Board of Directors. In case the Secretary is absent from any meeting, the chairperson may appoint any person to act as Secretary of the meeting.


 
 

 

Telephone Meetings

 3.15.          Subject to the provisions for notice required by these Bylaws and the Texas Business Organizations Code for notice of meetings, Directors may participate in and hold a meeting by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other. Participation in the meeting constitutes presence in person at the meeting, except when a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

Compensation
 
      3.16.          Directors will receive compensation for their services as Directors as is determined from time to time by resolution of the Board. Any Director may serve the corporation in any other capacity as an officer, agent, employee, or otherwise and receive compensation in that capacity.

Indemnification of Directors, Officers, Employees, or Agents
 
          3.17.          To the extent permitted and in the manner prescribed by Chapter 8 of the Texas Business Organizations Code, the corporation shall indemnify any person who was, is, or is threatened to be made a named defendant or respondent in a proceeding, whether civil, criminal, administrative, arbitrative, or investiga­tive, including all appeals, because that person is or was a Director, officer, employee, or agent of the corporation. Indemnification will be against all expenses, including, without limitation, attorney’s fees, court costs, expert witness fees, judgments, decrees, fines, penalties, and reasonable expenses actually incurred by the person in connection with the proceeding, except that if the person is found liable to the corporation or is found liable on the basis that he or she improperly received personal benefit, indemnification will be limited to reasonable expenses actually incurred by the person in connection with the proceeding, and will not be made in respect of any proceeding in which the person has been found liable for willful or intentional misconduct in the performance of his or her duty to the corporation. The indemnification provided in this Bylaw also extends to good-faith expenditures incurred in anticipation of, or preparation for, threatened or proposed litigation. The Board of Directors may, in proper cases, extend the indemnification to cover the good ­faith settlement of any such action, suit, or proceeding, whether formally instituted or not.


 
 

 

Insurance or Other Arrangement on
Directors, Officers, Employees, or Agents
 
          3.18.          The corporation may purchase and maintain insurance or other arrangement on behalf of any person who is or was a Director, officer, employee, or agent of the corporation or who is or was serving at the request of the corporation as a director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic corpora­tion, partnership, joint venture, sole proprietorship, trust, employee benefit plan, or other enterprise, against any liability asserted against him or her and incurred by him or her in such a capacity or arising out of his or her status as such a person, whether or not the corporation would have the power to indemnify him or her against that liability under Chapter 8 of the Texas Business Organizations Code. If the insurance or other arrangement is with a person or entity that is not regularly engaged in the business of insurance coverage, the insurance or arrangement may provide for payment of a liability with respect to which the corporation would not have the power to indemnify the person only if including coverage for the additional liability has been approved by the shareholders. Without limiting the corporation’s power to procure or maintain any kind of insurance or other arrangement, the corporation may, for the benefit of persons it has indemnified: (1) create a trust fund; (2) establish any form of self-insurance; (3) secure its indemnity obligation by grant of a security interest or other lien on the corporation’s assets; or (4) establish a letter of credit, guaranty, or surety arrangement. The insurance or other arrangement may be procured, maintained, or established within the corporation or with any insurer or other person deemed appropriate by the Board of Directors regardless of whether all or part of the stock or other securities of the insurer or other person are owned in whole or in part by the corporation. In the absence of fraud, the judgment of the Board of Directors as to the terms and conditions of the insurance or other arrangement and the identity of the insurer or other person participating in an arrangement is conclusive, and the insurance or arrangement will not be voidable and will not subject the Directors approving the insurance or arrangement to liability, on any ground, regardless of whether Directors participating in the approval are beneficiaries of the insurance or arrangement.

Interested Directors
 
          3.19.          Any otherwise valid contract or other transaction between the corpora­tion and any of its Directors (or any corporation or entity in which any of its Directors is a director or officer or has a financial interest) will be valid for all purposes notwithstanding the presence or participation of that Director at the meeting during which the contract or transaction was authorized. However, the foregoing applies only if one of the following criteria is satisfied: (1) the material facts as to the Director’s relationship or interest, and as to the contract or transaction, are disclosed or are known to the Board of Directors, and the Board in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested Directors, even though the disinterested Directors are less than a quorum; (2) the material facts as to the Director’s relationship or interest, and as to the contract or transaction, are disclosed or are known to the shareholders entitled to vote on the contract or transaction, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or (3) the contract or transaction is fair as to the corporation as of the time it is authorized, approved, or ratified by the Board of Directors or the shareholders. An interested Director is to be counted in determining whether a quorum is present at a Board meeting authorizing the contract or transaction, but not in calculating the majority necessary to carry a vote of the Directors.

