S-1 1 fs12019_f5finishesinc.htm

As filed with the Securities and Exchange Commission on November 7, 2019

Registration No. 333- _____

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

_________________________________

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

_________________________________

F5 Finishes, Inc.

(Exact name of Registrant as specified in its charter)

_________________________________

Delaware

 

1752

 

82-3052939

(State or other jurisdiction of
incorporation or organization)

 

(Primary Standard Industrial
Classification Code Number)

 

(I.R.S. Employer
Identification Number)

6571 Las Positas Road
Livermore, CA 94551
415.298.1243

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

_________________________________

Michael Patton
F5 Finishes, Inc.
6571 Las Positas Road
Livermore, CA 94551
415.298.1243

(Name, address, including zip code, and telephone number, including area code, of agent for service)

_________________________________

Copies to:

Johnson and Colmar
630 Dundee Road, Suite 225
Northbrook, Illinois 60062
(312) 922
-1980
Attn: Georgann Joseph
       Robin C. Friedman

 

Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas, 11
th Floor
New York, New York 10105
(212) 370
-1300
Attn: Barry I. Grossman
Sarah E. Williams

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

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. £

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

£

 

Accelerated filer

 

£

Non-accelerated filer

 

R

 

Smaller reporting company

 

R

       

Emerging growth company

 

R

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. £

 

Title of Each Class of Securities to be Registered

 

Amount to be
Registered

 

Proposed
Maximum
Offering Price
Per Unit

 

Proposed
Maximum
Aggregate
Offering
Price
(1)

 

Amount of
Registration
Fee
(2)

Common Stock $0.01 par value

     

$

 

$

46,000,000

 

$

5,970.80

Underwriter’s Warrants to purchase Common
Stock(3)

     

$

   

$

   

$

 

Common Stock underlying Underwriter’s
Warrants(4)

     

$

   

$

2,587,500

 

$

335.86

Total Registration Fee

     

$

   

$

48,587,500

 

$

6,306.66

____________

(1)      Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933. Includes offering price of shares that the underwriters have the option to purchase to cover over-allotments, if any. Pursuant to Rule 416 under the Securities Act of 1933, as amended, the shares of common stock registered hereby also include an indeterminate number of additional shares of common stock as may from time to time become issuable by reason of stock splits, stock dividends, recapitalizations or other similar transactions.

(2)      Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price of the securities registered hereunder to be sold by the registrant. The filing fee is not being submitted with this confidential submission as a result of guidance provided by the Securities and Exchange Commission on the Jumpstart Our Business Startups Act of 2012.

(3)      No registration fee pursuant to Rule 457(g) under the Securities Act.

(4)      Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(g) under the Securities Act. The underwriters warrants are exercisable at a per-share exercise price equal to 125% of the per-share public offering price. The proposed maximum aggregate offering price of the underwriter’s warrants is $         , or 125% of $      (        % of $             ).

_________________________________

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 hereafter 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.

 

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the prospectus filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Preliminary Prospectus

 

Subject to Completion, dated [•], 2019

[]Shares

F5 Finishes, Inc.

Common Stock

$[•] Per Share

F5 Finishes, Inc. was founded in 2007 and remained inactive until 2017, when it was repurposed to acquire six companies that provide commercial flooring solutions, including sales, installation and maintenance services for existing and new commercial buildings. This is the initial public offering of our common stock. We anticipate that the public offering price of our common stock will be between $[•] and $[•] per share.

Prior to this offering, there has been no public market for our common stock. We intend to apply to list our common stock on the NASDAQ Capital Market under the symbol “FLRZ.” If our listing application is not approved by the NASDAQ Stock Market (“NASDAQ”), we will not be able to close this offering and this offering will be terminated.

We are an emerging growth company as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary — Implications of Being an Emerging Growth Company.”

Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 19 for a discussion of the risks that you should consider in connection with an investment in our securities.

 

Per Share

 

Total

Public offering price

 

$

   

$

 

Underwriting discount and commissions

 

$

   

$

 

Proceeds, before expenses, to F5 Finishes, Inc.

 

$

   

$

To the extent that the underwriters sell more than [•] shares of common stock, the underwriters have the option to purchase up to an additional [•] shares from us at the public offering price less the underwriting discount. See “Underwriting” for a full description of underwriter compensation.

The underwriters expect to deliver the shares of common stock to the purchasers on [•], 2019.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Joint Book-Running Managers

Maxim Group LLC

 

Zelman Partners LLC

Co-manager

Sanders Morris Harris LLC

Prospectus dated [•], 2019

 

 

 

 

 

TABLE OF CONTENTS

 

Page

SUMMARY

 

1

IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY AND A SMALLER REPORTING COMPANY

 

18

RISK FACTORS

 

19

CAUTIONARY DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

 

39

INDUSTRY AND MARKET DATA

 

41

USE OF PROCEEDS

 

42

DIVIDEND POLICY

 

43

CAPITALIZATION

 

44

DILUTION

 

45

SELECTED FINANCIAL DATA

 

46

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

 

60

OUR BUSINESS

 

104

MANAGEMENT

 

120

EXECUTIVE AND DIRECTOR COMPENSATION

 

126

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

 

133

THE COMBINATIONS WITH THE FOUNDING COMPANIES

 

135

PRINCIPAL STOCKHOLDERS

 

142

DESCRIPTION OF CAPITAL STOCK OF F5 FINISHES

 

144

SHARES ELIGIBLE FOR FUTURE SALE

 

148

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS

 

150

UNDERWRITING

 

154

LEGAL MATTERS

 

159

EXPERTS

 

159

WHERE YOU CAN FIND MORE INFORMATION

 

159

INDEX TO FINANCIAL STATEMENTS

 

F-1

_________________________________

You should rely only on the information contained in this prospectus and any free writing prospectus prepared by us or on our behalf. We have not, and the underwriters have not, authorized anyone to provide you with any additional information or information that is different. This prospectus may be used only where it is legal to sell these securities. You should assume that the information in this prospectus is accurate only as of the date of this prospectus.

No action is being taken in any jurisdiction outside the United States to permit a public offering of these securities or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of the prospectus applicable to that jurisdiction.

“F5 Finishes,” “F5 Finishes, Inc.” and “f5finishes.com” are trademarks and are the property of F5 Finishes, Inc. All other trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners.

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SUMMARY

This summary highlights information contained elsewhere in the prospectus. Because it is a summary, it does not contain all of the information that you should consider before investing in our common stock. You should read and carefully consider this entire prospectus before making an investment decision, especially the information presented under the headings “Risk Factors,” “Cautionary Disclosure Regarding Forward-Looking Statements,” “Selected Financial Data,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Concurrently with the closing of this offering, we plan to acquire five corporations and one limited liability company in separate acquisitions that will be closed simultaneously: (i) Contract Carpet Systems Incorporated(“Contract Carpet”); (ii) D.S. Baxley, Inc., d/b/a DSB+(“DSB+”); (iii) Premier Maintenance Group, Inc. (“Premier”); (iv) Carpet Services of Tampa, Inc. d/b/a ReSource Flooring & Maintenance (“Resource Flooring”); (v) JD Shehadi, LLC (“Shehadi”); and (vi) Universal Metro, Inc. (“Universal”). We collectively refer to these transactions as the “Combinations,” and all of these companies are collectively referred to as the “Founding Companies.” The description of our business that follows assumes that the Combinations have occurred and the operations of the Founding Companies have been combined.

Unless otherwise indicated by the context, references to “F5 Finishes” refer to F5 Finishes, Inc. solely, and references to the “Company,” “our,” “we,” “us” and similar terms refer to F5 Finishes, Inc., together with the Founding Companies, after giving effect to the Combinations.

For accounting and reporting purposes, F5 Finishes has been identified as the accounting acquirer of each of the Founding Companies. All of the Founding Companies have been identified as the accounting co-predecessors to the Company.

Our Company

We are a provider of commercial flooring solutions, including sales, installation and maintenance services for existing and new commercial buildings. We provide a single-source solution for our customers’ commercial flooring and finishes needs, including without limitation, carpet, ceramic, concrete, cork, rubber, sports surfaces, stone, vinyl and wood. We also provide services such as the application of epoxy and industrial coatings, concrete polishing, flooring restoration, installation of building entry mat systems, installation of raised access flooring (i.e., an elevated structural floor above a solid substrate to create a hidden void for the passage of electrical services), linoleum maintenance, moisture testing and recycling. Our flooring suppliers are typically among the most recognized names in our industry, and our customers include many well-established commercial property developers, property managers and general contractors. We believe that our ability to provide our customers with a full range of commercial flooring solutions, including cost estimation, sales, project management, installation and maintenance, will enable us to be the provider of choice for all of their commercial flooring needs.

Concurrently with and as a condition to the closing of this offering, F5 Finishes will acquire the six Founding Companies, creating a business that management estimates will be among the ten largest commercial flooring solutions providers in the United States, with consolidated 2018 revenues of $111.3 million and Adjusted EBITDA of $7.1 million for the same period. Our Founding Companies have been in business for an average of 23 years and operate across seven major Metropolitan Statistical Areas (“MSA”) in California, Florida, Maryland, New Jersey and New York. F5 Finishes will use a portion of the net proceeds from this offering and newly-issued shares of common stock and subordinated debt to acquire:

•        Carpet Services of Tampa, Inc., doing business as Resource Flooring, founded in 1991 as a Florida corporation;

•        Contract Carpet Systems Inc., founded in 1977 as a Maryland corporation;

•        D.S. Baxley, Inc., doing business as DSB+, founded in 1997 as a California limited liability company and, in a statutory conversion, converted to a California corporation in 2005;

•        JD Shehadi, LLC, doing business as Shehadi Commercial Flooring, founded in 2001 as a New Jersey limited liability company;

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•        Premier Maintenance Group, Inc., founded in 2010 as a California corporation and under common control with D.S. Baxley, Inc.; and

•        Universal Metro, Inc., founded in 1998 as a California corporation.

See “Certain Relationships and Related Person Transactions — The Combinations with the Founding Companies.” Once the Combinations are closed, each of the Founding Companies will become a wholly-owned subsidiary of F5 Finishes.

F5 Finishes initiated business activity in October 2017 when it commenced planning for the combination of the six Founding Companies that operate across a diverse range of major metropolitan markets in the United States. Our goal is to become the leading commercial flooring solutions provider nationally by capitalizing on industry dynamics that we believe create an attractive consolidation opportunity for us and by leveraging the advantages of the Combinations to drive additional growth and margin expansion. Each of our Founding Companies is a member of either Starnet Worldwide Commercial Flooring Partnership or Fuse Commercial Flooring Alliance, the two largest commercial flooring trade associations in the U.S. Several members of the management teams of our Founding Companies have held leadership positions with these organizations. We believe that these organizations, which together have more than 300 members representing more than $4.5 billion in revenues, may provide us with potential acquisition opportunities in the future

We operate from eleven offices and warehouses located in (i) Beltsville, MD, (ii) Fairfield, NJ, (iii) Tustin, CA, (iv) Livermore, CA, (v) Petaluma CA, (vi) San Francisco, CA, (vii) San Jose, CA, (viii) Santa Fe Springs, CA, and (ix) Tampa, FL. We lease a total of approximately 100,000 square feet of office and warehouse space, and we operate a fleet of over 60 commercial vehicles.

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We assist our customers with flooring selection, cost estimation and project management. Once the flooring selection is made, we provide product procurement, handling, warehousing, onsite delivery and installation. Our installation services include subfloor repair and leveling, installation and occupied space flooring replacements. We also provide maintenance services to enhance flooring appearance and to extend its useful life, and we offer reclamation and recycling of our customers’ old flooring.

We obtain most of our customer contracts through requests for pricing from commercial general contractors retained by building owners, property managers, real estate developers and tenants to perform build-outs of commercial spaces. We also obtain customer contracts through established relationships directly with end-users of commercial spaces, including commercial building owners and tenants. In 2018, 78% of our top 250 customers were repeat customers and accounted for approximately 75% of our revenues.

Our customers include general contractors, educational institutions, financial institutions, fitness facilities, government entities, healthcare providers, hotels, insurance companies, office landlords, pharmaceutical companies, real estate developers, real estate managers, restaurants, retail businesses and technology companies. While the majority of our business is commercial building-related, we also provide flooring solutions for new developments of multi-family residential high-rise projects where our customer typically is the contractor or developer of the project.

Competition for customer contracts is based primarily on service, quality, pricing, and financial strength. Our ability to provide high-quality labor, in-house labor management and a broad menu of services, along with our access to capital to pay for materials and labor up-front, are critical to our ability to obtain and retain customers. In 2018, our customer base exceeded 1,000, with our 15 largest customers accounting for approximately 31.5% of our combined revenue. Our four largest customers in 2018 together accounted for approximately 12.8% of our combined revenue and individually ranged from approximately 2.4% to 4.1% of our combined revenue.

The Combinations

Concurrent with the closing of this offering, F5 Finishes will purchase all of the issued and outstanding stock and other equity securities of our six Founding Companies (referred to herein as the “Combinations”): (i) Contract Carpet; (ii) DSB+, (iii) Premier; (iv) Resource Flooring; (v) Shehadi; and (vi) Universal. The Founding Companies will be acquired for approximately $15.7 million of cash, approximately 2.7 million shares of our common stock, and promissory notes with an aggregate principal amount of approximately $6.8 million. A portion of the net proceeds from this offering will be used to pay the approximately $15.7 million cash portion of the consideration in the Combinations. We will not close the acquisition of any of the Founding Companies unless we close the acquisition of all of the Founding Companies. Furthermore, the closing of the Combinations and this offering are conditioned on the closing of each other. See, “Certain Relationships and Related Person Transactions — The Combinations with the Founding Companies.”

Our Industry

We operate in the large, growing, and fragmented U.S. commercial flooring industry. Based on independent third-party research1, disclosures from certain large flooring manufacturers2, and internal management analysis, we believe total U.S. floor covering sales by flooring manufacturers in 2018 were approximately $25 billion. Of this amount, we believe approximately 75% ($19 billion) of U.S. floor coverings were sold through the commercial flooring channel, 80%3 ($15 billion) of which was for the replacement of flooring in existing commercial buildings and 20% ($4 billion) of which was for new commercial building construction. Further, based on a report by BCC Research4, the market for the purchase and installation of replacement commercial flooring is approximately $25 billion annually and is expected to grow at a 4.5% compounded annual rate through 2021.

_________

1

 

Catalina Floor Coverings Report, 2016

2

 

Interface Investor Presentation, June 2019; Mohawk Industries 10-K filed February 2019 Tarkett Annual Shareholders’ Meeting Registration Document, 2019

3

 

Armstrong Flooring Investor Presentation May 2019; Tarkett Investor Day Presentation June 19, 2019

4

 

BCC Research, Commercial Flooring: North American Markets, Published January 2017

3

Highly Fragmented Market Primed for Consolidation

We believe the fragmented nature of U.S. commercial flooring installation and service contractors presents substantial consolidation and growth opportunities. According to the Starnet Worldwide Commercial Flooring Partnership, a network of independent flooring contractors, there are an estimated 2,100 commercial flooring contractors with a total of approximately 2,500 locations in the U.S. We believe that we currently have no direct competitors with more than two percent market share within the commercial flooring industry. We believe that the largest commercial flooring contractor is a subsidiary of Berkshire Hathaway, which has annual revenues of approximately $400 million. We estimate that the top ten companies in our industry have an aggregate estimated market share of less than 15%. Given the fragmented nature of our industry, we believe there is significant opportunity for us to employ a disciplined acquisition program to capitalize on industry growth opportunities through value-enhancing and accretive acquisitions.

Large and Stable Market Opportunity

The main revenue drivers for our business are commercial flooring replacement and new commercial construction.

Commercial Flooring Replacement.    Demand for our services in the commercial flooring replacement channel is a function of tenant turnover, tenant improvements, routine maintenance, and other factors requiring replacement flooring in existing buildings. According to management’s estimates, in 2018 approximately 74% of our revenue was derived from the replacement of flooring in existing commercial buildings. According to a report published by the University of Michigan, there is an estimated 87 billion square feet of existing commercial space in the U.S.5 Accordingly, with an average commercial flooring replacement cycle of seven to ten years, we estimate approximately 8.4 billion square feet of commercial flooring requires replacement annually and that the commercial flooring replacement channel represents the most significant organic growth opportunity for us.

New Commercial Construction.    Our revenue generated in the new commercial construction channel has historically correlated with new commercial construction activity — typically trailing commercial construction square footage put in place by several months — and as commercial new construction activity approaches historic trend levels, we expect a corresponding increase in demand for our services. While commercial construction square footage put in place has increased by 65% from 2011 to 2018, it remains below the annual historic average of 1.3 billion square feet and is significantly below prior cycle average peak levels of 1.6 billion square feet6.

_________

5

 

U.S. Energy Information Administration Commercial Buildings Energy Consumption Survey (CBECS) released March 4, 2015 and revised December 20, 2016, as of year-end 2018; The Center for Sustainable Systems at the University of Michigan, 2018

6

 

U.S. Census Bureau; Dodge Data & Analytics

4

Our Competitive Strengths

Favorable Industry Dynamics

We believe that demand for commercial flooring is more stable than demand for residential flooring. While a downturn in the economy may have a negative impact on commercial construction, with a correlating effect on the commercial flooring market, we believe the need for replacement of commercial flooring in existing buildings, combined with maintenance services, declines less than residential flooring market demand during economic downturns. Historically, commercial construction has been less volatile than residential construction. In the most recent economic recession, residential construction spending declined 64.8% from its high, while nonresidential construction spending declined only 29.4%.

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Resilient Services Mix with Growth Opportunities

We are significantly more active in the market for the replacement of flooring in existing commercial buildings than in new commercial building construction. In 2018, we generated approximately 74% of revenue from contracts for the replacement of flooring in existing commercial buildings. We believe this market is less likely to experience the same level of contraction as new commercial building construction during downward business cycles, and in light of that, our emphasis on replacement of flooring provides us with advantages over other flooring solutions providers that focus primarily on new commercial building construction. In addition, we believe that recurring maintenance services contracts present an important opportunity for organic growth and have historically generated higher profit margins. This opportunity is in addition to the replacement business and we believe experiences less volatility than commercial construction overall.

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Competitive Market Position

We believe that we will be the first publicly-traded company to undertake large-scale, national consolidation of commercial flooring contractors, providing us with first-mover advantage. We believe that demand from our customers for a single-source commercial flooring solutions provider, with the financial and other resources to perform large contracts, is significant. Due to the limited financial and operational capabilities of smaller, independent flooring contractors, larger contracts are typically spread among multiple flooring contractors, complicating the customer’s efforts to source, evaluate, retain, and oversee the execution of its commercial flooring projects. We believe that as we consolidate and grow, our ability to serve as the single source for our customers’ commercial flooring needs will improve, including for larger projects, thereby simplifying the process for our customers and driving additional growth. Additionally, we believe that as a public company, we will be able to grow our business in an expedited manner through greater access to capital for organic and inorganic growth as well as the potential to use our stock as consideration for acquisitions. We believe that greater scale will increase our purchasing power and negotiating strength with both customers and suppliers.

Flexible Project Profile

While we believe that there are significant advantages to executing large contracts, we intend to retain the flexibility to perform smaller projects — which we define as projects that generate less than $50,000 in revenues and which may be completed in less than six weeks. In 2018, approximately 90% of our contracts generated revenue of less than $50,000 and were completed in six weeks or less. Continuing to include smaller projects in our overall project mix will enable us to avoid dedicating capital solely to long-term projects and to mitigate exposure to pre-installation construction delays and/or customer credit risk.

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Extensive Industry Expertise

We believe that we will benefit from our industry operating track record, industry expertise and strong customer relationships that the Founding Companies have established over the course of their respective histories. Our key management personnel at the Founding Companies have served an average of 25 years in the commercial flooring industry. We believe that the Founding Companies’ management will be instrumental in the ongoing implementation of operational best practices across our platform. As long-term participants in the industry, we believe that our management personnel have deep relationships with peers that will help facilitate discussions for future acquisitions and enhance our consolidation strategy. Each of our Founding Companies is also a member of one of the two largest industry trade groups, Starnet Worldwide Commercial Flooring Partnership and Fuse Commercial Flooring Alliance, and many of our management personnel have held senior leadership positions in these trade groups. We believe that our involvement with these organizations may provide us with potential acquisition opportunities in the future.

Experienced Management Team

Upon closing of the offering, the Company’s senior management team will include a Chief Executive Officer and Chief Financial Officer, who each have approximately 40 years of experience in flooring, construction and real-estate connected businesses. The Company believes that it has assembled a senior management team with highly complementary skills and experiences in the commercial flooring market, the construction industry, accounting, finance, and acquisitions.

Attractive Financial Model

We employ an asset-light business model. Our cost structure, limited requirements for capital expenditures (in 2018, our capital and maintenance expenditures were less than 1% of revenues) and the stability of the commercial flooring market have historically enabled our business to deliver strong results through a variety of business cycles. We believe these factors have also allowed us to generate significant free cash flow that we expect will enable us to continue to fund our growth. We also believe that following the Combinations, our scale will create a broader base for cost absorption, allow us to consolidate duplicative functions to maximize cost efficiencies, and facilitate more informed decision making and better financial management through an improvement in oversight and management functions. In addition, our increased scale will enable us to:

•        Pursue larger projects that are currently beyond the financial capabilities of our individual founding companies;

•        Enhance our ability to obtain bonding to support larger projects, resulting in competitive advantages;

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•        Provide flooring solutions to larger multi-location customers; and

•        Expand our maintenance service offerings.

Though increasing the number of larger projects could potentially expose us to increased customer credit risk, we anticipate mitigating this potential risk through a variety of measures:

•        Billing customers for materials immediately upon our receiving an invoice for materials from the manufacturer;

•        For projects requiring non-standard materials, requiring up-front cash payment to cover the cost of materials;

•        On larger projects, issuing monthly invoices, commonly known as “progress billing;”

•        Stopping or delaying work if payment is not forthcoming within the agreed-upon time frame; and

•        Filing mechanics liens against the property if the flooring has already been installed.

Additionally, the financial strength of the customers on larger projects tends to decrease the credit risk for larger projects.

Organizational Structure

We will operate on a decentralized basis with an emphasis on regional and local market execution supported by corporate coordination. Local management will continue to operate and leverage relationships with customers and suppliers. Certain administrative functions will be centralized on a regional and, in certain circumstances, a national basis following this offering, including but not limited to accounting support functions, corporate strategy and acquisitions, human resources, information technology, insurance, marketing, safety, systems support and transactional processing.

Our Strategy

We intend to pursue the strategies described below to grow our business and enhance shareholder value.

Enhance and Build our Network through Acquisitions

The acquisition of other commercial flooring businesses in our markets and throughout the U.S. is a key element of our strategy, increasing our customer base and growing our future acquisition network. We believe that the highly fragmented nature of the commercial flooring industry, combined with the opportunity to leverage our position as a public company with access to financial resources, presents a significant opportunity for consolidation of commercial flooring services. There are currently an estimated 2,100 businesses in the commercial flooring industry, and we expect that there will continue to be an ample number of attractive acquisition candidates. We believe the relationships developed by the management of our Founding Companies, particularly through leadership positions within the two largest commercial flooring trade associations, Starnet Worldwide Commercial Flooring Partnership and Fuse Commercial Flooring Alliance — which together have over 300 members, with over $4.5 billion in combined total revenues — will assist us in gaining access to potential acquisition candidates. Each of our Founding Companies is a member of one of these two trade organizations. We believe that these organizations may provide us with potential acquisition opportunities in the future. We intend to actively pursue acquisitions to increase customer density and expand into new geographic markets, using a disciplined approach to identify and evaluate acquisition candidates. We believe that our expansion strategy, our financial resources and our ability as a public company to use our stock as acquisition consideration also makes us an attractive buyer to sellers of commercial flooring businesses that may wish to remain active in their business while participating in our acquisition growth strategy. We also believe that there are a number of owners of such businesses who are close to retirement with limited exit strategy options who would find us to be an attractive buyer, providing them with both a way to transition out of their businesses and to protect their employees. We believe we can expand our high-margin flooring maintenance services offerings by targeting businesses whose primary service is commercial flooring maintenance. We believe that our ability to acquire businesses at prevailing private company valuations will present opportunities for earnings growth, accretion, and private-to-public valuation multiple positive arbitrage. Moreover, our acquisition strategy will provide opportunities, not only to expand into new geographic areas, but also to expand our range of service offerings in existing areas of operation and cross-sell novel flooring solutions

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that newly-acquired businesses bring to our collective enterprise. We currently have nondisclosure agreements in place with [•] potential acquisition targets (other than the Combination Agreements with our Founding Companies, we have no term sheets, letters of intent or other agreements in place with any acquisition targets and no acquisition is imminent). Our goal is to acquire between [•] and [•] commercial flooring contracting businesses during the 12 months immediately following the closing of this offering. We estimate that these acquisitions may contribute a total of $[•] million to $[•] million in sales over the next 24 months, although we can provide no assurance as to the timing or completion of such acquisitions. As a result of our reputation in the market place and our proprietary deal-sourcing model, we expect our pipeline of potential acquisitions to grow over time.

Organically Grow Market Share and Expand our Profit Margins

We believe integrated operations within geographic areas will create opportunities for economies of scale as we grow. We expect cost savings in such areas as flooring materials purchasing, information systems and contractual relationships with key suppliers. We also believe there are significant opportunities to improve operating margins by consolidating administrative functions such as accounting, employee benefits, finance, insurance, marketing, and risk management. We have identified initiatives to increase market share, revenue and volume and to expand our profit margins. These initiatives include, but are not limited to:

•        Implement System-Wide Best Practices.    We have identified certain best practices among our Founding Companies, including those that define minimum profit margins for contracts we will accept, which implement more aggressive collection procedures for our accounts receivable and that improve project management oversight with the objective of protecting profit margins. We plan to implement these best practices to improve the operating margins of our Founding Companies and any subsequently-acquired businesses.

•        Leverage Size to Create Efficiencies.    Larger projects are significantly more likely than smaller projects to present opportunities to implement change orders that increase project revenues and profits. Smaller commercial flooring companies do not have the financial capability to take on larger projects by themselves. These projects often are split among multiple companies to reduce the risks for general contractors on the projects. We believe that as we acquire additional businesses, and as our access to growth capital increases, we will be able to increase our customer base and fulfill larger project demands without having to share larger projects with third party flooring contractors. Additionally, we believe our increasing scale will enhance our ability to obtain bonding to support larger projects, resulting in competitive advantages.

•        Deploy System-Wide Flooring Maintenance Programs and Implement National Installation and Maintenance Contracts.    Many of our customers own or manage multiple locations throughout the U.S. Many of these customers prefer a single-source flooring solution. In particular, larger customers are looking to streamline their procurement processes by using fewer, larger service providers. As we expand our geographic reach, we plan to centralize the management and oversight of our installation and maintenance teams. This will position us to enter into nationwide installation and maintenance contracts, affording our customers the simplicity of centralized management of these functions, which we believe will provide a more attractive option for customers with multiple locations.

•        Expand our Service Offerings.    We will have opportunities to share expertise across our acquired business on the sale and installation of flooring solutions that are not currently offered by all of our Founding Companies or that will become available to us through acquisitions. We believe that as we scale, we will have the opportunity to become the leading company in the U.S. operating on a national basis and offering a full range of commercial flooring solutions, including cost estimation, sales, project management, installation and maintenance. We believe that our ability to provide our customers with a full range of commercial flooring solutions will enable us to be their provider of choice for all of their commercial flooring needs.

•        Increase our Margins and Enhance Operating Efficiencies.    We believe that as our portfolio of acquired businesses grows, so will our ability to negotiate volume and cash discounts (e.g., discounts for paying within agreed time frames) from our flooring suppliers, thereby increasing our profit margins. The commercial flooring manufacturing industry has become significantly more consolidated over the last 50 years. In the early 1980s, there were approximately 500 carpet mills in the U.S. By the early 1990s, the four top companies accounted for 80% of the production in the U.S. It is the experience of the Founding

10

Companies that flooring manufacturers and carpet mills are significantly less likely now than they were prior to the consolidation of their industry to give volume and cash discounts to smaller commercial flooring contractors. As we organically grow and acquire new businesses, we believe we will be in an improved position to negotiate volume and cash discounts and to increase the mix of higher-margin service offerings, such as maintenance contracts, ceramic, stone and concrete polishing and moisture testing and application of epoxy and other high tech coatings. These increased profit margins will also provide us with additional room to negotiate pricing with our customers that will improve our competitive advantages.

Risk Factors

Investing in shares of our common stock involves a high degree of risk. See “Risk Factors” beginning on page 19 of this prospectus for a discussion of factors you should carefully consider before investing in our common stock. If any of these risks actually occurs, our business, financial condition, results of operations, cash flows and prospects would likely be materially and adversely affected. As a result, the trading price of our common stock would likely decline, and you could lose all or part of your investment. Listed below is a summary of some of the principal risks related to our business:

•        We have not operated as a combined company, and we may not be able to successfully integrate the Founding Companies into one entity.

•        Our business is significantly dependent upon commercial construction and corporate remodeling and refurbishment activities, which are sensitive to prevailing economic conditions over which we have no control.

•        Our failure to accurately estimate project costs or successfully execute a project could result in reduced profits or losses.

•        The commercial flooring sales, installation and maintenance contracting industry is highly competitive, with many well-established competitors.

•        Our business strategy includes growth through acquisitions. If we are unable to locate desirable companies, acquire them on commercially reasonable terms, or finance such acquisitions, or if we are unable to successfully integrate the companies we do acquire or to manage our internal growth, our operating results could be adversely affected.

•        Our success depends in part on the future contributions of our executives and managers, including those who were employees of the Founding Companies. The loss of the services of any of them could have an adverse effect on our business and business prospects.

•        Product shortages and the loss of key suppliers or their failure to adhere to quality standards could damage our reputation and our relationships with our customers, reduce our competitiveness and otherwise negatively affect our business.

•        Changes in the costs of our flooring products, including costs due to tariffs, U.S. trade policies and regulations imposed on products from foreign suppliers, could decrease profit margins or otherwise negatively affect our business.

•        Our costs would increase if we were to lose our membership in the purchasing co-operatives from which we receive monetary rebates.

•        Our operating results may vary significantly from quarter to quarter.

•        We face significant competition for qualified employees in our industry, and tight labor markets may make it difficult for us to control labor costs.

•        We must maintain, and have adequate working capital to fund the purchase of materials and to pay for the labor costs of installation before we receive payment from our customers. If we are unable to effectively manage our working capital as we attempt to expand our business, our financial performance could be negatively impacted.

11

•        We must adequately and quickly adapt our product offerings and installation services to changing customer preferences and building standards, and if we are unable to do so, we could lose market share to our competitors which could negatively impact our financial performance.

•        Compliance with employment laws and regulations, including immigration laws, and legal actions alleging employment violations or workplace injuries can be costly.

•        A portion of our workforce is unionized, and labor activities could disrupt our operations and decrease our profitability, especially if our workforce or the workforce of our suppliers becomes more unionized.

•        The nature of our business exposes us to personal injury, product liability, warranty, breach of contract, construction defect and other claims and government investigations, which may not be covered by our insurance and could harm our brand and adversely affect our operating results.

•        Claims may be made against our Founding Companies and other acquired businesses arising from their operations prior to the dates we acquired them.

•        Increasingly stringent environmental laws and regulations and liabilities associated with violations of these laws, including liabilities for hazardous or toxic substances located on our properties, may adversely affect our business, financial condition or results of operations.

Our Corporate Information

We are incorporated in Delaware, and our corporate offices are located at 6571 Las Positas Road, Livermore, CA 94551. Our telephone number is 415.298.1243. Our website is www.F5Finishes.com. None of the information on our website or any other website identified herein is part of this prospectus or the registration statement of which it forms a part.

12

The Offering

Common stock offered by us in this offering

 


[•] shares

Common stock to be outstanding after this offering

 


[•] shares

Option to purchase additional shares

 

We have granted the underwriters a 45-day option to purchase up to an additional [•] shares of our common stock at the public offering price, less underwriting discounts and commissions.

Use of proceeds

 

We estimate that our net proceeds from this offering after fees and expenses will be approximately $[•] million (or $[•] million if the underwriters exercise their option to purchase additional shares in full). We intend to use the net proceeds:

   

•   To pay the cash portion of the Combination Consideration payable to the Founding Companies upon closing of the Combinations, in the aggregate amount of approximately $15.7 million, subject to adjustment;

   

•   To repay the promissory notes in the aggregate principal amount of $2 million that we issued in connection with the bridge loans made by Business Ventures Corp. to F5 Finishes to cover expenses associated with this offering; and

   

•   While we have not allocated a specific amount of the approximately $ [•] of remaining net proceeds from this offering for any particular purpose, we may use such remaining net proceeds for the acquisitions of additional businesses, to pay holders of the promissory notes we issue in connection with the Combinations when they become due, and for general corporate purposes.

   

See “Use of Proceeds” and “Certain Relationships and Related Person Transactions — The Combinations with the Founding Companies.”

Risk factors

 

See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.

Proposed NASDAQ Capital Market symbol

 


We intend to apply to list our common stock on the NASDAQ Capital Market under the symbol “FLRZ.” The completion of this offering is conditioned on our common stock being approved for listing on the NASDAQ Capital Market.

Lockup Agreements

 

We, our founders (including the founders of our Founding Companies), executive officers and directors and certain existing stockholders have agreed, subject to limited exceptions, not to sell or transfer any common stock for one (1) year after the date of this prospectus without first obtaining the written consent of Maxim Group LLC. See “Underwriting — No Sales of Similar Securities”.

The number of shares of common stock to be outstanding after this offering is based on 1,500,000 shares of our common stock outstanding as of [•], 2019, the [•] shares of our common stock being offered in this offering and 2,665,962 shares of common stock issuable as part of the Combination Consideration to the shareholders and other equity holders of the Founding Companies (the “Founding Company Shareholders” or the “Shareholders”) for the purchase of all of the issued and outstanding equity of the Founding Companies and excludes as of such date:

•        Up to 232,000 shares of common stock issuable upon exercise of outstanding options granted to the four founders of F5 Finishes at an exercise price of approximately $0.002 per share;

13

•        1,450,000 shares of common stock reserved for future issuance under our 2019 stock plan; and

•        [•] shares of common stock issuable upon exercise of warrants to be issued to Maxim Group, LLC (the “Underwriter”), in connection with this offering (4.5% of the total number of shares being sold in the offering, and assuming the sale of [•] shares), at an exercise price per share equal to 125% of the public offering price, as described in the ‘‘Underwriting — Underwriter’s Warrants’’ section of this prospectus.

Unless we indicate otherwise, all share, per share and financial data set forth in this prospectus:

•        have been adjusted to give effect to the 500-for-1 common stock split, which will occur immediately prior to the closing of this offering;

•        have been adjusted to give effect to the Combinations; and

•        assume a public offering price of $[•] per share (the midpoint of the price range set forth on the cover page of this prospectus) and no exercise of the underwriters’ option to purchase additional shares of our common stock;

14

Summary Financial Data
(In thousands, except per share data)

The summary unaudited pro forma condensed combined financial data as of June 30, 2019 and for the six months ended June 30, 2019 and 2018 and for the year ended December 31, 2018 are derived from the unaudited pro forma condensed combined financial statements included elsewhere in this prospectus. The condensed combined financial information for the year ended December 31, 2017 represents the aggregated financial information of the Founding Companies. The unaudited pro forma condensed combined financial data gives effect to (a) the Combinations, (b) the 500-for-1 common stock split, which will occur immediately prior to the completion of this offering, and (c) the completion of this offering and the use of the proceeds therefrom. The pro forma adjustments are based on currently available information and certain estimates and assumptions, and, therefore, the actual effects of the offering and the Combinations reflected in the pro forma data may differ from the effects reflected below. However, management believes that the assumptions provide a reasonable basis for presenting the significant effects of the offering and Combinations as contemplated and that the pro forma adjustments give appropriate effect to those assumptions. During the periods presented, F5 Finishes and the Founding Companies were not under common control or management and, therefore, the data presented may not be comparable to, or indicative of, post-combination results.

The summary unaudited pro forma condensed combined financial data for the year ended December 31, 2017 is derived from an aggregation of the audited December 31, 2017 financial information of the Founding Companies included elsewhere in this prospectus. The unaudited pro forma condensed combined financial data for the year ended December 31, 2017 gives effect solely to the Combinations and does not include any pro forma adjustments. Although the Founding Companies were not under common control or management during this period, the Founding Companies are all in the same specialized industry and have common accounting policies and principles. We believe that this presentation provides a direct line item comparison of the summary financial information presented below for the years ended December 31, 2017 and 2018, except for the effect of certain adjustments to the 2018 unaudited pro forma financial data, as follows: $3,298,000 of amortization expense associated with the acquired intangible assets and $407,000 of interest expense related to promissory notes issued in connection with the Combinations.

You should review the information below together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the Unaudited Pro Forma Condensed Combined Financial Information and the related notes beginning on page F-1 of this prospectus, and the audited and unaudited interim financial statements of F5 Finishes, each Founding Company, and the related notes all included elsewhere in this prospectus.

15

F5 Finishes, Inc. — Unaudited Pro Forma Condensed Combined Financial Information

(In thousands, except per share data)

 

For the six months ended
June 30,

 

For the years ended
December 31,

Income statement

 

2019

 

2018

 

2018

 

2017

   

Pro Forma
(Unaudited)

 

Pro Forma
(Unaudited)

 

Pro Forma
(Unaudited)

 

Pro Forma
(Unaudited)

Revenues

 

$

53,742

 

 

$

54,009

 

 

$

111,297

 

 

$

105,602

 

Cost of revenues

 

 

38,571

 

 

 

39,624

 

 

 

81,394

 

 

 

76,872

 

Gross profit

 

 

15,171

 

 

 

14,385

 

 

 

29,903

 

 

 

28,730

 

Operating expenses

 

 

13,920

 

 

 

13,504

 

 

 

27,087

 

 

 

23,080

 

Operating income

 

 

1,251

 

 

 

881

 

 

 

2,816

 

 

 

5,650

 

Other expense

 

 

(244

)

 

 

(320

)

 

 

(722

)

 

 

(476

)

Income before provision for
income taxes

 

 

1,007

 

 

 

561

 

 

 

2,094

 

 

 

5,174

 

Provision for income taxes

 

 

(278

)

 

 

(154

)

 

 

(576

)

 

 

(220

)

Net income

 

$

729

 

 

$

407

 

 

$

1,518

 

 

$

4,954

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

[  ]

 

 

 

[  ]

 

 

 

[  ]

 

 

 

[  ]

 

Diluted

 

 

[  ]

 

 

 

[  ]

 

 

 

[  ]

 

 

 

[  ]

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

[  ]

 

 

 

[  ]

 

 

 

[  ]

 

 

 

[  ]

 

Diluted

 

 

[  ]

 

 

 

[  ]

 

 

 

[  ]

 

 

 

[  ]

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Key financial and operating metrics

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

28

%

 

 

27

%

 

 

27

%

 

 

27

%

Adjusted EBITDA margin

 

 

6

%

 

 

6

%

 

 

6

%

 

 

6

%

Operating margin

 

 

2

%

 

 

2

%

 

 

2

%

 

 

5

%

CAPEX

 

$

388

 

 

$

216

 

 

$

492

 

 

$

380

 

Summary Combined Balance sheet

 

As of
June 30,
2019

   

(Unaudited)

Total cash

 

$

22,231

Total current assets

 

$

52,795

Total assets

 

$

93,679

Total current liabilities including current portion of long term debt

 

$

20,844

Total long term obligations

 

$

7,039

Total liabilities

 

$

32,420

Total stockholders’ equity

 

$

61,259

Total liabilities and stockholders’ equity

 

$

93,679

Working capital

 

$

31,951

Use of Non-GAAP Financial Measurements

EBITDA consists of net income before interest, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA with increases or decreases in compensation paid to certain employees of the Founding Companies as a result of new compensation plans being put in place for the former owners of these businesses. Adjusted EBITDA is intended as a supplemental measure of our performance that is not required by, or presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). We believe that Adjusted EBITDA provides useful information to management and investors regarding certain financial and business trends relating to our financial condition and operating results.

16

We believe that the use of Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with other commercial flooring businesses, which may present similar non-GAAP financial measures to investors. We believe that Adjusted EBITDA is a useful measure because it normalizes operating results by excluding non-recurring gains, losses and other items and helps to demonstrate how much cash we are able to generate annually. In addition, you should be aware when evaluating Adjusted EBITDA that in the future we may incur expenses similar to those excluded when calculating these measures. Our presentation of these measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies do not calculate Adjusted EBITDA in the same fashion.

Our management does not consider EBITDA or Adjusted EBITDA in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitations of Adjusted EBITDA are that it excludes significant expenses and income that are required by GAAP to be recorded in our financial statements. Some of these limitations are:

a.      Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

b.      Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

c.      Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debts;

d.      although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;

e.      Adjusted EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and

g.      other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally. You should review the reconciliation of net income to EBITDA and Adjusted EBITDA below and not rely on any single financial measure to evaluate our business.

 

For the six months ended
June 30,

 

For the years ended
December 31,

Adjusted EBITDA

 

2019

 

2018

 

2018

 

2017

   

Pro Forma
(Unaudited)

 

Pro Forma
(Unaudited)

 

Pro Forma
(Unaudited)

 

Pro Forma (Unaudited)

GAAP net income

 

$

729

 

$

407

 

$

1,518

 

$

4,954

GAAP interest expense

 

 

399

 

 

445

 

 

878

 

 

661

GAAP depreciation and amortization expense

 

 

1,964

 

 

1,968

 

 

3,930

 

 

650

GAAP provision for income taxes

 

 

277

 

 

154

 

 

576

 

 

220

EBITDA

 

 

3,369

 

 

2,973

 

 

6,902

 

 

6,485

Compensation adjustment(a)

 

 

35

 

 

103

 

 

208

 

 

207

Adjusted EBITDA

 

$

3,404

 

$

3,076

 

$

7,110

 

$

6,692

____________

(a)      Represents the effects of the following: (i) adjustment to normalize all salaries of Founding Company executives to an annual base salary of $250,000 pursuant to employment agreements entered into as part of Combination Agreements; (ii) the elimination of expenses of a personal nature that were paid or reimbursed by Founding Companies on behalf of Founding Company executives that will not be paid or reimbursed by F5 Finishes following the combinations; and (iii) the elimination of other non-recurring income or expenses that will not be paid or reimbursed by F5 Finishes following the combinations. See Executive and Director Compensation — Employment Agreements and Change in Control Arrangements.

17

IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY AND A SMALLER
REPORTING COMPANY

We qualify as an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include, among other things:

•        a requirement to have only two years of audited financial statements and only two years of related selected financial data and management’s discussion and analysis of financial condition and results of operations disclosure;

•        an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”);

•        reduced disclosure about the emerging growth company’s executive compensation arrangements;

•        Deferral of complying with certain changes in accounting standards; and

•        no requirement to seek non-binding advisory votes on executive compensation or golden parachute arrangements.

The JOBS Act also permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. Currently, we are choosing to take advantage of this extended transition period. We may later choose to “opt out” of the extended transition period, with the result that we would then be required to comply with new or revised accounting standards as applicable to public companies. Any later decision to opt out of the extended transition period would be irrevocable.

We have elected to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of these elections, the information that we provide in this prospectus may be different from the information you may receive from other public companies in which you hold equity interests. In addition, it is possible that some investors will find our common stock less attractive as a result of our elections, which may result in a less active trading market for our common stock and more volatility in our stock price.

We may take advantage of these provisions until we are no longer an emerging growth company. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We may choose to take advantage of some but not all of the reduced disclosure requirements.

Additionally, we are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary shares held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, reduced disclosure obligations regarding executive compensation. Furthermore, as long as we are neither a “large accelerated filer” nor an “accelerated filer,” as a smaller reporting company, we would not be required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.

18

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this prospectus, including our consolidated financial statements and related notes included elsewhere in this prospectus, before making an investment decision. If any of the following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. In that event, the trading price of our common stock could decline, and you could lose part or all of your investment.

Risks Related to Our Business

We have no combined operating history, and there are risks associated with the proposed Combinations that could adversely affect the results of our operations.

F5 Finishes was founded in 2007 but has generated no revenues and conducted no operations to date, other than activities related to the acquisition of the Founding Companies and this offering. F5 Finishes has entered into agreements to combine with each of the Founding Companies simultaneously with, and as a condition to, the sale of the shares of common stock in this offering. However, the Founding Companies have operated independently of one another to date. There can be no assurance that we will be able to integrate the operations of the Founding Companies successfully or to institute the necessary systems and procedures, including accounting and financial reporting systems, to manage the combined enterprise on a profitable basis and to report the results of operations of the combined entities on a timely basis. In addition, there can be no assurance that our recently assembled management team will be able to successfully manage the combined entity and effectively implement our operating or growth strategies. The pro forma financial results of the Founding Companies cover periods during which they were not under common control or management and, therefore, may not be indicative of the combined entity’s future financial or operating results. Our success will depend on management’s ability to integrate the six companies we are combining concurrently with this offering and other companies we may acquire in the future into one organization. Our inability to successfully integrate the companies we acquire and to coordinate and integrate certain operational, administrative, financial and information technology systems would have a material adverse effect on our financial condition and results of operations.

Our business is dependent upon commercial construction, corporate remodeling and refurbishment activities, which are sensitive to prevailing economic conditions over which we have no control. A decline in commercial construction activity, corporate remodeling or refurbishment could have a material adverse effect on our business.

Our business has greater sales opportunities when construction activity is strong and, conversely, has fewer opportunities when such activity declines. Although the impact of a decline in new construction activity is typically accompanied by an increase in remodeling and refurbishment activity, these activities typically lag as well. The cyclical nature of the construction industry tends to be influenced by prevailing economic conditions. Such prevailing economic conditions are beyond our control and are affected by the following:

•        short- and long-term interest rates and inflation;

•        credit availability for commercial construction projects;

•        material costs;

•        energy prices;

•        employment levels;

•        office vacancy and absorption rates;

•        tax rates and tax policy;

•        trade relations and tariffs;

19

•        the state of the global economy;

•        demand for hotel space in a geographic area, changes in travel patterns, and the level of tourism and convention-related activity in general;

•        changes in the amount of funds budgeted for governmental projects;

•        changes in the magnitude of capital expenditures devoted to the construction of hospitals, hotels, retail establishments, educational institutions, banking facilities, offices and other facilities; and

•        federal, state and local energy efficiency programs, regulations, codes and standards.

Adverse changes in economic conditions may affect our business generally or may be more prevalent or concentrated in particular markets in which we operate or in which we may operate in the future. Any changes that result in significant or prolonged downturns in construction activity could have a material adverse effect on our financial condition, liquidity or results of operations. In addition, increasing volatility in financial and capital markets may cause some of the above factors to change with a greater degree of frequency and magnitude than in the past. The American Institute of Architecture’s August 2019 Architecture Billings Index (ABI), a monthly economic indicator that leads nonresidential construction activity by approximately 9 to 12 months, was at 47.2 (a score over 50 indicates billings growth), representing its 11th time below 50 over the past 85 months. Until March of 2019, the BD had been above the growth threshold of 50 for 25 consecutive months. Architecture firm billings have either declined or been flat since February 2019, the longest period of such softness since 2012.

Our failure to accurately estimate project costs or successfully execute a project could result in reduced profits or losses that could adversely affect our business, financial condition, results of operations and cash flows.

We currently generate a portion of our revenues under fixed price contracts, and we expect to continue generating varying amounts of revenues under these types of contracts on various projects. Under these contracts, we assume risks related to project estimates and execution, and project revenues, profitability and costs can vary, sometimes substantially, from our original projections due to a variety of factors, including, without limitation:

•        unforeseen circumstances or project modifications not included in our cost estimates or covered by our contract for which we cannot obtain adequate compensation, including concealed or unknown environmental, geological or geographical conditions;

•        failure to accurately estimate project costs or accurately establish the scope of our services covered by the project contract;

•        unanticipated technical problems, such as uneven floors, the discovery of latent damage or issues with moisture;

•        inability to achieve guaranteed performance or quality standards with regard to engineering, construction or project management obligations;

•        failure to properly make judgments in accordance with applicable professional standards, including floor flatness, floor hardness and floor moisture content standards;

•        changes in the cost of equipment, commodities, materials or labor;

•        unanticipated costs or claims due to delays or failure to perform by customers, subcontractors, suppliers or other third parties;

•        contract termination or suspension and our inability to obtain reimbursement;

•        delays and additional costs associated with obtaining required permits or approvals; and

•        quality issues, including those requiring rework or replacement

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These factors and events may result in reputational harm or cause actual revenues and gross profits for a project to differ from what we originally estimated, resulting in reduced profitability or losses on projects. Such differences could be material and could have a significant impact on our business, financial condition, results of operations and cash flows.

Our industry is highly fragmented and competitive, and increased competitive pressure may adversely affect our business, financial condition, results of operations and cash flows.

The commercial flooring sales, installation and maintenance contracting industry is highly fragmented and competitive, and the barriers to entry are relatively low. We face significant competition from other national, regional and local companies. Currently, most of our competitors are other local businesses. Our largest single competitor is Spectra Contract Flooring, a Berkshire Hathaway company with more than 30 locations and the largest commercial flooring contractor in the United States, with which we presently compete in our Southern California and Tampa Florida markets. Other significant companies in our industry with which we do not presently compete because they are not operating in the same geographic areas as any of our Founding Companies, but with which we may compete in the future as we expand the geographic scope of our operations, include Bonitz, Inc., the largest regional commercial flooring contractor in the southeastern United States, and Mr. David’s Flooring International, LLC, a large commercial flooring contractor in the Chicago area with additional locations in the Midwest and Florida. Any of these competitors and other present and future competitors may (i) foresee the course of market development more accurately than we do, (ii) offer services that are deemed superior to ours, (iii) provide flooring products and services at a lower cost, including without limitation, the installation and maintenance of flooring products, (iv) develop stronger relationships with commercial builders and landlords, (v) adapt more quickly to new technologies, new installation techniques or evolving customer requirements, (vi) have more favorable contracts or arrangements with suppliers, or (vii) have access to financing on more favorable terms than we can obtain in the market. As a result, we may not be able to compete successfully with them. If we are unable to compete effectively, our business, financial condition, results of operations and cash flows may be adversely affected.

If our efforts to locate desirable targets in the business of commercial flooring and installation are unsuccessful or if we are unable to acquire desirable companies on commercially reasonable terms, our revenues and profits will be adversely affected.

Following this offering, one of our principal growth strategies will be to increase our revenue through the acquisition of additional businesses within our industry, particularly since there is no assurance that the operations of our Founding Companies alone will be sufficiently profitable to meet our expectations. We may face competition in our pursuit to acquire additional businesses, which could limit the number of available companies for sale and may lead to higher acquisition prices. When we identify desirable companies, their owners may not be willing to sell their companies at all or on terms that we have determined to be commercially reasonable. If our efforts to locate and acquire desirable companies are not successful, our revenues and profits may be adversely affected.

Our ability to acquire additional businesses may require issuances of our common stock and/or debt financing that we are unable to obtain on acceptable terms.

Following this offering, the timing, size and success of our acquisition efforts and the associated capital commitments cannot be readily predicted. We intend to use our common stock, cash, and borrowings under the credit facility we intend to enter into concurrently with this offering, if necessary, as consideration for future acquisitions of companies. The issuance of additional common stock in connection with future acquisitions may be dilutive to holders of shares of common stock issued in this offering. In addition, if our common stock does not maintain a sufficient market value or potential acquisition candidates are unwilling to accept common stock as part of the consideration for the sale of their businesses, we may be required to utilize more of our cash resources, including obtaining additional capital through debt financing. However, there can be no assurance that we will be able to obtain financing if and when it is needed or that it will be available on terms that we deem acceptable. As a result, we may be unable to pursue our acquisition strategy successfully, which may prevent us from achieving our growth objectives.

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We may not be able to successfully integrate future acquisitions or generate sufficient revenues from future acquisitions, which could cause our business to suffer.

If we buy a company or a division of a company, there can be no assurance that we will be able to profitably manage such business or successfully integrate such business without substantial costs, delays or other operational or financial problems. There can be no assurance that the businesses we acquire in the future will achieve anticipated revenues and earnings. Additionally:

•        the key personnel of the acquired business may decide not to work for us;

•        changes in management at an acquired business may impair its relationships with employees and customers;

•        we may be unable to maintain uniform standards, controls, procedures and policies among acquired businesses;

•        we may be unable to successfully implement infrastructure, logistics and systems integration;

•        we may be held liable for legal claims (including environmental claims) arising out of activities of the acquired businesses prior to our acquisitions, some of which we may not have discovered during our due diligence, and we may not have indemnification claims available to us or we may not be able to realize on any indemnification claims with respect to those legal claims;

•        we will assume risks associated with deficiencies in the internal controls of acquired businesses;

•        we may not be able to realize the cost savings or other financial benefits we anticipated; and

•        our ongoing business may be disrupted or receive insufficient management attention.

Some or all of these factors could have a material adverse effect on our business, financial condition and results of operations.

If we are not able to manage our internal growth, the results of our operations will be adversely affected.

We will attempt to increase our revenues through internal growth as well as through acquisitions. There can be no assurance that our systems, procedures and controls will be adequate to support our operations as they expand. For example, the ability to internally communicate, coordinate and execute business strategies, plans and tactics may be negatively impacted by our increasing size and complexity. A decentralized structure places significant control and decision-making powers in the hands of our operating unit management. This contributes to the risk that we may be slower or less able to identify or react to problems affecting key business matters than we would in a more centralized environment. The lack of timely access to information may impact the quality of decision making by management. Our decentralized organization creates the possibility that our operating subsidiaries assume excessive risk without appropriate guidance from our centralized legal, accounting, tax, treasury and insurance functions as to the potential overall impact. Any future growth will also impose significant additional responsibilities on members of senior management. Furthermore, as we grow, our ability to increase productivity and profitability will be limited by our ability to employ, train and retain skilled personnel to provide services to our customers. There can be no assurance that we will be able to maintain an adequate skilled labor force necessary to operate efficiently or that our labor expenses will not increase as a result of a shortage in the supply of skilled personnel. To the extent that we are unable to manage our growth efficiently and effectively, or are unable to attract and retain skilled personnel, our financial condition and results of operations could be materially adversely affected.

We depend upon the services of our management team.

Our success depends, in part, upon the continuing contributions of our executives and other key employees. This includes, in part, continuing efforts from many of the executives and other key employees of the Founding Companies, whose reputations and client relationships have contributed significantly to the success of those companies. Although we have employment and noncompetition agreements with certain of our executives, there is no guarantee that they will remain with us. The loss of the services of any of our executives or other key employees, or our failure to attract other executive officers or managers, could have a material adverse effect on our business or our business prospects. If we lose the services of any of our executives or other key employees at the operating or regional level, we may not be able to replace them with similarly qualified personnel, which could harm our business.

