In November 1997, Celerity Systems completed an IPO and raised gross proceeds of $15 million. According to the final prospectus, “Celerity Systems, Inc. ("Celerity" or the "Company") designs, develops, integrates, installs, operates, and supports interactive video services hardware and software. The Company also designs, develops, installs, and supports CD-ROM software products for business applications. In the interactive video services area, the Company seeks to provide scalable solutions, including products and services developed by the Company and by strategic partners, that enable interactive video programming and applications to be provided to a wide variety of market niches.”
By August 2005, Celerity Systems had gone through a number of incarnations and had become a Business Development Company as defined under the Investment Company Act of 1940. In August 2005, the management of the company decided to change the strategic direction of the company. They decided “to focus on owing and operating small and mid-sized businesses that provide homeland security solutions through innovative technologies to both the public and private sector and to drive growth through management, strategic guidance, capital and financial support, and government marketing expertise.” On August 31, 2005, Tom McMillen was retained by the company as it CEO.
As of September 30, 2005, the company had current assets of $782,912, including $630,033 in cash, and total liabilities of $795,409.
Prior to changing the focus of the company, CESY’s primary asset was its investment in Yorkville Advisors Management, LLC. The investment was liquidated in the third quarter and most of the proceeds were used to clean up the balance sheet.
From the 10-Q:
4. Investment in Yorkville Advisors Management, LLC
On December 1, 2003, the Company purchased a minority interest in Yorkville Advisors Management, LLC (“Yorkville”). Yorkville is the investment manager of a private equity fund that is a principal holder of equity securities of the Company. The purchase price amounted to $5,240,000. The acquisition was funded through the sale of 2,000,000,000 shares of common stock to the aforementioned private equity fund, resulting in net proceeds of $4,000,000 and the balance paid using the proceeds received from the issuance of convertible notes payable. During the year ended December 31, 2004 and 2003, the Company received proceeds of $1,255,000 and $65,000, respectively, from this investment, which amounts have been recorded as dividend income in the statements of operations. In 2005, the Company was informed that Yorkville was in the process of an orderly liquidation of its business. Under the terms of a Preferential Rights Agreement, the Company’s membership interest in Yorkville was converted into a new class with certain preferential rights entitling the Company to receive consideration equal to the original purchase price of the investment less certain debt of approximately $1,500,000 due to Cornell Capital Partners, LP (“Cornell”), an affiliate of Yorkville. In the nine months ended September 30, 2005, the Company received $5,240,000 net of the $1,500,000 due to Cornell, a related party, for debt the Company had recorded at $1,681,901. The resulting gain has been recorded as an addition to additional paid in capital in the balance sheet as of September 30, 2005.
The 10-Q for the third quarter can be found at:
sec.gov
The 10-K for 2004:
sec.gov |