Board Committees—Authority to Appoint

 3.20.       (1)       The Board of Directors may, by resolution adopted by a majority of the full Board, designate an executive committee and one or more other committees to conduct the business and affairs of the corporation, to the extent authorized by the resolution. The Board of Directors may also designate one or more of its members as alternate members of any committee, who may, subject to any limitations imposed by the Board of Directors, replace absent or disqualified members at any meeting of the committee. The Board of Directors, by a majority vote, has the power at any time to change the powers and members of any committees to fill vacancies, and to dispose of any committee. Members of any committee will receive compensation as the Board of Directors may from time to time provide. The designation of any committee and the delegation of authority to the committee will not operate to relieve the Board of Directors, or any member of the Board of Directors, of any responsibility imposed by law.


 
 

 

Authority of Executive and Other Committees

 (2)            Any committee referred to in Paragraph 3.20(1), above, to the extent provided by resolution or in these Bylaws, will have and may exercise all the authority of the Board of Directors, except with respect to the following:

 
(a)
Amending the Certificate of Formation, except that a committee may, to the extent provided by resolu­tion designating that committee or in these Bylaws, exercise the authority vested in the Board of Directors in accordance with Section 21.155 of the Texas Business Organizations Code with respect to issuance of shares in a series;
 
(b)
Proposing a reduction of the stated capital of the corporation without amendment of the Certificate of Formation or cancellation of shares, as permitted by Section 21.253 of the Texas Business Organiza­tions Code;
 
(c)
Approving a plan of merger, share exchange, or conversion of the corporation;
 
(d)
Recommending to the shareholders the sale, lease, or exchange of all or substantially all of the property and assets of the corporation other than in the usual course of its business;
 
(e)
Recommending to the shareholders a voluntary dissolution of the corporation or a revocation of a voluntary dissolution of the corporation;
 
(f)
Amending, altering, or repealing these Bylaws or adopting new bylaws;
 
(g)
Filling vacancies in the Board of Directors;
 
(h)
Filling vacancies in, or designating alternate members of, any committee of the Board of Directors;
 
(i)
Filling any directorship to be filled by reason of an increase in the number of Directors;
 
(j)
Electing or removing officers of the corporation or members or alternate members of any Board committee;
 
(k)
Fixing the compensation of any member or alternate member of any
 
Board committee;
       (l)           
Altering or repealing any resolution of the Board of Directors that by its terms provides that it may not be so amended or repealed; and
 
(m)
Authorizing the issuance of shares of the corporation or a distribution, unless a resolution of the Board of Directors or these Bylaws expressly authorizes these actions.

ARTICLE 4. OFFICERS
`
Number and Titles
 
          4.01.          The officers of the corporation will be a President a Secretary and a Treasurer. The corporation may also have, at the discretion of the Board of Directors, a Chairperson of the Board, one or more additional Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and other officers as may be appointed in accordance with the provisions of Paragraph 4.03 of these Bylaws. One person may hold two or more offices.


 
 

 

Election

4.02.          The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Paragraph 4.03 or Paragraph 4.05 of these Bylaws, will be chosen annually by the Board of Directors, and each will hold office until he or she resigns or is removed or otherwise becomes disqualified to serve, or until successor is elected and qualified.

Subordinate Officers

 4.03.          The Board of Directors may appoint other officers or agents as the business of the corporation may require, each of whom will hold office for a period, have the authority, and perform the duties that are provided in these Bylaws or that the Board of Directors may from time to time determine. The Board of Directors may delegate to any officer or committee the power to appoint any subordinate officers, committees, or agents, to specify their duties, and to determine their compensation.

Removal and Resignation

 4.04.          Any officer may be removed, either with or without cause, by a majority of the Directors, at any regular or special meeting of the Board, or, except in case of an officer chosen by the Board of Directors, by any committee or officer on whom that power of removal may be conferred by the Board of Directors; provided, however, that the removal is without prejudice to the contract rights, if any, of the person removed. Any officer may resign at any time by giving written notice to the Board of Directors, the President, or the Secretary of the corporation. Any resignation will take effect at the date of the receipt of that notice or at any later time specified in it, and, unless otherwise specified in the notice, the acceptance of that resignation will not be necessary to make it effective.

Vacancies

4.05.          If the office of the President, Vice President (if any), Secretary, Treasurer (if any), Assistant Secretary (if any), or Assistant Treasurer (if any) becomes vacant by reason of death, resignation, removal, or otherwise, the Board of Directors will elect a successor who will hold office for the unexpired term, and until a successor is elected.

Chairperson of the Board

 4.06.          The Chairperson of the Board, if there is such an officer, will, if present, preside at all meetings of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned to the Chairperson by the Board of Directors or prescribed by these Bylaws.

President

 4.07.          Subject to the supervisory powers, if any, that may be given by the Board of Directors to the Chairperson of the Board, if there is such an officer, the President will be the chief executive officer of the corporation and will, subject to the control of the Board of Directors, have general supervision, direction, and control of the business and officers of the corporation, and will have the general powers and duties of management usually vested in the office of President of a corporation, and will have other powers and duties that may be prescribed by the Board of Directors or the Bylaws. Within this authority and in the course of his or her duties, the President will:


 
 

 

Conduct Meetings

 (1)            Preside at all meetings of the shareholders and in the absence of the Chairperson of the Board, or, if there is none, at all meetings of the Board of Directors, and will be ex officio a member of all the standing committees, including the executive committee, if any.

Sign Share Certificates
 
 (2)            Sign all certificates of shares of the corporation, in conjunction with the Secretary or Assistant Secretary, unless otherwise ordered by the Board of Directors. The President’s signature on the certificates may be facsimile.

Execute Instruments

 (3)            When authorized by the Board of Directors or required by law, execute, in the name of the corporation, deeds, conveyances, notices, leases, checks, drafts, bills of exchange, warrants, promissory notes, bonds, debentures, contracts, and other papers and instruments in writing, and, unless the Board of Directors orders otherwise by resolution, make contracts that the ordinary conduct of the corporation’s business may require.

Hire and Fire Employees

 (4)            Appoint and remove, employ and discharge, and prescribe the duties and fix the compensation of all agents, employees, and clerks of the corporation other than the duly appointed officers, subject to the approval of the Board of Directors, and control, subject to the direction of the Board of Directors, all of the officers, agents, and employees of the corporation.

Meetings of Other Corporations

 (5)            Unless otherwise directed by the Board of Directors, attend all meetings of the shareholders of any corporation in which this corporation holds stock, and act and vote on behalf of the corporation at those meetings. The President may attend in person or by substitute appointed by the President or Vice President and the Secretary or Assistant Secretary.

Vice President

4.08.           In the absence or disability of the President, the Vice Presidents, in order of their rank as fixed by the Board of Directors or, if not ranked, the Vice President designated by the Board of Directors, will perform all the duties of the President, and when so acting will have all the powers of, and be subject to all the restrictions on, the President. The Vice Presidents will have such other powers and perform other duties that from time to time may be prescribed for them respectively by the Board of Directors or the Bylaws.


 
 

 

Secretary

4.09.          The Secretary will:

Sign Share Certificates
 
 (1)            Sign, with the President or a Vice President, certificates for shares in the corporation. An Assistant Secretary may sign the certificates instead of the Secretary. The Secretary’s signature on the certificates may be facsimile.

Bylaws

 (2)            Attest and keep at the principal office of the corporation the original or a copy of these Bylaws as amended or otherwise altered to date.

Certificate of Formation

 (3)            Keep the original or a copy of the Certificate of Formation, certified by the secretary of state, with all amendments to date in the minute book.

Minutes of Meetings

 (4)            Keep, at the principal office of the corporation or another place that the Board of Directors may order, a book of minutes of all meetings of its Directors and shareholders, executive committee, and other committees. The minutes will show the time and place of the meeting, whether regular or special, and if special, how authorized, the notice given, the names of those present at Directors’ meetings, the number of shares or members present or represented at shareholders’ meetings, and the proceedings of such meetings.
 
Notices

 (5)            See that all notices are duly given in accordance with the provisions of these Bylaws or as required by law. In case of the absence or disability of the Secretary, or the Secretary’s refusal or neglect to act, notice may be given and served by an Assistant Secretary or by the President or Vice President or by the Board of Directors.

Custodian of Records and Seal

 (6)            Be custodian of the records and of the seal of the corporation and see that it is engraved, lithographed, printed, stamped, impressed on, or affixed to all certificates for shares before their issuance and to all documents, the execution of which on behalf of the corporation under its seal is duly authorized in accordance with the provisions of these Bylaws.

Sign or Attest Documents

 (7)            Sign or attest any documents as required by law or the business of the corporation, and affix the corporate seal to instruments when necessary or proper.

Share Register

 (8)            Keep at the principal office of the corporation a share register or duplicate share register showing the names of the shareholders and their addresses; the number, date of issue, and class or series of shares represented by each outstanding share certificate; and the number and date of cancellation of each certificate surrendered for cancellation.


 
 

 

Reports and Statements
 
 (9)            See that the books, reports, statements, certificates, and all other documents and records required by law are properly kept and filed.
 
Exhibit Records

 (10)            Exhibit at all reasonable times to any Director, or, on written demand stating the purpose of the demand, to any person who has been a shareholder of record for at least six months immediately preceding the demand or who is the holder of record of at least 5 percent of all of the outstanding shares of the corporation, the Bylaws, the share register, and minutes of proceedings of the shareholders and Directors of the corporation.
Other Duties

 (11)            In general, perform all duties incident to the office of Secretary, and other duties that from time to time may be assigned to him or her by the Board of Directors.

Absence of Secretary

 (12)            In case of the absence or disability of the Secretary or the Secretary’s refusal or neglect to act, the Assistant Secretary, or if there be none, the Treasurer, acting as Assistant Secretary, may perform all of the functions of the Secretary. In the absence or inability, refusal or neglect to act of the Secretary, Assistant Secretary, and Treasurer, any person authorized by the President or Vice President or by the Board of Directors may perform the functions of the Secretary.

Assistant Secretary

4.10.          At the request of the Secretary, or in the Secretary’s absence or disability, the Assistant Secretary, designated as set forth in Paragraph 4.09(12) of these Bylaws will perform all the duties of the Secretary, and when so acting, the Assistant Secretary will have all the powers of, and be subject to all the restrictions on, the Secretary. The Assistant Secretary will perform such other duties as from time to time may be assigned to him or her by the Board of Directors or the Secretary.

Treasurer

4.11.          The Treasurer will:


 
 

 

Funds—Custody and Deposit

 (1)            Have charge and custody of, and be responsible for, all funds and securities of the corporation, and deposit all funds in the name of the corporation in those banks, trust companies, or other depositories that are selected by the Board of Directors.
 
 (2)            Receive, and give receipt for, moneys due and payable to the corporation from any source whatever.
 
Funds—Disbursements

 (3)            Disburse or cause to be disbursed the funds of the corporation as may be directed by the Board of Directors, taking proper vouchers for those disbursements.

Maintain Accounts

 (4)            Keep and maintain adequate and correct accounts of the corporation’s properties and business transactions, including account of its assets, liabilities, receipts, disbursements, gains, losses, capital, surplus, and shares. Any surplus, including earned surplus, paid-in surplus, and surplus arising from a reduction of stated capital, will be classified according to source and shown in a separate account.

Exhibit Records

 (5)            Exhibit at all reasonable times the books of account and records to any Director on application, or to any person who has been a shareholder of record for at least six months immediately preceding his or her demand or who is the holder of record of at least 5 percent of all the outstanding shares of the corporation, on written demand stating the purpose of the demand, during business hours at the office of the corporation where the books and records are kept.

Reports to President and Directors

 (6)            Render to the President and Directors, whenever they request it, an account of all his or her transactions as Treasurer and of the financial condition of the corporation.

Financial Report to Shareholders
 
 (7)            Prepare, or cause to be prepared, and certificate the financial statements to be included in a annual report to shareholders and statements of the affairs of the corporation, as directed by the Board of Directors.

Bond

 (8)            If required by the Board of Directors or the President, give to the corporation a bond to assure the faithful performance of the duties of the Treasurer’s office and the restoration to the corporation of all corporate books, papers, vouchers, money, and other property of whatever kind in the Treasur­er’s possession or control, in case of the Treasurer’s death, resignation, retirement or removal from office. The bond must be in a sum satisfactory to the Board of Directors, with one or more sureties or a surety company satisfactory to the Board of Directors.


 
 

 

Other Duties

 (9)            In general, perform all the duties incident to the office of Treasurer and other duties that from time to time may be assigned to the Treasurer by the Board of Directors.

Absence of Treasurer

 (10)            In case of the absence or disability of the Treasurer or the Treasurer’s refusal or neglect to act, the Assistant Treasurer or the Secretary acting as Assistant Treasurer may perform all of the functions of the Treasurer. In the absence or inability, refusal, or neglect to act of the Treasurer, the Assistant Treasurer, and the Secretary, any person authorized by the President or Vice President or by the Board of Directors may perform the functions of the Treasurer.

Assistant Treasurer

4.12.          The Assistant Treasurer, if required to do so by the Board of Directors, must give bond for the faithful discharge of the duties of the Assistant Treasurer, in a sum and with the sureties that the Board of Directors requires. At the request of the Treasurer; or in the Treasurer’s absence or disability, the Assistant Treasurer designated as set forth in Paragraph 4.11(10) of these Bylaws will perform all the duties of the Treasurer, and when so acting, will have all the powers of, and be subject to all the restrictions on, the Treasurer. The Assistant Treasurer will perform such other duties as from time to time may be assigned to him or her by the Board of Directors or the Treasurer.

Salaries

4.13.          The salaries of the officers will be fixed from time to time by the Board of Directors, and no officer will be prevented from receiving a salary by reason of the fact that the officer is also a Director of the corporation.

ARTICLE 5. EXECUTION OF INSTRUMENTS AND
DEPOSIT OF FUNDS

Authority for Execution of Instruments

5.01.          The Board of Directors, except as otherwise provided in these Bylaws, may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and that authority may be general or confined to specific instances, and, unless so authorized, no officer, agent, or employee will have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable monetarily for any purpose or in any amount.

Execution of Instruments

5.02.          Unless otherwise specifically determined by the Board of Directors or otherwise required by law, formal contracts of the corporation, promissory notes, deeds of trust, mortgages and other evidences of indebtedness of the corporation other corporate instruments or documents, and certificates of shares of stock owned by the corporation will be executed, signed, or endorsed by the President or any Vice President and by the Secretary or the Treasurer, or any Assistant Secretary or Assistant Treasurer, and may have the corporate seal affixed to them.


 
 

 

Bank Accounts and Deposits
 
5.03.       (1)      All funds of the corporation will be deposited from time to time to the credit of the corporation with the banks, trust companies, or other depositories that the Board of Directors may select or that may be selected by any officer(s) or agent(s) of the corporation to whom that power may be delegated from time to time by the Board of Directors.

Endorsement Without Countersignature

 (2)            Endorsements for deposit to the credit of the corporation in any of its duly authorized depositories may be made without countersignature by the President or any Vice President, or the Treasurer or any Assistant Treasurer, or by any other officer or agent of the corporation to whom the Board of Directors, by resolution, has delegated that power, or by hand-stamped impression in the name of the corporation.

Signing of Instruments

 (3)            All checks, drafts or other order for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the corporation, must be signed or endorsed by the person or persons and in the manner that is determined from time to time by resolution of the Board of Directors.

ARTICLE 6. ISSUANCE AND TRANSFER OF SHARES

Classes and Series of Shares

6.01.          The corporation may issue one or more classes or series of shares, or both, any of which classes or series may be with par value or without par value and with such designations, preferences, limitations, and relative rights, including voting rights, as are stated in the Certificate of Formation. All shares of the same class must be of the same par value or be without par value. Unless the shares of a class have been divided into series, all shares of the same class must be identical in all respects. If the shares of a class have been divided into series, shares of the same class may vary between series, but all shares of the same series must be identical in all respects. Any such class or series must be so designated as to distinguish the shares of that class or series from the shares of all other classes and series. There must always be a class or series of shares outstanding that has complete voting rights except as limited or restricted by voting rights conferred on some other class or series of outstanding shares.

Certificates for Fully Paid Shares

6.02.          Neither shares nor certificates representing shares may be issued by the corporation until the full amount of the consideration has been paid. When the consideration has been paid to the corporation, the shares will be deemed issued and the certificate representing the shares will be issued to the shareholder.


 
 

 

Consideration for Shares

 6.03.          The consideration paid for the issuance of shares may consist of any tangible or intangible benefit to the corporation or other property of any kind or nature, including cash, promissory notes, services performed, contracts for services to be performed, other securities of the corporation, or securities of any other corporation, domestic or foreign, or other entity.

Compliance With Corporate Securities Law

 6.04.          The corporation may not sell or offer to sell any security issued by it, whether or not through underwriters, until that offer or sale has been qualified by the Texas Securities Commissioner as required by the Texas Securities Act and the rules and regulations of the Commissioner, unless the security or transaction is exempted from qualification and the applicable statutes and rules and regulations have been complied with.

Contents of Share Certificates

6.05.       (1)      Certificates for shares must be in a form and style, printed or otherwise, that the Board of Directors designates, and each certificate must state on its face all of the following facts:

 (a)            That the corporation is organized under the laws of the State of Texas;

 (b)            The name of the person to whom issued;

 (c)            The number and class of shares and the designation of the series, if any,
that the certificate represents; and

 (d)            The par value of each share represented by the certificate, or a statement
that the shares are without par value.

Restriction on Transfer

 (2)            Any restrictions imposed by the corporation on the sale or other disposition of its shares and on the transfer of the shares must be conspicuously set forth in full or in summary form on the face, or set forth on the back and conspicuously referred to on the face, of each certificate representing shares to which the restriction applies. The certificate may, however, conspicuously state on the face or back that a restriction exists pursuant to a specified document, and that the corporation will furnish a copy of the document to the record holder of the certificate without charge on written request to the corporation at its principal place of business or registered office. If the document is required or permitted to be filed with the secretary of state and is actually on file, the certificate may instead indicate that the filed document contains a full statement of the restriction.


 
 

 

Information About Classes or Series

 (3)       Certificates for shares must conspicuously set forth, either on the face or the back of the certificate, a full statement of all of the designations, preferences, limitations, and relative rights of the shares of each class or series to the extent they have been fixed and determined, and the authority of the Board of Directors to fix and determine the designations, preferences, limita­tions, and relative rights of subsequent series.

Signing Certificates; Facsimile Signatures

 6.06.          All share certificates of the corporation must be signed by the President or a Vice President and by the Secretary or an Assistant Secretary, as provided in Paragraphs 4.07(2), 4.08 and 4.09(1) of these Bylaws. The signatures of the officers may be facsimiles. If an officer who has signed or whose facsimile signature has been placed on the certificate has ceased to be such officer before the certificate is issued, the certificate may be issued by the corporation with the same effect as if he or she were such officer on the date of its issuance.

Fractional Shares or Scrip

Authority to Issue

 
6.07.        (1)       The corporation may, if the Board so determines, issue fractions of shares. Fractional shares may be issued originally or on transfer.

Failure to Issue

 (2)            If the corporation does not issue fractions of shares, it must, in connection with any original issuance of shares:

 
(a)
Designate an agent to conduct a sale of fractional interests on behalf of the shareholders, and to distribute the proceeds pro rata among those entitled to them; or
 
(b)
Pay in cash the fair value of fractional interests as of the time when the owners of those interests are determined; or
 
(c)
Issue scrip, in registered or bearer form, that will entitle the holder to receive a certificate for a full share or, if otherwise allowable, an uncertificated full share, on the surrender of scrip aggregating a full share. Scrip will not entitle the holder to exercise voting tights, receive dividends, or partici­pate in any of the assets of the corporation in the event of liquidation, unless otherwise stated on the scrip certificate. Any scrip issued will become void if not exchanged for certificates representing full shares before the date specified on the scrip certificate.

Stock Rights, Options, and Convertible Indebtedness
 
          6.08.       (1)       The corporation may, if so determined by the Board, and subject to any restrictions or limitations in the Certificate of Formation, create and issue tights or options to purchase or receive shares of any class or series, and indebtedness convertible into shares of any class or series, on such terms and conditions as the Board may deem expedient. These stock tights, options, or convertible indebtedness may be issued in connection with the issue, subscription, or sale of any of its shares, bonds, debentures, notes, or other securities, or independently.


 
 

 

Requirements for Stock Rights and Options

         (2)            Stock tights and options must set forth the terms on which, the time or times within which, and the consideration, if any, for which the shares may be purchased or received from the corporation on exercise of the right or option. The consideration for shares issued on the exercise of rights or options will be determined as provided in Section 21.161(d) of the Texas Business Organiza­tions Code. The consideration to be received for any shares having a par value, other than treasury shares, to be issued on the exercise of the tights or options cannot be less than the par value of those shares. Stock rights and options may be issued to the corporation’s shareholders, employees, or Directors without consideration if, in the judgment of the Board of Directors, the issuance of those rights or options is in the interests of the corporation.

Requirements for Convertible Indebtedness

         (3)            Convertible indebtedness must set forth the terms and conditions on which, the time or times within which, and the conversion ratio or ratios at which the indebtedness may be converted into shares. The consideration for shares issued on the exercise of convertible indebtedness will be determined as provided in Section 21.161(c) of the Texas Business Organizations Code. No privilege of conversion will be conferred in, or altered in respect to, any indebtedness that would result in receipt by the corporation of less than the minimum consideration required to be received on issuance of the shares.

Transfer of Lost or Destroyed Shares
 
          6.09.       (1)       When a security certificate has been lost, apparently destroyed, or wrongfully taken, the owner must notify’ the corporation of that fact within a reasonable time after the owner has notice of it. Otherwise, if the corporation registers a transfer of the security before receiving notification, the owner may not assert against the corporation a claim for registering the transfer or a claim to a new security certificate.

Replacement of Lost or Destroyed Certificates

                (2)            When an owner of a certificated security, whether in registered or bearer form, claims that the certificate has been lost, destroyed, or wrongfully taken, the corporation must issue a new certificate if the owner: (a) so requests before the corporation has notice that the certificate has been acquired by a protected purchaser; (b) files a sufficient indemnity bond with the corporation; and (c) satisfies other reasonable requirements imposed by the Board of Directors.


 
 

 

Transfer After Replacement

    (3)             If, after the issue of a new security certificate, a protected purchaser of the original certificate presents it for registration of transfer, the corporation must register the transfer unless an overissue would result. If an overissue would result from the registration of the transfer, and an identical security not constituting an overissue is reasonably available, the corporation must, on request of the protected purchaser, purchase the security. The security is to be delivered if certificated, and its transfer is to be registered if uncertificated. This is done against surrender of any security certificate the person holds. If a security is not reasonably available for purchase, the corporation must, on request of the protected purchaser, pay to that purchaser the price the person or the last purchaser for value paid for it with interest from the date of the person’s demand. In addition to any rights on the indemnity bond, the corporation may recover the new certificate from a person to whom it was issued or any person taking under that person, except a protected purchaser.

Transfer Agents and Registrars
 
          6.10.          The Board of Directors may appoint one or more transfer agents or transfer clerks, and one or more registrars, at times and places that the requirements of the corporation may necessitate and the Board of Directors may designate. The registrar must be an incorporated bank or trust company, either domestic or foreign.
 
Conditions of Transfer
 
          6.11.          A person in whose name shares of stock stand on the books of the corporation will be deemed the owner of the shares as regards the corporation, provided that whenever any transfer of shares will be made for collateral security, and not absolutely, and written notice of the transfer is given to the Secretary of the corporation or its transfer agent, if any, that fact will be stated in the entry of the transfer.

Reasonable Doubts as to Right to Transfer
 
          6.12.          When a transfer of shares is requested and there is reasonable doubt as to the right of the person seeking the transfer, the corporation or its transfer agent, before recording the transfer of the shares on its books or issuing any certificate for the shares, may require from the person seeking the transfer reasonable proof of that person’s right to the transfer. If there is a reasonable doubt of the right to the transfer, the corporation may refuse a transfer unless the person gives adequate security or a bond of indemnity executed by a corporate surety or by two individual sureties satisfactory to the corporation as to form, amount, and responsibility of sureties. The bond will be conditioned to protect the corporation, its officers, transfer agents, and registrars, or any of them, against any loss, damage, expense, or other liability to the owner of the shares by reason of the recordation of the transfer or the issuance of a new certificate for shares.

ARTICLE 7. CORPORATE RECORDS, REPORTS, AND SEAL

Minutes of Corporate Meetings

7.01.     The corporation will keep at the principal place of business a book of minutes of all meetings of its Directors, each committee of its Board of Directors, and its shareholders or members, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice given of the meeting, the names of those present at Directors’ and committee meetings, the number of shares or members present or represented at shareholders’ or members’ meetings, and the proceedings of the meetings.


 
 

 

Books of Account

 7.02.          The corporation will keep at the principal place of business adequate and correct accounts of its properties and business transactions, including accounts of its assets, liabilities, receipts, disbursement, gains, losses, capital, surplus, and shares. Any surplus, including earned surplus, paid-in surplus, and surplus arising from a reduction of stated capital, will be classified according to source and shown in a separate account.

Share Register

 7.03.          The corporation will keep at the principal place of business a record of the original issuance of shares issued by the corporation and a record of each transfer of those shares that have been presented to the corporation for registration of transfer. The records must contain the names and addresses of all past and current shareholders and the number and class or series of shares held by each of them. This information may be kept by the corporation on an information storage device, such as electronic data processing equipment, provided that the equipment is capable of reproducing the information in clearly legible form for the purposes of inspection as provided in Paragraph 7.04 of these Bylaws.

Inspection of Records by Shareholders
 
          7.04.       (1) Any person who has been a shareholder of record for at least six months immediately preceding that person’s demand to inspect the corporate records, or who is the holder of record of at least 5 percent of all of the outstanding shares of the corporation, has the right to examine the corporation’s relevant books and records of account, minutes, and share transfer records, and to make extracts from them. This right is exercisable on written demand by the shareholder stating the purpose of the demand. The examination may be made either in person or by the shareholder’s agent, accountant, or attorney. The examination may be made at any reasonable time or times and for any proper purpose.

Inspection of Records by Directors

      (2) Every Director is entitled to examine the corporation’s books and records of account, share transfer records, corporate minutes, and any other corporate books and records for any purpose that is reasonably related to his or her service as a Director. A Director is also entitled to make copies or extracts from the books or records.

Fiscal Year
      
          7.05.          The fiscal year of the corporation will be as determined by the Board of Directors.
 
Corporate Seal
 
          7.06.          The Board of Directors may adopt, use, and thereafter alter the corporate seal.


 
 

 

ARTICLE 8. AMENDMENT OF BYLAWS

Adoption, Amendment, or Repeal by Directors

8.01.          These Bylaws may be amended or repealed, and new bylaws may be adopted, by the Board of Directors, unless the power to do so is reserved exclusively to the shareholders by the Certificate of Formation or by the Texas Business Organizations Code, or unless the shareholders, in amending, repealing, or adopting a particular bylaw, expressly provide that the Directors may not amend or repeal that bylaw.

Adoption, Amendment, or Repeal by Shareholders

 8.02.         Notwithstanding the powers conferred on the Board of Directors by Paragraph 8.01, above, the shareholders may amend or repeal these Bylaws, or adopt new bylaws, unless the Certificate of Formation or a bylaw adopted by the shareholders provides otherwise as to all or some portion of the Bylaws.

The undersigned hereby certifies that these Bylaws were duly adopted effective as of the 11 th day of August, 2009.
 
   
   
   By: /s/ Richard J. Church                 
   Richard J. Church, President

 
 
 

 


INCORPORATED UNDER THE LAWS OF
TEXAS
 
 NUMBER   SHARES
 
REO PLUS, INC.
Common Stock
Par Value $.001 Per Share

THIS CERTIFIES THAT:________________________________________________________ is the registered holder of _____________________________________ shares of the Common Stock, par value $.001 per share, of REO Plus, Inc., a Texas corporation, transferable on the books of the Corporation by the holder hereof in person or by attorney upon surrender of this certificate duly endorsed.

    IN WITNESS, the said Corporation has caused this Certificate to be signed by its duly authorized officers and its Corporate Seal is hereunto affixed this the ______ day of _____________________, A.D. _______.


 
                                                                                                                                                                                               
 PRESIDENT    SECRETARY
 
              

CERTIFICATE
FOR
__________
SHARES
of Common S