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Product shortages or the loss of key suppliers could reduce our competitiveness, slow our plans for expansion, adversely affect net sales and operating results and damage our relationships with customers.

We purchase flooring and related products directly from manufacturers and other suppliers located around the world. While we do not believe we depend on any sole or limited source of supply, we do source the majority of our flooring products from a limited number of large suppliers. We generally do not have long-term contractual supply agreements with our suppliers that obligate them to supply us with products exclusively or at specified quantities or prices. As a result, our current suppliers may decide to sell products to our competitors and may not continue selling products to us. In order to retain the competitive advantage that we believe results from these relationships, we need to continue to identify, develop and maintain relationships with qualified suppliers that can satisfy our high standards for quality and safety and our requirements for delivery of flooring and related products in a timely and efficient manner at attractive prices. The need to develop new relationships will be particularly important as we seek to expand our operations and enhance our product offerings in the future. The loss of a large supplier, or a substantial decrease in the availability of products or components from our suppliers, could disrupt our business and adversely affect our operations, revenues, and profits. The loss of one or more of our existing suppliers or our inability to develop relationships with new suppliers could reduce our competitiveness, slow our plans for further expansion and cause our net sales and operating results to be adversely affected. Availability of materials can change for a number of additional reasons, including environmental conditions, laws and regulations, shifts in demand by other industries competing for the same materials, new tariffs, changes in trade policy, transportation disruptions and/or business decisions made by, or events that affect, our suppliers. There is no assurance that materials will remain in adequate supply to us. Our inability to source materials in a timely manner could also damage our relationships with our customers.

The failure of our suppliers to adhere to the quality standards that we set for our products could lead to investigations, litigation, write-offs, recalls or boycotts of our products, which could damage our reputation and our brand, increase our costs, and otherwise adversely affect our business.

We do not control the operations of our manufacturers and other suppliers and cannot guarantee that our suppliers will comply with applicable laws and regulations (including laws and regulations relating to “conflict minerals” due diligence and reporting under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010) or operate in a legal, ethical and responsible manner. Violation of applicable laws, rules and regulations by our suppliers or their failure to operate in a legal, ethical or responsible manner, could expose us to legal risks, cause us to violate laws and regulations and reduce demand for our products if, as a result of such violation or failure, we attract negative publicity. In addition, the failure of our suppliers to adhere to the quality standards that we set for our products could lead to government investigations, litigation, write-offs and recalls, which could damage our reputation and our brand, increase our costs, and otherwise adversely affect our business.

We procure approximately 30% (including 5% from China) of our products from manufacturers and other suppliers located outside of the United States, and as a result, we are subject to risks associated with obtaining products from abroad that could adversely affect our business, financial condition and results of operations.

We procure some of our products from manufacturers and other suppliers located outside of the United States. As a result, we are subject to risks associated with obtaining products from abroad, including:

•        political unrest, acts of war, terrorism, trade wars and economic instability resulting in the disruption of trade from foreign countries where our products originate;

•        currency exchange fluctuations;

•        the imposition of new or more stringent laws and regulations, including those relating to environmental, health and safety matters and climate change issues, labor conditions, quality and safety standards, trade restrictions and restrictions on funds transfers;

•        the imposition of new or different duties (including antidumping and countervailing duties), tariffs, taxes and/or other charges on exports or imports, including as a result of errors in the classification of products upon entry or changes in the interpretation or application of rates or regulations relating to the import or export of our products;

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•        the risk that one or more of our suppliers will not adhere to applicable legal requirements, including fair labor standards, the prohibition on child labor, environmental, product safety or manufacturing safety standards, anti-bribery and anti-kickback laws such as the Foreign Corrupt Practices Act (the “FCPA”) and sourcing laws such as the Lacey Act;

•        disruptions or delays in production, shipments, delivery or processing through ports of entry (including those resulting from strikes, lockouts, work stoppages or slowdowns, or other forms of labor unrest);

•        changes in local economic conditions in countries where our suppliers are located; and

•        differences in product standards, acceptable business practice and legal environments.

These and other factors beyond our control could disrupt the ability of our suppliers to ship certain products to us cost effectively or at all, expose us to significant operational and legal risk and negatively affect our reputation, any of which could adversely affect our business, financial condition and results of operations.

Disruptions in our supply chain and other factors affecting the distribution of our inventory could adversely impact our business.

A disruption within our logistics or supply chain network could adversely affect our ability to deliver inventory in a timely manner, which could impair our ability to meet customer demand for products and result in lost sales, increased supply chain costs, or damage to our reputation. Such disruptions may result from damage or destruction to warehouses; weather-related events; natural disasters; trade policy changes or restrictions; tariffs or import-related taxes; third-party strikes, lock-outs, work stoppages or slowdowns; shipping capacity constraints; third-party contract disputes; supply or shipping interruptions or costs; military conflicts; acts of terrorism; or other factors beyond our control. Any such disruption could negatively impact our financial performance or financial condition.

Changes in the costs of our flooring products can decrease our profit margins.

The wholesale prices for the flooring products that we sell and materials that we use in providing installation services have been subject to fluctuations in the past, some of which have been significant, and will continue to be subject to such fluctuations. These prices may fluctuate based on a number of factors beyond our control, including the price of raw materials used in the manufacture of flooring, energy costs, changes in supply and demand, concerns about inflation, general economic conditions, labor costs, competition, import duties, tariffs, currency exchange rates, government regulation, the impact of natural disasters (including those due to the effects of climate change), duty and other import costs. In particular, energy costs have fluctuated dramatically in the past and may fluctuate in the future. These fluctuations may result in an increase in our transportation costs for distribution from the manufacturer to our warehouses, showrooms and customers, utility costs for our facilities and overall costs to purchase products from our suppliers.

Our results of operations for individual quarters can be and have been hurt by a delay between the time product cost increases are implemented and the time we are able to increase prices for our products and installation services. Furthermore, we may not be able to adjust the prices of our products, especially in the short-term to recover these cost increases.

If we were to lose membership in the purchasing co-ops in which we participate, our costs would increase.

Each of our Founding Companies are members of one of two purchasing co-ops, Starnet Worldwide Commercial Flooring Partnership and Fuse Commercial Flooring Alliance. These co-ops provide monetary rebates to the Founding Companies based on materials purchased through the co-ops. If the Founding Companies or any companies that we acquire (assuming such companies are members) lose their membership in the co-ops or if the co-ops go out of business, the loss of such rebates would increase our costs and could adversely affect our revenue.

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Our operating results may vary significantly from quarter to quarter.

Our business is subject to seasonal and other variations for Founding Companies located in harsher climates that can result in significant differences in operating results from quarter to quarter. For example, we typically experience lower gross and operating margins during winter months due to lower demand for our services and more difficult operating conditions. Additionally, our quarterly results may be materially and/or adversely affected by:

•        the timing and volume of work we perform and our performance with respect to ongoing projects;

•        project delays, reductions in scope or cancellations, including as a result of permitting, regulatory or environmental processes, project performance, customer capital constraints, claimed force majeure events, protests or other political activity, or legal challenges;

•        adverse weather conditions and significant weather events;

•        variations in the size, scope and margins of projects we perform and the mix of our customers, contracts and business during any particular quarter;

•        the magnitude of work performed under change orders and the timing of their recognition;

•        disputes with customers or delays relating to billing and payment under our contracts and change orders, and our ability to successfully negotiate and obtain payment or reimbursement under our contracts and change orders;

•        changes in accounting pronouncements that require us to account for items differently;

•        the recognition of tax impacts related to changes in tax laws or uncertain tax positions;

•        the timing and magnitude of costs we incur to support growth internally or through acquisitions or otherwise;

•        the timing and integration of acquisitions and the magnitude of the related acquisition and integration costs; and

•        estimates and assumptions in determining our financial results, remaining performance obligations and backlog, including the timing and significance of impairments of long-lived assets, equity or other investments, receivables, goodwill or other intangible assets.

U.S. policies related to global trade and tariffs could adversely affect our business, financial condition and results of operations.

The current domestic and international political environment, including existing and potential changes to U.S. policies related to global trade and tariffs, have resulted in uncertainty surrounding the future state of the global economy. We import approximately 30% of the products we sell from foreign suppliers (including approximately 5% from China), which could be impacted by these tariffs. Potential costs and any attendant impact on pricing arising from these tariffs and any further expansion in the types or levels of tariffs implemented could require us to modify our current business practices and could adversely affect our business, financial condition and results of operations.

Our performance is dependent on our ability to attract, train and retain qualified employees while controlling labor costs.

The labor market for our industry is very competitive. We must attract, train and retain a large number of qualified employees, including sales representatives, branch managers, installers, and truck drivers, while controlling related labor costs. We face significant competition for these employees. Tighter labor markets may make it even more difficult for us to hire and retain employees and control labor costs. In particular, in a tight labor market, we compete with other companies to recruit and retain qualified installers and truck drivers, which positions have high turnover rates. Difficulty obtaining needed labor at the required times can impact the timing and completion of projects or inhibit our ability to grow our revenue. Our ability to attract qualified employees and control labor costs is subject to numerous external factors, including competitive wage rates and health and other insurance and benefit costs. A

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significant increase in competition, minimum wage or overtime rates in localities where we have employees could have a significant impact on our operating costs, which can affect our profit margins. Also, high turnover rates can lead to increased training costs. If we are not able to maintain a sufficient workforce and attract additional personnel as required, we may not be able to implement our business plan and our results of operations could be materially and adversely affected.

Our operating results may be adversely affected if we are not successful in managing our working capital.

We must maintain, and have adequate working capital to fund the purchase of materials and to pay for the labor costs of installation before we receive payment from our customers.  Our investment in our ongoing work-in-process is substantial, and efficient and timely billing is an important component of our business strategy and working capital management process.  We must manage our working capital to fund our materials purchases. If we are unable to effectively manage our working capital as we attempt to expand our business, our cash flows may be negatively affected, which could have a material adverse effect on our business, financial condition and operating results.

Failure to adapt to changes in building codes and commercial consumer preferences could lead to less demand for our products, resulting in reduced net sales.

Our business is impacted by local and state building codes and commercial consumer preferences, including a growing focus on energy efficiency. Our competitive advantage is due, in part, to our ability to respond to changes in these commercial consumer preferences and building codes. However, if our product offerings and installation services do not adequately or quickly adapt to changing preferences and building standards, we may lose market share to competitors, which could reduce net sales.

Compliance with employment laws and regulations and legal actions alleging employment violations or workplace injuries can be costly, which may adversely affect our business and financial performance.

We are subject to federal, state and local employment laws and regulations, including the U.S. Occupational Safety and Health Act, the U.S. Fair Labor Standards Act, and the Immigration Reform and Control Act. These laws and regulations govern such matters as wage and hour requirements, workers’ compensation insurance, unemployment and other taxes, working and safety conditions, and citizenship and immigration status. Compliance with these laws can be costly, and a failure or perceived failure to comply with these laws could result in negative publicity that could harm our reputation.

We may be subject to lawsuits from our employees, alleging violations of federal and state laws regarding workplace and employment matters, discrimination and similar matters, and we have been party to such matters in the past. Our warehouses and flooring installation services involve the operation of forklifts and other machinery and the storage and movement of heavy merchandise, all of which are activities that have the inherent danger of injury or death to employees despite safety precautions, training and compliance with federal, state and local health and safety regulations. Our employees are also at risk for other workplace-related injuries, including slips and falls, and our installers may be exposed to hazardous or toxic materials. While we have insurance coverage in place in addition to policies and procedures designed to minimize these risks, we may nonetheless be unable to avoid material liabilities for an injury or death arising out of job-related hazards. In light of the potential cost and uncertainty involved in litigation, we may settle matters even when we believe we have a meritorious defense. Litigation and its related costs may have a material adverse effect on our business, financial condition or results of operations.

Our business could be adversely affected by changes in immigration laws or failure to properly verify the employment eligibility of our employees.

Some states in which we operate are considering or have already adopted new immigration laws or enforcement programs, and the federal government from time to time considers and implements changes to federal immigration laws, regulations or enforcement programs. These changes may increase our compliance and oversight obligations, which could subject us to additional costs and make our hiring process more cumbersome, or reduce the availability of potential employees. Although we verify the employment eligibility status of all our employees, including through participation in the “E-Verify” program in the states that require it, some of our employees may, without our knowledge, be unauthorized workers. In addition, use of the “E-Verify” program does not guarantee that we will properly identify all applicants who are ineligible for employment. Unauthorized workers are subject to deportation and may subject us

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to fines or penalties, and if any of our workers are found to be unauthorized, we could experience adverse publicity that negatively impacts our brand and may make it more difficult to hire and retain qualified employees. Termination of a significant number of employees due to work authorization or other regulatory issues may disrupt our operations, cause temporary increases in our labor costs as we train new employees and result in additional adverse publicity. We could also become subject to fines, penalties and other costs related to claims that we did not fully comply with all recordkeeping obligations of federal and state immigration laws. These factors could have a material adverse effect on our reputation, business, financial condition and results of operations.

Furthermore, immigration laws have been an area of considerable political focus in recent years, and the U.S. Congress, Department of Homeland Security and the Executive Branch of the U.S. government from time to time consider or implement changes to federal immigration laws, regulations or enforcement programs. Changes in immigration or work authorization laws may increase our obligations for compliance and oversight, which could subject us to additional costs and potential liability and make our hiring process more cumbersome, or reduce the availability of potential employees. We are subject to regulations of U.S. Immigration and Customs Enforcement, or ICE, and Department of Labor, and we are audited from time to time by these parties for compliance with work authentication requirements. While we believe we are in compliance with applicable laws and regulations, if we are found not to be in compliance as a result of any audits, we may be subject to fines or other remedial actions.

A portion of our workforce is unionized, and labor activities could disrupt our operations and decrease our profitability, especially if our workforce or the workforce of our suppliers becomes more unionized.

Certain of our field employees (less than 30%) are currently covered by collective bargaining or other similar labor agreements. If these employees were to engage in labor activities, this could disrupt our operations. If a larger number of our employees were to unionize, including in the wake of any future legislation that makes it easier for employees to unionize, our business could be negatively affected. Any inability by us to negotiate collective bargaining arrangements (either to replace expiring agreements or new agreements) could cause strikes or other work stoppages, and newly negotiated contracts could result in increased operating costs. If any such strikes or other work stoppages occur, or if other employees become represented by a union, we could experience a disruption of our operations and higher labor costs.

In addition, while our suppliers typically have non-unionized work forces, if a larger number of their work forces were to unionize in the future, this could result in strikes, work stoppages or slowdowns, which could cause slowdowns or closures of facilities where components of the products that we install are manufactured or could affect the ability of our suppliers to deliver such products to us. Any interruption in the production or delivery of these products could delay or reduce availability of these products and increase our costs.

All of our unionized employees are employed by DSB+. While we do not believe that any of our collective bargaining agreements would require collective bargaining at our current or future non-union locations, there is a risk that our structure could be challenged, and an adverse claim or judgment resulting from such a challenge could have a material adverse effect on our operations.

The nature of our business exposes us to personal injury, product liability, workmanship warranty, breach of contract, construction defect and other claims and governmental investigations, which could result in negative publicity, harm our brand and adversely affect our business, financial condition and operating results.

We face an inherent risk of exposure to personal injury, product liability, workmanship warranty, breach of contract, construction defect and other claims or governmental investigations in the event that the use of our products is alleged to have resulted in economic loss, personal injury or property damage or violated environmental or other laws. For instance, companies in the flooring industry have been the subject of regulatory action and claims related to formaldehyde in laminate flooring.

We rely on manufacturers and other suppliers to provide us with products and do not have direct control over the quality of the products provided to us. As such, we are exposed to risks relating to the quality of such products. Statutes of limitation on lawsuits relating to construction defects can run as long as ten years. Any personal injury, product liability or other claims made against us, whether or not they have merit, or governmental investigation related to our products, could be time consuming and costly to defend or respond to, may not be covered by insurance carried by us, could result in negative publicity, could harm our brand and could adversely affect our business, financial condition and operating results. Furthermore, product liability or other claims made against our suppliers or other flooring companies, and any resulting negative publicity, may harm our reputation and affect the demand for our products.

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We also generally provide a warranty against defects in workmanship for a period of one year.  If warranty claims are significant, this could have a material adverse effect on us by, among other things, requiring additional expenditures for products and personnel, as well as damaging our reputation and goodwill.

We may be subject to claims arising from the operations of our various businesses for periods prior to the dates we acquired them.

We may be subject to claims or liabilities arising from the ownership or operation of acquired businesses for the periods prior to our acquisition of them, including environmental, warranty, workers’ compensation and other employee-related and other liabilities and claims not covered by insurance. These claims or liabilities could be significant. Our ability to seek indemnification from the former owners of our acquired businesses for these claims or liabilities may be limited by various factors, including the specific time, monetary or other limitations contained in the respective acquisition agreements and the financial ability of the former owners to satisfy our indemnification claims. In addition, insurance companies may be unwilling to cover claims that have arisen from acquired businesses or locations, or claims may exceed the coverage limits that our acquired businesses had in effect prior to the date of acquisition. If we are unable to successfully obtain insurance coverage of third-party claims or enforce our indemnification rights against the former owners, or if the former owners are unable to satisfy their obligations for any reason, including because of their current financial position, we could be held liable for the costs or obligations associated with such claims or liabilities, which could adversely affect our financial condition and results of operations.

We are from time to time engaged in various legal actions, claims and proceedings arising in the ordinary course of business and, while we cannot predict the outcomes of such proceedings and other contingencies with certainty, this litigation and any potential future litigation could have an adverse impact on us.

We are, from time to time, engaged in various legal actions, claims and proceedings arising in the ordinary course of business, including claims related to breach of contract, product liabilities, intellectual property matters and employment related matters resulting from our business activities. As with most actions such as these, an estimate of any possible and/or ultimate liability cannot always be determined. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors. Additionally, we cannot guarantee that we will not become engaged in additional legal actions, claims, proceedings or governmental investigations in the future. Any such action could result in negative publicity, harm to our reputation and adversely affect our business, financial condition and operating results.

We are subject to environmental and health and safety regulations and potential exposure to environmental liabilities.

Certain portions of our operations are subject to laws and regulations governing the environmental protection of natural resources and health and safety, including formaldehyde emissions and the use, storage, handling, generation, transportation, treatment, emission, release, discharge and disposal of certain hazardous or toxic materials and wastes. In addition, certain of our products are subject to laws and regulations relating to the importation, exportation, acquisition or sale of certain plants and plant products, including those that have been illegally harvested, and the emissions of hazardous or toxic materials.

We operate our business in accordance with standards and procedures designed to comply with the applicable laws and regulations in these areas and work closely with our suppliers in order to comply with such laws and regulations. If we violate or are alleged to have violated these laws, we could incur significant costs, be liable for damages, experience delays in shipments of our products, be subject to fines, penalties, criminal charges or other legal risks, or suffer reputational harm. In addition, as owners and lessees of real property, we may be held liable for, among other things, hazardous or toxic substances on, at, under or emanating from currently or formerly owned or operated properties, or any off-site disposal locations, or for any known or newly discovered environmental conditions at or relating to any of our properties, including those arising from activities conducted by previous occupants or at adjoining properties, without regard to whether we knew of or were responsible for such release. We also may be required to investigate, remove, remediate or monitor the presence or release of hazardous or toxic substances. Any of these outcomes could reduce demand for our products and adversely affect our business, financial condition and operating results. In addition, there can be no assurance that such laws or regulations will not become more stringent in the future or that we will not incur additional costs in the future in order to comply with such laws or regulations.

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Transportation regulations could impose substantial costs and/or restrictions on our operations that would reduce our net income.

Our transportation operations, upon which we depend to transport materials from our locations to job sites, are subject to the regulatory jurisdiction of the U.S. Department of Transportation, or DOT. The DOT has broad administrative powers with respect to our transportation operations. More restrictive limitations on vehicle weight and size, trailer length and configuration or driver hours of service would increase our costs, which, if we are unable to pass these cost increases on to our customers, may increase our selling and administrative expenses and adversely affect our financial condition, operating results and cash flows. If we fail to comply adequately with DOT regulations or regulations become more stringent, we could experience increased inspections, regulatory authorities could take remedial action including imposing fines or shutting down our operations and we could be subject to increased audit and compliance costs.

Our results of operations could be adversely affected as a result of asset impairments.

Our results of operations and financial condition could be adversely affected by impairments to goodwill, other intangible assets, receivables, long-lived assets or investments. For example, when we acquire a business, we record goodwill in an amount equal to the amount we paid for the business minus the fair value of the net tangible assets and other identifiable intangible assets of the acquired business. Goodwill and other intangible assets that have indefinite useful lives cannot be amortized, but instead must be tested at least annually for impairment. For additional description on this impairment testing, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies”. Any future impairments, including impairments of goodwill, intangible assets, long-lived assets or investments, could have a material adverse effect on our financial condition and results of operations for the period in which the impairment is recognized.

We may be required to contribute cash to meet our underfunded obligations in certain multiemployer pension plans.

Our collective bargaining agreements generally require us to participate with other companies in multiemployer pension plans. To the extent those plans are underfunded, the Employee Retirement Income Security Act of 1974, as amended by the Multiemployer Pension Plan Amendments Act of 1980, may subject us to substantial liabilities under those plans if we withdraw from them or they are terminated or experience a mass withdrawal.

In addition, the Pension Protection Act of 2006, as amended, added special funding and operational rules generally applicable to plan years beginning after 2007 for multiemployer plans that are classified as “endangered,” “seriously endangered” or “critical” status based on multiple factors (including, for example, the plan’s funded percentage, cash flow position and whether it is projected to experience a minimum funding deficiency). Plans in these classifications must adopt measures to improve their funded status through a funding improvement or rehabilitation plan, as applicable, which may require additional contributions from employers (which may take the form of a surcharge on benefit contributions) and/or modifications to retiree benefits. Certain plans to which we contribute or may contribute in the future are in “endangered,” “seriously endangered” or “critical” status. The amount of additional funds, if any, that we may be obligated to contribute to these plans in the future cannot be estimated due to uncertainty of the future levels of work that require the specific use of union employees covered by these plans, as well as the future contribution levels and possible surcharges on contributions applicable to these plans. See Note 10 of the accompanying notes to F5 Finishes’ consolidated financial statements included elsewhere in the prospectus for a further description of the funding status of these plans.

F5 Finishes is a holding company and conducts all of our operations through our subsidiaries.

F5 Finishes is a holding company, and all of our operating assets are held by our subsidiaries. We derive all of our operating income from our subsidiaries. We will rely on the earnings and cash flows of our subsidiaries, which are paid to us by our subsidiaries in the form of dividends and other payments or distributions, to meet our debt service and other obligations, and to pay dividends on our common stock (which we do not intend to do in any case in the foreseeable future, as addressed elsewhere in these risk factors). The ability of our subsidiaries to pay dividends or make other payments or distributions to us will depend on their respective operating results and may be restricted by, among other things, the laws of their jurisdiction of organization (which may limit the amount of funds available

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for the payment of dividends and other distributions to us), the terms of existing and future indebtedness and other agreements of our subsidiaries and the covenants of any future outstanding indebtedness that our subsidiaries incur.

We are at times required to obtain performance bonds and licensing bonds, the unavailability of which could adversely affect our business, financial condition, results of operations and/or cash flows.

We are at times required to obtain performance bonds and licensing bonds to secure our performance under certain contracts and other arrangements. In addition, the commercial construction end market also requires higher levels of performance bonding.

Our ability to obtain performance bonds and licensing bonds primarily depends on our credit rating, capitalization, working capital, past performance, management expertise and certain external factors, including the overall capacity of the surety market and the underwriting practices of surety bond issuers. The ability to obtain performance bonds and licensing bonds can also be impacted by the willingness of insurance companies to issue performance bonds and licensing bonds. If we are unable to obtain performance bonds and licensing bonds when required, our business, financial condition, results of operations and/or cash flows could be adversely impacted.

We may be adversely affected by disruptions in our information technology systems caused by, among other things, our initial reliance on the legacy information technology systems of our Founding Companies and our transition to an integrated technology platform.

Our operations are dependent upon our information technology systems, which we rely upon to manage customer orders on a timely basis, to coordinate our sales and installation activities across all of our locations and to manage invoicing. Our existing information technology systems, including financial software systems for financial and budget reporting, general ledger accounting, accounts payable, payroll and fixed assets, are not integrated across our Founding Companies. We intend to adopt an integrated technology platform as soon as practicable following this offering. Until we transition to an integrated technology platform, we will continue to rely upon the legacy information technology systems of each of our Founding Companies, which may be unable to provide adequate support for our needs. This may delay our ability to achieve operating efficiencies or otherwise realize cost savings as a result of anticipated acquisition synergies. The process of transitioning to an integrated technology platform may result in operational disruptions and resource constraints. A substantial disruption in our information technology systems for any prolonged time period arising from this transition and from other causes (for example, system capacity limits from unexpected increases in our volume of business, outages, computer viruses, unauthorized access or delays in our service) could result in delays in receiving customer orders and inventory and supplies, placing orders with suppliers and scheduling production, or installing our products on a timely basis for our customers, which could adversely affect our reputation and customer relationships. In addition, our systems might be damaged or interrupted by natural or man-made events or by computer viruses, physical or electronic break-ins, or similar disruptions affecting the Internet. Such disruptions, delays, problems or costs could have a material adverse effect on our financial condition, results of operations and cash flows.

In the event of a cybersecurity incident, we could experience operational interruptions, incur substantial additional costs, become subject to legal or regulatory proceedings or suffer damage to our reputation.

In addition to the disruptions that may occur from interruptions in our information technology systems, cybersecurity threats and sophisticated and targeted cyberattacks pose a risk to our information technology systems. We intend to implement security policies, processes and defenses designed to help identify and protect against intentional and unintentional misappropriation or corruption of our information technology systems and disruption of our operations. Until such time as we implement such policies, processes and defenses, there is a heightened risk of security breaches. Even after implementation of such protective measures, our information technology systems may be damaged, disrupted or shut down due to attacks by unauthorized access, malicious software, computer viruses, undetected intrusion, hardware failures or other events, and in these circumstances our disaster recovery plans may be ineffective or inadequate. These breaches or intrusions could lead to business interruption, exposure of proprietary or confidential information, data corruption, damage to our reputation, exposure to legal and regulatory proceedings and other costs. Such events could have a material adverse impact on our financial condition, results of operations and cash flows. In addition, we could be adversely affected if any of our significant customers or suppliers experiences any similar events that disrupt their business operations or damage their reputation.

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We intend to implement monitoring practices and protections of our information technology to reduce these risks and test our systems on an ongoing basis for potential threats, but until these practices and protections are implemented, we face a heightened risk of exposure to such threats. We will carry cybersecurity insurance to help mitigate the financial exposure and related notification procedures in the event of intentional intrusion. There can be no assurance, however, that our efforts will prevent the risk of a security breach of our databases or systems that could adversely affect our business.

Restrictions in our new credit facility, or any other indebtedness we may incur in the future, could adversely affect our business, financial condition, results of operations, ability to make distributions to stockholders and the value of our common stock.

We intend to enter into a new credit facility concurrently with the completion of this offering. Our new credit facility, or any future credit facility or other indebtedness we enter into, may limit our ability to, among other things:

•        incur or guarantee additional debt;

•        make distributions or dividends on or redeem or repurchase shares of common stock;

•        make certain investments and acquisitions;

•        make capital expenditures;

•        incur certain liens or permit them to exist;

•        enter into certain types of transactions with affiliates;

•        acquire, merge or consolidate with another company; and

•        transfer, sell or otherwise dispose of all or substantially all of our assets.

Our new credit facility or other debt instruments will also likely contain covenants requiring us to maintain certain financial ratios and meet certain tests, such as a fixed charge coverage ratio, a leverage ratio and minimum EBITDA test. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — F5 Finishes — Combined — Liquidity.” Our ability to comply with those financial ratios and tests can be affected by events beyond our control, and we may not be able to comply with those ratios and tests when required to do so under the applicable debt instruments.

The provisions of our new credit facility or other debt instruments may affect our ability to obtain future financing and pursue attractive business opportunities and our flexibility in planning for, and reacting to, changes in business conditions. In addition, a failure to comply with the provisions of our new or any future credit facility or other debt instruments could result in a default or an event of default that could enable our lenders or other debt holders to declare the outstanding principal of that debt, together with accrued and unpaid interest, to be immediately due and payable. If the payment of our debt is accelerated, our assets may be insufficient to repay such debt in full, and our stockholders could experience a partial or total loss of their investment.

Our business relies significantly on our expertise in installation and distribution logistics, and we generally do not have intellectual property that is protected by patents.

Our business is significantly dependent upon our expertise in installation and distribution logistics, including significant expertise in the application of building science. We rely on a combination of trade secrets and contractual confidentiality provisions and, to a much lesser extent, copyrights and trademarks, to protect our proprietary rights. Accordingly, our intellectual property is more vulnerable than it would be if it were protected primarily by patents. We may be required to spend significant resources to monitor and protect our proprietary rights, and in the event a misappropriation or breach of our proprietary rights occurs, our competitive position in the market may be harmed. In addition, competitors may develop competing technologies and expertise that renders our expertise obsolete or less valuable.

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Risks Related to this Offering and Our Common Stock

There is no public market for our common stock, and an active trading market for our common stock may not develop, which could impede your ability to sell shares and depress the market price of your shares.

Prior to this offering, there has been no public market for our common stock. An active trading market for our common stock may not develop upon completion of this offering, or if it does develop, it may not be sustained. If an active trading market does not develop, you may have difficulty selling any shares of our common stock that you purchase. The initial public offering price of our common stock was determined by negotiations between us and representatives of the underwriters and may not reflect the prevailing price in the open market. Consequently, you may not be able to sell shares of our common stock at prices equal to or greater than the price you paid in this offering.

The price of our common stock may fluctuate substantially, and your investment may decline in value.

Following this offering, the market price of our common stock could be extremely volatile and may be significantly affected by factors, such as:

•        market conditions affecting the commercial construction and building products industries;

•        quarterly variations in our results of operations;

•        changes in government regulations;

•        the announcement of acquisitions by us or our competitors;

•        changes in general economic and political conditions;

•        volatility in the financial markets;

•        results of our operations and the operations of others in our industry;

•        changes in interest rates;

•        threatened or actual litigation and government investigations;

•        the addition or departure of key personnel;

•        actions taken by our stockholders, including the sale or disposition of their shares of our common stock; and

•        differences between our actual financial and operating results and those expected by investors and analysts and changes in analysts’ recommendations or projections.

These and other factors may lower the market price of our common stock, regardless of our actual operating performance. As a result, our common stock may trade at prices significantly below the public offering price.

Furthermore, in recent years the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies. The changes frequently appear to occur without regard to the operating performance of the affected companies. Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us, and these fluctuations could materially reduce the price of our common stock and materially affect the value of your investment.

In the past, securities class action litigation often has been instituted against companies following periods of volatility in the market price of their securities. This type of litigation, if directed at us, could result in substantial costs and a diversion of management’s attention and resources.

The requirements of being a public company may strain our resources, increase our costs and distract management, and we may be unable to comply with these requirements in a timely or cost-effective manner.

As a public company with listed equity securities, we will need to comply with certain laws, regulations and requirements, including corporate governance provisions of the Sarbanes-Oxley Act, related regulations of the Securities and Exchange Commission (the “SEC”) and the requirements of NASDAQ, including the listing standards

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of the NASDAQ Capital Market tier, with which the Founding Companies were not required to comply as private companies. Complying with these statutes, regulations and requirements will occupy a significant amount of the time of our board of directors and management and will result in significant costs and expenses, particularly after we are no longer an emerging growth company under the JOBS Act. We will need to:

•        institute comprehensive corporate governance and compliance functions;

•        design, establish, evaluate and maintain a system of internal control over financial reporting in compliance with the requirements of Section 404(a) of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board;

•        comply with rules promulgated by NASDAQ;

•        prepare and distribute periodic public reports in compliance with our obligations under the federal securities laws;

•        establish internal policies, such as those relating to disclosure controls and procedures and insider trading;

•        involve and retain to a greater degree outside counsel and accountants with these activities; and

•        establish an investor relations function.

If we are not able to comply with the applicable continued listing requirements or standards of NASDAQ, NASDAQ could delist our common stock.

In conjunction with this offering, we have applied to list our common stock on the NASDAQ Capital Market simultaneously with the closing of this offering. Prior to this offering, there has been no established public market for our common stock. There is no assurance that our common stock will ever be quoted on the NASDAQ Capital Market. Should our common stock be listed on the NASDAQ Capital Market, in order to maintain that listing, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price, and certain corporate governance requirements. There can be no assurances that we will be able to comply with the applicable listing standards. If NASDAQ were to delist our common stock, it would be more difficult for our stockholders to dispose of our common stock and more difficult to obtain accurate price quotations on our common stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our common stock is not listed on a national securities exchange.

If our listing application for our common stock is not approved by NASDAQ, we will not be able to consummate this offering and will terminate this offering.

An approval of our listing application by NASDAQ will be subject to our fulfillment of certain minimum financial and liquidity requirements. If we fail to meet NASDAQ’s minimum requirements, we will not be able to consummate the offering and will terminate this offering. We will need to receive a minimum offering amount of $[] in order to satisfy the listing conditions to trade our common stock on the NASDAQ Capital Market.

If we are unable to implement and maintain effective internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, which could adversely affect the market price of our common stock.

We are not currently required to comply with Section 404 of the Sarbanes-Oxley Act, and are therefore not required to make an assessment of the effectiveness of our internal control over financial reporting for that purpose. As such, our management and independent registered public accounting firm did not perform an evaluation of our internal control over financial reporting as of and for the years ended December 31, 2018 and 2017. However, we have identified material weaknesses in our internal control over financial reporting. We are in the process of taking steps intended to remedy these material weaknesses, and we will not be able to fully address these material weaknesses until these steps have been completed. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Controls and Procedures” for information regarding our remediation efforts.

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As a public company, we will be required to maintain internal control over financial reporting and to report any material weaknesses in such internal controls. A material weakness is defined in the standards established by the Public Company Accounting Oversight Board (United States) as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In addition, we will be required to furnish a report by management on the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, at the time of our second annual report on Form 10-K, which will be for our year ending December 31, 2020. We intend to begin the process of designing, implementing and testing the internal control over financial reporting required to comply with this obligation upon the completion of this offering, which process is time consuming, costly and complex. If we fail to increase and maintain the number and expertise of our staff for our accounting and finance functions and to improve and maintain internal control over financial reporting adequate to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, we may be unable to report our financial results accurately and prevent fraud. In addition, we cannot be certain that any such steps we undertake will successfully remediate the material weaknesses or that other material weaknesses and control deficiencies will not be discovered in the future. If our remediation efforts are not successful or other material weaknesses or control deficiencies occur in the future, we may be unable to report our financial results accurately or on a timely basis, which could cause our reported financial results to be materially misstated and result in the loss of investor confidence or delisting and cause our stock price to decline. As a result of such failures, we could also become subject to investigations by NASDAQ, the SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, any of which could harm our reputation and financial condition, and divert financial and management resources. Even if we are able to report our consolidated financial statements accurately and timely, if we do not make all the necessary improvements to address the material weaknesses, continued disclosure of our material weaknesses will be required in future filings with the SEC, which could reduce investor confidence in our reported results and our cause our stock price to decline.

We are an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and as a result of the reduced disclosure and governance requirements applicable to emerging growth companies and smaller reporting companies, our common stock may be less attractive to investors and may make it more difficult to compare our performance with other public companies.

We are an emerging growth company, as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies. Those exemptions include, but are not limited to, a requirement to present only two years of audited financial statements, an exemption from the auditor attestation requirement of Section 404 of the Sarbanes-Oxley Act, reduced disclosure about executive compensation arrangements in our periodic reports and proxy statements, and no requirement to seek non-binding advisory votes on executive compensation or golden parachute arrangements. We have elected to adopt these reduced disclosure requirements. We may take advantage of these provisions until we are no longer an emerging growth company. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If some investors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may be more volatile.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

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Additionally, we are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary shares held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, reduced disclosure obligations regarding executive compensation. Furthermore, as long as we are neither a “large accelerated filer” nor an “accelerated filer,” as a smaller reporting company, we would not be required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.

Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.

The market price of our common stock could decline significantly as a result of sales of a large number of shares of our common stock in the market after this offering. These sales, or the perception that these sales might occur, could depress the market price of our common stock or make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

Upon the completion of this offering, based on an assumed initial public offering price of $[•] per share, which is the midpoint of the price range set forth on the cover of this prospectus, we will have [•] shares of common stock outstanding (or [] if the underwriters exercise their option to purchase additional shares in full). Of these shares, [•] shares sold in this offering to persons not subject to a lock-up agreement with our underwriters will be freely tradable without restriction immediately following this offering. After the lock-up agreements expire one year from the date of this prospectus, an additional 4,165,615 shares will be eligible for sale in the public market, [765,615] of which will be held by our directors, executive officers and other affiliates, and will be subject to volume limitations under Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”), and certain other restrictions. The underwriters may also, in their sole discretion, permit our founders, officers, directors, current stockholders and stockholders and equity interest holders of the Founding Companies to sell shares prior to the expiration of the lockup agreements. See “Shares Eligible for Future Sale” for more information regarding shares of our common stock that may be sold by existing stockholders after the closing of this offering.

In addition, the following will become eligible for sale in the public market in the future: 1,450,000 shares reserved for future issuance under our 2019 Incentive Stock Plan, subject to certain legal and contractual limitations; [•] shares (assuming the sale of [•] shares in this offering) issuable upon the exercise of warrants to be issued to the Underwriter; and up to 232,000 shares issuable upon the exercise of outstanding options. Additionally, the approximately 2.7 million shares that will be issued to the Shareholders of the Founding Companies as consideration under the Combinations are subject to a registration rights agreement, under which such shares may be registered under certain conditions, causing such shares to be more readily sold in the public markets. Also, in the future, we may issue shares of our common stock in connection with investments or acquisitions. The number of shares of our common stock issued in connection with an investment or acquisition could constitute a material portion of our then-outstanding shares of our common stock.

A significant portion of the proceeds we receive in this offering will be used as part of the Combination Consideration, and our management will have broad discretion over the use of the remaining proceeds and may not apply those proceeds in ways that increase the value of your investment.

We intend to use the net proceeds from this offering to pay the cash portion of the Combination Consideration payable to the Founding Companies at the closing of the Combinations, in the aggregate amount of approximately $15.7 million, subject to adjustment. We will also use a portion of the net proceeds from this offering to pay the promissory notes we issued in connection with the bridge loans made by Business Ventures Corp. to F5 Finishes to cover expenses associated with this offering in the aggregate amount of $2 million and may use proceeds for the payment of the promissory notes we issued in the aggregate principal amount of approximately $6.8 million in connection with the Combinations with the Founding Companies as they become due and may use proceeds to

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repay any debt assumed in the Combinations. As a result, a significant amount of the net proceeds we receive in the offering will not be available to us to use to grow our business or for other uses beneficial to the Company. Our management will have broad discretion to use the remaining net proceeds from this offering, and you will be relying on the judgment of our management regarding the application of such proceeds. See “Certain Relationships and Related Person Transactions — The Combinations with the Founding Companies” and “Use of Proceeds.”

A significant amount of the proceeds we receive will be invested in short-term, investment-grade securities; there can be no guarantees that our investments will not lose value or that the returns on our investments will not decrease due to market and economic conditions or other factors outside of our control.

We intend to invest the net proceeds from this offering in short-term, investment grade securities until we deploy them for other corporate uses. See “Use of Proceeds.” Although the risks inherent in short-term, investment grade securities are generally low, economic and market conditions could result in a decrease in returns on short-term securities or in the partial or entire loss of our investment. For example, there can be sudden shifts in interest rates, major credit quality downgrades for multiple firms and/or world events that create extreme volatility in the financial markets. Although we intend to implement investment procedures and safeguards and to diversify investments and asset allocations so that our combined investment risk exposure is limited, there is no guarantee that our efforts will prevent the loss of, or the decrease in returns on, our investments, which may cause our stock price to decline.

Our officers and directors and the stockholders and equity interest holders of the Founding Companies and their affiliates will exercise significant control over us.

After the completion of this offering, our executive officers and directors and the stockholders and equity interest holders of the Founding Companies and their immediate family members will beneficially own, in the aggregate, approximately [•]% of our outstanding common stock. As a result, these stockholders will be able to exercise significant control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, which could delay or prevent someone from acquiring or merging with us. These stockholders may have interests that are different from yours.

Provisions in our amended and restated certificate of incorporation and bylaws and under Delaware law could discourage a takeover that stockholders may consider favorable.

Following this offering, our amended and restated certificate of incorporation and amended and restated bylaws may discourage, delay or prevent a merger or acquisition that a stockholder may consider favorable because they, among other things:

•        authorize our board of directors, without stockholder approval, to issue up to [•] shares of undesignated preferred stock, which could be used to significantly dilute the ownership of the holders of our stock or a hostile acquirer;

•        do not provide for cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

•        establish supermajority voting requirements in order to amend certain provisions in our amended and restated certificate of incorporation, which makes it more difficult for stockholders to eliminate anti-takeover provisions;

•        eliminate stockholder-initiated action by written consent in lieu of a meeting, which hampers the ability of stockholders to take action during the interim periods between annual meetings of stockholders; and

•        require the written request of stockholders holding an aggregate of 25% of shares of our common stock in order for stockholders to call a special meeting, which together with the elimination of stockholder action by written consent described above, makes it very difficult for stockholders to take action during the interim periods between annual meetings of stockholders.

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As a Delaware corporation, we are also subject to the Delaware anti-takeover provisions contained in Section 203 of the Delaware General Corporation Law. Under Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. Our board of directors could rely on this provision to prevent or delay an acquisition of us. See “Description of Capital Stock.”

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.

Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) shall be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:

•        any derivative action or proceeding brought on our behalf;

•        any action asserting a breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders;

•        any action asserting a claim against us or our directors, officers or other employees arising under the Delaware General Corporation Law, our amended and restated certificate of incorporation or our bylaws;

•        any action or proceeding to interpret, apply, enforce or determine the validity of our amended and restated certificate of incorporation or our bylaws;

•        any action or proceeding as to which the Delaware General Corporation Law confers jurisdiction to the Court of Chancery of the State of Delaware; or

•        any action asserting a claim against us or our directors, officers or other employees that is governed by the “internal affairs doctrine” as that term is defined in Section 115 of the Delaware General Corporation Law,

in all cases to the fullest extent permitted by law and subject to the court’s having personal jurisdiction over the indispensable parties named as defendants. This exclusive forum provision does not apply to claims under the Securities Act or the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction.

Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and to have consented to this exclusive forum provision of our amended and restated certificate of incorporation. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find this choice of forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions. Additional costs associated with resolving an action in other jurisdictions could materially adversely affect our business, financial condition and results of operations

Purchasing shares of our common stock in this offering will result in an immediate and substantial dilution of your investment, and your investment may be further diluted if new securities are issued in connection with capital raises.

The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock. Therefore, investors purchasing shares of our common stock in this offering will pay a price per share that substantially exceeds the book value of our tangible assets after subtracting our liabilities. As a result, after giving effect to the Combinations, investors purchasing common stock in this offering will incur immediate dilution of $[•] per share (assuming no exercise of the underwriters’ option to purchase additional shares of our common stock), based on an assumed initial public offering price of $[•] per share, which is the midpoint of

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the price range set forth on the cover of this prospectus. Furthermore, if we raise additional capital or acquire new businesses by issuing new convertible or equity securities, the interests of investors in this offering may be further diluted. This may result in the loss of all or a portion of their investment. In addition, newer securities may have rights, preferences or privileges senior to those of securities held by investors in our common stock. See “Dilution.”

Our amended and restated certificate of incorporation authorizes us to issue shares of blank check preferred stock, and issuances of such preferred stock, or securities convertible into or exercisable for such preferred stock, may result in immediate dilution to existing stockholders, including investors in this offering.

If we raise additional funds through future issuances of preferred equity or debt securities convertible into preferred equity, our stockholders could suffer significant dilution, and any new equity or debt securities that we issue could have rights, preferences and privileges superior to those of holders of shares of common stock. Moreover, in the event that the price of our common stock in this offering is below $[•] per share, as part of the consideration for the purchase of the Founding Companies in the Combination, the Shareholders of the Founding Companies will receive subordinated convertible promissory notes, the principal amount of which will equal the difference between $[•] and the per share price of our common stock in this offering, multiplied by the number of shares of our common stock they are receiving as partial compensation in the Combination. Although we have no present plans to issue any shares of preferred stock or any additional convertible debt securities, in the event that we issue shares of our preferred stock, or securities convertible into or exercisable for our common stock after the date of the offering, the investors in this offering may be diluted. We may choose to raise additional capital using such preferred equity or debt securities because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans.

We do not expect to pay any dividends in the foreseeable future.

We intend to retain our future earnings, if any, in order to reinvest in the development and growth of our business and, therefore, do not intend to pay dividends on our common stock for the foreseeable future. Any future determination to pay dividends will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, the limits imposed by the terms of our new credit facility and such other factors as our board of directors deems relevant. Accordingly, investors in our common stock may need to sell their shares to realize a return on their investment in our common stock, and investors may not be able to sell their shares at or above the prices paid for them.

If securities analysts do not publish favorable reports about us or if we, or our industry, are the subject of unfavorable commentary, the price of our common stock could decline.

The trading price for our common stock will depend in part on the research and reports about us that are published by analysts in the financial industry. Analysts could issue negative commentary about us or our industry, or they could downgrade our common stock. We may also not receive sufficient research coverage or visibility in the market. Any of these factors could result in the decline of the trading price of our common stock, causing investors in our common stock to lose all or a portion of their investment.

38

CAUTIONARY DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements within the meaning of U.S. federal securities laws, which involve risks and uncertainties. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believe,” “estimate,” “project,” “aim,” “anticipate,” “expect,” “seek,” “predict,” “contemplate,” “continue,” “possible,” “intend,” “may,” “plan,” “forecast,” “future,” “might,” “will,” “could,” would” or “should” or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this prospectus and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth strategies, the industry in which we operate and potential acquisitions. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements are based upon information available to us on the date of this prospectus.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the stability of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. In addition, even if our results of operations, financial condition and liquidity and the development of the industry in which we operate are consistent with the forward-looking statements contained in this prospectus, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause our results to vary from expectations include, but are not limited to:

•        our lack of combined operating history and our ability to successfully integrate the Founding Companies into one entity;

•        our dependence on the commercial construction industry and remodeling and refurbishment activities, which are sensitive to changes in prevailing economic conditions;

•        our failure to accurately estimate project costs or successfully execute a project;

•        the highly fragmented and competitive nature of our industry;

•        our ability to successfully locate and acquire companies in the commercial flooring and installation business, to obtain debt financing for that purpose and to successfully integrate them into our business and manage our internal growth;

•        loss of any of our executives and managers;

•        product shortages and the loss of key suppliers or their failure to adhere to quality standards;

•        changes in the costs of our flooring products, including costs due to tariffs and trade policies;

•        increases in the costs of our flooring products if we were to lose our membership in the purchasing co-ops from which we receive monetary rebates;

•        quarterly variations in our operating results;

•        our ability to attract and retain qualified employees while controlling labor costs;

•        our ability to manage our working capital to facilitate our inventory management;

•        disruptions in the manufacturing and supply chains;

•        our ability to adapt our product offerings and services to changing preferences and building standards;

•        our exposure to claims relating to employment violations and workplace injuries;

39

•        strikes or work stoppages and increases in labor costs in the event of labor activities by unionized members of our workforce or in the event of increased unionization of our workforce;

•        our exposure to personal injury, product liability, warranty, casualty, breach of contract, construction defect and other claims and government investigations;

•        our exposure to claims arising from our acquired operations;

•        compliance with environmental and health and safety regulations and exposure to environmental liabilities;

•        the potential for asset impairments when we acquire businesses;

•        our exposure in the event of underfunded obligations in certain multiemployer pension plans in which our employees may participate;

•        disruptions in our information technology systems;

•        restrictions imposed on our operations by our new credit facility and by other indebtedness we may incur in the future;

•        our ability to implement and maintain effective internal control over financial reporting; and

•        additional factors discussed under the sections captioned “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Our Business.”

Other sections of this prospectus include additional factors that could adversely impact our business and financial performance. In light of these risks, uncertainties and assumptions, the forward-looking events described in this prospectus may not occur. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time, and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

Estimates and forward-looking statements speak only as of the date they were made, and, except to the extent required by law, we undertake no obligation to update or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. As a result of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this prospectus might not occur and our future results and our performance may differ materially from those expressed in these forward-looking statements due to, but not limited to, the factors mentioned above. Because of these uncertainties, you should not place undue reliance on these forward-looking statements when making an investment decision.

40

INDUSTRY AND MARKET DATA

In this prospectus, we rely on and refer to information and statistics regarding our industry. We obtained this information and these statistics from sources other than us, which we have supplemented where necessary with information from publicly available sources, discussions with our customers and our own internal estimates. The industry publications, reports, surveys, sources and forecasts containing the industry and market data cited in this prospectus are provided below:

•        American Institute of Architects (AIA) Architecture Billings Index (ABI)

•        Armstrong Flooring Investor Presentation, May 2019

•        BCC Research, Commercial Flooring: North American Markets, January 2017

•        Catalina Floor Coverings Report 2016

•        Dodge Data and Analytics

•        Fuse Commercial Flooring Alliance

•        Interface Investor Presentation, June 2019

•        Mohawk Industries, Inc. 10-K for the fiscal year ended December 31, 2018 (filed with the SEC on February 28, 2019)

•        Moody’s Analytics

•        Patton, Randall. “A History of the U.S. Carpet Industry”. EH.Net Encyclopedia, edited by Robert Whaples, September 22, 2006

•        Starnet Worldwide Commercial Flooring Partnership

•        Tarkett 2018 Registration Document, filed with the French financial markets’ authority (Autorité des marchés financiers — AMF) on March 21, 2019

•        Tarkett Investor Day Presentation, June 19, 2019

•        The Center for Sustainable Systems at the University of Michigan, Commercial Buildings Fact Sheet 2018

•        U.S. Bureau of Labor Statistics

•        U.S. Census Bureau

•        U.S. Energy Information Administration Commercial Buildings Energy Consumption Survey (CBECS), released March 4, 2015 and revised December 20, 2016

References to a Metropolitan Statistical Area, or an MSA, refer to an area that generally consists of at least one urbanized area of 50,000 or more inhabitants, plus adjacent territory that has a high degree of social and economic integration with the core area as measured by commuting ties. MSA boundaries are based on U.S. Census Bureau determinations as of July 1, 2018.

We believe these sources and estimates to be reliable, but we cannot give you any assurance that any of the projected results will occur. In addition, projections, assumptions and estimates of the future performance of the industry in which we operate and our future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.

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USE OF PROCEEDS

We estimate that the net proceeds we will receive from the sale of [•] shares of our common stock in this offering, after deducting underwriter discounts and commissions and estimated expenses payable by us, will be approximately $35.2 million (approximately $40.8 million if the underwriters exercise their option to purchase additional shares in full). This estimate assumes a public offering price of $[•] per share, the midpoint of the price range set forth on the cover page of this prospectus.

A $1.00 increase (decrease) in the assumed public offering price of $[•] per share would increase (decrease) the net proceeds to us from this offering by $[•] million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

The principal purposes of this offering are to create a public market for our common stock, to fund the acquisition of the Founding Companies, to facilitate future access to the public capital markets and to provide us with flexibility in the future, including to acquire additional businesses, either with the net proceeds from this offering and/or through the issuance of our common stock.

We intend to use an aggregate of approximately $15.7 million of the net proceeds to pay the cash portion of the Combination Consideration in the Combinations with the Founding Companies and $2 million of the net proceeds from this offering to pay off the bridge loans made to F5 Finishes by Business Ventures Corp., the company through which the founding shareholders of F5 Finishes founded F5 Finishes. Such cash portion of the Combination Consideration is subject to adjustment based upon the Founding Companies’ working capital on the closing date of the Combinations and certain other factors. See “Certain Relationships and Related Person Transactions — The Combinations with the Founding Companies.”

While we have not allocated a specific amount of the remaining net proceeds from this offering to any particular purpose, we may use such remaining net proceeds for the acquisitions of additional businesses, to pay the holders of the promissory notes we will issue in the aggregate principal amount of approximately $6.8 million in connection with the Combination Consideration when such notes become due (the third anniversary of the closing of this offering), and for general corporate purposes.

The net proceeds we actually expend for the acquisition of additional businesses may vary significantly depending on a number of factors, including our ability to locate such companies and enter into a binding acquisition agreement on favorable terms and the negotiated purchase price. In addition, the net proceeds we actually expend for general corporate purposes may vary significantly depending on a number of factors, including future revenue growth and our cash flows. As a result, we will retain broad discretion over the allocation of the remaining net proceeds from this offering. Pending use of the net proceeds from this offering, we intend to invest the net proceeds in short-term, investment-grade securities.

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DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock and do not anticipate paying any cash dividends in the foreseeable future. We currently expect to retain future earnings, if any, to finance the growth and development of our business. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and other factors that our board of directors may deem relevant. In addition, the terms of the credit facility that we intend to enter into concurrently with the closing of this offering may place certain limitations on the amount of cash dividends we can pay, even if no amounts are currently outstanding.

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2019:

•        on an actual basis for F5 Finishes (the designated accounting acquirer);

•        on an actual basis for each of the Founding Companies (the designated accounting co-predecessors);

•        on a pro forma combined basis to reflect (i) a 500-for-1 common stock split effective immediately prior to the closing of this offering, (ii) the completion of the Combinations with the Founding Companies; and (iii) the sale of [•] shares of our common stock at the assumed public offering price of $[•] per share (the midpoint of the price range set forth on the cover page of this prospectus), less the underwriting discounts and commissions and estimated offering expenses.

You should read this information in conjunction with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our unaudited pro forma combined financial statements and the related notes and the historical financial statements and related notes appearing elsewhere in this prospectus.

 

As of June 30, 2019

   

Actual

   
   

F5
Finishes

 

DSB+

 

Contract
Carpet

 

Premier

 

Resource
Flooring

 

Shehadi

 

Universal

 

Total

 

Pro
Forma

   

(in thousands)

Cash and cash equivalents

 

$

152

 

 

$

878

 

$

814

 

$

267

 

$

125

 

$

432

 

$

24

 

$

2,693

 

$

22,231

 

   

 

 

 

 

 

   

 

   

 

   

 

   

 

   

 

   

 

   

 

 

 

Indebtedness, including current portion

 

$

500

 

 

$

3,445

 

$

55

 

$

5

 

$

876

 

$

1,217

 

$

1,667

 

$

7,765

 

$

14,040

 

Shareholders’/member’s equity: