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Kitara Media Corp. – ‘PREM14A’ for 11/5/14

On:  Wednesday, 11/5/14, at 7:32pm ET   ·   As of:  11/6/14   ·   For:  11/5/14   ·   Accession #:  1213900-14-7780   ·   File #:  0-51840

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

11/06/14  Kitara Media Corp.                PREM14A    11/05/14    1:4.4M                                   Edgar Agents LLC/FA

Document/Exhibit                   Description                      Pages   Size 

 1: PREM14A     Preliminary Proxy Solicitation Material -- Merger   HTML   2.62M 
                          or Acquisition                                         

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act Of 1934

Filed by the Registrant þ

Filed by a Party other than the Registrant ¨

Check the appropriate box:

þ Preliminary Proxy Statement

¨ Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2))

¨ Definitive Proxy Statement

¨ Definitive Additional Materials

¨ Soliciting Material Under Rule 14a-12

KITARA MEDIA CORP.

(Name of Registrant as Specified in its Charter)

Payment of Filing Fee (Check the appropriate box):

¨ No fee required.

þ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11

Common stock, par value $0.0001 per share, of Kitara Media Corp. (“Common Stock”)

105,265,065 shares of Common Stock

Estimated solely for the purpose of calculation of the filing fee in accordance with Rule 0-11, based upon the product of (x) $0.5205 (the average of the high and low prices of Common Stock on October 30, 2014) and (y) 105,265,065 shares of Common Stock, the maximum number of shares of Common Stock estimated to be issued and outstanding immediately prior to the merger described herein, including the estimated maximum number of shares of Common Stock that may be issuable pursuant to options and warrants prior to the date the merger is expected to be completed. The fee equals the value from the preceding sentence multiplied by $116.20 per million dollars.

$54,790,466.33

$0 ($6,366.65 less the $6,366.65 offset described below)

¨ Fee paid previously with preliminary materials.

þ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

(1) Amount Previously Paid:

$6,366.65

(2) Form, Schedule or Registration Statement No:

Registration Statement on Form S-4 (File No. 333-199892)

(3) Filing party:

Kitara Holdco Corp.

(4) Date Filed:

November 5, 2014

KITARA MEDIA CORP.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON DECEMBER [●], 2014

To Kitara Media Corp. Stockholders:

A Special Meeting of the Stockholders (“Special Meeting”) of Kitara Media Corp. (“Kitara”) will be held on December [●], 2014 at 10:00 a.m., local time, at the offices of our general counsel, Graubard Miller, located at The Chrysler Building, 405 Lexington Avenue, 11th Floor, New York, New York 10174. The purposes of the Special Meeting are to:

The board of directors of Kitara unanimously recommends a vote “FOR” the Merger Proposal, the Charter Amendment Proposals, the Equity Plan Proposal and, if necessary, the Adjournment Proposal.

The board of directors of Kitara has fixed November [●], 2014 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Special Meeting or any adjournment thereof. Only holders of record of shares of Kitara common stock at the close of business on the record date are entitled to notice of, and to vote at, the Special Meeting or any adjournments or postponements thereof.

For more information about the proposals and the Special Meeting, please review carefully the accompanying proxy statement/prospectus.

Whether or not you expect to attend the Special Meeting in person, please submit a proxy by telephone or over the internet as instructed in these materials, or complete, date, sign and return the enclosed proxy card, as promptly as possible in order to ensure that we receive your proxy with respect to your shares of Kitara common stock. Instructions are shown on the enclosed proxy card and a return envelope (postage pre-paid if mailed in the United States) is enclosed for your convenience.

Please do not send documents or certificates representing your ownership of Kitara common stock at this time. If the transactions contemplated by the merger agreement are consummated, we will notify you of the procedures for exchanging your shares of Kitara common stock.

The information in this proxy statement/prospectus is not complete and may be changed. The registrant may not sell the securities described herein until the registration statement filed with the Securities and Exchange Commission is declared effective. This proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

PRELIMINARY PROXY STATEMENT/PROSPECTUS
SUBJECT TO COMPLETION, DATED NOVEMBER 5, 2014

PROXY STATEMENT FOR SPECIAL MEETINGS OF STOCKHOLDERS OF
KITARA MEDIA CORP.

PROSPECTUS FOR SHARES OF COMMON STOCK OF
KITARA HOLDCO CORP.

Kitara Media Corp., or “Kitara,” has entered into (i) an Agreement and Plan of Reorganization, dated as of October 10, 2014, or the “merger agreement,” with Kitara Holdco Corp., or “New Holdco,” a wholly-owned subsidiary of Kitara, and Kitara Merger Sub, Inc., or “Merger Sub,” a wholly-owned subsidiary of New Holdco, and (ii) a Unit Exchange Agreement, dated as of October 10, 2014, or the “exchange agreement,” with New Holdco, Future Ads LLC, or “Future Ads,” and the holders of the outstanding limited liability company interests of Future Ads, or the “members.” If the transactions contemplated by the merger agreement and the exchange agreement are consummated, New Holdco will become the new publicly traded company and Kitara and Future Ads will become wholly-owned subsidiaries of New Holdco.

Pursuant to the merger agreement, Merger Sub will merge with and into Kitara, with Kitara surviving the merger as a wholly-owned subsidiary of New Holdco. We refer to this merger throughout this proxy statement/prospectus as the “merger.” In the merger, the outstanding shares of Kitara common stock will be converted into shares of New Holdco common stock. Immediately following the merger and as part of a single integrated transaction, pursuant to the exchange agreement, the members will exchange all of the outstanding limited liability company interests of Future Ads for cash, shares of New Holdco common stock and the right to receive certain additional payments, all as described in more detail in this proxy statement/prospectus. We refer to this exchange throughout this proxy statement/prospectus as the “exchange.” The merger and the exchange are conditioned on each other and neither will be consummated if the other cannot be consummated.

The transactions will be financed by funds managed or advised by Highbridge Principal Strategies LLC, or “Highbridge,” which we expect will be providing up to $96,000,000 in senior term loan and revolving loan credit to New Holdco and certain of its subsidiaries (including Kitara and Future Ads).

In the merger, you will receive one share of New Holdco common stock for each share of Kitara common stock you own. Immediately following completion of the merger and the exchange, we expect that New Holdco will have 250,097,333 shares outstanding. Immediately following the completion of the merger and the exchange, of the shares of New Holdco common stock to be outstanding, we expect that the former Kitara stockholders and certain of the former members of Future Ads will own 95,884,241 shares (or 38.3%) and 154,213,092 shares (or 61.7%), respectively. Additionally, we expect there to be an aggregate of 40,870,765 shares of New Holdco common stock reserved for issuance under stock options and warrants assumed by New Holdco and awards that may be granted under New Holdco’s new equity compensation plan.

Kitara will hold a special meeting of its stockholders, or the “Special Meeting,” to consider and vote on a proposal to adopt the merger agreement and approve the merger. The Special Meeting will be held on December [●], 2014 at 10:00 a.m., local time, at the offices of our general counsel, Graubard Miller, located at The Chrysler Building, 405 Lexington Avenue, 11th Floor, New York, New York 10174. Adoption of the merger agreement and approval of the merger requires the affirmative vote of the holders of a majority of the outstanding shares of Kitara common stock entitled to vote. In connection with the exchange agreement, Kitara entered into a voting agreement, or the “voting agreement,” with certain of the existing Kitara stockholders, including Kitara’s officers and directors, or the “supporting parties.” Under the voting agreement, the supporting parties have agreed, among other things, to vote their shares of Kitara common stock in favor of the adoption of the merger agreement and approval of the merger and any other matters necessary for consummation of the merger and any other transactions contemplated in the merger agreement. The supporting parties hold a majority of the currently outstanding Kitara common stock. Accordingly, the supporting parties may adopt the merger agreement and approve the merger without the affirmative vote of any other Kitara stockholder.

On October 10, 2014, the last full trading day before the merger agreement and exchange agreement were announced, the closing sales price of Kitara’s common stock, which trades on the Over-the-Counter Bulletin Board, or “OTCBB,” under the symbol “KITM,” was $0.305 per share. We expect that immediately following completion of the transactions contemplated by the merger agreement and exchange agreement, the shares of New Holdco common stock will trade on the OTCBB under the symbol “[●].”

Important information about the Special Meeting, the proposed transactions and related matters is contained in this proxy statement/prospectus, which we urge you to read in its entirety, including the annexes and exhibits.

Please carefully review this document, including the section entitled “Risk Factors” beginning on page 23, for a discussion of the risks relating to the transactions.

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

The proxy statement/prospectus is dated [●], 2014, and is first being mailed to stockholders of Kitara on or about [●], 2014.

ADDITIONAL INFORMATION

This proxy statement/prospectus incorporates important business and financial information about Kitara that is not included in or delivered with this proxy statement/prospectus. Please refer to the section entitled “Where You Can Find More Information” beginning on page 184. In addition, this information is available without charge to security holders upon written or oral request to:

Kitara Holdco Corp.
525 Washington Blvd., Suite 2620
Jersey City, New Jersey 07310

Attn: Corporate Secretary
(201) 539-2200

To obtain timely delivery, security holders must request the information no later than December [●], 2014, which is five business days before the date of the Special Meeting.

TABLE OF CONTENTS

i

1

RISK FACTORS

In addition to the other information included in and found in the annexes attached to this proxy statement/‌prospectus, including the matters addressed in the “Cautionary Statement Regarding Forward — Looking Statements” on page 54, you should carefully consider the following risk factors in deciding whether to vote for the Merger Proposal. You should also read and consider the other information in this proxy statement/prospectus.

An investment in New Holdco’s common stock involves a high degree of risk. If any of the following risks or uncertainties occurs, New Holdco’s business, financial condition and operating results could be materially and adversely affected. As a result, the trading price of its common stock could decline and you may lose all or a part of your investment in New Holdco’s common stock. You should carefully consider all of the risks described below regarding the transactions, the business of Kitara, the business of Future Ads and New Holdco and its securities. Additional risks and uncertainties not currently known to us or that we currently deem immaterial also may materially and adversely affect our business operations.

Risks Related to the Transactions

The exchange and merger are subject to conditions, including certain conditions that may not be satisfied on a timely basis, if at all. Failure to complete the exchange and merger, or significant delays in completing the exchange and merger, could negatively affect Kitara’s share price and its future business and financial results.

The completion of the exchange and merger are subject to a number of conditions, including the adoption of the merger agreement and approval of the merger by Kitara common stockholders and the availability of $96,000,000 in debt financing in part for payment of the cash consideration to the members of Future Ads, which are not entirely within the control of Kitara and make the completion and timing of the merger uncertain. Either Kitara or Future Ads may terminate the exchange agreement if the exchange has not been completed on or before January 31, 2015.

Kitara and New Holdco have obtained a debt commitment letter for $96,000,000 in financing from Highbridge to be provided through a new revolving credit facility and a new term loan facility. The closing of the financing contemplated by the debt commitment letter, however, is subject to certain conditions, some of which are beyond the control of Kitara and New Holdco.

The debt financing contemplated by the debt commitment letter is subject to certain conditions, including, among others, Kitara and Future Ads having combined Consolidated Adjusted EBITDA (as defined in the debt commitment letter and described in “The Agreements – Debt Financing” on page 96) of at least $26,000,000 for the trailing 12 months prior to the closing and Future Ads having Consolidated Adjusted EBITDA of at least $31,500,000 for the trailing 12 months prior to the closing.

If the debt financing cannot be obtained or is significantly delayed, and the exchange agreement or merger agreement is terminated, or if there are significant delays in completing the transactions, there may be various consequences, including:

If the transactions are consummated, New Holdco will have significant leverage at closing.

Kitara and New Holdco must obtain at least $96,000,000 of debt financing in order to consummate the exchange. After the closing, New Holdco may seek to raise additional capital, if and when necessary. Accordingly, New Holdco is expected to have a high degree of leverage after the transactions that could have important consequences, including:

In addition, the terms of the financing that will be obtained by New Holdco from Highbridge (or another lender) will likely subject New Holdco to a number of financial or operational covenants as well as compliance with certain financial ratios. For example, the covenants may impose restrictions on it, including the ability to incur additional indebtedness and liens, make loans and investments, make capital expenditures, sell assets, engage in mergers, acquisitions and consolidations, enter into transactions with affiliates, enter into sale and leaseback transactions and pay dividends on New Holdco’s common stock. A breach of any of the covenants imposed on New Holdco by the terms of any indebtedness, including any financial or operational covenants, could result in a default under such indebtedness. In the event of a default, the lenders could terminate their commitments to New Holdco, and could accelerate the repayment of all of New Holdco’s indebtedness. In such case, New Holdco (and Kitara and Future Ads) may not have sufficient funds to pay the total amount of accelerated obligations, and the lenders could proceed against the collateral securing the facilities, which is expected to consist of substantially all of the assets of New Holdco, Kitara and Future Ads. Any acceleration in the repayment of indebtedness or related foreclosure could have a material adverse effect on New Holdco’s business.

New Holdco’s results of operations and financial condition following the transactions may materially differ from the pro forma information presented in this proxy statement/prospectus.

The pro forma financial information included in this proxy statement/prospectus is derived from Kitara’s and Future Ads’ separate historical audited and unaudited consolidated financial statements, as well as from certain internal, unaudited financial statements. The preparation of this pro forma information is based upon available information and certain assumptions and estimates that Kitara and Future Ads believe are reasonable. This pro forma information may be materially different from what New Holdco’s actual results of operations and financial condition would have been had the transactions occurred during the periods presented or what New Holdco’s results of operations and financial position will be after the consummation of the proposed transactions.

The consideration to be received by Kitara’s stockholders in the merger and by the members in the exchange is fixed (subject to certain limited exceptions) and will not be adjusted for changes affecting Kitara or Future Ads.

Under the merger agreement, each share of Kitara common stock will be converted into the right to receive one share of New Holdco common stock. Under the exchange agreement, the members will receive (i) $80,000,000 in cash, (ii) shares of New Holdco common stock that represent 53% of the fully diluted shares of New Holdco common stock outstanding as of the closing, (iii) performance-based “earn out” payments of up to an additional $40,000,000 in cash or stock based on Future Ads reaching certain EBITDA levels during the 2015 to 2018 fiscal years, (iv) on or prior to June 30, 2016, $10,000,000 of deferred consideration in cash and/or shares of New Holdco common stock and (v) immediately after the payment of certain fees to Highbridge on or about the fourth anniversary of the closing, $6,000,000 in cash. The consideration payable to the members is subject to a limited post-closing adjustment as described elsewhere in this proxy statement/prospectus based on Kitara’s working capital and Future Ads’ working capital and indebtedness at the closing. Accordingly, except for the post-closing adjustment and the earnout payments, the consideration payable at the closing under the merger agreement and the exchange agreement is fixed and will not be adjusted prior to completion of the transactions, including for changes in the businesses, operations, results and prospects of Kitara or Future Ads, which changes could in turn affect the value of the business of Future Ads without a commensurate change in the consideration payable to the members of Future Ads. As a result, such changes may affect the value of the New Holdco’s common stock that Kitara stockholders will receive upon completion of the merger or the market value of shares of Kitara’s common stock prior to completion of the merger. Market assessments of the benefits of the merger and general and industry-specific market and economic conditions also may have an effect on the market prices of New Holdco’s common stock and Kitara’s common stock. Neither Kitara nor Future Ads nor the members are permitted to terminate the merger agreement or exchange agreement solely because of changes in the market price of Kitara’s common stock and may only terminate the exchange agreement for changes in the business of Kitara or Future Ads under certain limited circumstances.

The exchange and merger will result in a significant dilution of the interests of Kitara’s stockholders and any further issuance by New Holdco of equity securities will further dilute the interests of Kitara’s stockholders.

The consummation of the exchange and merger will result in a significant dilution of the interests of the holders of the outstanding shares of Kitara common stock. Since Kitara’s stockholders in the aggregate will own only 38.3% of New Holdco common stock outstanding immediately after the closing, each such stockholder will have a significantly smaller percentage ownership of New Holdco than such stockholder had of Kitara. In addition, New Holdco will in the future issue equity securities to raise funds for or to pay the $10,000,000 of deferred consideration, and may in the future issue equity securities to raise additional capital, as necessary, including upon the exercise of the stock options and warrants to be assumed by New Holdco or pursuant to awards under the 2014 Plan. The issuance of these equity securities will further dilute the ownership interests of Kitara’s stockholders. Consequently, Kitara stockholders will not be able to exercise as much influence over the management and policies of New Holdco as they currently exercise over Kitara.

There is a potential market overhang that could depress the value of New Holdco’s common stock, and future sales of its common stock could put a downward pressure on the price of New Holdco shares and could have a material adverse effect on the price of New Holdco shares.

Immediately after the consummation of the transaction, we estimate that the former members of Future Ads will own approximately 61.7% of the outstanding New Holdco common stock. Under the lockup agreements, the former members may dispose of a substantial percentage of their stock, including in open-market transactions and underwritten offerings, from time to time after the twelve month anniversary of closing or earlier in certain circumstances if the sale of the shares is registered under the Securities Act of 1933, as amended, or the “Securities Act.” In that regard, the registration rights agreement provides that the holders of the exchange shares will have the right to demand that New Holdco file a registration statement covering 15% or greater of the then-outstanding exchange shares (or, if New Holdco is eligible to use a “short form” registration statement, a “short form” registration statement covering 5% or greater of the then-outstanding exchange shares). New Holdco will not be obligated to effect more than two such “demand” registrations on a “long form” registration statement, but there is no limit on the number of “short form” registration statements it might be required to file. Once registered and released from the restrictions under the lockup agreements, shares of New Holdco common stock generally can be freely sold in the public market. Accordingly, the possibility that substantial amounts of our outstanding common stock may be sold by the members, or the perception that such sales could occur, could materially adversely affect the market price of the New Holdco common stock and impair the ability of New Holdco to raise additional capital through the sale of equity securities in the future. In addition, this selling activity could decrease the level of public interest in New Holdco’s common stock, inhibit buying activity that might otherwise help support the market price of New Holdco’s common stock, and prevent possible upward price movements in New Holdco’s common stock.

