Background
Kingfish Holding Corporation (“us”, “our”, “we”, the “Company” or “Kingfish”) was incorporated in the State of Delaware on April 11, 2006 as Offline Consulting Inc. We became Kesselring Holding Corporation (“Kesselring Holding”) on June 8, 2007 and on November 25, 2014 we changed our name to Kingfish Holding Corporation. The principal executive offices of the Company are located at 2641 49th Street, Sarasota, Florida 34234, and our telephone number is (941) 870-2986.
On May 18, 2007, we entered into a reverse merger transaction pursuant to a Share Exchange Agreement (“Exchange Agreement”) whereby we acquired Kesselring Corporation, a Florida corporation (“Kesselring Florida”), that was engaged in the business of homebuilding and restoration operations in central Florida and in the manufacture of building products from operations located in the State of Washington. As a result of this transaction, Kesselring Florida became a wholly-owned subsidiary of the Company. Pursuant to the terms of the Exchange Agreement, however, Kesselring Florida’s shareholders received approximately 80% of the Company’s outstanding common stock and its management was given actual operational and governance control over the Company. As a result thereof, the Company effectively succeeded its otherwise minimal operations to Kesselring Florida and Kesselring Florida was considered the accounting acquirer in the reverse-merger transaction.
At the time of its acquisition, Kesselring Florida had the following wholly-owned subsidiaries: Kesselring Restoration Inc. (which was engaged in restoration services, principally to commercial property owners); King Brothers Woodworking, Inc. and King Door and Hardware, Inc. (which such businesses were engaged in the manufacture and sale of cabinetry and remodeling products, principally to contractors); Kesselring Homes, Inc. (which was engaged in new construction, residential and commercial remodeling, and building services on customer owned properties); and Kesselring Aluminum Corporation Inc. (formerly 1st Aluminum, Inc., which had minimal operations).
Following the completion of the reverse merger transaction, the Company formed a wholly-owned subsidiary named Kesselring Holding Corporation, a Delaware corporation, and engaged in a merger transaction with this subsidiary, pursuant to which the Company was the surviving entity, to effect a name change of the Company from “Offline Consulting, Inc.” to “Kesselring Holding Corporation.” A Certificate of Ownership was filed with the Secretary of State of the State of Delaware, effective as of June 8, 2007.
On December 12, 2008, in response to the dramatically deteriorating business environment in the West Central Florida area for the services offered by Kesselring Restoration Corporation (“KRC”), the Company decided to terminate those employees and focus its efforts on subcontracting-out certain projects. On March 31, 2009, KRC executed and delivered an Assignment for Benefit of Creditors, under Florida Statutes Section 727.101 et seq. (“Assignment”), assigning all of its assets to an assignee (“Assignee”), who was responsible for taking possession of, protecting, preserving, and liquidating such assets and ultimately distributing the proceeds to creditors of KRC according to their priorities as established by Florida law. The Assignee filed a petition commencing the assignment proceedings in the Circuit Court of the Twelfth Judicial Circuit in and for Manatee County, Florida, Civil Division on March 31, 2009. Neither the Company nor its other wholly-owned subsidiaries were included in the above referenced proceedings.
On November 16, 2009, certain shareholders of the Company owning a majority of our outstanding common stock ("Majority Shareholders") and acting pursuant to a written consent effected a change of control of the Company by removing certain of the sitting directors and electing new directors to the board. Immediately following the change of control of the board of directors, the newly elected directors terminated the then-President and Chief Executive Officer and appointed a successor.
In addition, on November 16, 2009, the Majority Shareholders and several additional shareholders also filed a Stockholders' Derivative Complaint (including Request for Temporary Restraining Order) in the United States District Court, Eastern District of Washington against the Company, Kesselring Florida, and certain officers and directors of the Company to judicially restrain the defendants from taking certain specified actions that might impair the value of the Company or its outstanding capital stock. On November 24, 2009, the United States District Court Eastern District of Washington entered a Temporary Restraining Order Granting Plaintiffs’ Order essentially ceasing all corporate activities of the Company, including, but not limited to, prohibiting the issuance of shares, entering contracts, the termination of any board member, officers and/or employees of Kesselring or its subsidiaries and the payment of cash from the subsidiary to the Company. On December 16, 2009, the Court held that actions taken by the Majority Shareholders were proper and entered an order granting a preliminary injunction in favor of the plaintiffs. The parties subsequently entered a Settlement Agreement in which the parties released one another from any and all liability and an order dismissing the action was signed April 5, 2010.
In 2007, the Company had borrowed $500,000 from AMI Holdings, Inc. ("AMI") in two separate loan transactions, which loans were secured by a continuing security interest in, a continuing lien upon, and an unqualified right to possession and disposition of, all of the Company's assets. AMI was a corporation controlled by James K. Toomey, a former director of the Company (“Mr. Toomey”), and certain of his relatives, including his wife, children and siblings. On May 13, 2010, following the Company’s default on these loans, AMI foreclosed on certain of the Company's assets, including 100% of the common stock of Kesselring Florida, and 100% of the common stock of King Brothers Woodworking, Inc., a subsidiary of Kesselring Florida. The Company also was indebted to Gary E. King, a former President and Director of the Company, evidenced by a promissory note ("Gary E. King Notes), and to Kenneth Craig, the Company’s then-President, also evidenced by a promissory note (“Kenneth Craig Note"). On May 24, 2010, AMI sold 100% of the King Brothers Woodworking, Inc. common stock to King Bro Wood, L.L.C., a Washington limited liability company, owned by Gary E. King and Terisita Craig, the wife of Don Craig, a former Chief Operating Officer of the Company (who resigned from such office on April 27, 2010) (the “King Brothers Sale”). As consideration for not objecting to the King Brothers Sale, King Bro Wood, L.L.C. delivered the Gary E. King Notes and the Kenneth Craig Note to the Company marked paid in full, resulting in substantial reduction of the Company's indebtedness. In addition, King Bro Wood, L.L.C. issued a promissory note to the Company in the principal amount of $156,990, such promissory note being payable over 24 months at the interest rate of 6% per annum.
As a result of the foreclosure, the Company no longer held any operating entities, its only asset was the King Bro Wood, L.L.C. promissory note, and it no longer conducted any business operations.
On September 16, 2011, the Company, having only 69 holders of record and no significant assets, filed a Form 15 with the U.S. Securities and Exchange Commission (the “Commission”) to terminate the registration of its common stock under Section 12 of the Exchange Act and to suspend its reporting obligations under Section 15(d) of the Exchange Act.
Recent Developments
In 2012, the sole remaining director and officer of the Company, Ted Sparling, and a former director of the Company, Mr. Toomey, met to discuss the Company’s business prospects in an effort to determine whether the Company had any viable alternatives and to assess the Company’s liabilities, if any, as well as the nature of any such remaining claims. In particular, there was an interest in seeking a means for creating stockholder value in the Company for those stockholders, who had, to that point, lost a significant amount of their investment in the Company. These discussions included the need for financing to pay for ongoing operations, to undertake an audit of the Company’s financial statements, to pay off certain outstanding indebtedness, and to reactivate the Company’s reporting obligations under Section 15(d) of the Exchange Act which had been suspended since 2011.
It was concluded that it might be feasible to acquire a target company or business seeking the perceived advantages of being a publicly held corporation and, based on these discussions, our management decided that it should explore opportunities to acquire other assets or business operations that will maximize shareholder value. Accordingly, it was determined that prior to undertaking a search for any such acquisition opportunities, the Company should take the steps necessary to (a) reconstitute a full board of directors, (b) update and complete its corporate records and corporate governance documents, including the payment of any franchise fees and taxes owed to the State of Delaware, (c) satisfy all its obligations owed to its transfer agent, (e) obtain an audit of its financial statements by independent registered public accountants, and (f) reactivate its suspended reporting obligations under Section 15(d) of the Exchange Act (collectively, “Preparatory Actions”).
Commencing in late 2012 and continuing through the date of the filing of this Form 10-K, Mr. Toomey has loaned to the Company the funds necessary to pay for the costs of such Preparatory Actions, including the payment of legal, accounting, and transfer agent fees, certain liability payments, and fees payable to the State of Delaware. In order to limit the Company’s debt burdens, these loans were evidenced by promissory notes convertible into common stock of the Company (“Convertible Notes”) and, as of the date hereof, Mr. Toomey has converted such Convertible Notes to the extent that there were sufficient authorized shares of common stock available therefor. However, there currently are an insufficient number of authorized shares to convert all of the Convertible Notes and, as a result, Convertible Notes issued after August 22, 2013 continue to be outstanding.
On November 25, 2014, as part of its Preparatory Actions, a majority of the Company’s stockholders took an action by written consent to elect the board of directors of the Company (following a removal of the then-sitting directors in accordance with the Delaware General Corporation Law) and to amend and restate the Company’s certificate of incorporation to, among other things:
Immediately following these stockholder actions, the Company’s bylaws were amended and restated, officers were appointed, and the board of directors authorized the dissemination of a Notice of Action Taken by Written Consent to those stockholders who had not provided their written consent to the above actions taken by the stockholders.
On December 15, 2014, the board of directors of the Company reviewed the audited financial statements of the Company, this Form 10-K, and the Quarterly Reports on Form 10-Qs for the quarters ended December 31, 2013, March 31, 2014, and June 30, 2014 and approved the filing of the Form 10-K and the filing of the Form 10-Qs.
Business Strategy
Currently, the Company intends to seek suitable candidates for a business combination with a private company, including a potential combination and financing transaction involving Florida Fuel Solutions, LLC, a Florida limited liability company controlled by certain of our directors (“FFS”). As of the date of the filing of this Form 10-K, the Company has only taken the Preparatory Actions and has not yet made any efforts to identify any private companies or potential business combinations other than FFS. However, the Company does not intend to enter into any negotiations or pursue a business combination transaction with any entity, including FFS, until it completes the Preparatory Actions and undertakes an evaluation of the alternatives available to the Company. As a result, the Company has not conducted negotiations or entered into a letter of intent concerning any target company or business, including FFS. The business purpose of the Company is to seek the acquisition of, or merger with, an existing company or business.
The Company is currently considered to be a "blank check" company. The rules and regulations of the Commission defines blank check companies as "any development stage company that is issuing a penny stock, within the meaning of Section 3(a)(51) of the [Exchange Act] and that has no specific business plan or purpose, or has indicated that its business plan is to merge with an unidentified company or companies." Pursuant to Rule 12b-2 promulgated under the Exchange Act, the Company also qualifies as a “shell company,” because it has no or nominal assets (other than cash) and no or nominal operations. Many states have enacted statutes, rules and regulations limiting the sale of securities of "blank check" companies in their respective jurisdictions. Management does not intend to undertake any efforts to cause a market to develop in our securities, either debt or equity, until we have successfully concluded a business combination transaction.
Consistent with this strategy, the Company’s principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a business combination transaction rather than seeking immediate, short-term earnings. The Company will not restrict its potential candidate target companies or businesses to any specific business, industry or geographical location and, thus, may acquire any type of business.
We may consider a business which has recently commenced operations, is a developing company in need of additional funds for expansion into new products or markets, is seeking to develop a new product or service, or is an established business which may be experiencing financial or operating difficulties and is in need of additional capital. In the alternative, a business combination may involve the acquisition of, or merger with, a company which does not need substantial additional capital, but which desires to establish a public trading market for its shares, while avoiding, among other things, the time delays, significant expense, and loss of voting control which may occur in a public offering.
We anticipate that the selection of an appropriate business combination transaction will be complex and extremely risky. Because of general economic conditions, rapid technological advances being made in some industries and shortages of available capital, our management believes that there are firms seeking the perceived benefits of becoming a publicly traded corporation. Such perceived benefits of becoming a publicly traded corporation include, among other things, facilitating or improving the terms on which additional equity financing may be obtained, providing liquidity for the principals of and investors in a business, creating a means for providing incentive stock options or similar benefits to key employees, and offering greater flexibility in structuring acquisitions, joint ventures and the like through the issuance of stock. Potentially available business combinations may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.
The Company has unrestricted flexibility in seeking, analyzing and participating in potential business opportunities and the analysis of potential business combination opportunities will be undertaken by or under the supervision of the officers and directors of the Company. In its efforts to analyze potential acquisition targets or businesses, the Company will consider the following kinds of factors:
In applying the foregoing criteria, none of which will be controlling, management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Due to the Company's limited capital available for investigation, the Company may not discover or adequately evaluate adverse facts about the opportunity to be acquired.
In evaluating a prospective business combination, we will conduct a due diligence review of potential targets in an extensive manner as is practicable given the lack of information which may be available regarding private companies, our limited personnel and financial resources, and the inexperience of our management with respect to such activities. We expect that our due diligence will encompass, among other things, meetings with the target business’s incumbent management and inspection of its facilities, as necessary, as well as a review of financial and other information which is made available to us. This due diligence review will be conducted either by our management or by unaffiliated third parties that we may engage, including but not limited to attorneys, accountants, consultants or other such professionals. At this time the Company has not specifically identified any third parties that it may engage. The costs associated with hiring third parties as required to complete a business combination may be significant and are difficult to determine as such costs may vary depending on a variety of factors, including the amount of time it takes to complete a business combination, the location of the target company, and the size and complexity of the business of the target company. Also, we do not currently intend to retain any entity to act as a “finder” to identify and analyze the merits of potential target businesses.
It is anticipated that when the Company is analyzing the available alternatives, it will consider and evaluate a potential business combination with FFS, combined with a simultaneous funding transaction. FFS is a development stage company focused producing high quality bio diesel fuel efficiently using state of the art, scalable, fully automated, continuous flow equipment from renewable sustainable feed stocks. Although FFS is negotiating for the right to purchase proprietary processing equipment from a third party corporation with substantially more resources than FFS to manufacture bio-fuels in central Florida, it does not yet have any contractual rights to purchase such equipments or processes. Furthermore, FFS is a development stage entity with limited funds and, as a result, does not have sufficient financial resources to purchase the equipment, to construct a processing plant, or to conduct any such operations. In order for a business combination with FFS to be feasible, not only would FFS need to successfully negotiate the terms and conditions of the purchase of the necessary processing equipment at a price satisfactory to it, a simultaneous source of financing must be negotiated and obtained. If the Company were to pursue a business combination with FFS under such circumstances, it is likely that the necessary financing would be in the form of an investment in the Company which would be made at the same time as the Company acquired FFS. In any event, FFS does not currently have any agreement to purchase the processing equipment or to finance its proposed business, and there can be no assurance that it will be able to do so in the future. In view of the number of significant uncertainties surrounding a possible transaction with FFS, the Company has determined not to negotiate any potential transaction with FFS at this time and will instead merely consider it as a potential alternative when seeking and evaluating other potential business combination opportunities.
Our limited funds and the lack of full-time management will likely make it impracticable to conduct a complete and exhaustive investigation and analysis of a target business before we consummate a business combination. Management decisions, therefore, will likely be made without detailed feasibility studies, independent analysis, market surveys and the like which, if we had more funds available to us, would be desirable. We will be particularly dependent in making decisions upon information provided by the promoters, owners, sponsors or others associated with the target business seeking our participation.
The time and costs required to select and evaluate a target company or business and to structure and complete a business combination cannot presently be ascertained with any degree of certainty. The amount of time it takes to complete a business combination, the location of the target company and the size and complexity of the business of the target company are all factors that determine the costs associated with completing a business combination transaction. The time and costs required to complete a business combination transaction can be ascertained once a business combination target has been identified. Any costs incurred with respect to evaluation of a prospective business combination that is not ultimately completed will result in a loss to us.
Our management anticipates that we will likely be able to effect only one business combination, due primarily to our limited financing and the degree of dilution anticipated for present and prospective shareholders, which is likely to occur as a result of our management’s plan to offer a controlling interest to a target business in order to achieve a tax-free reorganization. This lack of diversification should be considered a substantial risk in investing in us, because it will not permit us to offset potential losses from one venture against gains from another.
Form of Acquisition
The manner in which the Company participates in any specific opportunity would depend upon the nature of the opportunity, the respective needs and desires of the Company and the promoters of the opportunity, and the relative negotiating strength of the Company and such promoters.
It is likely that the Company will acquire its participation in a business opportunity through the issuance of common stock or other securities of the Company. Although the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an acquisition is a so-called "tax free" reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), depends upon whether the owners of the acquired business own 80% or more of the voting stock of the surviving entity. If a transaction were structured to take advantage of these provisions rather than other "tax free" provisions provided under the Code, all prior stockholders would in such circumstances retain 20% or less of the total issued and outstanding shares of the surviving entity.
Under other circumstances, depending upon the relative negotiating strength of the parties and including situations where the investment is made in the Company to fund the purchase of operating assets,, prior stockholders may retain substantially less than 20% of the total issued and outstanding shares of the surviving entity. This could result in substantial additional dilution to the equity of those who were stockholders of the Company prior to such reorganization.
The stockholders of the Company will likely not have control of a majority of the voting securities of the Company following a reorganization or investment transaction. As part of such a transaction, all or a majority of the Company's directors may resign and one or more new directors may be appointed without any vote by stockholders.
In the case of an acquisition, the transaction may be accomplished upon the sole determination of management without any vote or approval by stockholders. In the case of a statutory merger or consolidation directly involving the Company, it will likely be necessary to call a stockholders' meeting and obtain the approval of the holders of a majority of the outstanding securities. The necessity to obtain such stockholder approval may result in delay and additional expense in the consummation of any proposed transaction and will also give rise to certain appraisal rights to dissenting stockholders. Most likely, management will seek to structure any such transaction so as not to require stockholder approval.