EXHIBIT D RISK FACTORS
EX-10.2 3 v119391_ex10-2.htm Unassociated Document
EXHIBIT D
RISK FACTORS
THERE IS A LIMITED MARKET FOR OUR COMMON STOCK WHICH MAY MAKE IT MORE DIFFICULT FOR YOU TO SELL YOUR STOCK.
There is a limited trading market for our common stock. On June 6, 2008, the Company provided NASDAQ with notice of its intent to voluntarily delist from The NASDAQ Stock Market, which notice was amended on June 10, 2008. The Company is voluntarily delisting to reduce and more effectively manage its regulatory and administrative costs, and to enable Company management to better focus on its business on developing the natural gas drilling rights recently acquired in connection with the acquisition of Davy Crockett Gas Company, LLC, which was announced on May 9, 2008.
The Company has requested that its shares be suspended from trading on NASDAQ at the open of the market on June 16, 2008. The Company’s shares have been accepted for quotation and trading on the OTC Bulletin Board under the symbol "EMVL." The Company filed a Form 25 with the Securities and Exchange Commission on June 16, 2008. The Company expects that the delisting from NASDAQ will be effective or on or about June 26, 2008. Accordingly, there can be no assurance as to the liquidity of any markets that may develop for our common stock, the ability of holders of our common stock to sell our common stock, or the prices at which holders may be able to sell our common stock.
OUR STOCK PRICE MAY BE VOLATILE.
The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including:
| · | new products and services by our competitors; |
| · | additions or departures of key personnel; |
| · | sales of our common stock; |
| · | our ability to integrate operations, technology, products and services; |
| · | our ability to execute our business plan; |
| · | operating results below expectations; |
| · | loss of any strategic relationship; |
| · | industry developments; |
| · | economic and other external factors; and |
| · | period-to-period fluctuations in our financial results. |
Because we have a limited operating history, you may consider any one of these factors to be material. Our stock price may fluctuate widely as a result of any of the above listed factors.
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
OUR COMMON STOCK WILL BE SUBJECT TO THE "PENNY STOCK" RULES OF THE SEC.
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require:
| · | that a broker or dealer approve a person's account for transactions in penny stocks; and |
| · | the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. |
In order to approve a person's account for transactions in penny stocks, the broker or dealer must:
| · | obtain financial information and investment experience objectives of the person; and |
| · | make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. |
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form:
| · | sets forth the basis on which the broker or dealer made the suitability determination; and |
| · | that the broker or dealer received a signed, written agreement from the investor prior to the transaction. |
Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
THE ISSUANCE OF SHARES THROUGH OUR STOCK COMPENSATION PLANS MAY DILUTE THE VALUE OF EXISTING STOCKHOLDERS AND MAY AFFECT THE MARKET PRICE OF OUR STOCK.
We may use stock options, stock grants and other equity-based incentives, to provide motivation and compensation to our officers, employees and key independent consultants. The award of any such incentives will result in an immediate and potentially substantial dilution to our existing stockholders and could result in a decline in the value of our stock price. The exercise of these options and the sale of the underlying shares of common stock and the sale of stock issued pursuant to stock grants may have an adverse effect upon the price of our stock.
WE HAVE NOT PAID DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY DIVIDENDS IN THE FUTURE. ANY RETURNS ON INVESTMENT MAY BE LIMITED TO THE VALUE OF OUR COMMON STOCK.
We have never paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as the board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if its stock price appreciates.
EMVELCO CORP.
Subscription Agreement
EMVELCO CORP.
1061 ½ N. Spaulding Ave.
Los Angeles, CA 90046
Gentlemen:
You have informed the undersigned (the “Purchaser”) that Emvelco Corp., a Delaware corporation, (the “Company”) wishes to raise a minimum of Fifty Thousand Dollars ($50,000) and a maximum of Five Hundred and Twenty-Five Thousand Dollars ($525,000) from various persons by selling 525,000 shares of the Company’s Common Stock, $0.001 par value (the “Shares”), at a price of One Dollar ($1.00) per Share. Each Offering Unit will be issued with 200,000 convertible Warrants. Specifically, 200,000 of the Warrants are convertible upon exercise to one (1) Common Share of stock at $1.50 per share for a term of four (4) years. Notwithstanding the foregoing, however, the Warrants may be converted to Common Shares only if EMVELCO issues Twenty-Five Million (25,000,000) or more of its Common Stock so that there are at least Thirty Million (30,000,000) authorized Shares at the time of any conversion term.
I have received, read, and understand the Limited Offering Memorandum dated June 6, 2008 (the “Memorandum”). I further understand that my rights and responsibilities as a Purchaser will be governed by the terms and conditions of this Subscription Agreement, the Memorandum and the Shares (the “Share Documents”). I understand that you will rely on the following information to confirm that I am an “Accredited Investor”, as defined in Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”), or one of 35 Non-Accredited Investors that will be allowed to purchase Shares in this Offering (subject to Company approval), and that I am qualified to be a Purchaser.
This Subscription Agreement is one of a number of such subscriptions for Shares. By signing this Subscription Agreement, I offer to purchase and subscribe from the Company the number of Shares set forth below on the terms specified herein. The Company reserves the right, in its complete discretion, to reject any subscription offer or to reduce the number of Shares allotted to me. If this offer is accepted, the Company will execute a copy of this Subscription Agreement and return it to me. I understand that commencing on the date of this Memorandum all funds received by the Company in full payment of subscriptions for Shares will be deposited in an escrow account. The Company has set a minimum offering proceeds figure of $50,000 for this Offering. All proceeds from the sale of Shares will be delivered directly to the Company and be available for its use.
SUBSCRIPTION PAID FOR IN FULL PURSUANT TO THAT CERTAIN LIMITED LIABILITY COMPANY OPERATING AGREEMENT DATED JUNE 30, 2008 IN CONNECTION WITH VORTEX OCEAN ONE, LLC.
1. Accredited Investor. I am an Accredited Investor because I qualify within one of the following categories:
Please Check The Appropriate Category
_____ $1,000,000 Net Worth.
A natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his purchase exceeds $1,000,000.
______________
Purchaser’s Initials
_____ $200,000/$300,000 Income.
A natural person who had an individual income in excess of $200,000 (including contributions to qualified employee benefit plans) or joint income with such person’s spouse in excess of $300,000 per year in each of the two most recent years and who reasonably expects to attain the same individual or joint levels of income (including such contributions) in the current year.
_____ Director or Officer of Issuer.
Any director or executive officer of the Company
_____ All Equity Owners In Entity Are Accredited.
An entity, (i.e. corporation, partnership, trust, IRA, etc.) in which all of the equity owners are Accredited Investors as defined herein.
_____ Corporation.
A corporation not formed for the specific purpose of acquiring the Shares offered, with total assets in excess of $5,000,000.
_____ Other Accredited Investor.
Any natural person or entity which qualifies as an Accredited Investor pursuant to Rule 501(a) of Regulation D promulgated under the Act; specify basis for qualification:
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
______One of 35 Non-Accredited Investors that may be allowed to invest in the offering
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2. Representations and Warranties. I represent and warrant to the Company that:
(a) I (i) have adequate means of providing for my current needs and possible contingencies and I have no need for liquidity of my investment in the Shares, (ii) can bear the economic risk of losing the entire amount of my investment in Shares, and (iii) have such knowledge and experience that I am capable of evaluating the relative risks and merits of this investment; (iv) the purchase of Shares is consistent, in both nature and amount, with my overall investment program and financial condition.
(a) The address set forth below is my true and correct residence, and I have no intention of becoming a resident of any other state or jurisdiction.
(b) I have not utilized the services of a “Purchaser Representative” (as defined in Regulation D promulgated under the Securities Act) because I am a sophisticated, experienced investor, capable of determining and understanding the risks and merits of this investment.
______________
Purchaser’s Initials
(d) I have received and read, and am familiar with the Share Documents, including the Memorandum and the forms of certificate for Shares. All documents, records and books pertaining to the Company and the Shares requested by me, including all pertinent records of the Company, financial and otherwise, have been made available or delivered to me.
(e) I have had the opportunity to ask questions of and receive answers from the Company’s officers and representatives concerning the Company’s affairs generally and the terms and conditions of my proposed investment in the Shares.
(f) I understand the risks implicit in the business of the Company. Among other things, I understand that there can be no assurance that the Company will be successful in obtaining the funds necessary for its success. If only a fraction of the maximum amount of the Offering is raised, the Company may not be able to expand as rapidly as anticipated, and proceeds from this Offering may not be sufficient for the Company’s long term needs.
(g) Other than as set forth in the Memorandum, no person or entity has made any representation or warranty whatsoever with respect to any matter or thing concerning the Company and this Offering, and I am purchasing the Shares based solely upon my own investigation and evaluation.
(h) I understand that no Shares have been registered under the Securities Act, nor have they been registered pursuant to the provisions of the securities or other laws of applicable jurisdictions.
(i) The Shares for which I subscribe are being acquired solely for my own account, for investment and are not being purchased with a view to or for their resale or distribution. In order to induce the Company to sell Shares to me, the Company will have no obligation to recognize the ownership, beneficial or otherwise, of the Shares by anyone but me.
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(j) I am aware of the following:
| (i) | The Shares are a speculative investment which involves a high degree of risk; and |
| (ii) | My investment in the Shares is not readily transferable; it may not be possible for me to liquidate my investment. |
| (iii) | The financial statements of the Company have merely been compiled, and have not been reviewed or audited. |
| (iv) | There are substantial restrictions on the transferability of the Shares registered under the Securities Act; and |
______________
Purchaser’s Initials
| (v) | No federal or state agency has made any finding or determination as to the fairness of the Shares for public investment nor any recommendation or endorsement of the Shares; |
(k) Except as set forth in the Memorandum, none of the following information has ever been represented, guaranteed, or warranted to me expressly or by implication, by any broker, the Company, or agents or employees of the foregoing, or by any other person:
| (i) | The appropriate or exact length of time that I will be required to hold the Shares; |
| (ii) | The percentage of profit and/or amount or type of consideration, profit, or loss to be realized, if any, as a result of an investment in the Shares; or |
| (iii) | That the past performance or experience of the Company, or associates, agents, affiliates, or employees of the Company or any other person, will in any way indicate or predict economic results in connection with the purchase of Shares; |
| (iv) | The amount of dividends or distributions that the Company will make; |
(l) I have not distributed the Memorandum to anyone, no other person has used the Memorandum, and I have made no copies of the Memorandum; and
(m) I hereby agree to indemnify and hold harmless the Company, its officers, directors, and representatives from and against any and all liability, damage, cost or expense, including reasonable attorneys fees, incurred on account of or arising out of:
| (i) | Any inaccuracy in the declarations, representations, and warranties set forth above; |
| (ii) | The disposition of any of the Shares by me which is contrary to the foregoing declarations, representations, and warranties; and |
| (iii) | Any action, suit or proceeding based upon (1) the claim that said declarations, representations, or warranties were inaccurate or misleading or otherwise cause for obtaining damages or redress from the Company; or (2) the disposition of any of the Shares. |
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(n) By entering into this Subscription Agreement, I acknowledge that the Company is relying on the truth and accuracy of my representations.
The foregoing representation and warranties are true and accurate as of the date hereof, shall be true and accurate as of the date of the delivery of the funds to the Company and shall survive such delivery. If, in any respect, such representations and warranties are not true and accurate prior to delivery of the funds, I will give written notice of the fact to the Company, specifying which representations and warranties are not true and accurate and the reasons therefor.
_______________
Purchaser’s Initials
3. Transferability. I understand that I may sell or otherwise transfer my Shares only if registered under the Securities Act or I provide the Company with an opinion of counsel acceptable to the Company to the effect that such sale or other transfer may be made in absence of registration under the Securities Act. I have no right to cause the Company to register the Shares. Any certificates or other documents representing my Shares will contain a restrictive legend reflecting this restriction, and stop transfer instructions will apply to my Shares.
4. Indemnification. I understand the meaning and legal consequences of the representations and warranties contained in Paragraph 2 hereof, and I will indemnify and hold harmless the Company, its officers, directors, and representatives involved in the offer or sale of the Shares to me, as well as each of the managers and representatives, employees and agents and other controlling persons of each of them, from and against any and all loss, damage or liability due to or arising out of a breach of any representation or warranty of mine contained in this Subscription Agreement.
5. Revocation. I will not cancel, terminate or revoke this Subscription Agreement or any agreement made by me hereunder and this Subscription Agreement shall survive my death or disability.
6. Termination of Agreement. If this subscription is rejected by the Company, then this Subscription Agreement shall be null and void and of no further force and effect, no party shall have any rights against any other party hereunder, and the Company shall promptly return to me the funds delivered with this Subscription Agreement.
7. Miscellaneous.
| (a) | This Subscription Agreement shall be governed by and construed in accordance with the substantive law of the State of California. |
| (b) | This Subscription Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and may be amended only in writing and executed by all parties. |
8. Ownership Information. Please print here the total number of Shares to be purchased, and the exact name(s) in which the Shares will be registered.
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Total Shares:_________________
Name(s):_____________________________________________________________
_____ Single Person
_____ Husband and Wife, as community property
_____ Joint Tenants (with right of survivorship)
_____ Tenants in Common
_____ A Married Person as separate property
_____ Corporation or other organization
_____ A Partnership
_____ Trust
_____ IRA
______________
Purchaser’s Initials
_____ Tax-Qualified Retirement Plan
(i) Trustee(s)/ Custodian____________________________________________________
(ii) Trust Date_____________________________________________________________
(iii) Name of Trust__________________________________________________________
(iv) For the Benefit of________________________________________________________
_____ Other:_________________________________________________________________________
(please explain)
Social Security or Tax I.D.#:_______________________________________________________________
Residence Address:
__________________________________________________________________________________________
Street Address
__________________________________________________________________________________________
City State Zip
Mailing Address: (Complete only if different from residence)
___________________________________________________________________________________________
Street Address (If P.O. Box, include address for surface delivery if different than residence)
____________________________________________________________________________________________
City State Zip
Phone Numbers
Home: (_______)_____________________
Business: (_______)___________________
Facsimile: (_______)___________________
______________
Purchaser’s Initials
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9. Date and Signatures. Dated ______________________________, 2008.
| Signatures | Purchaser Name (Print) | |||
| (Each co-owner or joint owner must sign - “Purchaser Name”) | Names must be signed exactly as listed under | |||
ACCEPTED:
EMVELCO CORP.
| By: | Dated:______________________, 2008 | ||
| YOSSI ATTIA | |||
| President | |||
______________
Purchaser’s Initials
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EMVELCO CORP.
Investor Suitability Questionnaire
To: Prospective purchasers of Shares of Common Stock (the “Shares”) offered by EMVELCO CORP. (the “Company”).
The Purpose of this Questionnaire is to solicit certain information regarding your financial status to determine whether you are an “Accredited Investor,” as defined under applicable federal and state securities laws, and otherwise meet the suitability criteria established by the Company for purchasing Shares. This questionnaire is not an offer to sell securities.
Your answers will be kept as confidential as possible. You agree, however, that this Questionnaire may be shown to such persons as the Company deems appropriate to determine your eligibility as an Accredited Investor or to ascertain your general suitability for investing in the Shares.
Please answer all questions completely and execute the signature page
A. Personal
1. Name:________________________________________________________________________
2. Address of Principal Residence:____________________________________________________
______________________________________________________ County:__________________
3. Residence Telephone: (______)__________________________________
4. Where are you registered to vote?___________________________________________________
5. Your driver’s license is issued by the following state:_____________________________________
6. Other Residences or Contacts: Please identify any other state where you own a residence, are registered to vote, pay income taxes, hold a driver’s license or have any other contacts, and describe your connection with such state:
__________________________________________________________________________________
__________________________________________________________________________________
7. Please send all correspondence to:
(1)_____ Residence Address (as set forth in item A-2)
(2)_____ Business Address (as set forth in item B-1)
8. Date of Birth:___________________________________________________________________________
9. Citizenship:____________________________________________________________________________
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10. Social Security or Tax I.D. #:_______________________________________________________________
B. Occupations and Income
1. Occupation:_________________________________________________________
(a) Business Address:______________________________________________
_______________________________________________________________
(b) Business Telephone Number: (______)______________________________
2. Gross income during each of the last two years exceeded:
(1)_____$25,000 (2)_____$50,000
(3)_____$100,000 (4)_____$200,000
3. Joint gross income with spouse during each of the last two years exceeded $300,000
(1)_____Yes (2)_____No
4. Estimated gross income during current year exceeds:
(1)_____$25,000 (2)_____$50,000
(3)_____$100,000 (4)_____$200,000
5. Estimated joint gross income with spouse during current year exceeds $300,000
(1)_____Yes (2)_____No
C. Net Worth
1. Current net worth or joint net worth with spouse (note that “net worth” includes all of the assets owned by you and your spouse in excess of total liabilities, including the fair market value, less any mortgage, of your principal residence.)
(1)_____$50,000-$100,000 (2)_____$100,000-$250,000 (3)_____$250,000-$500,000
(4)_____$500,000-$750,000 (5)_____$750,000-$1,000,000 (6)_____over $1,000,000
2. Current value of liquid assets (cash, freely marketable securities, cash surrender value of life insurance policies, and other items easily convertible into cash) is sufficient to provide for current needs and possible personal contingencies:
(1)_____Yes (2)_____No
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D. Affiliation with the Company
Are you a director or executive officer of the Company?
(1)_____Yes (2)_____No
E. Investment Percentage of Net Worth
If you expect to invest up to $200,000 in Shares, does your total purchase price exceed 10% of your net worth at the time of sale, or joint net worth with your spouse.
(1)_____Yes (2)_____No
F. Consistent Investment Strategy
Is this investment consistent with your overall investment strategy?
(1)_____Yes (2)_____No
G. Prospective Investor’s Representations
The information contained in this Questionnaire is true and complete, and the undersigned understands that the Company and its counsel will rely on such information for the purpose of complying with all applicable securities laws as discussed above. The undersigned agrees to notify the Company promptly of any change in the foregoing information which may occur prior to any purchase by the undersigned of securities from the Company.
Prospective Investor:
| | Date:________________, 2008 | |
| Signature | ||
| | ||
| Signature (of joint purchase if purchase is to be | ||
| made as joint tenants or as tenants in common) | ||
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