New Holdco may never realize the anticipated benefits from the transactions.

The transactions involve the integration of two companies that have previously operated independently and are geographically remote from each other. Although the parties believe that the combination of Kitara and Future Ads has the potential to result in substantial financial and operating benefits, including increased revenues, cost savings and other benefits, New Holdco does not assure you regarding when, whether or the extent to which the combined company will be able to realize increased revenues, cost savings or other benefits, if at all.

Antitrust authorities may attempt to delay or prevent the consummation of the transactions.

Consummation of the transactions is subject to prior receipt of those approvals and consents required under the Hart-Scott Rodino Act Antitrust Improvements Act of 1976, as amended, or the “HSR Act.” Kitara and Future Ads have agreed to use all commercially reasonable efforts to obtain, as promptly as practicable, all governmental and third party consents, approvals, authorizations, qualifications and orders necessary for the consummation of the transactions and to promptly make all necessary filings, if any, and thereafter make any other required submissions, with respect the exchange agreement required under the HSR Act or other applicable law. No assurance can be given that the required approvals will be obtained and, even if all such approvals are obtained, no assurance can be given as to the terms, conditions and timing of the approvals or that they will satisfy the terms of the exchange agreement.

Lawsuits may be filed against Kitara, the members of its board of directors, New Holdco and Merger Sub challenging the proposed transactions. An adverse ruling in any such lawsuit may delay or prevent the transactions from being consummated and may result in costs to Kitara and Future Ads.

Kitara stockholders, as plaintiffs, may initiate stockholder class action lawsuits seeking, among other things, to enjoin the transactions. One of the conditions to the consummation of the exchange agreement is no United States national, federal, state or local governmental, regulatory or administrative authority, agency or commission or any judicial or arbitral body has enacted, issued, promulgated, enforced or entered any Law or order (whether temporary, preliminary or permanent) that is then in effect (and has not been vacated, withdrawn or overturned) and that enjoins, restrains, makes illegal or otherwise prohibits the consummation of the transactions contemplated by the exchange agreement.

Kitara has obligations under certain circumstances to hold harmless and indemnify each of the defendant directors against judgments, fines, settlements and expenses related to claims against such directors and otherwise to the fullest extent permitted under Delaware law and Kitara’s certificate of incorporation and bylaws. Such obligations may apply to any such stockholder class action lawsuits, if initiated. There can be no assurance that Kitara and the other defendants in these lawsuits will be successful in their defenses. An unfavorable outcome in any of the lawsuits could prevent or delay the consummation of the transactions and result in substantial costs to Kitara or Future Ads or both.

The integration of Kitara and Future Ads following the transactions will present significant challenges that may reduce the anticipated potential benefits of the transactions.

Kitara and Future Ads will face significant challenges in consolidating functions and integrating their organizations, procedures and operations in a timely and efficient manner, as well as retaining key personnel. The principal challenges will include the following:

The respective managements of Kitara and Future Ads will have to dedicate substantial effort to integrating the businesses. These efforts could divert management’s focus and resources from the company’s other business, corporate initiatives or strategic opportunities during the integration process.

Kitara and Future Ads will incur significant transaction and merger-related integration costs in connection with the transactions.

Kitara and Future Ads expect to pay transaction costs of approximately $2.7 million in the aggregate. These transaction fees include legal and accounting fees and expenses, expenses associated with the financing of the transactions, SEC filing fees, printing expenses, mailing expenses and other related charges. These amounts are preliminary estimates that are subject to change. Approximately $1.625 million of the transaction costs already have been incurred as of the date of this proxy statement/‌prospectus and additional transaction costs will be incurred regardless of whether the transactions are consummated. If the transactions are not consummated, Kitara and Future Ads will each pay its own transaction costs, except that Kitara and Future Ads will each pay one half of the filing fees for the filing in connection with the HSR Act and Kitara and Future Ads will each pay one half of Highbridge’s reimbursable expenses. If the transactions are consummated, after the closing, New Holdco will reimburse the members for all transaction expenses paid by Future Ads, its subsidiaries or the members on or before the closing, and will assume all of their unpaid transaction expenses as of such date. Future Ads estimates that the aggregate transaction expenses reimbursed or assumed by New Holdco will be approximately $1.25 million. Kitara and Future Ads also expect to incur costs associated with integrating the operations of the two companies and these costs could be significant and could have a material adverse effect on New Holdco’s future operating results.

While the transactions are pending, Kitara and Future Ads will be subject to business uncertainties and contractual restrictions that could have a material adverse effect on their respective businesses.

Uncertainty about the effect of the transactions on customers and suppliers may have a material adverse effect on Kitara and Future Ads and, consequently, on New Holdco. These uncertainties could cause customers, suppliers and others who deal with Kitara and Future Ads to seek to change existing business relationships with Kitara and Future Ads. In addition, the exchange agreement restricts Kitara and Future Ads, without the other party’s consent and subject to certain exceptions, from making certain acquisitions and taking other specified actions until the transactions occur or the exchange agreement terminates. These restrictions may prevent Kitara and Future Ads from pursuing otherwise attractive business opportunities that may arise prior to completion of the transactions or termination of the exchange agreement and from making other changes to their businesses.

Failure to complete the transactions could negatively impact the stock price and the future business and financial results of Kitara.

The parties may not satisfy the conditions necessary to the completion of the transactions. If the transactions are not completed for any reason, Kitara could be subject to several risks, including the following:

Further, Kitara would not realize any of the expected benefits of having completed the transactions.

If the transactions are not completed, the price of Kitara common stock may decline to the extent that the current market price of that stock reflects a market assumption that the transactions will be completed and that the related benefits will be realized, or a market perception that the transactions were not consummated due to an adverse change in Kitara’s business. In addition, Kitara’s business may be harmed, and the price of its stock may decline as a result, to the extent that customers, suppliers and others believe that Kitara cannot compete in the marketplace as effectively without the transactions or otherwise remain uncertain about Kitara’s future prospects in the absence of the transactions. Similarly, current and prospective employees of Kitara may experience uncertainty about their future roles with the resulting company and choose to pursue other opportunities, which could have a material adverse effect on Kitara if the transactions are not completed. The realization of any of these risks may materially adversely affect the business, financial results, financial condition and stock price of Kitara.

Some of the executive officers and directors of Kitara have interests in the transactions that are different from the interests of Kitara’s stockholders.

When considering the recommendation of their board of directors with respect to the transactions, stockholders should be aware that some executive officers and directors of Kitara have interests in the transactions that are different from, or in addition to, the interests of the Kitara stockholders. For additional information on interests of Kitara’s executive officers and directors in the transactions, see “The Transactions – Interests of Kitara Directors and Officers in the Transactions.” The Kitara stockholders should consider these interests in conjunction with the recommendation of the board of directors of Kitara that the stockholders approve the transactions.

Risks Related to the Business of Both Kitara and Future Ads

The risk factors listed herein will apply to the businesses of both Kitara and Future Ads after the transactions. References in this section to “we,” “us” and “our” refer to both entities as appropriate.

We may be unable to retain key advertisers, attract new advertisers or replace departing advertisers.

Our success requires us to maintain and expand our relationships with our existing advertisers (including the ad agencies that represent them), and to develop new relationships with other advertisers and ad agencies. We sell advertising through insertion orders with ad agencies and through advertising networks and exchanges. These advertising sources generally do not include long-term obligations requiring them to purchase from us and are cancelable upon short notice and without penalty in accordance with standard terms and conditions for the purchase of internet advertising published by the Interactive Advertising Bureau. As a result, we have limited visibility as to our future advertising revenue streams from our advertisers. Our advertisers’ usage may decline or fluctuate as a result of a number of factors, including, but not limited to:

If a major advertiser decides to materially reduce its use of our services, it could do so on short or no notice. We cannot assure that our advertisers will continue to use our services or that we will be able to replace in a timely or effective manner departing advertisers with new advertisers from whom we generate comparable revenue.

Seasonal fluctuations in digital video advertising activity could adversely affect our cash flows.

Many advertisers devote a disproportionate amount of their advertising budgets to the fourth quarter of the calendar year to coincide with increased holiday purchasing. Accordingly, our revenue tends to be seasonal in nature with the fourth quarter of each calendar year historically representing the largest percentage of our total revenue for the year. Our operating cash flows could also fluctuate materially from period to period as a result of these seasonal fluctuations.

Our business depends on our ability to collect and use data to deliver ads, and to disclose data relating to the performance of our ads, and any limitation on these practices could significantly diminish the value of our solutions and cause us to lose customers and revenue.

Our ability to optimize the placement and scheduling of video advertisements for our advertisers and to grow our revenue depends on our ability to successfully leverage data that we collect from our advertisers, publishers, and third parties such as data providers. Our ability to successfully leverage such data, in turn, depends on our ability to collect and obtain rights to utilize such data. When we deliver an ad to an Internet-connected device, we are able to collect information about the placement of the ad and the interaction of the device user with the ad, such as whether the user visited a landing page or watched a video. We are also able to collect information about the user’s IP address, device, mobile location and some demographic characteristics. We may also contract with one or more third parties to obtain additional anonymous information about the device user who is viewing a particular ad, including information about the user’s interests. As we collect and aggregate this data provided by billions of ad impressions, we analyze it in order to optimize the placement and scheduling of ads across the advertising inventory provided to us by digital media properties. Any interruptions, failures, or defects in our data collection, mining, analysis, and storage systems could limit our ability to aggregate and analyze user data from our clients’ advertising campaigns. If that happens, we may not be able to optimize the placement of advertising for the benefit of our advertisers, which could make our solutions less valuable, and, as a result, we may lose clients and our revenue may decline.

Our business practices with respect to data could give rise to liabilities, restrictions on our business or reputational harm as a result of evolving governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection.

In the course of providing our solutions, we transmit and store information related to Internet-connected devices, user activity and the ads and other content we place. Federal, state and international laws and regulations govern the collection, use, processing, retention, sharing and security of data that we collect across our solutions. The U.S. government, including the Federal Trade Commission and the Department of Commerce, has also announced that it is reviewing the need for greater regulation of the collection of consumer information, including regulation aimed at restricting some targeted advertising practices. The Federal Trade Commission has also adopted revisions to the Children’s Online Privacy Protection Act that expand liability for the collection of information by operators of websites and other electronic solutions that are directed to children. We strive to comply with all applicable laws, regulations, policies and legal obligations relating to privacy and data collection, processing use and disclosure. However, the applicability of specific laws may be unclear in some cases and domestic and foreign government regulation and enforcement of data practices and data tracking technologies is expansive, not clearly defined and rapidly evolving. In addition, it is possible that these requirements may be interpreted and applied in a manner that is new or inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Complying with any new regulatory requirements could also force us to incur substantial costs or require us to change our business practices in a manner that could reduce our revenue or compromise our ability to effectively pursue our growth strategy. Any actual or perceived failure by us to comply with U.S. federal, state or international laws, including laws and regulations regulating privacy, data, security or consumer protection, or disclosure or unauthorized access by third parties to this information, could result in proceedings or actions against us by governmental entities, private parties or others. Any such proceedings or actions could hurt our reputation, result in significant expense to defend, distract our management, increase our costs of doing business, adversely affect the demand for our solutions and ultimately result in the imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless our clients from the costs or consequences of litigation resulting from using our solutions or from the disclosure of confidential information, which could damage our reputation among our current and potential clients, require significant expenditures of capital and other resources and cause us to lose business and revenue.

If we fail to detect fraud or other actions that impact video ad campaign performance, we could lose the confidence of advertisers or agencies, which would cause our business to suffer.

Our business relies on effectively and efficiently delivering video ad campaigns for advertisers. We may in the future be subject to fraudulent and malicious activities such as the use of bots, non-human traffic delivered by machines that are designed to simulate human users and artificially inflate user traffic on websites. These activities could overstate the performance of any given video ad campaign and could harm our reputation. It may be difficult to detect fraudulent or malicious activity because we do not rely solely on our own content and rely in part on publisher partners for controls with respect to such activity. While we routinely assess the campaign performance on our digital media properties’ websites and our partner publishers’ websites, such assessments may not detect or prevent fraudulent or malicious activity. If fraudulent or other malicious activity is perpetrated by others, and we fail to detect or prevent it, the affected advertisers may experience or perceive a reduced return on their investment and our reputation may be harmed. High levels of fraudulent or malicious activity could lead to dissatisfaction with our solutions, refusals to pay, refund demands or withdrawal of future business. If we fail to detect fraud or other actions that impact the performance of our video ad campaigns, we could lose the confidence of our advertisers or agencies, which could cause our business to suffer.

Technological errors and system failures could significantly disrupt our operations and cause us to lose clients.

Our success depends on the continuing and uninterrupted performance of our solutions, which we utilize to place video ads and other content, monitor the performance of advertising campaigns, manage our content inventory and respond to publisher needs. Our revenue depends on our ability to categorize video content and deliver ads and other content, as well as measure ad campaigns on a real-time basis. Factors that may adversely affect the performance of our solutions include:

Sustained or repeated technological errors or system failures that interrupt our ability to deliver content and provide access to our licensed solutions, including technological failures affecting our ability to deliver video content quickly and accurately and to process viewers’ responses to video content or fill publisher content requests, could significantly reduce the attractiveness of our solutions and reduce our revenue. Any steps we take to increase the reliability and redundancy of our systems may be expensive and may not be successful in preventing technological errors and system failures. Any such technological errors or system failures could harm our ability to attract potential clients and retain and expand business with existing clients and our business, financial condition and operating results could be adversely affected.

Defects or errors in our solutions could harm our reputation, result in significant costs to us, impair our ability to deliver advertising campaigns and other content and impair our ability to meet our obligations to publishers and content providers.

The technology underlying our solutions, including our proprietary technology and technology provided by third-parties, may contain material defects or errors that can adversely affect our ability to operate our business and cause significant harm to our reputation. This risk is compounded by the complexity of the technology underlying our solutions and the large amounts of data we utilize. Although we test technologies before incorporating them into our solutions, we cannot guarantee that all of the technologies that we incorporate will not contain errors, bugs or other defects. Errors, defects, disruptions in service or other performance problems in our solutions could result in the incomplete or inaccurate delivery of an ad campaign or other content, including serving an ad campaign in an incomplete or inaccurate manner, in an incorrect geographical location or in an environment that is detrimental to the advertiser’s brand health. Any such failure, malfunction, or disruption in service could result in damage to our reputation, our clients withholding payment to us, advertisers, publishers or content providers making claims or initiating litigation against us, and our giving credits to our clients toward future services.

Security breaches, computer viruses and computer hacking attacks could harm our business and results of operations.

We collect, store and transmit information of, or on behalf of, our advertisers, publishers and content providers. We take steps to protect the security, integrity and confidentiality of such information, but there is no guarantee that inadvertent or unauthorized use or disclosure will not occur or that third parties will not gain unauthorized access to this information despite our efforts. Security breaches, computer malware and computer hacking attacks have become more prevalent in our industry and may occur on our systems or those of our information technology vendors in the future. Security breaches computer viruses or other harmful software code and computer hacking attacks could result in the unauthorized disclosure, misuse, or loss of information, legal claims and litigation, indemnity obligations, regulatory fines and penalties, contractual obligations and liabilities, and other liabilities. In addition, if our security measures or those of our vendors are breached or unauthorized access to consumer data otherwise occurs, our solutions may be perceived as not being secure, and advertisers, publishers and content providers may reduce the use of or stop using our solutions. Any of the foregoing could damage our reputation among our current and potential clients, require significant expenditures of capital and other resources and cause us to lose business and revenue.

Our failure to protect our intellectual property rights could diminish the value of our services, weaken our competitive position and reduce our revenue.

We regard the protection of our intellectual property as critical to our success. We strive to protect our intellectual property rights by relying on contractual restrictions. We enter into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with third parties with whom we conduct business in order to limit access to, and disclosure and use of, our intellectual property and proprietary information. However, these contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent the misappropriation of our proprietary information or deter independent development of similar technologies by others. We may, in the future, seek to protect our intellectual property in new ways, such as by registering our trademarks and copyrights or applying for patents for technology we develop. Effective trade secret, copyright, trademark, domain name and patent protection is expensive to develop and maintain, both in terms of initial and ongoing registration requirements and the costs of defending our rights. Protecting our intellectual property through federal and state filings in the future may prove expensive and time-consuming.

We have licensed in the past, and may license in the future, some of our proprietary rights to third parties. These licensees may take unauthorized actions that diminish the value of our proprietary rights or harm our reputation.

Monitoring unauthorized use of our intellectual property is difficult and costly. Our efforts to protect our proprietary rights may not be adequate to prevent misappropriation of our intellectual property. Further, we may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Our competitors may also independently develop similar technology. The laws in the United States and elsewhere change rapidly, and any future changes could adversely affect us and our intellectual property rights. Our failure to meaningfully protect our intellectual property could result in competitors offering services that incorporate our most technologically advanced features, which could seriously reduce demand for our solutions. In addition, we may in the future need to initiate infringement claims or litigation. Litigation, whether we are a plaintiff or a defendant, can be expensive, time-consuming and may divert the efforts of our technical staff and managerial personnel, which could harm our business, whether or not such litigation results in a determination that is unfavorable to us. In addition, litigation is inherently uncertain, and thus we may not be able to stop our competitors from infringing upon our intellectual property rights.

Our business may suffer if it is alleged or determined that our solutions or another aspect of our business infringes the intellectual property rights of others.

Companies in the online advertising industry are often required to defend against litigation claims that are based on allegations of infringement or other violations of intellectual property rights. Our success depends, in part, upon non-infringement of intellectual property rights owned by others and being able to resolve claims of intellectual property infringement or misappropriation without major financial expenditures or adverse consequences. In the future, we may face claims by third parties that we infringe upon or misappropriate their intellectual property rights, and we may be found to be infringing upon or to have misappropriated such rights. Such claims may be made by competitors or other parties. Regardless of whether claims that we are infringing patents or infringing or misappropriating other intellectual property rights have any merit, these claims are time-consuming and costly to evaluate and defend, and can impose a significant burden on management and employees. The outcome of any litigation is inherently uncertain, and we may receive unfavorable interim or preliminary rulings in the course of litigation. There can be no assurances that favorable final outcomes will be obtained in all cases. We may decide to settle lawsuits and disputes on terms that are unfavorable to us. Some of our competitors have substantially greater resources than we do and are able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. Claims that we are infringing patents or other intellectual property rights could:

Our business will suffer if we are unable to successfully integrate acquired companies into our business or otherwise manage the growth associated with multiple acquisitions.

Part of our overall growth strategy is to acquire businesses, personnel and technologies that are complementary to our existing business and expand our employee base and the breadth of our offerings. Our ability to grow through future acquisitions will depend on the availability of suitable acquisition and investment candidates at an acceptable cost, our ability to compete effectively to attract these candidates and the availability of financing to complete larger acquisitions. Future acquisitions or investments could result in potential dilutive issuances of equity securities, use of significant cash balances or incurrence of debt, contingent liabilities or amortization expenses related to goodwill and other intangible assets, any of which could adversely affect our financial condition and results of operations. The benefits of an acquisition or investment may also take considerable time to develop, and we cannot be certain that any particular acquisition or investment will produce the intended benefits.

Integration of a new company’s operations, assets and personnel into ours will require significant attention from our management. The diversion of our management’s attention away from our business and any difficulties encountered in the integration process could harm our ability to manage our business. Future acquisitions will also expose us to potential risks, including risks associated with any acquired liabilities, the integration of new operations, technologies and personnel, unforeseen or hidden liabilities and unanticipated, information security vulnerabilities, the diversion of resources from our existing businesses, sites and technologies, the inability to generate sufficient revenue to offset the costs and expenses of acquisitions, and potential loss of, or harm to, our relationships with employees, players, and other suppliers as a result of integration of new businesses.

We may need additional capital in the future to meet our financial obligations and to pursue our business objectives. Additional capital may not be available on favorable terms, or at all, which could compromise our ability to meet our financial obligations and grow our business.

We may need additional capital in the future to expand our marketing and sales and technology development efforts or to make acquisitions. Additional financing may not be available on favorable terms, if at all. If adequate funds are not available on acceptable terms, we may be unable to fund the expansion of our marketing and sales and technology development efforts or take advantage of acquisition or other opportunities, which could harm our business and results of operations.

Financing, if any, may be in the form of debt or additional sales of equity securities, including common or preferred stock. The incurrence of debt or the sale of preferred stock may result in the imposition of operational limitations and other covenants and payment obligations, any of which may be burdensome to us. The sale of equity securities, including common or preferred stock, may result in dilution to the current shareholders’ ownership.

Risks Related to the Business of Kitara

The risk factors listed herein will apply to New Holdco after the transactions based on New Holdco’s continuation of the business of Kitara. References in this section to “we,” “us” and “our” refer to Kitara and its operating subsidiaries, Kitara Media, LLC, or “Kitara Media,” New York Publishing Group, Inc., or “NYPG,” and Heath Guru Media, Inc., or “Health Guru.”

If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards and client needs, our solutions may become less competitive or obsolete.

The market for digital video advertising solutions is characterized by rapid technological change, evolving industry standards and frequent new product and service introductions. Our future success will depend on our ability to adapt and innovate. To attract new digital advertisers, digital publishers and video content providers and increase spending by our existing clients, we will need to expand and enhance our solutions to meet client needs, add functionality and address technological advancements. If we fail to develop new solutions that address our clients’ needs, or enhance and improve our solutions in a timely manner or conform to industry standards, we may not be able to achieve or maintain adequate market acceptance of our solutions, and our solutions may become less competitive or obsolete.

Our ability to grow is also subject to the risk of future technologies. If new technologies emerge that are able to deliver video advertising solutions at lower prices or more efficiently or effectively than our solutions, such technologies could adversely impact our ability to compete. Keeping pace with new and changing technology and evolving industry standards may require significant expenditures of financial and other resources. We cannot guarantee that such efforts will be successful.

We operate in a highly competitive industry, and we may not be able to compete successfully.

The digital video advertising market is highly competitive, with many companies providing competing solutions. We compete with Hulu and Google (YouTube and DoubleClick) as well as advertising networks and exchanges (such as BrightRoll, Inc. and YuMe, Inc.), demand side advertiser platforms and ad networks. Many of our competitors are significantly larger than we are and have more capital to invest in their businesses. We also face competition from direct response advertisers who also seek to target brands. They, or other companies that offer competing solutions, may establish or strengthen cooperative relationships with their digital media property partners, advertisers or other parties, thereby limiting our ability to promote our solutions and generate revenue. Competitive pressures could require us to lower our prices or increase the prices we pay to publishers and content providers. Additionally, some large advertising agencies that represent our current advertising customers have their own relationships with digital media properties and can directly connect advertisers with digital media properties. Our business will suffer to the extent that our advertisers, publishers and content providers purchase and sell inventory directly from one another or through other companies that act as intermediaries between them. Other companies that offer analytics, mediation, exchange or other third party solutions have or may become intermediaries between our clients and thereby compete with us. Any of these developments would make it more difficult for us to sell our solutions and could result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses or the loss of market share. Accordingly, we may not be able to compete successfully against our current and future competitors.

Our sales efforts with advertisers, publishers and video content providers require significant time and expense.

Attracting new advertisers, publishers and video content providers requires substantial time and expense, and we may not be successful in establishing new relationships or in maintaining or advancing our current relationships. For example, it may be difficult to identify, engage and market to potential advertisers who do not currently spend on digital video advertising or are unfamiliar with our current solutions. Furthermore, many of our advertising customers’ purchasing and design decisions typically require input from multiple internal constituencies, including those units historically responsible for TV and digital ad campaigns. As a result, we must identify those persons involved in the purchasing decision and devote a sufficient amount of time to presenting our solutions to each of those persons. With respect to our publishers and content providers, we seek to establish long-term relationships to ensure access to publisher sites and content for our advertisers. As a result, we invest significant time in cultivating relationships with our publishers and content providers to ensure they understand the potential benefits of monetization of their inventory with us rather than other parties. The relationship building process can take many months and may not result in us winning an opportunity with any given advertiser, agency, publisher or content provider. Moreover, even when opportunities are won, the contractual obligation may be short-term and terminable by the client upon short or no notice. For example, many of our advertising sources are ad exchanges that programmatically bid and buy inventory without obligation or commitment and can terminate or stop buying immediately. Therefore, we may invest significant resources into winning an opportunity only to result in a short-term commitment from our clients.

Our solutions and business model are relatively new and often require us to spend substantial time and effort educating potential advertisers, publishers and content providers about our solutions, including providing demonstrations. This process can be costly and time-consuming. If we are not successful in targeting, supporting and streamlining our sales processes, our ability to grow our business may be adversely affected.

The data we collect from consumers may decrease.

We participate in industry self-regulatory programs under which, in addition to other compliance obligations, we provide consumers with notice about our use of cookies and our collection and use of data in connection with the delivery of targeted advertising. In addition, consumers can currently opt out of the placement or use of our cookies for online targeted advertising purposes by either deleting or disabling cookies on their browsers, visiting websites that allow consumers to place an opt-out cookie on their browsers, which instructs advertisers and their service providers not to use certain data about the consumer’s online activity for the delivery of targeted advertising, or by downloading browser plug-ins and other tools that can be set to: (1) identify cookies and other tracking technologies used on websites; (2) prevent websites from placing third-party cookies and other tracking technologies on the consumer’s browser; or (3) block the delivery of online advertisements on websites and applications. If there is a material increase in the number of consumers who choose to opt out or are otherwise using browsers where they need to, and fail to, configure the browser to accept cookies (or similar tracking technologies), our ability to collect valuable and actionable data may be impaired, which may make our solutions less valuable and adversely affect our business.

The data we collect from publishers and advertisers may decrease.

In order to effectively operate our video advertising campaigns, we collect data from advertisers, publishers, and other third parties. If we are not able to obtain sufficient rights to data from these third parties, we may not be able to utilize data in our solutions. Although our arrangements with advertisers and publishers generally permit us to collect non-personally identifiable and aggregate data from advertising campaigns, sometimes an advertiser or publisher declines to permit the use of this data. For example, publishers may not agree to permit us to place our data collection tags on their sites or agree to provide us with the data generated by interactions with the content on their sites. The inability to collect or use data from advertisers and publishers may limit the usefulness of the data that we do collect and use. Furthermore, advertisers may request that we discontinue using data obtained from their campaigns that have already been aggregated with other advertisers’ campaign data. It would be difficult, if not impossible, to comply with these requests, and complying with these kinds of requests could cause us to spend significant amounts of resources. Interruptions, failures or defects in our data collection, mining, analysis and storage systems, as well as privacy concerns and regulatory restrictions regarding the collection, use and processing of data, could also limit our ability to aggregate and analyze the data from our customers’ advertising campaigns. If that happens, we may not be able to optimize the placement of advertising for the benefit of our advertising customers, which could make our solutions less valuable, and, as a result, we may lose customers and our revenue may decline.

We rely on data, other technology, and intellectual property licensed from other parties, the failure or loss of which could increase our costs and delay or prevent the delivery of our solutions.

We utilize various types of data, other technology, and intellectual property licensed from unaffiliated third parties in order to provide certain elements of our solutions. Licensed technology, data, and intellectual property may not continue to be available on commercially reasonable terms, or at all. Any loss of the right to use any of these on commercially reasonable terms, or at all, could result in delays in producing or delivering our solutions until equivalent data, other technology, or intellectual property is identified and integrated, which delays could harm our business. In this situation we would be required to either redesign our solutions to function with technology, data or intellectual property available from other parties or to develop these components ourselves, which would result in increased costs. Furthermore, we might be forced to limit the features available in our current or future solutions. If we fail to maintain or renegotiate any of these technology or intellectual property licenses, we could face significant delays and diversion of resources in attempting to develop similar or replacement technology, or to license and integrate a functional equivalent of the technology or intellectual property. The occurrence of any of these events may have an adverse effect on our business, financial condition and operating results.

We currently generate the majority of our revenue from a concentrated base of customers.

We generate the majority of our revenue from a concentrated base of customers. Our largest customers accounted for approximately 43.4% (3 customers accounted for 18.0%, 14.7%, and 10.7% of this amount) and 47.4% (3 customers accounted for 25.8%, 11.4%, and 10.2% of this amount) of our revenues for the six months ended June 30, 2014 and 2013, respectively, and approximately 15.9% and 63.8% (3 customers accounted for 36.2%, 15.9%, and 11.6% of this amount) of the related accounts receivable as of June 30, 2014 and 2013, respectively. For the years ended December 31, 2013 and 2012, our largest three customers accounted for approximately 52.9% and 36.5%, respectively, of our revenues, and for approximately 49.4% and 15.3%, respectively, of the related accounts receivable. Such concentration exposes us to increased risk in the event of nonpayment or reduced use of our services from any one of these customers. Customer demand depends on a variety of factors including, but not limited to, our customers’ financial condition and general economic conditions. If any one of our largest customers is unable to pay for services provided, significantly reduces their use of our services or discontinues their relationship with us, our revenues and results of operations would be materially and adversely affected.

We have a few key vendors from whom we obtain necessary services to continue our business.

We have a few key vendors from whom we obtain necessary services to continue to efficiently and effectively operate our business. For example, our largest vendors accounted for approximately 63.5% (3 vendors accounted for 23.4%, 21% and 19.1% of this amount) and 35.8% (2 vendors accounted for 20.7% and 15.1% of this amount) of our cost of revenues for the six months ended June 30, 2014 and 2013, respectively, and approximately 29.5% (2 vendors accounted for 16.3% and 13.2%) and 25.9% (from one vendor) of the related accounts payable as of June 30, 2014 and 2013, respectively. Such concentration exposes us to increased risk in the event any one of these vendors becomes unable or unwilling to provide us with the services we need or significantly increases the cost of such services. In such event, we cannot guarantee that we will be able to find a replacement vendor to provide services on terms comparable to our current arrangements. If our vendor costs increase, we may be required pass the increased cost on to our clients, which may harm our competitive position. The inability to replace our key vendors or significant increases in cost for the services provided by our key vendors would adversely and materially affect our revenues and results of operations.

Kitara Media’s existing credit facility contains restrictive covenants that may limit our ability to respond to changes in market conditions or pursue business opportunities.

Kitara Media’s existing credit facility with Wells Fargo, National Association contains certain affirmative and negative covenants and financial covenants incumbent upon Kitara Media that are typical in such agreements. If the transactions are consummated, this credit facility will be repaid and replaced by the debt financing from Highbridge. If the transactions are not consummated, this credit facility will remain in place. Among the negative covenants are covenants restricting, without the consent of the lender, the incurrence of indebtedness and liens, restrictions on fundamental changes by Kitara Media such as mergers, acquisitions, consolidations, reorganizations and reclassifications, and restrictions on the disposal of assets, the making of Restricted Junior Payments, Changes of Control, Investments, transactions with Affiliates and the issuance of Stock (as such terms are defined in the credit agreement). Complying with these covenants may have a material adverse effect on our operations and financial condition.

If we are unable to comply with the restrictions and covenants in our existing credit facility, there could be a default under the terms of such agreements, which could result in an acceleration of repayment. Failure to maintain existing financing or to secure new financing could have a material adverse effect on our liquidity and financial position.

If the transactions are not consummated and our credit facility with Wells Fargo, National Association is not repaid and replaced, or we are unable to comply with the restrictions and covenants in our existing credit facility and other debt agreements, there could be a default under the terms of those agreements. In the event of a default under those agreements, lenders could terminate their commitments to lend or accelerate the loans and declare all amounts borrowed due and payable. If any of those events occur, our assets might not be sufficient to repay the indebtedness and we may be unable to find alternative financing. Even if we could obtain alternative financing, it might not be on terms that are favorable or acceptable to us. Additionally, we may not be able to amend our debt agreements or obtain needed waivers on satisfactory terms or without incurring substantial costs. Failure to maintain existing or secure new financing could have a material adverse effect on our liquidity and financial position.

We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our financial statements

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 1992. Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of December 31, 2013 due to control deficiencies in several areas that are considered to be material weaknesses. A material weakness is 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 the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management identified the following material weaknesses in internal control over financial reporting as of June 30, 2014:

We have made efforts to improve our internal control and accounting policies and procedures. These efforts included hiring new accounting personnel. However, we may identify additional deficiencies including material weaknesses or fail to remediate the identified deficiencies in our internal controls. If material weaknesses or deficiencies in our internal controls exist and go undetected, our financial statements could contain material misstatements that, when discovered in the future, could cause us to fail to meet our future reporting obligations and cause the price of our common stock to decline.

We cannot assure you that we will not continue to have material weaknesses or significant deficiencies in our internal control over financial reporting. If we are unable to successfully remediate any material weakness or significant deficiency in our internal control over financial reporting, or identify any material weaknesses or significant deficiencies that may exist, the accuracy and timing of our financial reporting may be adversely affected, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, and our stock price may decline materially as a result.

Risks Related to the Business of Future Ads

The risk factors listed herein will apply to New Holdco after the transactions based on New Holdco’s continuation of the business of Future Ads. References in this section to “we,” “us” and “our” refer to Future Ads and its subsidiaries.

If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards and advertiser needs, our solutions may become less competitive or obsolete.

The market for display, video, desktop application, mobile application and online advertising solutions is characterized by rapid technological change, evolving industry standards and frequent new product and service introductions. Our future success will depend on our ability to adapt and innovate. To attract new digital advertisers, application developers and other partners, and increase spending by our existing advertisers, we will need to expand and enhance our solutions to meet advertiser needs, add functionality and address technological advancements. If we fail to develop new solutions that address our advertisers’ needs, or enhance and improve our solutions in a timely manner or conform to industry standards, we may not be able to achieve or maintain adequate market acceptance of our solutions, and our solutions may become less competitive or obsolete.

Our ability to grow is also subject to the risk of future technologies. If new technologies emerge that are able to deliver advertising solutions at lower prices or more efficiently or effectively than our solutions, such technologies could adversely impact our ability to compete. Keeping pace with new and changing technology and evolving industry standards may require significant expenditures of financial and other resources. We cannot guarantee that such efforts will be successful.

We and our distribution partners rely on the ability to offer our audience downloadable applications which allows us and our partners to offer services and serve advertising to them. Should we or our distribution partners be unable in the future to profitably acquire new audiences due to an inability to offer downloadable applications via the Internet, our ability to generate revenues could be significantly negatively impacted.

Our ability to serve our advertisers and to generate revenues is dependent on our ability to provide the appropriate audiences for our advertisers’ campaigns. We acquire audiences in a variety of ways including offering free downloadable applications ourselves or via our distribution partners that audiences agree to install and which allows us to serve advertising to them. If our ability to acquire audiences through this value exchange is disrupted, our advertising business model could be impaired. Possible reasons for such disruption could include audiences not valuing the offered application, costs of marketing the software could be too high, the lifetime value of the acquired audiences does not cover the cost of acquiring the audiences, or ad blockers, anti-virus protection blockers or other applications might prevent our applications from being installed.

Should the dominant players in our industry (such as Microsoft and Google) modify their guidelines and policies to prevent or limit our ability to offer downloadable applications or to serve advertising to our audience, our ability to generate revenues would be severely negatively impacted and this would cause a material adverse effect on our financial results.

In an effort to protect their audiences from unwanted applications or unwanted behaviors while using their software and to control the computing experience, the dominant industry players who control access to audiences via their browsers and operating systems are regularly updating their policies and procedures to regulate the applications that may be installed on a computer. We cannot predict the changes that these players, such as Google or Microsoft, might implement. If they implement changes to their policies and procedures that limit our ability or application developers’ or other partners’ ability to distribute their applications online, we will have difficulties acquiring audiences at scale which are required to meet the demands of our advertisers. This could materially affect our financial results.

We operate in a highly competitive industry, and we may not be able to compete successfully.

The display, video, desktop application and online advertising solutions market is highly competitive, with many companies providing competing solutions. We compete with Google, RocketFuel, Tremor, IAC, Facebook and many other demand side advertiser platforms, supply side advertising platforms, ad networks, and desktop and mobile application networks. Many of our competitors are significantly larger than we are and have more capital to invest in their businesses. They, or other companies that offer competing solutions, may establish or strengthen cooperative relationships with their advertisers, thereby limiting our ability to promote our solutions and generate revenue. Competitive pressures could require us to lower our prices for our advertisers. Competition also exists in the acquisition of audiences from many of these same large scale competitors. As competition for audiences increases, the cost of acquiring audiences could rise. Any of these developments would make it more difficult for us to sell our solutions and could result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses or the loss of market share. Accordingly, we may not be able to compete successfully against our current and future competitors.

Our sales efforts and relationships with advertisers, application developers and other partners require significant time and expense.

Attracting new advertisers, application developers and other partners requires substantial time and expense, and we may not be successful in establishing new relationships or in maintaining or advancing our current relationships. For example, it may be difficult to identify, engage and market to potential advertisers who do not currently spend on contextual, display or digital video advertising or are unfamiliar with our current solutions. Furthermore, many of our advertising customers’ purchasing and buying decisions typically require input from multiple internal constituencies. As a result, we must identify those persons involved in the purchasing decision and devote a sufficient amount of time to presenting our solutions to each of those persons. With respect to our application developers, we seek to establish long-term relationships to ensure access to ad inventory and audience reach for our advertisers. As a result, we invest significant time in cultivating relationships with our application developer to ensure they understand the potential benefits of monetization of their inventory with us rather than other parties. The relationship building process can take many months and may not result in us winning an opportunity with any given advertiser, application developer or other potential partner. Moreover, even when opportunities are won, the contractual obligation may be short-term and terminable by the other party upon short or no notice. For example, many of our advertising sources are direct advertisers and ad exchanges that programmatically bid and buy inventory without obligation or commitment and can terminate or stop buying immediately. Therefore, we may invest significant resources into winning an opportunity only to result in a short-term commitment from our clients.

Our solutions and business model are relatively new and often require us to spend substantial time and effort educating potential advertisers, application developers and other partners about our solutions, including providing demonstrations. This process can be costly and time-consuming. If we are not successful in targeting, supporting and streamlining our sales processes, our ability to grow our business may be adversely affected.

Any material reduction in spending by our key advertisers and/or our inability to retain such key advertisers could adversely impact our business and results of operations.

Our success requires us to sell advertising through our Trafficvance online advertising platform, to maintain and expand our relationships with our existing advertisers and to develop new relationships with other advertisers and ad agencies. These advertising sources generally do not include long-term obligations requiring them to purchase from us and are cancelable at any time or upon short notice and without a termination penalty. As a result, we have limited visibility as to our future advertising revenue streams from our advertisers, even if they have been long-standing advertisers. Our advertisers’ usage may decline, fluctuate or cease all together as a result of a number of factors, including, but not limited to:

If a major advertiser decides to materially reduce its use of our services, it could do so on short or no notice. We cannot ensure that our advertisers will continue to use our services or that we will be able to replace in a timely or effective manner departing advertisers with new advertisers from whom we generate comparable revenue.

Seasonal fluctuations in digital advertising activity could adversely affect our cash flows.

Many advertisers devote a disproportionate amount of their advertising budgets to the fourth quarter of the calendar year to coincide with increased holiday purchasing. Accordingly, our revenue tends to be seasonal in nature with the fourth quarter of each calendar year historically representing the largest percentage of our total revenue for the year. Our operating cash flows could also fluctuate materially from period to period as a result of these seasonal fluctuations.

Our business depends on our ability to target and use data to deliver ads and to disclose data relating to the performance of our ads, and any limitation on these practices could significantly diminish the value of our solutions and cause us to lose customers and revenue.

Our ability to optimize the placement and targeting of advertisements for our advertisers and to grow our revenue depends on our ability to successfully deliver relevant ads and use data. Our ability to successfully target and leverage such data, in turn, depends on our ability to collect and utilize such data. When we deliver an ad to a computer connected to the Internet, we are able to collect information about the placement of the ad and the interaction of the user’s device with the ad, such as whether the user clicked on an ad. We are also able to collect certain information about our audience, such as their IP addresses. As we collect and aggregate this data provided by billions of ad impressions, we analyze it in order to optimize the placement and scheduling of ads across the advertising inventory available to us. Any interruptions, failures, or defects in our data collection, analysis, and storage systems could limit our ability to aggregate and analyze user data from our advertisers’ campaigns. If that happens, we may deliver irrelevant ads and may not be able to optimize the placement of advertising for the benefit of our advertisers, which could make our solutions less valuable, and, as a result, we may lose clients and our revenue may decline.

Our business practices with respect to data could give rise to liabilities, restrictions on our business or reputational harm as a result of evolving governmental regulation, legal requirements or industry standards relating to consumer privacy and data protection.

In the course of providing our solutions, we transmit information related to computers connected to the Internet, user activity and the ads and other content we place. Federal, state and international laws and regulations govern the collection, use, processing, retention, sharing and security of data that we collect across our solutions. The U.S. government, including the Federal Trade Commission and the Department of Commerce, has also announced that it is reviewing the need for greater regulation of the collection of consumer information, including regulation aimed at restricting some targeted advertising practices. The Federal Trade Commission has also adopted revisions to the Children’s Online Privacy Protection Act that expand liability for the collection of information by operators of websites and other electronic solutions that are directed to children.

We strive to comply with all applicable laws, regulations, policies and legal obligations relating to privacy and data collection, processing use and disclosure. However, the applicability of specific laws may be unclear in some cases and domestic and foreign government regulation and enforcement of data practices and data tracking technologies is expansive, not clearly defined and rapidly evolving. In addition, it is possible that these requirements may be interpreted and applied in a manner that is new or inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Complying with any new regulatory requirements could also force us to incur substantial costs or require us to change our business practices in a manner that could reduce our revenue or compromise our ability to effectively pursue our growth strategy. Any actual or perceived failure by us to comply with U.S. federal, state or international laws, including laws and regulations regulating privacy, data, security or consumer protection, or disclosure or unauthorized access by third parties to this information, could result in proceedings or actions (including class actions) against us by governmental entities, private parties or others. Any such proceedings or actions could hurt our reputation, result in significant expense to defend, distract our management, increase our costs of doing business, adversely affect the demand for our solutions and ultimately result in the imposition of monetary liability. We may also be contractually liable to indemnify and hold harmless our clients from the costs or consequences of litigation resulting from using our solutions or from the disclosure of confidential information, which could damage our reputation among our current and potential clients, require significant expenditures of capital and other resources and cause us to lose business and revenue.

If we fail to detect fraud or other actions that impact ad campaign performance, we could lose the confidence of advertisers or agencies, which would cause our business to suffer.

Our business relies on effectively and efficiently delivering advertising campaigns for advertisers. We may in the future be subject to fraudulent and malicious activities such as the use of bots, non-human traffic delivered by machines that are designed to simulate human users and artificially inflate user traffic. These activities could overstate the performance of any given ad campaign and could harm our reputation. If fraudulent or other malicious activity is perpetrated by others, and we fail to detect or prevent it, the affected advertisers may experience or perceive a reduced return on their investment and our reputation may be harmed. High levels of fraudulent or malicious activity could lead to dissatisfaction with our solutions, refusals to pay, refund demands or withdrawal of future business. If we fail to detect fraud or other actions that impact the performance of our ad campaigns, we could lose the confidence of our advertisers or agencies, which could cause our business to suffer.

Technological errors and system failures could significantly disrupt our operations and cause us to lose clients.

Our success depends on the continuing and uninterrupted performance of our solutions, which we utilize to place advertisements, monitor the performance of advertising campaigns, manage our inventory and respond to advertiser, application developer and other partner needs. Our revenue depends on our ability to target, as well as measure ad campaigns on a real-time basis. Factors that may adversely affect the performance of our solutions include:

Sustained or repeated technological errors or system failures that interrupt our ability to deliver advertisements and provide access to our solutions, including technological failures affecting our ability to deliver advertising quickly could significantly reduce the attractiveness of our solutions and reduce our revenue. Any steps we take to increase the reliability and redundancy of our systems may be expensive and may not be successful in preventing technological errors and system failures. Any such technological errors or system failures could harm our ability to attract potential clients and retain and expand business with existing clients and our business, financial condition and operating results could be adversely affected.

Defects or errors in our solutions could harm our reputation, result in significant costs to us, impair our ability to deliver advertising campaigns and impair our ability to meet our obligations to our partners.

The technology underlying our solutions, including our proprietary technology and technology provided by third-parties, may contain material defects or errors that can adversely affect our ability to operate our business and cause significant harm to our reputation. This risk is compounded by the complexity of the technology underlying our solutions and the large amounts of data we utilize. Although we test technologies before incorporating them into our solutions, we cannot guarantee that all of the technologies that we incorporate will not contain errors, bugs or other defects. Errors, defects, disruptions in service or other performance problems in our solutions could result in the incomplete or inaccurate delivery of an ad campaign or other content, including serving an ad campaign in an incomplete or inaccurate manner. Any such failure, malfunction, or disruption in service could result in damage to our reputation, our clients withholding payment to us, advertisers, application developers or other partners making claims or initiating litigation against us, and our giving credits to our clients toward future services.

Security breaches, computer viruses and computer hacking attacks could harm our business and results of operations.

We collect, store and transmit advertising information relating to our audience, advertisers, application developers and other partners and we store information about our employees and the company (such as contracts and company confidential information). We take steps to protect the security, integrity and confidentiality of such information, but there is no guarantee that inadvertent or unauthorized use or disclosure will not occur or that third parties will not gain unauthorized access to this information despite our efforts. Security breaches, computer malware and computer hacking attacks have become more prevalent in our industry and may occur on our systems or those of our information technology vendors in the future. Security breaches, computer viruses or other harmful software code and computer hacking attacks could result in the unauthorized disclosure, misuse, or loss of information, legal claims and litigation, indemnity obligations, regulatory fines and penalties, contractual obligations and liabilities, and other liabilities. In addition, if our security measures or those of our vendors are breached or unauthorized access to data otherwise occurs, our solutions may be perceived as not being secure and advertisers, application developers and other partners may reduce the use of or stop using our solutions, a government entity may bring a claim for inadequate data protection and our own employees may bring claims against our company for breaches of confidentiality. Any of the foregoing could damage our reputation among our current and potential clients, require significant expenditures of capital and other resources and cause us to lose business and revenue.

In order to maintain our revenue and grow our business, we need to continuously acquire and reach new audiences and maintain audience engagement with our application products through advertising campaigns.

Our business depends on reaching audiences through relationships with third party application developers and distribution partners as well as through direct media buying. In all cases, our growth is dependent on our ability to reach and expand audiences. The market to generate audiences for applications is highly competitive, and we experience significant competition for audience engagement with our applications from other vendors who use application advertising business models. We generate the substantial majority of revenues associated with our audiences during the first year after an application is installed. In order to maintain our current revenues and grow our business, we need to continuously engage in marketing campaigns aimed at maintaining audience engagement with our applications and acquiring new audiences. If we fail to conduct such marketing campaigns or any of our marketing campaigns prove less successful than anticipated, either because we are not able to accurately project the number of completed installations of the applications or otherwise, we expect that our audience engagement would decline materially, which would have a material adverse effect on our operating results.

Our business and prospects would be harmed if new versions or upgrades of operating systems and Internet browsers adversely impact the process or platform by which audiences install our applications and audiences view our advertisements. The application installation process for our solutions is currently straightforward and includes detailed information about our products and services. In the future, operating systems, internet browsers, ad blockers, and security programs could introduce new features or limitations that would make it more difficult to install applications and may negatively impact the growth of our audience base, and adversely impact our business and prospects.

Our failure to protect our intellectual property rights could diminish the value of our services, weaken our competitive position and reduce our revenue.

We regard the protection of our intellectual property as critical to our success. We strive to protect our intellectual property rights by relying on contractual restrictions. We enter into confidentiality and invention assignment agreements with our employees and contractors, and confidentiality agreements with third parties with whom we conduct business in order to limit access to, and disclosure and use of, our intellectual property and proprietary information. However, these contractual arrangements and the other steps we have taken to protect our intellectual property may not prevent the misappropriation of our proprietary information or deter independent development of similar technologies by others. We may, in the future, seek to protect our intellectual property in new ways, such as by registering our trademarks and copyrights or applying for patents for technology we develop. Effective trade secret, copyright, trademark, domain name and patent protection is expensive to develop and maintain, both in terms of initial and ongoing registration requirements and the costs of defending our rights. Protecting our intellectual property through federal and state filings in the future may prove expensive and time-consuming.

We have licensed in the past, and may license in the future, some of our proprietary rights to third parties. These licensees may take unauthorized actions that diminish the value of our proprietary rights or harm our reputation.

Monitoring unauthorized use of our intellectual property is difficult and costly. Our efforts to protect our proprietary rights may not be adequate to prevent misappropriation of our intellectual property. Further, we may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Our competitors may also independently develop similar technology. The laws in the United States and elsewhere change rapidly, and any future changes could adversely affect us and our intellectual property rights. Our failure to meaningfully protect our intellectual property could result in competitors offering services that incorporate our most technologically advanced features, which could seriously reduce demand for our solutions. In addition, we may in the future need to initiate infringement claims or litigation. Litigation, whether we are a plaintiff or a defendant, can be expensive, time-consuming and may divert the efforts of our technical staff and managerial personnel, which could harm our business, whether or not such litigation results in a determination that is unfavorable to us. In addition, litigation is inherently uncertain, and thus we may not be able to stop our competitors from infringing upon our intellectual property rights.

Our business may suffer if it is alleged or determined that our solutions or another aspect of our business infringes the intellectual property rights of others.

Companies in the online advertising industry are often required to defend against litigation claims that are based on allegations of infringement or other violations of intellectual property rights. Our success depends, in part, upon non-infringement of intellectual property rights owned by others and being able to resolve claims of intellectual property infringement or misappropriation without major financial expenditures or adverse consequences. In the future, we may face claims by third parties that we infringe upon or misappropriate their intellectual property rights, and we may be found to be infringing upon or to have misappropriated such rights. Such claims may be made by competitors or other parties. Regardless of whether claims that we are infringing patents or infringing or misappropriating other intellectual property rights have any merit, these claims are time-consuming and costly to evaluate and defend, and can impose a significant burden on management and employees. The outcome of any litigation is inherently uncertain, and we may receive unfavorable interim or preliminary rulings in the course of litigation. There can be no assurances that favorable final outcomes will be obtained in all cases. We may decide to settle lawsuits and disputes on terms that are unfavorable to us. Some of our competitors have substantially greater resources than we do and are able to sustain the costs of complex intellectual property litigation to a greater degree and for longer periods of time than we could. Claims that we are infringing patents or other intellectual property rights could:

Our business will suffer if we are unable to successfully integrate acquired companies into our business or otherwise manage the growth associated with multiple acquisitions.

Part of our overall growth strategy is to acquire businesses, personnel and technologies that are complementary to our existing business and expand our employee base and the breadth of our offerings. Our ability to grow through future acquisitions will depend on the availability of suitable acquisition and investment candidates at an acceptable cost, our ability to compete effectively to attract these candidates and the availability of financing to complete larger acquisitions. Future acquisitions or investments could result in potential dilutive issuances of equity securities, use of significant cash balances or incurrence of debt, contingent liabilities or amortization expenses related to goodwill and other intangible assets, any of which could adversely affect our financial condition and results of operations. The benefits of an acquisition or investment may also take considerable time to develop, and we cannot be certain that any particular acquisition or investment will produce the intended benefits.

Integration of a new company’s operations, assets and personnel into ours will require significant attention from our management. The diversion of our management’s attention away from our business and any difficulties encountered in the integration process could harm our ability to manage our business. Future acquisitions will also expose us to potential risks, including risks associated with any acquired liabilities, the integration of new operations, technologies and personnel, unforeseen or hidden liabilities and unanticipated, information security vulnerabilities, the diversion of resources from our existing businesses, sites and technologies, the inability to generate sufficient revenue to offset the costs and expenses of acquisitions, and potential loss of, or harm to, our relationships with employees, players, and other suppliers as a result of the integration of new businesses.

We may need additional capital in the future to meet our financial obligations and to pursue our business objectives. Additional capital may not be available on favorable terms, or at all, which could compromise our ability to meet our financial obligations and grow our business.

We may need additional capital in the future to expand our marketing and sales and technology development efforts or to make acquisitions. Additional financing may not be available on favorable terms, if at all. If adequate funds are not available on acceptable terms, we may be unable to fund the expansion of our marketing and sales and technology development efforts or take advantage of acquisition or other opportunities, which could harm our business and results of operations.

Financing, if any, may be in the form of debt or additional sales of equity securities, including common or preferred stock. The incurrence of debt or the sale of preferred stock may result in the imposition of operational limitations and other covenants and payment obligations, any of which may be burdensome to us. The sale of equity securities, including common or preferred stock, may result in dilution to the current shareholders’ ownership.

We depend on third party Internet and telecommunication providers to operate our business. Temporary failure of these services, including catastrophic or technological interruptions, would reduce our revenues and damage our reputation, and securing alternate sources for these services could significantly increase our expenses. 

Each of our third party Internet and telecommunication providers may not continue to provide services to us without disruptions in services, at the current cost or at all. Moreover, as technology advances occur, we will need to upgrade our systems, infrastructure and technologies. Although there may be overlap between the companies that provide such services, any such disruption in services, even if temporary, may negatively impact our performance.

Our servers and communications systems could be damaged or interrupted by fire, flood, power loss, telecommunications failure, earthquakes, acts of war or terrorism, acts of God, computer viruses, physical or electronic break-ins and similar events or disruptions. Any of these events could cause deterioration in performance or interruption in these systems, delays, loss of critical data and lost revenues. Further, because our California headquarters and server location site are in seismically active areas, earthquakes present a particular serious risk of business disruption.

A loss of the services of our senior management and other key personnel could adversely affect the execution of our business strategy. 

We depend on the continued services of our senior management team. The loss of the services of these personnel could create a gap in management and could result in the loss of expertise necessary for us to execute our business strategy and thereby adversely affect our business.

Further, our ability to execute our business strategy also depends on our ability to continue to attract, retain and motivate qualified and skilled technical and creative personnel and skilled management, marketing and sales personnel. Competition for well-qualified employees in our industry is intense and our continued ability to compete effectively depends, in part, upon our ability to retain existing key employees and to attract new skilled employees as well. If we cannot attract and retain additional key employees or lose one or more of our current key employees, our ability to develop or market our products and attract or acquire new users could be adversely affected. Although we have established programs to attract new employees and provide incentives to retain existing employees, particularly senior management, we cannot be assured that we will be able to retain the services of senior management or other key employees, or that we will be able to attract new employees in the future who are capable of making significant contributions.

Any significant decline in desktop PC computer audiences accessing the Internet could significantly diminish the value of our solutions and cause us to lose revenue since most of our revenue generating solutions are currently not usable on competing platforms.

We focus primarily on the market related to personal computers, or “PCs.” To the extent that there is an even more significant shift by the market from PCs to mobile or tablet devices, we could experience a substantial reduction in revenues. Recently, the number of individuals who access the Internet through devices other than PCs, such as mobile phones and tablets, has increased dramatically. Our services are not yet available on these alternative platforms and devices. If this trend accelerates, and if we fail to successfully develop a mobile offering, we may fail to capture a sufficient share of an increasingly important portion of the market for online services, and our services will become less relevant and may fail to attract advertisers and web traffic.

Additionally, mobile devices are more controlled by the mobile device manufacturers and the providers of their operating systems. To the extent that these hardware and software providers use their position to advantage their own offerings, our opportunities could be more limited.

Our results of operations and financial condition may be adversely impacted by worldwide economic conditions.

In the event that the United States and/or Europe experiences an economic downturn or the current economic climate worsens, this could reduce our advertisers’ ability to spend on internet advertising. A reduction in the purchasing of our products, use of our services and consumer internet spending may possibly have a greater negative impact in the future on our sales and revenue generation, margins and operating expenses, and consequently have a material adverse effect on our business, results of operations and financial condition.

Geo-political uncertainties and instabilities may have negative impacts on our ability to operate and/or grow.

As we expand our business globally, we depend on a stable geo-political environment in the regions in which we operate. Should there be instabilities in regions where we sell, wish to sell or have outsourced development operations, we may find it difficult to maintain or grow our business. As we expand our advertiser base to cover Asia, the Middle East, Africa and Latin America, geo-political instabilities could have an adverse impact on our business. Additionally, we outsource our technology development to an engineering firm located in Bosnia and Herzegovina. The region has a history of geopolitical unrest and should a period of instability ensue, our technology development capabilities could be jeopardized.

New laws and regulations applicable to Internet advertising, privacy and data collection and protection, and uncertainties regarding the application or interpretation of existing laws and regulations, could harm our business.

Our business is conducted through the internet and therefore, among other things, we are subject to the laws and regulations that apply to online businesses around the world. These laws and regulations are becoming more prevalent in the United States, Europe and elsewhere and may impede the growth of internet marketing; and consequently our services.  These regulations and laws may cover user privacy, data collection and protection, content, use of “cookies”, access changes, “net neutrality,” pricing, intellectual property, distribution, protection of minors, consumer protection and taxation.

Many areas of the law affecting the internet remain largely unsettled, even in areas where there has been legislative action. This uncertainty can be compounded when services hosted in one jurisdiction are directed at users in another jurisdiction. Therefore, it is difficult to determine whether and how existing laws, such as those governing intellectual property, privacy and data collection and protection, libel, marketing, data security and taxation, apply to the Internet and our business.

Risks Related to New Holdco and New Holdco Securities

The majority of New Holdco’s common stock will be owned by current members of Future Ads, whose interests may not be aligned with the interests of Kitara stockholders.

Immediately after the consummation of the transactions, the former holders of Kitara common stock will own approximately 38.3% of the outstanding New Holdco common stock and the prior members of Future Ads will own the remaining approximately 61.7%. As a result of their stock ownership in New Holdco, the prior members of Future Ads will be able to control all matters requiring approval by New Holdco stockholders, including, but not limited to:

The interests of the current members of Future Ads may not be aligned with the interests of the former Kitara stockholders in these matters. In addition, this concentration of stock ownership may have a material adverse effect on the trading price of New Holdco’s common stock because investors may perceive disadvantages in owning shares in a company with significant stockholders. Such persons’ stock ownership also may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of our company, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.

Furthermore, under the stockholders’ agreement entered into between the current members of Future Ads and New Holdco, as long as the members own at least 50% of the outstanding New Holdco common stock, the members will have the right to designate a majority of the directors of the New Holdco board and, as long as the members own at least 20% of the outstanding New Holdco common stock, the members will have the right to designate at least 40% of the directors of the New Holdco board. As a result of their right to designate a majority of the directors, the members of Future Ads will have even greater influence over the management of New Holdco’s business.

New Holdco does not intend to pay cash dividends on its common stock in the foreseeable future.

Kitara has not paid any cash dividends on its common stock to date. New Holdco does not anticipate paying dividends in the foreseeable future, but expects to retain earnings to finance the growth of its business. Therefore, any return on investments will only occur if the market price of New Holdco common stock appreciates. In addition, the terms of the debt financing obtained in connection with the transactions likely will restrict New Holdco’s ability to pay dividends on its common stock.

There has been no prior public market for New Holdco common stock.

Prior to the completion of the merger, no public market will have existed for the shares of New Holdco common stock that you will receive in the merger. Your shares of New Holdco common stock will be listed on the OTCBB. However, an active public market for New Holdco common stock may not develop or be sustained, which could affect your ability to sell, or depress the market price of, the New Holdco common stock. We are unable to predict whether an active trading market for New Holdco common stock will develop or will be sustained.

The public price and trading volume of New Holdco common stock may be volatile.

The price and volume of New Holdco common stock may be volatile and subject to fluctuations. Some of the factors that could cause fluctuations in the stock price or trading volume of New Holdco common stock include:

There can be no assurance that the price of New Holdco common stock will not fluctuate or decline significantly. The stock market in recent years has experienced considerable price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of individual companies and that could materially adversely affect the price of New Holdco common stock, regardless of New Holdco’s operating performance. The market prices of stock in technology and advertising companies have been especially volatile. You should also be aware that price volatility might be worse if the trading volume of shares of the common stock is low.

New Holdco will have the ability to issue “blank check” preferred stock, which could affect the rights of holders of New Holdco common stock.

New Holdco’s certificate of incorporation allows the board of directors of New Holdco to issue 1,000,000 shares of preferred stock and to set the terms of such preferred stock. The terms of such preferred stock may materially adversely impact the dividend and liquidation rights of holders of New Holdco common stock.

The requirements of being a public company, including the requirements of the Sarbanes-Oxley Act of 2002, may strain the resources of New Holdco and its subsidiaries, increase their costs and distract their management, and New Holdco and its subsidiaries may be unable to comply with these requirements in a timely or cost-effective manner.

Neither New Holdco nor Future Ads has any history operating as a publicly-traded company. Following consummation of the merger, as a public company, New Holdco and its subsidiaries, including Future Ads, will need to comply with certain laws and regulations and public reporting requirements, including the reporting obligations of the Securities Exchange Act of 1934, as amended, or the “Exchange Act,” certain corporate governance provisions of the Sarbanes-Oxley Act of 2002, the Dodd-Frank Act and other laws, regulations and rules of the SEC, all of which New Holdco and Future Ads are not required to comply with as private companies. Complying with these statutes, regulations and requirements will increase New Holdco’s and Future Ads’ general and administrative costs as a result of higher expenses associated with director and officer liability insurance, audit work, legal counsel, regulatory requirements and the establishment and maintenance of heightened corporate governance measures and management oversight. Compliance will occupy a significant portion of New Holdco’s board of directors’ and management’s time.

New Holdco and Future Ads will need to:

If New Holdco and its subsidiaries are unable to accomplish these objectives in a timely and effective fashion, their ability to comply with its public reporting requirements and other rules that apply to public companies could be impaired, and New Holdco may be subject to sanction or investigation by the SEC.

After the merger, New Holdco’s failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could result in a restatement of its financial statements, cause investors to lose confidence in its financial statements and have a material adverse effect on New Holdco’s business and stock price.

Neither New Holdco nor Future Ads is currently required to evaluate its internal control over financial reporting in the manner that is currently required of certain public companies in the United States. As a public company New Holdco’s internal accounting controls, including those applicable to Future Ads business, will need to meet all standards applicable to companies with publicly traded securities. Effective internal controls are necessary for New Holdco to provide reliable financial reports, to help mitigate the risk of fraud and to operate successfully as a publicly traded company. As a public company, New Holdco will be required to document and test its internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC and the Public Company Accounting Oversight Board, including annual management assessments of the effectiveness of New Holdco’s internal control over financial reporting and, if New Holdco ceases to be a non-accelerated filer as defined under rules and regulations of the SEC, a report by New Holdco’s independent registered public accounting firm that addresses its internal control over financial reporting. The requirement for management’s report will apply starting with the annual report for the year ended December 31, 2015 and the requirement for a report by New Holdco’s independent registered public accounting firm will apply starting with the annual report for the first year ending on or after December 31, 2015 in which New Holdco has a public float of at least $75,000,000 as of the end of its second fiscal quarter.

As New Holdco prepares to comply with Section 404 of the Sarbanes-Oxley Act with respect to internal control over financial reporting, it may identify significant deficiencies or errors that it may not be able to remediate in time to meet its deadline for compliance. For example, Kitara has identified certain material weaknesses in its internal controls, as discussed above. Testing and maintaining internal control over financial reporting can divert New Holdco’s management’s attention from other matters that are important to its business. New Holdco may not be able to conclude on an ongoing basis that it has effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act or New Holdco’s independent registered public accounting firm may not be able or willing to issue a favorable assessment if New Holdco concludes that its internal control over financial reporting is ineffective. If either New Holdco is unable to conclude that it has effective internal control over financial reporting or New Holdco’s independent registered public accounting firm is unable to provide New Holdco with an unqualified report, investors could lose confidence in New Holdco’s reported financial information and New Holdco itself, which could result in a decline in the market price of New Holdco’s shares, and cause New Holdco to fail to meet its future reporting obligations, which in turn could impact its ability to raise additional financing if needed in the future.

Once New Holdco is a public company, if it fails to implement the requirements of Section 404 of the Sarbanes-Oxley Act with respect to internal control over financial reporting in a timely manner, it may also be subject to sanctions or investigation by regulatory authorities such as the SEC.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus and the documents that are incorporated into this proxy statement/prospectus by reference may contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. We consider such statements to be “forward-looking statements.” You can typically identify forward-looking statements by the use of forward-looking words, such as “may,” “will,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “potential,” “plan,” “aim,” “seek,” “forecast” and other similar words. These include, but are not limited to, statements relating to the strategy of New Holdco, the synergies and the benefits that we expect to achieve in the transaction discussed herein, including future financial and operating results, the combined company’s plans, objectives, expectations and intentions, projections related to future financial information of Future Ads and Kitara and other statements that are not historical facts. Those statements represent our intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors. Many of those factors are outside the control of New Holdco, Future Ads and Kitara, and could cause actual results to differ materially from the results expressed or implied by those forward-looking statements. In addition to the risk factors described under “Risk Factors” beginning on page 23, those factors include:

The areas of risk and uncertainty described above should be considered in connection with any written or oral forward-looking statements that may be made after the date of this proxy statement/prospectus by Kitara or Future Ads or anyone acting for any or all of them.

Kitara and New Holdco also caution the reader that undue reliance should not be placed on any forward-looking statements, which speak only as of the date of this proxy statement/prospectus. Neither Kitara nor New Holdco undertakes any duty or responsibility to update any of these forward-looking statements to reflect events or circumstances after the date of this proxy statement/prospectus or to reflect actual outcomes.

THE SPECIAL MEETING

Date, Time and Place of the Special Meeting

The Special Meeting is scheduled to be held on December [●], 2014 at 10:00 a.m., local time, at the offices of our general counsel, Graubard Miller, located at The Chrysler Building, 405 Lexington Avenue, 11^th Floor, New York, New York 10174.

Purpose of the Special Meeting

At the Special Meeting, Kitara stockholders will be asked to consider and vote upon:

Record Date; Outstanding Shares Entitled to Vote

The board of directors of Kitara has fixed November [●], 2014, as the record date for the Special Meeting. If you were a Kitara stockholder at the close of business on the record date, you are entitled to vote your Kitara shares at the Special Meeting. As of the record date, there were [●] shares of Kitara common stock, par value $0.0001 per share, outstanding and entitled to vote at the Special Meeting.

Ownership of Kitara Common Stock

If your shares of Kitara common stock are registered directly in your name with Kitara’s transfer agent, Continental Stock Transfer & Trust Company, you are considered, with respect to those shares of Kitara common stock, the “stockholder of record.” This proxy statement/prospectus and the enclosed proxy card have been sent directly to you by Kitara.

If your shares of Kitara common stock are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares of Kitara common stock held in “street name.” This proxy statement/prospectus has been forwarded to you by your broker, bank or nominee who is considered, with respect to those shares of Kitara common stock, the stockholder of record. As the beneficial owner of shares of Kitara common stock held in street name, you have the right to direct your broker, bank or nominee how to vote your shares of Kitara common stock by using the voting instruction card included in the mailing or by following their instructions for voting by telephone or the Internet.

Quorum

In order to transact business at the Special Meeting, a quorum of Kitara stockholders must be present. A quorum will exist if holders of a majority of the outstanding shares of Kitara common stock entitled to vote on a matter are present in person, or represented by proxy, at the Special Meeting. Accordingly, the presence at the Special Meeting, either in person or by proxy, of holders of at least [●] shares of Kitara common stock will be required to establish a quorum. If a quorum is not present, the Special Meeting may be adjourned, pending stockholder approval, to a later date.

Holders of shares of Kitara common stock present in person at the Special Meeting but not voting, and shares of Kitara common stock for which Kitara has received proxies indicating that their holders have abstained, will be counted as present at the Special Meeting for purposes of determining whether a quorum is established.

Vote Required

Under Delaware law, the affirmative vote of the holders of at least a majority of the outstanding shares of Kitara common stock is required to approve the merger agreement.

The affirmative vote of the holders of at least a majority of the outstanding shares of Kitara common stock who are present at the meeting, in person or by proxy, and entitled to vote on the applicable matter is required to approve:

Because approval of the Merger Proposal requires the affirmative vote of the majority of the outstanding shares of common stock of Kitara as of the record date, if you mark “abstain” or fail to instruct your bank, broker or other nominee on how to vote the shares of Kitara common stock you hold in street name on the proposed merger, it will have the same effect as a vote “AGAINST” the Merger Proposal.

If you mark “abstain” with respect to the Charter Amendment Proposals, the Equity Plan Proposal or Adjournment Proposal, it will have the same effect as a vote “AGAINST” the proposal. If you fail to instruct your bank, broker or other nominee on how to vote the shares of Kitara common stock you hold in street name with respect to the Charter Amendment Proposals, the Equity Plan Proposal or Adjournment Proposal, your shares of Kitara common stock will not be treated as present at the Special Meeting and entitled to vote on that proposal, and as such, your failure to instruct your broker or nominee how to vote will not have any effect on the vote with respect to that proposal.

Recommendation of Kitara’s Board of Directors

The Merger Proposal:  Kitara’s board of directors unanimously determined that the merger agreement is advisable, fair and in the best interests of Kitara and its stockholders and unanimously approved the merger agreement. The Kitara board of directors recommends that the stockholders of Kitara vote “FOR” the Merger Proposal. Additional information on the recommendation of Kitara’s board of directors is set forth in “The Transactions — Kitara’s Reasons for the Transactions and Recommendation of Kitara’s Board of Directors” beginning on page 78.

Kitara stockholders should carefully read this proxy statement/prospectus in its entirety for additional information concerning the merger agreement and the proposed transaction. In addition, Kitara stockholders are directed to the merger agreement, as amended, which is attached as Annex A to this proxy statement/prospectus and is incorporated by reference as an exhibit to the registration statement of which this proxy statement/prospectus is a part.

The Charter Amendment Proposals: Kitara’s board of directors unanimously recommends that the stockholders of Kitara vote “FOR” each of the Charter Amendment Proposals.

The Equity Plan Proposal:  Kitara’s board of directors unanimously recommends that the stockholders of Kitara vote “FOR” the Equity Plan Proposal.

The Adjournment Proposal:  Kitara’s board of directors unanimously recommends that the stockholders of Kitara vote “FOR” the Adjournment Proposal.

Voting by Kitara’s Directors and Executive Officers

As of the record date, Kitara’s directors and executive officers and certain of their affiliates beneficially owned more than 50% of the total votes entitled to be cast at the Special Meeting. Accordingly, Kitara’s directors and executive officers and their affiliates may approve the Merger Proposal, the Charter Amendment Proposals, the Equity Plan Proposal and the Adjournment Proposal without the affirmative vote of any other Kitara stockholder. Under the voting agreement, Kitara’s directors and executive officers and their affiliates have agreed, among other things, to vote their shares of Kitara common stock in favor of the Merger Proposal and the Equity Plan Proposal. They have also agreed to vote in favor of any other matters necessary for consummation of the merger and any other transactions contemplated in the merger agreement, which would include the Charter Amendment Proposals and the Adjournment Proposal.

How to Vote

After reading and carefully considering the information contained in this proxy statement/prospectus, please vote promptly. In order to ensure your vote is recorded, please submit your proxy or voting instructions as instructed below as soon as possible, even if you plan to attend the Special Meeting.

Internet. You can vote over the Internet by following the instructions included with your proxy card. If you vote over the Internet, do not return your proxy card. The availability of Internet voting for beneficial owners holding Kitara shares in street name will depend on the voting process of your broker, bank or nominee. Please follow the voting instructions in the materials you receive from your broker, bank or nominee.

Telephone. You can vote by telephone by following the instructions included with your proxy card. You will then be prompted to enter the control number printed on your proxy card and to follow subsequent instructions. Telephone voting is available 24 hours a day. If you vote by telephone, do not return your proxy card. The availability of telephone voting for beneficial owners holding Kitara shares in street name will depend on the voting process of your broker, bank or nominee. Please follow the voting instructions in the materials you receive from your broker, bank or nominee.

Mail. You can vote by mail by simply completing, signing, dating and mailing your proxy card or voting instruction card in the postage-paid envelope included with this proxy statement/prospectus.

In addition, all stockholders may vote in person at the special meeting. You may also be represented by another person at the meeting by executing a proper proxy designating that person as your proxy. If you are a beneficial owner of shares held in street name, you must obtain a legal proxy from your broker, bank or nominee and present it to the inspectors of election with your ballot when you vote at the meeting.

Attending the Special Meeting

All Kitara stockholders as of the record date may attend the Special Meeting. If you are a beneficial owner of Kitara shares held in street name, you must provide evidence of your ownership of Kitara shares, which you can obtain from your broker, banker or nominee.

Voting of Proxies

If you vote by Internet, telephone or by completing, signing, dating and mailing your proxy card or voting instruction card, your Kitara shares will be voted in accordance with your instructions. If you are a stockholder of record and you sign, date and return your proxy card but do not indicate how you want to vote or do not indicate that you wish to abstain, your Kitara shares will be voted “FOR” the Merger Proposal, “FOR” the Charter Amendment Proposals, “FOR” the Equity Plan Proposal and “FOR” the Adjournment Proposal.

Voting of Kitara Shares Held in Street Name

Kitara stockholders who hold shares of Kitara common stock in a stock brokerage account or through a bank, broker or other nominee (referred to in this proxy statement/prospectus as “street name” stockholders) who wish to vote at the Special Meeting should be provided a voting instruction card by the institution that holds their Kitara shares. If this has not occurred, contact the institution that holds your Kitara shares. A number of banks and brokerage firms participate in a program that also permits stockholders whose Kitara shares are held in “street name” to direct their vote by telephone or over the Internet. If your Kitara shares are held in an account at a bank or brokerage firm that participates in such a program, you may direct the vote of these Kitara shares by telephone or over the Internet by following the voting instructions enclosed with the proxy form from the bank or brokerage firm. The Internet and telephone proxy procedures are designed to authenticate stockholders’ identities, to allow stockholders to give their proxy voting instructions and to confirm that those instructions have been properly recorded. Votes directed by telephone or over the Internet through such a program must be received by 11:59 p.m. eastern time on December [●], 2014. Directing the voting of your Kitara shares will not affect your right to vote in person if you decide to attend the Special Meeting; however, you must first obtain a signed and properly executed legal proxy from your bank, broker or other nominee to vote your Kitara shares held in “street name” at the Special Meeting. Requesting a legal proxy prior to the deadline described above will automatically cancel any voting directions you have previously given by telephone or over the Internet with respect to your Kitara shares.

Revoking your Proxy

If you are a stockholder of record you can revoke your vote at any time before your proxy is voted at the Special Meeting. You can do this in one of three ways:

If you choose either of the first two methods, you must submit your notice of revocation or your new proxy no later than the beginning of the Special Meeting. If you are a beneficial owner of Kitara shares held in street name, you may submit new voting instructions by contacting your broker, bank or nominee. You may also vote in person at the Special Meeting if you obtain a legal proxy from your broker, bank or nominee and present it to the inspectors of election with your ballot when you vote at the meeting.

Proxy Solicitations

Kitara is soliciting proxies for the Special Meeting from Kitara stockholders. Kitara will bear the cost of soliciting proxies from Kitara stockholders, including the expenses incurred in connection with the printing and mailing of this proxy statement/prospectus. In addition to this mailing, Kitara’s directors, officers and employees (who will not receive any additional compensation for such services) may solicit proxies by telephone or in-person meeting.

Kitara will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to the beneficial owners of Kitara common stock.

Other Business

Kitara’s board of directors is not aware of any other business to be acted upon at the Special Meeting.

Adjournments and Postponements

Adjournments or postponements may be made for the purpose of, among other things, soliciting additional proxies. Any adjournment may be made from time to time with the approval of a majority of the votes present in person at the Special Meeting or represented by proxy at the time of the vote, whether or not a quorum exists. Kitara is not required to notify stockholders of any adjournment if the time and place of the adjourned meeting are announced at the meeting at which the adjournment is taken, unless after the adjournment a new record date is fixed for the adjourned meeting.

In addition, at any time prior to convening the Special Meeting, the Special Meeting may be postponed without the approval of Kitara stockholders. If postponed, Kitara will publicly announce the new meeting date.

At any adjourned or postponed meeting, Kitara may transact any business that it might have transacted at the original meeting, provided that a quorum is present at such adjourned or postponed meeting. Proxies submitted by Kitara stockholders for use at the Special Meeting will be used at any adjournment or postponement of the meeting. References to the Special Meeting in this proxy statement/prospectus are to the Special Meeting, as the same may be adjourned or postponed.

PROPOSAL NO. 1 — THE MERGER PROPOSAL

As discussed in this proxy statement/prospectus, Kitara is requesting that its stockholders adopt the merger agreement and approve the merger, which is part of a single integrated transaction with the exchange. Approval of this proposal is a condition to the completion of the merger and the exchange.

Kitara stockholders should read carefully this proxy statement/‌prospectus in its entirety for more detailed information concerning Kitara, Future Ads and the merger agreement, exchange agreement and the transactions contemplated thereby, including the sections entitled “The Transactions” beginning on page 76, “The Agreements — Description of the Merger Agreement” beginning on page 85 and “The Agreements — Description of the Exchange Agreement” beginning on page 86. The merger agreement and exchange agreement are attached as Annex A and Annex B, respectively, to this proxy statement/prospectus. You are urged to read carefully the entire merger agreement and the entire exchange agreement before voting on this proposal.

The vote on this Proposal No. 1 is a vote separate and apart from the vote on the other proposals. Accordingly, you may vote for Proposal No. 1 on the adoption of the merger agreement and approval of the merger and vote against any of the other proposals, and vice versa.

Vote Required for Approval

The merger agreement will be approved if the holders of at least a majority of the outstanding shares of Kitara common stock vote “FOR” this proposal.

Because this proposal requires the affirmative vote of the majority of the outstanding shares of common stock of Kitara as of the record date, if you mark “abstain” or fail to instruct your bank, broker or other nominee on how to vote the shares of Kitara common stock you hold in street name on the proposed merger, it will have the same effect as a vote “AGAINST” the merger.

Under the voting agreement, the supporting parties have agreed, among other things, to vote their shares of Kitara common stock in favor of the adoption of the merger agreement and approval of the merger. The supporting parties hold more than 50% of the shares of Kitara common stock outstanding. Accordingly, the supporting parties may adopt the merger agreement and approve the merger without the affirmative vote of any other Kitara stockholder.

Recommendation of the Kitara Board of Directors

THE KITARA BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THE KITARA STOCKHOLDERS VOTE “FOR” THE ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER. 

PROPOSAL NOS. 2A TO 2F — THE CHARTER AMENDMENT PROPOSALS

Kitara and Future Ads agreed as part of the negotiations for the exchange agreement that the New Holdco certificate of incorporation would be in the form attached as Annex H to this proxy statement/‌prospectus. It is the position of the SEC that Kitara is required to submit to its stockholders for approval certain of the provisions of the New Holdco certificate of incorporation that differ materially from those set forth in the Kitara’s amended and restated certificate of incorporation and bylaws.

Kitara stockholders should read carefully this proxy statement/‌prospectus in its entirety for more detailed information concerning the New Holdco certificate of incorporation, including the sections entitled “—Proposal 2A — Increase in Authorized Shares,” “—Proposal 2B — Super-Majority Requirement for Removal of Directors,” “—Proposal 2C — Super-Majority Requirement for Amendments to Certificate of Incorporation,” “—Proposal 2D — Super-Majority Requirement for Amendments to Bylaws,” “—Proposal 2E — Opt Out of Section 203” and “—Proposal 2F — Exclusive Forum Provision” below. The New Holdco certificate of incorporation is attached as Annex H to this proxy statement/‌prospectus. You are urged to read carefully the entire New Holdco certificate of incorporation before voting on this proposal.

The Kitara board of directors believes that approval of each of the provisions of the New Holdco certificate of incorporation set forth below is in the best interests of Kitara’s shareholders for the reasons set forth below. Furthermore, the provisions were negotiated by Kitara and the other parties to the exchange agreement and are considered by the parties to be an integral part of the larger negotiated transaction approved and recommended by the Kitara board of directors.

Proposal 2A — Increase in Authorized Shares

Kitara is requesting that its stockholders approve the New Holdco certificate of incorporation to the extent it provides that New Holdco is authorized to issue 500,000,000 shares of common stock, which is 200,000,000 more shares than Kitara is authorized to issue under the Kitara amended and restated certificate of incorporation.

Upon closing of the transactions, New Holdco estimates that 250,097,333 shares of New Holdco common stock will be issued and outstanding. In addition, New Holdco estimates that 26,187,129 shares of common stock will be reserved for issuance under the 2014 Plan, 8,320,000 shares will be reserved for issuance under outstanding stock options and 6,363,636 will be reserved for issuance under outstanding warrants.

The authorization of additional shares of common stock will enable New Holdco to meet its obligations under the exchange agreement complete equity financing to fund the $10,000,000 of deferred consideration payable to the members of Future Ads and its obligations under its equity compensation plans and under its warrants, while retaining flexibility to respond to future business needs and opportunities. For example, the additional shares may be used for financing New Holdco’s business, for acquiring other businesses, for forming strategic partnerships and alliances, for granting equity compensation to our employees or for stock dividends and stock splits.

The New Holdco board of directors will be authorized to issue the additional shares of common stock, in its discretion, without further approval of the stockholders, and the New Holdco board of directors does not intend to seek stockholder approval prior to any issuance of the shares of common stock, unless stockholder approval is required by applicable law or securities exchange rules. Although New Holdco reviews from time to time various transactions that could result in the issuance of common stock, New Holdco has no current plan, agreement, commitment, understanding or arrangement to issue additional shares of its common stock, except for issuances described in the preceding paragraph.

The issuance of additional shares of common stock will have a dilutive effect on earnings per share and on the equity and voting power of the then-existing holders of New Holdco capital stock, including the current Kitara stockholders. It may also adversely affect the market price of the common stock. However, if the issuance of additional shares of common stock allows New Holdco to pursue its business plan and grow its business, the market price of its common stock may increase.

While not intended as an anti-takeover provision, and while the threat of a takeover attempt will remain attenuated as long as ownership is concentrated with the members and New Holdco management and the stockholders’ agreement remains in effect, the additional shares of common stock ultimately could be used to oppose a hostile takeover attempt or to delay or prevent changes in control or management of the company. For example, without further stockholder approval, the New Holdco board of directors could strategically sell shares of common stock to purchasers who would oppose a takeover or favor the current board of directors. Although the size of the New Holdco authorized capital has been determined based on business and financial considerations and not by the threat of any hostile takeover attempt (nor is the board of directors currently aware of any such attempts directed at the company), approval of the proposal could facilitate future efforts by New Holdco to deter or prevent changes in control of the company, including transactions in which the stockholders might otherwise receive a premium for their shares over then current market prices.

Proposal 2B — Super-Majority Requirement for Removal of Directors

Kitara is requesting that its stockholders approve the New Holdco certificate of incorporation to the extent it provides that, except for such additional directors, if any, as are elected by the holders of any series of preferred stock as provided for or fixed by the terms of such preferred stock, and unless otherwise restricted by law, any director or the entire board of directors may be removed, with or without cause, by the affirmative vote of at least 66 2/3% of the voting power of the stock outstanding and entitled to vote thereon. The Kitara amended and restated certificate of incorporation does not contain a similar provision. As a result, any director of Kitara may currently be removed, with or without cause, by the affirmative vote of a majority of the shares of common stock entitled to vote an election of directors.

This super-majority requirement for the removal of directors will enable New Holdco to maintain continuity of management and also will help ensure the negotiated terms of the transactions relating to management of New Holdco are not circumvented. The Kitara board of directors believes that maintaining continuity of New Holdco management in accordance with the provisions of the transactions will permit more effective long-term strategic planning with respect to the businesses of Kitara and Future Ads and will promote the creation of long-term value for the current Kitara stockholders.

While the threat of a takeover attempt will remain attenuated as long as ownership is concentrated with the members and New Holdco management and the stockholders’ agreement remains in effect, the super-majority requirement for the removal of directors ultimately may delay or prevent changes in control or management of the company. For example, a takeover bidder who acquired a majority but less than 66 2/3% of the New Holdco common stock would not be able to immediately remove and replace the board of directors, but instead would have to wait until the next annual meeting. Approval of the proposal could in the future deter or prevent changes in control of the company, including transactions in which the stockholders might otherwise receive a premium for their shares over then current market prices.

Proposal 2C — Super-Majority Requirement for Amendments to Certificate of Incorporation

Kitara is requesting that its stockholders approve the New Holdco certificate of incorporation to the extent it provides that, except as otherwise provided in the certificate of incorporation, and in addition to any requirements of law, the affirmative vote of at least 66 2/3% of the voting power of the stock outstanding and entitled to vote thereon, shall be required to amend any provision of the New Holdco certificate of incorporation. The Kitara amended and restated certificate of incorporation does not contain a similar provision. As a result, any amendment to the Kitara certificate of incorporation may currently be approved by the affirmative vote of a majority of the shares of common stock outstanding and entitled to vote thereon.

This super-majority requirement for the amendment of the certificate of incorporation will help ensure the negotiated terms of the New Holdco certificate of incorporation are not changed, deleted or circumvented, including the provision requiring a super-majority vote in order to remove directors of New Holdco.

While the threat of a takeover attempt will remain attenuated as long as ownership is concentrated with the members and New Holdco management and the stockholders’ agreement remains in effect, the super-majority requirement for the amendment of the certificate of incorporation, together with the super-majority requirement for the amendment of the bylaws, ultimately may delay or prevent changes in control or management of the company. For example, a takeover bidder who acquired a majority but less than 66 2/3% of the New Holdco common stock would not be able to remove provisions of the certificate of incorporation or bylaws that interfered with such stockholder’s ability to assert control over the company, including the provision related to the removal of directors. Approval of the proposal could in the future deter or prevent changes in control of the company, including transactions in which the stockholders might otherwise receive a premium for their shares over then current market prices.

Proposal 2D — Super-Majority Requirement for Amendments to Bylaws by the Stockholders of New Holdco

Kitara is requesting that its stockholders approve the New Holdco certificate of incorporation to the extent it provides that, except as otherwise provided in the certificate of incorporation and bylaws, and in addition to any requirements of law, the affirmative vote of at least 66 2/3% of the voting power of the stock outstanding and entitled to vote thereon, shall be required for the stockholders of New Holdco to amend any provision of the New Holdco bylaws. The Kitara amended and restated certificate of incorporation does not contain a similar provision. As a result, any amendment to the Kitara bylaws by the Kitara stockholders may currently be approved by the affirmative vote of a majority of the shares of common stock present in person or by proxy and entitled to vote thereon. The New Holdco board of directors is authorized to amend the bylaws without regard to the super-majority requirement.

The reasons for, and the potential adverse consequences of, the super-majority requirement for amendments to New Holdco’s bylaws by the stockholders of New Holdco are substantially the same as for the super-majority requirement for amendments to New Holdco’s certificate of incorporation.

Proposal 2E — Opt Out of Section 203

Kitara is requesting that its stockholders approve the New Holdco certificate of incorporation to the extent it provides that New Holdco shall not be bound or governed by, or otherwise subject to, Section 203 of the Delaware General Corporation Law. The Kitara amended and restated certificate of incorporation does not contain a similar provision.

Section 203 generally provides that any person or entity who acquires 15% or more in voting power of a corporation's voting stock (thereby becoming an “interested stockholder”) may not engage in a wide range of transactions (referred to as “business combinations”) with the corporation for a period of three years following the date the person became an interested stockholder, subject to certain exceptions. The exceptions are (i) the board of directors of the corporation has approved, prior to that acquisition date, either the business combination or the transaction that resulted in the person becoming an interested stockholder, (ii) upon consummation of the transaction that resulted in the person becoming an interested stockholder, that person owns at least 85% in voting power of the corporation's voting stock outstanding at the time the transaction commenced (excluding certain shares), or (iii) the business combination is approved by the board of directors and authorized, at a shareholder meeting and not by written consent, by the affirmative vote of at least 66 2/3% in voting power of the outstanding voting stock not owned by the interested stockholder. Under Section 203 of the DGCL, a corporation can elect not to be subject to Section 203 if the corporation inserts a provision to that effect in its certificate of incorporation or if the stockholders of the corporation insert a provision to that effect in the bylaws of the corporation.

The provision opting out of Section 203 is an integral part of the transaction negotiated by Future Ads. If the Section 203 Proposal is adopted, it will increase the flexibility for the members of Future Ads to sell an interest of between 15% and 85% in voting power of their voting stock to a third party. If the opt out provision is approved and becomes effective, the acquirer would not be subject to the restrictions on business combinations set forth in Section 203. The members have advised the New Holdco board of directors that they have no present plan or intention of seeking to sell any of their shares of New Holdco common stock. Furthermore, in recommending the provision opting out from Section 203, the Kitara board of directors considered the fact that, as the members will be the controlling stockholders of New Holdco, the members will have the power to cause New Holdco to opt out of Section 203 on their own by consent or causing New Holdco to call a special meeting of shareholders for that purpose.

Proposal 2F — Exclusive Forum Provision

Kitara is requesting that its stockholders approve the New Holdco certificate of incorporation to the extent it provides that, unless New Holdco consents to an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for any stockholder to bring (a) any derivative action on behalf of New Holdco, (b) any action asserting a claim of breach of fiduciary duty owed by any director, officer or employee of New Holdco to New Holdco or its stockholders, (c) any action asserting a claim arising pursuant to any provision of the DGCL or the certificate of incorporation or bylaws, or (d) any action asserting a claim governed by the internal affairs doctrine shall be a state court located within the State of Delaware, in all cases subject to the court having personal jurisdiction over the indispensable parties named as defendants. The Kitara amended and restated certificate of incorporation does not contain a similar provision.

The exclusive forum provision is intended to assist New Holdco in avoiding multiple lawsuits in multiple jurisdictions on matters relating to the corporate law of Delaware. The provision will only regulate the forum where New Holdco stockholders may file claims relating to the specified intra-corporate disputes. The provision does not restrict the ability of New Holdco stockholders to bring such claims, nor the remedies available if such claims are ultimately successful.

The Kitara board of directors believes that New Holdco’s stockholders will benefit from having intra-corporate disputes litigated in the courts of the State of Delaware. The Delaware courts are widely regarded as the preeminent court for the determination of disputes involving a corporation’s internal affairs in terms of precedent, experience and focus. The court’s considerable expertise has led to the development of a substantial and influential body of case law interpreting Delaware’s corporate law. This provides New Holdco and its stockholders with more predictability regarding the outcome of intra-corporate disputes. In addition, the Delaware courts have developed streamlined procedures and processes that help provide relatively quick decisions for litigating parties. This accelerated schedule can limit the time, cost, and uncertainty of litigation for all parties. The selection of the Delaware Court of Chancery as the exclusive forum for intra-corporate disputes would reduce the risks that New Holdco could be forced to waste resources defending against duplicative suits and that the outcome of cases in multiple jurisdictions could be inconsistent, even though each forum purports to follow Delaware law.

Vote Required for Approval of Each Charter Amendment Proposal

The Charter Amendment Proposals will not be presented at the Special Meeting unless Proposal No. 1, the Merger Proposal, is approved. The vote on each Charter Amendment Proposal is a vote separate and apart from the vote on the other proposals. Accordingly, you may vote for any Charter Amendment Proposal and vote against any of the other proposals, including any of the other Charter Amendment Proposals, and vice versa.

Each of the Charter Amendment Proposals will be approved if the holders of at least a majority of the outstanding shares of Kitara common stock who are present at the meeting, in person or by proxy, and entitled to vote on the proposal vote “FOR” each proposal.

If you mark “abstain” with respect to any of these proposals, it will have the same effect as a vote “AGAINST” such proposal. If you fail to instruct your bank, broker or other nominee on how to vote the shares of Kitara common stock you hold in street name with respect to any of these proposals, your shares of Kitara common stock will not be treated as present at the Special Meeting and entitled to vote on these proposals, and as such, your failure to instruct your bank, broker or nominee how to vote will not have any effect on the vote with respect to these proposals.

Under the voting agreement, the supporting parties have agreed, among other things, to approve any other matters necessary for consummation of the merger and any other transactions contemplated in the merger agreement, which would include the Charter Amendment Proposals. The supporting parties hold more than 50% of the shares of Kitara common stock outstanding. Accordingly, the supporting parties may approve the Charter Amendment Proposals without the affirmative vote of any other Kitara stockholder.

Recommendation of the Kitara Board of Directors

THE KITARA BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THE KITARA STOCKHOLDERS VOTE “FOR” EACH OF THE CHARTER AMENDMENT PROPOSALS.

PROPOSAL NO. 3 — THE EQUITY PLAN PROPOSAL

Kitara is requesting that its stockholders approve the 2014 Plan. On October 9, 2014, the New Holdco board of directors and the sole stockholder of New Holdco adopted the 2014 Plan, subject to the approval of Kitara’s stockholders. If approved by the Kitara stockholders at the Special Meeting, the 2014 Plan will become effective on the consummation of the transactions.

Kitara stockholders should read carefully this proxy statement/‌prospectus in its entirety for more detailed information concerning the 2014 Plan, including the section entitled “—Summary of the 2014 Plan” below. The 2014 Plan is attached as Annex C to this proxy statement/‌prospectus. You are urged to read carefully the entire 2014 Plan before voting on this proposal.

This Proposal No. 3 will not be presented at the Special Meeting unless Proposal No. 1, the Merger Proposal, is approved. The vote on this Proposal No. 3 is a vote separate and apart from the vote on the other proposals. Accordingly, you may vote for Proposal No. 3 on the 2014 Plan and vote against any of the other proposals, and vice versa.

Background

Kitara currently sponsors the 2012 Plan and the 2013 Plan, together the “Existing Plans,” each of which provides for the award of stock options, restricted stock, stock appreciation rights and other stock-based awards. In addition, Kitara granted a stock option to purchase 750,000 shares of Kitara common stock to an affiliate of Jonathan Ledecky, which award was not made under either such plan. Each of the Existing Plans and the non-plan option will be assumed by New Holdco upon consummation of the merger and the non-plan option and all outstanding awards under the Existing Plans will survive. However, New Holdco will amend the Existing Plans so that no further awards may be issued under such plans after the closing. Assuming no further grants are made prior to the closing and no outstanding awards are forfeited or otherwise terminated prior to the closing, it is expected that at the time of the closing 8,320,000 shares will be reserved for issuance pursuant to the non-plan option and outstanding stock option awards under the Existing Plans. These stock options have a weighted average exercise price of $0.30 per share and weighted average remaining contractual term of 3.8 years.

All of the awards (including the non-plan option and the stock options under the Existing Plans) outstanding at June 30, 2014 were granted after the acquisitions of Kitara Media and NYPG on July 1, 2013. Kitara’s burn rate during the 12-month period from July 1, 2013 to June 30, 2014, which it defines as the total number of shares subject to awards granted during such period that were not subsequently forfeited, divided by the weighted average common shares outstanding during such period, was approximately 12.7%. However, there can be no assurance that New Holdco’s annual burn rate after the transactions will be substantially similar to Kitara’s burn rate during such 12-month period.

Subject to approval of the 2014 Plan by Kitara’s shareholders, a total of nine percent of the fully diluted outstanding shares of New Holdco common stock as of the closing (which is estimated to be approximately 290,968,097 shares) will be available for future awards under the 2014 Plan. In addition, New Holdco will have an aggregate of approximately 8,320,000 shares subject to the non-plan option and outstanding stock options under the Existing Plans as described above. Accordingly, immediately after the closing, a total of approximately 34,507,129 shares will be reserved for issuance under all of the equity compensation arrangements. This amount represents approximately 13.8% of the shares of New Holdco common stock estimated to be outstanding immediately after the transactions.

Summary of the 2014 Plan

The following summary of the principal features of the 2014 Plan is qualified in its entirety by reference to the 2014 Plan itself set forth in Annex C.

Purpose

The purpose of the 2014 Plan is to enable New Holdco to offer its employees, officers, directors and consultants whose past, present and/or potential future contributions to New Holdco have been, are, or will be important to its success, an opportunity to acquire a proprietary interest in New Holdco. The various types of incentive awards that may be provided under the plan are intended to enable New Holdco to respond to changes in compensation practices, tax laws, accounting regulations and the size and diversity of its business.

Administration

The 2014 Plan is administered by the New Holdco board of directors or a committee of the New Holdco board of directors comprised of at least two directors. If administered by a committee, the committee will be comprised solely of “outside directors,” as defined in the regulations issued under Section 162(m) of the Code, and “non-employee” directors, as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended.  If no committee is designated, then all references in this description of the plan to “committee” shall mean the board. Subject to the provisions of the plan, the committee determines, among other things, the persons to whom from time to time awards may be granted, the specific type of awards to be granted, the number of shares subject to each award, share prices, any restrictions or limitations on the awards, and any vesting, exchange, surrender, cancellation, acceleration, termination, exercise or forfeiture provisions related to the awards.

Stock Subject to the Plan 

The board of directors has reserved nine percent of the fully diluted shares of New Holdco common stock to be outstanding as of the closing for issuance under the 2014 Plan.  Shares of stock subject to other awards that are forfeited or terminated will be available for future award grants under the 2014 Plan. If a holder pays the exercise price of a stock option by surrendering any previously owned shares of common stock or arranges to have the appropriate number of shares otherwise issuable upon exercise withheld to cover the withholding tax liability associated with the stock option exercise, the shares surrendered by the holder or withheld by the company will not be available for future award grants under the plan.

Under the plan, in the event of a change in the number of shares of New Holdco common stock as a result of a dividend on shares of common stock payable in shares of common stock, common stock forward split or reverse split or other extraordinary or unusual event that results in a change in the shares of common stock as a whole, the committee shall determine whether such change equitably requires an adjustment in the terms of any award in order to prevent dilution or enlargement of the benefits available under the plan or the aggregate number of shares reserved for issuance under the plan.

Eligibility

New Holdco may grant awards under the 2014 Plan to employees, officers, directors, and consultants who are deemed to have rendered, or to be able to render, significant services to New Holdco and who are deemed to have contributed, or to have the potential to contribute, to its success. An incentive stock option may be granted under the plan only to a person who, at the time of the grant, is an employee of ours. Based on the current number of employees and consultants of Kitara and Future Ads and on a seven member New Holdco board of directors, New Holdco estimates that 200 individuals will be eligible for awards under the 2014 Plan.

Types of Awards

Options. The 2014 Plan provides both for “incentive” stock options as defined in Section 422 of the Code, and for options not qualifying as incentive options, both of which may be granted with any other stock based award under the plan. The committee determines the exercise price per share of common stock purchasable under an incentive or non-qualified stock option, which may not be less than 100% of the fair market value on the day of the grant or, if greater, the par value of a share of common stock. However, the exercise price of an incentive stock option granted to a person possessing more than 10% of the total combined voting power of all classes of New Holdco’s stock may not be less than 110% of the fair market value on the date of grant. The aggregate fair market value of all shares of common stock with respect to which incentive stock options are exercisable by a participant for the first time during any calendar year (under all of New Holdco’s plans), measured at the date of the grant, may not exceed $100,000.

No stock option shall have a term of more than 10 years (or five years in the case of an incentive stock option granted to a person who, at the time of the grant, owns common stock possessing more than 10% of the total combined voting power of all classes of New Holdco stock). An incentive stock option may only be exercised within ten years from the date of the grant, or within five years in the case of an incentive stock option granted to a person who, at the time of the grant, owns common stock possessing more than 10% of the total combined voting power of all classes of New Holdco stock.

Subject to any limitations or conditions the committee may impose, stock options may be exercised, in whole or in part, at any time during the term of the stock option by giving written notice of exercise to New Holdco specifying the number of shares of common stock to be purchased. The notice must be accompanied by payment in full of the purchase price, either in cash or, if provided in the agreement, in New Holdco securities or in combination of the two.

Generally, stock options granted under the plan may not be transferred other than by will or by the laws of descent and distribution and all stock options are exercisable, during the holder’s lifetime, only by the holder, or in the event of legal incapacity or incompetency, the holder’s guardian or legal representative. However, a holder, with the approval of the committee, may transfer a non-qualified stock option by gift to a family member of the holder, by domestic relations order to a family member of the holder or by transfer to an entity in which more than 50% of the voting interests are owned by family members of the holder or the holder, in exchange for an interest in that entity.

Generally, if the holder is an employee, no stock options granted under the plan may be exercised by the holder unless he or she is employed by New Holdco or a subsidiary of ours at the time of the exercise and has been so employed continuously from the time the stock options were granted. However, in the event the holder’s employment is terminated due to disability or normal retirement, the holder may still exercise his or her vested stock options for a period of 12 months, or such other greater or lesser period as the committee may determine, from the date of termination or until the expiration of the stated term of the stock option, whichever period is shorter.  Similarly, should a holder die while employed by New Holdco or a subsidiary, his or her legal representative or legatee under his or her will may exercise the decedent holder’s vested stock options for a period of 12 months from the date of his or her death, or such other greater or lesser period as the board or committee may determine, or until the expiration of the stated term of the stock option, whichever period is shorter.  If the holder’s employment is terminated for any reason other than death, disability or normal retirement, the stock option will automatically terminate, except that if the holder’s employment is terminated by New Holdco without cause, then the portion of any stock option that is vested on the date of termination may be exercised for the lesser of three months after termination of employment, or such other greater or lesser period as the committee may determine but not beyond the balance of the stock option’s term.

Stock Appreciation Rights. Under the 2014 Plan, New Holdco may grant stock appreciation rights to participants who have been, or are being, granted stock options under the plan as a means of allowing the participants to exercise their stock options without the need to pay the exercise price in cash, or New Holdco may grant them alone and unrelated to an option. In conjunction with non-qualified stock options, stock appreciation rights may be granted either at or after the time of the grant of the non-qualified stock options. In conjunction with incentive stock options, stock appreciation rights may be granted only at the time of the grant of the incentive stock options. A stock appreciation right entitles the holder to receive a number of shares of common stock having a fair market value equal to the excess fair market value of one share of common stock over the exercise price of the related stock option, multiplied by the number of shares subject to the stock appreciation rights. The granting of a stock appreciation right in tandem with a stock option will not affect the number of shares of common stock available for awards under the plan. In such event, the number of shares available for awards under the plan will, however, be reduced by the number of shares of common stock acquirable upon exercise of the stock option to which the stock appreciation right relates.

Restricted Stock. Under the 2014 Plan, New Holdco may award shares of restricted stock either alone or in addition to other awards granted under the plan. The committee determines the persons to whom grants of restricted stock are made, the number of shares to be awarded, the price (if any) to be paid for the restricted stock by the person receiving the stock from New Holdco, the time or times within which awards of restricted stock may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the restricted stock awards.

The 2014 Plan requires that all shares of restricted stock awarded to the holder remain in New Holdco’s physical custody until the restrictions have terminated and all vesting requirements with respect to the restricted stock have been fulfilled. New Holdco will retain custody of all dividends and distributions made or declared with respect to the restricted stock during the restriction period. A breach of any restriction regarding the restricted stock will cause a forfeiture of the restricted stock and any retained dividends and distributions. Except for the foregoing restrictions, the holder will, even during the restriction period, have all of the rights of a shareholder, including the right to vote the shares.

Other Stock-Based Awards. Under the 2014 Plan, New Holdco may grant other stock-based awards, subject to limitations under applicable law that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of common stock, as deemed consistent with the purposes of the plan. These other stock-based awards may be in the form of purchase rights, shares of common stock awarded that are not subject to any restrictions or conditions, convertible or exchangeable debentures or other rights convertible into shares of common stock and awards valued by reference to the value of securities of, or the performance of, one of New Holdco’s subsidiaries. These other stock-based awards may include performance shares or options, whose award is tied to specific performance criteria. These other stock-based awards may be awarded either alone, in addition to, or in tandem with any other awards under the 2014 Plan or any of New Holdco’s other plans.

Accelerated Vesting and Exercisability. If any one person, or more than one person acting as a group, acquires the ownership of stock of the company that, together with the stock held by such person or group, constitutes more than 50% of the total fair market value or combined voting power of the stock of the company, and the company’s board of directors does not authorize or otherwise approve such acquisition, then the vesting periods of any and all stock options and other awards granted and outstanding under the 2014 Plan shall be accelerated and all such stock options and awards will immediately and entirely vest, and the respective holders thereof will have the immediate right to purchase and/or receive any and all common stock subject to such stock options and awards on the terms set forth in the plan and the respective agreements respecting such stock options and awards. An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which the company acquires its stock in exchange for property is not treated as an acquisition of stock.

The committee may, in the event of an acquisition by any one person, or more than one person acting as a group, together with acquisitions during the 12-month period ending on the date of the most recent acquisition by such person or persons, of assets from the company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the company immediately before such acquisition or acquisitions, or if any one person, or more than one person acting as a group, acquires the ownership of stock of the company that, together with the stock held by such person or group, constitutes more than 50% of the total fair market value or combined voting power of the stock of the company, which has been approved by the company’s board of directors, (i) accelerate the vesting of any and all stock options and other awards granted and outstanding under the 2014 Plan, or (ii) require a holder of any award granted under the plan to relinquish such award to the company upon the tender by the company to the holder of cash in an amount equal to the repurchase value of such award. For this purpose, gross fair market value means the value of the assets of the company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

Notwithstanding any provisions of the 2014 Plan or any award granted thereunder to the contrary, no acceleration shall occur with respect to any award to the extent such acceleration would cause the plan or an award granted thereunder to fail to comply with Section 409A of the Code.

Award Limitation. No participant may be granted awards for more than 4,000,000 shares under the plan in any calendar year.

Other Limitations. The committee may not modify or amend any outstanding option or stock appreciation right to reduce the exercise price of such option or stock appreciation right, as applicable, below the exercise price as of the date of grant of such option or stock appreciation right. In addition, no option or stock appreciation right with a lower exercise price may be granted in exchange for, or in connection with, the cancellation or surrender of an option or stock appreciation right or other award with a higher exercise price.

Withholding Taxes

When an award is first included in the gross income of the holder for federal income tax purposes, the holder will be required to make arrangements regarding the payment of all federal, state and local withholding tax requirements, including by settlement of such amount in shares of New Holdco common stock.  The obligations of the company under the 2014 Plan are contingent on such arrangements being made.

Term and Amendments

Unless terminated by the board, the 2014 Plan shall continue to remain effective until no further awards may be granted and all awards granted under the plan are no longer outstanding. Notwithstanding the foregoing, grants of incentive stock options may be made only until ten years from the effective date of the plan. The board may at any time, and from time to time, amend the plan or any award agreement, subject to certain limitations, provided that no amendment will be made that would impair the rights of a holder under any agreement entered into pursuant to the plan without the holder’s consent.

Federal Income Tax Consequences

The following discussion of the federal income tax consequences of participation in the 2014 Plan is only a summary of the general rules applicable to the grant and exercise of stock options and other awards and does not give specific details or cover, among other things, state, local and foreign tax treatment of participation in the plan. The information contained in this section is based on present law and regulations, which are subject to being changed prospectively or retroactively.

Incentive Stock Options. Participants will recognize no taxable income upon the grant of an incentive stock option. The participant generally will realize no taxable income when the incentive stock option is exercised. The excess, if any, of the fair market value of the shares on the date of exercise of an incentive stock option over the exercise price will be treated as an item of adjustment for a participant’s taxable year in which the exercise occurs and may result in an alternative minimum tax liability for the participant. New Holdco will not qualify for any deduction in connection with the grant or exercise of incentive stock options. Upon a disposition of the shares after the later of two years from the date of grant or one year after the transfer of the shares to a participant, the participant will recognize the difference, if any, between the amount realized and the exercise price as long-term capital gain or long-term capital loss, as the case may be, if the shares are capital assets.

If common stock acquired upon the exercise of an incentive stock option is disposed of prior to the expiration of the holding periods described above, the participant will recognize ordinary compensation income in the taxable year of disposition in an amount equal to the excess, if any, of the fair market value of the shares on the date of exercise over the exercise price paid for the shares; and New Holdco will qualify for a deduction equal to any amount recognized, subject to the limitation that the compensation be reasonable.

Non-Qualified Stock Options. With respect to non-qualified stock options:

On a disposition of the shares, the participant will recognize gain or loss equal to the difference between the amount realized and the sum of the exercise price and the ordinary compensation income recognized. The gain or loss will be treated as capital gain or loss if the shares are capital assets and as short-term or long-term capital gain or loss, depending upon the length of time that the participant held the shares.

If the shares acquired upon exercise of a non-qualified stock option are subject to a substantial risk of forfeiture, the participant will recognize ordinary income at the time when the substantial risk of forfeiture is removed, unless the participant timely files under Section 83(b) of the Code to elect to be taxed on the receipt of shares, and New Holdco will qualify for a corresponding deduction at that time. The amount of ordinary income will be equal to the excess of the fair market value of the shares at the time the income is recognized over the amount, if any, paid for the shares.

Stock Appreciation Rights. Upon the grant of a stock appreciation right, the participant recognizes no taxable income and New Holdco receives no deduction. The participant recognizes ordinary income and New Holdco receives a deduction at the time of exercise equal to the cash and fair market value of common stock payable upon the exercise.

Restricted Stock. A participant who receives restricted stock will recognize no income on the grant of the restricted stock and New Holdco will not qualify for any deduction. At the time the restricted stock is no longer subject to a substantial risk of forfeiture, a participant will recognize ordinary compensation income in an amount equal to the excess, if any, of the fair market value of the restricted stock at the time the restriction lapses over the consideration paid for the restricted stock. The holding period to determine whether the participant has long-term or short-term capital gain or loss begins when the restriction period expires, and the tax basis for the shares will generally be the fair market value of the shares on this date.

A participant may elect under Section 83(b) of the Code, within 30 days of the transfer of the restricted stock, to recognize ordinary compensation income on the date of transfer in an amount equal to the excess, if any, of the fair market value on the date of transfer of the shares of restricted stock, as determined without regard to the restrictions, over the consideration paid for the restricted stock. If a participant makes an election under Section 83(b), the holding period will commence on the day after the date of transfer and the tax basis will equal the fair market value of shares, as determined without regard to the restrictions, on the date of transfer.

On a disposition of the shares, a participant will recognize gain or loss equal to the difference between the amount realized and the tax basis for the shares.

Whether or not the participant makes an election under Section 83(b), New Holdco generally will qualify for a deduction, subject to the reasonableness of compensation limitation, equal to the amount that is taxable as ordinary income to the participant, in the taxable year in which the income is included in the participant’s gross income. The income recognized by the participant will be subject to applicable withholding tax requirements.

Dividends paid on restricted stock that is subject to a substantial risk of forfeiture generally will be treated as compensation that is taxable as ordinary compensation income to the participant and will be deductible by New Holdco subject to the reasonableness limitation. If, however, the participant makes a Section 83(b) election, the dividends will be treated as dividends and taxable as ordinary income to the participant, but will not be deductible by New Holdco.

Other Stock-Based Awards. The federal income tax treatment of other stock-based awards will depend on the nature and restrictions applicable to the award.

Section 162(m) Limits. Section 162(m) of the Code places a limit of $1,000,000 on the amount of compensation that a publicly traded company may deduct in any one year with respect to each of its chief executive officer and four most highly paid executive officers. Certain performance-based compensation approved by shareholders is not subject to the deduction limit. The 2014 Plan has been designed such that, upon approval by the Kitara stockholders, stock options and stock appreciation rights awarded under the plan may constitute performance-based compensation not subject to Section 162(m) of the Code. One of the requirements for such treatment is that there must be a limit to the number of shares granted to any one individual under the plan. Accordingly, the plan provides that the maximum number of shares for which awards may be made to any employee in any calendar year is 4,000,000.  

Certain Awards Deferring or Accelerating the Receipt of Compensation. Section 409A of the Code, enacted as part of the American Jobs Creation Act of 2004, imposes certain new requirements applicable to “nonqualified deferred compensation plans.” If a nonqualified deferred compensation plan subject to Section 409A fails to meet, or is not operated in accordance with, these new requirements, then all compensation deferred under the plan may become immediately taxable. Stock appreciation rights and deferred stock awards that may be granted under the 2014 Plan may constitute deferred compensation subject to the Section 409A requirements.  It is New Holdco’s intention that any award agreement governing awards subject to Section 409A will comply with these rules.

New Plan Benefits

The benefits that will be awarded or paid under the 2014 Plan are not currently determinable. Awards granted under the 2014 Plan are within the discretion of the New Holdco board of directors or a committee thereof, and neither the New Holdco board of directors nor a committee thereof has determined any future awards or who might receive them.

Vote Required for Approval

The 2014 Plan will be approved if the holders of at least a majority of the outstanding shares of Kitara common stock who are present at the meeting, in person or by proxy, and entitled to vote on this proposal, vote “FOR” this proposal.

If you mark “abstain” with respect to this proposal, it will have the same effect as a vote “AGAINST” the proposal. If you fail to instruct your broker or other nominee on how to vote the shares of Kitara common stock you hold in street name with respect to this proposal, your shares of Kitara common stock will not be treated as present at the Special Meeting and entitled to vote on this proposal, and as such, your failure to instruct your broker or nominee how to vote will not have any effect on the vote with respect to this proposal.

Under the voting agreement, the supporting parties have agreed, among other things, to vote their shares of Kitara common stock in favor of the 2014 Plan. The supporting parties hold more than 50% of the shares of outstanding Kitara common stock. Accordingly, the supporting parties may approve the 2014 Plan without the affirmative vote of any other Kitara stockholder.

Recommendation of the Kitara Board of Directors

THE KITARA BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THE KITARA STOCKHOLDERS VOTE “FOR” THE ADOPTION OF THE EQUITY PLAN PROPOSAL.

PROPOSAL NO. 4 — THE ADJOURNMENT PROPOSAL

Kitara is requesting that its stockholders approve a proposal to adjourn the Special Meeting, if necessary, to permit further solicitation of proxies, if there are not sufficient votes at the Special Meeting to adopt the merger agreement and approve the merger.

In addition to an adjournment of the special meeting upon approval of an adjournment proposal, the board of directors of Kitara is empowered under Delaware law to postpone the meeting at any time prior to the meeting being called to order. In such event, Kitara will issue a press release and take such other steps as it believes are necessary and practical in the circumstances to inform its stockholders of the postponement.

If an adjournment proposal is presented to the meeting and is not approved by the stockholders, Kitara’s board of directors may not be able to adjourn the special meeting to a later date in the event, based on the tabulated votes, there are not sufficient votes at the time of the Special Meeting to approve the adoption of the merger agreement and the approval of the merger. In such event, the transactions with Future Ads would not be completed and Kitara would continue as a stand-alone public company.

This Proposal No. 4 will only be presented at the Special Meeting if Proposal No. 1, the Merger Proposal, is not approved. The vote on this Proposal No.4 is a vote separate and apart from the vote on the other proposals. Accordingly, you may vote for Proposal No. 4 on the adjournment of the meeting and vote against any of the other proposals, and vice versa.

Vote Required for Approval

The adjournment of the Special Meeting, if necessary, to permit the further solicitation of proxies, if there are not sufficient votes at the Special Meeting to adopt the merger agreement and approve the merger, will be approved if the holders of at least a majority of the outstanding shares of Kitara common stock who are present at the meeting, in person or by proxy, and entitled to vote on this proposal vote “FOR” this proposal.

If you mark “abstain” with respect to this proposal, it will have the same effect as a vote “AGAINST” the proposal. If you fail to instruct your broker or other nominee on how to vote the shares of Kitara common stock you hold in street name with respect to this proposal, your shares of Kitara common stock will not be treated as present at the Special Meeting and entitled to vote on this proposal, and as such, your failure to instruct your broker or nominee how to vote will not have any effect on the vote with respect to this proposal.

Under the voting agreement, the supporting parties have agreed, among other things, to approve any matters necessary for consummation of the merger and any other transactions contemplated in the merger agreement, which would include the Adjournment Proposal. The supporting parties hold more than 50% of the shares of Kitara common stock outstanding. Accordingly, the supporting parties may approve the Adjournment Proposal without the affirmative vote of any other Kitara stockholder.

Recommendation of the Kitara Board of Directors

THE KITARA BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY, TO PERMIT FURTHER SOLICITATION OF PROXIES, IF THERE ARE NOT SUFFICIENT VOTES AT THE SPECIAL MEETING TO ADOPT THE MERGER AGREEMENT AND APPROVE THE MERGER.

THE TRANSACTIONS

The following is a description of certain material aspects of the transactions. While we believe that the following description covers the material terms of the transactions, the description may not contain all of the information that may be important to you. The discussion of the transactions in this proxy statement/prospectus is qualified in its entirety by reference to the merger agreement which is attached to the proxy statement/prospectus as Annex A, the exchange agreement which is attached to this proxy statement/prospectus as Annex B, and the other annexes to this proxy statement/prospectus, all of which are provided for the purpose of providing you with information regarding their terms and are incorporated by reference into this proxy statement/prospectus. We encourage you to read carefully this entire proxy statement/prospectus, including the merger agreement, the exchange agreement and the other annexes for a more complete understanding of the transactions.

General Description of the Transactions

On October 10, 2014, Kitara simultaneously entered into the merger agreement with New Holdco and Merger Sub and the exchange agreement with New Holdco, Future Ads and the members of Future Ads.

Pursuant to the merger agreement, Merger Sub will merge with and into Kitara, with Kitara surviving the merger as a wholly-owned subsidiary of New Holdco. In the merger, each outstanding share of Kitara common stock will be converted into one share of New Holdco common stock.

Immediately following the merger and as part of a single integrated transaction, pursuant to the exchange agreement, the members of Future Ads will exchange all of the outstanding limited liability company interests of Future Ads to New Holdco for (i) $80,000,000 in cash, (ii) shares of New Holdco common stock that represent 53% of the fully diluted shares of New Holdco common stock outstanding as of the closing, (iii) the right to receive performance-based “earn out” payments that would enable the members to receive up to an additional $40,000,000 in cash or stock consideration based on Future Ads reaching certain EBITDA levels during the 2015 to 2018 fiscal years, (iv) on or prior to June 30, 2016, $10,000,000 of deferred consideration in cash and/or shares of New Holdco common stock and (v) immediately after the payment of certain fees to Highbridge on or about the fourth anniversary of the closing, $6,000,000 in cash. The consideration payable to the members is subject to a post-closing adjustment based on the working capital and indebtedness of Future Ads and the working capital of Kitara.

Furthermore, after the closing, New Holdco will reimburse the members for all transaction expenses paid by Future Ads, its subsidiaries or the members on or before the closing, and will assume all of their unpaid transaction expenses as of such date. Future Ads estimates that the aggregate transaction expenses reimbursed or assumed by New Holdco will be approximately $1.25 million.

The merger and the exchange are conditioned on each other and neither will be consummated if the other cannot be consummated. Immediately following the closing, New Holdco will be the new publicly traded company and Kitara and Future Ads will be wholly-owned subsidiaries of New Holdco. Immediately following the closing, of the shares of New Holdco common stock to be outstanding, we expect that the former Kitara stockholders and certain of the former members of Future Ads will own 95,884,241 shares (or 38.3%) and 154,213,092 shares (or 61.7%), respectively. Additionally, we expect there to be an aggregate of 40,870,765 shares of New Holdco common stock reserved for issuance under stock options and warrants assumed by New Holdco and awards that may be granted under the 2014 Plan.

At the Special Meeting, the holders of Kitara common stock will be asked to vote upon a proposal to approve the merger agreement.

Background of the Transactions

The board of directors and senior management team of Kitara Media and the managing member and senior management of Future Ads regularly review their respective company’s performance, future growth prospects and overall strategic direction and consider potential business opportunities to improve their respective businesses and enhance stockholder value. For each company, these reviews have included consideration of potential transactions with third parties that would further its strategic objectives, and the potential benefits and risks of those transactions in light of, among other things, the business environment facing the industries in which they operate and each company’s competitive position. In addition, from time to time, members of the senior management teams of each of Kitara Media and Future Ads meet with other companies within the industry in which they operate, including each other, to discuss industry developments, business opportunities and potential strategic transactions. Since 2007, Kitara Media and Future Ads have also had many commercial dealings with each other.

On April 12, 2014, Robert Regular, the Chief Executive Officer of Kitara, initiated several strategic discussions regarding a potential transaction with Jared Pobre, the Chief Executive Officer of Future Ads. Based on these initial discussions, the parties determined to engage in more detailed discussions concerning a potential transaction between the two companies.

On April 30, 2014, Mr. Regular and Jonathan Ledecky, Chairman of Kitara, met with Mr. Pobre in California to continue strategic discussions regarding a potential transaction

On May 1, 2014, Kitara and Future Ads entered into a confidentiality agreement and the parties commenced their due diligence review of each other.

On May 21, 2014, Mr. Regular sent a draft term sheet to Mr. Pobre regarding a potential transaction between the companies. On May 22, 2014, the parties, along with their respective legal counsel, had a conference call to discuss the draft term sheet that had been circulated and to discuss certain terms of the proposed transaction and the timing related thereto. On May 23, 2014, legal counsel for Future Ads circulated a revised term sheet addressing various changes that had been discussed at the prior conference call, including the need to structure the transaction in a more tax-efficient manner for the members of Future Ads. On May 28, 2014, the parties and their respective legal counsel held another conference call to further refine the structure of a proposed transaction between the parties. Following this call, a further revised term sheet was circulated. Between May 28, 2014 and June 16, 2014, the parties continued to negotiate the amount and form of consideration to be paid by Kitara to the members of Future Ads. On June 17, 2014, legal counsel to Future Ads circulated a further revised term sheet and the parties executed the same on such date.

Beginning on June 20, 2014, the management teams of Kitara and Future Ads initiated discussions with financial lenders, including Highbridge, to explore the opportunity and terms for funding the transaction.

On July 6, 2014, Highbridge delivered a draft term sheet to Kitara and Future Ads relating to their proposal for financing the transaction. On July 8, 2014, legal counsel for Future Ads circulated a revised draft of the term sheet. On July 15, 2014, Kitara and Future Ads received a revised term sheet from Highbridge and the parties executed such term sheet.

Commencing on July 23, 2014, the parties began circulating drafts of the various documents related to the transactions, including drafts of the merger agreement and exchange agreement and related exhibits. Over the next two months, the parties continued to negotiate the terms of such agreements and exhibits.

While negotiations concerning the merger agreement and exchange agreement were ongoing, the management teams of Kitara and Future Ads continued negotiations with Highbridge on the terms and sourcing of the financing to be provided for the transactions.

On October 9, 2014 a telephonic meeting of the Kitara board of directors was convened. Present at the meeting were Messrs. Regular, Ledecky and Silberstein, as well as Sam Humphreys, another board member, representing a quorum of the board. Also present at the meeting by invitation were Jeffrey M. Gallant, Esq., of Graubard Miller, legal counsel to Kitara, and Richard Cooke of Marcum LLP, Kitara’s independent auditor. Prior to the meeting, copies of the most recent drafts of the significant transaction documents, in substantially final form, were delivered to the directors. Mr. Gallant was first asked to provide the board with a brief summary of the structure of the proposed transactions. Messrs. Regular and Silberstein then provided the other members of the board with a detailed overview of the strategic rationale of the proposed transaction as well as the strengths and weaknesses of Future Ads, as detailed below under the section “Kitara’s Reasons for the Transactions and Recommendation of Kitara’s Board of Directors.” After considerable review and discussion, the merger agreement and exchange agreement and related documents were unanimously approved, subject to final negotiations and modifications, and the board determined to recommend the approval of the merger agreement to Kitara’s stockholders.

The merger agreement and exchange agreement were signed on October 10, 2014. The debt commitment letter with Highbridge was also executed on such date. Prior to the market open on October 13, 2014, the parties issued a press release announcing the execution of the agreements and some of the salient terms of the transaction. On October 14, 2014, Kitara filed a Current Report on Form 8-K, which included the press release issued on October 13, 2014, the merger agreement and the exchange agreement as exhibits thereto.

Kitara’s Reasons for the Transactions and Recommendation of Kitara’s Board of Directors

The members of Kitara’s board who were present at the meeting called to approve the transactions unanimously approved the merger agreement and exchange agreement and all agreements and documents related thereto, and determined that the transactions contemplated by the merger agreement and exchange agreement and all agreements and documents related thereto were in the best interests of Kitara and its stockholders and recommended that the merger agreement be approved by the stockholders of Kitara. The two members that were not present at this meeting (Jeremy Zimmer and Ben Lewis) subsequently expressed their approval for the transaction to the other members of the board.

The board of directors considered various factors, discussed in more detail below, in making its determination and recommendation.

Kitara’s board of directors considered the following additional factors as generally supporting its determination and recommendation: